Annual Financial Report

RNS Number : 6892D

AEW UK REIT PLC

08 July 2016

AEW UK REIT PLC

Annual Financial Report for the period from 1 April 2015 to 30 April 2016

The Board of AEW UK REIT plc (the 'Company') is pleased to announce the annual results for the period from 1 April 2015 to 30 April 2016.

The following text is copied from the Annual Report:

Strategic Report

Financial Highlights

• Net Asset Value ('NAV') of £116.38 million and of 99.03 pence per share as at 30 April 2016.

• Operating profit before investment property and investment revaluations is £6.31 million for the period from the Initial Public Offering ('IPO') on 12 May 2015 to 30 April 2016.

• Unadjusted profit before tax ('PBT') of £4.64 million and of 4.83 pence per share for the period from IPO to 30 April 2016.

• Total dividends of 5.5 pence per share have been declared for the period from the IPO to 30 April 2016.

• The Company has raised total gross proceeds of £117.68 million for the period from the IPO to 30 April 2016.

• The Company entered into a 5 year £40 million term credit facility with The Royal Bank of Scotland International Limited. The Company has utilised this facility to invest in properties, and is currently geared to 20% of the Gross Asset Value ('GAV') of the Company as at 27 May 2016.

• The price of the Company's Ordinary Shares on the Main Market of the London Stock Exchange was at 100.00 pence per share as at 30 April 2016.

• The Company held cash balances totalling £7.96 million as at 30 April 2016 of which £4.94 million was held for the purpose of capital acquisitions.

• The Company's NAV Total Return for the period from the date of inception, 1 April 2015 to 30 April 2016 is 4.77%.

Property Highlights

• The Company acquired 25 properties between inception of the Company and 30 April 2016.

• As at 30 April 2016, the Company's property portfolio had a fair value of £114.34 million as compared to the combined purchase price of the portfolio of £110.64 million (excluding purchase costs), representing an increase of £3.70 million, or 3.35%.

• The majority of assets that have been acquired are fully let and the portfolio has a vacancy rate of 3.16%.

• Rental income generated in the period under review is £6.15 million. The number of tenants as at 30 April

• Average portfolio net initial yield of 8.38%. 2016 stands at 56.

• Weighted average unexpired lease term of 4.9

• A further 2 properties have been acquired for £13.20 million (excluding purchase costs) since the period end generating a further £1.41 million per annum in passing rent. years to break and 6.1 years to expiry.

Chairman's Statement

Overview

I am pleased to present the first annual audited results of AEW UK REIT plc (the 'Company') for the period from 1 April 2015 to 30 April 2016. This was a very active period for the Company in which we have implemented our investment policy and met our investment objective to deliver an attractive total return to shareholders from investing predominately in a portfolio of smaller commercial properties in the UK.

In May 2015, the Company's IPO raised gross proceeds of £100.5 million, with the Company's Ordinary Shares admitted to listing on the premium listing segment of the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange.

Our Investment Manager, AEW UK Investment Management LLP (the 'Investment Manager'), immediately began to invest the net proceeds from the IPO and establish a portfolio of commercial investment properties throughout the UK, together with the acquisition of a £9.63 million holding in the AEW UK Core Property Fund. The Company raised a further £17.18 million during a share issue in December 2015 with the issuance of 17,010,000 new Ordinary Shares at an issue price of 101 pence per share.

As at 30 April 2016, the Company has established a diversified portfolio of 25 commercial investment properties throughout the UK with a weighted average total equivalent yield of 8.36%.

Financial Results

Our financial results reflect the establishment of the property portfolio for the period as we have implemented our investment policy.

Under International Financial Reporting Standards ('IFRS') as adopted by the European Union, our operating profit for the period of the IPO on 12 May 2015 to 30 April 2016 was £4.86 million, with total comprehensive income of £4.64 million. Basic earnings per share ('EPS') for the period were 4.83 pence. This includes net valuation losses of £1.94 million on the revaluation of investment properties across the portfolio (being £5.64 million of transaction costs associated with asset purchases offset by £3.70 million of unrealised valuation gains) and a valuation gain on the investment in the AEW UK Core Property Fund of £0.48 million. Adjusting for these valuation losses and finance costs of £0.23 million, adjusted earnings per share for the period were 6.34 pence.

Under European Public Real Estate Association ('EPRA') methodology, EPS for the period was 6.33 pence and the NAV per share at 30 April 2016 was 98.97 pence. A full list of EPRA performance figures can be found below.

The audited NAV per share as at 30 April 2016 was 99.03 pence, prior to adjusting for the fourth interim dividend for the period of 2.00 pence per share. This compares with the Net Asset Value per share of 98.03 pence immediately following the IPO.

The Company has Ongoing Charges of 1.14% for the period under review.

The Company's property portfolio has been independently valued by Knight Frank in accordance with the RICS Valuation - Professional Standards (the 'Red Book'). As at 30 April 2016, the Company's Portfolio had a Fair Value of £114.34 million as compared with the combined purchase price of the Portfolio of £110.64 million (excluding purchase costs), an increase of £3.70 million or 3.35%.

Financing

On 20 October 2015, the Company entered into a 5 year £40 million term loan facility with The Royal Bank of Scotland International Limited. The Company used £14.25 million of this facility to continue to invest in properties once the initial net IPO proceeds had been fully invested. As at 30 April 2016, the unexpired term of the facility was 4.5 years and the gearing was 12.5% (as calculated on the loan to market value of the property portfolio).

The loan attracts interest at LIBOR +1.4%. The Company is protected from a potential significant rise in interest rates as it has entered into an interest rate CAP with a notional value of £14.25 million and a strike rate of 2.5% for 5 years.

On 18 May 2016 the Company amended the terms of its loan facility with The Royal Bank of Scotland International Limited to increase the facility limit from 20% to 30% of NAV measured at drawdown. This amendment will enable the Company to utilise the facility up to an amount calculated as the equivalent of 25% of the GAV (measured at drawdown) which is the maximum gearing limit as set out in the Company's Prospectus.

Dividends

We have developed our portfolio to provide an income stream to deliver our target of declaring fully covered dividends of 2.00 pence per Ordinary Share per quarter.

During the period from the IPO to 30 April 2016, we have paid three interim dividends. The first, which we paid on 31 December 2015 was 1.50 pence per Ordinary Share and related to the period from the IPO to 31 October 2015. The second interim dividend was 0.75 pence per Ordinary Share and related to the period from 1 November 2015 to 14 December 2015 when we held our second Ordinary Share placement. The third interim dividend was 1.25 pence per Ordinary Share and related to the period from 15 December 2015 to 31 January 2016. The second and third interim dividends totalling 2.00 pence per Ordinary Share were paid on 31 March 2016.

On 31 May 2016, the Board declared a fourth interim dividend of 2.00 pence per Ordinary Share, in respect of the period from 1 February 2016 to 30 April 2016. This fourth interim dividend was paid on 30 June 2016.

Outlook

The Board and the Investment Manager are confident of delivering strong relative returns for our shareholders through the diversified and high income yielding property portfolio that has been established. Active asset management initiatives should also provide opportunities for further capital value enhancement.

In the period since the Statement of Financial Position date at 30 April 2016, the Company has acquired a further 2 properties totalling £13.20 million (net of acquisition costs) and generating a further £1.41 million per annum in passing rent. Following these 2 acquisitions, the Company has now fully invested the equity raised at the IPO and the December fundraising and is geared to 20% of Gross Asset Value. The portfolio should provide the Company with the ability to meet its target dividend of 8% per annum based on the IPO issue price of 100 pence per Ordinary Share with fully covered income.

On 20 May 2016 the Company held a General Meeting at which resolutions to allot up to 11,740,000 Ordinary Shares and to allot up to 250,000,000 Ordinary Shares in connection with a share issuance programme were passed.

At the time of writing our Annual Report, the UK has recently voted in the EU referendum with the Leave campaign securing 51.9% of the vote. In the immediate aftermath we have seen a period of volatility in the financial markets and we enter a period of economic and political uncertainty for the future of the UK.

The Company is keeping a close eye on the situation and our investments but at the current time sees no need to take any immediate action.

The Company's objective is to grow and raise more capital and the Company intends that strategy will be implemented as market conditions allow.

Mark Burton

Chairman

7 July 2016

Business Model and Strategy

Our Business

Introduction

AEW UK REIT plc (the 'Company') is a real estate investment company that was incorporated on 1 April 2015. The Company was admitted to the premium listing segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange's Main Market on 12 May 2015 following an Initial Public Offering ('IPO'). As part of its business model and strategy, the Company intends to carry on business with a group UK REIT status. With effect from 5 June 2015, HM Revenue and Customs has acknowledged the Company's intention to meet the necessary qualifying conditions to conduct its affairs as a group UK REIT.

Investment Objective

The investment objective of the Company is to deliver an attractive total return to Shareholders from investing predominantly in a portfolio of smaller commercial properties in the United Kingdom.

Investment Policy

In order to achieve its investment objective the Company invests in freehold and leasehold properties across the whole spectrum of the commercial property sector (office properties, retail warehouses, high street retail and industrial/warehouse properties) to achieve a balanced portfolio with a diversified tenant base.

Within the scope of restrictions set out below (under the heading "Investment Restrictions") the Company may invest up to 10 per cent. of its Net Assets (at the time of investment) in the AEW UK Core Property Fund and up to 10 per cent. of its net assets for investment (measured at the commencement of the project) in development opportunities, with the intention of holding any completed development as an investment.

On 1 June 2015, the Company made a £9.63 million investment in the AEW UK Core Property Fund, representing 9.7% of its Net Assets at the time of investment. The AEW UK Core Property Fund is a property authorised investment fund ('PAIF') managed by AEW UK Investment Management UK LLP which has a similar investment policy to that of the Company. The investment by the Company into the AEW UK Core Property Fund is not subject to management fees or performance fees otherwise charged to investors in the AEW UK Core Property Fund by the Investment Manager.

The Company will at all times invest and manage its assets in a way that is consistent with its objective of spreading investment risk and in accordance with its published investment policy. The Company will not, at any time, conduct any trading activity which is significant in the context of the business of the Company as a whole.

In the event of a breach of the investment policy set out above or the investment restrictions set out below, the Investment Manager shall inform the Board upon becoming aware of the same and if the Board considers the breach to be material, notification will be made to a Regulatory Information Service and the Investment Manager will look to resolve the breach.

Any material change to the investment policy of the Company may only be made with the prior approval of Shareholders.

Investment Restrictions

The Company will invest and manage its assets with the objective of spreading risk through the following investment restrictions:

• the value of no single property, at the time of investment, will represent more than 15 per cent. of Gross Asset Value;

• the Company may commit up to a maximum of 10 per cent. of its Net Asset Value (measured at the commencement of the project) to development activities;

• the value of properties, measured at the time of each investment, in any one of the following sectors: office properties, retail warehouses, high street retail and industrial/warehouse properties will not exceed 50 per cent. of Net Asset Value;

• investment in unoccupied and non-income producing assets will, at the time of investment, not exceed 20 per cent. of Net Asset Value;

• the Company will not invest in other closed-ended investment companies; and

• if the Company invests in derivatives for the purposes of efficient portfolio and cash management, the total notional value of the derivatives at the time of investment will not exceed, in aggregate, 20 per cent. of Gross Asset Value.

The Directors currently intend, at all times, to conduct the affairs of the Company so as to enable the Group to qualify as a REIT for the purposes of Part 12 of the CTA 2010 (and the regulations made thereunder).

Our Strategy

The Company currently intends to exploit what it believes to be the compelling relative value opportunities offered by pricing inefficiencies in smaller commercial properties let on shorter occupational leases. The Company intends to supplement this core strategy with asset management initiatives to upgrade buildings and thereby improve the quality of income streams.

In the current market environment the focus will be to invest in properties which:

• typically have a value, on investment, of between £5 million and £15 million*;

• have initial net yields, on investment, of typically between 8-10 per cent;

• achieve across the whole Portfolio an average weighted lease term of between four to six years remaining;

• achieve, across the whole Portfolio, a diverse and broad spread of tenants; and

• have some potential for asset management initiatives to include refurbishment and re-lettings.

*As at 30 April 2016, the Company has an average property lot size of £4.6 million.

The Company may also invest up to a maximum of 10 per cent. of its Net Asset Value in the AEW UK Core Property Fund. The AEW UK Core Property Fund has an investment policy that is similar to that of the Company although generally it may invest in smaller value properties than those to be purchased by the Company. The Investment Manager has a stock allocation process that determines how property investments are allocated to the Company, AEW UK Core Property Fund and any other funds managed by the Investment Manager.

The Directors, rather than the Investment Manager, will determine when to divest of the Company's holding in the AEW UK Core Property Fund.

The Company's strategy is focused on delivering enhanced returns from the smaller end (up to £15 million) of the UK property market. The Company believes that there are currently pricing inefficiencies in smaller commercial properties relative to the long term pricing resulting in a significant yield advantage which the Company hopes to exploit. This is demonstrated in the graphs below;

http://www.rns-pdf.londonstockexchange.com/rns/6892D_2-2016-7-8.pdf

How we add value

An experienced team

Alongside an experienced Board, the investment management team has an average of 17 years working together reflecting stability and continuity, which translates to confidence for our shareholders.

Value investing

The Investment Manager's investment philosophy is based on the principle of value investing. The Investment Manager looks to acquire assets with an intrinsically sustainable income profile coupled with underlying residual characteristics that underpin long term capital preservation. As value managers, the Investment Manager looks for assets where today's pricing may not correspond to long term fundamentals.

Active Asset Management

The Investment Manager has an in-house team of dedicated asset managers with a strong focus on active asset management to enhance income and add value to commercial properties.

Our Asset Management Process

http://www.rns-pdf.londonstockexchange.com/rns/6892D_-2016-7-8.pdf

Strategy in Action

Maintaining income streams

Bath Street, Glasgow

• Acquired in July 2015

• Multi-let - 7 tenants providing a WAULT of 2.3 years to break.

• Low ongoing capex requirement due to comprehensive refurbishment in 2008 - modern plant and machinery, refurbished reception area.

• 5 year reversionary lease now exchanged with existing tenant Indigo at £15 psf. £0.50 psf ahead of ERV.

Driving rental growth

Queen Square, Bristol

• Very little asset management carried out by previous landlord.

• Acquired by AEW in December 2015 with vacancy of 46%, reduced to 26% as at 30 April 2016.

• 10,465 sq ft of accommodation relet since purchase at ERV of c.£22 psf (average passing rent of £16.70 psf).

• Business plan to refurbish accommodation and relet. £825,000 of capex to be incurred as projected at acquisition.

• Refurbish underutilised lower ground floor to provide improved common facilities e.g. bike storage and showers which will help to drive rental growth.

Immediate upside with further potential

Fargate, Sheffield

Immediate upside

• Acquired for £5.3m.

• A sale of the vacant office floors has been in excess of valuation to a student housing developer.

• Assumed value of upper floors at purchase £0.25m. Sale price achieved £0.71m.

• Running yield post sale of 10.3%.

Potential further upside

• Prime units fronting Fargate are currently let at low levels so provide good potential for rental growth in the future.

• The letting of two vacant retail units on Chapel Walk will strengthen the income stream further providing yield compression.

• Further prime retail development nearby will help to draw footfall in to the City Centre improving the location.

Attracting retailers

Valley Retail Park, Belfast

• Acquisition pricing allows accommodation to be offered at a discount to the surrounding space.

• Rents on nearby park: £15-23 psf, we can offer space at £9-10 psf.

• Planning consent allows for wide range of uses.

• Surrender premium of £1m received from outgoing tenant Harvey Norman.

• New 20 year lease exchanged with Go Outdoors for their first Northern Ireland store.

• Remaining vacant accommodation under offer to Smyths Toys.

• Running yield of c15% against the acquisition price once deals complete.

Key Performance Indicators

KPI AND DEFINITION

RELEVANCE TO STRATEGY

PERFORMANCE

1. Triple Net Initial Yield

Triple Net Initial Yield is a representation to the investor what their 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 Triple Net Initial Yield is in line with the Company's target dividend yield meaning that, after costs, the Company should have the ability to meet its target dividend through property income.

8.38%

at 30 April 2016.

2. True Equivalent Yield

The average weighted return a property will produce according to the present income and estimated rental value assumptions, assuming the income is received quarterly in advance.

An Equivalent Yield profile in line with the Company's target dividend yield shows that, after costs, the Company should have the ability to meet its target dividend through property income.

8.36%

at 30 April 2016.

3. Reversionary Yield

The expected return the property will provide once rack rented.

A Reversionary Yield profile that is in line with an initial 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.

8.27%

at 30 April 2016.

4. Weighted Average Unexpired Lease Term to expiry

Weighted average unexpired lease term to expiry is the average lease term remaining to expiry, across the portfolio weighted by contracted rent.

The Investment Manager believes that current market conditions present an opportunity whereby assets with a shorter unexpired lease term are often mispriced. It is also 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 review mechanisms.

6.08 years

at 30 April 2016.

5. Weighted Average Unexpired Lease Term to break

Weighted average unexpired lease term to break is the average lease term remaining to break, across the portfolio weighted by contracted rent.

4.94 years

at 30 April 2016.

6. NAV

Net asset value (NAV) is the value of an entity's assets minus the value of its liabilities

The NAV reflects the success of the Company's strategy.

£116.38 million

at 30 April 2016.

7. Leverage (Loan to Gross Asset Value)

The proportion of our property portfolio that is funded by borrowings.

The Company intends to utilise borrowings to enhance returns over the medium term. Borrowings will not exceed 25 per cent. of Gross Asset Value (measured at drawdown). It is currently anticipated that the level of total borrowings will typically be at the level of 20 per cent. of Gross Asset Value (measured at drawdown).

10.5%

at 30 April 2016.

8. Vacant ERV

The Vacant ERV of the space in the property portfolio which is currently let, as a percentage of the total ERV of the portfolio.

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.

3.16%

at 30 April 2016.

9. Development Exposure

The exposure to real estate development or property development encompassing activities that range from the purchase of raw land for development to material refurbishments.

By nature of its high yielding strategy, the Company will limit its exposure to property developments which will lead to a temporary reduction in income. It will have consider limited or infill development to the extent that this will not detract from a property's income.

at 30 April 2016.

10. Dividend

Dividends declared in relation to the year. The Company targets a dividend yield of between 8 to 9% per annum on the IPO issue price, when fully invested.

The dividend reflects the Company's ability to deliver a sustainable income stream from its portfolio.

2.0 pence per share

for the quarter to 30 April 2016. This supports an annualised target of 8.0 pence per share.

5.5 pence per share

for the period from inception to 30 April 2016.

11. Ongoing Charges

The ratio of total administration and property operating costs expressed as a percentage of average net asset value throughout the period.

The Ongoing Charges ratio provides a measure of total costs associated with managing and operating the Company, which includes the management fees due to the Investment Manager. The Investment Manager presents this measure to provide investors with a clear picture of operational costs involved in running the Company.

1.14%

at 30 April 2016.

12. Profit before tax

Profit before tax is a profitability measure which considers the Company's profit before the payment of corporate income tax.

The PBT is an indication of the Company's financial performance for the period in which its strategy is exercised.

£4.64 million

for the period from inception to 30 April 2016.

Investment Manager's Report

Financial Results

Operating profit before investment property and revaluations was £6.31 million for the period of the IPO on 12 May 2015 to 30 April 2016. The Company has built a diversified portfolio of properties since the IPO and as at 30 April 2016 holds 25 investment properties.

Net rental income earned from this portfolio during the period under review amounts to £6.88 million. Net asset value as at 30 April 2016 was £116.38 million.

The Company received dividends during the period totalling £0.65 million from its investment in the AEW UK Core Property Fund (the 'AEW Core Fund'). In the period to 31 October 2015, a dividend of £0.27 million was received in relation to the Company's investment in the AEW Core Fund. A further dividend of £0.38 million was received from the AEW Core Fund in relation to the period 1 October 2015 to 31 March 2016 representing a gross dividend of 4.72 pence per share. In addition, the valuation of the investment of the AEW Core Fund has increased from £9.63 million on acquisition to £10.11 million at 30 April 2016, a rise of 5.01%.

A loss of £1.94 million has arisen on the revaluation of investment properties across the portfolio, mainly driven by £5.64 million of transaction costs associated with asset purchases, although this is partially offset by £3.70 million of unrealised gains across the portfolio.

Administration expenses, which include the Investment Manager's fee and other costs attributable to the running of the Company for the period, were £1.22 million. The Company's Ongoing Charges for the period is 1.14%. The Company has incurred finance costs of £0.23 million during the period under review.

The total profit before tax for the period of £4.64 million, equates to basic earnings per share of 4.83 pence.

Valuation

The Company's property portfolio has been independently valued by Knight Frank in accordance with the RICS Valuation - Professional Standards Global January 2014, including the International Valuations Standards, and RICS Professional Standards UK January 2014 (revised April 2015). References to "the Red Book" refer to either or both of these documents, as applicable. The properties have been valued on the basis of Fair Value in accordance with the RICS Valuation - Professional Standards VVPS4 (1.5) Fair Value and VPGA1 Valuations for Inclusion in Financial Statements, which adopt the definition of Fair Value used by the International Accounting Standards Board.

As at 30 April 2016, the Company's Portfolio had a Fair Value of £114.34 million.

Asset Management

Our objective is to build a diversified portfolio of investment properties throughout the UK to support a target dividend of 8-9 pence per Ordinary Share. New acquisitions have been selected to provide an income return to meet our target. We undertake active asset management to seek opportunities to achieve rental growth, let vacant space and enhance value through initiatives such as refurbishments.

The majority of assets that have been acquired are fully let and the portfolio has a vacancy rate (as a % of Estimated Rental Value ('ERV')) of 3.16% as at 30 April 2016. During the reporting period, key asset management initiatives have included:

- Valley Retail Park, Belfast - We negotiated a surrender premium of £1 million from Harvey Norman and immediately let Units 1&2 (46,513 sq ft) to Go Outdoors for 20 years with no break at a rent of £400,000pa. This is Go Outdoors' first store in Northern Ireland. We have also exchanged and completed an agreement for lease with Smyths Toys in respect of Units 5&6 (21,000 sq ft). The park is now fully let and we are currently preparing a planning application to reconfigure the car park to ensure it meets the retailer's requirements.

- 40 Queen Square, Bristol - At Queen Square in Bristol, acquired December 2015, there has been significant letting activity taking the vacancy level from 46% of ERV at acquisition to 26% with 4 letting deals either completed or under offer. These deals have all been agreed in line with ERV and show a shorter void position than anticipated. Further lettings are expected to be announced as the improvement works are undertaken to the remaining accommodation.

- 225 Bath Street, Glasgow - A 5 year reversionary lease has been completed with the tenant Indigo at Bath Street in Glasgow. The letting has been documented at a level £1 psf ahead of the building's previous ERV. The tenant was granted a rent free period of 3 months.

Financing

On 20 October 2015, the Company entered into a 5 year £40 million term credit facility with The Royal Bank of Scotland International Limited ('RBSi').

As at 30 April 2016, the Company had utilised £14.25 million of its £40 million facility with RBSi. Gearing as at 30 April 2016 was 12.5% (Loan to market value of the property portfolio). The loan attracts interest at LIBOR + 1.4%. To mitigate the interest rate risk that arises as a result of entering into a variable rate linked loan, the Company entered into an interest rate cap on £14.25 million of the loan at a strike rate of 2.5% on 4 March 2016 for 5 years.

On 18 May 2016, the Company completed an amendment to the terms of its facility with RBSi. The terms of the facility limit have increased from 20% to 30% of NAV measured at drawdown. This will enable the Company to utilise the facility up to an amount calculated as the equivalent of 25% of the Gross Asset Value (measured at drawdown), the maximum gearing limit as set out in the Company's Prospectus.

Acquisitions after Statement of Financial position date

On 27 May 2016, the Company acquired two mixed use assets in Nottingham and Blackpool for a total of £13.20 million, net of acquisition costs. With these two acquisitions, the Company has now fully invested its equity capital and is geared to 20% Gross Asset Value, in line with its investment strategy.

Nottingham, acquired for £8.15 million, is located on Wheeler Gate with frontage to Old Market Square within the retailing core of the City Centre. The property provides a total of 71,260 sq ft and is let to 9 office tenants and 6 retail tenants including Poundland, Costa and Lakeland providing a WAULT of approximately 4.5 years to break and 5.2 years to expiry. The acquisition shows an initial yield of 9.0%, a reversionary yield of 9.9% and a capital value of £114 per sq ft.

Blackpool, acquired for £5.05 million, is prominently located directly adjacent to the famous Blackpool Tower. The property extends to 100,079 sq ft and provides 3 retail units at ground floor and basement level let to Poundland, Sports Direct and J D Wetherspoons providing a WAULT of approximately 7.5 years to break and 10 years to expiry. The upper floors of the property are currently vacant and have been de-listed for rating purposes but provide strong potential for alternative uses which the Company is currently investigating. The acquisition shows an initial yield of 9.5%, a reversionary yield of 8.4% and a capital value of £50 per sq ft.

Market Outlook

UK Economic outlook

On the 23 June 2016, the UK held the EU in/out referendum ("Brexit"). On the morning of 24 June 2016 after the votes had been counted, the Leave campaign had ultimately prevailed having gained 51.9% of the vote. The Prime Minister, David Cameron announced his resignation and the financial markets opened to high levels of volatility with Sterling and the FTSE taking big falls, bond yields falling and gold prices rising. In the immediate aftermath, 5 year swap rates have fallen 50bps as the markets anticipate an interest rate cut in the near future to ward off recessionary pressure.

As anticipated in the event of a leave vote, the quoted real estate sector experienced an immediate fall in share prices, especially those with the greatest exposure to London. However, the impact on the smaller, externally managed REITs with limited exposure to London such as the Company, has been less pronounced.

The uncertainty around what happens next with the UK's negotiation to exit its EU membership is likely to prolong caution from investors and tenants alike. A new prime minister is to be appointed at the Conservative Party Conference in October and it is unclear at present when Article 50 will be served to begin the formal proceedings of taking the UK out of the EU. This will trigger a 2 year deadline to negotiate an exit from the EU. Trade deals between the UK and the rest of the world will need to be negotiated and this is likely to take considerable time and create prolonged uncertainty.

It remains to be seen if Scotland will hold a second independence referendum that could lead to Scotland leaving the UK and joining the EU.

UK Real Estate Outlook

Despite recent economic turbulence, the outlook for UK commercial property returns remains positive for the foreseeable future. The real estate sector remains attractive from an economic fundamental view as the yield gap to government bonds remains significant and the supply of available properties remains constricted.

Looking forward to 2016/2017, we expect rental growth to spread beyond Central London and to the rest of the South East and larger regional cities. As a result, income is likely to be the main component of returns as opposed to recent years when total returns have largely been driven by capital growth which we expect to slow down through 2016/2017.

While the property market continues to exhibit positive rental value growth, albeit at slower rates to 2020, the capital growth is predicted to decline, particularly in the prime property sector as suggested by the IPF UK Consensus Forecast. The Company is well positioned to take advantage of increases in rental values throughout the UK given the diversified spread of income producing properties within the portfolio.

The Company aims to deliver an attractive total return to shareholders from investing predominantly in a portfolio of smaller commercial properties in strong commercial locations across the UK. It is therefore not as susceptible to capital value erosion as will be experienced by holders of prime asset portfolios. The yield differential between prime and secondary property continues to narrow which will also be beneficial for shareholders looking for an attractive return with the Company's portfolio.

In terms of sector focus, we foresee the best total returns to be in the industrial/logistics sector. This is driven by online retailers' requirements for distribution hubs around big cities to enable them to deliver goods in an expedient fashion to shoppers' homes. Forecast total returns for industrial property for 2016 are 11.7% (Source: Capital Economics, UK Commercial Property Analyst Q1 2016).

Alternative Investment Fund Manager ('AIFM')

AEW UK Investment Management LLP is authorised and regulated by the Financial Conduct Authority 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 Group is required to make disclosures in relation to its leverage under the prescribed methodology of the Directive.

Leverage

The AIFM Directive prescribes two methodologies for evaluating leverage, namely the "Gross Method" and the "Commitment Method". The Group's maximum and actual leverage levels at 30 April 2016 are as per below:

Leverage Exposure	Gross Method	Commitment Method
Maximum Limit	140%	140%
Actual	105%	112%

In accordance with the AIFM Directive, leverage is expressed as a percentage of the Group's exposure to its net asset value and adjusted in line with the prescribed gross and commitment method. The gross method is representative of the sum of the Group'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 Group's positions without deducting cash balances and taking into account any hedging and netting arrangements. For the purposes of evaluating the methods above, the Group's positions primarily reflect its current borrowings and net asset value.

As at 30 April 2016, the Company's portfolio has the following geographical and sector allocations (split by valuation).

Geographical allocation

South East	20%
Yorkshire & Humberside	17%
West Midlands	15%
South West	14%
Scotland	11%
North West	9%
Northern Ireland	7%
Eastern	7%

Sector allocation

Industrial	35%
Office	32%
Retail Warehouse	15%
Retail	13%
Other	5%

The Group's top ten properties as at 30 April 2016 as set out below comprise 67.98% of the portfolio value:

Top Ten Properties

Property Name	Market Value Range
	(£)	Sector
225 Bath Street, Glasgow	10-15m	Office
Valley Retail Park, Belfast	10-15m	Retail Warehouse
69-75 Above Bar Street, Southampton	7.5-10m	Standard Retail
Eastpoint Business Park, Oxford	7.5-10m	Office
40 Queen Square, Bristol	7.5-10m	Office
Barnstaple Retail Park, Barnstaple	0-7.5m	Retail Warehouse
Langthwaite Grange Industrial Estate, South Kirkby	0-7.5m	Industrial
Odeon Cinema, Southend On Sea	0-7.5m	Other
11/15 Fargate & 18/36 Chapel Walk, Sheffield	0-7.5m	Standard Retail
Oak Park Rylands Lane, Droitwich	0-7.5m	Industrial

The table below sets out the Group's top ten tenants as at 30 April 2016 that represent 43.04% of the passing rent of the property portfolio.

Top Ten Tenants

	Passing Rent	As % of Total
Tenant Group	(£'000)	Passing Rent
Ardagh Glass Limited	676	6.53
The Secretary of State for Communities and Local Government	625	6.04
Egbert H. Taylor & Company Limited	620	5.99
Odeon Cinemas Limited	505	4.88
Wella (UK) Holdings Limited	410	3.96
Barclays Bank plc	375	3.62
ROM Group Limited	350	3.38
B&Q plc	348	3.36
Waterstones Booksellers Limited	280	2.71
Aecom Limited	266	2.57

Lease Expiry profile

http://www.rns-pdf.londonstockexchange.com/rns/6892D_1-2016-7-8.pdf

AEW UK Investment Management LLP

7 July 2016

Principal Risks and Uncertainties

The Group's assets consist primarily 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 carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. The Board's assessment identified a number of specific risks that are reviewed by the Board on a quarterly basis. The Group has a limited operating history and therefore some risks are not yet known and some that are currently not deemed material, could turn out to be material in the future. An analysis of the principal risks and uncertainties is set out below:

PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT

HOW RISK IS MANAGED

REAL ESTATE RISKS

Tenant default

Failure by tenants to comply with their rental obligations could affect the income that the properties earn and the ability of the Group to pay dividends to its Shareholders.

Tenant covenant checks are carried out on new tenants where there are concerns as to their creditworthiness.

Asset management conduct ongoing monitoring and liaison with tenants to manage potential bad debt risk.

Asset management initiatives

Asset management initiatives such as refurbishment works may prove to be more extensive, expensive and take longer than anticipated. Cost overruns may have a material adverse effect on the Group's profitability, the Net Asset Value and the share price.

Costs incurred on asset management initiatives are closely monitored against budgets and reviewed in regular presentations to the Investment Management Committee of the Investment Manager.

Due diligence

Due diligence may not identify all the risks and liabilities in respect of an acquisition (including any environmental, structural or operational defects) that may lead to a material adverse effect on the Group's profitability, the Net Asset Value and the price of Shares.

The Group's due diligence relies on the work (such as legal reports on title, property valuations, environmental, building surveys) outsourced to third parties which have Professional Indemnity cover in place.

Fall in rental rates

Rental rates may be adversely affected by general UK economic conditions and other factors that depress rental rates, including local factors relating to particular properties/locations (such as increased competition).

Any fall in the rental rates for the Group's properties may have a material adverse effect on the Group's profitability, the Net Asset Value, the price of the Shares and the Group's ability to meet interest and capital repayments on any debt facilities.

The Group mitigates this risk through building a diversified property and tenant base with subsequent monitoring of concentration to individual occupiers (top 10 tenants) and sectors (geographical and sector exposure).

Quarterly meetings are held with the Investment Strategy Committee of the Investment Manager and Board of Directors to assess whether any changes with the market present risks that should be considered in our strategy.

Property market

Any property market recession or future deterioration in the property market could, inter alia, (i) cause the Group to realise its investments at lower valuations; (ii) delay the timings of the Group's realisations. These risks could have a material adverse effect on the ability of the Group to achieve its investment objective.

The Group has investment restrictions in place to invest and manage its assets with the objective of spreading and mitigating risk.

Property valuation

Property and property related assets are inherently difficult to value due to the individual nature of each property.

There may be an adverse effect on the Group's profitability, the Net Asset Value and the price of Ordinary Shares in cases where properties are sold whose valuations have previously been materially overstated.

The Group uses an independent valuer (Knight Frank) to value the properties at Fair Value in accordance with accepted RICS appraisal and valuation standards.

FINANCIAL RISKS

Breach of borrowing covenants

The Group has entered into a term credit facility.

Material adverse changes in valuations and net income may lead to breaches in the LTV and interest cover ratio covenants.

The Group monitors the use of borrowings on an ongoing basis through weekly cash flow forecasting and quarterly risk monitoring to monitor financial covenants.

Interest rate rises

The Group's borrowings through a term credit facility is subject to interest rate risk due to changing LIBOR rates. Any increases in LIBOR rates may have an adverse effect on the Group's ability to pay dividends.

An interest rate cap of 2.5% is in place to mitigate the adverse impact of possible interest rate rises.

CORPORATE RISKS

Use of service providers

The Group has no employees and is reliant upon the performance of third party service providers.

Failure by any service provider to carry out its obligations to the Group in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Group.

The performance of service providers in conjunction with their service level agreements is monitored via regular calls and face to face meetings and the use of Key Performance Indicators where relevant.

Dependence on the Investment Manager

The Investment Manager is responsible for providing investment management services to the Group.

The future ability of the Group to successfully pursue its 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.

The Investment Manager has endeavoured to ensure that the principal members of its management team are suitably incentivised.

Ability to meet objectives

The Group may not meet its investment objective to deliver an attractive total return to shareholders from investing predominantly in a portfolio of smaller commercial properties in the United Kingdom.

Poor relative total return performance may lead to an adverse reputational impact that affects the wider Group's ability to raise new capital and new funds.

The Group has an investment policy to achieve a balanced portfolio with a diversified tenant base. The Group also has investment restrictions in place to limit exposure to potential risk factors. These factors mitigate the risk of fluctuations in returns.

TAXATION RISKS

Group REIT status

The Group has a UK REIT status that provides a tax-efficient corporate structure.

If the Group fails to remain a REIT for UK tax purposes, its profits and gains will be subject to UK corporation tax.

Any change to the tax status or in UK tax legislation could impact on the Group's ability to achieve it's investment objectives and provide attractive returns to Shareholders.

The Group monitors REIT compliance through the Investment Manager on acquisitions; the Administrator on asset and distribution levels; the Registrar and Broker on shareholdings and the use of third-party tax advisors to monitor REIT compliance requirements.

Our Portfolio

Sarus Court, Runcorn
Attractive yield, improving industrial location

Property characteristics		Adding value
Property type	Industrial	1. The location is set to benefit from the completion of the Mersey Gateway Project in 2017 which will link Runcorn with the M56 to M62. 2. The Company has since acquired a further unit on the same estate, Cleaver House, to provide more efficient control of estate management.
Area	56,123 sq ft
Purchase price
£3.37m
Purchase yield	8.00%
Vendor	Property Company


Lease		Investment summary
Tenants	Multi-let to two tenants providing a WAULT of 3.2 years to break and 4.6 years to expiry.	1. Established industrial location. 2. High quality, modern accommodation compared to the competing offer. 3. Fully let.
Rent	Average passing rent of £5.08 psf.

Cleaver House, Runcorn
Attractive yield, improving industrial location

Property characteristics		Adding value
Property type	Industrial	1. The location is set to benefit from the completion of the Mersey Gateway Project in 2017 which will link Runcorn with the M56 to M62. 2. The unit was acquired following the acquisition by the Company of the wider Sarus Court estate. Cleaver House therefore assists in providing a more efficient control of estate management.
Area	16,154sq ft
Purchase price
£0.91m
Purchase yield	7.92%
Constructed	1990's
Vendor	Private

Lease		Investment summary
Tenants	Single let with an unexpired term of 5 years, 2 years to break.	1. Established industrial location. 2. High quality, modem accommodation compared to the competing offer. 3. Fully let.
Rent	Passing rent of £4.71 psf.

Equinox, Castlegate Business Park, Salisbury
High yielding industrial investment

Property characteristics		Adding value
Property type	Industrial	1. Designated to allow easy subdivision to create a multi let terrace leading to increase in ERV. 2. Adjoining residential land uses create long term higher alternative use value, subject to planning.
Area	43,421 sq ft
Purchase price
£2.00m
Purchase yield	11.34%
Vendor	Standard Life


Lease		Investment summary
Tenants	Equinox International Ltd. £240,000 pa. WAULT of 0.4 year to break and 5.4 years to expiry.	1. Modern single let industrial warehouse. 2. Attractive yield profile. 3. Embedded tenant - the building was purpose built in 1996. 4. Low capital value per sq ft.
Rent	Passing rent of £5.54 psf.

Units 16 and 16a, Langthwaite Business Park, South Kirkby
High yielding industrial units

Property characteristics		Adding value
Property type	Industrial	1. Negotiate a lease extension with the current tenant due to their requirement to remain within the local area. 2. High yielding industrial units located in Yorkshire, as short distance from the A1 (M). 3. 5A1 covenant strength (D&B).
Area	230,850 sq ft
Purchase price
£5.80m
Purchase yield	11.00%
Vendor	Onward Holdings


Lease		Investment summary
Tenants	Both units (16 and 16a) let to Ardagh Glass Ltd. Total £682,029 pa. WAULT of 1.54 years to expiry.	1. Strategically located for the tenant due to other nearby facilities. 2. Low capital value. 3. Shortage of availability in the local market.
Rent	Average passing rent of £2.95 psf.

Oak Park, Rylands Lane, Elmley Lovett, Droitwich
Industrial complex let to a strong covenant

Property characteristics		Adding value
Property type	Industrial	1. Investment value strongly underpinned by underlying site value. 2. Potential future change to use to residential subject to planning.
Area	188,555 sq ft
Purchase price
£6.62m
Purchase yield	10.40%
Vendor	Receivership sale


Lease		Investment summary
Tenants	Single let to Taylor Bins (trading name) providing a WAULT of 6.5 years to expiry.	1. Established industrial location. 2. Fully let to a strong covenant. 3. Attractive WAULT. 4. High yielding and stable income stream.
Rent	Average passing rent of £3.29 psf.

Odeon Cinema, Victoria Circus, Southend on Sea
Prominent south east town centre location, strong underlying trade

Property characteristics		Adding value
Property type	Leisure	1. Instigate outstanding rent review to improve returns. 2. Negotiate lease extension with the tenant. Potential to add significant value through indexation.
Area	40,635 sq ft
Purchase price
£5.70m
Purchase yield	8.40%
Vendor	Institution


Lease		Investment summary
Tenants	Fully let to Odeon Cinemas Ltd providing a WAULT of 6.4 years to expiry.	1. Prominently located on the High Street and a short distance from the train station. 2. Only cinema within 25 minute drive time. 3. 5A1 covenant strength (D&B). 4. Tenant trading strongly. 5. Reversionary potential. 6. Attractive yield and stable income steam.
Rent	Average passing rent of £12.42 psf. ERV of £13.00 psf.

Brockhurst Crescent, Walsall
Three fully industrial units, strategically located near the M6

Property characteristics		Adding value
Property type	Industrial	1. Fixed rental uplifts in 2017 taking the running yield to 11.0%. 2. Opportunity to negotiate a reversionary lease with an existing tenant to extend the income.
Area	136,171 sq ft
Purchase price
£3.85m
Purchase yield	9.80%
Vendor	Property Company


Lease		Investment summary
Tenants	Multi-let to Tata Steel and Micheldever Tyres providing a WAULT of 5.9 years expiry.	1. Established industrial location just off the M6 at junction 9. 2. Fully let. 3. Attractive net initial yield 4. Shortage of low rented industrial accommodation within the surrounding area.
Rent	Average passing rent of £2.96 psf.

40 Queen Square, Bristol
Prime Bristol Office Location, refurbishment potential

Property characteristics		Adding value
Property type	Office	1. Refurbish and let vacant space. 2. Refurbish lower ground floor to provide improved common facilities. 3. Strong rental growth properties.
Area	38,326 sq ft
Purchase price
£7.20m
Purchase yield	8.70%
Vendor	Fund


Lease		Investment summary
Tenants	Multi-let to 6 tenants with 46% vacancy in terms of floor area. WAULT of 1.6 years to break and 2.2 years to expiry.	1. Prime office location in central Bristol. 2. Increasing levels of occupier demand is driving rental growth. 3. Asset management opportunities - regear of existing leases and refurbish vacant space.
Rent	Average passing rent of £16.70 psf (on let space).

Barbot Hall Industrial Estate Magham Road, Rotherham
Single let industrial unit in established location, reversionary potential

Property characteristics		Adding value
Property type	Industrial	1. Reversionary potential - ERV of c.£3.25 psf. 2. Negotiate lease renewal on expiry of the current lease in December 2018. Sapa are wedded to the location due to their distribution network. 3. Established industrial location.
Area	81,979 sq ft
Purchase price
£2.17m
Purchase yield	8.50%
Vendor	Property Company


Lease		Investment summary
Tenants	Single let to Sapa Components UK Ltd with a WAULT of 2.7 years to expiry.	1. Increasing levels of occupier demand within the surrounding area. 2. Lack of new development has created a shortage of competing stock. 3. Strong tenant covenant. 4. Low passing rent.
Rent	Average passing rent of £2.38 psf.

Lea Green Industrial Estate, Walkers Lane, St Helen's
Single let industrial unit, long term income stream

Property Characteristics		Adding value
Property type	Industrial	1. Minimal asset management required due to long lease. 2. Some reversionary potential at review. ERV of £3.25 psf.
Area	93,588 sq ft
Purchase price
£3.44m
Purchase yield	8.24%
Vendor	Property Company


Lease	Single let to Kverneland Group UK Ltd with a WAULT of 9.4 years to expiry with no break option.	Investment summary
Tenants	£3.25 psf (ERV). Passing rent is £0 as currently in a rent free period.	1. Established industrial location. 2. New lease to embedded tenant. 3. Attractive WAULT. 4. Strong tenant covenant.

Cranbourne House, Bessemer Road, Basingstoke
Modern, single let industrial unit in prime South East location

Property characteristics		Adding value
Property type	Industrial	3. Remove break option to add value through yield compression. 4. Negotiate lease renewal with the current tenant. 5. Should Wella vacate - relet the unit on a new 5 year term at ERV.
Area	58,445 sq ft
Purchase price
£3.39m
Purchase yield	10.00%
Vendor	Property Company


Lease		Investment summary
Tenants	Fully let to Wella UK Holdings Ltd with a WAULT of 1.7 years to break and 3.7 years to expiry.	1. Established South East industrial location. 2. Modern accommodation. 3. Increasing levels of occupier demand. 4. Lack of new development. 5. Strong tenant covenant.
Rent	Average passing rent of £7.01 psf.

Eastpoint Business Park, Oxford
Major south east city, improving occupier demand

Property characteristics		Adding value
Property type	Office	1. Letting of vacant accommodation (12 month vendor guarantee on rent and shortfalls). 2. Capital expenditure of £160,000 spent refreshing vacant accommodation. 3. Marketing campaign now relaunched quoting £15.50 psf, ahead of acquisition ERV of £14.50. 4. Application for conversion to residential under Permitted Development Rights has been submitted.
Area	74,266 sq ft
Purchase price
£8.20m
Purchase yield	9.40%
Constructed	1980's
Vendor	Property Company

Lease		Investment summary
Tenants	5 tenants providing a WAULT of 5.1 years to break and 6.9 years to expiry.	1. Majority refurbished office park with good road links. 2. Constrained supply and improving occupier demand in a key south east location. 3. Low capital value psf.
Rent	Average passing rent of £10.95 psf.

69 - 75 Above Bar Street, Southampton
Top 20 retailing centre, improving occupier demand


Property characteristics		Adding value
Property type	Retail	1. Potential to increase rental value in the medium term due to rental growth within the wider area.
Area	21,936 sq ft
Purchase price
£9.25m
Purchase yield	8.75%
Constructed	1993
Vendor	Fund

Lease		Investment summary
Tenants	Fully let to 3 tenants providing a WAULT of 5.2 years to expiry.	1. Top 20 retail centre. 2. Property located just a short walk from the prime pitch and between the two main covered centres. 3. Improving occupier demand and potential for rental growth going forward.
Rent	Average passing rent of £197.00 psf In Terms of Zone A ('ITZA').

Sandford House, Solihull
Prime office location, tenant wedded to the location

Property characteristics		Adding value
Property type	Office	1. Potential to regear the lease with the current tenant. 2. Refurbishment potential in the short term could increase rental value. 3. Ability to extend the building, subject to planning.
Area	34,418 sq ft
Purchase price
£5.40m
Purchase yield	10.90%
Constructed	1988
Vendor	Fund

Lease		Investment summary
Tenants	Government tenant with 2.9 years to break and 4.5 years to expiry.	1. Prime Birmingham office location. 2. Significant improvement in occupier demand over the past 2 years. 3. Government tenant is strongly wedded to the location - Border Force have disclosed a new requirement but are very unlikely to move before break date. 4. Potential to refurbish in the short to medium term to increase rental value.
Rent	Average passing rent of £18.16 psf.

Stoneferry Retail Park, Hull
Prominent location, attractive yield

Property characteristics		Adding value
Property type	Retail warehouse	1. Potential to agree a surrender with Wren kitchens if an alternative tenant can be found. 2. Improve signage and access.
Area	17,656 sq ft
Purchase price
£2.16m
Purchase yield	10.00%
Constructed	1994
Vendor	Fund

Lease		Investment summary
Tenants	Fully let to 3 tenants providing a WAULT of 5.8 years to expiry.	1. Good prominence to a major roundabout junction. 2. Established retail warehousing location. 3. Attractive and stable yield profile in medium to long term.
Rent	Average passing rent of £12.95 psf.

Bath Street, Glasgow
City centre location, attractive yield profile

Property characteristics		Adding value
Property type	Office	1. The current low passing rents make the building well placed to benefit from future rental growth. 2. Requires minimal capex going forward e.g. improvement of tenant amenity space on the ground floor.
Area	88,159 sq ft
Purchase price
£12.20m
Purchase yield	10.00%
Constructed	1980's
Vendor	Fund

Lease		Investment summary
Tenants	Fully let to 7 tenants providing a WAULT of 2.1 years to break and 4.3 years to expiry.	1. Multi-let city centre office building. 2. Comprehensively refurbished in 2008. 3. Shortage of competing stock for this size of floor plate.
Rent	Average passing rent of £14.68 psf.

Valley Retail Park, Newtownabbey, Belfast
Modern scheme, attractive yield profile

Property characteristics		Adding value
Property type	Retail warehouse	1. Agreed surrender with Harvey Norman. 2. Let vacant units. 3. Potential addition of leisure and coffee pod.
Area	100,189 sq ft
Purchase price
£7.15m
Purchase yield	14.00%
Constructed	2003
Vendor	Asset Manager

Lease		Investment summary
Tenants	Let to 5 tenants providing a WAULT of 10.5 years to break and 13.1 years to expiry.	1. Modern scheme. 2. Attractive yield profile. 3. Low vacancy level within the surrounding area. 4. Ability to offer space at a discount to surrounding schemes. 5. Halfords trading strongly. 6. Wider interpretation of bulky goods planning consent than rest of UK.
Rent	Average passing rent of £9.75 psf.

710 Brightside Lane, Sheffield
Long income, higher alternative use potential

Property characteristics		Adding value
Property type	Industrial	1. Potential to increase rent at review. 2. Potential for medium to long term redevelopment for higher value uses including trade counter and motor dealership.
Area	121,733 sq ft
Purchase price
£3.50m
Purchase yield	8.82%
Constructed	1960's
Vendor	Property Company

Lease		Investment summary
Tenants	Single let for a further 13.9 years with a tenant break option in 8.9 years.	1. Prominent frontage to busy arterial route. 2. Tenant wedded to the location having significantly invested in the roof. 3. Low capital value psf and low passing rent. 4. Long term income. 5. Surrounding sites currently being redeveloped for higher value uses.
Rent	Average passing rent of £2.87 psf.

11/15 Fargate, 18/36 Chapel Walk, Sheffield
Prime retailing location, attractive yield profile

Property characteristics		Adding value
Property type	Retail	1. Potential to add value through letting of vacant units and sale of upper parts. 2. Potential for future rental growth.
Area	34,362 sq ft
Purchase price
£5.30m
Purchase yield	8.90%
Vendor	Fund


Lease		Investment summary
Tenants	Multi-let to 7 tenants providing a WAULT of 2.5 years to break and 5.0 years to expiry.	1. Prime retail location within Top 25 retailing city. 2. Low passing rent on the prime units. 3. Further retail development nearby will help to draw more footfall into the city centre.
Rent	Passing rent of £135 psf on the prime units.

Vantage Point, Hemel Hempstead
Low capital value psf, strong and improving occupier market

Property characteristics		Adding value
Property type	Office	1. Refurbishment potential if the first floor tenant breaks their lease and in the medium term ERV could increase to £15 psf on refurbished accommodation.
Area	18,466 sq ft
Purchase price
£2.18m
Purchase yield	8.40%
Constructed	1980
Vendor	Private vendor

Lease		Investment summary
Tenants	Fully let to 2 tenants providing a WAULT of 4.1 years to break and 8.4 years to expiry.	1. Established south east business park location. 2. Strong south east office occupational market. 3. Low passing rent. 4. Low capital value psf.
Rent	Average passing rent of £10.49 psf.

Barnstaple Retail Park, Station Road, Barnstaple
Fully let on rebased rents, established location

Property characteristics		Adding value
Property type	Retail warehouse	1. Low base rents could create potential for future rental growth.
Area	51,021 sq ft
Purchase price
£6.79m
Purchase yield	8.50%
Constructed	1988
Vendor	Guy & St Thomas' Charitable Foundation

Lease		Investment summary
Tenants	B&Q, Sports Direct and Poundland. WAULT of 7.93 years to expiry.	1. Retail warehousing scheme located within an established destination area. 2. Fully let to national occupiers on rebased rents. 3. Average weighted unexpired term of 8.6 years. 4. Attractive and stable yield profile.
Rent	Average passing rent of £11.97 psf.

349 Moorside Road, Swinton, Salford
Income longer than portfolio level WAULT, strong covenant

Property characteristics		Adding value
Property type	Industrial	1. The current lease provides a strong income stream.
Area	24,307 sq ft
Purchase price
£1.28m
Purchase yield	7.64%
Constructed	2010
Vendor	Private

Lease		Investment summary
Tenants	Single let with an unexpired term of 7.3 years. Secured against National Crash Repair Centre Ltd.	1. Strong covenant. 2. Income longer than portfolio level WAULT. 3. Well located a short distance from the M60 Manchester Ring Motorway. 4. Modern building.
Rent	Low passing rent of £4.25 psf.

Waggon Road, Mossley, Ashton Under Lyne
Income longer than portfolio level WAULT, strong covenant

Property characteristics		Adding value
Property type	Industrial	1. The current lease provides a strong income stream.
Area	12,836 sq ft
Purchase price
£0.28m
Purchase yield	11.1%
Constructed	1980's
Vendor	Private

Lease		Investment summary
Tenants	Single let with an unexpired term of 7.3 years. Secured against National Crash Repair Centre Ltd.	1. Strong covenant. 2. Income longer than portfolio level WAULT. 3. Well located a short distance from the M60 Manchester Ring Motorway.
Rent	Low passing rent of £2.50 psf.

Clarke Road, Milton Keynes
Income longer than portfolio level WAULT, strong covenant

Property characteristics		Adding value
Property type	Industrial	1. The current lease provides a strong income stream.
Area	28,348 sq ft
Purchase price
£1.53m
Purchase yield	7.66%
Constructed	1980's
Vendor	Private

Lease		Investment summary
Tenants	Single let with an unexpired term of 7.3 years. Secured against National Crash Repair Centre Ltd.	1. Strong covenant. 2. Income longer than portfolio level WAULT.
Rent	Average passing rent of £4.73. psf

Carrs Coatings, North Moons Industrial Estate, Redditch
Established industrial location, strong tenant demand

Property characteristics		Adding value
Property name	Industrial	1. The lease provides for annual RPI uplifts. 2. Strong demand from owner occupiers within the wider area due to lack of supply.
Area	37,992 sq ft
Purchase price
£2.00m
Purchase yield	9.5%
Vendor	Property Company


Lease		Investment summary
Tenants	Carrs Coatings Limited 12.3 years unexpired term.	1. Attractive initial yield. 2. Long income providing annual fixed uplifts in line with RPI. 3. Located within a very well established industrial location. 4. Purchase price c.85% underpinned by vacant possession value.
Rent	Average passing rent of £5.35 psf.

Diversity, Social and Environmental Matters

Diversity

During the period the Board approved and adopted the diversity policy. The policy acknowledges the importance of diversity, including gender diversity, for the Company.

The Board has established the following measurable objectives for achieving diversity on the Board:

• All Board appointments will be made on merit, in the context of the skills, knowledge and experience that are needed for the Board to be effective.

• Requests that any long lists of potential directors include diverse candidates of appropriate merit.

• When engaging with executive search firms, the Company will only engage with those firms who have signed up to the voluntary Code of Conduct on gender diversity and best practice.

Progress against all of these objectives is ongoing and the Board will report more fully in the next Annual Report.

Social, Community and Employee Responsibility

The Company has no direct social, community or employee responsibilities. The Company has no employees and accordingly no requirement to separately report in this area as the management of the portfolio has been delegated to the Investment Manager.

The Investment Manager is an equal opportunities employer who respect and seek to empower each individual and the diverse cultures, perspectives, skills and experiences within their workforce.

In light of the nature of the Company's business there are no relevant human rights issues and there is thus no requirement for a human rights policy.

There are three male Directors who do not have service contracts.

Environmental Policy

The Investment Manager acquires and manages properties on behalf of the Company. It is recognised that these activities have both direct and indirect environmental impacts.

The Investment Manager has a Sustainable and Responsible Investment ('SRI') policy. This can be found on the Investment Manager's website http://www.aeweurope.com/en/Strategies/UK/overview.html).

The Investment Manager believes environmentally responsible fund management means being active, on the ground every day. As part of this process, the Investment Manager submits to the Global Real Estate Sustainability Benchmark ('GRESB'). GRESB is an industry driven organisation committed to assessing the sustainability of real estate portfolios (public, private and direct) around the globe.

The Investment Manager is in the process of submitting the Company's GRESB assessment and will receive the results of this assessment in September 2016.

As an investment company, the Company's own direct environmental impact is minimal and greenhouse gas ('GHG') emissions are therefore negligible. Information on the GHG emissions in relation to the Company's property portfolio are disclosed on pages 52 and 53 in the full Annual Report and Accounts.

The Strategic Report has been approved and signed on behalf of the Board by:

Mark Burton

Chairman

7 July 2016

Directors' Responsibilities Statement

The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable United Kingdom law and regulations.

Company law requires the Directors to prepare group and parent company financial statements for each financial period. Under that law they are required to prepare the group financial statements in accordance with International Financial Reporting Standards as adopted by the EU ('IFRS') and have elected to prepare the parent company financial statements on the same basis.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations, and for ensuring that the Annual Report includes information required by the Listing Rules and Disclosure and Transparency Rules of the Financial Conduct Authority.

Declaration under DTR4.1.12

The Directors listed above, being the persons responsible, hereby confirm to the best of their knowledge:

• that the financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

In the opinion of the Board, the Annual Report and Accounts taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the group's position and performance, business model and strategy.

On behalf of the Board

Mark Burton

Chairman

7 July 2016

Non-statutory Accounts

The financial information set out below does not constitute the Company's statutory accounts for the period ended 30 April 2016 but is derived from those accounts. Statutory accounts for the period ended 30 April 2016 will be delivered to the Registrar of Companies in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' Report can be found in the Company's full Annual Report and Accounts on the Company's website.

Consolidated Statement of Comprehensive Income

for the period 1 April 2015 to 30 April 2016

		For the period
		1 April 2015 to
		30 April 2016
	Note	£'000
Income
Rental and other income	3	7,185
Property operating expenses	4	(300)
Net rental and other income		6,885

Dividend income	3	653
Net rental and dividend income		7,538

Investment management fees	4	(653)
Auditor remuneration	4	(95)
Operation costs	4	(403)
Directors' remuneration	5	(72)
Operating profit before fair value changes		6,315

Change in fair value of investment properties	10	(1,935)
Change in fair value of investments	10	482
Operating profit		4,862

Finance expense	6	(226)
Profit before tax		4,636

Taxation	7	-
Profit after tax		4,636

Other comprehensive income		-

Total comprehensive income for the period		4,636

Earnings per share (pence per share) (basic and diluted)	8	4.83

The notes form an integral part of these consolidated financial statements.

Consolidated Statement of Changes in Equity

for the period 1 April 2015 to 30 April 2016

					Total equity
		Share	Capital		attributable to
	Share	premium	reduction	Retained	owners of the
	capital	account	reserve	earnings	Group
	£'000	£'000	£'000	£'000	£'000

Balance at beginning of the period	-	-	-	-	-
Profit for the period	-	-	-	4,636	4,636
Other comprehensive income	-	-	-	-	-

Total comprehensive income	-	-	-	4,636	4,636

Ordinary Shares issued	1,175	116,505	-	-	117,680
Share issue costs	-	(2,211)	-	-	(2,211)
Cancellation of share premium	-	(97,565)	97,565	-	-
Dividends paid	-	-	-	(3,730)	(3,730)

Balance at 30 April 2016	1,175	16,729	97,565	906	116,375

The notes form an integral part of these consolidated financial statements.

Consolidated Statement of Financial Position

as at 30 April 2016

		As at
		30 April 2016
	Note	£'000
Assets
Non-Current Assets
Investment property	10	114,387
Investments	10	10,109
		124,496

Current Assets
Receivables and prepayments	11	2,962
Cash and cash equivalents	12	7,963
Other financial assets held at fair value	13	77
		11,002

Total assets		135,498
Non-Current Liabilities
Interest bearing loans and borrowings	14	(14,250)
Finance lease obligations	16	(1,791)

		(16,041)

Current Liabilities
Payables and accrued expenses	15	(2,959)
Finance lease obligations	16	(123)
		(3,082)
Total Liabilities		(19,123)

Net Assets		116,375

Equity
Share capital	19	1,175
Share premium account	20	16,729
Capital reduction reserve	21	97,565
Retained earnings		906

Total capital and reserves attributable to equity holders of the Group		116,375

Net Asset Value per share	8	99.03 pps

The consolidated financial statements were approved by the Board of Directors on 7 July 2016 and signed on their behalf by:

Mark Burton

Chairman

AEW UK REIT plc

Company number: 09522515

The notes form an integral part of these consolidated financial statements.

Consolidated Statement of Cash Flows

for the period 1 April 2015 to 30 April 2016

	For the period
	1 April 2015 to
	30 April 2016
	£'000

Cash flows from operating activities

Operating profit	4,862

Adjustment for non-cash items:
Loss from change in fair value of investment property	1,935
Gain from change in fair value of investments	(482)
Changes in fair value of interest rate derivatives	(14)
Increase in receivables and prepayments	(2,962)
Increase in payables and accrued expenses	2,936

Net cash flow generated from operating activities	6,275

Cash flows from investing activities

Purchase of investing properties	(114,408)
Purchase of investments	(9,627)

Net cash used in investing activities	(124,035)

Cash flows from financing activities

Proceeds from issue of ordinary share capital	117,680
Share issue costs	(2,211)
Loan draw down	14,250
Finance costs	(266)
Dividends paid	(3,730)

Net cash generated from financing activities	125,723

Net increase in cash and cash equivalents	7,963

Cash and cash equivalents at the start of the period	-

Cash and cash equivalents at the end of the period	7,963

The notes form an integral part of these consolidated financial statements.

Notes to the Consolidated Financial Statements

for the period 1 April 2015 to 30 April 2016

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 located at 40 Dukes Place, London, EC3A 7NH.

The Company's Ordinary Shares were listed on the Official List of the UK Listing Authority and admitted to trading on the Main Market of the London Stock Exchange on 12 May 2015.

AEW UK REIT 2015 Limited is a subsidiary of the Company incorporated in the UK on 2 April 2015. At 30 April 2016, the Company held 1 share being 100% of the issued share capital. AEW UK REIT 2015 Limited is wholly owned by the Company (together known as the 'Group') and is currently dormant.

The consolidated financial statements of the Group for the 13-month period ended 30 April 2016 comprise the results of the Company and its subsidiary and were approved by the Board for issue in on 7 July 2016.

The nature of the Group's operations and its principal activities are set out in the Strategic Report above.

2. Accounting policies

2.1 Basis of preparation

These consolidated financial statements are prepared and approved by the Directors in accordance with the principles of International Financial Reporting Standards ('IFRS') and interpretations issued by the International Accounting Standards Board ('IASB') as adopted by the European Union ('EU IFRS').

These consolidated financial statements have been prepared under the historical-cost convention, except for investment property, investments and interest rate derivatives that have been measured at fair value.

The consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand pound (£'000), except when otherwise indicated.

As the subsidiary AEW UK REIT 2015 Limited is dormant and has no balances material for consolidation, these consolidated financial statements are representative of the accounts of the Group and Company.

Basis of consolidation

The consolidated financial statements for the period ended 30 April 2016 incorporate the financial statements of AEW UK REIT plc (the 'Company') and its subsidiary undertaking together (the 'Group'). Subsidiary undertaking refers to the entity controlled by the Company, being the entity AEW UK REIT 2015 Limited.

IFRS 10 outlines the requirements for the preparation of consolidated financial statements. The Company has control over an investee if all three of the following elements are present: power over the investee, exposure or rights to variable returns from the investee and the ability of the investor to use its power to affect those variable returns.

Changes to accounting standards and interpretations

The following accounting standards and their amendments were in issue at the period end but will not be in effect until after this financial period and are not expected to have any material impact on the financial statements.

- IAS 1 Presentation of Financial Statements - amendments resulting from the disclosure initiative (effective for annual periods beginning on or after 1 January 2016)

- IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018)

- IFRS 15 Revenue from contracts (effective for annual periods beginning on or after 1 January 2018)

- IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019)

2.2 Significant accounting judgements and estimates

The preparation of financial statements in accordance with EU IFRS requires the Directors of the Group 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.

i) Valuation of property

The valuations of the Group's investment property will be at fair value as determined by the independent valuer on the basis of market value in accordance with the internationally accepted Royal Institution of Chartered Surveyors (RICS) Appraisal and Valuation Standards.

ii) Valuation of investments

The valuations of the Group's investment in securities will be the last announced unit price for collective investment schemes as at the Consolidated Statement of Financial Position date.

iii) Valuation of interest rate derivatives

In accordance with IAS 39, the Group carries its interest rate derivatives at fair value. The fair values are estimated by the loan counterparty with revaluation occurring on a quarterly basis. The counterparties will use a number of assumptions in determining the fair values including estimations over future interest rates and therefore future cash flows. The fair value represents the net present value of the difference between the cash flows produced by the contracted rate and the valuation rate.

2.3 Going concern

The Directors have made an assessment of the Group's ability to continue as a going concern and are satisfied that the Group has the resources to continue in business for at least 12 months. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern. Therefore, the financial statements have been prepared on the going concern basis.

2.4 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below.

a) Presentation currency

The primary objective of the Group is to generate returns in Sterling, its capital-raising currency. The

Group's performance is evaluated in Sterling. Therefore, the Directors consider Sterling as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions and it has therefore been adopted as the presentation currency.

b) Revenue recognition

i) Rental income

Rental income receivable under operating leases is recognised on a straight-line basis over the term of the lease, except for contingent rental income, which is recognised when it arises.

Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if the payments are not made on such a basis. The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the directors are reasonably certain that the tenant will exercise that option.

ii) Deferred income

Deferred income is rental income received in advance during the accounting period.

c) Dividend income

Dividend income is recognised in profit and loss on the date the entity's right to receive a dividend is established.

d) 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. All other financing expenses are expensed in the period in which they occur.

Interest income and interest payable are recognised in profit or loss as they accrue, using the effective interest method.

e) Investment property

Property held under a lease 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 include 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 the fair values are included in profit or loss.

Investment properties are valued by the Valuation Agent on the basis of a full valuation with physical inspection at least once a year. Any valuation of an Immovable by the Valuation Agent must be undertaken in accordance with the current issue of RICS Valuation - Professional Standards (the 'Red Book'), or in the case of overseas immovables, on an appropriate basis, but guided by the FCA Rules.

The determination of the fair value of investment property requires the use of estimates such as future cash flows from assets (such as lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets.

For the purposes of these financial statements, in order to avoid 'double counting', 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.

Gains or losses on the disposal of investment property are determined as the difference between net disposal proceeds and the carrying value of the asset in the previous full period financial statements.

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.

f) Investments in collective investment schemes

Investments in collective investment schemes are stated at the latest share price for dealing purposes with any resultant gain or loss recognised in profit or loss.

g) Derivative financial investments

Derivative financial instruments, comprising interest rate caps and swaps for hedging purposes, are initially recognised at fair value and are subsequently measured at fair value being the estimated amount that the Group 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. The gain or loss at each fair value remeasurement date is recognised in profit or loss and hedge accounting is not applied. Premiums payable under such arrangements are initially capitalised into the Consolidated Statement of Financial Position.

The Group 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.

h) Cash and cash equivalents

Cash and short-term deposits in the Consolidated Statement of Financial Position comprise cash at bank and short-term deposits with an original maturity of three months or less.

i) Receivables and prepayments

Rent and other receivables are recognised at their original invoiced value. Where the time value of money is material, receivables are discounted and then held at amortised cost. Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.

j) Capital prepayments

Capital prepayments are made for the purpose of acquiring future property assets. When the asset is acquired, the prepayments are capitalised as a cost of purchase. Where a purchase is not successful, these costs are reclassified as abortive costs and written off to profit or loss in the period they arise.

k) Other payables and accrued expenses

Other payables and accrued expenses are initially recognised at fair value and subsequently held at amortised cost.

l) Rent deposits

Rent deposits represents cash received from tenants at inception of a lease and are consequently transferred to the rent agent to hold on behalf of the Group. These balances are held as creditors in the Consolidated Statement of Financial Position.

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.

n) Impairment of financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

o) Provisions

A provision is recognised in the Consolidated Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

p) Dividend payable to shareholders

Equity dividends are recognised when they become legally payable.

q) 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.

r) 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 Group 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 enacted or substantively enacted at the period end date.

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 provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the period end date.

s) European Public Real Estate Association

The Group 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 Group's Ordinary Shares. Under EPRA's methodology, EPS and NAV calculations for the period ended 30 April 2016 are presented in note 8 to these financial statements.

3. Revenue

	For the period
	1 April 2015 to
	30 April
	2016
	£'000

Gross rental income received	6,153
Surrender premium received	1,000
Dilapidation income received	19
Other property income	13

Total rental and other income	7,185

Dividend income:
Property income distribution*	629
Dividend distribution	24
	653

Total Revenue	7,838

* Property income distribution ('PID') is received from the investment in the AEW UK Core Property Fund which holds property directly.

Rent available under the terms of the leases, is adjusted, for the effect of any incentives agreed.

4. Expenses

	For the period
	1 April 2015 to
	30 April
	2016
	£'000

Property operating expenses	300
Investment management fee	653
Auditor remuneration	95
Operation costs	403

Total	1,451

During the period ended 30 April 2016, KPMG LLP as the independent auditor of the Group received £20,000 in relation to the statutory audit of the initial accounts and £65,000 in relation to the statutory audit of the year end accounts. KPMG LLP also received £10,000 in relation to the review of the Company's half-yearly accounts and £40,000, which is included in equity, in relation to work performed as reporting accountant in connection with the IPO.

There are no employees employed by the Group.

5. Directors' remuneration

	For the period
	1 April 2015 to
	30 April
	2016
	£'000

Director's fees	69
Tax and social security	3

Total remuneration	72

A summary of the Directors' remuneration is set out in the Directors' Remuneration Report in the full Annual Report and Accounts.

6. Finance expense

	For the period
	1 April 2015 to
	30 April
	2016
	£'000

Interest payable on loan borrowings	110
Amortisation of loan arrangement fee	40
Agency fee payable on loan borrowings	11
Commitment fees payable on loan borrowings	51
	212
Change in fair value of interest rate derivatives	14

Total	226

On 20 October 2015, the Group entered into a 5 year £40 million term credit facility with The Royal Bank of Scotland International Limited.

The Group has used this facility to continue to invest in properties once the net IPO proceeds had been fully invested. The facility can be used up to 30% loan to Net Asset Value measured at drawdown.

7. Taxation

	For the period
	1 April 2015 to
	30 April
	2016
	£'000
Analysis of charge in the period
Profit before tax	4,636

Theoretical tax at UK corporation tax standard rate of 20%	927

Adjusted for:
Exempt REIT income	(1,119)
UK dividend not taxable	(99)
Non taxable investment losses	291


Total	-

8. Earnings per share and NAV per share

	Profit after tax	Weighted average
	(£'000)	number of shares	Pence per share

Earnings per share (basic and diluted) for the period 1 April 2015 to 30 April 2016	4,636	96,022,424	4.83

Adjustments to revenue:
Loss from change in fair value of investment property	1,935	-	2.02
Gain from change in fair value of investments	(482)	-	(0.50)
Change in fair value of interest rate derivatives	(14)	-	(0.01)
EPRA earnings per share (basic and diluted)	6,075	96,022,424	6.33

The ordinary number of shares is based on the time weighted average number of shares throughout the period.

The earnings per share calculation above is from the date of incorporation. From the date of incorporation of 1 April 2015 to the Initial Public Offering ('IPO'), 1 founder share was in existence.


	Net assets (£'000)	Ordinary Shares in issue	NAV per share (pence)

NAV per share at 30 April 2016	116,375	117,510,000	99.03
Other financial assets held at fair value	(77)	-	(0.06)
EPRA NAV per share at 30 April 2016	116,298	117,510,000	98.97

9. Dividends paid

	For the period
	1 April 2015 to
	30 April
	2016
	£'000
First dividend paid in respect of the period ended 31 October 2015 at 1.5p per Ordinary Share	1,507
Second dividend paid in respect of the period 1 November 2015 to 14 December 2015 at 0.75p per Ordinary Share	754
Third dividend paid in respect of the period 15 December 2015 to 31 January 2016 at 1.25p per Ordinary Share	1,469

Total dividends paid during the period	3,730

Fourth dividend declared for the period 1 February 2016 to 30 April 2016 at 2p per Ordinary Share	2,350


Total dividends declared during the period	6,080

The fourth dividend is not included in the accounts as a liability as at 30 April 2016.

10. Non-current assets

	Freehold	Long Leasehold	Total
	£'000	£'000	£'000
UK Investment property
Purchases in the period	88,798	25,610	114,408
Revaluation of investment property	247	(315)	(68)

Valuation provided by Knight Frank	89,045	25,295	114,340

Adjustment to fair value for rent free debtor			(1,082)
Adjustment to fair value for rent guarantee debtor			(785)
Adjustment for finance lease obligations†			1,914

Total investment property			114,387

Investment in AEW UK Core Property Fund
Purchases in period			9,627
Gain from change in fair value			482

Total investment in AEW UK Core Property Fund			10,109

Change in fair value of investment property
Loss from change in fair value			(68)
Adjustment to fair value for rent free debtor			(1,082)
Adjustment to fair value for rent guarantee debtor			(785)

			(1,935)

† Adjustment in respect of minimum payment under head leases separately included as a liability within the Statement of Financial Position.

Fair value

Valuation of investment property is performed by Knight Frank LLP, an accredited external 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 Group'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 following table provides the fair value measurement hierarchy for non-current assets:

	30 April 2016
		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
Investment properties	-	-	114,387	114,387
Investment in AEW UK Core Property Fund	-	-	10,109	10,109

	-	-	124,496	124,496

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.

Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy

The Group has considered sensitivity analysis for assets measured at fair value and recognises the significant unobservable inputs relating to investment property and investments.

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the entity's portfolios of investment property are:

1) Estimated Rental Value ('ERV')

2) Equivalent yield

Increases (decreases) in the ERV (per sq ft p.a.) in isolation would result in a higher (lower) fair value

measurement. Increases (decreases) in the discount rate/yield (and exit or 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 entity's investment is:

1) Single swinging price

Increase (decreases) in the single swinging price would result in a higher (lower) fair value measurement.

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 portfolio of investment property and investments are:

			Significant
	Fair Value	Valuation	Unobservable	Range
Class	£,000	Technique	Inputs	£/psf

			ERV	£21.81-£426.24
Investment Property	£114,340	Income capitalisation	Equivalent / yield	6.70%-11.90%
Investments	£10,109	Market capitalisation	Single swinging price	£1.2581

Where possible, sensitivity of the fair values of level 3 assets are tested to changes in unobservable inputs to reasonable alternatives.

All gains and losses recorded in profit or loss 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 and investments held at the end of the reporting period.

With regards to investment property, losses for recurring fair value measurements categorised within Level 3 of the fair value hierarchy, prior to adjustment for rent free debtor and rent guarantee debtor, are recorded in profit and loss.

With regards to investments, the single swinging price of the AEW UK Core Property Fund can swing to a lower price in the event that the net redemptions in the AEW UK Core Property Fund are over 1% of NAV. This pricing mechanism can be exercised by the managers of the AEW UK Core Property Fund at their discretion when the abovementioned condition is met and is known as the 'single swinging price'.

The carrying amount of the assets and liabilities, detailed within the Consolidated Statement of Financial Position, is considered to be the same as their fair value.

	Change in single swinging price		Change in ERV		Change in equivalent yield
	£'000	£'000	£'000	£'000	£'000	£'000
Sensitivity analysis	+5%	-5%	+5%	-5%	+5%	-5%

Resulting fair value of investment properties	-	-	119,303	109,166	107,815	121,126
Resulting fair value of investments	10,615	9,604	-	-	-	-

11. Receivables and prepayments

	30 April
	2016
	£'000
Receivables
Dividend receivable	193
Rent free debtor	1,082
Rent guarantee debtor	785
Rent debtor	622
Rent agent float account	92
Other receivables	29

	2,803

Prepayments
Property related prepayments	149
Depositary services	8
Listing fees	2
	159

Total	2,962

As at 30 April 2016, the aged debtor analysis of receivables was as follows:

	30 April
	2016
	£'000

Less than three months due	573
Between three and six months due	331
Between six and twelve months due	32

Total	936

12. Cash and cash equivalents

	30 April
	2016
	£'000

Cash at Bank	7,963

Total	7,963

13. Interest rate and derivatives

	30 April
	2016
	£'000

Interest rate cap premium paid	91
Changes in fair value of interest rate derivatives	(14)

Total	77

To mitigate the interest rate risk that arises as a result of entering into variable rate linked loans, the Group entered into an interest rate cap during the period.

The interest rate cap has a strike price of 2.50% and a notional amount of £14.25 million.

The total premium payable in the period towards securing the interest rate cap was £91,000.

Fair Value hierarchy

The following table provides the fair value measurement hierarchy for interest rate derivatives:

		Quoted prices	Significant	Significant
		in active	observable	unobservable
		markets	input	inputs
	Valuation	(Level 1)	(Level 2)	(Level 3)	Total
	date	£'000	£'000	£'000	£'000

Assets measured at fair value	30 April 2016	-	77	-	77

The fair value of these contracts are recorded in the Consolidated Statement of Financial Position as at the period end.

There have been no transfers between level 1 and level 2 during the period, nor have there been any transfers between level 2 and level 3 during the period.

The carrying amount of the assets and liabilities, detailed within the Consolidated Statement of Financial Position, is considered to be the same as their fair value.

14. Interest bearing loans and borrowings

	Bank	Bank
	borrowings	borrowings
	drawn	undrawn	Total
	£'000	£'000	£'000

As at 1 April 2015	-	-	-
Bank borrowings drawn in the period	14,250	-	14,250
Bank borrowings available but undrawn in the period	-	25,750	25,750

As at 30 April 2016	14,250	25,750	40,000

The Group entered into a £40 million credit facility with the Royal Bank of Scotland on 20 October 2015, of which £25.75 million remained undrawn as at the period end.

Borrowing costs associated with the credit facility are shown as finance costs in note 6 to these financial statements.

The term to maturity as at the period end is 4.47 years as further represented below:

	30 April
	2016
	£'000

Repayable between 1 and 2 years	-
Repayable between 2 and 5 years	14,250
Repayable in over 5 years	-

Total	14,250

15. Payables and accrued expenses

	30 April
	2016
	£'000

Deferred income	1,675
Accruals	1,008
Other creditors	276

Total	2,959

16. Finance lease obligations

Finance leases are capitalised at the lease's commencement at the lower of the fair value of the property and 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 finance leases for the period:

	30 April
	2016
	£'000

Not later than one year	123
Later than one year but not later than five years	372
Later than five years	1,419

Total	1,914

17. Guarantees and commitments

Operating lease commitments - as lessor

The Group has entered into commercial property leases on its investment property portfolio. These non-cancellable leases have a remaining term of between 0 and 20 years.

Future minimum rentals receivable under non-cancellable operating leases as at 30 April 2016 are as follows:

	30 April
	2016
	£'000

Within one year	9,902
After one year but not more than five years	31,651
More than five years	23,401

Total	64,954

18. Investment in subsidiary

The company listed below is part of the Group as at 30 April 2016:

Name and company	Country of registration
number	and incorporation	Principal activity	Ordinary Shares held

AEW UK REIT 2015 Limited (Company number 09524699)	England and Wales	Dormant	100%

19. Issued Share Capital

		Number of
	£'000	Ordinary Shares

Ordinary Shares issued and fully paid
At 1 April 2015	-	1
Issued on admission to trading on the London Stock Exchange on 12 May 2015	1,005	100,499,999
Issued on admission to trading on the London Stock Exchange on 15 December 2015	170	17,010,000

As at 30 April 2016	1,175	117,510,000

On 12 May 2015, AEW UK REIT Plc announced that it had raised £100.5 million through its initial public offering and the Ordinary Shares had been admitted to the Official List and to trading on the Main Market of the London Stock Exchange.

The Company ticker is AEWU. The initial raising by the Company involved the issue of Ordinary Shares to relevant subscribers at 100 pence per Ordinary Share.

On 15 December 2015, the Company issued a further 17,010,000 Ordinary Shares at a price of 101 pence per share in the form of a placing as part of the Company's share issuance programme.

20. Share premium account

	£'000

The share premium relates to amounts subscribed for share capital in excess of nominal value:

At 1 April 2015	-
Issued on admission to trading on the London Stock Exchange on 12 May 2015	99,495
Share issue costs (Paid and accrued)	(1,930)
Transfer to capital reduction account	(97,565)
Issued on admission to trading on the London Stock Exchange on 15 December 2015	17,010
Share issue costs (Paid and accrued)	(281)

At 30 April 2016	16,729

21. Capital reduction reserve

	£'000

At 1 April 2015	-
Transferred from share premium reserve	97,565

At 30 April 2016	97,565

On 17 September 2015, the Company by way of Special Resolution cancelled the value of its share premium account, by an Order of the High Court of Justice, Chancery Division.

As a result of this cancellation £97.5 million has been transferred from the share premium account into the capital reduction reserve account. The capital reduction reserve account is classed as a distributable reserve.

22. Financial risk management and objectives and policies

22.1 Financing instruments

The Group'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 Group'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 Group's property portfolio.

Set out below is a comparison by class of the carrying amounts and fair value of the Group's financial instruments that are carried in the financial statements.

	Book Value	Fair Value
	30 April 2016	30 April 2016
	£'000	£'000

Financial Assets
Investment in AEW UK Core Property Fund	10,109	10,109
Receivables and prepayments	936	936
Cash and cash equivalents	7,963	7,963
Other financial assets held at fair value	77	77

Financial Liabilities
Interest bearing loans and borrowings	14,250	14,250
Payables and accrued expenses	2,712	2,712
Finance lease obligations	1,914	1,914

22.2 Financing management

The Group's activities expose it to a variety of financial risks: market risk, real estate risk, credit risk and liquidity risk.

The Group's objective in managing risk is the creation and protection of shareholder value. Risk is inherent in the Group's activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risks limits and other controls.

The principal risks facing the Group in the management of its portfolio are as follows:

22.3 Market price risk

Market price 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 Group diversifies its portfolio geographically in the United Kingdom and across property sectors.

The disciplined approach to the purchase, sale and assets 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 ('IMC') of the Investment Manager, meets monthly and reserves the ultimate decision with regards to investments purchases or sales. In order to monitor property valuation fluctuations, the IMC and the Portfolio Management Team of the Investment Manager meet with 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.

22.4 Real Estate risk

The Group is exposed to the following risks specific to its investments in investment property:

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 scheme 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 Group. 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 Group.

22.5 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 Group by failing to meet a commitment it has entered into with the Group.

It is the Group's policy to enter into financial instruments with reputable counterparties. All cash deposits are placed with an approved counterparty, The Royal Bank of Scotland.

In respect of property investments, in the event of a default by a tenant, the Group 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 Group's exposure to credit risk:

	As at
	30 April
	2016
	£'000

Debtors (excluding incentives and prepayments)	936
Cash and cash equivalents	7,963
Total
	8,899

22.6 Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its borrowings. It is the risk the Group will encounter difficulty in meeting its financial obligations as they fall due as the majority of the Group's assets are investment properties and therefore not readily realisable. The Group'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 Group's financial liabilities based on contractual undiscounted payments:

	On	< 3	3 - 12	1 - 5
30 April 2016	demand	months	months	years	> 5 years	Total

Interest bearing loans and borrowings	-	-	-	14,250	-	14,250
Interest payable	-	102	301	1,400	-	1,803
Payables and accrued expenses	-	2,712	-	-	-	2,712
Finance lease obligations	-	-	123	372	1,419	1,914

	-	2,814	424	16,022	1,419	20,679

23. Capital management

The primary objectives of the Group's capital management is to ensure that it qualifies for the UK REIT status and remains within its quantitative banking covenants.

To enhance returns over the medium term, the Group intends to utilise borrowings on a limited recourse basis for each investment or all or part of the total portfolio. The Group's policy is such that its borrowings will not exceed 25% of Gross Asset Value (measured at drawdown) of each investment or Portfolio. It is currently anticipated that the level of total borrowings will typically be at the level of 20% of Gross Asset Value (measured at drawdown).

Alongside the Group's borrowing policy, the Directors intend, at all times, to conduct the affairs of the Group so as to enable the Group to qualify as a REIT of the purposes of Part 12 of the CTA 2010 (and the regulations made thereunder). The REIT status compliance requirements includes the 90% distribution test, interest cover ratio, 75% assets test and the substantial shareholder rule, all of which the Group remained compliant with in this reporting period.

The monitoring of the Group's level of borrowing is performed primarily using a Loan to Gross Asset Value ('GAV') ratio. The Loan to GAV Ratio is calculated as the amount of outstanding debt divided by the total assets of the Group, which includes the valuation of the investment property portfolio. The Group Loan to GAV ratio at the period end was 10.51%

Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. During the current period, the Group did not breach any of its loan covenants, nor did it default on any other of its obligations under its loan agreements.

24. Transaction with related parties

As defined by IAS 24 Related Party 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 period ended 30 April 2016, 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 5, Directors' remuneration.

The Group is party to an Investment Management Agreement with the Investment Manager, pursuant to which the Company has appointed the Investment Manager to provide investment management services relating to the respective assets on a day-to-day basis in accordance with their respective investment objectives and policies, subject to the overall supervision and direction of the Boards of Directors.

Under the Investment Management Agreement the Investment Manager receives a management fee which is calculated and accrued monthly at a rate equivalent to 0.9% per annum of NAV (excluding un-invested fundraising proceeds) and paid quarterly. The investment by the Group into the AEW UK Core Property Fund is not subject to management fees or performance fees otherwise charged to investors in the AEW UK Core Property Fund by the Investment Manager. During the period 1 April 2015 to 30 April 2016, the Company incurred £652,706 in respect of investment management fees and expenses of which £230,631 was outstanding at 30 April 2016.

On 1 June 2015, the Company purchased 8,035,272 shares (share class E) in the AEW UK Core Property Fund for a cost of £9,627,000 (net of equalisation). The investment is deemed to be with a related party due to the common influence of the Investment Manager has with both parties. As at 30 April 2016, the Company held a 4.1% shareholding in the AEW UK Core Property Fund.

25. Segmental information

Management has considered the requirements of IFRS 8 'operating segments'. The source of the Group's diversified revenue is from the ownership of investment properties across the UK. Financial information on a property by property basis is provided to senior management of the Investment Manager and Directors, which collectively comprise the chief operating decision maker. Responsibilities are not defined by type or location, each property being managed individually and reported on for the Group as a whole directly to the Board of Directors. Therefore, the Group is considered to be engaged in a single segment of business, being property investment and in one geographical area, United Kingdom.

26. Events after reporting date

Dividend

On 31 May 2016, the Board declared its fourth interim dividend of 2.00 pence per share, in respect of the period from 1 February 2016 to 30 April 2016. This was paid on 30 June 2016, to shareholders on the register as at 10 June 2016. The ex-dividend date was 9 June 2016.

Loan Drawdown

On 16 May 2016, the Group made a drawdown request of £12.26 million against its £40 million credit facility with Royal Bank of Scotland giving a drawdown total of £26.51 million and a Loan to Gross Asset Value of 20.0%. The proceeds of the drawdown received were used to finance the acquisition of Nottingham and Blackpool as noted in Property Acquisitions note below.

Property Acquisitions

On 27 May 2016, the Group made a further 2 acquisitions totalling £13.20 million (net of acquisition costs).

Nottingham, acquired for £8.15m, is located on Wheeler Gate with frontage to Old Market Square within the retailing core of the City Centre. The property provides a WAULT of approximately 4.5 years to break and 5.2 years to expiry. The acquisition provides an initial yield of 9.0%, a reversionary yield of 9.9% and a capital value per sq ft of £114.

Blackpool, acquired for £5.05m, is prominently located directly adjacent to the famous Blackpool Tower. The property provides a WAULT of approximately 7.5 years to break and 10 years to expiry. The acquisition provides an initial yield of 9.5%, a reversionary yield of 8.4% and a capital value per sq ft of £50.

Interest Rate Derivatives

On 9 June 2016, to mitigate the interest rate risk that arises as a result of entering into variable rate linked loans, the Group entered into an interest rate cap. The interest rate cap has a strike price of 2.50% and a notional amount of £12.26 million. The total premium payable in the period towards securing the interest rate cap was £66,000.

EPRA Unaudited Performance Measures

Detailed below is a summary table showing the EPRA performance measures

MEASURE AND DEFINITION

PURPOSE

PERFORMANCE

1. EPRA Earnings

Earnings from operational activities.

A key measure of a company's underlying operating results and an indication of the extent to which current dividend payments are supported by earnings.

£6.08 million/6.33 pps EPRA earnings for the period to

30 April 2016

2. 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.

Makes adjustments to IFRS NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities within a true real estate investment company with a long-term investment strategy.

£116.30 million/98.97 pps EPRA NAV as at 30 April 2016

3. EPRA NNNAV

EPRA NAV adjusted to include the fair values of:

(i) financial instruments;

(ii) debt and;

(iii) deferred taxes.

Makes adjustments to EPRA NAV to provide stakeholders with the most relevant information on the current fair value of all the assets and liabilities within a real estate company.

£116.38 million/99.03 pps EPRA NNNAV as at 30 April 2016

4.1 EPRA Net Initial Yield (NIY)

Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs.

A comparable measure for portfolio valuations. This measure should make it easier for investors to judge themselves, how the valuation of portfolio X compares with portfolio Y.

8.01%

EPRA NIY as at 30 April 2016

4.2 EPRA 'Topped-Up' NIY

This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents).

A comparable measure for portfolio valuations. This measure should make it easier for investors to judge themselves, how the valuation of portfolio X compares with portfolio Y.

8.56%

EPRA 'Topped-Up' NIY

as at 30 April 2016

5. EPRA Vacancy

Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio.

A "pure" (%) measure of investment property space that is vacant, based on ERV.

3.16%

EPRA ERV

as at 30 April 2016

6. EPRA Cost Ratio

Administrative and operating costs (including and excluding costs of direct vacancy) divided by gross rental income.

A key measure to enable meaningful measurement of the changes in a company's operating costs.

Including direct vacancy costs

EPRA Cost Ratio 12.23%

as at 30 April 2016

10.90% EPRA Cost ratio excluding direct vacancy costs as at 30 April 2016

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

	2016
	£'000

Investment property - wholly owned	114,340
Allowance for estimated purchasers' cost	6,632

Gross up completed property portfolio valuation	120,972

Annualised cash passing rental income	9,842
Property outgoings	(148)

Annualised net rents	9,694

Rent expiration of rent-free periods and fixed uplifts	655

'Topped-up' net annualised rent	10,349

EPRA Net Initial Yield	8.01%

EPRA 'topped-up' Net Initial Yield	8.56%

EPRA Net Initial Yield (NIY) basis of calculation

EPRA NIY is calculated as the annualised net rent, divided by the gross value of the completed property portfolio.

The valuation of grossed up completed property portfolio is determined by our external valuers as at 30 April 2016, plus an allowance for estimated purchaser's costs. Estimated purchaser's costs are determined by the relevant stamp duty liability, plus an estimate by our valuers of agent and legal fees on notional acquisition. The net rent deduction allowed for property outgoings is based on our valuers' assumptions on future recurring non-recoverable revenue expenditure.

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

Calculation of EPRA Vacancy Rate

	2016
	£'000/%

Annualised potential rental value of vacant premises	342
Annualised potential rental value for the completed property portfolio	10,821

EPRA Vacancy Rate	3.16


Calculation of EPRA Cost Ratios

	2016
	£'000/%

Administrative/operating expense per IFRS income statement	1,523
Less: Performance & management fees	(653)
Other fees and commission	(70)
Ground rent costs	(64)

EPRA Costs (including direct vacancy costs)	736

Direct vacancy costs	(80)

EPRA Costs (excluding direct vacancy costs)	656

Gross Rental Income less ground rent costs	6,089
Less: service charge costs of rental income	(70)

Gross rental income	6,019

EPRA Cost Ratio (including direct vacancy costs)	12.23%

EPRA Cost Ratio (excluding direct vacancy costs)	10.90%

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Share Information
Ordinary £0.01 Shares	117,510,000
SEDOL Number	BWD2415
ISIN Number	GB00BWD24154

7 September 2016	Annual General Meeting
31 October 2016	Half-year End
December 2016	Announcement of half-yearly results
30 April 2017	Year end
July 2017	Announcement of annual results

	£
Dividend for the period 1 April 2015 to 31 October 2015	1,507,500
Dividend for the period 1 November 2015 to 14 December 2015	753,750
Dividend for the period 15 December 2015 to 31 January 2016	1,468,875

Total	3,730,125