## AEW UK REIT plc ## Annual Report and ## Financial Statements ## for the year ended 31 March 2025 ## AEW UK REIT plc (“AEWU”) invests in and ## actively asset manages a value-focused ## portfolio of high-yielding commercial ## properties across the UK. ## The Company has delivered market- ## leading property and NAV total returns*, ## outperforming both the MSCI UK property ## index and UK diversified REIT peers. * During the year, the Company won the MSCI listed funds category for delivering the highest three-year annualised property total return to 31 December 2023. AEWU also won the Citywire award for the fifth consecutive year for achieving the highest annualised three-year NAV total return of any UK listed property investment trust. ## Contents ### Strategic Report 3 Performance Summary 5 Strategy Commentary 8 Chairman’s Statement 11 Key Performance Indicators 15 Investment Manager’s Report 19 Property Portfolio 36 Principal Risks and Uncertainties 44 AIFM Statement 46 Stakeholder Engagement ### Governance 51 Board of Directors 53 Corporate Governance Statement 61 Report of the Audit and Risk Committee 65 Directors’ Remuneration Report 71 Directors’ Report 91 Statement of Directors’ Responsibilities 92 Independent Auditor’s Report ### Financial Statements 103 Statement of Comprehensive Income 104 Statement of Changes in Equity 105 Statement of Financial Position 106 Statement of Cash Flows 107 Notes to the Financial Statements ### Additional Information 135 EPRA Unaudited Performance Measures 140 EPRA Sustainability Performance Measures 153 Company Information 155 Glossary ## Strategic ## Report Strategic Report Governance Financial Statements Additional Information Bristol, 40 Queen Square ## Performance Summary ## 8.0 pps ## 112.5% ### DIVIDEND EARNINGS ### PAID DIVIDEND COVER ## 14.8% 15.3% 28.7% ### PROPERTY NAV TOTAL SHAREHOLDER ### TOTAL RETURN RETURN TOTAL RETURN Alternative performance measures are defined on pages 11 to 14. 3 Strategic Report Governance Financial Statements Additional Information ## The Board and Investment Manager are pleased ## to report strong performance for the year, ## demonstrating the effectiveness of our strategy ## and continued commitment to enhancing ## shareholder value through active management. ## We delivered annual NAV growth of 7.2% ## and a covered dividend despite a subdued ## property market backdrop, demonstrating our ## active strategy’s resilience across different ## market cycles. ## Our proactive style drove income and minimised ## void costs, while our tenant base exhibited ## robust occupational performance amid ongoing ## economic challenges. ## We remain committed to delivering sustained ## returns, as reflected in our quarterly dividend ## of 2.0 pence per share, paid consistently for ## 38 consecutive quarters, as part of a shareholder ## total return of 28.7% for the year. 4 ## Strategy ## Commentary ### AEWU invests in and actively asset ### Investment Criteria ### manages a value-focused portfolio ### of high-yielding commercial We typically target properties that meet the following criteria: ### properties across the UK. Net Initial Yields: We seek net initial yields ### The Company capitalises on at purchase ranging between 7% and 10%, in order to maintain a high level of income across ### value opportunities that arise from the portfolio. ### pricing inefficiencies in the sector. Rental Growth Potential: We focus on ### The AEWU team have proven properties with low passing rents, which present opportunities for income growth. ### their expertise in identifying these Value Investment Style: We prioritise the ### opportunities throughout market acquisition of assets with low capital values at ### cycles over a 10-year period. purchase when compared to their alternative use and vacant possession values. This ### These mispriced opportunities provides optionality in business plans and protects investors’ capital throughout market ### present significant potential for cycles. ### income growth and value creation Lot Size: We typically invest in assets at ### through active asset management, purchase prices under £20 million as we find less competitive appetite in this lot size ### as evidenced by the Company's category leads to a greater propensity for ### market leading returns. mispricing. Strong Commercial Locations: We focus ### We believe that a true value on strong commercial locations, enabling us ### strategy is best enacted without to leverage tenant demand and enhance the overall performance of our portfolio. ### sector constraint. AEWU seeks ### value across the entire UK ### commercial property universe and ### analyses investment opportunities ### based on their individual merits. 55 Strategic Report Governance Financial Statements Additional Information ### Active Asset Management Outcomes of Our Strategy Once acquired, we employ a proactive asset This comprehensive approach enables us to management strategy that focuses on: achieve the following: Growing Income Streams: Enhancing rental Maximise Income income through a dynamic approach to lease We have consistently paid a quarterly dividend events and expert knowledge of markets. of 2 pence per share since Q1 2016, currently Extending and Improving Tenant Leases: delivering one of the highest dividend yields in Negotiating longer leases and improved terms the UK commercial property sector. to secure stable income. Unlock Capital Upside Adding Value through Planning: Utilising the Annualised total property return of 11.2% over planning system to enhance property value. the five years ending 31 March 2025. Refurbishing Properties: Undertaking Outperformance of the MSCI benchmark by refurbishments where necessary to maintain 7.7% over the same period. competitiveness and appeal of the property. Since inception, we have achieved an average Enhancing ESG Credentials: Improving the sale price premium of 38% over purchase price environmental, social, and governance (ESG) from 20 asset sales, crystallising significant standards of our properties. profits for shareholders. At times when the dividend is not fully covered by EPRA earnings, the Company supplements its net earnings by distributable reserves derived from capital profits on property disposals. Bath, Northgate House 6 ### ATTRIBUTION ANALYSIS OF FINANCIAL RESULTS The Company’s NAV as at March 2025 was £174.44 million or 110.11 pps (31 March 2024: £162.75 million or 102.73 pps). This represents an increase of 7.38 pps or 7.18% over the 12-month period, with the underlying movement in NAV set out in the chart below: 125 13.10 120 (4.09) 115 110.11 8.58 110 (8.00) 105 102.73 NAV (PPS) (0.03) (0.41) 100 (1.77) 95 90 85 | NAV as at | Portfolio | Loss on sale of | Capital | Valuation | Income earned | Expenses for | Dividend | NAV as at | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 1 April 2024 | acquisition | investments | expenditure | changes | for the period | the period | paid | 31 March 2025 | | | costs | | | in property | | | | | portfolio ### FINANCING As at 31 March 2025, the Company has a £60.00 million loan Facility with AgFe, in place until May 2027, the details of which are presented below: 31 MARCH 2025 31 MARCH 2024 Facility £60.00 million £60.00 million Drawn £60.00 million £60.00 million Gearing (Loan to GAV) 25.01% 28.97% Gearing (Loan to NAV) 34.40% 36.87% Interest rate 2.959% 2.959% fixed fixed Notional Value of Loan Balance Hedged N/A N/A Shares in Issue 158,774,746* 158,774,746* * including 350,000 treasury shares 7 ## Chairman’s Statement Strategic Report Governance Financial Statements Additional Information ### Robin Archibald Chairman ### OVERVIEW ### During the year, the Company has continued its strong run of ### performance, despite a challenging economic backdrop. Since its ### inception ten years ago, the Company has consistently paid annualised ### dividends of 8p per share and realised significant capital profits. ### Earnings from the portfolio have also grown each year for the past three ### years. This demonstrates how AEWU can deliver strong returns, using ### its value-focused and sector-agnostic approach to acquire mispriced ### assets throughout varying market conditions. ### The investment style of the Company is articulated on page 5. Key to its ### success has been active management of the portfolio and to maximise ### both income and capital returns. In the current market environment, ### the Manager believes that a significant number of attractively priced ### opportunities could be pursued, should the Company have more ### available cash to deploy, a subject which the Board is actively ### considering. 8 ### Investment and share Dividends The Company continues to pay quarterly dividends ### price performance of 2p per share (as it has done for 38 consecutive The statistics on page 3 demonstrate a strong financial quarters), which were covered by earnings for the return for the year to 31 March 2025. Shareholder total year. It is the sustainability of the dividend, rather than return of 28.7% (2024: 1.9% and 121.7% since inception its growth, that remains the Board’s focus. Based on a on an annualised basis) and net asset value total return year-end share price of 101.4p and portfolio valuation of 15.3% (2024: 5.0% and 136.1% since inception) show level, this produces respective yields of 7.9% and 8.0%, both strong portfolio performance and a significant as well as a reversionary yield of 8.8%. re-rating of the Company’s share price during the year. The Company remains committed to paying its quarterly dividend of 2p per share predominantly AEW UK REIT plc Property Performance vs. from income, but also using a total return approach. In Benchmark for 12 months to 31 March 2025 periods where the annual dividend of the Company is | 20 | uncovered by earnings, owing to the Manager’s active | | --- | --- | | 18 | strategy, the dividend is maintained using capital profits | | 16 | from property disposals. | 14 | | 12 | Gearing | | --- | --- | --- | | % | 10 | The Company has a fully-drawn debt facility of £60m, | | | 8 | which is due to mature in May 2027, with a fixed | | | 6 | interest rate of 2.959%, representing a 25.0% Loan to | | | 4 | Gross Asset Value ratio. The loan covenants all have | | | 2 | significant headroom. | 0 The use of gearing and the Company’s ability to AEW UK REIT Benchmark* refinance is monitored closely by Board and Manager Capital Growth Income Return Total Return alike. When practical and economical to do so, the Source: MSCI 31 March 2025 Company will be refinanced whilst recognising that the * the Benchmark refers to MSCI/AREF PFI expected interest cost on a future facility is unlikely to Balanced Funds Quarterly Property Index be as competitive as it was when the current facility was negotiated. That said, it is currently expected that this With a property total return of 14.8% (2024: 6.7% and refinancing will not create materially different earnings annualised 8.5% since inception) the significant benefit performance than the Company has been able to of the Company’s value-driven strategy can be seen. achieve over the previous 10 years. The Manager’s review on pages 15 to 35 provides ### detail of how portfolio performance has been achieved, Portfolio including gains made on disposals, the proceeds of At year-end, the Company had a diversified portfolio of which have all been deployed following the purchase 33 UK commercial properties. The average lot size was of Freemans Leisure Park, Leicester, after year-end. £6.2m, with occupancy of 92.5% from 124 tenants and cash of £27.8m. The Manager has achieved total return outperformance relative to both the MSCI Balanced Funds Quarterly During the year, the Company disposed of two assets: Property Index and its listed peer group, which, along Oak Park Industrial Estate and Units 1-11 of Central with its high annual dividend, has helped keep the Six Retail Park. The sale prices achieved, of £32.6m share price rating much closer to net asset value than in aggregate, reflected a blended net initial yield of for many of the Company’s peers. 7.6%, and a respective 12% and 60% premium to their purchase prices. The purchase of a high-street retail asset in Hitchin was completed in May 2025, with an attractive net initial yield of 8.3%. Deployment of the remainder of the disposal proceeds was completed post-year-end via the acquisition of Freemans Leisure Park, Leicester. 9 Strategic Report Governance Financial Statements Additional Information ### Governance ## During the year, the Board established delegated “The resilience of the portfolio authorities for operations of the Board, particularly ## evidences the effectiveness responsibilities for nominations, remuneration, ## management engagement and risk, and appointed a of the Company’s active Senior Independent Director. ## strategy to deliver superior As part of the review of Board responsibilities, ## Board remuneration was refined to reflect individual performance, free from sector responsibilities and the commitment expected of a ## or geographical constraints.” small and fully engaged Board. I would like to thank my Board colleagues for their considerable efforts during the year, and the former Chair and Audit Chair for presiding over the excellent long-term performance of the Company. The Company has been adversely impacted by the PRIIPs reporting regime, where cost disclosures are, ### Outlook in the opinion of the Board, misleading for investors At a time of much corporate activity in the UK listed in a property company, albeit a property investment property sector, the Board and Manager will look company with sub-contracted management. Both to exploit growth opportunities for the Company, the Board and the Manager, in common with many including the potential issuance of equity, with the other investment companies, have made detailed protection of existing shareholders’ interests being submissions to the FCA to that effect. first and foremost, rather than pursuing ‘growth for growth’s sake’. Appropriate scaling of AEWU’s strategy ### Awards is expected to bring shareholder benefits including During the year, the Company’s performance and improved liquidity in the Company’s shares, a reduction business practices were recognised by the receipt of in the operating cost ratio and greater investment five industry awards that reflect well on the Company scope in the portfolio. and its performance. The Manager is enthusiastic about the current buying The Company won the Citywire investment trust award opportunities in the UK property market, believing in the ‘UK Property’ category for the fifth consecutive that now is an ideal time to deploy capital, as property year, an award given to the investment company values are at their lowest point since the Company’s with the highest NAV total returns over an annualised IPO. With a proven track record of stock selection, the three-year period. The Company also won the ‘Listed Manager expects that acquisitions made in the near- Funds’ category in the 2023 MSCI UK Property term would yield strong performance in the future. Investment Awards, an award given to the listed fund displaying the highest annualised three-year property Against an unpredictable economic backdrop, total return for the three years to 31 December 2023. fiscal and interest rate pressures, and destabilising Lastly, the Company won the ‘Property’ category at the geo-political events, the challenge is to present the Investment Week Awards for the second consecutive Company’s excellent investment case, to continue to year. manage the portfolio for income and capital profits and to try and maintain a strong rating on the Company’s The Company has also been awarded by the European shares and liquidity in the secondary market. That is our Public Real Estate Association (“EPRA”), a gold medal challenge for 2025 onwards, and we are working with for its high standard of financial reporting, and for the AEW to build on the excellent results for this financial first time, a gold medal for its standard of sustainability year. reporting, improving on the previously awarded silver medal. Robin Archibald Chairman of the Board 26 June 2025 10 ## Key Performance Indicators ### FINANCIAL KPIs | | NAV | | PROPERTY | | SHAREHOLDER | | DIVIDEND | | DIVIDEND | | LEVERAGE | | OPERATING COST | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | * | | ^* | | ^ | | ^ | | * | | ^ | | ^ | | | | TOTAL RETURN | | TOTAL RETURN | | TOTAL RETURN | | PAID | | COVER | | (LOAN TO GAV) | | RATIO (OCR) | | | | | The percentage change | | The total property return | | The percentage change | | Dividends declared | | The ratio of the Company's EPRA | | The proportion of the Company’s | | The ratio of total administration | | | | | in NAV, assuming | | is the combined income | | in the share price | | in relation to the year. | | earnings over the dividend paid to | | total assets that are funded by | | and operating costs expressed | | | | | that dividends paid | | and capital return from | | assuming dividends are | | The Company targets a | | shareholders. | | borrowings. | | as a percentage of average NAV | | | | | to shareholders are | | the property portfolio for | | reinvested to purchase | | dividend of 8.00 pence | | | | | | throughout the year. | | | | | reinvested at NAV to | | the year, as calculated by | | additional Ordinary | | per Ordinary Share per | | | | | | | | | | | purchase additional | | MSCI. | | Shares. | | annum. However, given | | | | | | | | | | KPI AND | | | | | | | | | | | | | | | KPI AND | | | ordinary shares. | | | | | | the current general | | | | | | | | | | DEFINITION | | | | | | | | | | | | | | | DEFINITION | economic uncertainty, regard will be had to the circumstances prevailing at the relevant time in determining dividend payments. | This is a direct indicator | This shows the success | This reflects the return | The dividend reflects | This metric indicates the ability of | The Company intends to utilise | The OCR provides a measure | | --- | --- | --- | --- | --- | --- | --- | | of the value produced | of the portfolio strategy | for investors through | the Company’s ability | the Company to cover its dividend | borrowings to enhance returns. A | of total costs associated with | | by the Company’s | without the impact of | share price movements | to deliver a sustainable | payments through earnings. | target of 25% Loan to GAV is stated | managing and operating the | | financial performance. | gearing and corporate | and dividends received. | profit distribution for | | in the Company’s Investment | Company, which includes | | | costs. | | its shareholders. | | Guidelines. | the management fees and | operating costs. PURPOSE AND PURPOSE AND RELEVANCE RELEVANCE TO STRATEGY TO STRATEGY TARGET 8.00% 8.00% 8.00% 8.00 pps 100% 25% < 1.50% TARGET | | 15.29% | 14.80% | 28.68% | 8.00 pps | 112.5% | | 1.49% | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | for the year ended | for the year ended | for the year ended | for the year ended | for the year ended | 25.01% | for the year ended | | | | 31 March 2025 | 31 March 2025 | 31 March 2025 | 31 March 2025 | 31 March 2025 | at 31 March 2025 | 31 March 2025 | | | PERFORMANCE | | | | | | | | PERFORMANCE | | | ( year ended 31 March | ( year ended 31 March | ( year ended 31 March | ( year ended 31 March | ( year ended 31 March | ( 31 March 2024: 28.97%) | ( year ended 31 March | | | | 2024: 4.98%) | 2024: 6.65%) | 2024: 1.85%) | 2024: 8.00 pps) | 2024: 91.25%) | | 2024: 1.60%) | | 11 Strategic Report Governance Financial Statements Additional Information | | NAV | | PROPERTY | | SHAREHOLDER | | DIVIDEND | | DIVIDEND | | LEVERAGE | | OPERATING COST | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | * | | ^* | | ^ | | ^ | | * | | ^ | | ^ | | | | TOTAL RETURN | | TOTAL RETURN | | TOTAL RETURN | | PAID | | COVER | | (LOAN TO GAV) | | RATIO (OCR) | | | | | The percentage change | | The total property return | | The percentage change | | Dividends declared | | The ratio of the Company's EPRA | | The proportion of the Company’s | | The ratio of total administration | | | | | in NAV, assuming | | is the combined income | | in the share price | | in relation to the year. | | earnings over the dividend paid to | | total assets that are funded by | | and operating costs expressed | | | | | that dividends paid | | and capital return from | | assuming dividends are | | The Company targets a | | shareholders. | | borrowings. | | as a percentage of average NAV | | | | | to shareholders are | | the property portfolio for | | reinvested to purchase | | dividend of 8.00 pence | | | | | | throughout the year. | | | | | reinvested at NAV to | | the year, as calculated by | | additional Ordinary | | per Ordinary Share per | | | | | | | | | | | purchase additional | | MSCI. | | Shares. | | annum. However, given | | | | | | | | | | KPI AND | | | | | | | | | | | | | | | KPI AND | | | ordinary shares. | | | | | | the current general | | | | | | | | | | DEFINITION | | | | | | | | | | | | | | | DEFINITION | economic uncertainty, regard will be had to the circumstances prevailing at the relevant time in determining dividend payments. | This is a direct indicator | This shows the success | This reflects the return | The dividend reflects | This metric indicates the ability of | The Company intends to utilise | The OCR provides a measure | | --- | --- | --- | --- | --- | --- | --- | | of the value produced | of the portfolio strategy | for investors through | the Company’s ability | the Company to cover its dividend | borrowings to enhance returns. A | of total costs associated with | | by the Company’s | without the impact of | share price movements | to deliver a sustainable | payments through earnings. | target of 25% Loan to GAV is stated | managing and operating the | | financial performance. | gearing and corporate | and dividends received. | profit distribution for | | in the Company’s Investment | Company, which includes | | | costs. | | its shareholders. | | Guidelines. | the management fees and | operating costs. PURPOSE AND PURPOSE AND RELEVANCE RELEVANCE TO STRATEGY TO STRATEGY TARGET 8.00% 8.00% 8.00% 8.00 pps 100% 25% < 1.50% TARGET | | 15.29% | 14.80% | 28.68% | 8.00 pps | 112.5% | | 1.49% | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | for the year ended | for the year ended | for the year ended | for the year ended | for the year ended | 25.01% | for the year ended | | | | 31 March 2025 | 31 March 2025 | 31 March 2025 | 31 March 2025 | 31 March 2025 | at 31 March 2025 | 31 March 2025 | | | PERFORMANCE | | | | | | | | PERFORMANCE | | | ( year ended 31 March | ( year ended 31 March | ( year ended 31 March | ( year ended 31 March | ( year ended 31 March | ( 31 March 2024: 28.97%) | ( year ended 31 March | | | | 2024: 4.98%) | 2024: 6.65%) | 2024: 1.85%) | 2024: 8.00 pps) | 2024: 91.25%) | | 2024: 1.60%) | | ^ Alternative Performance Measures * True equivalent yield, WAULT to Break, NAV, Profit/(Loss) Before Tax have all been removed as KPIs, as these are deemed to be less strategically relevant to the Company than the following KPIs which have been added: EPRA NTA per share, Dividend cover, NAV total return and Property total return. 12 ![img-0.jpeg](img-0.jpeg) ## PROPERTY KPIs | | NET INITIAL YIELD (MY) % | REVERSIONARY YIELD (RY) % | VACANT ESTIMATED RENTAL VALUE (ERV) | WEIGHTED AVERAGE UNEXPIRED LEASE TERM (WAULT) | | --- | --- | --- | --- | --- | | API AND DEFINITION | What the initial net yield would be at a predetermined purchase price after taking account of all associated costs, e.g. void costs and rent-free periods. | The expected return the property will provide once rack-rented. | The space in a property portfolio which is currently unlet, as a percentage of the total ERV of the portfolio. | The average lease term remaining to expiry across the portfolio, weighted by contracted rent. | | PURPOSE AND RELEVANCE TO STRATEGY | The Company's EPRA NIY demonstrates the ability to generate income from its portfolio in the short term in order to meet its target dividend. | A Reversionary Yield profile shows a potentially sustainable income stream that can be used to meet dividends past the expiry of a property's current leasing arrangements. | The Company's aim is to minimise vacancy of the properties. A low level of structural vacancy provides an opportunity for the Company to capture rental uplifts and manage the mix of tenants within a property. | Assets with a shorter unexpired lease term are often mispriced. It is the Investment Manager's view that a shorter WAULT is useful for active asset management as it allows the Investment Manager to engage in direct negotiation with tenants rather than via rent-review mechanisms. | | TARGET | 7.50 - 10.00% | 7.50 - 10.00% | < 10.00% | > 3 years | | PERFORMANCE | **7.97%** **at 31 March 2025** (31 March 2024: 8.02%) | **8.76%** **at 31 March 2025** (31 March 2024: 8.77%) | **7.50%** **at 31 March 2025** (31 March 2024: 6.38%) | **5.73 years** **at 31 March 2025** (31 March 2024: 5.60 years) | 13 Strategic Report Governance Financial Statements Additional Information ![img-1.jpeg](img-1.jpeg) # **EPRA KPIs** EPRA EARNINGS PER SHARE (EPS)* EPRA NET TANGIBLE ASSETS PER SHARE (PENCE)* Earnings from core operational activities. A key measure of a company's underlying operating results from its property rental business and an indication of the extent to which current dividend payments are supported by earnings. Measures the value of shareholders' equity in the business. KPI AND DEFINITION This reflects the Company's ability to generate earnings from the portfolio which underpins dividends. This measures the growth of the business over time and the Company regards this as the most relevant net asset metric for the business. PURPOSE AND RELEVANCE TO STRATEGY 8.00 pps Increase year on year. TARGET **9.00 pps** **for the year ended** **31 March 2025** **110.11 pps** **at 31 March 2025** (year ended 31 March 2024: 7.29 pps) (31 March 2024: 102.73 pps) PERFORMANCE * Alternative Performance Measures This report provides Alternative Performance Measures ("APMs") which are not defined or specified under the requirements of International Financial Reporting Standards. We believe these APMs provide important information on our business. Further explanation of APMs and why we use them is set out in EPRA unaudited performance measures. * True equivalent yield, WAULT to Break, KPV, Profit/Loss: Before Tax have all been removed as KPIs, as these are deemed to be less strategically relevant to the Company than the following KPIs which have been added: EPRA NTA per share, Dividend cover, NAV total return and Property total return. 14 # Investment Manager's Report ![img-2.jpeg](img-2.jpeg) **Laura Elkin** Portfolio Manager ![img-3.jpeg](img-3.jpeg) **Henry Butt** Assistant Portfolio Manager Difficult market conditions often provide opportunities for the Company's actively managed strategy. Despite the challenging backdrop, the Company achieved a 5.9% like-for-like valuation gain in its portfolio for the year, testament to its value-focused strategy of investing in mispriced assets where we believe income can be grown, and value created, through active asset management. This valuation performance has culminated in the Company delivering 14.8% property total return for the year, double that of the MSCI index performance of 7.4%, further building upon the outperformance achieved in previous years. Following the purchase of Freemans Leisure Park, Leicester, subsequent to the year-end, the Company is once again fully invested. ## INDUSTRIAL Investment activity gathered momentum throughout the year, with Q4 2024 marking the strongest quarter since Q3 2022. Total industrial investment volumes for 2024 finished at £8.4 billion, up from £6.5 billion recorded in 2023. During the period, the occupier market for industrial property grew notably, with transaction volumes increasing by 20% compared to the previous year. Distribution companies continued to be the main driver, representing 38% of the market. Manufacturing firms, however, contributed the most significant increase in take-up, with a 36% rise in 2024 compared to the previous year. Average market rental levels continued to grow, rising by 5.5% during 2024, albeit a slowdown in growth compared to 7.6% recorded in 2023. Despite increased occupier demand, the overall vacancy rate rose, climbing from 5.5% at the end of 2023 to 7.3% by the close of 2024. This was principally due to higher levels of development activity. Industrial property remains the largest constituent of the Company's portfolio standing at 38%. In recent years, several sales have decreased the Company's exposure to the sector. Disposals have been driven by a decision to crystallise capital profits from asset management gains and trade in lower-yielding assets in favour of those offering higher yields, such as in the retail sector. The Company's sale of Oak Park, Droitwich during the period was typical of this activity. The portfolio's outperformance of the benchmark in this sector during the period was driven by a high income return. With a low average passing rent of only £3.62 per sq. ft., the sector is expected to continue to deliver strong income growth in the future. AEW UK REIT INDUSTRIAL PERFORMANCE VS. BENCHMARK ![img-4.jpeg](img-4.jpeg) Source: MSCI Year to 31 March 2025 • the Benchmark refers to MSCI AREF PFI Balanced Funds Quarterly Property Index 15 Strategic Report Governance Financial Statements Additional Information ### RETAIL During the period, the all-retail vacancy rate remained We are of the view that the existing retail assets in stable, proving that physical retail is expected to remain the portfolio will continue to perform strongly. This a core component of occupiers’ business strategies is evidenced by the Company’s recent acquisition going forward. This has been a trend that we have of Bancroft in Hitchin, which is fully-let to a range of seen across the retail warehousing sector since 2021, strong-performing national retailers and purchased however, the same can also now be said for the high for a net initial yield of 8.3%. We continue to see an street, particularly prime locations. As such, a cautious attractive pipeline of retail assets in the UK’s investment and location-specific sense of optimism has returned market. Our focus remains on strong locations to the high street, boosted by the first quarter of 2025, underwritten by alternative use values and tenants who which showed a discernible upward trend in retail are known to trade profitably. sales, despite usually being the quietest quarter of the year. Further sales growth is anticipated throughout 2025, driven by an expected increase in real household AEW UK REIT RETAIL income and further interest rate cuts. The impact on PERFORMANCE VS. BENCHMARK retailers of the National Insurance and minimum wage hikes is expected to provide challenges, but occupier 8 distress is currently limited, and many national retailers 7 have reported strong trade, including Next, Footasylum, | DFS, and Waterstones. | 6 | | --- | --- | | Over the course of the past few years, the Company | 5 | | has been counter-cyclically buying retail, increasing | 4 | % its portfolio weighting to 35%. Counter-cyclical buying 3 has allowed the Company to access higher yields, 2 which has benefitted the Company’s performance in this sector relative to the benchmark. The Company’s 1 portfolio also recorded a significantly greater capital 0 return during the period which was predominantly AEW UK REIT Benchmark* driven by Central Six Retail Park in Coventry. This asset Capital Growth Income Return Total Return was sold during the period crystalising an approximate Source: MSCI Year to 31 March 2025 60% premium to the purchase price, having increased * the Benchmark refers to MSCI/AREF PFI the net operating income by circa 54% during its hold Balanced Funds Quarterly Property Index. period. Barnstaple, Barnstaple Retail Park 1616 ### OFFICES Despite a recent improvement in investor sentiment, The Company holds a low exposure to the office market particularly at the top end of the market, investment at only 12% of portfolio value across three assets, one activity continued to waver throughout 2024, with of which has retail and leisure on the ground floor level. transactional volumes 24% below the five-year average. These assets have been selected for their location, with their investment values supported by alternative- In 2024, growth in office-based employment in the UK use values. As such, the portfolio’s office assets have stagnated somewhat after a significant rise in 2023. experienced a greater level of resilience than the Nevertheless, leasing activity saw a slight uptick over wider market in recent years as demonstrated by the the year, reflecting tenants’ preparations for future Company’s performance versus the benchmark during expansion. the period. Across the UK’s major regional office markets, total leased space for 2024 surpassed the five-year average AEW UK REIT Office of four million sq. ft. demonstrating occupational Performance vs. Benchmark momentum heading into 2025. Of particular interest to the Company, due to its exposure at Northgate House 1 and Cambridge House, both in Bath, was the flexible office market, which continued its expansion, attracting a broader range of tenants than in previous years, particularly from the financial and professional services % 0 sectors. The focus for both occupiers and investors continues to be on the best quality space, both in terms of specification and location. Vacancy in newly completed -1 and Grade A space is just 3% of the total stock, and here AEW UK REIT Benchmark* rents have stabilised. In secondary locations and for Capital Growth Income Return Total Return Grade B stock and worse, rents are still on a downward Source: MSCI 31 Year to 31 March 2025 trajectory. Sentiment toward secondary and tertiary * the Benchmark refers to MSCI/AREF PFI Balanced Funds Quarterly Property Index. assets remains subdued, driven by concerns of future obsolescence and refurbishment cost. Bristol, Queen Square 1717 Strategic Report Governance Financial Statements Additional Information Dewsbury, The Railway Centre ### ALTERNATIVES In the leisure market, which constitutes 14% of the Company’s portfolio, experiential leisure has led AEW UK REIT Alternatives the occupier recovery, with tenpin bowling and Performance vs. Benchmark competitive social operators reporting growing 2 profitability during the period. Despite the squeeze on consumer discretionary spend, this sub-sector has, over the past 10 years, helped fuel a significant increase in leisure take-up across the UK’s largest cities, averaging more than 30%. Around 75% of this growth has been % 1 through conversion of existing units, likely former retail and office space, rather than new development, a clear sign of repositioning in action. Improved box office sales will be key to regaining widespread investor confidence in the cinema sector. 0 Both Odeon and Vue refinanced in H1 2024, providing AEW UK REIT Benchmark* greater stability for the sector, with all operators Capital Growth Income Return Total Return predicting a return to profit in 2025. The health and fitness sector continues to experience growth, Source: MSCI Year to 31 March 2025 * the Benchmark refers to MSCI/AREF PFI particularly at the premium and budget end of the Balanced Funds Quarterly Property Index. market. The Company’s portfolio outperformed the benchmark during the period both in terms of income and capital return. This was driven predominantly by a key letting to Tenpin in Dewsbury. This letting was undertaken in competition with traditional retail tenants, with the terms secured as leisure use being considered more lucrative than retail. Sources: Savills UK | Market in Minutes: UK Commercial – February 2025 UK Real Estate Navigator UK Real Estate Market Outlook 2025 Reflecting on the UK Industrial and logistics market in 2024 and looking forward to 2025 18 ## Property ## Portfolio 19 # Property Portfolio SECTOR WEIGHTING BY VALUATION - HIGH INDUSTRIAL WEIGHTING AND LOW EXPOSURE TO OFFICES ![img-5.jpeg](img-5.jpeg) GEOGRAPHIC WEIGHTING BY VALUATION - HIGHLY DIVERSIFIED ACROSS THE UK ![img-6.jpeg](img-6.jpeg) LIKE-FOR-LIKE VALUATION MOVEMENT FOR THE YEAR | SECTOR | VALUATION 31 MARCH 2025 | | LIKE-FOR-LIKE VALUATION MOVEMENT FOR THE YEAR | | | --- | --- | --- | --- | --- | | | VALUATION (£M) | % OF PORTFOLIO | LFL MOVEMENT (£M) | LFL MOVEMENT (%) | | Industrial | 78.60 | 38.42 | 4.63 | 6.26 | | High Street Retail | 43.80 | 21.41 | 2.25 | 7.10 | | Other | 28.90 | 14.13 | 0.48 | 1.67 | | Retail Warehouses | 28.65 | 14.01 | 3.93 | 15.90 | | Office | 24.60 | 12.03 | (0.45) | (1.80) | | Total | 204.55 | 100.00 | 10.84 | 5.89+ | + This is the overall weighted average like-for-like valuation increase of the portfolio. Strategic Report Governance Financial Statements Additional Information 30 ## AEW UK REIT Top Ten Assets ### At year-end, the portfolio’s top 10 assets constituted 50.1% of the overall ### portfolio value. As detailed on the following pages, these are diversified ### across both sector and geography. | | Wrexham | | Bath | | --- | --- | --- | --- | | 1 | | 2 | | | | Gresford Industrial Estate | | Northgate House | | | Dagenham | | Bath | | --- | --- | --- | --- | | 3 | | 4 | | | | London East Leisure Park | | Cambridge House | | | Bristol | | York | | --- | --- | --- | --- | | 5 | | 6 | | | | 40 Queen Square | | 25 George Hudson Street | | | Hitchin | | Shrewsbury | | --- | --- | --- | --- | | 7 | | 8 | | | | Bancroft | | Arrow Retail Park | | | Bristol | | Basildon | | --- | --- | --- | --- | | 9 | | 10 | | | | Union Street | | Apollo Business Park | 21 TOP 10 MARKET VALUE ASSETS SECTOR SQ FT RANGE (£M) Wrexham Industrial 279,541 10.0 – 15.0 ## 1 Gresford Industrial Estate Strategic Report Governance Financial Statements Additional Information TOP 10 MARKET VALUE ASSETS SECTOR SQ FT RANGE (£M) Bath Retail 67,020 10.0 – 15.0 ## 2 Northgate House 22 TOP 10 MARKET VALUE ASSETS SECTOR SQ FT RANGE (£M) Dagenham Leisure 102,400 10.0 – 15.0 ## 3 London East Leisure Park TOP 10 MARKET VALUE ASSETS SECTOR SQ FT RANGE (£M) Bath Office 51,132 10.0 – 15.0 ## 4 Cambridge House 2323 TOP 10 MARKET VALUE ASSETS SECTOR SQ FT RANGE (£M) Bristol Office 36,433 10.0 – 15.0 ## 5 40 Queen Square Strategic Report Governance Financial Statements Additional Information TOP 10 MARKET VALUE ASSETS SECTOR SQ FT RANGE (£M) York Other 19,326 10.0 – 15.0 ## 6 25 George Hudson Street 24 TOP 10 MARKET VALUE ASSETS SECTOR SQ FT RANGE (£M) Hitchin Retail 47,118 5.0 – 10.0 ## 7 Bancroft TOP 10 MARKET VALUE ASSETS SECTOR SQ FT RANGE (£M) Shrewsbury Retail 94,891 5.0 – 10.0 Arrow Retail Park Warehouse ## 8 2525 TOP 10 MARKET VALUE ASSETS SECTOR SQ FT RANGE (£M) Bristol Retail 68,875 5.0 – 10.0 ## 9 Union Street Strategic Report Governance Financial Statements Additional Information TOP 10 MARKET VALUE ASSETS SECTOR SQ FT RANGE (£M) Basildon Industrial 68,813 5.0 – 10.0 ## 10 Apollo Business Park 26 ## AEW UK REIT Property Portfolio ### 14% ### 39% ### Hitchin, Bancroft | | INDUSTRIAL | | | | OTHER | | | | --- | --- | --- | --- | --- | --- | --- | --- | | Baslidon | | | 68,813 | Cardiff | | | 39,470 | | | | Freehold | | | | Freehold | | | Apollo Business Park | | | sq ft | Circuit Nightclub | | | sq ft | | Baslidon | | | 32,857 | Dagenham | | | 102,400 | | | | Freehold | | | | Freehold | | | 1 Bentalls, Pipps Hill Industrial Estate | | | sq ft | London East Leisure Park | | | sq ft | | Bradford | | | 46,629 | Glasgow | | | 26,341 | | | | Freehold | | | | Freehold | | | Knowles Lane | | | sq ft | JD Gyms Glasgow | | | sq ft | | Peterborough | | | 184,114 | Southend | | | 40,635 | | | | Freehold | | | | Leasehold | | | Storey’s Bar Road | | | sq ft | Odeon Cinema | | | sq ft | | Redditch | | | 37,992 | York | | | 19,326 | | | | Freehold | | | | Freehold | | | Eagle Road, North Moons Industrial Estate | | | sq ft | 25 George Hudson Street | | | sq ft | | Rotherham | | | 81,979 | | | | | Freehold Barbot Hall Industrial Estate sq ft Runcorn 82,379 Freehold Sarus Court sq ft Sheffield 121,733 Freehold Brightside Lane sq ft ### 14% St Helens 93,588 Freehold Lea Green Industrial Estate sq ft Wakefield 202,043 Freehold Diamond Business Park sq ft Walsall 136,171 Freehold Brockhurst Cresent sq ft Weston-Super-Mare 323,353 Freehold | Westlands Distribution Park | | sq ft | | RETAIL WAREHOUSE | | | | --- | --- | --- | --- | --- | --- | --- | | Wrexham | | 279,541 | Barnstaple | | | | | | Freehold | | | | | 51,021 | | | | sq ft | | | Freehold | | | Gresford Industrial Estate | | | Barnstaple Retail Park | | | sq ft | | | | | Coventry | | | 15,935 | Mixed Central Six Retail Park sq ft Dewsbury 93,358 Freehold | | The Railway Centre | | sq ft | | --- | --- | --- | --- | | | Preston | | 58,306 | | 21% | | Freehold | | | | Cuerden Way | | sq ft | | | Shrewsbury | | 94,891 | Freehold Arrow Point Retail Park sq ft ### HIGH STREET RETAIL ### 12% Bath 67,020 Leasehold Northgate House sq ft Bristol 68,875 Leasehold Union Street sq ft Bromley 52,415 Leasehold Next sq ft Hitchin 47,118 Freehold | Bancroft | sq ft | | OFFICE | | | --- | --- | --- | --- | --- | | Nottingham | 28,219 | | | | | | | Bath | | 51,132 | Freehold sq ft Freehold Wheeler Gate sq ft Cambridge House Sheffield 5,495 Bristol 36,433 Freehold sq ft Leasehold Fargate sq ft 40 Queen Square Southampton 21,936 Gloucester 37,753 Freehold sq ft Freehold Above Bar Street sq ft Cedar House 27 ## Investment Update Strategic Report Governance Financial Statements Additional Information The Company made one acquisition during the year: RETAIL ### Hitchin, Bancroft In March, the Company completed the purchase of a freehold, high-street retail asset at 13/13A, 114-119, 121-123 Bancroft and 3-4 Portmill Lane in the affluent commuter town of Hitchin for £10,000,000. The purchase price reflects an attractive net initial yield of 8.31% and a capital value of £213 per sq. ft. The property provides accommodation of 47,118 sq. ft. across 12 retail units and a standalone office building, as well as car parking and service yards. The retail elements of the property are fully let to a strong line-up of 14 tenants, with recent leasing activity evidencing the strength of the location. Major tenants include Marks & Spencer plc, Next Group plc, Vodafone Ltd, The White Company and Holland & Barrett. The vacant office element to the rear provides various asset management options in the short-to-medium term, including new lettings or residential conversion. 28 The Company made one disposal and one part-disposal during the year: ### Droitwich, Oak Park Industrial Estate INDUSTRIAL In July 2024, the Company completed the sale of Oak Park Industrial Estate, Droitwich, for £6,300,000, reflecting a net initial yield of 7.95% and a capital value of £33 per sq. ft. A sale at this price represented a circa 33% premium to the 31 March 2024 valuation. Following the completion of three new lettings during 2023, which added £272,000 of annual rental income, the property was fully let. With impending capital expenditure on refurbishment, it was believed that the value of the asset in the medium term had been maximised. The industrial estate was bought in December 2015 for £5,625,000, reflecting a 10.4% net initial yield and a capital value of £30 per sq. ft. ### Coventry, Central Six Retail Park RETAIL WAREHOUSE In December 2024, the Company completed the part-disposal of units 1-11 of Central Six Retail Park, Coventry, for £26,250,000, reflecting a net initial yield of 7.49% and a capital value of £213 per sq. ft. The sale price represented a 60% premium to the purchase price of the entire property which was acquired in November 2021 for £16,411,000 (£110 per sq. ft.), and a 6.7% premium to the 30 June 2024 valuation, being the latest valuation date prior to agreeing sale terms. During its ownership, the Company increased occupancy from 24% to 100% and increased the net operating income by circa 54% by undertaking lettings to tenants including Aldi Stores Limited, Iceland Foods Limited, Next Group plc, Boots UK Ltd, and TJX UK (TK Maxx). Excluding the remaining part of the retail park (Units 12, A(1), A(2) and B), known as the ‘triangle site’, which the Company has retained, the sale delivered an IRR of circa 15%. 29 ## Asset Management Update Strategic Report Governance Financial Statements Additional Information The Company completed the following material asset management transactions during the year: ### Bradford, Knowles Lane INDUSTRIAL The Company completed a lease renewal with Pilkington United Kingdom Limited at an increased rent of £265,000 per annum. The previous rent (payable until September 2024) was £208,000 per annum, representing a 27% increase. On the fifth anniversary of the lease term, there is an open market rent review, as well as a tenant-only break option. ### Peterborough, Storey’s Bar Road The Company settled Walstead Peterborough Limited’s three- yearly RPI rent review (2% collar and 4% cap, compounded annually) at £724,861 per annum (£3.94 per sq. ft.), an £80,462 per annum (12.5%) increase on the previous passing rent of £644,399 per annum (£3.50 per sq. ft.). Despite this notable uplift, the single-let industrial unit is still considered ‘under-rented’ with an ERV greater than £4.00 per sq. ft. ### Redditch, Eagle Road, North Moons Industrial Estate The Company settled Carrs Coatings Ltd’s August 2024 annual uncapped RPI rent review at £304,809 per annum (£8.02 per sq. ft.), representing a £10,461 per annum (circa 3.6%) increase. 30 ### Runcorn, Sarus Court Bromley, Next The Company completed a speculative refurbishment project of units 1001 and 1003, formerly let to CJ Services. The works comprised roof improvements, respraying of external elevations, internal strip-out and decoration, and replacing M&E services to improve the EPC ratings to a B. The cost of the works was £811,578, excluding professional fees. Following practical completion of the project, the Company completed a new lease of Unit 1001 to ODL Europe Ltd. The tenant has entered a straight five-year lease paying a rent of £137,530 per annum (£8.50 per sq. ft.). The tenant has been granted a three-month rent-free incentive. The previous passing rent, prior to refurbishment, was £6.50 per sq. ft. In carrying out the refurbishment, the Company has crystalised significant rental growth from the previous rent. ### Wakefield, Diamond Business Park ### Bristol, Union Street Following a statutory demand being served on the last remaining office tenant of Diamond House, AFI-Uplift Ltd (“AFI”), due to service charge and insurance arrears of £210,967, AFI has paid all of their arrears and surrendered their lease, which was due to expire in November 2027. An early surrender will enable demolition of the entire block, facilitating an industrial open storage letting on the estate. ### Weston-super-Mare, Westlands Distribution Park The Company settled North Somerset District Council’s April 2024 open market rent review at £110,000 per annum ### (£3.61 per sq. ft.), representing a 14% increase on the previous Sheffield, Fargate passing rent. The Company also settled Container Team Limited’s outstanding June 2024 open market rent review at £99,000 per annum, representing a 90% increase on the previous passing rent of £52,000 per annum. The increase in rent reflects the current strength of the UK’s IOS (industrial outdoor storage) occupational market. The Company completed a three-year lease renewal of Unit 3A with Weston & District Community Transport Ltd at a rent of £12,000 per annum. On the first anniversary of the lease term, there is a mutual rolling break option. 31 Strategic Report Governance Financial Statements Additional Information ### Bromley, Next RETAIL The Company agreed Next’s annual turnover top-up rent for the year to 28 September 2024 at £200,791 in addition to the base rent of £350,000 per annum. The Company subsequently completed a lease regear with Next, who will enter a five-year reversionary lease effective from September 2025 in return for rebasing the rent at a fixed amount of £430,000 per annum with nine months’ rent-free, subject to Next completing a refurbishment of the store. Next will continue to pay the existing base rent of £350,000 per annum plus a turnover rent equal to 8% of turnover above £3.5 million until September this year. With the lease regear remaining outside the 1954 Act, this is advantageous to the Company, with the property being an attractive opportunity for a residential developer or an owner-occupier. ### Bristol, Union Street Having completed subdivision works to the former Wilko unit, separating the ground and basement levels from the first floor, the Company completed a new letting of the first floor to Roxy Lanes (Bristol) Ltd (Roxy), who already occupy the second floor of the building. Roxy entered into a new lease until 2036, conterminous with their existing lease of the second floor. The rent, which will be reviewed to RPI (1.50% collar and 4.0% cap, compounded annually) in 2026 and 2031, is £95,000 per annum (£10.55 per sq. ft.) and is guaranteed by Roxy Leisure Holdings Ltd. Roxy was granted a 12-month rent-free period and a £95,000 capital contribution as a letting incentive. The Company also completed a new lease of the ground and basement levels to Grip-UK Ltd (trading as Climbing Hanger), who operate the space as a climbing and bouldering centre. The tenant has entered a 12-year lease, with a tenant break option on the expiry of the tenth year, paying a rent of £300,000 per annum. There will be a five yearly rent review in line with annually compounded CPI (2% collar and 4% cap). The tenant has been granted a 12-month rent-free period. ### Sheffield, Fargate The Company completed a new lease to fashion retailer, Blue Banana Retail Limited. The tenant has entered into a 10-year lease, with a tenant break option on the expiry of the fifth year, paying a rent of £55,000 per annum. There will be a five yearly-rent review to RPI compounded annually (1% collar and 3% cap). The tenant has been granted a seven-month rent-free period. 32 ### Cardiff, Circuit Nightclub OTHER The Company completed an assignment of CC Stim UK Tradeco 5 Ltd’s (in administration) lease to Neos 13 Ltd. There was a simultaneous variation of the lease, revising the rent from £300,000 per annum to a base rent of £175,000 per annum, together with an additional ‘top-up’ rent equivalent to 10% of turnover where turnover exceeds £1.75m per annum, with an aggregate of the combined base rent and turnover rent to be capped at £300,000 per annum. The variation also provides a mutual break clause allowing either party to exercise a break on 1 February or 1 August in any year after August 2026. ### Dagenham, London East Leisure Park Following a protracted exchange of correspondence with The Original Bowling Company Limited (trading as Hollywood Bowl), the turnover rent equating to £276,120 (£92,040 per annum) was billed. 33 Strategic Report Governance Financial Statements Additional Information ### Barnstaple, Barnstaple Retail Park RETAIL WAREHOUSE The Company completed a letting of Unit 2 to Farmfoods Limited, who have taken a 15-year lease, with a tenant break option at the expiry of the tenth year, at a rent of £125,000 per annum (£13.00 per sq. ft.). No rent-free incentive was given, but the unit’s externals were refurbished by the Company, with the cost recovered through a dilapidations settlement with the former tenant. ### Coventry, Central Six Retail Park On 9 December 2024, the Company simultaneously exchanged an agreement for surrender with TUI UK Retail Limited (TUI) and an agreement for lease with Superdrug Stores Plc (Superdrug) for Unit 10. The agreements are conditional upon TUI carrying out works to Unit 10 and a capital contribution of £31,000 from the Company. Once the conditions have been satisfied, Superdrug will enter into a new 10-year lease, with a tenant-only break option in year five, at a rent of £158,760 per annum (£18 per sq. ft.). The letting includes a 12-month rent-free incentive. The Company completed a lease with new tenant, Salvation Army Trading Company Ltd, for Unit 12. The tenant entered a new lease expiring in November 2032, with a tenant-only break option at the end of the fifth year, at a rent of £140,000 per annum (£13.97 per sq. ft.). The letting includes a nine-month rent-free incentive. The Company completed a new lease with TUI UK Retail Limited (TUI) for Unit A (2) on a five-year term, with a tenant- only break option at the end of year three, at a rent of £75,000 per annum (£43.55 per sq. ft.). The letting includes a six-month rent-free incentive and a tenant break penalty equivalent to 12 months’ rent. The Company provided a £174,000 capital contribution for strip-out and subdivision works of the former American Golf unit. The Company completed a new lease of Unit A (1) to Costa Limited. The tenant has entered a lease expiring in November 2032, with a tenant break option on the expiry of the fifth year, paying a rent of £65,000 per annum. There will be a five-yearly open market rent review capped at 2.5%, compounded annually. The tenant has been granted a six-month rent-free period. 34 ### Dewsbury, The Railway Centre The Company completed a 25-year lease with leisure operator, Tenpin Limited, of the former Mecca Bingo space. The lease provides a passing rent of £378,470 per annum (£13.59 per sq. ft.), with five-yearly compounded CPI reviews (1% collar and 3% cap). There is a tenant break option in year 17.5. At the time of Mecca Bingo vacating, the unit had an ERV of £8.00 per sq. ft. A £1,550,000 capital contribution was given as a tenant incentive, with the Company carrying out strip-out and enabling works at a cost of £383,352. ### Bath, Cambridge House OFFICE The Company completed a new lease on the ground and basement floors with premium gym operator, Marchon Bath Ltd (trading as Marchon). The tenant has entered a straight 10-year lease paying a rent of £70,000 per annum. Lease completion was subject to the completion of circa £90,000 landlord strip-out works. There will be a five-yearly upwards only rent review to the higher of open market or annually compounded RPI (2% collar and 4% cap). The tenant has been granted a 12-month rent-free period. This will be Marchon’s fourth location, including White City and Stratford, both in London, as well as Harpenden. ### Bristol, 40 Queen Square A circa £200,000 refurbishment project has commenced on the former Ramboll Whitbybird (Ramboll) space on the first floor (north). Ramboll’s dilapidation liability was settled at £37,888, therefore net capital expenditure equates to approximately £162,000. Approximately £450,000 has been spent undertaking a refurbishment project of vacant space on the first floor (north) as well as the building’s communal reception area. About two-thirds of the cost invested in the building during the period has been recoverable from tenants via service charges and dilapidations payments. 35 ## Principal Risks ## and Uncertainties Strategic Report Governance Financial Statements Additional Information The Company’s assets consist of UK commercial property. Its principal risks are therefore related to the commercial property market in general, but also to the particular circumstances of the individual properties and the tenants within the properties. The Board has overall responsibility for reviewing the effectiveness of the system of risk management and internal control which is operated by the Investment Manager. The Company’s ongoing risk management process is designed to identify, evaluate and mitigate the significant risks the Company faces. At least twice a year, the Board undertakes a formal risk review through the Audit and Risk Committee, to assess the adequacy and effectiveness of the Investment Manager and other service providers’ risk management and internal control processes. The Audit and Risk Committee is responsible for reviewing the principal and emerging risks facing the Company and, in liaison with the Investment Manager, advises the Board on these risks. Stated movements in the probability or impact of risks is in comparison to the prior year end. The Board has carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. An analysis of the principal risks and uncertainties is set out below. The risks below do not purport to be exhaustive as some risks are not yet known and some risks are currently not deemed material but could turn out to be material in the future. POLITICAL/ECONOMIC KEY REAL ESTATE 1. Property market 4 2. Property valuation 15 2 3. Tenant default 4. Asset management initiatives 14 5. Due diligence 5 6. Fall in rental rates 7. Breach of borrowing covenants 13 1 8. Availability and cost of debt 9. Dependence on the 6 Investment Manager and 3 Other Service Providers 10. Failure to meet objectives 7 11. Business interruption 12. Company REIT status 10 13. General political/economic environment 14. Environmental transition risk 9 12 15. Physical risk to buildings TAXATION 8 BORROWING 11 CORPORATE Principal risk impact High Medium Low Low Probability of risk Moderate High The matrix above illustrates the Company’s assessment of the impact and probability of the principal risks identified. 36 ### REAL ESTATE RISKS ### 1. Property Market PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT Any property market recession or future The Company has investment restrictions in place Probability: deterioration in the property market to invest and manage its assets with the objective High could, inter alia, of spreading and mitigating risk. Impact: (i) cause the Company to realise its The Investment Manager actively monitors Moderate to High investments at lower valuations; net debt to mitigate the need for sub-optimal Movement: (ii) delay the timings of the Company’s investment disposals. No change realisations; and (iii) cause a deterioration in the rating of the Company’s shares as a result of declining sentiment, thereby reducing ### shareholder return. 5. Due diligence These risks could have a material adverse effect on the ability of the Company to achieve its investment objective. ### 2. Property valuation PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT Property and property-related assets are The Company uses an independent external Probability: inherently difficult to value due to the valuer (Knight Frank LLP) to value the properties Low individual nature of each property. at fair value in accordance with accepted RICS Impact: appraisal and valuation standards. There may be an adverse effect on the High Company’s profitability, NAV and the Property valuations are subject to an independent ### Movement: 6. Fall in rental rates price of Ordinary Shares in cases where statutory audit on an annual basis. No change property valuations have been materially The Audit and Risk Committee Chair attends misstated. quarterly valuation meetings on a recurring basis. ### 3. Tenant default PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT Failure by tenants to fulfil their rental Comprehensive due diligence is undertaken on all Probability: obligations could affect the income new tenants. Tenant covenant checks are carried High that the properties earn and the ability out on all new tenants where a default would have Impact: of the Company to pay dividends to its a significant impact. Moderate to High shareholders. The asset management team conducts ongoing Movement: monitoring and liaison with tenants to manage No change potential bad debt risk. Tenant concentration is also monitored on an ongoing basis to ensure that a single tenant failure would not significantly impact the Company’s financial performance. 37 Strategic Report Governance Financial Statements Additional Information ### 4. Asset management initiatives PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT Asset management initiatives, such as Costs incurred on asset management initiatives Probability: refurbishment works, may prove to be are closely monitored against budgets and Low to Moderate more extensive, expensive and take reviewed in regular presentations to the Impact: longer than anticipated. Cost overruns Investment Management Committee of the High may have a material adverse effect on the Investment Manager. Company’s profitability, the NAV and the Movement: share price. No change ### 5. Due diligence PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT Due diligence may not identify all the risks The Company’s due diligence benefits from work Probability: and liabilities in respect of an acquisition (such as legal reports on title, property valuations, Low (including any environmental, structural environmental and building surveys) outsourced Impact: or operational defects) that may lead to a to third parties who have expertise in their areas. Moderate material adverse effect on the Company’s Such third parties have professional indemnity profitability, the NAV and the price of the cover in place. Movement: Company’s Ordinary Shares. No change ### 6. Fall in rental rates PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT Rental rates may be adversely affected The Company builds a diversified property and Probability: by general UK economic conditions tenant base with subsequent monitoring of Moderate and other factors that depress rental concentration to individual occupiers and sectors Impact: rates, including local factors relating to (geographical and sector exposure). Moderate to High particular properties/locations (such as The Investment Manager holds quarterly meetings increased competition). Movement: with its Investment Strategy Committee and No change regularly meets the Board of Directors to assess Any fall in the rental rates for the whether any changes in the market present risks Company’s properties may have a that should be addressed in the Company’s material adverse effect on the Company’s strategy. profitability, the NAV, the price of the Ordinary Shares and the Company’s ability to meet interest and capital repayments on any debt facilities. 38 ### BORROWING RISKS ### 7. Breach of borrowing covenants 9. Dependence on the Investment Manager ### and Other Service Providers PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT Material adverse changes in valuations The Company monitors the use of borrowings Probability: and net income may lead to breaches on an ongoing basis through weekly cash flow Low in the Loan to Value (‘LTV’) and interest forecasting and quarterly risk monitoring to Impact: cover ratio covenants. monitor financial covenants. Moderate to High Significant headroom currently exists for both Movement: loan covenants. No change The Investment Manager maintains a close relationship with its loan finance provider, AgFe, to ensure continuing dialogue around covenants. ### 8. Availability and cost of debt PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT In tandem with any future growth of the The Company maintains a good relationship with Probability: Company, renewed and additional debt the lender providing the term credit facility. Low funding is considered. It is acknowledged The Company monitors the projected usage Impact: that the current interest rate environment and covenants of the credit facility on an Moderate may constrain the financial viability of ongoing basis. further debt funding and that renewal of Movement: The Company actively monitors the debt markets debt may be on less favourable terms. No change and loan term, engaging in loan extension negotiations far in advance of expiry. 39 Strategic Report Governance Financial Statements Additional Information ### CORPORATE RISKS ### 9. Dependence on the Investment Manager ### and Other Service Providers PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT The Company has no employees and The Investment Manager has endeavoured Probability: is reliant upon the performance of its to ensure that the principal members of its Moderate to High Investment Manager and other third management team are suitably incentivised. Impact: party service providers. Failure by the The performance of service providers, in Moderate Investment Manager and/or any service conjunction with their service level agreements, provider to carry out its obligations to the Movement: is monitored via regular calls and face-to-face Company in accordance with the terms No change meetings and the use of key performance of its appointment could have a materially indicators, where relevant. detrimental impact on the operation of The Investment Manager encourages a team- the Company. The future ability of the based approach with the Board and its suppliers Company to successfully pursue its in order to promote an effective working culture. investment objective and investment policy may, among other things, depend on the ability of the Investment Manager to retain its existing staff and/or to recruit individuals of similar experience and calibre. 40 ### 10. Failure to meet objectives PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT The Company may not meet its The Company has an investment policy to achieve Probability: investment objective to deliver an a balanced portfolio with a diversified asset and High attractive total return to shareholders from tenant base. The Company also has investment Impact: investing predominantly in a portfolio restrictions in place to limit exposure to potential Moderate to High of smaller commercial properties in the risk factors. The Investment Manager has extensive United Kingdom. experience in navigating market volatility. Movement: No change Poor relative total return performance may The Company has the ability to pay dividends from lead to an adverse reputational impact current year revenue as well as revenue reserves that affects the Company’s ability to raise and realised capital. new capital or maintain an attractive rating in its shares. The Company may not pay its target dividend. ### 11. Business interruption PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT Cyber attacks on the Investment The Investment Manager’s and other service Probability: Manager’s and/or other service providers’ providers’ IT systems are protected by anti-virus Low to Moderate IT systems could lead to operational software and firewalls that are updated regularly. Impact: disruption, reputational damage, Fire protection and access security procedures Moderate regulatory (including GDPR) or financial exist at all the Company’s managed properties, loss to the Company. Movement: along with the offices of its Investment Manager No change and other service providers. 41 Strategic Report Governance Financial Statements Additional Information ### TAXATION RISKS ### 12. Company REIT status PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT The Company has a UK REIT status that The Company monitors REIT compliance through Probability: provides a tax-efficient corporate structure. the Investment Manager on acquisitions; the Low If the Company fails to remain a REIT for Administrator on asset and distribution levels; Impact: UK tax purposes, its profits and gains will the Registrar and Broker on shareholdings; and Moderate to High be subject to UK corporation tax. the use of third-party tax advisers to monitor REIT compliance requirements. Movement: Any change to the tax status or UK No change tax legislation could impact on the Company’s ability to achieve its investment objectives and provide attractive returns to shareholders. ### POLITICAL/ECONOMIC RISKS ### 13. General political/economic environment PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT Political and macroeconomic events The Board considers the impact of political and Probability: present risks to the real estate and macroeconomic events when reviewing strategy. High financial markets that affect the Company Impact: and the business of its tenants. Moderate to High These might damage consumer and Movement: investor sentiment as real income and No change wealth levels are challenged by these exogenous events. Conflicts in the Middle East and Eastern Europe, as well as political and economic disruptions caused by tariffs, have all heightened the risks in the last year. 42 ### 14. Environmental transition risk PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT Failure to identify and mitigate the The Company has engaged specialist Probability: transition risk for climate change could environmental consultants to advise the Board Moderate lead to the Company holding stranded on compliance with regulatory requirements Impact: assets and lead to a negative impact on and adopting best practice where possible. All Moderate its reputation. Failure by the Company to prospective acquisitions and asset management meet required regulatory standards could initiatives are influenced by environmental Movement: lead to increased stakeholder concern assessments undertaken by the Company, such No Change and negative feedback. as ensuring they are in conformance with the Minimum Energy Efficiency Standard (‘MEES’) Regulations. All assets have an Asset Sustainability Action Plan (‘ASAP’) initiative, which tracks environmental initiatives across the portfolio on an asset-by-asset basis for targeted, relevant and specific implementation of environmental improvements. ### 15. Physical risk to properties PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT HOW RISK IS MANAGED RISK ASSESSMENT The risk of physical damage to properties The Company obtains environmental surveys for Probability: as a result of environmental factors such all acquisitions, which mitigate the short-term risk Low as flooding and natural fires. In the long- of climate-related damage to properties owned. Impact: term, changes in climate and/or weather The Investment Manager’s asset management Moderate to High systems may mean properties become team perform regular site visits to the Company’s unviable to tenants. properties in order to continually assess the Movement: physical risk posed to them. This includes climate No Change resilience assessments. 43 ## Alternative Investment ## Fund Manager (‘AIFM’) Strategic Report Governance Financial Statements Additional Information AEW UK Investment Management LLP is authorised and regulated by the FCA as a full-scope AIFM and provides its services to the Company. The Company has appointed Langham Hall UK Depositary LLP (‘Langham Hall’) to act as the depositary to the Company, responsible for cash monitoring, asset verification, and oversight of the Company. Information Disclosures under the AIFM Directive Under the AIFM Directive, the Company is required to make disclosures in relation to its leverage under the prescribed methodology of the Directive. Leverage The AIFM Directive prescribes two methods for evaluating leverage, namely the ‘Gross Method’ and the ‘Commitment Method’. The Company’s maximum and actual leverage levels are as per below: 31 MARCH 2025 31 MARCH 2024 COMMITMENT COMMITMENT LEVERAGE EXPOSURE GROSS METHOD METHOD GROSS METHOD METHOD Maximum Limit 140% 140% 140% 140% Actual 118% 134% 130% 137% In accordance with the AIFM Directive, leverage is expressed as a percentage of the Company’s exposure to its NAV and adjusted in line with the prescribed ‘Gross’ and ‘Commitment’ methods. The Gross method is representative of the sum of the Company’s positions after deducting cash balances and without taking into account any hedging and netting arrangements. The Commitment method is representative of the sum of the Company’s positions without deducting cash balances and taking into account any hedging and netting arrangements. For the purposes of evaluating the methods above, the Company’s positions primarily reflect its current borrowings and NAV. Remuneration The AIFM has adopted a Remuneration Policy which accords with the principles established by AIFMD. AIFMD Remuneration Code Staff includes the members of the AIFM’s Management Committee, those performing Control Functions, Department Heads, Risk Takers and other members of staff that exert material influence on the AIFM’s risk profile or the AIFs it manages. Staff are remunerated in accordance with the key principles of the firm’s remuneration policy, which include: – promoting sound risk management; – supporting sustainable business plans; – remuneration being linked to non-financial criteria for Control Function staff; – incentivising staff performance over longer periods of time; – awarding guaranteed variable remuneration only in exceptional circumstances; and – having an appropriate balance between fixed and variable remuneration. As required under section ‘Fund 3.3.5.R(5)’ of the Investment Fund Sourcebook, the following information is provided in respect of remuneration paid by the AIFM to its staff for the year ended to 31 December 2024 44 31 DECEMBER 2024 Total remuneration paid to employees during the financial year: | a) | remuneration, including, where relevant, any carried interest paid by the AIFM: | £11,779,657 | | --- | --- | --- | | b) | the number of beneficiaries | 74 | The aggregate amount of remuneration of the AIFM Remuneration Code staff, broken down by: | a) | senior management | £3,948,361 | | --- | --- | --- | | b) | members of staff | £7,831,296 | | | FIXED REMUNERATION | VARIABLE REMUNERATION | TOTAL REMUNERATION | | --- | --- | --- | --- | | Senior Management | £2,129,944 | £1,818,417 | £3,948,361 | | Staff | £5,553,932 | £2,277,364 | £7,831,296 | | **Total** | **£7,683,876** | **£4,095,781** | **£11,779,657** | Fixed remuneration comprises basic salaries and variable remuneration comprises bonuses. ### AEW UK Investment Management LLP 26 June 2025 ![img-7.jpeg](img-7.jpeg) 48 ## Stakeholder Engagement Strategic Report Governance Financial Statements Additional Information ### S172 STATEMENT The Directors’ overarching duty is to promote the success of the Company for the benefit of its shareholders, having regard to the interests of its other stakeholders, as set out in section 172 of the Companies Act 2006 (the ‘Act’). The Directors have considered each aspect of this section of the Act and consider that the information set out below is particularly relevant in the context of the Company’s business as an externally managed investment company which does not have any employees and relies on the contracted services from its key agents and suppliers. We set out in the table below our key stakeholders, the nature of their relationship with the Company and Board, their key interests and how we engage with those stakeholders. Our relationships with stakeholders are factored into Board discussions and decisions made by the Board will consider the impact on the stakeholders, in accordance with s172 of the Act. STAKEHOLDER INTERESTS ENGAGEMENT Investors Our shareholders are impacted – Sustainable growth of the – AGM, Annual and Interim directly by the financial Company and achieving Report, regulatory performance of the Company target returns announcements through dividends and share – Good relationship with the – Quarterly update reports price movements. Company and Board and other key information They also play an important role published on the website – Effective structure and in monitoring the governance of control framework – Roadshows, meetings the Company. and presentations via the – Impact of the Company on Investment Manager, and the wider community and the Company’s Broker and environment marketing agents – Reputation of the Company Service providers Key functions of the Company – Good relationship with the – Effective and regular are outsourced to third-party Company and Board communication suppliers, including investment – Fair contract terms and – Service-level agreements management, property service-level agreements management, administration, – Formal tender processes company secretarial, registrar, – Reputation of the Company where appropriate depositary and legal services. It – The Company’s performance – Management Engagement is important to develop strong and long-terms prospects Committee review long-term working relationships with these providers to enhance the efficiency of the Company’s operations, as well as that of the providers themselves. 46 STAKEHOLDER INTERESTS ENGAGEMENT Tenants The Company’s strategy in – Good communication – Site visits and face-to-face relation to its individual assets and relationship with the meetings through the will directly affect the tenants in Company as landlord Investment Manager occupation of those assets. – Fair lease terms – Formal negotiations – Long-term strategy for – Ongoing communication the asset in line with the through the property objectives of the tenant’s manager activities The wider community and environment The Company’s physical – Impact of properties and – Publishing of Sustainability real estate assets have a their business plans on the Disclosure Report and direct impact on their local local economy Greenhouse Gas Emissions communities depending on Statement – Impact of properties on the their primary use and on the attractiveness and appeal of – Global Real Estate environment through their the local area Sustainability Benchmark emissions and energy usage. (‘GRESB’) reporting – Energy efficiency and greenhouse gas emissions – Communication with local authorities via Investment Manager Wrexham, Gresford Industrial Estate 4747 Strategic Report Governance Financial Statements Additional Information ### PRINCIPAL DECISIONS MADE BY THE BOARD The principal decisions made by the Board during the year are summarised below. Dividends The Board considered the Company’s target dividend of 8.00 pps per annum and approved payment of it, continuing the Company’s track record in paying dividends at this level. Continued focus on sustainability The Board has continued its focus on responsible business practices. impact and GRESB score More details on sustainability impact and GRESB score can be found in the Directors’ Report on pages 71 to 76. The Investment Manager meets regularly with MAPP and Evora, its ESG consultants, to consider initiatives to improve the Company’s GRESB score. Oversight of Investment Manager The Board is responsible for the ongoing review of investment activity and and Review of Investment Activities performance and the control and supervision of the Investment Manager. During the year, the following key investment activities were reviewed by the Board: – The acquisition of 13-13A, 114-123 Bancroft and 3-4 Portmill Lane, Hitchen; – The disposal of Oak Park Industrial Estate, Droitwich; and – The disposal of Units 1-11, Central Six Retail Park, Coventry. Further details of the property transactions can be found in the ‘Property Portfolio’ section of the Investment Manager’s Report. Corporate Initiatives The Board and Investment Manager assessed the Company’s ability to grow through a variety of initiatives, including capital raising and M&A. Such opportunities continue to be reviewed. Further information on the Company’s engagement with stakeholders and its ESG policy can be found on pages 46 and 75. Approval The Strategic Report has been approved and signed on behalf of the Board by: Robin Archibald Chairman of the Board 26 June 2025 48 ## Governance Strategic Report Governance Financial Statements Additional Information Runcorn, Sarus Court ## Board of Directors ### Robin Archibald Mark Kirkland non-executive Chairman of the Board, non-executive Director, and Chairman and Chairman of the Management of the Audit and Risk Committee Engagement Committee Mr Archibald was formerly Head of Corporate Finance Mr Kirkland qualified as a Chartered Accountant with and Broking at Winterflood until April 2014 when PricewaterhouseCoopers in London and has extensive he retired from his executive roles. He is a Chartered corporate experience gained over 30 years, having Accountant and worked as a Corporate Financier held several senior roles in both public and private with a number of leading city firms, including SG companies. Mr Kirkland’s initial career was in corporate Warburg Securities and NatWest Markets. Robin has finance, predominately with UBS Limited. He has been concentrated for much of his career on advising and CFO of several public and private companies and managing transactions in the UK listed closed-ended latterly was CEO of Delin Property, a pan-European funds sector. He is currently Chairman of Shires Income logistics developer, investor and manager. He is Trust, having been Chair of Albion Technology Venture currently an Executive Director of Kelso Group Capital Trust and former Audit Chair and SID of Ediston Holdings plc and Non-Executive Director of Property Investment Company, Henderson European Strix Group Holdings plc. Trust and Capital Gearing Trust, roles he retired from in Appointed: 9 November 2022 recent years. Appointed: 1 October 2023 5151 Strategic Report Governance Financial Statements Additional Information ### Katrina Hart Liz Peace non-executive Director, and non-executive Director, and Chairman of the Nomination and Senior Independent Director Remuneration Committee Mrs Hart spent her executive career in corporate Mrs Peace spent her early career in Government in the finance and equity research advising, analysing Ministry of Defence, eventually becoming a key player and commenting on a broad range of businesses in the creation of QinetiQ plc in 2001. She then moved operating in the wealth and asset management into the private sector, becoming Chief Executive of sectors. During this period, she accumulated an the British Property Federation where she played a in-depth understanding of the commercial dynamics significant role in the creation of the UK’s Real Estate and operational drivers of asset management and Investment Trust structure. She was awarded a CBE in worked very closely with some of the most respected 2008 for services to the property industry. Mrs Peace companies in the sector. Latterly, she was a highly rated has a non-executive portfolio career primarily focused financials analyst at HSBC, Bridgewell Group Plc and on real estate, including NED roles at Howard de headed up the financials research team at Canaccord Walden Estates Ltd, Greencore Homes Ltd, and the Genuity Inc. Royal Institution of Chartered Surveyors where she is the Senior Independent Governor. She is chair of the Mrs Hart is Chairman of BlackRock Frontiers Investment University of Cambridge Property Board and of Nuclear Trust plc and JPMorgan UK Small Cap Growth and Waste Services, an operating company of the Nuclear Income plc and a non-executive Director of Montanaro Decommissioning Authority. She is also chair of the Asset Management Limited. She was formerly a Churches Conservation Trust, a secular organisation non-executive Director of Premier Miton Group Plc, looking after 358 redundant Church of England Polar Capital Global Financials Trust plc and Keystone churches. Positive Change Investment Trust plc. Appointed: 1 October 2023 Appointed: 5 June 2017 5252 ## Corporate Governance ## Statement This Corporate Governance Statement comprises pages 53 to 60 and forms part of the Directors’ Report. ### STATEMENT FROM THE CHAIRMAN OF THE BOARD ### The Company is committed to maintaining high standards of corporate ### governance and considers that reporting against the principles and ### recommendations of the AIC Code of Corporate Governance issued in ### 2024 (the ‘AIC Code’), provides better information to shareholders as it ### addresses all the principles set out in the UK Corporate Governance Code ### issued in 2024 (the ‘UK Code’), as well as setting out additional principles ### and recommendations on issues that are of specific relevance to investment ### trusts, and is endorsed by the Financial Reporting Council (the ‘FRC’). ### The terms of the FRC’s endorsement mean that AIC members who report ### against the AIC Code fully meet their obligations under the UK Code and ### the related disclosure requirements contained in the Listing Rules. The AIC ### Code is available from the AIC website at theaic.co.uk. A copy of the UK ### Code can be obtained at frc.org.uk. The Board recognises the importance of a strong corporate governance culture and has established a framework for corporate governance which it considers to be appropriate. The UK Code includes provisions relating to: – the role of the chief executive; and – executive directors’ remuneration. For the reasons set out in the AIC Code, the Board considers these provisions not relevant to the position of the Company, being an externally managed REIT. In particular, all of the Company’s day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions. The Board has reviewed the principles and recommendations of the AIC Code and considers that the Company has complied with these throughout the year. Mrs Peace was appointed as the Board’s Senior Independent Director, and additional Board Committees were established in January 2025 (a Nomination and Remuneration Committee and Management Engagement Committee). Bath, Northgate House 5353 Strategic Report Governance Financial Statements Additional Information Runcorn, Sarus Court Chairman ### THE BOARD OF DIRECTORS The Chairman leads the Board and is responsible for Under the leadership of the Chairman, the Board of its overall effectiveness in directing the Company. Directors is collectively responsible for the long-term He promotes a culture of openness and debate sustainable success of the Company. It provides overall and facilitates constructive Board relations and the leadership, sets the strategic aims of the Company effective contribution of all Directors. In liaison with and ensures that the necessary resources are in place the Company Secretary, he ensures that the Directors for the Company to meet its objectives and fulfil its receive accurate, timely and clear information. obligations to shareholders within a framework of The Chairman was independent on appointment high standards of corporate governance and effective and is deemed by his fellow Board members to be internal controls. The Directors are responsible for independent in character and judgement and free of determining the Company’s investment policy and any conflicts of interest. He considers himself to have investment strategy and have overall responsibility sufficient time to spend on the affairs of the Company for the Company’s activities, including the review of and no conflicting activities. investment activity and performance and supervision of the Investment Manager. The document setting out the responsibilities of the Chairman is available on the Company’s website. The The Board consisted of five non-executive Directors Board’s policy is that the Chairman will serve for a up to Mr Burton’s retirement at the AGM in September maximum of nine years in order to be consistent with 2024. Mr Archibald was appointed as Chairman of the requirement for regular Board refreshment. the Board following the AGM, and the Board now consists of four independent non-executive Directors. Board Operation The Board seeks to ensure that it has an appropriate The Board has adopted a formal schedule of matters balance of skills and experience, and considers that, reserved for decision by the Board. These matters collectively, the Directors have substantial recent and include: relevant experience of the property sector, investment companies and financial and public company – responsibility for the determination of the management. Company’s investment objective and policy; The terms and conditions of the appointment of – overall responsibility for the Company’s activities, Directors are formalised in letters of appointment, including the review of investment activity, gearing, copies of which are available for inspection from the performance and supervision of the Investment Company’s registered office. None of the Directors Manager; has a contract of service with the Company. On – approval of Annual and Half-Yearly Reports and appointment, non-executive Directors undertake that Financial Statements and accounting policies, they will have sufficient time to meet the expectations of prospectuses, circulars and other shareholder the role. Directors are not entitled to any compensation communications; for loss of office. – raising new capital and approval of financing facilities; – approval of the valuation of the Company’s portfolio of assets; – approval of the periodic announcement of the NAV of the Company; – Board appointments and removals; and – appointment and removal of the Investment Manager, Auditor and the Company’s other service providers. 54 Board Meetings The Nomination and Remuneration Committee comprises all the non-executive Directors and is chaired The Company has four scheduled Board meetings a by Mrs Hart. Further details about this Committee and year, with additional meetings held to approve NAV its activities can be found on pages 66 to 70. announcements and dividends, and other meetings arranged as necessary. At each Board meeting, the The Management Engagement Committee comprises Directors follow a formal agenda which is circulated in all the non-executive Directors and is chaired by advance by the Company Secretary. The Administrator, Mr Archibald. The Committee is responsible for Investment Manager and the Company Secretary monitoring and evaluating the Investment Manager’s regularly provide the Board with financial information, and other key service providers’ performance. together with briefing notes and papers in relation to The MEC was established during the year, including changes in the Company’s economic and financial its remit as distinct from the Board, and its activities environment, statutory and regulatory changes and included analysis of the services provided by all the corporate governance best practice. A description of key agents to the Company, including AEW, the costs the Company’s risk management and internal control of those services and how effective the agents were systems is set out on page 59. in performing their services. The services of the audit The Company’s main functions are delegated to a firm remains under the remit of the Audit and Risk number of service providers, each engaged under committee. The MEC reported to the Board that it was separate contracts. The management of the Company’s satisfied with the services provided and that changes portfolio is delegated to the Investment Manager, to individuals providing the services during the course who manages the assets in accordance with the of the year had been managed successfully. The Company’s investment objective and policy. At each MEC commended the services provided by AEW in Board meeting, representatives from the Investment managing the portfolio and the resultant performance Manager attend to present reports to the Directors record for the Company. The MEC continues to covering the Company’s current and future activities, challenge costs, given the size of the Company, but portfolio of assets and its investment performance over recognises that in order to address an ambition for the preceding period. The Board and the Investment growth over the medium term, as well as providing the Manager operate in a fully supportive, co-operative and service level required for a listed REIT, with gearing, the open environment, and communication with the Board operating costs will be higher than might be the case is maintained between scheduled meetings. for an equity investment company. Board Committees The Company has three Committees: the Audit and Risk Committee, the Nomination and Remuneration Committee, and the Management Engagement Committee (“MEC”). The Nomination and Remuneration Committee and the Management Engagement Committee were established in January 2025. Each Committee’s delegated responsibilities are clearly defined in formal terms of reference, which are available on the Company’s website. The Audit and Risk Committee comprises all the non- executive Directors and is chaired by Mr Kirkland, who has recent and relevant financial experience. Given the size and nature of the Board, it is felt appropriate that all Directors are members of the Audit and Risk Committee. The Board is satisfied that the combined knowledge and experience of its members is such that the Committee discharges its responsibilities in an effective, informed and challenging manner. The Committee as a whole has competence relevant to the investment trust sector. Further details about this Committee and its activities can be found on pages 61 to 64. Redditch, Eagle Road, North Moons Industrial Estate 5555 Strategic Report Governance Financial Statements Additional Information ### MEETING ATTENDANCE The table below sets out the number of scheduled Board and Committee meetings attended by each Director during the year ended 31 March 2025. The Board met on a number of occasions during the year, outside the normal cycle of board meetings, to discuss corporate issues affecting the Company. NOMINATION AND BOARD AUDIT AND RISK COMMITTEE REMUNERATION COMMITTEE MANAGEMENT ENGAGEMENT MEETINGS MEETINGS MEETINGS COMMITTEE MEETINGS NUMBER OF NUMBER NUMBER OF NUMBER NUMBER OF NUMBER NUMBER OF NUMBER MEETINGS ATTENDED MEETINGS ATTENDED MEETINGS ATTENDED MEETINGS ATTENDED Robin Archibald 6 6 2 2 1 1 1 1 Katrina Hart 6 6 2 2 1 1 1 1 Mark Kirkland 6 6 2 2 1 1 1 1 Liz Peace 6 6 2 2 1 1 1 1 Mark Burton* 6 3 2 1 1 – 1 – * Retired on 4 September 2024. ### PERFORMANCE EVALUATION The Board has a formal process to evaluate its performance annually through the Nomination and Remuneration Committee. The Chairman acts on the results of the evaluation by recognising the strengths and addressing any weaknesses of the Board, as appropriate. The evaluation of the Chairman is carried out by the other Directors of the Company, led by Mrs Peace as the Senior Independent Director. The evaluation covers: – the performance of the Board and its Committees, including how Directors work together as a whole; – the balance of diversity, skills, experience, independence and knowledge of the Directors; and – identification of areas for improving Board performance as well as key priorities ahead. The Board seeks to ensure that it has an appropriate balance of skills and experience, and considers that, collectively, it has substantial recent and relevant experience of investment trusts, the UK real estate sector, and financial and capital markets. ### DIRECTORS’ INDEPENDENCE The Board considers and reviews the independence of each non-executive Director on an annual basis as part of the Directors’ performance evaluation. In carrying out the review, consideration is given to factors such as their character, judgement, commitment and performance on the Board and its Committees. Following review, all Directors are considered to be independent of the Investment Manager and free from any business or other relationship that could materially interfere with the exercise of his or her independent judgement. The Nomination and Remuneration Committee leads the appointment process for any new Directors through the use of an independent search firm. 56 ### DIVERSITY Board Diversity The Board’s policy on diversity is to ensure that the Directors on the Board have a broad range of experience, skills and knowledge, with diversity of thinking, background and perspective. Appointments to the Board are made on merit against objective criteria, having regard to the benefits of diversity and the current and future needs of the business and the other factors set out in the AIC Code. Diversity, including, but not limited to, gender, social background, ethnicity, age, sexual orientation, disability and professional and industry-specific knowledge, is an important consideration in ensuring that the Board and its committees have the right balance of skills, experience, independence and knowledge necessary to discharge their responsibilities. The Board notes the FCA rules on diversity and inclusion on company boards, namely, that from accounting periods starting on or after 1 April 2022: a. At least 40% of individuals on the Board to be women; b. At least one senior Board position to be held by a woman; and c. At least one individual on the Board to be from a minority ethnic background. The Board continues to develop its succession planning in line with these recommendations. In accordance with Listing Rule 6 Annex 1, the tables below, in prescribed format, show the gender and ethnic background of the Directors at the date of this Report. The Board has complied with two out of the three recommendations and will look to address the third as part of ongoing succession planning whilst recognising that maintaining a small, closely functioning Board is an important requisite of the Company given its size. PERCENTAGE NUMBER OF NUMBER OF ON THE SENIOR POSITIONS BOARD MEMBERS BOARD ON THE BOARD Men 2 50% 1 Women 2 50% 1 Not specified/prefer not to say – – – PERCENTAGE NUMBER OF NUMBER OF ON THE SENIOR POSITIONS BOARD MEMBERS BOARD ON THE BOARD White British or other White 4 100% 2 (including minority white groups) Mixed/Multiple ethnic groups – – – Asian/Asian British – – – Black/African/Caribbean/Black British – – – Other ethnic group, including Arab – – – Not specified/prefer not to say – – – The data in the above tables was collected through self-reporting by the Directors. Each Board member is also a Director of the Company’s subsidiary, AEW UK REIT 2015 Limited. 57 Strategic Report Governance Financial Statements Additional Information Hitchin, Bancroft ### DIRECTOR INDUCTION AND TRAINING RE-ELECTION AND TENURE OF DIRECTORS All Directors receive an induction on joining the The Board recognises the value of regular refreshment Board and other relevant training as necessary. As the of its composition and remains committed to ensuring business environment changes, it is important to ensure that it has the right mix of skills and experience that the Directors’ skills and knowledge are refreshed and are aligned with the evolution and strategic plans of updated regularly. Accordingly, the Company Secretary the Company, while maintaining its independence of ensures that updates on corporate governance, character and judgement. regulatory and technical matters are provided to In accordance with the requirements of the AIC Code, Directors at Board meetings. In this way, Directors keep the Board has adopted a policy whereby all Directors their skills and knowledge relevant to enable them to stand for annual re-election and no Director will serve continue to fulfil their duties effectively. Each Director for a period of more than nine years, unless there are has access to the advice and services of the Company specific circumstances where it makes sense for a Secretary, who is responsible to the Board for ensuring Board member to continue beyond nine years. that Board procedures are followed and that applicable rules and regulations are complied with. On the basis of the performance evaluation process, the Board considers that all Directors continue to be effective, committed to their roles and have sufficient ### DIRECTORS’ CONFLICTS OF INTEREST time available to perform their duties. The Board therefore believes that it is in the best interests of Directors have a statutory duty to avoid situations in shareholders that each of the Directors is re-elected at which they have or may have interests that conflict the forthcoming AGM. with those of the Company, unless that conflict is first authorised by the Board. This includes potential ### conflicts that may arise when a Director takes up SUCCESSION PLANNING a position with another company. The Company’s Articles of Association allow the Board to authorise The composition of the Board and succession planning such potential conflicts, and there is a procedure in are kept under review by the Board and reviewed place to deal with any actual or potential conflict of annually as part of the Board evaluation process in interest. The Board deals with each appointment on its order to ensure an orderly refreshment of the Board. individual merit and takes into consideration all relevant Succession planning will be important for the coming circumstances. A register of conflicts is maintained year and the next refresh will be ahead of Mrs Hart’s by the Company Secretary and is reviewed at Board retirement at the 2026 AGM. meetings to ensure that any authorised conflicts remain appropriate. The Directors are required to confirm at these meetings whether there has been any change to their position. 58 ### CULTURE The Directors are aware that establishing and maintaining a healthy and constructive culture amongst the Board and in its interaction with the Investment Manager, other service providers, shareholders and other stakeholders will support the delivery of the Company’s purpose, values and investment strategy. The Board seeks to promote a culture of openness, transparency and integrity through ongoing dialogue and engagement with its stakeholders, principally the Investment Manager, as well as providing constructive challenge where required. The Company has a number of policies and procedures in place to assist with maintaining a culture of good governance including those relating to diversity, Directors’ conflicts of interest and Directors’ dealings in the Company’s shares. The Board assesses and monitors compliance with these policies as well as the general culture of the Board regularly through Board meetings and in particular during the annual evaluation process. The Board seeks to appoint the best possible service providers and evaluates their services on a regular basis as described on page 74. The Board considers the culture of the Investment Manager and other service providers, including their policies, practices and behaviour, through regular reporting from these stakeholders and in particular during the annual review of the performance and continuing appointment of all service providers by the Management Engagement Committee. ### INTERNAL CONTROL REVIEW The Board is responsible for the systems of internal controls relating to the Company, including the reliability of the financial reporting process, and for reviewing the systems’ effectiveness. The Directors have reviewed and considered the guidance supplied by the FRC on risk management, internal control and related finance and business reporting, and an ongoing process is in place for identifying, evaluating and managing the principal and emerging risks faced by the Company. This process, together with key procedures established with a view to providing effective financial control, was in place during the year under review and at the date of this report. The internal control systems are designed to ensure that proper accounting records are maintained, that the financial information on which business decisions are made and which is issued for publication is reliable, and that the assets of the Company are safeguarded. The risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Company’s objectives. It should be recognised that such systems can only provide reasonable, not absolute, assurance against material misstatement or loss. The Directors have carried out a review of the effectiveness of the systems of internal control as they have operated over the period and up to the date of approval of the Annual Report and Financial Statements. There were no matters arising from this review that required further investigation, and no significant failings or weaknesses were identified. Bristol, Union Street 5959 Strategic Report Governance Financial Statements Additional Information Internal Control Assessment Process Robust risk assessments and reviews of internal controls are undertaken regularly in the context of the Company’s overall investment objective. The following are the key internal controls which the Company has in place: – a risk register has been maintained against which identified and emerging risks, as well as the controls in place to mitigate those risks, can be monitored. The risks of any failure of internal controls are identified in the risk matrix, which is regularly reviewed by the Board through the Audit and Risk Committee and the impact of such risks is also assessed. The principal and emerging risks and uncertainties identified from the risk matrix can be found in the Strategic Report on pages 36 to 43; – a procedure to monitor the compliance status of the Company to ensure that it can continue to be approved as a REIT; – the Investment Manager and the Administrator prepare forecasts and management accounts which allow the Board and the Audit and Risk Committee to assess performance and prospects; and – the controls employed by the Investment Manager and other third-party service providers, as evidenced by their ISAE 3402 or equivalent reports, are periodically reviewed by the Audit and Risk Committee, and there are agreed and defined investment criteria, specified levels of authority and exposure limits in relation to investments, leverage and payments. Over and above the ongoing process, as part of the year-end reporting process, the Board and the Audit and Risk Committee receive letters of comfort from the Investment Manager, Company Secretary, Administrator and Registrar regarding their internal controls, accompanied by their ISAE 3402, or equivalent reports, if available. Following the review of these submissions from service providers, the Board and the Audit and Risk Committee has determined that the effectiveness of the systems of internal control was satisfactory. ### AGM The Company’s AGM will take place on 4 September 2025. The notice of this meeting and details of the resolutions to be put to the AGM are contained in the circular sent to shareholders with this report and are available on the Company’s website. Dewsbury, The Railway Centre 60 ## Report of the Audit ## and Risk Committee ### Mark Kirkland Chairman of the Audit and Risk Committee ### I am pleased to present the Report of the Audit and Risk Committee for the ### year ended 31 March 2025. ### The Audit Committee was renamed to the “Audit and Risk” Committee in ### January 2025 to reflect the Committee’s role in overseeing the Company’s ### internal controls and risk management systems. The Audit and Risk ### Committee (the “Committee”) comprises all Directors of the Company. ### The Directors have reviewed Mr Archibald’s ongoing membership of ### the Committee given that he is Chair of the Board. Mr Archibald was ### independent on his appointment as Chairman of the Board and provides ### a significant contribution to the Committee as a chartered accountant and ### experienced former audit chair on other investment companies, including a ### REIT; as such, the Directors believe it is important for him to continue to be ### a member of the Committee. The Committee as a whole has competence ### relevant to the sector in which the Company operates. 61 Strategic Report Governance Financial Statements Additional Information – reviewing and monitoring the Auditor’s ### MEETINGS independence, objectivity and effectiveness; and The Committee met formally twice during the year – reviewing any non-audit services to be provided by and met once following the year-end. Details of the the Auditor and monitoring the level of fees payable composition of the Committee are set out in the in that respect. Corporate Governance Statement on page 55 along with details on how the Committee’s evaluation process ### MATTERS CONSIDERED DURING THE YEAR was conducted. There was also regular engagement throughout the year on individual matters as well as The Committee receives reports from external advisers input to the quarterly net asset value announcements. and from the Investment Manager, as required, to enable it to discharge its duties. ### ROLE OF THE AUDIT AND RISK COMMITTEE The main activities undertaken during the year, and to the date of this Annual Report, were that the The Committee’s terms of reference outlining its Committee: duties can be found on the Company’s website. The Committee assists the Board in discharging its – reviewed the internal controls and risk management responsibilities concerning: systems of the Company and its third-party service providers; – financial reporting; – kept under close review the risk environment – going concern and viability; to identify any significant emerging risks to be – internal controls and risk management systems; addressed; – principal risks and uncertainties; – reviewed the reporting environment for the Company to help refresh Key Performance – compliance, whistleblowing and fraud; Indicators, Risk Factors and Alternative Performance – external audit; and Measures; – valuation. – agreed the plan and fees with the Auditor in respect of the review of the Half-Yearly Report for This includes: the six months ended 30 September 2024 and the – monitoring the integrity of the financial statements statutory audit of the Annual Report for the year of the Company, including its Annual and Half- ended 31 March 2025, including the principal areas Yearly Reports, and reviewing significant financial of focus; reporting issues and judgements which they – received and discussed with the Auditor its report contain; on the results of the review of the Half-Yearly Report – reviewing the content of the Annual Report and and the year-end audit; Financial Statements and advising the Board on – reviewed the Annual and Half-Yearly Reports and whether, taken as a whole, it is fair, balanced and recommended these to the Board for approval; understandable and provides the information necessary for shareholders to assess the – reviewed the performance and effectiveness of the Company’s position and performance, prospects, Auditor and considered its fees; business model and strategy; – reviewed the non-audit services provided by the – keeping under review the adequacy and Auditor and the associated fees incurred; and effectiveness of the Company’s risk management – reviewed Knight Frank’s valuation of investment systems, reviewing the principal and emerging risks properties. facing the Company; and reviewing and approving the statements to be included in the Annual Report – With effect from 18 March 2025, CBRE was concerning internal controls and risk management; appointed independent property valuer to the Company for periods from 30 June 2025 onwards, – reviewing the scope and effectiveness of the audit in accordance with RICS valuer rotation best process undertaken by the Auditor; practice. The term of instruction for regulated – conducting the tender process and making purpose valuations will commence on 30 June recommendations to the Board in relation to the 2025 and expire on 29 June 2030, encompassing appointment, re-appointment or removal of the quarterly valuations in respect of the properties Auditor and approving its remuneration and terms during that period. of engagement; 62 Going Concern and Long-term ### SIGNIFICANT ISSUES CONSIDERED Viability of the Company ### BY THE AUDIT AND RISK COMMITTEE The Committee considered the Company’s financial requirements for the next 12 months and concluded Valuation of Investment Properties that it has sufficient resources to meet its commitments. The Committee determined that the key area of risk Consequently, the financial statements have been in relation to the financial statements of the Company prepared on a going-concern basis. The Committee was the valuation of the investment properties. The 33 also considered the longer-term viability statement properties in the portfolio as at 31 March 2025 were covering five years, and the underlying factors and externally valued by qualified independent valuers, assumptions which contributed to the Committee using the internationally accepted Royal Institution of deciding that this was an appropriate length of time Chartered Surveyors (‘RICS’) Valuation – Professional to consider the Company’s long-term viability. This Standards, and whilst comparable market transactions included a specific examination of long-term debt provide valuation evidence, there are assumptions arrangements in place, and those which might be in which involve significant levels of judgement. The place in the future. The Company’s going concern Committee considered the quarterly and year-end statement and the viability statement can be found on valuations of the Company’s portfolio, which were pages 72 and 73. discussed with the Investment Manager and the Auditor during the audit of the financial statements. ### AUDIT FEES AND NON-AUDIT SERVICES Internal Controls The Committee has sole responsibility for agreeing the The Committee carefully considers the internal control audit fee in consultation with the Investment Manager, systems by regularly monitoring the services and based on the scope of the audit. The total audit fees for controls of its third-party service providers. the year ended 31 March 2025 can be found in note The Committee reviewed and, where appropriate, 5 to the Financial statements. During the year ended updated the risk matrix during the year to take account 31 March 2025, the Committee reviewed the policy of principal and emerging risks. It received reports on on the engagement of the Auditor to supply non-audit internal control and compliance from the Investment services, taking into account the recommendations Manager and the Company’s other service providers, of the FRC. All non-audit services are reviewed by the and no significant matters of concern were identified. Committee, which makes recommendations to the Board for the provision of each non-audit service and Internal Audit ensures that the statutory auditor is not engaged to The Company does not have an internal audit function. perform work that is prohibited under UK law. During the year, the Committee reviewed whether an internal audit function would be of value and The Auditor is permitted to provide non-audit related concluded that this would provide minimal additional services where the work involved is closely related to comfort at considerable extra cost to the Company. the work performed in the audit. These include: While the Committee believes that the existing system – reviews of interim Financial information; of monitoring and reporting by third parties remains appropriate and adequate, it will actively continue, on – reporting on internal Financial controls when an annual basis, to consider possible areas within the required by law or regulation; Company’s control environment which may need to be – reporting required by law or regulation to be reviewed in detail. provided by the Auditor; and Maintenance of REIT Status – prospectus/capital markets reporting. The Committee monitored the compliance status of The policy was reviewed and its application monitored the Company and considered the requirements for the by the Committee during the year, and it was agreed maintenance of REIT status, including all applicable tax that the policy remained appropriate for the Company. legislation. This was the first full year where an external review of REIT obligations was provided by a separate accounting firm, Grant Thornton, throughout the financial year. 63 Strategic Report Governance Financial Statements Additional Information | | YEAR ENDED 31 MARCH 2025 | YEAR ENDED 31 MARCH 2024 | | --- | --- | --- | | **Audit** | **£237,000** | £190,000 | | Statutory audit of Annual Report and Financial Statements | **£197,700** | £190,000 | | Under accrual from prior year | **£39,300** | - | | **Non-audit** | **£36,000** | £36,000 | | ISRE (UK) 2410 (interim review fee) | **£36,000** | £36,000 | | **Total fees paid to BDO LLP** | **£273,000** | **£226,000** | | **Percentage of total fees attributed to non-audit services** | **13%** | **16%** | ## INDEPENDENCE AND OBJECTIVITY OF THE AUDITOR It is the Committee's responsibility to monitor annually the performance, objectivity and independence of the Auditor. In evaluating BDO LLP's ('BDO') performance, the Committee examined five main criteria - robustness of the audit process, independence and objectivity, quality of delivery, quality of people and service, and value-added advice. Having carried out the above review, the Committee was satisfied with the Auditor's performance and that the engagement of BDO to provide the non-audit services was appropriate, and did not compromise its objectivity and independence. ## EXTERNAL AUDIT PROCESS The Committee reviews the effectiveness of the external audit carried out by the Auditor on an annual basis. At least twice a year, the Committee meets with the Auditor, once at the planning stage before the audit and once after the audit at the reporting stage. The Auditor provides a planning report in advance of the annual audit, a report on the annual audit and a report on its review of the interim financial statements. The Committee has an opportunity to question and challenge the Auditor in respect of each of these reports. During the year under review, BDO carried out the half-year review for the Company. The Chairman of the Committee maintains regular contact with the audit partner throughout the year. In addition, at least once a year, the Committee has an opportunity to discuss any aspect of the Auditor's work with the Auditor in the absence of the Investment Manager. After each audit, the Committee reviews the audit process and considers its effectiveness. The review of the 2025 audit concluded that the audit process worked well, and no significant issues were identified specifically in relation to the Company. We consider that the audit team assigned to the Company by BDO has a good understanding of the Company's business, which enables it to produce a detailed, high-quality, in-depth audit and permits the team to scrutinise and challenge the Company's financial procedures and significant judgments. We asked the Auditor to explain the key audit risks and how these have been addressed. We also considered BDO's internal quality control procedures and transparency report and found them to be sufficient. Overall, the Committee is satisfied that the audit process is transparent and of good quality and that the Auditor has met the agreed audit plan. **Mark Kirkland** Chairman of the Audit and Risk Committee 26 June 2025 64 ## Directors’ Remuneration Report ### Katrina Hart Chairman of the Nomination and Remuneration Committee ### This report is prepared in accordance with Schedule 8 to the Large and ### Medium-sized Companies and Groups (Accounts and Reports) Regulations ### 2008, as amended, and in accordance with the UK Listing Rules of the FCA ### and the Companies Act 2006. An ordinary resolution for the approval of ### this report will be put to shareholders at the forthcoming Annual General ### Meeting (“AGM”). ### The Company’s Remuneration Policy was last put to shareholders and ### approved by ordinary resolution at the AGM held on 14 September 2023 ### under Section 439 of the Companies Act 2006. The Remuneration Policy will ### be put to a binding shareholder vote at the 2026 AGM and, if approved, will ### continue in force until the 2029 AGM. There have been no changes to the ### content of the Remuneration Policy since the previous approved version. ### The law requires the Company’s Auditor to audit certain of the disclosures ### provided. Where disclosures have been audited, they are indicated as such. ### The Auditor’s opinion is included in their report on pages 92 to 100. 65 ## STATEMENT FROM THE CHAIRMAN OF THE NOMINATION AND REMUNERATION COMMITTEE I am pleased to present the Directors' Remuneration Report for the year ended 31 March 2025, which has been prepared by the Nomination and Remuneration Committee. This Committee was established in January 2025 and has since met once on 21 January 2025. It consists entirely of non-executive Directors and is responsible for board appraisal, succession planning and determining and agreeing the remuneration policy for the Directors of the Company and the Chairman of the Board to ensure that the policy supports strategic aims and promotes the long-term sustainable success of the Company. During the year under review, the Committee: - Assessed the size, composition and structure of the Board, the time commitment required of the Directors and the leadership needs of the Company; - Deliberated on the re-election of Directors at the AGM; - Evaluated board performance and planning; - Examined remuneration trends across its peer group; - Reviewed the Directors' expenses policy; and - Considered the Directors' fees, how they might be structured and amended in line with reasonable expectations of roles and responsibilities. The Committee also noted the FCA's rules on diversity and inclusion on company boards included in Listing Rule 6.6.6 (9-11), which are as follows: - At least 40% of individuals on the Board to be women; - At least one senior Board position to be held by a woman; and - At least one individual on the Board to be from a minority ethnic background. The Board has complied with two out of the three recommendations and will look to address the third as part of ongoing succession planning. The Committee believes that the current Board possesses the necessary skills and experience to meet the needs of the Company, while retaining a relatively small and cohesive structure. Any succession planning will consider diversity, additional skills and the preservation of the collective competence and chemistry of the Board. No changes to the Board are anticipated during 2025. It had been anticipated that I would need to retire at the time of the 2025 AGM due to my promotion to the role of Chair on another listed investment company board. However, due to a reduction in my commitments elsewhere since then, this is no longer necessary. It is therefore anticipated that I will retire at the end of my nine-year tenure in 2026, as originally envisaged. The Committee is satisfied that all Directors remain independent, demonstrate commitment and skill in their roles, are not overboarded through other activities and that there is the correct balance of skill and experience to acquit the responsibilities of the Board. During the year, the Committee conducted a thorough review of the Directors' fees in accordance with the Remuneration Policy and the circumstances of the Company. This review considered the Company's performance, the demands placed on the Directors' skills and time, and the fees paid to non-executive Directors in the Company's peer group. The review also took account of the size and cost of the Board relative to peers. Following consultations with Panmure Liberum (the Company's broker) and MUFG Corporate Governance Limited (the Company Secretary), it was agreed that, effective 1 April 2025, fees would be adjusted as follows: - The base remuneration for all non-executive Directors would be increased from £30,000 to £32,000. - An additional £16,000 would be added to the base remuneration for the Chairman of the Board, recognising the additional commitment required. - An additional £7,500 would be added to the base remuneration for the Chairman of the Audit and Risk Committee. - An additional £2,000 would be added to the base remuneration for those Directors taking on the role of the Chairman of the Nomination and Remuneration Committee, the Chairman of the Management Engagement Committee and the role of the Senior Independent Director. Mr Archibald agreed to take on the role of the Chair of the Management Engagement Committee, but would relinquish it if succession planning permitted. Strategic Report Governance Financial Statements Additional Information 66 | Chairman of the Board | £38,000 to £50,000 | Applying to Robin Archibald (Chairman of the Board and Management Engagement Committee) | | --- | --- | --- | | Chairman of the Audit and Risk Committee | £32,500 to £40,000 | Applying to Mark Kirkland (Chairman of the Audit and Risk Committee) | | Non-executive Director | £30,000 to £34,000 | Applying to Katrina Hart (Chairman of the Nomination and Remuneration Committee) and Liz Peace (Senior Independent Director) | With effect from 1 April 2025, the total aggregate fees for the Board increased from £136,500 to £158,000, and the Board is satisfied that these changes comply with the Directors' Remuneration Policy and are appropriate to the increasing time commitment and expertise required to fulfil the role effectively. The Board's review of remuneration across the Company's peer group highlighted that its own compensation had fallen materially out of kilter. It was deemed necessary to address this divergence in view of the need to attract suitable talent at the time of the next Board refreshment. The Company's Articles of Association permit the provision of pensions or similar benefits for Directors. However, no pension schemes or similar arrangements have been established, and no Director is entitled to any pension or similar benefits. Directors are not entitled to compensation for loss of office, nor are they entitled to any other monetary payment or assets of the Company. Accordingly, the Single Total Figure table on page 68 does not include columns for these items or their monetary equivalents. An ordinary resolution to approve the Directors' Remuneration Report will be put to shareholders at the forthcoming AGM in 2025. No significant changes are proposed to the implementation of the current Directors' Remuneration Policy, approved by shareholders in 2023, during the next financial year. ## PERFORMANCE OF THE COMPANY The chart below compares the share price total return to shareholders (assuming all dividends are reinvested) with the total return on the FTSE 350 and FTSE 350 Real Estate indices since the inception of the Company. These indices have been chosen as they are considered to be an appropriate benchmark against which to assess the relative performance of the Company. ![img-8.jpeg](img-8.jpeg) 67 ## VOTING AT AGM The Directors' remuneration report for the year ended 31 March 2024 and the Directors' remuneration policy were approved by shareholders at the AGM held on 4 September 2024 and 14 September 2023 respectively. The results taken on a poll were as follows: | REMUNERATION REPORT 2024 | NUMBER OF VOTES CAST | PERCENTAGE OF VOTES CAST | | --- | --- | --- | | For | 41,540,759 | 99.17 | | Against | 346,954 | 0.83 | | Total votes cast | 41,887,713 | - | | Number of votes withheld | 80,941 | - | | REMUNERATION POLICY 2023 | NUMBER OF VOTES CAST | PERCENTAGE OF VOTES CAST | | --- | --- | --- | | For | 28,871,860 | 99.02 | | Against | 286,268 | 0.98 | | Total votes cast | 29,158,128 | - | | Number of votes withheld | 114,384 | - | ## DIRECTORS' REMUNERATION FOR THE YEAR ENDED 31 MARCH 2025 (AUDITED) | NAME OF DIRECTOR | FEES | | TOTAL | | % CHANGE IN DIRECTORS' FEES | | --- | --- | --- | --- | --- | --- | | | 2025 | 2024 | 2025 | 2024 | | | Robin Archibald+ | £34,508 | £15,000 | £34,508 | £15,000 | N/A | | Mark Kirkland | £35,000 | £32,500 | £35,000 | £32,500 | 7.69 | | Katrina Hart | £30,000 | £30,000 | £30,000 | £30,000 | - | | Liz Peace+ | £30,000 | £15,000 | £30,000 | £15,000 | N/A | | Mark Burton++ | £16,126 | £38,000 | £16,126 | £38,000 | N/A | | Bim Sandhu+++ | - | £17,500 | - | £17,500 | N/A | | | £145,634 | £148,000 | £145,634 | £148,000 | | + appointed on 1 October 2023. ++ retired on 4 September 2024. +++ retired on 30 September 2023. Robin Archibald, who operates between Edinburgh and London, incurred travel expenses which were reimbursed of £725. Liz Peace incurred travel expenses which were reimbursed of £93. Total expenses claimed £818 (2024: none). There are no additional fees to disclose since the Company has no employees or executive directors. The figures detailed in the Directors' Remuneration Report pertain solely to Director remuneration, with no variable elements payable to the Directors. The Company is committed to ongoing dialogue with shareholders. Any views expressed by shareholders regarding the fees paid to Directors will be taken into consideration by the Board when reviewing the Directors' remuneration policy and during the annual review of Directors' remuneration. Strategic Report Governance Financial Statements Additional Information 65 ### ANNUAL PERCENTAGE CHANGE IN DIRECTORS’ REMUNERATION The following table sets out the annual percentage change in Directors’ Fees for the previous four years to 31 March 2025. | | | | | | | | | | | % CHANGE | | % CHANGE | | % CHANGE | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | IN TOTAL | | IN TOTAL | | IN TOTAL | | | YEAR ENDED | | YEAR ENDED | | YEAR ENDED | | YEAR ENDED | | REMUNERATION | | REMUNERATION | | REMUNERATION | | | | 31 MARCH | | 31 MARCH | | 31 MARCH | | 31 MARCH | | BETWEEN 2024 | | BETWEEN 2023 | | BETWEEN 2022 | | | DIRECTOR | | 2025 | | 2024 | | 2023 | | 2022 | | AND 2025 | | AND 2024 | | AND 2023 | Robin Archibald* £34,508 £15,000 N/A N/A N/A N/A N/A Mark Kirkland £35,000 £32,500 £10,894 N/A 7.69 N/A – Katrina Hart £30,000 £30,000 £27,500 £27,500 – 9.09 – Liz Peace* £30,000 £15,000 N/A N/A N/A N/A N/A Mark Burton** £16,126 £38,000 £35,000 £35,000 N/A 8.57 – Bim Sandhu*** – £17,500 £32,500 £32,500 – N/A – * appointed on 1 October 2023. ** retired on 4 September 2024. *** retired on 30 September 2023. ### RELATIVE IMPORTANCE OF SPEND ON PAY The table below sets out, in respect of the year ended 31 March 2025: a. the remuneration paid to the Directors; b. the management fee and expenses, which have been included to give shareholders a greater understanding of the relative importance of spend on pay; and c. distributions to shareholders by way of dividends. | YEAR ENDED | | | YEAR ENDED | | | | --- | --- | --- | --- | --- | --- | | | 31 MARCH | | | 31 MARCH | | | | | 2025 | | | 2024 CHANGE | Directors’ fees £145,634 £148,000 (£2,366) Management fee and expenses £1,379,245 £1,391,335 (£12,090) Dividends paid £12,673,980 £12,673,980 – Note: the items listed in the table above are as required by the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 s.20, except for the management fee and expenses, which has been included because the Directors believe that they will help shareholders’ understanding of the relative importance of the spend on pay. The figures for these measures are the same as those shown in note 5 to the financial statements. 69 ## STATEMENT OF DIRECTORS' SHAREHOLDINGS AND SHARE INTERESTS (AUDITED) Neither the Company's Articles of Association nor the Directors' Letters of Appointment require a Director to own shares in the Company. The interests of the Directors and their persons closely associated in the equity of the Company as of 31 March 2025 are shown in the table below: | DIRECTOR | NUMBER OF ORDINARY SHARES | | % OF TOTAL VOTING RIGHTS | | | --- | --- | --- | --- | --- | | | 2025 | 2024 | 2025 | 2024 | | Robin Archibald | 22,329 | - | 0.014 | - | | Katrina Hart | 19,145 | 19,145 | 0.012 | 0.012 | | Liz Peace | 15,666 | - | 0.009 | - | | Mark Kirkland | - | - | - | - | The Company has not been informed of any changes to the above interests between 31 March 2025 and the date of this report. ### Approval The Directors' Remuneration Report has been approved by the Board of Directors and signed on its behalf by: **Katrina Hart** Chairman of the Nomination and Remuneration Committee 26 June 2025 Strategic Report Governance Financial Statements Additional Information 10 Bromley, Next ## Directors’ Report ### The Directors’ Report, prepared in accordance with the requirements of the ### Companies Act 2006 and the FCA’s Listing Rules and Disclosure Guidance ### and Transparency Rules, comprises pages 71 to 90 and incorporates the ### Corporate Governance Statement on pages 53 to 60. ### DIVIDENDS POWER OF DIRECTORS The Company pays dividends every quarter. The Directors’ powers are determined by UK legislation and the Company’s Articles of Association. The Articles The interim dividends paid by the Company are set out of Association may be amended by a special resolution in note 11 of the financial statements. No final dividend of the members. The Directors may exercise all of is being proposed. the Company’s powers, provided that the Articles of Association or applicable legislation do not stipulate ### DIRECTORS that any such powers must be exercised by the members. The Directors of the Company are listed on pages 51 and 52. All served throughout the year under review. ### INDEMNITY PROVISIONS Save for such indemnity provisions in the Company’s Articles of Association, there are no qualifying third- party indemnity provisions in force. The Board has agreed to a procedure by which Directors may seek independent professional advice, if necessary, and at the Company’s expense. The Company has also arranged for appropriate provision of Directors’ and Officers’ Liability Insurance. 71 ## GOING CONCERN The Directors assessed the Company's ability to continue as a going concern, which takes into consideration current economic uncertainty, as well as the Company's cashflows, financial position, liquidity and borrowing facilities. As at 31 March 2025, the Company had £25.99 million of unrestricted cash at bank. The Company's loan is held with AgFe and is a £60.00 million facility with a five-year term. This is priced as a fixed rate loan with a total interest cost of 2.959% and associated 10% projected debt yield and 60% loan to value ("LTV") covenants. The Company reported an LTV of 33.87% at year-end. This provides room for a £71.88 million fall in portfolio valuation before breaching the 60% hard LTV covenant. Moreover, based on the £60.00 million of debt drawn as at year-end, the Company had a projected debt yield of 25.11%, comfortably in excess of the 10% covenant. The Company benefits from a secure, diversified income stream from a tenancy profile which is not overly reliant on any one tenant or sector, which reduces risk. The Directors also noted that: - The Company's rent collection has been strong, with 98% of contracted rent either having been collected, or payment plans agreed, for the March 2025 quarter. - Based on the contracted rent as at 31 March 2025, a reduction of 60.18% in net rental income could be accommodated before breaching the debt yield covenant in the Company's re-financed debt arrangements. - Based on the property valuation at 31 March 2025, the Company had room for a £71.88 million fall in portfolio valuation before breaching the maximum LTV hard covenant in the Company's re-financed debt arrangements. - The Company's cash flow can also be significantly managed through the adjustment of dividend payments, to the extent that this does not breach the REIT regime requirements for distributions. Taking this into consideration, the Directors have reviewed a number of scenarios over 12 months from the date of approval of these financial statements, including a worst-case plausible downside scenario which makes the following assumptions: - a reduction in net rental income of 30%; - no new lettings or renewals, other than those where terms have already been agreed; - a 20% fall in property valuations; and - no new acquisitions or disposals. In the above scenario, the Company is forecast to generate a positive cash flow before dividend payments, however it would generate a cash flow much lower than its target dividend of 8 pps per annum. Moreover, the Company is forecast to pass the debt yield covenant during the 12-month period with a minimum projected yield of 18%, compared with the limit of 10%, assuming that no repayments of the facility were to be made. Given the Company's substantial headroom against its borrowing covenants, the Directors believe that the Company is well placed to manage its financing and business risks. The Directors are confident that the Company will have sufficient funds to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore the financial statements have been prepared on a going concern basis. ![img-9.jpeg](img-9.jpeg) Strategic Report Governance Financial Statements Additional Information 7/7 In assessing the Company’s viability, the Board has ### VIABILITY STATEMENT carried out a thorough review of the Company’s business model, including future performance, The Directors have assessed the prospects of the refinancing, REIT compliance, liquidity, dividend cover Company over a period longer than the 12 months and banking covenant tests over a five-year period. required by the ‘Going Concern’ provisions. The The business model is subject to annual sensitivity Board has considered the nature of the Company’s analysis, which involves flexing a number of key assets, liabilities and associated cash flows, and has assumptions underlying the forecasts both individually determined that five years up to 31 March 2030 is the and in aggregate for normal and stressed conditions. maximum timescale over which the performance of The five-year review also considers whether financing the Company can be forecast with a material degree of facilities will be renewed as required. accuracy and so is an appropriate period over which to assess the Company’s viability. Considerations in The following scenarios were tested, both individually support of the assessment of the Company’s viability and combined, in an effort to represent a severe but over a five-year period include: plausible scenario: – the Company’s property portfolio has a WAULT of – a reduction in net rental income of 30%; 5.73 years to expiry, representing a secure income – a 20% fall in portfolio valuation; and stream for the period under consideration; – increased periods of vacancy. – the Company benefits from a portfolio which is diversified in terms of sector and location, Based on the result of this analysis, the Directors have a mitigating the risk of tenant default during the reasonable expectation that the Company will be able period; and to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment. – most leases contain a five-year rent review pattern and therefore an assessment over five years allows ### the Directors to assess the impact of the portfolio’s SUBSIDIARY COMPANY reversion arising from rent reviews. Details of the Company’s dormant subsidiary, AEW UK REIT 2015 Limited, can be found in note 19 to the financial statements. Baslidon, 1 Bentalls, Pipps Hill Industrial Estate 7373 Strategic Report Governance Financial Statements Additional Information | MANAGEMENT ARRANGEMENTS | FINANCIAL RISK MANAGEMENT | | --- | --- | | AEW UK Investment Management LLP is the | The financial risk management objectives and policies | | Company’s Investment Manager and has been | can be found in note 22 to the financial statements. | appointed as the AIFM. Under the terms of the Investment Management Agreement, the Investment ### SOCIAL, COMMUNITY AND Manager is responsible for the day-to-day discretionary ### management of the Company’s investments subject EMPLOYEE RESPONSIBILITY to the investment objective and policy of the Company and the overall supervision of the Directors. The Company is an externally managed REIT and has The Investment Manager is entitled to receive a no direct employees. The management of the portfolio quarterly management fee in respect of its services, has been delegated to the Investment Manager who calculated at the rate of one-quarter of 0.9% of the provides the employees that support the Company. prevailing NAV (excluding uninvested proceeds All other functions of the Company have also been from fundraisings). There is no performance fee. Any outsourced and as the Company has no employees, investment by the Company into the Core Fund is there is no further reporting in respect of these not subject to management fees or performance fees provisions. otherwise charged to investors in the Core Fund by the The Investment Manager is an equal opportunities Investment Manager. The Investment Management employer who respects and seeks to empower each Agreement may be terminated by the Company or the individual and the diverse cultures, perspective, skills Investment Manager, giving 12 months’ written notice. and experiences within its workforce. For further information on the Investment Manager’s principles ### CONTINUING APPOINTMENT in relation to people including diversity, gender pay, employee satisfaction surveys, wellbeing and retention, ### OF THE INVESTMENT MANAGER please refer to the ESG link within the Corporate Responsibility area at www.aewukreit.com. The Board has reviewed the appropriateness of the continuing appointment of the Investment Manager, The Company is not required to produce a statement ensuring the terms and conditions of the Investment on slavery and human trafficking pursuant to the Management Agreement align with the investment Modern Slavery Act 2015 as it does not satisfy all policy and investment objective of the Company. It is the relevant triggers under that Act that require such satisfied that the terms of the Investment Management a statement. The Company does, however, closely Agreement remain fair and competitive, and in the best monitor the policies of its suppliers to ensure that interests of shareholders. proper provisions are in place. In the opinion of the Directors, the continuing AEW UK Investment Management LLP, the Investment appointment of the Investment Manager is in the Manager to the Company, is part of the Natixis Group, interests of shareholders as a whole. The Investment whose statement on Slavery and Human Trafficking has Manager has and continues to manage the Company’s been published in accordance with the Modern Slavery portfolio and continues to apply the Company’s Act 2015. investment policy and investment level. https://natixis.groupebpce.com/wp-content/ uploads/2022/11/Modern-Slavery-Act-statement-2024. ### REVIEW OF SERVICE PROVIDERS pdf The Management Engagement Committee and the Board reviews the ongoing performance and the continuing appointment of all service providers of the Company on an annual basis. Any variation required to the terms of all service providers’ agreements is also considered. A review of all service providers was undertaken during the year by the Management Engagement Committee, which concluded that the services provided to the Company were satisfactory and that their continued appointments were in the best interests of the shareholders. 74 MIFID II ### HOW WE ENGAGE WITH STAKEHOLDERS As an externally managed REIT with a listing as a Investors closed-ended investment fund under Chapter 11 of the FCA’s Listing Rules, the PRIIPS (Packaged Retail The Investment Manager maintains an open dialogue and Insurance-based Investment Products) regulation with shareholders and analysts. All feedback is applies to the Company. The Company is required provided to the Board on a regular basis. to publish a Key Information Document (‘KID’) that is The Company provides investors with regular updates updated on a semi-annual basis on the Company’s on its business activity and financial performance. website www.aewukreit.com. Quarterly factsheets are available, along with Annual/ Half Year accounts and London Stock Exchange ### ENVIRONMENTAL, SOCIAL RNS announcements, on the Company’s website ### www.aewukreit.com. AND GOVERNANCE POLICY Shareholders are encouraged to contact the The Investment Manager is committed to creating Investment Manager to raise any matters of concern long-term value for shareholders and adhere to a and to attend the AGM, where possible, to meet and Socially Responsible Investment (‘SRI’) Policy that discuss the Company’s operations with the Board. can be found on AEW’s corporate website The Chairman is available to meet with shareholders www.aew.com/socially-responsible-investment. to understand their views on governance and the Over the coming years, we believe that both occupiers Company’s performance, where they wish to do and investors will increasingly focus on how ESG so. With assistance from the Investment Manager, issues are managed. In turn, this is expected to impact during the year, the Chairman sought meetings with building obsolescence, lettability, rates of lease shareholders who wished to meet with him. renewals and ultimately the rental and capital values Tenants for individual assets. In recognition of this, the Board believes in open disclosure of ESG performance, The Investment Manager, more specifically the Asset including through participation in the annual Global Management team, maintains an ongoing dialogue Real Estate Sustainability Benchmark (‘GRESB’) survey. with tenants either directly or through its appointed property manager. The property manager issues an GRESB is the dominant global standard for assessing annual satisfaction survey to all tenants, which provides ESG performance for real estate funds and companies. qualitative feedback on their relationship with the GRESB requires the Company to report against a property manager and Investment Manager. wide array of ESG matters and highlights areas for improvement and opportunities for growth. Shareholder engagement and investor The Company uses the annual outcome from GRESB meetings as a benchmark to assess its own sustainability During the year, the Company held 18 meetings with performance. The Company was awarded two stars approximately 23 potential and existing shareholders. from GRESB for 2024, improving its score from 67 to 68 The meetings engagements were attended by the (peer group average 69). Investment Manager and Capital Access Group. Quarterly, the Company also engaged with its retail A large portion of the GRESB score relates to data investors through virtual presentations held on the coverage. Due to the high percentage of single-let Investor Meet Company platform. assets with tenant procured utilities, the Company does not score as well as funds with a larger holding of 2025 AGM managed multi-let assets. The Company’s AGM will take place on 4 September 2025. The notice of this meeting and details of the resolutions to be put to the AGM are contained in the circular sent to shareholders with this report and are available on the Company’s website. The voting results of the AGM will be published on the Company’s website www.aewukreit.com. 75 Strategic Report Governance Financial Statements Additional Information Further information on the Company’s engagement ### Within GRESB, the Company with stakeholders can be found on pages 46 to 47 and ### is benchmarked against two the full ESG disclosures for the Company, including Streamlined Energy and Carbon Reporting disclosures, ### dimensions: can be found in the EPRA Sustainability Performance Measures on pages 140 to 152. 1. Management Our fiduciary duty to shareholders will always come relating to strategy and leadership management, first in all investment decision-making. The Investment policies, risk management and stakeholder Manager offers clients long-term value-based real engagement completed at an entity level. The estate investment solutions. This is delivered via stock Company achieved a score of 29 out of 30. This section selection and asset management of UK commercial real is dependent on fund level policies and initiatives estate. It is the Investment Manager’s belief that this which are directly applicable to the Company (e.g. financial objective can be achieved simultaneously with Environmental, Governance and Employee Policies). a constructive engagement with environmental and 2. Performance social concerns. relating to the measurement of the fund’s asset The Board believes environmentally responsible fund portfolio performance. The Company achieved a score management means being active, on the ground every of 39 out of 70. This score is representative of the fund day. As such, the Company operates an Environmental composition as the Performance dimension is heavily Management Systems (‘EMS’) which is designed to influenced by the level of control landlords have across be aligned with ISO4001, to integrate sustainability issues such as energy management, service charge objectives into the overall business strategy. Our budgets and access to environmental data. property managers, MAPP, also apply their own internal EMS to all managed assets across the portfolio. All The Investment Manager is in the process of submitting members of the Investment Manager’s team have a the Company’s GRESB assessment for the year from sustainability objective within their annual performance 1 April 2024 to 31 March 2025 and expects to receive objectives. the results of the assessment in September 2025. The Company is committed to improving its Greenhouse Gas Emissions transparency of ESG performance and has adopted the Refer to the EPRA Sustainability Performance Measures European Public Real Estate Association (‘EPRA’) Best on pages 140 to 152 for Greenhouse Gas Emissions Practice recommendations on Sustainability Reporting disclosures. 2017. The progress that the Company has made on ESG issues during the period has been recognised externally, most notably by being awarded the EPRA Sustainability Best Practice Recommendations Silver Award and receiving its Most Improved Award for 2020. This was awarded in addition to the EPRA Gold Medal for Financial Reporting received in the year. 76 ## Taskforce on ## Climate-Related ## Financial ## Disclosures 77 Strategic Report Governance Financial Statements Additional Information ### The Board and the Investment Manager recognise the importance of ### understanding the risks and opportunities presented by climate change, ### including the potential impact on its business and the value of investments ### under its management. The following disclosures are intended to provide ### decision-useful information in a manner consistent with the TCFD. ### Accordingly, the disclosures are organised thematically, addressing ### Governance, Strategy, Risk Management, Metrics and Targets. In future ### reporting periods the Board and the Investment Manager will seek to ### incorporate TCFD sector-specific guidance. ### This is the Company’s third year of voluntary reporting against the TCFD ### framework; we remain committed to further improvements, in terms of ### both the quality of disclosures and degree of alignment with the TCFD ### recommendations. In future reporting periods the Board and the Investment ### Manager expect that the Company’s TCFD framework will demonstrate ### continual refinement of climate-related assessments, as well as integrating ### more sophisticated and comprehensive risk management practices in day- ### to-day operations. Barnstaple, Barnstaple Retail Park 78 ### 1. GOVERNANCE Board oversight of climate-related risks and opportunities The Board is ultimately responsible to stakeholders for the Company’s activities and for oversight of climate-related risks and opportunities. The Board receives quarterly updates from the Investment Manager regarding climate- related issues, activities and initiatives, and progress reports against climate related goals and targets. As part of the Audit and Risk Committee’s review of ongoing performance and continuing appointment of key service providers, consideration is given to key service providers’ ESG credentials and expertise. The Audit and Risk Committee remains responsible for reviewing and approving the content of the Company’s TCFD disclosure. Following Mark Kirkland’s appointment as non-Executive Director on 9 November 2022, the Board nominated him as the Board’s “ESG Champion”. The ESG Champion will regularly meet with the Investment Manager to discuss ESG issues including climate-related risks and opportunities facing the Company and will report back to the wider Board as necessary. The knowledge of the Board on ESG-related matters continues to be enhanced through interaction with the Investment Manager and training. In January 2023, the Board undertook further TCFD training provided by the Investment Manager and AEW’s Head of Sustainable Responsible Investment in Europe to support their understanding of climate change, climate resilience assessment and other ESG risks and opportunities. ### THE INVESTMENT MANAGER’S ROLE IN ASSESSING AND MANAGING CLIMATE-RELATED ### RISKS AND OPPORTUNITIES AEW Global Governance: AEW’s approach to Environmental, Social, Governance and Resilience issues (“ESG+R”), which includes climate- related risks and opportunities, is integrated into its broader governance practices. AEW’s governance relies on a committee structure where responsibility for oversight of AEW’s operations has been delegated to senior management teams that meet on a regular and formalised basis. The organisation chart below illustrates how the AEW group integrates climate-related considerations at a UK, European and global level. managing climate-related risks and opportunities for AEW, both at the enterprise level and within investment activities. AEW UK REIT Board Global ESG+R Steering Committee European Executive Committee European ESG+R European Risk Committee Committee AEW UK Investment Management LLP (Investment Manager)* * AIFM & Investment Manager UK Europe UK ESG+R Working Group Portfolio Management Review Committee Global The Global ESG+R Steering Committee and its subcommittee structure play a central role in assessing and managing climate-related risks and opportunities for AEW, both at the enterprise level and within investment activities. 79 Strategic Report Governance Financial Statements Additional Information European Governance: ### 1. GOVERNANCE 2. STRATEGY AEW’s European Executive Committee (“ExCom”) Board oversight of climate-related risks and opportunities is ultimately responsible for climate-related risks at Strategy – disclose the actual and the European level and delegates to a number of The Board is ultimately responsible to stakeholders for the Company’s activities and for oversight of climate-related potential impacts of climate-related risks sub-committees including: risks and opportunities. The Board receives quarterly updates from the Investment Manager regarding climate- and opportunities on the organisation’s related issues, activities and initiatives, and progress reports against climate related goals and targets. – European ESG+R Committee (“ESG+R Com”) – businesses, strategy, and financial planning responsible for delivering the sustainability strategy As part of the Audit and Risk Committee’s review of ongoing performance and continuing appointment of key where such information is material in Europe, the coherence of policies relating to service providers, consideration is given to key service providers’ ESG credentials and expertise. The Audit and The Investment Manager anticipates that investors climate risks and the implementation climate risk Risk Committee remains responsible for reviewing and approving the content of the Company’s TCFD disclosure. and valuers will increasingly factor climate-related policy. ESG+R Com meets every two months. Following Mark Kirkland’s appointment as non-Executive Director on 9 November 2022, the Board nominated him risks into market pricing if transition and physical risks as the Board’s “ESG Champion”. The ESG Champion will regularly meet with the Investment Manager to discuss – European Risk Committee (“ERC”) – the principal are not appropriately managed. We will therefore ESG issues including climate-related risks and opportunities facing the Company and will report back to the wider European-wide risk management forum, where all increasingly assess climate-related impacts on Board as necessary. sustainability risks can be considered according to liquidity and market pricing as a consequence of an established framework. ERC meets quarterly. The knowledge of the Board on ESG-related matters continues to be enhanced through interaction with the environmental obsolescence and depreciation. The Investment Manager and training. In January 2023, the Board undertook further TCFD training provided by Investment Manager assesses climate- related risks UK Governance (Investment Manager the Investment Manager and AEW’s Head of Sustainable Responsible Investment in Europe to support their and opportunities against short-term (3 years or less), Board’s oversight of climate-related risks understanding of climate change, climate resilience assessment and other ESG risks and opportunities. medium-term (3 to 7 years) and long-term (over 7 years) and opportunities) time horizons to align with the proposed changes to The Investment Manager’s Board is responsible for Minimum Energy Efficiency Standards (MEES). ### THE INVESTMENT MANAGER’S ROLE IN ASSESSING AND MANAGING CLIMATE-RELATED assessing climate-related risks and opportunities In accordance with TCFD, the Investment Manager ### RISKS AND OPPORTUNITIES for the Investment Manager and its fund mandates. identifies the two principal categories of risks The Investment Manager Board includes senior level associated with climate change as: AEW Global Governance: executives as well as two independent non-executive directors. – Transition Risk – associated with the transition AEW’s approach to Environmental, Social, Governance and Resilience issues (“ESG+R”), which includes climate- to a low carbon economy e.g. policy, legal, related risks and opportunities, is integrated into its broader governance practices. AEW’s governance relies on a At each meeting the Investment Manager’s Board technological and market changes to address committee structure where responsibility for oversight of AEW’s operations has been delegated to senior receives updates on the firm’s activities, initiatives mitigation and adaptation requirements. management teams that meet on a regular and formalised basis. The organisation chart below illustrates how the and progress against climate- related goals from sub- AEW group integrates climate-related considerations at a UK, European and global level. managing climate-related committees and working groups including: – Physical Risk – this includes acute (event-driven risks and opportunities for AEW, both at the enterprise level and within investment activities. e.g. more severe floods) and chronic (longer-term – Portfolio Management Review Committee shifts such as sustained higher temperatures (“PMRC”) – this is the principal UK-focused risk causing chronic heatwaves) risks. AEW UK REIT Board management forum, where all sustainability risks can be considered according to an established Global ESG+R Steering Committee framework, and climate-related issues and risks are reviewed. European Executive Committee – UK ESG+R Working Group (“WG”) – which oversees ESG+R projects and management of European ESG+R European Risk Committee climate-related risks and opportunities in the UK, Committee to ensure risk management objectives are met and aligned with the overall risk management AEW UK Investment Management LLP (Investment Manager)* * AIFM & Investment Manager framework. UK Europe The Investment Manager’s Board undertakes regular UK ESG+R Working Group Portfolio Management Review Committee Global training on ESG-related matters including TCFD and climate resilience assessment to support their The Global ESG+R Steering Committee and its subcommittee structure play a central role in assessing and understanding of climate change and other ESG risks managing climate-related risks and opportunities for AEW, both at the enterprise level and within investment and opportunities. activities. The Investment Manager’s approach to the governance and management of environmental impacts is outlined within its Climate Adaptation Policy. The Investment Manager is responsible for monitoring trends and developments in climate related issues. The Investment Manager reports quarterly to the Company’s Board on ESG matters. 80 Climate-related risks and opportunities the organisation has identified over the short, medium and long term: POTENTIAL FINANCIAL RISKS SPECIFIC RISK IMPACT STRATEGY TIME HORIZON Policy and The Minimum Energy Loss of revenue for Risk monitoring of EPC ratings Short to medium Legal – EPC Efficiency Standards unlettable space or across the portfolio, contributing term risk Compliance Regulations (“MEES”) lower rental income. to the development of Asset proposed changes to Sustainability Action Plans Impact on valuation. mandate increasing (“ASAPs”) quantifying capital Increase in capital the minimum Energy expenditure requirements or expenditure to meet Performance Certificate the existence of relevant MEES minimum requirements. | (“EPC”) rating to ‘E’ by 2023, | | exemptions. | | --- | --- | --- | | ‘C’ by 2028 and to ‘B’ by | Non-compliance | | | 2030. | fines are potentially | | significant. MEES would prevent the Company from leasing non- compliant space, potentially resulting in an asset becoming ‘stranded’ or requiring significant capital expenditure. Policy and Costs could increase as Direct costs associated Develop calculation of carbon Medium to long Legal – Carbon carbon pricing is factored with emissions pricing. footprint for the portfolio and term Pricing into construction and implement action plan to reduce Increased capex costs operating costs (from GHG emissions. during construction and embodied carbon and costs refurbishment. of carbon intensive energy for occupiers). Market – Occupiers may vacate Increased void costs. Occupier engagement Medium term Occupier assets that are unable to to ascertain occupier’s Increased capital meet their energy efficiency commitment to transition to low expenditure. or greenhouse gas (“GHG”) carbon economy and net zero Impact on valuation. emission tolerance. targets. EPC management, asset sustainability action plans (ASAPs) to improve resilience and energy efficiency of assets. Market – High energy and utility Potential impact Occupier engagement Short to medium Energy costs consumption may increase on service charge particularly for assets with term exposure to energy price affordability for tenants. energy-intensive use. fluctuations exacerbated by Engage regularly with occupiers climate change. to identify low carbon solutions which may reduce energy consumption, costs and improve energy performance. Pilot on-site renewable energy generation and storage project with selected tenants. 81 Strategic Report Governance Financial Statements Additional Information POTENTIAL FINANCIAL RISKS SPECIFIC RISK IMPACT STRATEGY TIME HORIZON Market – Investors and valuers may Impact on valuation. Continual review of asset Medium term Investors price less energy efficient business plans with Impact on the assets more conservatively consideration to lease expiry, Company’s ability to to reflect the potential cost EPC ratings and opportunity to raise new or retain and risks. implement energy efficiency existing capital. solutions. Existing and prospective Company investors may AEW will assess the additional attach onerous conditions costs and benefits of climate- on the Investment Manager related initiatives with respect to and Company to meet their liquidity and pricing. own standards, regulations Focus on investor and requirements. engagement, develop improved communication and presentation of ESG strategy. In 2025/26 the Company will assess further the pathway to net zero and will report this to investors in future reporting periods. Technology UK Government requirement Potential material capital AEW will continue to assess Medium term – Lower to transition to lower GHG expenditure to meet the additional costs of climate- emissions emissions technology requirements. related issues compared to (e.g. from natural gas boilers any assessment of reduced to low-carbon heating liquidity and market pricing due technologies such as air and to environmental obsolescence ground source heat pumps). and depreciation. EPC management and asset sustainability action plans to improve resilience and energy efficiency over time. Reputational – Fall in demand from tenants Potential risk of Focus on key stakeholder Medium term Occupiers and for properties with inefficient stranded assets, leading engagement, develop Investors building performance to reduced valuation. improved communication and or concern over the presentation of ESG strategy Impact on the Company’s reputation with (and the effective delivery of it). Company’s ability to regard to climate risks. raise new or retain Increased stakeholder existing capital. concern and poor investor relations. Acute (floods, Increased frequency Cost of maintaining and Undertake asset-level climate Short to medium windstorms, and intensity of extreme repairing assets. resilience audits and develop term cold weather, weather events leading to pre-investment due diligence Increased insurance heatwaves) property damage, increased process to identify vulnerable costs. maintenance and repair investments. Impact on valuation and costs. potential inability to sell Requirement for protection or lease property. measures, e.g. flood protection and drainage measures. 82 POTENTIAL FINANCIAL RISKS SPECIFIC RISK IMPACT STRATEGY TIME HORIZON Chronic Rising temperatures leading Potential impact Incorporate climate change Medium to long (sustained to increased utility costs on service charge scenarios within investment term higher or lower and investment in cooling affordability for tenants. framework that are suitable for temperatures) equipment and solutions. real estate investment strategies. Cost of installing Reduced thermal comfort of cooling and heating occupiers resulting in lack equipment and of demand from potential solutions. occupiers. Loss of revenue for unlettable space or lower rental income. Impact on valuation. Chronic (rising Risk of sustained flooding Cost of installing, Incorporate climate change Medium to long sea levels and and requirement for maintaining and scenarios within investment term water stress) protection measures – repairing assets. framework that are suitable for e.g. flood mitigation and real estate investment strategies. Increased insurance drainage projects. costs or asset becoming Risk asset becomes uninsurable. stranded. Loss of revenue for unlettable space or lower rental income. Impact on valuation. Resource Reduce energy and water Potential material capital To commission EPC+ reports Short to medium efficiency use. expenditure. on selected assets, energy term efficiency audits and net zero Reduce carbon emissions Reduce operating pathway assessments on and improve energy efficient expenditure through selected assets. buildings e.g. installation of efficiency gains. LED lighting. Where appropriate, prepare Reduce GHG emissions larger buildings to become Improve occupier resilience and possible future subject to public disclosure and efficiency alongside carbon taxes. framework. comfort and well-being. Energy source Investment in lower Potential material capital Deploy where possible Short to medium emissions sources of expenditure. on-site renewable energy term energy and use of new generation and storage assets in Additional revenue technologies. partnership with tenants. through sale of Investment in on-site renewable energy to In the short term this will include renewable energy customers and the grid. pilot projects with tenants prior generation and storage e.g. to undertaking feasibility studies Protect against energy installation of solar PV and on other assets. cost volatility for our batteries. tenants. Cost of improvement. Products and Improve building amenities Improve the Continued review and Short to medium Services (e.g. EV charging, install LED marketability of a development of ASAPs. term lights). property including Engagement with tenants to rental value and understand their requirements. valuation. | Resilience The development of net zero | | Increased market value | To consider further during 2025 | Medium to long | | --- | --- | --- | --- | --- | | | carbon assets could future- | of properties through | the potential pathway to net | term | | | proof the portfolio against | resilience planning. | zero. Consider adopting net zero | | | | tightening regulation | | target and pathway. | | e.g. MEES standards. 83 Strategic Report Governance Financial Statements Additional Information Describe the impact of climate-related risks and opportunities on the organisation’s business, strategy and financial planning Having identified relevant risks and opportunities, the Board and the Investment Manager describe below how these influences are incorporated into strategic and financial planning. With respect to its business activities, the Investment Manager is seeking to improve investment, asset management and risk monitoring processes to avoid transition and physical risks having unforeseen impacts on real estate portfolios. During the period, our UK efforts were focused principally on transition risk related to MEES/EPC compliance and adapting to the physical risks of climate disruption. With respect to the latter, climate risks are now systematically integrated into AEW UK’s investment process. We have incorporated a comprehensive ESG+R acquisition assessment into our due diligence process for reviewing and evaluating the potential risks and opportunities of our assets. Material ESG+R due diligence findings, if any, will be referred back to the Investment Management Committee (“IMC”) for further consideration. With the exception of MEES, where an EPC provides a measurable data point, our approach in assessing the potential impact of climate-related risks and opportunities remains qualitative. We aim to enhance our assessment for future reporting periods to be more quantitative as more data and information becomes available. We assess climate resilience with a climatologist, having undertaken a review of the entire portfolio in 2022 and are undertaking climate resilience audits on selected assets where potential material risks are present. The resilience audit findings will be used to assess the potential impact of the risk and cost to reduce the vulnerabilities of identified buildings. In relation to the MEES/EPC regime, during the period the Investment Manager undertook a gap analysis of the portfolio to identify any assets posing a non-compliance risk. Those investments were then re-assessed and action plans created where necessary. Determining the impact of climate-related risks and opportunities on the business, strategy and financial planning will be an iterative process over future reporting periods. We will utilise the findings of ongoing projects and assessments, EPC improvement plans and climate resilience audits to quantify impacts on specific assets and to inform our qualitative assessment of physical and transition risk and opportunities. Climate-related opportunities are considered to be principally connected with resource efficiency, energy sourcing, property services and resilience. The Investment Manager is tasked with developing these opportunities through ongoing asset management initiatives and assessment of opportunities through Asset Sustainability Action Plans. 84 Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2 degree Celsius or lower scenario The ESG+R Com considered various climate scenarios and determined AEW’s approach is currently to consider the high emissions scenario of ‘Business as Usual’ Representative Concentration Pathway (“RCP”) 8.5 and assess portfolio resilience on this basis. The RCP 8.5 scenario refers to the concentration of carbon that delivers global warming at an average of 8.5 watts per square meter across the planet. The RCP 8.5 pathway delivers a temperature increase of about 4.3˚C by 2100, relative to pre-industrial temperatures. It should be noted that this is not aligned with the TCFD requirement to at least model the impact of a 2 degree Celsius or lower scenario as we have focused our efforts on the higher risk scenario which has the greater potential impact on the portfolio. AEW has worked with the Climate Company to qualitatively assess the climatic risks exposure of all portfolio assets on an urban micro- scale for the next two decades. The assessment includes qualitative assessment against various climate driven event thresholds of. Certain assets within the portfolio exceeded one or more of the thresholds. We have selected a sample of assets to subject to further climate resilience audits and to develop action plans and quantify costs, if appropriate, to reduce their vulnerability. The results of these audits will be used in future reporting periods to inform AEW and the Board of potential vulnerability of the portfolio and potential costs. ### 3. RISK MANAGEMENT Describe the organisation’s processes for identifying and assessing climate-related risks AEW brings a disciplined, holistic approach to risk monitoring and control. Our risk management process is designed to identify, evaluate, manage and mitigate (rather than eliminate) the significant risks we face. The Investment Manager maintains a risk register which includes the principal climate-related risks of: (i) Transition risks associated with the transition to a low or ultra-low economy; and (ii) Physical risks associated with tangible impacts of climate change. The ESG+R Com allocates responsibility to individual members for specific climate risks and resilience matters, including physical risks, regulatory risk, market risk, insurance risk and reputational and liability risk. Members assess risks at the European level through pilot studies and work with third-party specialists. The UK Risk Manager works closely with members of the ESG+R Com and the European SRI team to identify relevant risks and determine appropriate strategies to assess the risk UK real estate assets are exposed to. The Portfolio Manager is supported by the Risk Manager and UK ESG Working Group in the management of climate-related risks. 85 Strategic Report Governance Financial Statements Additional Information Describe the organisation’s processes for managing climate-related risks The Investment Manager’s IMC approves all acquisitions and any material climate-related due diligence findings, if any, will be referred back to the IMC for further consideration. The PMRC considers portfolio-level assessments of environmental and energy issues and evaluates these assessments and climate-related risks as part of the bi-annual review of the Company. Any material findings are escalated at the local level to the Investment Manager’s UK Board and the Company’s Board. The Company’s Board and the Investment Manager’s Board needs to be informed of all material risks and issues so as to be in a position to approve the appropriate course of action to ensure that these risks are mitigated. Where a particular climate-related risk is deemed to have a potentially material adverse impact then this would be further escalated to AEW’s ERC, ESG+R Com and ExCom as well as the Company’s Board. Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management AEW recognises the importance of identifying, assessing and managing climate-related risks. Indeed, as an FCA-authorised Alternative Investment Fund Manager, it is a core regulatory requirement to engage meaningfully with risks. Risk assessment is therefore a vital aspect of AEW’s investment operating model and it takes place on a continuous basis. Climate-related risk is integrated into AEW’s risk management process; this includes monitoring and reporting to the AEW UK Board, European Committees and participation in the wider Enterprise Compliance Programme operated by its parent company Natixis Investment Managers. This programme seeks to foster a comprehensive risk management and control environment to limit operational and non-compliance risk, as follows: – First level of control where risk management controls are integrated into the operating processes of the Investment Manager and formalised in clearly defined and documented procedures which are reviewed by a number of committees. – Second level of control carried out by the compliance department through the permanent control programme. – Third level of control carried out by the annual internal audit programme undertaken with Natixis Investment Manager’s internal audit department and their independent external consultants. – Fourth level of control carried out through audits undertaken by Natixis and the BPCE Group’s internal audit teams together with independent external consultants. The Board considers climate change a principal risk to the Company and assesses transition and physical risk as part of the Board’s formal risk review with the assistance of the Audit and Risk Committee. 86 ### 4. METRICS AND TARGETS A core requirement of TCFD is to establish and develop suitable metrics and targets. Our focus in 2024 was: – Progressing with portfolio climate resilience assessment using a “business as usual” warming scenario. – EPC management across the portfolio. – Review of metrics and targets – Climate resilience audits at selected assets. In 2025 our focus is on: – Climate opportunity projects at selected assets. – Continuing to develop our assessment of the potential impact of the identified climate-related risks and opportunities on the Fund’s business operations, strategy and financial performance. – Continued enhancement of risk assessment as improved data and metrics enable us to move from qualitative to quantitative assessment over time. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. The table below summarises key metrics and targets used to assess climate-related risks and opportunities. METRIC CATEGORY METRIC PREVIOUS TARGET 2025 DATA CURRENT TARGET | GHG emissions Absolute Scope 1 GHG | | 40% reduction in Scope 1 | 83 tonnes 40% reduction in absolute | | | --- | --- | --- | --- | --- | | | Emissions | GHG emissions within the | | Scope 1 GHG emissions | | | | Managed Portfolio by 2030 | | within the Managed | | | | as compared to the 2018 | | Portfolio by 2030 as | | | | baseline | | compared to the 2018 | baseline | | Absolute Scope 2 GHG | 40% reduction in Scope | 158 tonnes 40% reduction in absolute | | | --- | --- | --- | --- | --- | | | Emissions | 2 GHG emissions within | | Scope 2 GHG emissions | | | | the Managed Portfolio | | within the Managed Portfolio | | | | as compared to the 2018 | | by 2030 as compared to the | | | | baseline | | 2018 baseline | | Renewable | Percentage of landlord- | 100% (with exception of | 100% 100% (with exception of new | | | energy | controlled assets with | new acquisitions during first | | acquisitions during first | | | renewable electricity | 12 months of ownership) | | 12 months of ownership) | supplies Transition risk Percentage of assets with N/A 69% 100% EPC to at least C grade EPC A-C (by ERV) by 2027 and to B by 2030 (unless exempt) | Physical risks Percentage of assets | | 100% 100% for | | 100% | | --- | --- | --- | --- | --- | | | with climate resilience | | existing Portfolio | | | | assessment | | completed | | | | Number of assets with a | 3 N/A 3 to be completed during | | | | | specific climate resilience | | | 2025/26 | audit and plan Number of assets with a net 6 N/A 2 assets selected for net zero zero assessment pathway assessment pathway during 2025/26 | Climate related | On-site renewable energy | N/A 2 2 further assets selected | | | --- | --- | --- | --- | | opportunities | generation and storage | | subject to additional | | | projects | | feasibility and tenant | engagement during 2025/26 87 As a Real Estate Investment Trust, the majority of the Company's emissions arise through assets that are owned and leased. At multi-let properties, the Company (in its capacity as landlord) has control and influence over the whole building and/or shared services (including refrigerant leakage), external lighting and void spaces. The position with FRI leases is significantly different, as described in the GHG disclosure section. These metrics, however, will evolve over time as for example, in relation to Scope 3 GHG emissions, given a landlord has limited operational control, the Investment Manager will initially focus on improving data collection. Over time the Company, via the Investment Manager, will actively engage with tenants to reduce their GHG emissions, with improvement plans aiming to increase a building's operational performance, reduction in energy usage and feasibility of on-site renewable energy generation or storage. The PMRC and the UK ESG Working Group and sub-committees monitor progress against targets. ### Disclose Scope 1, Scope 2 and if appropriate, Scope 3 greenhouse gas emissions and the related risk Emissions sources listed on page 142 relate to the managed portfolio only and the following sources of energy consumption within each sector: - Office: whole building - Retail, High Street: whole building, tenant space and common areas - Retail, Warehouse: tenant space and external lighting - Leisure: external lighting, tenant space and common areas - Industrial: tenant space, common areas and external lighting ### Emissions outside of operational control: The Company was not responsible for emission from gas and/or electricity use at any other owned asset or for head office operations. The Company is not directly responsible for any GHG emissions/energy usage at single let/FRI assets nor at multi-let assets where the tenant is counterparty to the energy contract. As these emissions are outside of the Company's direct control, they form part of the wider value chain (i.e. 'Scope 3') emission, which are not monitored at present. ### Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets The Company has reviewed the existing targets and is in the process of setting new targets in consultation with its external advisors. Targets are re-licensed at least annually and will be amended where appropriate as our management of climate-related risks and opportunities evolves over future reporting periods. Targets are reported in table on page 87, where no targets had previously been set this is reported as N/A. ### SHARE CAPITAL #### Share Issues At the Company's AGM held on 4 September 2024, the Company was granted the authority to allot Ordinary Shares up to an aggregate nominal amount of £158,424.74 on a non pre-emptive basis. The Company was also granted authority to allot further Ordinary Shares up to an aggregate nominal amount of £158,424.74 on a non pre-emptive basis. No Ordinary Shares have been allotted under either authority during the year and both authorities will expire at the conclusion of the 2025 AGM. A resolution to renew the Company's authority to allot Ordinary Shares up to an aggregate nominal amount of £158,424.74 on a non pre-emptive basis will be put to shareholders at the 2025 AGM alongside a resolution to allot further Ordinary Shares up to an aggregate nominal amount of £158,424.74 on a non pre-emptive basis. As at 31 March 2025, and the date of this report, the Company had 158,774,746 Ordinary Shares in issue, of which 350,000 (2024: 350,000) were held in treasury and therefore the total voting rights attaching to Ordinary Shares are 158,424,746. #### Purchase of Own Shares At the Company's AGM on 4 September 2024, the Company was granted authority to purchase up to 23,747,869 Ordinary Shares (being 14.99% of the Company's Ordinary Shares in issue). No shares have been bought back under this authority during the year, which expires at the conclusion of the Company's 2025 AGM. A resolution to renew the Company's authority to purchase (either for cancellation or for placing into treasury) up to 23,747,869 Ordinary Shares (being 14.99% of the issued Ordinary Share capital (excluding treasury shares) as at the date of this report), will be put Strategic Report Governance Financial Statements Additional Information 18 to shareholders at the 2025 AGM. Any purchase will be made in the market and prices will be in accordance with the terms laid out in the Notice of AGM (enclosed separately and available on the Company's website). The authority will be used where the Directors consider it to be in the best interests of shareholders. ## RIGHTS ATTACHED TO ORDINARY SHARES ### Income Entitlement The profits of the Company (including accumulated revenue reserves) available for distribution and resolved to be distributed shall be distributed in proportion to the amount paid up per share by way of interim and, where applicable, special or final dividends among the holders of Ordinary Shares. ### Capital Entitlement After meeting the liabilities of the Company on a winding-up, the surplus assets shall be paid to the holders of different classes of members and distributed among such holders rateably according to the amounts paid up or credited as paid up on their shares. ### Voting Entitlement Each Ordinary shareholder is entitled to one vote on a show of hands and, on a poll, to one vote for every Ordinary Share held. The Notice of AGM and Form of Proxy stipulate the deadlines for the valid exercise of voting rights and, other than with regard to Directors not being permitted to vote their Ordinary Shares on matters in which they have an interest, there are no restrictions on the voting rights of Ordinary Shares. There are no restrictions concerning the transfer of securities in the Company or on voting rights: - no special rights with regard to control attached to securities; no agreements between holders of securities regarding restrictions on the transfer of securities or voting rights known to the Company; and - no agreements which the Company is party to that might affect its control following a successful takeover bid. ### Requirements of the Listing Rules Listing Rule 6.6.4 requires the Company to include specified information in a single identifiable section of the Annual Report or a cross reference table indicating where the information is set out. The Directors confirm that there are no disclosures required in relation to Listing Rule 6.6.1. ## SUBSTANTIAL SHAREHOLDINGS As at 31 March 2025, the Company had been notified under the Disclosure and Transparency Rule ("DTR") 5 of the following significant holdings of voting rights in its Ordinary Shares. These holdings may have changed since notification, however, notification of any change is not required until the next applicable threshold is cross. The Company has not been notified of any changes to the above interests between 31 March 2025 and the date of this report. | SHAREHOLDER | NUMBER OF ORDINARY SHARES HELD | % OF TOTAL VOTING RIGHTS | | --- | --- | --- | | Momentum Global Investment Management Limited | 7,856,028 | 5.0 | | TrinityBridge Limited | 7,836,451 | 4.9 | | Schroders plc | 7,643,485 | 4.8 | | Investec Wealth & Investment Limited | 4,813,400 | 3.0 | | Natwest Group plc | 4,747,598 | 3.0 | 30 In addition to the above notified holdings under DTR 5, the Company completes its own analysis of significant holdings of voting rights and is aware that a significant proportion of the Company's Ordinary Shares are owned by retail investors via platforms. In accordance with this analysis, which differs significantly to the above, the Company notes the following additional holders of Ordinary Shares at 31 March 2025. | SHAREHOLDER | NUMBER OF ORDINARY SHARES HELD | % OF TOTAL VOTING RIGHTS | | --- | --- | --- | | Hargreaves Lansdown Asset Management | 36,869,877 | 23.3 | | Interactive Investor | 22,428,605 | 14.2 | | A J Bell Securities | 10,941,574 | 6.9 | | Halifax Share Dealing | 5,029,245 | 3.2 | It is also the Company's understanding that of the notified holdings listed above, only TrinityBridge Limited continue to hold more than 3.0% of the Company's Ordinary Shares. ## RELATED PARTY TRANSACTIONS Related party transactions during the year ended 31 March 2025 can be found in note 24 to the financial statements. ## POST BALANCE SHEET EVENTS Post balance sheet events can be found in note 26 to the financial statements. ## STATEMENT OF DISCLOSURE OF INFORMATION TO AUDITOR So far as each Director is aware, there is no relevant audit information, which would be needed by the Company's Auditor in connection with preparing its audit report (on pages 92 to 100), of which the Auditor is not aware; and each Director, in accordance with section 418(2) of the Companies Act 2006, has taken all reasonable steps that they ought to have taken as a Director to make themselves aware of any such information and to ensure that the Auditor is aware of such information. ## AUDITOR BDO LLP has expressed its willingness to continue as the Company's Auditor. As outlined in the Report of the Audit and Risk Committee on page 62, resolutions proposing the Auditor's re-appointment and to authorise the Audit Committee to determine its remuneration will be proposed at the forthcoming AGM. The Directors' Report has been approved by the Board of Directors and signed on its behalf by: Chairman of the Board 26 June 2025 Strategic Report Governance Financial Statements Additional Information 90 ## Statement of Directors’ ## Responsibilities in respect of ## the Annual Report and ## Financial Statements The Directors are responsible for preparing the Annual ### WEBSITE PUBLICATION Report and the Financial Statements in accordance with UK adopted international accounting standards The Directors are responsible for ensuring the Annual and applicable law and regulations. Report and the Financial Statements are made available Company law requires the Directors to prepare financial on a website. Financial statements are published on statements for each financial year. Under that law, the Company’s website in accordance with legislation the Directors are required to prepare the Company’s in the United Kingdom governing the preparation financial statements in accordance with UK adopted and dissemination of financial statements, which international accounting standards. Under company may vary from legislation in other jurisdictions. The law, the Directors must not approve the financial maintenance and integrity of the Company’s website statements unless they are satisfied that they give a true is the responsibility of the Directors. The Directors’ and fair view of the state of affairs of the Company and responsibility also extends to the ongoing integrity of of the profit or loss for the Company for that period. the financial statements contained therein. In preparing these financial statements, the Directors ### DIRECTORS’ RESPONSIBILITIES are required to: ### – select suitable accounting policies and then apply PURSUANT TO DTR4 them consistently; The Directors confirm to the best of their knowledge: – make judgements and accounting estimates that – The financial statements have been prepared in are reasonable and prudent; accordance with the applicable set of accounting – state whether they have been prepared in standards, give a true and fair view of the assets, accordance with UK adopted international liabilities, financial position and profit or loss of the accounting standards, subject to any material Company. departures disclosed and explained in the financial – The Annual Report includes a fair review of the statements; development and performance of the business and – prepare the financial statements on the going the financial position of the Company, together with concern basis unless it is inappropriate to presume a description of the principal risks and uncertainties that the Company will continue in business; and that it faces. – prepare a Directors’ Report, a Strategic Report and The Directors consider that this Annual Report and Directors’ Remuneration Report which comply with Financial Statements, taken as a whole, is fair, balanced, the requirements of the Companies Act 2006. and understandable and provides the information The Directors are responsible for keeping adequate necessary for shareholders to assess the Company’s accounting records that are sufficient to show and position and performance, business model and explain the Company’s transactions and disclose with strategy. reasonable accuracy at any time the financial position This Statement of Responsibilities was approved by the of the Company and enable them to ensure that the Board and signed on its behalf by: financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring Robin Archibald that the Annual Report and Financial statements, taken Chairman as a whole, is fair, balanced, and understandable and 26 June 2025 provides the information necessary for shareholders to assess the Company’s performance, prospects, business model and strategy. 91 ## Independent Auditor’s ## Report to the Members Strategic Report Governance Financial Statements Additional Information ## of AEW UK REIT plc ### OPINION ON THE FINANCIAL STATEMENTS In our opinion, the financial statements: – give a true and fair view of the state of the Company’s affairs as at 31 March 2025 and of its profit for the year then ended; – have been properly prepared in accordance with UK adopted international accounting standards; – have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of AEW UK REIT plc (the “Company”) for the year ended 31 March 2025 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including a summary of material accounting policy information. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards. ### BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the Audit and Risk Committee. Independence Following the recommendation of the Audit and Risk Committee, we were appointed by the board of directors on 8 September 2021 to audit the financial statements for the year ended 31 March 2022 and subsequent financial periods. The period of total uninterrupted engagement is 4 years, covering the years ended 31 March 2022 to 31 March 2025. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company. 92 ### CONCLUSIONS RELATING ### TO GOING CONCERN In auditing the financial statements, we have – analysing the sensitivities applied by the Directors’ concluded that the Directors’ use of the going stress testing calculations and challenging the concern basis of accounting in the preparation of the assumptions made using our knowledge of the financial statements is appropriate. Our evaluation of business and of the current economic climate, the Directors’ assessment of the Company’s ability to assess the reasonableness of the downside to continue to adopt the going concern basis of scenarios selected and the appropriateness of the accounting included: Directors’ mitigating actions; – using our knowledge of the Company and its – considering board minutes, and evidence market sector together with the current general obtained throughout the audit and challenging the economic environment to assess the Directors’ Directors on the identification of any contradictory identification of the inherent risks to the Company’s information in the forecasts and the impact on the business and how these might impact the going concern assessment; Company’s ability to remain a going concern for the – analysing the Directors’ stress testing calculations going concern period, being the period to 30 June and challenging the assumptions made using 2026, which is at least 12 months from when the our knowledge of the business and of the current financial statements are authorised for issue; economic climate, to assess the reasonableness – obtaining an understanding of the Directors’ of the downside scenarios selected and the process for assessing going concern including an appropriateness of the Directors’ mitigating actions; understanding of the key assumptions used; and – obtaining the Directors’ going concern assessment – reviewing the disclosures in the financial and: statements relating to going concern to check that the disclosure is consistent with the circumstances. – assessing the Company’s forecast cash flows with reference to historic performance and Based on the work we have performed, we have not challenging the Directors’ forecast assumptions identified any material uncertainties relating to events in comparison to the current performance of the or conditions that, individually or collectively, may Company; cast significant doubt on the Company’s ability to continue as a going concern for a period of at least – agreeing the key inputs into the forecasts to twelve months from when the financial statements are supporting documentation for reasonableness authorised for issue. based on contractual agreements, where available; In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have – agreeing the Company’s available borrowing nothing material to add or draw attention to in relation facilities and the related terms and covenants to to the Directors’ statement in the financial statements loan agreements; about whether the Directors considered it appropriate – obtaining forecast covenant calculations to check to adopt the going concern basis of accounting. for any potential future covenant breaches; Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Bristol, Union Street 9393 Strategic Report Governance Financial Statements Additional Information ### OVERVIEW COVERAGE 100% (2024: 100%) of profit before tax 100% (2024: 100%) of revenue 100% (2024: 100%) of total assets 100% (2024: 100%) of investment property | KEY AUDIT MATTERS Valuation of | | 2025 | 2024 | | --- | --- | --- | --- | | | investment properties |  |  | | MATERIALITY | Company financial statements as a whole | | | £2.41m (2024: £2.32m) based on 1% (2024: 1%) of total assets ### AN OVERVIEW OF THE SCOPE OF OUR AUDIT Our audit was scoped by obtaining an understanding We challenged the extent to which climate-related of the Company and its environment, including considerations, including the expected cash flows from the Company’s system of internal control, and the initiatives and commitments have been reflected, assessing the risks of material misstatement in the where appropriate, in the Directors’ going concern financial statements. We also addressed the risk of assessment and viability assessment. management override of internal controls, including We also assessed the consistency of management’s assessing whether there was evidence of bias by the disclosures included as “other information” on page 97 Directors that may have represented a risk of material with the financial statements and with our knowledge misstatement. obtained from the audit. Climate change Based on our risk assessment procedures, we did not Our work on the assessment of potential impacts on identify there to be any Key Audit Matters materially climate-related risks on the Company’s operations and impacted by climate-related risks and related financial statements included: commitments. – enquiries and challenge of management to understand the actions they have taken to identify climate-related risks and their potential impacts on the financial statements and adequately disclose climate-related risks within the annual report; – our own qualitative risk assessment taking into consideration the sector in which the Company operates and how climate change affects the real estate sector; and – review of the minutes of board and audit and risk committee meetings and other papers related to climate change and performed a risk assessment as to how the impact of the Company’s commitment as set out in pages 81 to 83 may affect the financial statements and our audit. Bristol, Queen Square 94 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. HOW THE SCOPE OF OUR AUDIT ADDRESSED KEY AUDIT MATTER THE KEY AUDIT MATTER Valuation of investment The Company has an Our audit procedures included the following: properties investment property portfolio Experience of valuer and relevance of their As detailed in note 12 to of commercial property across work the financial statements, a number of sectors in the the Company owns a United Kingdom. This comprises – We obtained the valuation report prepared portfolio of investment completed investment property by the independent external valuer and with properties which are held which is let, or available to the assistance of our internal RICS qualified at their fair value. | | let and is valued using the | real estate valuation experts, discussed | | --- | --- | --- | | The Company’s | income capitalisation method, | the basis of the valuations with them, | | accounting policy for | in accordance with RICS | read the valuation reports and confirmed | | these properties is | methodology and IFRS 13 Fair | that all valuations had been prepared in | | described in note 2.5 to | | accordance with applicable valuation | Value Measurement. the financial statements. guidelines and the requirements of the The valuation of investment The key judgements and applicable accounting standards (IFRS 13 property requires significant estimates in arriving at Fair Value Measurement) and were therefore judgement and estimates by the the fair values are set out appropriate for determining the carrying Directors and their independent in notes 2.2 and 12 to the value in the Company’s financial statements. external valuer and is therefore financial statements. considered a significant risk – We assessed the external valuer’s due to the subjective nature of competence and qualifications and certain assumptions inherent in read their terms of engagement with the each valuation. Company, to identify any matters that could have affected their independence and objectivity or imposed scope limitations upon them. – We obtained a copy of the instructions provided to the independent valuer and reviewed for any limitations in scope or for evidence of management bias. Data provided to the valuer – We validated the underlying data provided to the valuer by Investment Manager. This data included inputs such as current rent and lease term, which we agreed on a sample basis to the executed lease agreements as part of our audit work. 95 Strategic Report Governance Financial Statements Additional Information HOW THE SCOPE OF OUR AUDIT ADDRESSED KEY AUDIT MATTER THE KEY AUDIT MATTER Any input inaccuracies or Assumptions and estimates used by the unreasonable bases used in the valuer valuation judgements (such as – With assistance from our internal real in respect of estimated rental estate valuation experts, we developed value and yield profile applied) yield expectations on each property using could result in a material available independent industry data, reports misstatement of the Company’s and comparable transactions in the market financial statements. around the period end. Our in-house valuers also attended the audit meetings with the There is also a risk of fraud Company’s valuers to assist us in assessing that the Directors may that explanations provided were appropriate influence the judgements and and in line with market knowledge. estimates in respect of property valuations in order to achieve – We compared the key valuation property valuations and other assumptions against our independently performance targets to meet formed market expectations (by reference market expectations. to market data based on the location and specifics of each property). The valuation of investment properties was therefore – We discussed the assumptions used and the considered to be a key audit valuation movement in the period with the matter. independent valuer. Where the valuation was outside of our expected range, we challenged the independent valuer on specific assumptions and reasoning for the yields applied and corroborated their explanations where relevant, including agreeing to third party documentation. Key observations – Based on the procedures performed, we did not identify any indicators to suggest that the judgements and estimates made in the valuation of the Company’s investment properties were inappropriate. ### OUR APPLICATION OF MATERIALITY We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. 96 Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: | | COMPANY FINANCIAL STATEMENTS 2025 | COMPANY FINANCIAL STATEMENTS 2024 | | --- | --- | --- | | **MATERIALITY** | £2.41 million | £2.32 million | | **BASIS FOR DETERMINING MATERIALITY** | 1% of Total Assets | | | **RATIONALE FOR THE BENCHMARK APPLIED** | We determined that total assets would be the most appropriate basis for determining overall materiality as we consider it to be one of the principal considerations for users of the financial statements in assessing the financial performance of the Company. | | | **PERFORMANCE MATERIALITY** | £1.81 million | £1.74 million | | **BASIS FOR DETERMINING PERFORMANCE MATERIALITY** | 75% of Materiality | | | **RATIONALE FOR THE PERCENTAGE APPLIED FOR PERFORMANCE MATERIALITY** | Overall performance materiality for the Company has been set at 75% (2024: 75%) of materiality. This was on the basis of our risk assessment, together with our assessment of the Company's overall control environment and the expected total value of known and likely misstatements and the level of transactions in the year. | | ### Specific materiality We also determined that for other account balances and classes of transactions that impact the calculation of European Public Real Estate Association ("EPRA") earnings a misstatement of less than materiality for the financial statements as a whole, specific materiality, could influence the economic decisions of users. We consider EPRA earnings to be a key performance measure of the Company. EPRA earnings excludes the impact of the net surplus on revaluation of investment properties, profit on disposal of investment properties and changes in the fair value of interest rate derivatives. As a result, we determined specific materiality for these items to be £0.71m (2024: £0.58m), based on 5% of EPRA earnings (2024: 5%). We further applied a performance materiality level of 75% (2024: 75%) of specific materiality to ensure that the risk of errors exceeding specific materiality was appropriately mitigated. ### Reporting threshold We agreed with the Audit and Risk Committee that we would report to them all individual audit differences in excess of £120,000 (2024: £116,000) and for those items impacting the calculation of EPRA earnings £35,000 (2024: £28,000). We also agreed to report differences below these thresholds that, in our view, warranted reporting on qualitative grounds. ### OTHER INFORMATION The Directors are responsible for the other information. The other information comprises the information included in the Annual Report other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 37 Strategic Report Governance Financial Statements Additional Information ### CORPORATE GOVERNANCE STATEMENT The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: GOING CONCERN AND – The Directors’ statement with regards to the appropriateness of adopting LONGER-TERM VIABILITY the going concern basis of accounting and any material uncertainties identified on pages 72 and 73; and – The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate on page 73. OTHER CODE PROVISIONS – Directors’ statement on fair, balanced and understandable on page 91 – Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks on pages 36 to 43; – The section of the annual report that describes the review of effectiveness of risk management and internal control systems on page 59; and – The section describing the work of the audit and risk committee on pages 61 to 63. ### OTHER COMPANIES ACT 2006 REPORTING Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below: STRATEGIC REPORT AND In our opinion, based on the work undertaken in the course of the audit: DIRECTORS’ REPORT – the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and – the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report. DIRECTORS’ REMUNERATION In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. MATTERS ON WHICH WE ARE We have nothing to report in respect of the following matters in relation to REQUIRED TO REPORT BY which the Companies Act 2006 requires us to report to you if, in our opinion: EXCEPTION – adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or – the Company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or – certain disclosures of Directors’ remuneration specified by law are not made; or – we have not received all the information and explanations we require for our audit. 98 ### RESPONSIBILITIES OF DIRECTORS As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. ### AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: Non-compliance with laws and regulations Based on: – our understanding of the Company and the industry in which it operates; – discussion with management and those charged with governance; and – obtaining an understanding of the Company’s policies and procedures regarding compliance with laws and regulations; we considered the significant laws and regulations to be UK company law, UK tax legislation (including the REIT regime requirements) and the UK Listing Rules, and we considered the extent to which non-compliance might have a material effect on the Company’s financial statements. Our procedures in respect of the above included: – agreeing the financial statement disclosures to underlying supporting documentation where relevant; – reviewing legal expenditure accounts to understand the nature of expenditure incurred; – the review of Board and Committee meeting minutes and enquiries with management and the Directors as any known or suspected instances of non-compliance with laws and regulations; and – in order to address the risk of non-compliance with the REIT regime, considering a report from the Company’s external adviser, detailing the actions that the Company has undertaken to ensure compliance. This paper was reviewed, and the assumptions challenged, with the assistance of our own internal valuations expert. 99 Strategic Report Governance Financial Statements Additional Information Irregularities including fraud We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included: – enquiry with Directors and those charged with governance regarding any known or suspected instances of fraud; – obtaining an understanding of the Company’s policies and procedures relating to: – Detecting and responding to the risks of fraud; and – Internal controls established to mitigate risks related to fraud. – review of minutes of meeting of those charged with governance for any known or suspected instances of fraud; – discussion amongst the engagement team as to how and where fraud might occur in the financial statements; and – performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud. Based on our risk assessment, we considered the areas most susceptible to fraud to be potential manipulation of journals affecting revenue, investment property valuations, and management override of controls. Our procedures in response to the above included: – analysing and substantively testing unusual journals combinations to revenue to determine if they were appropriate; – work performed in the investment property balance which is set out in the key audit matters section above; and – testing a sample of journal entries processed during the year which met a defined risk criteria, agreeing to supporting documentation and evaluating whether there was evidence of bias by management or the Directors that represented a risk of material misstatement due to fraud. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were deemed to have the appropriate competence and capabilities, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. ### USE OF OUR REPORT This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Richard Levy (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, United Kingdom 26 June 2025 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 100 ## Financial ## Statements Strategic Report Governance Financial Statements Additional Information Wrexham, Gresford Industrial Estate ## Statement of ## Comprehensive Income ## for the year ended 31 March 2025 | | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | --- | | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | NOTES | | | £’000 | | | £’000 | Income Rental and other property income 3 22,677 24,345 Property operating expenses 4 (5,818) (6,861) Impairment gain/(loss) on trade receivables 430 (1,208) Other Income 3 1,082 – Net rental and other income 18,371 16,276 Other operating expenses 5 (2,625) (2,751) Directors’ remuneration 6 (160) (162) Operating profit before fair value changes 15,586 13,363 Change in fair value of investment properties 12 6,861 (4,350) Realised gains on disposal of investment properties 12 3,230 1,848 Operating profit 25,677 10,861 Change in fair value of financial assets through profit and loss – (12) Finance income 7 624 177 Finance expense 8 (1,931) (1,936) Profit before tax 24,370 9,090 Taxation 9 (26) (42) Profit for the year attributable to owners of the company 24,344 9,048 Other comprehensive income – – Total comprehensive income for the year 24,344 9,048 Earnings per share (pence per share) (basic and diluted) 10 15.37 5.71 The notes on pages 107 to 132 form an integral part of these financial statements. 103 ## Statement of ## Changes in Equity Strategic Report Governance ## for the year ended 31 March 2025 TOTAL CAPITAL AND | | | | | | | CAPITAL | | | | RESERVES | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | SHARE | RESERVE AND | | | | | ATTRIBUTABLE | | | | | SHARE | PREMIUM | | | | RETAINED | BUYBACK | | TO OWNERS OF | | | | FOR THE YEAR ENDED | CAPITAL | ACCOUNT | | | EARNINGS* | | RESERVE | | THE COMPANY | | | | 31 MARCH 2025 NOTES | £’000 | | £’000 | | | £’000 | | £’000 | | | £’000 | Balance at 1 April 2024 1,587 56,578 104,852 (265) 162,752 Profit for the year and total – – 24,344 – 24,344 comprehensive income Other distribution – – 21 – 21 Dividends paid 11 – – (12,674) – (12,674) Balance at 1,587 56,578 116,543 (265) 174,443 31 March 2025 Financial Statements Additional Information TOTAL CAPITAL AND | | | | | | | CAPITAL | | | | RESERVES | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | SHARE | RESERVE AND | | | | | ATTRIBUTABLE | | | | | SHARE | PREMIUM | | | | RETAINED | BUYBACK | | TO OWNERS OF | | | | FOR THE YEAR ENDED | CAPITAL | ACCOUNT | | | EARNINGS* | | RESERVE | | THE COMPANY | | | | 31 MARCH 2024 NOTES | £’000 | | £’000 | | | £’000 | | £’000 | | | £’000 | Balance at 1 April 2023 1,587 56,578 109,201 (265) 167,101 Profit for the year and total – – 9,048 – 9,048 comprehensive income Other distribution – – (723) – (723) Dividends paid 11 – – (12,674) – (12,674) Balance at 1,587 56,578 104,852 (265) 162,752 31 March 2024 * Part of the capital reserve has arisen from the cancellation of part of the Company’s share premium account and is a distributable reserve subject to realised profits. The notes on pages 107 to 132 form an integral part of these financial statements. 104 ## Statement of Financial Position ## as at 31 March 2025 | | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | --- | | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | NOTES | | | £’000 | | | £’000 | Assets Non-current assets Investment property 12 200,429 181,040 Receivables and prepayments 13 3,956 3,267 204,385 184,307 Current assets Investment property held for sale 12 – 26,086 Receivables and prepayments 13 9,281 10,625 Cash and cash equivalents 25,993 11,397 Restricted cash 14 1,790 – 37,064 48,108 Total assets 241,449 232,415 Non-current liabilities Interest bearing loans and borrowings 15 (59,773) (59,663) Lease obligations 17 (174) (174) (59,947) (59,837) Current liabilities Payables and accrued expenses 16 (7,046) (9,813) Lease obligations 17 (13) (13) (7,059) (9,826) Total liabilities (67,006) (69,663) Net assets 174,443 162,752 Equity Share capital 20 1,587 1,587 Buyback reserve 20 (265) (265) Share premium account 21 56,578 56,578 Capital reserve and retained earnings 116,543 104,852 Total capital and reserves attributable to equity 174,443 162,752 holders of the Company Net Asset Value per share (pps) 10 110.11 102.73 EPRA Net Tangible Assets per share (pps) 10 110.11 102.73 The financial statements were approved by the Board of Directors on 26 June 2025 and were signed on its behalf by: Robin Archibald Chairman AEW UK REIT plc (Company number: 09522515) The notes on pages 107 to 132 form an integral part of these financial statements. 105 ## Statement of Cash Flows ## for the year ended 31 March 2025 Strategic Report Governance | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Cash flows from operating activities Profit before tax 24,370 9,090 Adjustment for non-cash items: Finance income (624) (177) Finance costs 1,931 1,936 Loss from change in fair value of other financial assets – 12 (Gain)/loss from change in fair value of investment property (6,861) 4,350 Realised gains on disposal of investment properties (3,230) (1,848) Increase in other receivables and prepayments (3,162) (3,458) Increase in restricted cash (1,790) – (Decrease)/increase in other payables and accrued expenses (1,988) 1,821 Net cash flow generated from operating activities 8,646 11,726 Cash flows from investing activities Financial Statements Additional Information Purchase of and additions to investment properties (13,335) (25,135) Disposal of investment properties 33,941 24,528 Finance income 624 177 Net cash generated from/(used in) investing activities 21,230 (430) Cash flows generated from/(used in) financing activities Withholding tax paid on distributions (782) – Finance costs (1,807) (1,823) Dividends paid (12,691) (12,391) Net cash flow used in from financing activities (15,280) (14,214) Net increase/(decrease) in cash and cash equivalents 14,596 (2,918) Cash and cash equivalents at start of the year 11,397 14,315 Cash and cash equivalents at end of the year 25,993 11,397 The notes on pages 107 to 132 form an integral part of these financial statements. 106 # Notes to the Financial Statements for the year ended 31 March 2025 ## 1. CORPORATE INFORMATION AEW UK REIT plc (the 'Company') is a closed ended Real Estate Investment Trust ('REIT') incorporated on 1 April 2015 and domiciled in the UK. The registered office of the Company is 19th Floor, 51 Lime Street, London EC3M 7DQ. The Company's Ordinary Shares were listed on the Official List of the FCA and admitted to trading on the Main Market of the London Stock Exchange on 12 May 2015. The nature of the Company's operations and its principal activities are set out in the Strategic Report on pages 3 to 48. ## 2. ACCOUNTING POLICIES ### 2.1 Basis of preparation These financial statements are prepared and approved by the Directors in accordance with UK adopted international accounting standards. These financial statements have been prepared under the historical cost convention, except for investment property and interest rate derivatives that have been measured at fair value. The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000), except when otherwise indicated. The Company is exempt by virtue of Section 402 of the Companies Act 2006 from the requirement to prepare group financial statements. These financial statements present information solely about the Company as an individual undertaking. ### New standards, amendments, and interpretations The following amendments to existing standards, which are required for the Company's accounting period beginning on 1 April 2024, have been considered and applied: - Amendments to IAS 1 Presentation of Financial Statements clarifies that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period and not expectations of, or actual events after, the reporting date. The amendments also give clarification to the definition of settlement of a liability. - Amendments to IFRS 16 Lease Liability in a Sale and Leaseback specifies the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognise any amount of the gain or loss that relates to the right of use it retains. There were no material effects from the adoption of the above-mentioned amendments to IFRS effective in the period. They have no significant impact on the Company as they are either not relevant to the Company's activities or require accounting that is already consistent with the Company's current accounting policies. There are a number of new standards and amendments to existing standards, which have been published and are mandatory for the Company's accounting periods beginning on, or after, 1 April 2025. The Company is not adopting these standards early. The following are the most relevant to the Company: - Amendments to IAS 21 Lack of Exchangeability to assist entities in determining whether a currency is exchangeable into another currency, and the spot exchange rate to use when it is not. - IFRS 18 Presentation and Disclosures in Financial Statements. This is the new standard on presentation and disclosure in financial statements, which replaces IAS 1, with a focus on updates to the statement of profit or loss. - IFRS 19 Subsidiaries without Public Accountability: Disclosures. This reduces disclosure requirements that an eligible subsidiary entity is permitted to apply instead of the disclosure requirements in other IFRS Accounting Standards. - Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures. The amendments provide clarity on the date of recognition and derecognition of certain financial instruments and amends/ updates the disclosure required for some financial instruments. The Directors have yet to assess the full outcome of these new standards, amendments and interpretations; however, with the exception of IFRS 18, these other new standards, amendments and interpretations are not expected to have a significant impact on the Company's financial statements. 107 ## 2. ACCOUNTING POLICIES (CONTINUED) ### 2.2 Significant accounting judgements and estimates The preparation of financial statements in accordance with IFRS requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future. There are not considered to be any judgements which have a significant effect on the amounts recognised in the financial statements, however, there is an estimate that will have a significant effect on the amounts recognised in the financial statements: #### i) Valuation of investment property The Company's investment property is held at fair value as determined by the independent external valuer on the basis of fair value in accordance with the internationally accepted RICS Appraisal and Valuation Standards. Details of the considerations made in respect of the estimation are further detailed in note 12. ### 2.3 Segmental information The Board of Directors retains overall control of the Company, but the Investment Manager (AEW UK Investment Management LLP) has certain authorities and fulfils the function of allocating resource to, and assessing the performance of the Company's operating segments and is therefore considered to be the Chief Operating Decision Maker ("CODM"). In accordance with IFRS 8, the Company considers each of its properties to be an individual operating segment. The CODM allocates resources, and reviews the performance of, the Company's portfolio on a property-by-property basis and discrete financial information is available for each individual property. These operating segments have similar economic characteristics and, as such, are aggregated into one reporting segment, being investment in property and property-related investments in the UK. ### 2.4 Going concern The Directors assessed the Company's ability to continue as a going concern, which takes into consideration current economic uncertainty, as well as the Company's cashflows, financial position, liquidity and borrowing facilities. As at 31 March 2025, the Company had £25.99 million of unrestricted cash at bank. The Company's loan is held with AgFe and is a £60.00m facility with a five-year term. This is priced as a fixed rate loan with a total interest cost of 2.959% and associated 10% projected debt yield and 60% loan to value ("LTV") covenants. The Company reported an LTV of 33.87% at year-end. This provides room for a £71.88 million fall in portfolio valuation before breaching the 60% hard LTV covenant. Moreover, based on the £60.00 million of debt drawn as at year-end, the Company had a projected debt yield of 25.11%, comfortably in excess of the 10% covenant. The Company benefits from a secure, diversified income stream from a tenancy profile which is not overly reliant on any one tenant or sector, which reduces risk. The Directors also noted that: - The Company's rent collection has been strong, with 98% of contracted rent either having been collected, or payment plans agreed, for the March 2025 quarter. - Based on the contracted rent as at 31 March 2025, a reduction of 60.18% in net rental income could be accommodated before breaching the debt yield covenant in the Company's re-financed debt arrangements. - Based on the property valuation at 31 March 2025, the Company had room for a £71.88 million fall in portfolio valuation before breaching the maximum LTV hard covenant in the Company's re-financed debt arrangements. - The Company's cash flow can also be significantly managed through the adjustment of dividend payments, to the extent that this does not breach the REIT regime requirements for distributions. Strategic Report Governance Financial Statements Additional Information 108 ### 2. ACCOUNTING POLICIES (CONTINUED) 2.4 Going concern (continued) Taking this into consideration, the Directors have reviewed a number of scenarios over 12 months from the date of approval of these financial statements, including a worst-case plausible downside scenario which makes the following assumptions: – a reduction in net rental income of 30%; – no new lettings or renewals, other than those where terms have already been agreed; – a 20% fall in property valuations; and – no new acquisitions or disposals. In the above scenario, the Company is forecast to generate a positive cash flow before dividend payments, however it would generate a cash flow much lower than its target dividend of 8 pps per annum. Moreover, the Company is forecast to pass the debt yield covenant during the 12-month period with a minimum projected yield of 18%, compared with the limit of 10%, assuming that no repayments of the facility were to be made. Given the Company’s substantial headroom against its borrowing covenants, the Directors believe that the Company is well placed to manage its financing and business risks. The Directors are confident that the Company will have sufficient funds to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore the financial statements have been prepared on a going concern basis. 2.5 Summary of material accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. a) Presentation currency These financial statements are presented in Sterling, which is the functional and presentational currency of the Company. The functional currency of the Company is principally determined by the primary economic environment in which it operates. The Company did not enter into any transactions in foreign currencies during the year. b) Revenue recognition i) Rental income Rental income receivable under operating leases is recognised on a straight-line basis over the lease term. A rental adjustment is recognised from the rent review date in relation to unsettled rent reviews, whereby changes are recognised from the effective date of the modification when the terms are agreed. Lease incentives, including rent-free periods and payment to tenants, are also allocated to the Statement of Comprehensive Income on a straight-line basis over the lease term. The value of resulting accrued rental income is deducted from the valuation as provided by the valuer to arrive at the carrying value of the investment property. A modification to an operating lease in the form of a new lease incentive is accounted for as a new lease from the effective date of the modification. Any lease incentive existing on a modified lease will then be spread evenly over the new remaining life of the lease. Contingent rental income is calculated based off tenant reported actual turnover and is recognised when the amounts are confirmed and a rental demand is then raised. Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the Statement of Comprehensive Income when the right to receive them arises. Service charge income receivable under operating leases is charged based on budgeted service charge expenditure for a given property over a given service charge year. This income is recognised on a straight-line basis over the service charge year and any balance credits or charges on reconciliation following the end of the service charge year are recognised at the time they arise. Service charge expenses are recognised in the same period as the service charge income to ensure that income and expenditure are matched. Insurance income relates to a service cost re-charge of insurance costs incurred to the lease holder and is recognised in the accounting period in which the services are rendered. 109 Strategic Report Governance ### 2. ACCOUNTING POLICIES (CONTINUED) 2.5 Summary of material accounting policies (continued) ii) Deferred income Deferred income is any rental income that has been invoiced to the tenant but relates to future periods. It is reported as a current liability in the Statement of Financial Position. c) Financing income and expenses Financing income comprises interest receivable on funds invested. Financing expenses comprise interest and other costs incurred in connection with the borrowing of funds. Interest income and interest payable are recognised in profit or loss as they accrue, using the effective interest method. d) Investment property Property is classified as investment property when it is held to earn rentals or for capital appreciation or both. Investment property is measured initially at cost including transaction costs. Transaction costs recognise transfer taxes and professional fees to bring the property to the condition necessary for it to be capable of operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met. Subsequent to initial recognition, investment property is stated at fair value. Gains or losses arising from changes in Financial Statements Additional Information the fair values are included in profit or loss. Investment properties are valued by the independent external valuer on the basis of a full valuation with physical inspection at least once a year, in accordance with the current issue of RICS Valuation – Professional Standards (the ‘Red Book’). The determination of the fair value is based upon the income capitalisation approach. 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 estimated rental values are based on comparable property and leasing transactions in the market using the valuer’s professional judgement and market observation. Other factors taken into account in the valuations include the tenure of the property, tenancy details, capital values of fixtures and fittings, environmental matter and the overall repair and condition of the property. For the purposes of these financial statements, the assessed fair value is: – reduced by the carrying amount of any accrued income resulting from the spreading of lease incentives; and – increased by the carrying amount of leasehold obligations. Investment property is derecognised when it has been disposed of or permanently withdrawn from use and no future economic benefit is expected after its disposal or withdrawal. The profit on disposal is determined as the difference between the net sales proceeds and the carrying amount of the asset at the commencement of the accounting period plus capital expenditure in the period. Any gains or losses on the retirement or disposal of investment property are recognised in the profit or loss in the year of retirement or disposal. e) Investments in subsidiaries AEW UK REIT 2015 Limited is the subsidiary of the Company. The subsidiary was dormant during the current and previous reporting period. The investment in the subsidiary is stated at cost less impairment and shown in note 19. The Company has taken advantage of the exemption as permitted by Section 402 of the Companies Act 2006, therefore the subsidiary is not consolidated as its inclusion is not material for the purposes of giving a true and fair view. f) Investment property held for sale Investment property is classified as held for sale when it is being actively marketed at year-end and it is highly probable that the carrying amount will be recovered principally through a sale transaction within 12 months. Investment property classified as held for sale is included within current assets within the Statement of Financial Position and measured at fair value. 110 ### 2. ACCOUNTING POLICIES (CONTINUED) 2.5 Summary of material accounting policies (continued) g) Derivative financial instruments Derivative financial instruments, comprising interest rate caps for hedging purposes, are initially recognised at fair value and are subsequently measured at fair value, being the estimated amount that the Company would receive or pay to terminate the agreement at the period end date, taking into account current interest rate expectations and the current credit rating of the Company and its counterparties. Premiums payable under such arrangements are initially capitalised into the Statement of Financial Position. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair value measurement as a whole. Changes in fair value of interest rate derivatives are recognised within operating costs in profit or loss in the period in which they occur. h) Cash and cash equivalents Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and short-term deposits with an original maturity of three months or less. i) Restricted cash Restricted cash is restricted as to withdrawal or usage and the Company does not have ready access to until specific conditions are met. j) Receivables Rent and other receivables are initially recognised at fair value and subsequently at amortised cost. Impairment provisions are recognised based upon an expected credit loss model. The Company has made an assessment of expected credit losses at each period end, using the simplified approach where a lifetime expected loss allowance is recognised over the expected life of the financial instrument. Any adjustment is recognised in profit or loss as an impairment gain or loss. Expected credit losses are assessed based on the Company’s historical credit loss experience, adjusted for factors which are specific to the tenant and current and forecast economic conditions in general. If confirmation is received that a trade receivable will not be collected, the carrying value of the asset will be written off against the associated impairment provision. k) Capital prepayments Capital prepayments are made for the purpose of acquiring future property assets and held as receivables within the Statement of Financial Position. When the asset is acquired, the prepayments are capitalised as a cost of purchase. Where a purchase is not successful, these costs are expensed within profit or loss as abortive costs in the period. l) Other payables and accrued expenses Other payables and accrued expenses are initially recognised at fair value and subsequently held at amortised cost. m) Interest bearing loans and borrowings All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Borrowing costs are amortised over the lifetime of the facilities through profit or loss. When the lifetime of a floating rate facility is extended, and this is considered to be a non-substantial modification, the effective interest rate is revised to reflect changes in market rates of interest. n) Dividend payable to shareholders Equity dividends are recognised when they become legally payable. o) Share issue costs The costs of issuing or reacquiring equity instruments (other than in a business combination) are accounted for as a deduction from equity. 111 Strategic Report Governance ### 2. ACCOUNTING POLICIES (CONTINUED) 2.5 Summary of material accounting policies (continued) p) Leases Leases where the Company is lessee are capitalised at the lease commencement, at present value of the minimum lease payments, using the Company’s incremental borrowing rate as the discount rate, and held as both a right-of- use asset and a liability within the Statement of Financial Position. q) Taxes Corporation tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case, it is recognised in equity. As a REIT, the Company is exempt from corporation tax on the profits and gains from its investments, provided it continues to meet certain conditions as per REIT regulations. Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and deferred tax. Current tax is expected tax payable on any non-REIT taxable income for the period, using tax rates applicable in the period. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax that is Financial Statements Additional Information provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the period end date. r) European Public Real Estate Association The Company has adopted European Public Real Estate Association (‘EPRA’) best practice recommendations, which it expects to broaden the range of potential institutional investors able to invest in the Company’s Ordinary Shares. For the year to 31 March 2025, audited EPS and NAV calculations under EPRA’s methodology are included in note 10 and further unaudited measures are included on pages 135 to 152. s) Capital and reserves Share capital Share capital is the nominal amount of the Company’s Ordinary Shares in issue. Buyback reserve Buyback reserve represents the cost of the Company’s Ordinary Shares reacquired by the Company including directly attributable transaction costs. This reserve is not distributable. Share premium Share premium relates to amounts subscribed for share capital in excess of nominal value less associated issue costs of the subscriptions. Capital reserve The capital reserve represents the cancelled share premium less dividends paid from this reserve. This is a distributable reserve. Retained earnings Retained earnings represent the profits of the Company less dividends paid from revenue profits to date. Unrealised gains on the revaluation of investment properties contained within this reserve are not distributable until they crystallise on the sale of the investment property. The cumulative unrealised loss contained within this reserve at 31 March 2025 is £0.61 million (31 March 2024: cumulative unrealised loss of £7.47 million). 112 ### 3. RENTAL AND OTHER INCOME | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Rental income 18,328 19,488 Service charge income 2,436 2,899 Insurance income 1,194 1,171 Turnover rents 526 400 Dilapidation income received 180 323 Other property income 13 9 Lease surrender income – 55 Total rental and other property income 22,677 24,345 Other income* 1,082 – Total rental and other income 23,759 24,345 * As detailed in the March 2024 Annual Report, the Company identified in the prior year that certain historic dividends had been declared as ordinary dividends when they should have been declared as Property Income Distributions (“PIDs”). The Investment Manager had (without admission of liability) agreed to fully indemnify the Company for any losses it incurred as a result of rectifying this, thereby ensuring that the Company’s NAV would not ultimately be impacted. This indemnification was provided in return for an assignment of any claims the Company has against other parties. The indemnity income has been recognised in the period as a result of the indemnity agreement being finalised and signed. All rental and other income is derived from within the UK. No single tenant accounts for more than 10% of rental income. ### 4. PROPERTY OPERATING EXPENSES | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Recoverable service charge expense 2,436 2,899 Recoverable insurance expense 1,194 1,171 Other property expenses 1,191 1,802 Non-recoverable service charge expense 997 989 Total property operating expenses 5,818 6,861 113 Strategic Report Governance ### 5. OTHER OPERATING EXPENSES | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Investment management fee 1,379 1,391 Operating costs 973 1,134 Audit remuneration 273 226 Total other operating expenses 2,625 2,751 Details on how the investment management fees are calculated are disclosed in note 24. | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Audit Statutory audit of Annual Report and Financial Statements 198 190 Under accrual from prior year 39 – Financial Statements Additional Information 237 190 Non-audit ISRE (UK) 2410 review (interim review fee) 36 36 36 36 Total fees paid to BDO LLP 273 226 Percentage of total fees attributed to non-audit services 13% 16% ### 6. DIRECTORS’ REMUNERATION | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Directors’ remuneration 146 148 Tax and social security 14 14 Total remuneration 160 162 A summary of the Directors’ remuneration is set out in the Directors’ Remuneration Report on page 68. There are no other members of key management personnel other than the Directors. 114 ### 7. FINANCE INCOME | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Income receivable from cash and short-term deposits 624 177 Total 624 177 ### 8. FINANCE EXPENSES | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Interest payable on loan borrowings 1,776 1,780 Amortisation of loan arrangement fee 127 127 Interest expense on lease liabilities 14 28 Other loan expenses 12 – Bank charges 2 1 Total 1,931 1,936 ### 9. TAXATION | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Tax charge comprises: Corporation tax on interest allocated to the residual business 68 42 Prior year over accrual (42) – Total tax charge 26 42 Analysis of tax charge in the year Profit before tax 24,370 9,090 Theoretical tax at UK corporation tax standard rate of 25.00% 6,093 2,273 (31 March 2024: 25.00%) Adjusted for: Exempt REIT income (3,570) (2,898) Non taxable investment (gains)/losses (2,523) 625 Corporation tax payable 68 42 Prior year over accrual (42) – Total tax charge 26 42 Factors that may affect future tax charges Due to the Company’s status as a REIT and the intention to continue meeting the conditions required to obtain approval as a REIT in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. 115 ## 10. EARNINGS PER SHARE AND NAV PER SHARE | | YEAR ENDED 31 MARCH 2025 | YEAR ENDED 31 MARCH 2024 | | --- | --- | --- | | **Earnings per share:** | | | | Profit for the year attributable to owners of the company (£'000) | 24,344 | 9,048 | | Weighted average number of shares | 158,424,746 | 158,424,746 | | **Earnings per share (basic and diluted) (pence)** | 15.37 | 5.71 | | **EPRA earnings per share:** | | | | Profit for the year attributable to owners of the company (£'000) | 24,344 | 9,048 | | **Adjustment to total profit:** | | | | Change in fair value of investment properties (£'000) | (6,861) | 4,350 | | Realised gain on disposal of investment properties (£'000) | (3,230) | (1,848) | | **Total EPRA Earnings (£'000)** | 14,253 | 11,550 | | **EPRA earnings per share (basic and diluted) (pence)** | 9.00 | 7.29 | | Net assets (£'000) | 174,443 | 162,752 | | Ordinary Shares in issue | 158,424,746 | 158,424,746 | | **NAV per share (pence)** | 110.11 | 102.73 | Earnings per share ('EPS') amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the year. Strategic Report Governance Financial Statements Additional Information 116 ### 10. EARNINGS PER SHARE AND NAV PER SHARE (CONTINUED) EPRA NTA EPRA NRV EPRA NDV AS AT 31 MARCH 2025 £’000 £’000 £’000 IFRS NAV attributable to shareholders 174,443 174,443 174,443 1 Real estate transfer tax and other purchasers’ costs – 13,500 – Adjustment for the fair value of bank borrowings – – (2,927) At 31 March 2025 174,443 187,943 171,516 Number of ordinary shares (million) 158,424,746 158,424,746 158,424,746 NAV per share (pence) 110.11 118.63 108.26 EPRA NTA EPRA NRV EPRA NDV AS AT 31 MARCH 2024 £’000 £’000 £’000 IFRS NAV attributable to shareholders 162,752 162,752 162,752 1 Real estate transfer tax and other purchasers’ costs – 13,906 – Adjustment for the fair value of bank borrowings – – (4,641) At 31 March 2024 162,752 176,658 158,111 Number of Ordinary Shares 158,424,746 158,424,746 158,424,746 NAV per share (pence) 102.73 111.51 99.80 1 EPRA Net Tangible Assets (‘EPRA NTA’) and EPRA Net Disposal Value (‘EPRA NDV’) as calculated using property values in line with IFRS, where values are net of Real Estate Transfer Tax (‘RETT’) and other purchasers’ costs. RETT and other purchasers’ costs are added back when calculating EPRA Net Reinstatement Value (‘EPRA NRV’) and have been estimated at 6.6% of the net valuation provided by Knight Frank. ### 11. DIVIDENDS PAID | | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | --- | | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | DIVIDENDS PAID DURING THE YEAR | | | £’000 | | | £’000 | Represents four interim dividends of 2.00 pps each 12,674 12,674 | | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | --- | | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | DIVIDENDS RELATING TO THE YEAR | | | £’000 | | | £’000 | Represents four interim dividends of 2.00 pps each 12,674 12,674 Dividends paid during the period relate to Ordinary Shares only. The Statement of Cash Flows for dividends paid excludes £266,000 withholding tax which is payable as at 31 March 2025 (31 March 2024: £283,000). 117 Strategic Report Governance ### 12. INVESTMENT PROPERTY 12.a) Investment property 31 MARCH 2025 31 MARCH 2024 | INVESTMENT | | INVESTMENT | | | INVESTMENT | | INVESTMENT | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | PROPERTY | | PROPERTY | | | PROPERTY | | PROPERTY | | | | FREEHOLD | | LEASEHOLD | | TOTAL | FREEHOLD | | LEASEHOLD | | TOTAL | | | £’000 | | £’000 | £’000 | | £’000 | | £’000 | £’000 | UK investment property As at beginning of the year 154,340 56,350 210,690 156,325 57,500 213,825 Purchases in the year 10,533 – 10,533 22,984 – 22,984 Capital expenditure in the year 1,918 884 2,802 380 1,771 2,151 Disposals in the year (4,750) (22,143) (26,893) (24,300) – (24,300) Revaluation of investment property 6,454 959 7,413 (1,049) (2,921) (3,970) Valuation provided by Knight Frank 168,495 36,050 204,545 154,340 56,350 210,690 Adjustment to carrying value for lease (4,303) (3,751) incentive debtor Financial Statements Additional Information Adjustment for lease obligations* 187 187 Total investment property 200,429 207,126 Classified as: Investment property held for sale – 26,086 Investment property 200,429 181,040 200,429 207,126 Change in fair value of investment property Change in fair value before 7,413 (3,970) adjustments for lease incentives Adjustment for movement in the year: in value of lease incentive debtor (552) (380) 6,861 (4,350) Gains on disposal of the investment property Net proceeds from disposals of 30,123 26,148 investment property during the year** Fair value at the beginning of period (26,893) (24,300) Realised gain on disposal of 3,230 1,848 investment property held for sale * Adjustment in respect of minimum payment under head leases separately included as a liability within the Statement of Financial Position ** Net proceeds include deductions for topped up rents and rent-free periods of £1,642,000 (31 March 2024: £555,000). 118 ### 12. INVESTMENT PROPERTY (CONTINUED) 12.a) Investment property (continued) Valuation of investment property Valuation of investment property is performed by Knight Frank LLP, an accredited external independent valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued. The valuation of the Company’s investment property at fair value is determined by the external valuer on the basis of market value in accordance with the internationally accepted RICS Valuation – Professional Standards (incorporating the International Valuation Standards). The determination of the fair value is based upon the income capitalisation approach. 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 estimated rental values are based on comparable property and leasing transactions in the market using the valuer’s professional judgement and market observation. Other factors taken into account in the valuations include the tenure of the property, tenancy details, capital values of fixtures and fittings, environmental matter and the overall repair and condition of the property. 12.b) Fair value measurement hierarchy The following table provides the fair value measurement hierarchy for investments: | | | | SIGNIFICANT | | | | SIGNIFICANT | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | QUOTED PRICES IN | | | OBSERVABLE | | | UNOBSERVABLE | | | | | | ACTIVE MARKETS | | | | | INPUTS | | | | INPUTS | | | | (LEVEL 1) | | | (LEVEL 2) | | | | (LEVEL 3) | | TOTAL | | | | £’000 | | | £’000 | | | | £’000 | £’000 | Assets measured at fair value 31 March 2025 – – 200,429 200,429 Investment property 31 March 2024 – – 207,126 207,126 Investment property Explanation of the fair value hierarchy: Level 1 – Quoted prices for an identical instrument in active markets; Level 2 – Prices of recent transactions for identical instruments and valuation techniques using observable market data; and Level 3 – Valuation techniques using non-observable data. There have been no transfers between Level 1 and Level 2 during either year, nor have there been any transfers in or out of Level 3. 119 ## 12. INVESTMENT PROPERTY (CONTINUED) ### 12.b) Fair value measurement hierarchy (continued) Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the entity's portfolio of investment property are: #### 1) ERV #### 2) Equivalent yield Increases/(decreases) in the ERV (per sq ft per annum) in isolation would result in a higher/(lower) fair value measurement. Increases/(decreases) in the discount rate/yield in isolation would result in a lower/(higher) fair value measurement. The significant unobservable inputs used in the fair value measurement, categorised within Level 3 of the fair value hierarchy of the portfolio of investment property are as follows: | SECTOR | FAIR VALUE £'000 | ERV RANGE (PER SQ FT PER ANNUM) | SIGNIFICANT UNOBSERVABLE INPUTS | | WEIGHTED AVERAGE EQUIVALENT YIELD RANGE | | --- | --- | --- | --- | --- | --- | | | | | WEIGHTED AVERAGE ERV (PER SQ FT PER ANNUM) | EQUIVALENT YIELD RANGE | | | **As at 31 March 2025** | | | | | | | Industrial | 78,600 | £0.50 - £10.00 | £4.60 | 6.83% - 10.94% | 8.14% | | Retail | 72,450 | £4.00 - £94.00 | £11.74 | 7.09% - 10.88% | 8.61% | | Alternatives | 28,895 | £8.50 - £42.43 | £10.86 | 7.54% - 9.58% | 8.43% | | Office | 24,600 | £8.50 - £40.00 | £21.93 | 8.60% - 8.99% | 8.81% | | Portfolio+ | 204,545 | £0.50 - £94.00 | £7.57 | 6.83% - 10.94% | 8.42% | | **As at 31 March 2024** | | | | | | | Industrial | 78,720 | £0.50 - £10.00 | £4.24 | 6.81% - 10.94% | 8.23% | | Retail | 78,500 | £4.00 - £85.00 | £11.21 | 6.93% - 11.34% | 8.57% | | Alternatives | 28,420 | £8.00 - £29.60 | £12.53 | 8.57% - 8.92% | 8.51% | | Office | 25,050 | £8.50 - £40.00 | £21.79 | 7.60% - 9.77% | 8.76% | | Portfolio+ | 210,690 | £0.50 - £85.00 | £7.23 | 6.81% - 11.34% | 8.45% | + Valuation per freight basis p.p. Where possible, sensitivity of the fair values of Level 3 assets are tested to changes in unobservable inputs against reasonable alternatives. All gains and losses recorded in the statement of comprehensive income for recurring fair value measurements categorised within Level 3 of the fair value hierarchy, are attributable to changes in unrealised gains or losses relating to investment property held at the end of the reporting year, prior to adjustment for rent-free debtor and rent guarantee debtor, where applicable. Strategic Report Governance Financial Statements Additional Information 120 ### 12. INVESTMENT PROPERTY (CONTINUED) 12.b) Fair value measurement hierarchy (continued) CHANGE IN ERV CHANGE IN EQUIVALENT YIELD £’000 £’000 £’000 £’000 Sensitivity analysis +5% -5% +5% -5% 31 March 2025 213,044 196,182 194,227 215,985 Resulting fair value of investment property 31 March 2024 219,442 202,048 199,884 222,599 Resulting fair value of investment property CHANGE IN ERV CHANGE IN EQUIVALENT YIELD £’000 £’000 £’000 £’000 Sensitivity analysis +10% -10% +10% -10% 31 March 2025 221,537 187,827 184,841 228,686 Resulting fair value of investment property 31 March 2024 228,232 193,461 190,083 235,859 Resulting fair value of investment property CHANGE IN ERV CHANGE IN EQUIVALENT YIELD £’000 £’000 £’000 £’000 Sensitivity analysis +15% -15% +15% -15% 31 March 2025 230,146 179,541 176,276 242,887 Resulting fair value of investment property 31 March 2024 237,129 184,959 181,139 250,684 Resulting fair value of investment property Given the current volatility in the property market, the above levels of sensitivity of unobservable inputs are considered to demonstrate plausible scenarios in the near future and a reasonable resulting range of movement in valuation. 12.c) Real estate risk The Company has considered the risks specific to its investment property within note 22.2 Financing Management. 121 ### 13. RECEIVABLES AND PREPAYMENTS #### Non Current | | 31 MARCH 2025 £'000 | 31 MARCH 2024 £'000 | | --- | --- | --- | | **Receivables** | | | | Lease incentive debtor | 3,956 | 3,267 | | **Total** | **3,956** | **3,267** | #### Current | | 31 MARCH 2025 £'000 | 31 MARCH 2024 £'000 | | --- | --- | --- | | **Receivables** | | | | Rent agent float account | 5,635 | 2,505 | | Rent receivable | 1,287 | 1,956 | | Recoverable service charge receivable | 1,156 | 1,427 | | Completion proceeds due on sale of property | 350 | 2,175 | | Other receivables | 251 | 989 | | Recoverable insurance receivable | 166 | 1,408 | | Allowance for expected credit losses | (459) | (2,177) | | | **8,386** | **8,283** | | Lease incentive debtor | 347 | 484 | | | **8,733** | **8,767** | | Property related prepayments | 495 | 1,818 | | Other prepayments | 53 | 40 | | | **548** | **1,858** | | **Total** | **9,281** | **10,625** | The lease incentive debtor recognised from rent smoothing adjustments are not considered to be financial assets as the amounts are not yet contractually due. As such, the requirements of IFRS 9 (including the expected credit loss assessment) are not applicable to these balances. The credit risk associated with the tenant is considered in the determination of the fair value of the related property. The carrying value of trade and other receivables classified at amortised cost approximates fair value. Strategic Report Governance Financial Statements Additional Information 122 ### 13. RECEIVABLES AND PREPAYMENTS (CONTINUED) Current (continued) The aged debtor analysis of receivables is as follows: | | 31 MARCH 2025 £'000 | 31 MARCH 2024 £'000 | | --- | --- | --- | | Less than three months | 6,610 | 7,797 | | Between three and six months | 1,776 | 486 | | Total | 8,386 | 8,283 | The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are assessed on an individual tenant-by-tenant basis. The risk of credit loss applied to each tenant is assessed based on information including, but not limited to: external credit ratings; financial statements; press information; previous experience of losses or late payment; discussions with the property manager and the tenant. The expected loss rates are based on the Company's historical credit losses experienced over the three-year period prior to the year-end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Company's customers. The expected credit loss provision as at 31 March 2025 was £0.46 million (31 March 2024: £2.2 million). The reason for the large year-on-year decrease in the expected credit loss provision is due to the write off of the receivables impaired at 31 March 2024 on tenants that had entered administration during the year. No reasonably possible changes in the assumptions underpinning the expected credit loss provision would give rise to a material expected credit loss. The movement in the allowance for impairment in respect of trade receivables during the year was as follows: | | 31 MARCH 2025 £'000 | 31 MARCH 2024 £'000 | | --- | --- | --- | | Opening provision for impairment of trade receivables | 2,177 | 969 | | (Decrease)/increase during the year | (338) | 1,552 | | Unused amounts reversed | (92) | (13) | | Receivable written off during the year as uncollectible | - | (331) | | Movement in provision for impairment during the year | (430) | 1,208 | | Prior year receivable written off during the year as uncollectible | (1,288) | - | | | (1,718) | 1,208 | | At the end of the year | 459 | 2,177 | ### 14. RESTRICTED CASH | | 31 MARCH 2025 £'000 | 31 MARCH 2024 £'000 | | --- | --- | --- | | Restricted cash | 1,790 | - | | | 1,790 | - | Following the disposal of Units 1-11, Central Six Retail Park, Coventry, in December 2024, the Company temporarily exceeded an LTV threshold associated with its loan facility. No covenant was breached but £1,790,000 of the disposal proceeds was required to be maintained in a restricted account. This did not meet the policy for being classified as cash and cash equivalents as the Company did not have ready access to utilise the funds. 122 ## 15. INTEREST BEARING LOANS AND BORROWINGS | | 31 MARCH 2025 £'000 | 31 MARCH 2024 £'000 | | --- | --- | --- | | At the beginning of the period | 60,000 | 60,000 | | Bank borrowings drawn in the period | - | - | | Bank borrowings repaid in the period | - | - | | **Interest bearing loans and borrowings** | **60,000** | **60,000** | | Unamortised loan arrangement fees | (227) | (337) | | **At the end of the year** | **59,773** | **59,663** | | Repayable between two and five years | 60,000 | 60,000 | | Undrawn facility at the end of the period | - | - | | **Total facility** | **60,000** | **60,000** | The Company has a £60.00 million credit facility with AgFe, a leading independent asset manager specialising in debt-based investments. As of 31 March 2025, the Company had utilised £60.00 million (31 March 2024: £60.00 million). The loan is a fixed rate loan with a total interest cost of 2.959% and has a 5 year term maturing in May 2027. The Company has a target gearing of 35% Loan to NAV. As at 31 March 2025, the Company's gearing was 34.40% Loan to NAV (31 March 2024: 36.87%). Borrowing costs associated with the credit facility are shown as finance costs in note 8 to these financial statements. | | 31 MARCH 2025 | 31 MARCH 2024 | | --- | --- | --- | | Facility | £60.00 million | £60.00 million | | Drawn | £60.00 million | £60.00 million | | Loan at fair value | £57.07 million | £55.36 million | | Gearing (Loan to GAV) | 25.01% | 28.97% | | Gearing (Loan to NAV) | 34.40% | 36.87% | | Interest rate | 2.959% fixed | 2.959% fixed | | Notional Value of Loan Balance Hedged | N/A | N/A | Strategic Report Governance Financial Statements Additional Information 124 ## 15. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED) ### Reconciliation to cash flows from financing activities | | 31 MARCH 2025 £'000 | 31 MARCH 2024 £'000 | | --- | --- | --- | | Balance at beginning of year | 59,663 | 59,553 | | **Changes from financing cash flows** | | | | Interest paid | (1,810) | (1,793) | | **Total changes from financing cash flows** | **(1,810)** | **(1,793)** | | **Other changes** | | | | Amortisation of loan arrangement fees | 127 | 127 | | Interest expense | 1,776 | 1,780 | | Other loan expenses | 12 | - | | Changes in loan interest payable | 5 | 13 | | Release of prepaid arrangement fee | - | (17) | | **Total other changes** | **1,920** | **1,903** | | **Balance at the end of the year** | **59,773** | **59,663** | ## 16. PAYABLES AND ACCRUED EXPENSES | | 31 MARCH 2025 £'000 | 31 MARCH 2024 £'000 | | --- | --- | --- | | Deferred income | 3,991 | 5,403 | | Other creditors | 1,423 | 2,070 | | Accruals | 1,257 | 1,199 | | Recoverable service charge payable | 266 | 278 | | Recoverable insurance payable | 109 | 863 | | **Total** | **7,046** | **9,813** | 126 ## 17. LEASE OBLIGATIONS AS LESSEE Leases as lessee are capitalised at the lease's commencement at the present value of the minimum lease payments. The present value of the corresponding rental obligations are included as liabilities. The following table analyses the minimum lease payments under non-cancellable leases: | | 31 MARCH 2025 £'000 | 31 MARCH 2024 £'000 | | --- | --- | --- | | Current | 13 | 13 | | Non Current | 174 | 174 | | **Total** | **187** | **187** | ## 18. OPERATING LEASES ### Operating lease commitments - as lessor The Company has entered into commercial property leases on its investment property portfolio. These non-cancellable leases have a remaining term of between zero and 24 years. Future minimum rentals receivable under non-cancellable operating leases as at 31 March 2025 are as follows: | | 31 MARCH 2025 £'000 | 31 MARCH 2024 £'000* | | --- | --- | --- | | Within one year | 16,205 | 17,367 | | After one year but not more than two years | 13,369 | 14,435 | | After two years but not more than three years | 9,138 | 11,507 | | After three years but not more than four years | 6,859 | 7,163 | | After four years but not more than five years | 6,272 | 5,220 | | More than five years | 21,708 | 20,762 | | **Total** | **73,551** | **76,454** | * The comparatives have been restated to correct the calculation of future minimum lease rental receivables. During the year ended 31 March 2025, there were contingent rents totalling £526,000 (year ended 31 March 2024: £400,233) recognised as income. ## 19. INVESTMENT IN SUBSIDIARY The Company has a wholly-owned subsidiary, AEW UK REIT 2015 Limited: | NAME AND COMPANY NUMBER | COUNTRY OF REGISTRATION AND INCORPORATION | PRINCIPAL ACTIVITY | ORDINARY SHARES HELD | | --- | --- | --- | --- | | AEW UK REIT 2015 Limited (Company number 09524699) | England and Wales | Dormant | 100% | AEW UK REIT 2015 Limited is a subsidiary of the Company incorporated in the UK on 2 April 2015. At 31 March 2025, the Company held one share, being 100% of the issued share capital. AEW UK REIT 2015 Limited is dormant and the cost of the subsidiary is £0.01 (31 March 2024: £0.01). The registered office of AEW UK REIT 2015 Limited is 19$^{th}$ Floor, 51 Lime Street, London EC3M 7DQ. Strategic Report Governance Financial Statements Additional Information 126 ### 20. ISSUED SHARE CAPITAL 31 MARCH 2025 31 MARCH 2024 | | NUMBER OF | | NUMBER OF | | | --- | --- | --- | --- | --- | | | ORDINARY | | ORDINARY | | | £’000 | | SHARES £’000 | | SHARES | Ordinary Shares (nominal value £0.01 per share) authorised, issued and fully paid At the beginning of the year 1,587 158,774,746 1,587 158,774,746 At the end of the year 1,587 158,774,746 1,587 158,774,746 Treasury Shares At the beginning of the year (265) 350,000 (265) 350,000 At the end of the year (265) 350,000 (265) 350,000 Total Ordinary Share capital 1,587 158,424,746 1,587 158,424,746 excluding treasury shares The allotted, called up and fully paid shares at 31 March 2025 consisted of 158,424,746 Ordinary Shares. ### 21. SHARE PREMIUM ACCOUNT 31 MARCH 2025 31 MARCH 2024 £’000 £’000 The share premium relates to amounts subscribed for share capital in excess of nominal value: Balance at the beginning of the year 56,578 56,578 Balance at the end of the year 56,578 56,578 127 Strategic Report Governance ### 22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 22.1 Financial assets and liabilities The Company’s principal financial assets and liabilities are those derived from its operations: receivables and prepayments, cash and cash equivalents and payables and accrued expenses. The Company’s other principal financial liabilities are interest bearing loans and borrowings, the main purpose of which is to finance the acquisition and development of the Company’s property portfolio. Set out below is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments that are carried in the financial statements. 31 MARCH 2025 31 MARCH 2024 BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE £’000 £’000 £’000 £’000 Financial assets 1 Receivables 8,386 8,386 8,283 8,283 Cash and cash equivalents 25,993 25,993 11,397 11,397 Other financial assets held at fair value – – – – Financial Statements Additional Information Financial liabilities Interest bearing loans and borrowings 59,773 57,073 59,663 55,359 2 Payables and accrued expenses 2,530 2,530 3,886 3,886 Lease obligations 187 187 187 187 1 Excludes lease incentive debtor and prepayments. 2 Excludes tax, VAT liabilities and deferred income. All other financial assets and financial liabilities are measured at amortised cost. All financial instruments were designated in their current categories upon initial recognition. Fair value measurement hierarchy has not been applied to those classes of asset and liability stated above which are not measured at fair value in the financial statements. The difference between the fair value and book value of these items is not considered to be material. 128 ### 22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) 22.2 Financing management The Company’s activities expose it to a variety of financial risks: market risk, real estate risk, credit risk and liquidity risk. The Company’s objective in managing risk is the creation and protection of shareholder value. Risk is inherent in the Company’s activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. The principal risks facing the Company in the management of its portfolio are as follows: Market price risk Market risk is the risk that the fair values of financial instruments will fluctuate because of changes in market prices. The financial instruments held by the Company that are affected by market risk are principally the Company’s cash balances and bank borrowings. The Company entered into a fixed rate 5 year loan with AgFe in May 2022, with a total interest cost of 2.959% mitigating the market risk associated with bank borrowings. Real estate risk Real estate risk is the risk that future values of investments in direct property and related property investments will fluctuate due to changes in market prices. To manage market price risk, the Company diversifies its portfolio geographically in the United Kingdom and across property sectors. The disciplined approach to the purchase, sale and asset management ensures that the value is maintained to its maximum potential. Prior to any property acquisition or sale, detailed research is undertaken to assess expected future cash flow. The Investment Management Committee of the Investment Manager meets twice monthly and reserves the ultimate decision with regards to investment purchases or sales. In order to monitor property valuation fluctuations, the Investment Manager meets with the independent external valuer on a regular basis. The valuer provides a property portfolio valuation quarterly, so any movements in the value can be accounted for in a timely manner and reflected in the NAV every quarter. Property investments are illiquid assets and can be difficult to sell, especially if local market conditions are poor. Illiquidity may also result from the absence of an established market for investments, as well as legal or contractual restrictions on resale of such investments. In addition, property valuation is inherently subjective due to the individual characteristics of each property, and thus, coupled with illiquidity in the markets, makes the valuation in the investment property difficult and inexact. No assurances can be given that the valuations of properties will be reflected in the actual sale prices even where such sales occur shortly after the relevant valuation date. There can be no certainty regarding the future performance of any of the properties acquired for the Company. The value of any property can go down as well as up. Property and property-related assets are inherently subjective as regards value due to the individual nature of each property. As a result, valuations are subject to uncertainty. Real property investments are subject to varying degrees of risk. The yields available from investments in real estate depend on the amount of income generated and expenses incurred from such investments. There are additional risks in vacant, part vacant, redevelopment and refurbishment situations, although these are not prospective investments for the Company. 129 Strategic Report Governance ### 22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) 22.3 Credit risk Credit risk is the risk that the counterparty (to a financial instrument) or tenant (of a property) will cause a financial loss to the Company by failing to meet a commitment it has entered into with the Company. It is the Company’s policy to enter into financial instruments with reputable counterparties. All cash deposits are placed with approved counterparties, The Royal Bank of Scotland International Limited which has an A3 long term credit rating and MUFG Corporate Markets Treasury Limited which has an A1 long term credit rating. In respect of property investments, in the event of a default by a tenant, the Company will suffer a rental shortfall and additional costs concerning re-letting the property. The Investment Manager monitors tenant arrears in order to anticipate and minimise the impact of defaults by occupational tenants. The table below shows the Company’s exposure to credit risk: | | AS AT | | AS AT | | --- | --- | --- | --- | | 31 MARCH 2025 | | 31 MARCH 2024 | | | | £’000 | | £’000 | Receivables (excluding incentives and prepayments) 8,386 8,283 Cash and cash equivalents 25,593 11,397 Financial Statements Additional Information Total 33,979 19,680 Liquidity risk Liquidity risk arises from the Company’s management of working capital, the finance charges and principal repayments on its borrowings. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due, as the majority of the Company’s assets are investment properties and therefore not readily realisable. The Company’s objective is to ensure it has sufficient available funds for its operations and to fund its capital expenditure. This is achieved by continuous monitoring of forecast and actual cash flows by management. The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments: | | | | ON | | | < 3 | | 3–12 | | 1–5 | | > 5 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | DEMAND | | | MONTHS | | | MONTHS | | YEARS | | YEARS | | TOTAL | | 31 MARCH 2025 | | £’000 | | | £’000 | | | £’000 | £’000 | | £’000 | | £’000 | Interest bearing loans and borrowings – 443 1,333 61,974 – 63,750 Payables and accrued expenses – 2,530 – – – 2,530 Lease obligation – – 14 56 1,708 1,778 – 2,973 1,347 62,030 1,708 68,058 | | | | ON | | | < 3 | | 3–12 | | 1–5 | | > 5 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | DEMAND | | | MONTHS | | | MONTHS | | YEARS | | YEARS | | TOTAL | | 31 MARCH 2024 | | £’000 | | | £’000 | | | £’000 | £’000 | | £’000 | | £’000 | Interest bearing loans and borrowings – 443 1,333 63,750 – 65,526 Payables and accrued expenses – 3,886 – – – 3,886 Lease obligation – – 14 56 1,708 1,778 – 4,329 1,347 63,806 1,708 71,190 130 ## 23. CAPITAL MANAGEMENT The primary objectives of the Company's capital management are to ensure that it continues to qualify for UK REIT status and complies with its banking covenants. To enhance returns over the medium term, the Company utilises borrowings on a limited recourse basis for each investment or all or part of the total portfolio. The Company's policy is to target a borrowing level of 35.00% Loan to NAV. Alongside the Company's borrowing policy, the Directors intend, at all times, to conduct the affairs of the Company so as to enable the Company to qualify as a REIT for the purposes of Part 12 of the CTA 2010 (and the regulations made thereunder). The REIT status compliance requirements include: 90% distribution test, interest cover ratio and 75% assets test, all of which the Company remained compliant with in this reporting year. The monitoring of the Company's level of borrowing is performed primarily using a Loan to Value ratio and is reported to the lender on a quarterly basis against the financial covenants of the facility. At the year-end, the Company had a Loan to Value ratio of 33.87% (31 March 2024: 31.99%). Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. During the year under review, the Company did not breach any of its loan covenants, nor did it default on any of its other obligations under its loan agreements. ## 24. TRANSACTIONS WITH RELATED PARTIES As defined by IAS 24 Related Parties Disclosures, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. For the year ended 31 March 2025, the Directors of the Company are considered to be the key management personnel. Details of amounts paid to Directors for their services can be found within note 6, Directors' remuneration and the Director's remuneration report on page 68. During the year the Directors who served in the year received £3,498 gross in dividend payments (31 March 2024: £47,765). AEW UK Investment Management LLP is the Company's Investment Manager and has been appointed as AIFM. Under the terms of the Investment Management Agreement, the Investment Manager is responsible for the day-to-day discretionary management of the Company's investments subject to the investment objective and investment policy of the Company and the overall supervision of the Directors. The Investment Manager is entitled to receive a quarterly management fee in respect of its services calculated at the rate of one-quarter of 0.9% of the prevailing NAV (excluding uninvested proceeds from fundraisings). During the year, the Company incurred £1,379,246 (31 March 2024: £1,391,335) in respect of investment management fees and expenses, of which £335,510 (31 March 2024: £339,647) was outstanding as at 31 March 2025. 131 ## 25. SEGMENTAL INFORMATION The Board of Directors retains overall control of the Company but the Investment Manager (AEW UK Investment Management LLP) has certain authorities and fulfils the function of allocating resource to, and assessing the performance of the Company's operating segments and is therefore considered to be the Chief Operating Decision Maker ('CODM'). In accordance with IFRS 8, the Company considers each of its properties to be an individual operating segment. The CODM allocates resources, and reviews the performance of, the Company's portfolio on a property-by-property basis and discrete financial information is available for each individual property. These operating segments have similar economic characteristics and, as such, are aggregated into one reporting segment, being investment in property and property-related investments in the UK. ## 26. EVENTS AFTER REPORTING DATE ### Dividend On 1 May 2025, the Board declared its fourth interim dividend of 2.00 pps in respect of the period from 1 January 2025 to 31 March 2025. This was paid on 30 May 2025, to shareholders on the register as at 9 May 2025. The ex dividend date was 8 May 2025. ### Investment Property Purchase In June 2025, the Company completed on the purchase of Freemans Leisure Park, Leicester, for £11.15 million. Strategic Report Governance Financial Statements Additional Information 132 ## Additional ## Information Strategic Report Governance Financial Statements Additional Information Bath, Northgate House ## EPRA Unaudited ## Performance Measures EPRA disclosures are widely used across the listed property sector and, as such, have been presented below to aid comparison with other companies in this sector. Detailed below is a summary table showing the EPRA performance measures of the Company. All EPRA performance measures have been calculated in line with EPRA Best Practices Recommendations Guidelines which can be found at www.epra.com. MEASURE AND DEFINITION PURPOSE PERFORMANCE 1. EPRA Earnings Earnings for operational activities. A key measure of a company’s £14.25 million/9.00 pps underlying operating results and EPRA earnings for year to an indication of the extent to 31 March 2025 (31 March 2024: which current dividend payments £11.55 million/7.29 pps) are supported by earnings. 2. EPRA Net Tangible Assets (‘NTA’) £174.44 million/110.11 pps Assumes that entities buy and sell EPRA NTA as at 31 March assets, thereby crystallising certain 2025 (31 March 2024: £162.75 levels of unavoidable deferred tax. million/102.73 pps) 3. EPRA Net Reinstatement Value (‘NRV’) The EPRA NAV set of metrics £187.94 million/118.63 pps Assumes that entities never sell make adjustments to the NAV per EPRA NRV as at 31 March assets and aims to represent the the IFRS financial statements to 2025 (31 March 2024: £176.66 value required to rebuild the entity. provide stakeholders with the most million/111.51 pps) relevant information on the fair | 4. EPRA Net Disposal Value | value of the assets and liabilities of | | | --- | --- | --- | | (‘NDV’) | a real estate investment company, | £171.52 million/108.26 pps | | Represents the shareholders’ | under different scenarios. | | EPRA NDV as at 31 March value under a disposal scenario, 2025 (31 March 2024: £158.11 where deferred tax, financial million/99.80 pps) instruments and certain other adjustments are calculated to the full extent of their liability, net of any resulting tax. 5. EPRA Net Initial Yield (‘NIY’) Annualised rental income based A comparable measure for 7.97% on the cash rents passing at the portfolio valuations. EPRA NIY as at 31 March 2025 balance sheet date, less non- This measure should make it (31 March 2024: 8.02%) recoverable property operating easier for investors to judge expenses, divided by the market themselves, how the valuation value of the property, increased of portfolio X compares with with (estimated) purchasers’ portfolio Y. costs. 6. EPRA ‘Topped-Up’ NIY This measure incorporates an A comparable measure for 8.19% adjustment to the EPRA NIY portfolio valuations. EPRA ‘Topped-Up’ NIY as at in respect of the expiration This measure should make it 31 March 2025 (31 March 2024: of rent-free periods (or other easier for investors to judge 8.30%) unexpired lease incentives such themselves, how the valuation as discounted rent periods and of portfolio X compares with step rents). portfolio Y. 135 Strategic Report Governance Financial Statements Additional Information MEASURE AND DEFINITION PURPOSE PERFORMANCE 7. EPRA Vacancy Rate Estimated Market Rental Value A ‘pure’ (%) measure of 7.50% (‘ERV’) of vacant space divided investment property space that is EPRA Vacancy Rate as at by ERV of the whole portfolio. vacant, based on ERV. 31 March 2025 (31 March 2024: 6.38%) 8. EPRA Cost Ratio Administrative and operating A key measure to enable 24.05% costs (including and excluding meaningful measurement of EPRA Cost Ratio (including direct costs of direct vacancy) divided the changes in a company’s vacancy costs) as at 31 March by gross rental income. operating costs. 2025 (31 March 2024: 34.57%) 12.90% EPRA Cost Ratio (excluding direct vacancy costs) as at 31 March 2025 (31 March 2024: 26.67%) 9. EPRA Capital Expenditure | Property which has been held at | A measure used to illustrate | £13.34 million for the year ended | | --- | --- | --- | | both the current and comparative | change in comparable capital | 31 March 2025 (31 March 2024: | | balance sheet dates for which | values. | £25.13 million) | there has been no significant development. 10. EPRA Like-for-like Rental (Reduction)/Growth | Net growth generated by assets | A measure used to illustrate | £(0.24) million/(1.58)% for the | | --- | --- | --- | | which were held by the Company | change in comparable income | year ended 31 March 2025 | | throughout both the current | values. | (31 March 2024: £0.48 million/ | | and comparable periods which | | 3.39%) | there has been no significant development which materially impacts upon income. 11. EPRA Loan to Value | Debt divided by the market value | A measure to assess the gearing | 15.29% for the year ended | | --- | --- | --- | | of property. | of shareholder equity of a real | 31 March 2025 (31 March 2024: | | | estate company. | 22.63%) | 136 ### CALCULATION OF EPRA NTA, EPRA NRV AND EPRA NDV The Company considers EPRA NTA to be the most relevant NAV measure for the Company and we are now reporting this as our primary NAV measure, replacing our previously reported EPRA NAV and EPRA NNAV per share metrics. EPRA NTA excludes the cumulative fair value adjustments for debt-related derivatives which are unlikely to be realised. EPRA NTA EPRA NRV EPRA NDV AS AT 31 MARCH 2025 £’000 £’000 £’000 IFRS NAV attributable to shareholders 174,443 174,443 174,443 1 Real estate transfer tax and other purchasers costs – 13,500 – Adjustment for the fair value of bank borrowings – – (2,927) At 31 March 2025 174,443 187,943 171,516 Number of ordinary shares (‘000) 158,424,746 158,424,746 158,424,746 NAV per share (pence) 110.11 118.63 108.26 EPRA NTA EPRA NRV EPRA NDV AS AT 31 MARCH 2024 £’000 £’000 £’000 IFRS NAV attributable to shareholders 162,752 162,752 162,752 1 Real estate transfer tax and other purchasers’ costs – 13,906 – Adjustment for the fair value of bank borrowings – – (4,641) At 31 March 2024 162,752 176,658 158,111 Number of Ordinary Shares (‘000) 158,424,746 158,424,746 158,424,746 NAV per share (pence) 102.73 111.51 99.80 1 EPRA NTA and EPRA NDV are calculated using property values in line with IFRS, where values are net of Real Estate Transfer Tax (RETT) and other purchasers’ costs. RETT and other purchasers’ costs are added back when calculating EPRA NRV, and have been estimated at 6.6% of the net valuation provided by Knight Frank. ### CALCULATION OF EPRA NET INITIAL YIELD (‘NIY’) AND EPRA ‘TOPPED-UP’ NIY | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Investment property – wholly-owned 204,545 210,690 Allowance for estimated purchasers’ costs at 6.6% 13,500 13,906 Grossed-up completed property portfolio valuation (B) 218,045 224,596 Annualised cash passing rental income 17,861 18,694 Property outgoings (475) (674) Annualised net rents (A) 17,386 18,020 Rent from expiry of rent-free periods and fixed uplifts* 466 612 ‘Topped-up’ net annualised rent (C) 17,852 18,632 EPRA NIY (A/B) 7.97% 8.02% EPRA ‘topped-up’ NIY (C/B) 8.19% 8.30% * Rent-free periods expire by September 2025. 137 Strategic Report Governance Financial Statements Additional Information ### EPRA NIY BASIS OF CALCULATION EPRA NIY is calculated as the annualised net rent, divided by the grossed-up value of the completed property portfolio valuation. The valuation of the grossed-up completed property portfolio is determined by the Company’s external valuers as at 31 March 2025, 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 the Company’s 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. ### CALCULATION OF EPRA VACANCY RATE | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Annualised potential rental value of vacant premises (A) 1,498 1,334 Annualised potential rental value for the complete property portfolio (B) 19,974 20,912 EPRA Vacancy Rate (A/B) 7.50% 6.38% ### CALCULATION OF EPRA COST RATIOS | | YEAR ENDED | | | YEAR ENDED | | | --- | --- | --- | --- | --- | --- | | 31 MARCH 2025 | | | 31 MARCH 2024 | | | | | | £’000 | | | £’000 | Administrative/operating expense per IFRS income statement 4,543 6,912 Less: ground rent costs (11) (56) EPRA costs (including direct vacancy costs) (A) 4,532 6,856 Direct vacancy costs (see Glossary on page 155 for further details) (2,101) (1,567) EPRA costs (excluding direct vacancy costs) (B) 2,431 5,289 Gross rental income less ground rent costs (C) 18,843 19,832 Gross Rental Income (C) 18,843 19,832 EPRA Cost Ratio (including direct vacancy costs) (A/C) 24.05% 34.57% EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 12.90% 26.67% The Company has not capitalised any overhead or operating expenses in the accounting years disclosed above. Only costs directly associated with the purchase or construction of properties as well as all subsequent value- enhancing capital expenditure are capitalised. 138 ### LIKE-FOR-LIKE RENTAL GROWTH The table below sets out the like-for-like for rental growth of the portfolio, by sector, in accordance with EPRA Best Practices Recommendations. | | | | RENTAL | | | | RENTAL | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | INCOME FROM | | | | INCOME FROM | | | | | | | | | | | | LIKE-FOR-LIKE | | | | LIKE-FOR-LIKE | | | | | LIKE-FOR- | | | LIKE-FOR- | | | | | PORTFOLIO | | | | PORTFOLIO | | | LIKE RENTAL | | | LIKE RENTAL | | | | | | | | 2025 | | | | 2024 | | GROWTH | | | GROWTH | | | SECTOR | | | | £M | | | | £M | | | £M | | | % | Alternatives 2.09 2.01 0.08 3.98 High Street Retail 3.33 3.71 (0.38) (10.24) Industrial 6.05 6.22 (0.17) (2.73) Office 1.10 1.18 (0.08) (6.78) Retail Warehouse 2.42 2.11 0.31 14.69 Total 14.99 15.23 (0.24) (1.58) The like-for-like rental growth is based on changes in rental income for those properties which have been held for the duration of both the current and comparative reporting. This represents a portfolio valuation, as assessed by the valuer of £194.70 million (31 March 2024: £183.84 million). ### CAPITAL EXPENDITURE The table below sets out the capital expenditure of the portfolio in accordance with EPRA Best Practice Recommendations. 2025 2024 SECTOR £’000 £’000 Acquisitions 10,533 23,214 Investment properties – no incremental lettable space 2,802 1,921 Total purchases and capital expenditure 13,335 25,135 ### EPRA LOAN TO VALUE The table below sets out the loan to net value in accordance with EPRA Best Practice Recommendations: | | 31 MARCH | | 31 MARCH | | | --- | --- | --- | --- | --- | | | | 2025 | | 2024 | | EPRA LOAN-TO-VALUE | | £’000 | | £’000 | Borrowings from financial institutions 60,000 60,000 Cash and cash equivalents (25,993) (11,397) Restricted cash (1,790) – EPRA Net debt (A) 32,217 48,603 Investment properties at fair value 204,545 210,690 Net receivables 6,191 4,079 Total property value (B) 210,736 214,769 EPRA LTV (A/B) 15.29% 22.63% Net receivables comprises Receivables and prepayments 13,237 13,892 Payables and accrued expenses (7,046) (9,813) Total 6,191 4,079 139 ## EPRA Sustainability Performance ## Measures (unaudited) Strategic Report Governance Financial Statements Additional Information The Company has chosen to disclose sustainability information where material in accordance with EPRA Sustainability Best Practice Recommendations (4th Edition). EPRA use the following 28 performance measures as indicated, by code, in the table below: CODE PERFORMANCE MEASURE ENVIRONMENTAL Elec-Abs Total electricity consumption Elec-LfL Like-for-like total electricity consumption DH&C-Abs Total district heating and cooling consumption DH&C-LfL Like-for-like district heating and cooling consumption Fuels-Abs Total fuel consumption Fuels-LfL Like-for-like total fuel consumption Energy-LfL Building energy intensity GHG-Dir-Abs Total direct greenhouse gas (GHG) emissions GHG-Indir-Abs Total indirect greenhouse gas (GHG) emissions GHG-Int Greenhouse gas (GHG) emissions intensity from buildings Water-Abs Total water consumption Water-LfL Like-for-like total water consumption Water-Int Building water intensity Waste-Abs Total weight of waste by disposal route Waste-LfL Like-for-like total weight of waste by disposal route Cert-Tot Type and number of sustainably certified assets SOCIAL Diversity-Emp Employee gender diversity Diversity-Pay Gender pay ratio Emp-Training Employee training and development Emp-Dev Employee performance appraisals Emp-Turnover New hires and turnover H&S-Emp Employee Health and Safety H&S-Asset Asset Health and Safety assessments H&S-Comp Asset Health and Safety compliance Comty-Eng Community engagement, impact assessment and development programs GOVERNANCE Gov Board Composition of the highest governance body Gov Selec Process for nominating and selecting the highest governance body Gov CoI Process for managing conflicts of interest 140 ### SUSTAINABILITY PERFORMANCE MEASURES (ENVIRONMENTAL) The Company has chosen to report GHG emissions using the ‘Operational Control’ approach for its reporting boundary (as opposed to financial control’ or ‘equity share’). ‘Operational control’ has been selected as the reporting boundary as this reflects the portion of the portfolio where the Company can influence operational procedures and, ultimately, sustainability performance. The operational control approach is the most commonly applied within the industry. This boundary includes owned assets where the Company, acting as the landlord, is directly responsible for electricity and/or gas supplies and/or has control of air conditioning equipment. The following sources of emissions have been considered as part of this review: Scope 1 – Direct emissions from controlled gas boilers (converted from kWh usage) – Fugitive emissions from air conditioning systems under landlord control (converted from kg refrigerant releases). The Company’s property manager, Mapp, have confirmed that no fugitive emission (through refrigerant gases) were reported in 2024/25 – Business travel through company owned vehicles (not relevant as the Company does not own any vehicles) Scope 2 – Indirect emissions from electricity purchased by the Company and consumed within real estate assets owned by the Company (converted from kWh usage) – Greenhouse Gas (GHG) emissions from electricity (Scope 2) are reported according to the ‘location-based’ approach As a property company, the majority of the Company’s emissions arise through assets that are owned and leased. At multi-let properties, the Company, acting as the landlord, has control and influence over the whole building and/or shared services (including refrigerant leakage), external lighting and void spaces. In this reporting year, the Company was responsible for Scope 1 and/or Scope 2 emissions at the following assets: SCOPE 1 – SCOPE 2 – INCLUDED IN ASSET NAME SECTOR GAS ELECTRICITY LIKE-FOR-LIKE 40 Queen Square Office Yes Yes Yes 69-75 Above Bar Street Retail Yes Yes Yes 11/15 Fargate Retail No Yes No Barnstaple Retail Park Retail Warehouse No Yes No Diamond Business Park Industrial Yes Yes Yes Apollo Business Park Industrial Yes Yes Yes London East Leisure 1 Leisure No Yes Yes 15-33 Union Street Retail No Yes No Railway Station Centre Retail No Yes No Central Six Retail Park Retail Warehouse Yes Yes No Westlands Distribution Park Industrial No Yes Yes Arrow Point Retail Park Retail Warehouse No Yes No Northgate House Office No Yes No 13, 13a High St, 114-123 Bancroft Retail No Yes No and 3-4 Portmill Lane, Hitchin 25 George Hudson Street, York Retail/Office Yes Yes No Pearl House, Nottingham Retail No Yes Yes 141 Strategic Report Governance Financial Statements Additional Information Emission sources listed in the above table relate to the managed portfolio only and the following sources of energy consumption within each sector: – Office; Whole building and common areas (1 asset) – Retail; Whole building, tenant space and common areas – Retail Warehouse; Tenant space and external lighting – Leisure; External lighting, tenant space and common areas – Industrial; Tenant space, common areas and external lighting ### EMISSIONS OUTSIDE OF OPERATIONAL CONTROL The Company was not responsible for emissions from gas and/or electricity use at any other owned asset or for head office operations. The Company is not directly responsible for any GHG emissions/energy usage at single let/FRI assets nor at multi- let assets where the tenant is counterparty to the energy contract. As these emissions are outside of our direct control, they form part of our wider value chain (i.e. ‘Scope 3’) emissions, which are not monitored at present. ### WATER CONSUMPTION AND WASTE PRODUCTION Alongside GHG emissions/energy usage, the Company has chosen to report water and waste consumption of assets where the Company, acting as the landlord, is directly responsible for them. ASSET NAME SECTOR WATER WASTE 40 Queen Square Office Yes Yes Barnstaple Retail Park Retail Yes No Diamond Business Park Industrial Yes Yes London East Leisure 1 Leisure Yes No Railway Station Centre Retail Yes No Westlands Distribution Park Industrial Yes No Central Six Retail Park Retail Warehouse No Yes 69-75 Above Bar Street Retail Yes Yes Intensity Ratios In addition to reporting relevant absolute GHG emissions (per scope and per sector), the Company has chosen to report intensity ratios, where appropriate. The denominator determined to be most relevant to the business is metres squared of the area served by the meter. The intensity ratio is expressed as kilograms carbon dioxide equivalent per metre square (of area served by the 2 meter) per year, or, kg CO e/m /yr. 2 Like-for-like intensity ratios have only been determined on relevant emissions, where each of the following conditions is met: – An asset was in ownership for 24 months from 1 April 2023 to 31 March 2025 – No major renovation or refurbishment has taken place i.e. affecting more than 50% of the building by area or number of occupants – At least 12 months data is available at meter level in both years Assets excluded from the like-for-like analysis include: – Northgate House – Units A-H Arrowpoint Retail Park – 13, 13a High St, 114-123 Bancroft and 3-4 Portmill Lane, Hitchin 142 Assets disposed during the 2023/2024 reporting ### METHODOLOGY period and are therefore excluded from any 2024/2025 absolute and like-for-like data, but are included in Utility data is reported to EVORA by the Company’s 2023/2024 absolute figures: property manager (MAPP) based on invoiced data. – Pricebusters Building For the first time, EVORA, acting on behalf of AEW, has collected electricity and gas from the National – 208-220 Commercial Road and Database via Perse and Electralink. 7-13 Crasswell Street EVORA checked the Sustainability Performance Data Company Targets using our proprietary software tool SIERA. In summary, GHG Reporting Guidelines recommend establishing a the following steps were applied: target as a matter of good practice. Energy targets are Step 1: Confirmation of asset set up (data coverage and typically measured via changes to KWh usage and/ responsibility for procurement) or greenhouse gas emissions (in the form of carbon | dioxide equivalent) compared to a baseline. Energy | | Step 2: Input of asset characteristics and utility data | | | --- | --- | --- | --- | | targets help: | | | (e.g. energy kWh) | | – Support identification of asset improvement | | Step 3: Initial data reliability checks were performed in | | | | opportunities | | the SIERA tool to identify: | | – Drive improvements in operational efficiency (and | | – Consumption/tonnage data gaps | | potentially lower costs) – Periods of overlapping consumption/tonnage data – Futureproof asset against increased legislation and – Significant consumption/tonnage variance ‘brown discounting’ (on sale) between comparable periods – Support overall good asset management Step 4: Check of data and results utilising the inbuilt – Support GRESB function of SIERA with specialist EVORA consultant review. Like-for-like analysis was The Company has established absolute targets for used to assess, review and quantify year-on energy, greenhouse gas emissions and waste covering year performance changes. Variances of -/+ the whole portfolio based on a 2018 baseline. The 10% were identified and reviewed by EVORA targets are outlined below: consultants. – Energy consumption: 40% reduction in absolute energy by 2030 based on the 2018 baseline ### ABOUT EVORA – GHG emissions: 40% reduction in absolute energy by 2030 based on the 2018 baseline EVORA is an independent, pan-European sustainability consultancy and software provider, specialising in the – Waste: 100% waste diverted from landfill was commercial real estate sector. achieved by 2020. The fund aims to maintain this target Jamie Anderson Consultant, EVORA Global Ltd Environmental information in this report has been provided by EVORA Global, retained sustainability and 26 June 2025 energy management consultants to the Investment Manager. EVORA’s consultant statement is included below: EVORA Global Limited has been appointed by the Company to collate and report energy consumption data, greenhouse gas (GHG) emissions, water and waste data presented within this report. 143 ## ELECTRICITY CONSUMPTION (ELEC-ABS, ELEC-LFL) The table below sets out the like-for-like landlord obtained energy consumption from the Company's managed portfolio by sector. | | UNIT | INDICATOR | ABSOLUTE 2023/2024 | ABSOLUTE 2024/2025 | LIKE-FOR-LIKE 2023/2024 | LIKE-FOR-LIKE 2024/2025 | % CHANGE | | --- | --- | --- | --- | --- | --- | --- | --- | | Office | MWh | Total landlord-obtained electricity | 267.75 | 256.54 | 268 | 257 | -4.19 | | | % | Proportion of landlord obtained electricity from renewable sources | 100% | 100% | - | - | - | | Retail | MWh | Total landlord-obtained electricity | 765.14 | 477.08 | 76 | 83 | 9.13 | | | % | Proportion of landlord obtained electricity from renewable sources | 36% | 15% | - | - | - | | Logistics | MWh | Total landlord-obtained electricity | 1,188.38 | 1,206.56 | 1,188 | 1,207 | 1.53 | | | % | Proportion of landlord obtained electricity from renewable sources | 100% | 100% | - | - | - | | Leisure | MWh | Total landlord-obtained electricity | 313.51 | 313.26 | 12 | 12 | -0.10 | | | % | Proportion of landlord obtained electricity from renewable sources | 11% | 11% | - | - | - | | Other | MWh | Total landlord-obtained electricity | 259.32 | 291.13 | 113 | 145 | 28.50 | | | % | Proportion of landlord obtained electricity from renewable sources | 44% | 50% | - | - | - | | **Total** | **MWh** | **Total landlord-obtained electricity** | **2,794.10** | **2,544.57** | **1,657** | **1,703** | **2.78** | | | % | **Proportion of landlord obtained electricity from renewable sources** | **67%** | **67%** | - | - | - | | | UNIT | INDICATOR | 2023/2024 | 2024/2025 | | --- | --- | --- | --- | --- | | **Total** | % | Solar Photovoltaic | 6% | 2% | | | % | Wind turbine | 35% | 9% | | | % | Nuclear | 17% | 5% | | | % | Hydroelectric technology | 3% | 1% | | | % | Coal | 2% | 0% | For 2023/2024, 31.69% of data was estimated, and for 2024/2025 31.66% of data was estimated. Absolute electricity disclosures account for 18 assets. 15 assets are included in LfL analysis. The Company does not have any responsibility over any managed assets that consume energy from district heating or district cooling sources. Therefore, the EPRA sBPR DH&C-Abs indicator is not applicable and not presented in this report. Strategic Report Governance Financial Statements Additional Information 144 # FUEL CONSUMPTION (FUELS-ABS, FUELS-LFL) The table below sets out the absolute, like-for-like and intensity of the GHG emissions per sector and for the Company overall. | | UNIT | INDICATOR | ABSOLUTE 2023/2024 | ABSOLUTE 2024/2025 | LIKE-FOR-LIKE 2023/2024 | LIKE-FOR-LIKE 2024/2025 | % CHANGE | | --- | --- | --- | --- | --- | --- | --- | --- | | Office | MWh | Total landlord-obtained fuels | 0 | 0 | 0 | 0 | 0.00% | | | % | Natural Gas | - | - | - | - | - | | Retail | MWh | Total landlord-obtained fuels | 867.60 | 581.31 | 196 | 121 | -38.00% | | | % | Natural Gas | 100.0% | 100.0% | - | - | - | | Logistics | MWh | Total landlord-obtained fuels | 1051.14 | 911.89 | 1,051 | 912 | -13.27% | | | % | Natural Gas | 100.0% | 100.0% | - | - | - | | Leisure | MWh | Total landlord-obtained fuels | 0 | 0 | 0 | 0 | 0.00% | | | % | Natural Gas | - | - | - | - | - | | Other | MWh | Total landlord-obtained fuels | 887.53 | 1551.05 | 0 | 0 | 0.00% | | | % | Natural Gas | 100.0% | 100.0% | - | - | - | | Total | MWh | Total landlord-obtained fuels | 2806.27 | 3054.05 | 1,247 | 1,033 | -17.15% | | | % | Natural Gas | 100.0% | 100.0% | - | - | - | 100% of landlord procured fuels are sourced from Natural Gas. The company does not consume, for example, bioenergy such as wood pellets or bio-propane. For 2023/2024, 55.57% of data was estimated, and for 2024/2025 66.18% of data was estimated. Absolute fuel disclosures account for 13 assets. 10 assets are included in LFL analysis. # ENERGY INTENSITY (ENERGY-INT) The table below sets out the landlord-obtained energy intensity from the Company's managed portfolio by sector. | | UNIT | INDICATOR | 2023/2024 | 2024/2025 | | --- | --- | --- | --- | --- | | Office | kWh/m³/ | Landlord-obtained energy | 59.66 | 57.16 | | Retail | kWh/m³/ | Landlord-obtained energy | 42.81 | 28.01 | | Logistics | kWh/m³/ | Landlord-obtained energy | 47.71 | 45.13 | | Leisure | kWh/m³/ | Landlord-obtained energy | 37.64 | 37.61 | | Other | kWh/m³/ | Landlord-obtained energy | 19.19 | 30.83 | | Total | kWh/m³/ | Landlord-obtained energy | 35.52 | 35.51 | 145 Strategic Report Governance Financial Statements Additional Information ### GREENHOUSE GAS EMISSIONS (GHG-DIR-ABS; GHG-INDIR-ABS; GHG-INT) The table below sets out the absolute, like-for-like and intensity of the GHG emissions per sector and for the Company overall. UNIT INDICATOR 2023/2024 2024/2025 Office tCO e Total Direct Scope 1 0.00 0.00 2 Total Indirect Scope 2 Location based 55.44 53.12 Total Indirect Scope 2 Market based 0.00 0.00 Retail tCO e Total Direct Scope 1 158.68 108.15 2 Total Indirect Scope 2 Location based 158.44 98.77 Total Indirect Scope 2 Market based 0.00 0.00 Logistics tCO e Total Direct Scope 1 192.25 166.75 2 Total Indirect Scope 2 Location based 246.07 249.82 Total Indirect Scope 2 Market based 0.00 0.00 Leisure tCO e Total Direct Scope 1 0.00 0.00 2 Total Indirect Scope 2 Location based 64.91 64.86 Total Indirect Scope 2 Market based 0.00 0.00 Other tCO e Total Direct Scope 1 162.33 283.69 2 Total Indirect Scope 2 Location based 53.70 60.27 Total Indirect Scope 2 Market based 0.00 0.00 Total tCO e Total Direct Scope 1 513.27 558.59 2 Total Indirect Scope 2 Location based 578.57 526.85 Total Indirect Scope 2 Market based 0.00 0.00 The proportion of location based emissions estimated was 42.91% in 2023/2024, and 49.42% in 2024/2025. Scope 3 emissions have not been reported. Absolute emissions disclosures account for 18 assets. 15 assets are included in LfL analysis. Emissions Factors – All energy consumption and GHG emissions reported occurred at the Company’s assets all of which are located in the UK. – The Company’s GHG emissions are calculated according to the principles of the Greenhouse Gas (GHG) Protocol Corporate Standard. – The Company’s Greenhouse Gas Emissions are reported as tonnes of carbon dioxide equivalent (tCO e), 2 which includes the following emissions covered by the GHG Protocol (where relevant and available | greenhouse gas emissions factors allow): carbon dioxide (CO | | | ), methane (CH | ), hydrofluorocarbons | | | --- | --- | --- | --- | --- | --- | | | | | 2 | 4 | | | (‘HFCs’), nitrous oxide (N | | 0), perfluorocarbons (‘PFCs’), sulphur hexafluoride (SF | | | ) and nitrogen trifluoride | | | | 2 | | | 6 | | (NF | ). | | | | | 3 – GHG emissions from electricity (Scope 2) are reported according to the ‘location-based’ approach which accounts for grid-based emissions and according to the ‘market-based’ approach which accounts for contractual arrangements to procure renewable energy. 146 – The Company has contracts in place to procure electricity from renewable sources, and as a result, the Company produces zero tCO e market-based emissions. 2 UNIT INDICATOR 2023/2024 2024/2025 2 Office kgCO e/ m / year GHG emission intensity 12.35 11.84 2 2 Retail kgCO e/ m / year GHG emission intensity 5.21 4.13 2 2 Logistics kgCO e/ m / year GHG emission intensity 5.64 5.36 2 2 Leisure kgCO e/ m / year GHG emission intensity 7.79 7.79 2 2 Other kgCO e/ m / year GHG emission intensity 3.21 5.11 2 2 Total kgCO e/ m / year GHG emission intensity 4.99 5.22 2 The following greenhouse gas emissions conversion factors and sources have been applied: UTILITY YEAR GHG EMISSIONS FACTOR PER KWH SOURCE Electricity 2023 0.2070742 UK BEIS, Greenhouse Gas Reporting: Conversion Factors 2023 Gas 2023 0.1829289 UK BEIS, Greenhouse Gas Reporting: Conversion Factors 2023 Electricity 2024 0.207074 UK BEIS, Greenhouse Gas Reporting: Conversion Factors 2024 Gas 2024 0.182989 UK BEIS, Greenhouse Gas Reporting: Conversion Factors 2024 ### WATER (WATER-ABS; WATER-LFL; WATER-INT) The table below sets out the absolute, like-for-like and intensity value water consumption from the Company’s managed portfolio by sector. No assets met the criteria for like-for-like analysis. ABSOLUTE ABSOLUTE LIKE-FOR-LIKE LIKE-FOR-LIKE UNIT INDICATOR 2023/2024 2024/2025 2023/2024 2024/2025 % CHANGE 3 Office m /year Total landlord-obtained water 792.09 761.22 – – 0% 3 Retail m /year Total landlord-obtained water 302.84 935.64 – – 0% 3 Logistics m /year Total landlord-obtained water 32,107.79 30,657.83 24.09 22.66 -6% 3 Leisure m /year Total landlord-obtained water 1,927.47 1,938.69 – – 0% 3 Other m /year Total landlord-obtained water 18,167.59 32,034.62 – – 0% 3 Total m /year Total landlord-obtained water 53,297.76 66,328.01 24.09 22.66 -6% All water procured by AEW is procured via municipal water supplies or other public or private utilities. To the best of the Company’s knowledge, no water is procured or recorded from surface water, sourced from wetlands, rivers, lakes, and oceans, from ground Water, from rainwater collection, or from waste water from another organisation. | | | | ABSOLUTE | ABSOLUTE | LIKE-FOR-LIKE | | LIKE-FOR-LIKE | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UNIT INDICATOR | | 2023/2024 | 2024/2025 | | 2023/2024 | | 2024/2025 % CHANGE | | | 3 | 2 | | | | | | | | Office m | /m | /year Water intensity 0.18 0.17 0.00 0.00 0% | | | | | | | | | 3 | 2 | | | | | | | | Retail m | /m | /year Water intensity 0.01 0.02 0.00 0.00 0% | | | | | | | | | 3 | 2 | | | | | | | | Logistics m | /m | /year Water intensity 0.51 0.48 0.00 0.00 -6% | | | | | | | | | 3 | 2 | | | | | | | | Leisure m | /m | /year Water intensity 0.23 0.23 0.00 0.00 0% | | | | | | | | | 3 | 2 | | | | | | | | Other m | /m | /year Water intensity 0.27 0.48 0.00 0.00 0% | | | | | | | | | 3 | 2 | | | | | | | | Total m | | /m /year Water intensity 0.29 0.36 0.00 0.00 -6% | | | | | | | The proportion of water estimated was 52.59% in 2023/2024, and 64.59% in 2024/2025. 147 ## WASTE (WASTE-ABS; WASTE-LFL) The table below sets out the waste managed (absolute waste production and like-for-like) by the Company by disposal route and by sector. Absolute waste production figures are estimated using a bespoke waste estimation tool that takes bin size and number of collections to calculate the amount of waste produced. The waste estimation tool has been externally validated and is accepted as evidence for GRESB submissions. This does not include waste disposal services procured directly by tenants. Whilst zero waste is sent directly to landfill, a residual component of the 'recycled' and 'incineration with energy recovery' waste streams may end up in landfill. The approach taken follows guidance provided by EPRA Best Practice Recommendations on Sustainability Reporting 2017. | UNIT | INDICATOR | ABSOLUTE 2023/2024 | ABSOLUTE 2024/2025 | LIKE-FOR-LIKE 2023/2024 | LIKE-FOR-LIKE 2024/2025 | % CHANGE | | --- | --- | --- | --- | --- | --- | --- | | Office | Hazardous | - | - | - | - | 0% | | | Non-Hazardous | 40.71 | - | 40.71 | - | -100% | | | Recycled | 18.19 | - | 18.19 | - | -100% | | | Landfill | - | - | - | - | 0% | | | Incineration | 13.52 | - | 13.52 | - | -100% | | Retail | Hazardous | 0.035 | - | - | - | 0% | | | Non-Hazardous | 597.18 | 183.54 | 571.68 | 183.54 | -68% | | | Recycled | 30.28 | 82.91 | 27.43 | 82.91 | 202% | | | Landfill | 514.53 | 12.02 | 514.53 | 12.02 | -98% | | | Incineration | 50.34 | 87.64 | 29.39 | 87.64 | 198% | | Logistics | Hazardous | - | - | - | - | 0% | | | Non-Hazardous | 11.93 | 8.34 | 11.93 | 8.34 | -30% | | | Recycled | 6.31 | 0.34 | 6.31 | 0.34 | -95% | | | Landfill | - | - | - | - | 0% | | | Incineration | 5.52 | 7.68 | 5.52 | 7.68 | 39% | | Leisure | Hazardous | - | - | - | - | 0% | | | Non-Hazardous | 28.59 | 32.57 | 28.59 | 32.57 | 14% | | | Recycled | 23.71 | 27.65 | 23.71 | 27.65 | 17% | | | Landfill | - | - | - | - | 0% | | | Incineration | 4.88 | 4.92 | 4.88 | 4.92 | 1% | | Other | Hazardous | - | - | - | - | 0% | | | Non-Hazardous | 11.78 | 13.20 | 7.41 | - | -100% | | | Recycled | 3.62 | 3.46 | 2.47 | - | -100% | | | Landfill | 4.94 | - | 4.94 | - | -100% | | | Incineration | 3.22 | 9.74 | - | - | 0% | | Total | Hazardous | 0.04 | - | - | - | 0% | | | Non-Hazardous | 690.19 | 237.65 | 660.32 | 224.45 | -68% | | | Recycled | 82.11 | 114.36 | 78.12 | 110.89 | 42% | | | Landfill | 519.47 | 12.02 | 519.47 | 12.02 | -98% | | | Incineration | 77.48 | 109.98 | 53.30 | 100.24 | 88% | We present property energy, greenhouse gas ("GHG"), water and waste data on both an absolute ("abs") and like-for-like ("LFL") basis, covering assets in our UK based portfolio. Our organisational boundary for environmental disclosure is based on the principle of operational control, and therefore includes all property assets where we are responsible for the procurement of energy, water and waste services. A total of 14 assets in the portfolio reported GHG emissions for the 2024/2025 reporting period (year ended 31 March 2024: 14 assets). 11 assets reported water consumption for the 2024/2025 reporting period (year ended 31 March 2024: 4 assets), and 5 assets reported waste services (year ended 31 March 2024: 3 assets). AEW has set a target to reduce absolute Scope 1 GHG emissions by 40% within the Managed Portfolio by 2030 as compared to the 2018 baseline. Additionally, a target has been set to reduce absolute Scope 2 GHG emissions by 40% within the Managed Portfolio by 2030 as compared to the 2018 baseline. This target is inclusive of the decarbonisation of the UK electricity grid over recent years. Strategic Report Governance Financial Statements Additional Information 148 The reporting scope for electricity consumption covers 100% of the portfolio on a floor area basis (Gross Internal Area) across 2023/2024 and 2024/2025. Scope 1 GHG emissions were reported for 100% of the portfolio, and Scope 2 GHG emissions were reported for 100% of the portfolio. During the reporting year, the company procured 2,736 MWh (year ended 31 March 2024: 2,904 MWh) of like-for-like energy for use across the managed portfolio, which is 6% less like-for-like energy use than the prior year. The Scope 1 and 2 GHG emissions for the year totaled 559 tonnes CO$_{2}$e (2023: 513 tonnes CO$_{2}$e). The absolute Scope 1 and 2 increased by 9% from 2023/2024 to 2024/2025. During the period, the total reported waste amounted to 238 tonnes (year ended 31 March 2024: 690 tonnes), of which 12 tonnes (year ended 31 March 2024: 519 tonnes) was sent directly to landfill. In like-for-like terms, the amount of waste generated decreased from 2023/2024 to 2024/2025 by 66%, and the recycling rate increased by 42%. ## SUSTAINABILITY CERTIFICATION (CERT-TOT): GREEN BUILDING CERTIFICATES The Company has chosen not to pursue certification of any of its assets under measures such as BREEAM (the Building Research Establishment Environmental Assessment Methodology) or Green building certification. This decision will be reviewed periodically on an ongoing basis in the course of the Company's usual asset management activity. ## SUSTAINABILITY CERTIFICATION (CERT-TOT): ENERGY PERFORMANCE CERTIFICATES The Minimum Energy Efficiency Standards (MEES) Regulations stem from the Energy Act 2011, which has made it unlawful from April 2018 to let or renew leases at non-domestic properties in England & Wales with an Energy Performance Certificate (EPC) rating lower than an E, subject to certain exemptions. A 'hard backstop' which brings into the MEES standards existing leases will be introduced from 2024, again, subject to certain exemptions. The table below sets out the EPC rating by Estimated Rental Value (ERV). An A rating reflects the most efficient rating with a G being the least efficient. 69% (by ERV) of the assets within the Companies portfolio have efficient A-C EPC ratings. This represents an increase of 6% vs. the previous reporting period. | ENERGY PERFORMANCE CERTIFICATE RATING | PORTFOLIO BY ERV (%) | | | --- | --- | --- | | | 2024/25 | 2023/24 | | A-C | 69% | 63% | | D | 21% | 25% | | E | 8% | 8% | | F | - | - | | G | - | - | | Exempt | 2% | 3.6% | | No EPC/Expired | 0% | 0.4% | | Coverage | 100% | 100% | ## SUSTAINABILITY PERFORMANCE MEASURES (SOCIAL) EPRA's Sustainability Best Practices Recommendations Guidelines 2017 ("EPRA's Guidelines") include Social and Governance reporting measures to be disclosed for the entity i.e. the Company. The Company is an externally managed real estate investment trust and has no direct employees. A number of these Social Performance measures relate to entity employees and therefore these measures are not relevant for reporting at the entity level. The Investment Manager to the Company, AEW UK Investment Management LLP has responsibility for the employees that support the Company. The Company aims to comply with EPRA's Guidelines and therefore has included Social and Governance Performance Measure disclosures in this report. 140 Strategic Report Governance Financial Statements Additional Information ### EMPLOYEE GENDER DIVERSITY (DIVERSITY-EMP) As of 31 March 2025, the Company’s Board comprised four members: two (50%) female and two (50%) male. For further information on the Investment Manager’s employee gender diversity please refer to the ESG link within 1 the Corporate Responsibility area at www.aewukreit.com . ### GENDER PAY RATIO (DIVERSITY-PAY) The remuneration of the Company Board is set out on page 68 of this Annual Report. For further information on the Investment Manager’s gender pay ratio please refer to the ESG link within the 1 Corporate Responsibility area at www.aewukreit.com . ### TRAINING AND DEVELOPMENT (EMP-TRAINING) Please refer to the Director Induction and Training section in the Corporate Governance Statement (page 58) for details on training for the Company’s Board members. The Investment Manager requires employees to complete mandatory internal training and encourage all staff with professional qualifications to maintain the training requirements of their respective professional body. All employees of the Investment Manager that work on the Company’s activities hold professional qualifications and have completed the relevant CPD for their respective professional bodies. The Investment Manager also provides training to its employees to ensure that they understand and abide by the Anti-Bribery, Insider Trading and GDPR regulations. ### EMPLOYEE PERFORMANCE APPRAISALS (EMP-DEV) The Investment Manager’s performance appraisal process requires annual performance objective setting and reviews for all staff. For further information on the Investment Manager’s performance appraisal statistics please refer to the ESG link 1 within the Corporate Responsibility area at www.aewukreit.com . The Investment Manager confirms that performance appraisals were completed for 100% of staff relevant to the Company in 2024. ### EMPLOYEE TURNOVER AND RETENTION (EMP-TURNOVER) For further information on the Investment Manager’s employee turnover and retention please refer to the ESG link 1 within the Corporate Responsibility area at www.aewukreit.com . There have been no changes in the Investment Manager’s staff that work on the Companies activities during the year. ### EMPLOYEE HEALTH AND SAFETY (H&S-EMP) For further information on the Investment Manager’s employee health and safety (being the absenteeism rate) 1 please refer to the ESG link within the Corporate Responsibility area at www.aewukreit.com . ### ASSET HEALTH AND SAFETY ASSESSMENTS (H&S-ASSET) All sites were inspected by MAPP’s during the reporting period and further Health and Safety audits were carried out at those sites that are multi-let. 1 For direct link use: https://www.aewukreit.com/~/media/Files/A/AEW-UK-Reit/documents/aew-esg-flyer.pdf 150 ### ASSET HEALTH AND SAFETY COMPLIANCE (H&S-COMP) No incidents of non-compliance with regulations/and or voluntary codes were identified during the reporting period. ### COMMUNITY ENGAGEMENT, IMPACT ASSESSMENTS AND DEVELOPMENT PROGRAMMES ### (COMTY-ENG) The Company, in conjunction with Mapp, participated in the KidsOut Charity ‘Giving Tree’ initiative. This initiative aims to provide children living in local refuge homes with a present to open on Christmas Day. To facilitate this, decorative tags with a child’s name, age and suggested gift are placed on Christmas Trees in the receptions of participating offices throughout the Company’s portfolio. Tenants of the offices can then use the details given on the tags to make a donation (£5-£10) to the KidsOut charity. ### SUSTAINABILITY PERFORMANCE MEASURES (GOVERNANCE) ### COMPOSITION OF THE HIGHEST GOVERNANCE BODY (GOV-BOARD) The Board of the Company comprised 4 non-executive independent Directors (no executive board members) as at 31 March 2025. – The average tenure of the four Directors to 31 March 2025 is 3 years and 3 months (31 March 2024 average tenure of four Directors is 3 years and 8 months); – One Director on the Board possesses specific competencies relating to environmental and social topics. More information is outlined on page 79 (31 March 2024: one Director). ### PROCESS FOR NOMINATING AND SELECTING THE HIGHEST GOVERNANCE BODY ### (GOV-SELECT) The Company has established a Nomination and Remuneration Committee, which is responsible for board appraisal, succession planning, and determining the remuneration policy for the Directors and the Chairman. The Committee ensures that the remuneration framework supports the Company’s strategic objectives and promotes its long-term sustainable success. The Committee also reviews and makes recommendations on the composition of the Board to maintain an appropriate balance of skills, experience, and diversity – including gender – and to support the progressive refreshment of the Board. Prior to the appointment of any new Director, the Committee prepares a detailed description of the role and the capabilities required. While the Committee is committed to selecting the most suitable candidate for each role, it also recognises the importance of promoting diversity. The Board values a broad range of experience, knowledge, professional skills, and personal qualities, alongside the independence necessary to provide effective oversight of the Company’s affairs. ### PROCESS FOR MANAGING CONFLICTS OF INTEREST (GOV-COL) The Company maintains a Conflicts of Interest register that is managed by the Company Secretary and is reviewed at each quarterly Board meeting. Please refer to the Director’s Conflicts of interest section in the Corporate Governance Statement (page 58) for further details. 1 For direct link use: https://www.aewukreit.com/~/media/Files/A/AEW-UK-Reit/documents/aew-esg-flyer.pdf 151 Strategic Report Governance Financial Statements Additional Information ### TARGETS AND PROGRESS During the period we set the following long-term targets to support our strategic ESG objectives. Each year these will be reviewed, with progress being regularly reported to the Board by the Investment Manager. AREA OF FOCUS TARGET METRIC OF MEASURE YEAR PROGRESS | Health and | To ensure all incidents are | Number of incidents per year. Yearly MAPP track all instances via ‘risk | | | | --- | --- | --- | --- | --- | | Safety | resolved within the required | | | wise’ with priority 1 issues being | | | timeframe. | | | closed immediately. | | Wellbeing To promote health and | | 100% of managed assets to | Yearly Wellbeing tracker in place. | | | | wellbeing initiatives across all | have a health and wellbeing | | | | | managed assets. | tracker in year 1. | | | | Social Value To develop a tenant and | | Number of managed assets to | Yearly AEW initiatives working towards | | | | community engagement | have community engagement | | giving up to 2 working days for | | | programme. | programmes per year. | | community engagement for | each AEW staff member. | ESG | To achieve a Gold award for | Gold Rating EPRA. Yearly Achieved a gold rating in 2024. | | | --- | --- | --- | --- | | Disclosure and | disclosure in line with EPRA | | | | Transparency | sBPR. | | | | | To continuously improve the | GRESB star rating and score. Yearly Achieved two stars in 2024 | | | | GRESB rating year on year. | | GRESB assessment and | improved score from 67 in 2023 to 68. To strengthen alignment with Align the TCFD by 2023 and 2024 Updated in this Annual Report the TCFD recommendations. provide full publication by 2024. in alignment with TCFD recommendations. See pages 77 to 88. | Managing | To develop sustainability action | 100% of all managed assets to | Yearly Completed for all existing | | | --- | --- | --- | --- | --- | | environmental | plans for all managed assets. | have a sustainability action plan. | | assets and new assets within six | | impacts | | | | months of acquisition. | | | To maintain renewable | 100% of all procured electricity | Yearly Achieved, all suppliers providing | | | | electricity for all landlord- | to be from renewable sources. | | electricity from renewable | | | controlled areas. | | | sources. | | | Energy consumption: | 40% reduction 2030 See page 144. | | | To achieve a 40% reduction in absolute energy by 2030 based on the 2018 baseline. GHG emissions: 40% reduction 2030 See page 146. To achieve a 40% reduction in absolute energy by 2030 based on the 2018 baseline. | To improve the recycling rates | Sum of waste recycled as | Yearly 67% recycling rates on all | | | --- | --- | --- | --- | | on all managed assets. | opposed to incinerated with | | office managed assets (2024: | | | energy recovery. | | 65%). 78% recycling rates on | all industrial managed assets (2024: 74%). To maintain zero waste to 100% of waste diverted from Yearly Currently 100%. landfill on all waste managed. landfill on all waste managed assets. To ensure there are no All non-compliant EPCs to be Yearly See page 149. properties in the portfolio with improved to a minimum E rating. an EPC below an E rating. 152 # Company Information ## Share Register Enquiries The register for the Ordinary Shares is maintained by MUFG Corporate Markets. In the event of queries regarding your holding, please contact the Registrar on +44 (0)371 664 0391 or email: shareholderenquiries@cm.mpms.mufg.com. Changes of name and/or address must be notified in writing to the Registrar at the address shown on page 154. You can check your shareholding and find practical help on transferring shares or updating your details at www.signalshares.com. Shareholders eligible to receive dividend payments gross of tax may also download declaration forms from that website. ## Share Information | Total Voting Rights | 158,424,746 | | --- | --- | | SEDOL Number | BWD2415 | | ISIN Number | GB00BWD24154 | | Ticker/TIDM | AEWU | ## Share Prices The Company's Ordinary Shares are traded on the Main Market of the London Stock Exchange, which now operates under the FCA's listing category of a closed-ended investment fund. ## Frequency of NAV publication: The Company's NAV is released to the London Stock Exchange on a quarterly basis and is published on the Company's website. ## Annual and Half-Yearly Reports Copies of the Annual and Half-Yearly Reports are available from the Company's website. ## Financial Calendar | 4 September 2025 | Annual General Meeting | | --- | --- | | 30 September 2025 | Half-year end | | December 2025 | Announcement of half-yearly results | | 31 March 2026 | Year-end | | June 2026 | Announcement of annual results | ## Dividends The following table summarises the amounts distributed to equity shareholders in respect of the period: | | £ | | --- | --- | | Interim dividend for the period 1 April 2024 to 30 June 2024 (payment made on 23 August 2024) | 3,168,495 | | Interim dividend for the period 1 July 2024 to 30 September 2024 (payment made on 29 November 2024) | 3,168,495 | | Interim dividend for the period 1 October 2024 to 31 December 2024 (payment made on 7 March 2025) | 3,168,495 | | Interim dividend for the period 1 January 2025 to 31 March 2025 (payment made on 30 May 2025) | 3,168,495 | | **Total** | **12,673,980** | 153 Strategic Report Governance Financial Statements Additional Information Directors Administrator Robin Archibald (Non-executive Chairman of Waystone Administration Solutions (UK) Limited the Board and Chairman of the Management Broadwalk House Engagement Committee) Southernhay West Exeter EX1 1TS Katrina Hart (Non-executive Director and Chairman of the Nomination and Remuneration Committee) Company Secretary Mark Kirkland (Non-executive Director and Chairman of the Audit and Risk Committee) MUFG Corporate Governance Limited Central Square Liz Peace (Non-executive Director and Senior 29 Wellington Street Independent Director) Leeds LS1 4DL Registered Office Registrar th 19 Floor MUFG Corporate Markets IR Limited 51 Lime Street Central Square London EC3M 7DQ 29 Wellington Street Leeds LS1 4DL Company Website www.aewukreit.com Auditor BDO LLP Investment Manager and AIFM 55 Baker Street AEW UK Investment Management LLP London W1U 7EU 8 Bishopsgate London EC2N 4BQ Valuer Tel: 020 7016 4801 Website: www.aew.com Knight Frank LLP 55 Baker Street London W1U 8AN Property Manager MAPP (Property Management) Limited 180 Great Portland Street Copies of the Annual Report and London W1W 5QZ Financial Statements Upon request, printed copies of the Annual Report will be sent to shareholders shortly, and will be Corporate Broker available on the Company’s website. Panmure Liberum Limited Ropemaker Place National Storage Mechanism 25 Ropemaker Street A copy of the Annual Report and Financial London EC2Y 9LY Statements will be submitted shortly to the National Storage Mechanism (‘NSM’) and will be available for inspection at https://data.fca.org.uk/#/nsm/ Legal Adviser nationalstoragemechanism. Gowling WLG (UK) LLP 4 More London Riverside London SE1 2AU Depositary Langham Hall UK LLP th 8 Floor 1 Fleet Place London EC4M 7RA 154 ## Glossary AIC Association of Investment Companies. This is the trade body for closed-ended Investment companies (www.theaic.co.uk). AIC Code The AIC Code of Corporate Governance, as published in January 2024. A framework of best practice guidance for investment companies. AIFMD Alternative Investment Fund Managers Directive. AIFM Alternative Investment Fund Manager. The entity that provides portfolio management and risk management services to the Company and which ensures the Company complies with the AIFMD. The Company’s AIFM is AEW UK Investment Management LLP. AIF Alternative Investment Fund. Alternative Investment Funds are funds that are not regulated at EU level by the UCITS Directive. Annualised total The average annual growth of an investment, including capital appreciation and property return income, calculated over a specific period. Company AEW UK REIT plc. Company Secretary MUFG Corporate Governance Limited Company website www.aewukreit.com Contracted rent The annualised rent, adjusting for the inclusion of rent subject to rent-free periods. Direct vacancy costs Property expenses that are directly related to the property including the following: rates/property taxes; service charge; insurance premiums; carbon tax; any other costs directly billed to the unit. Dividend cover The Company’s ability to pay dividends to Shareholders based on net earnings. DTR Disclosure Guidance and Transparency Rules, issued by the FCA. Earnings Per Share (‘EPS’) Profit for the period attributable to equity shareholders divided by the weighted average number of Ordinary Shares in issue during the period. EPC Energy Performance Certificate. EPRA European Public Real Estate Association, the industry body representing listed companies in the real estate sector. EPRA cost ratio (including The ratio of net overheads and operating expenses against gross rental income direct vacancy costs) (with both amounts) excluding ground rents payable. Net overheads and operating expenses relate to all administrative and operating expenses. EPRA cost ratio (excluding The ratio calculated above, but with direct vacancy costs removed from net direct vacancy costs) overheads and operating) expenses balance. EPRA Earnings Per Share Recurring earnings from core operational activities. A key measure of a company’s underlying operating results from its property rental business and an indication of the extent to which current dividend payments are supported by earnings. EPRA Loan to Value The ratio of net debt (including net payables) divided by the market value of (‘EPRA LTV’) property operating (including net receivables). EPRA NAV Net Asset Value adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long-term investment property business. EPRA Net Initial Yield Annualised rental income based on the cash rents passing at the balance sheet date, (‘EPRA NIY’) less non-recoverable property operating expenses, divided by the fair value of the property, increased with (estimated) purchasers’ costs. EPRA Net Disposal Value This measure represents the shareholders’ value under a disposal scenario, where (‘EPRA NDV’) deferred tax, financial instruments and certain other adjustments are calculated to the full extent of their liability, net of any resulting tax. 155 Strategic Report Governance Financial Statements Additional Information EPRA Net Reinstatement NAV adjusted to assume that entities never sell assets and aims to represent the Value (‘EPRA NRV’) value required to rebuild the entity. EPRA Net Tangible Asset NAV adjusted to assume that entities buy and sell their assets, thereby crystallising (‘EPRA NTA’) certain levels of unavoidable deferred tax. EPRA Topped-Up Net This measure incorporates an adjustment to the EPRA NIY in respect of the expiration Initial Yield of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents). EPRA Vacancy Rate Estimated Rental Value (‘ERV’) of vacant space as a percentage of the ERV of the whole portfolio. Equivalent Yield The internal rate of return of the cash flow from the property, assuming a rise to ERV at the next review or lease expiry. No future growth is allowed for. ESG Environmental Social and Governance Estimated Rental Value The external valuers’ opinion as to the open market rent which, on the date of the (‘ERV’) valuation, could reasonably be expected to be obtained on a new letting or rent review of a property. External Valuer An independent external valuer of a property. The Company’s external valuer is CBRE, having previously been Knight Frank LLP. Fair Value The estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where parties had each acted knowledgeably, prudently and without compulsion. Fair value movement An accounting adjustment to change the book value of an asset or liability to its fair value. FCA The Financial Conduct Authority. FRI lease A lease which imposes full repairing and insuring obligations on the tenant, relieving the landlord from all liability for the cost of insurance and repairs. GRESB Global Real Estate Sustainability Benchmark. Gross Asset Value The aggregate value of the total assets of the Company as determined in accordance with IFRS. Gross passing rental The rent receivable from the portfolio’s leases at a particular reporting date. Allows income the user to assess the cash receipts the Company is entitled to receive. IFRS - UK UK adopted International accounting standards in accordance with the requirements of the Companies Act 2006. Investment Manager The Company’s Investment Manager, is AEW UK Investment Management LLP. IPO The admission to trading on the London Stock Exchange’s Main Market of the share capital of the Company and listing of Ordinary Shares to the premium segment of the Official List of the FCA, on 12 May 2015. Lease incentives Incentives offered to occupiers to enter into a lease. Typically, this will be an initial rent-free period, or a cash contribution to fit-out. Under accounting rules, the value of the lease incentive is amortised through the Statement of Comprehensive Income on a straight-line basis until the lease expiry. Lease surrender An agreement whereby the landlord and tenant bring a lease to an end other than by contractual expiry or the exercise of a break option. This will frequently involve the negotiation of a surrender premium by one party to the other. Leverage The ratio of the loan balance to the value of the Company’s Ordinary shares. 156 Like-for-like The like-for-like valuation movement compares the valuation (as provided by the external valuer and before adjustments for lease incentives) of properties at the end of the period in question with the valuation at the start of the period. This measure only compares movements for those properties which were held at both the start and end of the period, so excludes the effects of acquisitions and disposals. Loan to NAV The loan balance drawn expressed as a percentage of the Company’s Net Asset Value. Allows the user to assess the Company’s gearing and is relevant, as this is the measure tested the Company’s borrowing covenant. Loan to GAV The loan balance drawn expressed as a percentage of the combined value of (also Gross Loan to GAV) the Company’s investment property portfolio (as assessed by the valuer) and the Company’s other assets. Allows the user to assess the Company’s gearing and is relevant, as this is the measure used under the Company’s Investment Guidelines. Loan-to-Value (‘LTV’) The value of outstanding loans and borrowings (before adjustments for issue costs) expressed as a percentage of the combined valuation of the property portfolio (as provided by the external valuer) and the fair value of other investments. MEES Minimum Energy Efficiency Standard. Net Asset Value (‘NAV’) Net Asset Value is the equity attributable to shareholders calculated under IFRS. NAV per share Equity shareholders, funds divided by the number of Ordinary Shares in issue. This measure allows a comparison with the Company’s share price to determine whether the Company’s shares are trading at a premium or discount to its NAV calculated under IFRS. NAV total return The percentage change in NAV, assuming that dividends paid to shareholders are reinvested at the prevailing NAV to purchase additional Ordinary Shares. This is an alternative performance measure that the Company tracks, as it is a direct indicator of the value produced by the Company's operations. Net equivalent yield Calculated by the Company’s External Valuers, net equivalent yield is the internal rate of return from an investment property, based on the gross outlays for the purchase of a property (including purchase costs), reflecting reversions to current market rent and items as voids and non-recoverable expenditure but ignoring future changes in capital value. The calculation assumes rent is received annually in arrears. Net initial yield (‘NIY’) The initial net rental income from a property at the date of purchase, expressed as a percentage of the gross purchase price including the costs of purchase. Net Loan to GAV Measure of gearing calculated as follows: (l-c)/v, where “l” is the loan balance drawn, “c” is the Company’s cash and cash equivalents and “v” is the combined value of the Company’s investment property portfolio (as assessed by the valuer) and the Company’s investments. Allows the user to assess the potential effect on gearing of using the Company’s cash to repay a portion of its loan balance. Net Operating Income The Company’s gross operating income minus its operating expenses. (‘NOI’) Net rental income Rental income receivable in the period after payment of ground rents and net property outgoings. Non-PID Non-Property Income Distribution. The dividend received by a shareholder of the Company arising from any source other than profits and gains of the Tax Exempt Business of the Company. Ongoing charges A measure, expressed as a percentage of NAV, of the regular, recurring costs of running an investment company which is calculated in line with AIC methodology. Ordinary Shares Ordinary Shares of £0.01 each in the capital of the Company. Ordinary Shares are the main type of equity capital issued by conventional Investment Companies. Shareholders are entitled to their share of both income, in the form of dividends paid by the Company, and any capital growth. 157 Strategic Report Governance Financial Statements Additional Information Over-rented Space where the passing rent is above the ERV. Passing rent The gross rent, less any ground rent payable under head leases. PID Property Income Distribution. A dividend received by a shareholder of the Company in respect of profits and gains of the tax exempt business of the Company. Projected debt yield Measure of risk, calculated by dividing the projected 12 month net operating income by the outstanding principal balance of the debt secured by the Company. Property Total Return The overall profit from a property investment, including capital appreciation and income. Rack-rented Space where passing rent is the same as the ERV. REIT A Real Estate Investment Trust. A company which complies with Part 12 of the Corporation tax Act 2010. Subject to the relevant UK REIT criteria being met continually, the profits from the property business of a REIT, arising from both income and capital gains, are exempt from corporation tax. RETT Real Estate Transfer Tax. The tax payable by the buyer on the purchase of a property. The RETT payable is calculated at a rate depending on the consideration paid for the property. Reversion Increase in rent estimated by the Company’s external valuer, where the passing rent is below the ERV. Reversionary yield The anticipated yield, which the initial yield will rise (or fall) to once the rent reaches the ERV. Share price The value of a share at a point in time as quoted on a stock exchange. The Company’s Ordinary Shares are quoted on the Main Market of the London Stock Exchange. Shareholder total return The share price movement and dividends (pence per share) received during a period, expressed as a percentage of the opening share price for the period. Calculated as follows: (b - a + d)/a, where “a” is the opening share price, “b” is the closing share price and “d” is dividends per share. SRI Socially Responsible Investment. Total returns The returns to shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease in the share price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares or net assets. Under-rented Space where the passing rent is below the ERV. UK Corporate Governance A code issued by the Financial Reporting Council which sets out standards of Code good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders. All companies with a premium listing of equity shares in the UK are required under the Listing Rules to report on how they have applied the Code in their annual report and accounts. Vacant ERV Estimated Rental Value of a property that is currently unoccupied or vacant. Void costs Expenses incurred by the Company during periods when their rental property is vacant. Voids The amount of rent relating to properties which are unoccupied and generating no rental income. Stated as a percentage of ERV. Weighted Average The average lease term remaining for first break, or expiry, across the portfolio Unexpired Lease Term weighted by contracted rental income. (‘WAULT’) Yield compression Occurs when the net equivalent yield of a property decreases, measured in basis points. 158 ## Notes 159 AEW Offices United Kingdom 8 Bishopsgate London EC2N 4BQ +44 20 7016 4801 www.aew.com France 22 rue du Docteur Lancereaux 75008 Paris France +33 1 78 40 92 00 www.aew.com United States of America Two Seaport Lane Boston MA 02210 United States +1 617 261 9334 www.aew.com