Annual Financial Report

RNS Number : 5151K

AEW UK REIT PLC

10 July 2017

AEW UK REIT PLC

The Board of AEW UK REIT plc (the 'Company') is pleased to announce the annual results for the year from

1 May 2016 to 30 April 2017.

The following text is copied from the Annual Report and Financial Statements for the year ended 30 April 2017:

Strategic Report

Financial Highlights

· Net Asset Value ('NAV') of £118.67 million and of 95.98 pence per share as at 30 April 2017 (2016: £116.38 million and 99.03 pence per share).

· Operating profit before fair value changes and disposals of £9.81 million for the year ended 30 April 2017 (2016: £6.31 million).

· Unadjusted profit before tax ('PBT') of £6.10 million and of 5.04 pence per share for the year ended 30 April 2017 (2016: £4.64 million and of 4.83 pence per share).

· Total dividends of 8.0 pence per share have been declared for the year ended 30 April 2017 (2016: 5.5 pence per share).

· The Company raised total gross proceeds of £6.00 million for the year ended 30 April 2017 (2016: £117.68 million).

· The price of the Company's Ordinary Shares on the Main Market of the London Stock Exchange was 99.56 pence per share as at 30 April 2017 (30 April 2016: 100.00 pence per share).

· As at 30 April 2017, the Company had a £40 million (2016: £40 million) term credit facility with The Royal Bank of Scotland International Limited ('RBSi') and was geared to 19.31% of the Gross Asset Value (2016: 10.51%). On 8 May 2017, the Company reduced the facility from £40 million to £32.5 million.

· The Company held cash balances totalling £3.65 million as at 30 April 2017 (2016: £7.96 million) of which £1.31 million (2016: £4.94 million) was held for the purpose of capital acquisitions.

· Net revenue (being total comprehensive income before fair value changes) of £9.05m and of 7.49 pence per share.

Property Highlights

· The Company acquired five properties during the year ended 30 April 2017 (2016: 25 properties) and disposed of one property (2016: nil).

· As at 30 April 2017, the Company's property portfolio had a fair value of £137.82 million (2016: £114.34 million) as compared to the combined purchase price of the portfolio of £133.09 million (2016: £110.64 million) (excluding purchase costs), representing an increase of £4.73 million (2016: £3.70 million), or 3.55% (2016: 3.35%).

· The majority of assets that have been acquired are fully let and the portfolio has a vacancy rate of 7.22% (2016: 3.16%).

· Rental income generated in the year was £12.15 million (2016: £6.15 million). The number of tenants as at 30 April 2017 was 79 (2016: 56).

· Average portfolio net initial yield of 7.63% (2016: 8.38%).

· Weighted average unexpired lease term of 5.2 years (2016: 4.9 years) to break and 6.4 years (2016: 6.1 years) to expiry.

· A further two properties have been acquired for £4.92 million (excluding purchase costs) since the year end generating a further £0.41 million per annum in passing rent.

All comparative figures relate to the period from 1 April 2015 to 30 April 2016. Prior period was longer than 12 months so cannot be used as a direct comparator.

Chairman's Statement

Overview

I am pleased to present the second annual audited results of AEW UK REIT plc (the 'Company') for the financial year from 1 May 2016 to 30 April 2017.

It has been a very interesting and challenging year due to the uncertainty and market volatility created by various geopolitical and economic events.

In the aftermath of the EU referendum in June 2016, and in common with other REITs, the Company's share price fell to a low of 90 pence per Ordinary Share. I am pleased to see that the share price has recovered steadily and in recent months has reached its pre-Brexit levels of 102 pence per Ordinary Share. Furthermore our share price relative to NAV has been trading at a premium since mid-February 2017 and as at 30 April 2017 was at a premium of 3.7%.

The valuation of the Company's property portfolio fell by 1.8% in the period from May 2016 to July 2016, following the EU referendum result. This was in comparison to a fall of 3% in capital values of direct properties as measured by MSCI (IPD UK Monthly Property Index), a global independent provider of market indices, over the same period. I was encouraged by the resilience of the portfolio to the initial market uncertainty; our exposure to market risk was no doubt mitigated through having a diversified portfolio. On a like-for-like basis, the Company's property portfolio valuation increased slightly by 0.2% during the financial year.

During the financial year, the Company made a decision to sell down its investment in the AEW UK Core Property Fund (the 'Core Fund') with the aim of reinvesting the proceeds into direct property holdings. This investment in the Core Fund was accretive to the Company's performance during the initial ramp up phase but has proved less relevant to the Company's strategy as the portfolio has matured. The Company sold 20.8% of its shares in the Core Fund on 1 February 2017 at a premium of 2% to NAV and the remaining shares were sold on 9 May 2017 at a 1.5% premium to NAV. This investment has yielded a total return of 13% during the hold period.

The Company raised a further £6.0 million during its financial year through the issuance of new Ordinary Shares. These proceeds, together with amounts raised from the sale of investment properties (£2.8 million), proceeds raised from the Core Fund investment (totalling £9.6 million) and loan drawdowns under the debt facility (totalling £14.8 million), have been used to invest in new properties. During the financial year, the Company acquired a further five properties for a total of £24.7 million (excluding acquisition costs), and a further two properties have been acquired since the year end for a total of £4.9 million.

As at 30 April 2017, the Company had established a diversified portfolio of 29 commercial investment properties throughout the UK with a weighted average total equivalent yield of 8.5%.

Financial Results

The Company has continued to deliver an attractive total return, including significant dividend income, as it continues to follow its investment policy against a backdrop of uncertain political and economic conditions.

Under International Financial Reporting Standards ('IFRS') as adopted by the European Union, our operating profit for the year to 30 April 2017 was £6.86 million (30 April 2016: £4.86 million), with total comprehensive income of £6.10 million (30 April 2016: £4.64 million). Basic earnings per share ('EPS') for the year were 5.04 pence (30 April 2016: 4.83 pence).

Under European Public Real Estate Association ('EPRA') methodology, EPS for the year was 7.57 pence (30 April 2016: 6.33 pence) and the NAV per share at 30 April 2017 was 95.95 pence (30 April 2016: 98.97 pence). A full list of EPRA performance figures can be found below.

The audited NAV per share as at 30 April 2017 was 95.98 pence (30 April 2016: 99.03 pence), prior to adjusting for the interim dividend for the period 1 February 2017 to 30 April 2017 of two pence per Ordinary Share.

The Company had ongoing charges of 1.52% (30 April 2016: 1.14%) for the year under review. The main driver of the increase in ongoing charges during the 2016/17 financial was due to the Company paying a full management fee to AEW UK Investment Management of 0.9% on NAV.

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 2017, the Company's portfolio had a fair value of £137.8 million as compared with the combined purchase price of the portfolio of £133.1 million (excluding purchase costs), an increase of £4.7 million or 3.5%.

Financing

On 18 May 2016, the Company amended the terms of its loan facility with RBSi to increase the facility limit from 20% to 30% of NAV measured at drawdown. This amendment has enabled the Company to utilise the facility up to an amount calculated as the equivalent of 25% of the Gross Asset Value ('GAV') (measured at drawdown), which is the maximum gearing limit as set out in the Company's Prospectus.

During the financial year to 30 April 2017, the Company made utilisation requests totalling £14.8 million (30 April 2016: £14.3 million), bringing the total drawdown amount under the facility to £29.0 million (30 April 2016: £14.3 million).

The loan attracts interest at three month LIBOR +1.4%, making an all-in rate at 30 April 2017 of 1.736% (30 April 2016: 1.988%). The Company is protected from a significant rise in interest rates as it has interest rate caps with a combined notional value of £26.5 million and a strike rate of 2.5%.

As at 30 April 2017, the unexpired term of the facility was 3.5 years and the gearing was 19.3% (as calculated on the GAV of the investment portfolio).

On 11 May 2017, the Company amended the terms of its facility with RBSi, extending the availability period to 31 March 2019 and reducing the facility limit from £40 million to £32.5 million to mitigate the cost of non-utilisation fees.

Dividends

The Company continued to deliver on its target of declaring dividends of two pence per Ordinary Share per quarter. During the financial year, the Company declared and paid four quarterly dividends of two pence per Ordinary Share.

On 30 May 2017, the Board declared an interim dividend of two pence per Ordinary Share, in respect of the period from 1 February 2017 to 30 April 2017. This interim dividend was paid on 30 June 2017.

Board and Governance

During the year, the Board conducted a review of AEW UK Investment Management LLP (the 'Investment Manager') and the Investment Management Agreement. The Board concluded that the continuing appointment of the Investment Manager was appropriate and in the best interests of shareholders and that the terms and conditions of the Investment Manager's continuing appointment remained appropriate.

The Board also discussed the potential recruitment of a new Director and on 5 June 2017 appointed Katrina Hart as an independent non-executive Director.

Shareholder engagement

The Company has continued to develop its relations with investors. In particular, a new website (www.aewukreit.com) has been launched with the aim of improving communications and allowing users to sign up for email alerts to gain access to the latest Company news and information. Furthermore, the Company's daily share price has been added to the Investment Companies (Direct Property) section of the Financial Times. We look forward to welcoming shareholders at our Annual General Meeting ('AGM') on 12 September 2017.

Outlook

The Board and the Investment Manager are confident of continuing to deliver strong returns for our shareholders through the diversified and high yielding property portfolio that has been established. We believe that the Company's property portfolio is well positioned and there are a number of active asset management initiatives ongoing that should grow the income stream and provide opportunities for further capital value enhancement.

In the period since the Statement of Financial Position at 30 April 2017, the Company has acquired a further two properties totalling £4.9 million (excluding acquisition costs) and generating a further £0.4 million per annum in rent.

It is still unknown how the impact of Brexit will unfold and it is likely we will need to wait for some time to know the terms of the UK's exit from the EU and how this will impact on the UK commercial property market. In this period of uncertainty there is a higher chance that the Bank of England will keep interest rates at historical lows and this will maintain the fundamentals of property demand as investors search for yield.

Our current focus is to continue to grow the Company and subject to market conditions, look to raise additional capital. This will enable the Company to take advantage of economies of scale in its cost base and to allow the Manager to capitalise on the interesting market opportunities it sees.

The Investment Manager remains focused on searching for properties in locations that exhibit low levels of supply, with a particular focus on properties underwritten by vacant possession values and therefore less exposed to capital erosion.

Mark Burton

Chairman

7 July 2017

Business Model and Strategy

Our Business

Introduction

AEW UK REIT plc is a real estate investment company listed on the premium segment of the Official List of the UK Listing Authority and traded on the London Stock Exchange's Main Market. As part of its business model and strategy, the Company has and intends to maintain UK REIT status. HM Revenue and Customs has acknowledged that the Company has met and intends to continue to meet the necessary qualifying conditions to conduct its affairs as a 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% of its Net Assets (at the time of investment) in the AEW UK Core Property Fund and up to 10% of its Net Assets (measured at the commencement of the project) in development opportunities, with the intention of holding any completed development as an investment.

As at 30 April 2017, the Company held an investment valued at £7.59 million in AEW UK Core Property Fund, representing 6.4% of its Net Assets as at that date. The AEW UK Core Property Fund is a property authorised investment fund ('PAIF') managed by the Investment Manager 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 investment was sold on 9 May 2017 and as at the date of this report the Company does not intend to reinvest in the AEW UK Core Property Fund but will keep this under review.

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.

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% of GAV;

· the Company may commit up to a maximum of 10% of its NAV (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% of NAV;

· investment in unoccupied and non-income producing assets will, at the time of investment, not exceed 20% of NAV;

· 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% of GAV.

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

In the event of a breach of the investment policy or restrictions, the Investment Manager shall inform the Board upon becoming aware of such a breach 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.

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 less than £15 million;

· have initial net yields, on investment, of typically between 8-10%;

· achieve, across the whole Portfolio, a weighted average 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.

The Company may also invest up to a maximum of 10% of its NAV in the Core Fund. The Core 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, Core Fund and any funds managed by the Investment Manager.

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

The Company's strategy is focused on delivering enhanced returns from the smaller end (up to £15 million) of the UK commercial 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, as demonstrated in the graphs below, which the Company aims to exploit.

http://www.rns-pdf.londonstockexchange.com/rns/5151K_1-2017-7-7.pdf

How we add value

An Experienced Team

The investment management team average 18 years working together, reflecting stability and continuity.

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 income profile coupled with underlying 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/5151K_3-2017-7-7.pdf

Strategy in Action

Acquiring a stable income stream in a strong occupational market

Pipps Hill Industrial Estate, Basildon

· A strong, south east industrial location that has seen significant rental growth over the past 18 months

· Fully let on a new 10 year lease

· Rack rented at £6 per sq ft

· Acquisition pricing supported by the asset's underlying vacant possession value, limiting any downside risk

Improving the quality of an income stream

Cranbourne House, Basingstoke

· The tenant contracted to remove its 2017 break clause providing two years of additional income to 2019

· Lease assigned to new group parent company HFC Prestige Manufacturing Limited who offer a more robust covenant strength than the existing tenant, Wella Holdings Limited

· The tenant has since undertaken refurbishment works further demonstrating their commitment to the building

Adding value in strong occupational markets

Odeon, Southend on Sea

· An uplift of £30,000 per annum was achieved for the outstanding 2012 rent review

· Negotiations have now commenced on the 2017 rent review which could yield further uplift

Driving rental growth and reducing vacancy

Queen Square, Bristol

· Seven lettings secured on over 20,000 sq ft have led to the repositioning of the asset

· Occupancy level of 94% as compared to 54% at the time of purchase in December 2015

Repositioning an asset and maximising value

Valley Retail Park, Belfast

· Planning consent has been granted for the development of two restaurant pods within the existing car park on the site. The addition of such units to the park would be expected not only to increase overall visitor numbers but improve dwell times on the park, leading to greater potential for rental growth

· The now fully let retail park is under offer for sale following its successful repositioning and completed lettings to anchor tenants Go Outdoors and Smyths Toys

Key Performance Indicators

KPI AND DEFINITION

RELEVANCE TO STRATEGY

PERFORMANCE

1. Triple Net Initial Yield

A representation to the investor of 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.

7.63%

at 30 April 2017 (2016: 8.38%).

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 proposed dividend through property income.

8.50%

at 30 April 2017 (2016: 8.36%).

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.

8.37%

at 30 April 2017 (2016: 8.27%).

4. Weighted Average Unexpired Lease Term to expiry

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 rent review mechanisms.

6.37 years

at 30 April 2017 (2016: 6.08 years).

5. Weighted Average Unexpired Lease Term to break

The average lease term remaining to break, 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. As such, it is in line with the Investment Managers strategy to acquire properties with a WAULT that is generally shorter than the benchmark. 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 rent review mechanisms.

5.22 years

at 30 April 2017 (2016: 4.94 years).

6. NAV

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

The NAV reflects the Company's ability to grow the portfolio and add value to it throughout the life cycle of its assets.

£118.67 million

at 30 April 2017 (2016: £116.38 million).

7. Leverage (Loan to Gross Asset Value)

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

The Company utilises borrowings to enhance returns over the medium term. Borrowings will not exceed 25% of GAV (measured at drawdown).

19.31%

at 30 April 2017 (2016: 10.51%).

8. Vacant ERV

The space in the property portfolio which is currently unlet, 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.

7.22%

at 30 April 2017 (2016: 3.16%).

9. Development Exposure

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

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

at 30 April 2017 (2016: 0%).

10. Dividend

Dividends declared in relation to the year. The Company targets a dividend of between eight and nine pence per Ordinary Share per annum.

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 2017 (quarter to 30 April 2016: 2.0 pence per share).

8.0 pence per share

for the year ended 30 April 2017 (2016: 5.5 pence per share).

11. Ongoing Charges

The ratio of total administration and 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.

1.52%

for the year ended 30 April 2017 (2016: 1.14%).

12. Profit before tax

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

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

£6.10 million

for the year ended 30 April 2017

(2016: £4.64 million)

Investment Manager's Report

Financial Results

Operating profit before fair value changes and disposals was £9.81 million for the year ended 30 April 2017 (2016: £6.31 million). The Company has continued to build a diversified portfolio of properties and as at 30 April 2017 held 29 direct property investments (2016: 25).

Net rental income earned from this portfolio during the year under review amounts to £11.07 million (2016: £6.88 million). NAV as at 30 April 2017 was £118.67 million (2016: £116.38 million).

The Company received dividends during the year totalling £0.58 million (2016: £0.65 million) from its investment in the Core Fund. On 1 February 2017, the Company disposed of part of its holding in the Core Fund for proceeds of £2.00 million, and the remaining holding at 30 April 2017 was valued at £7.59 million. After the year-end the Company fully disposed of the remaining holding for proceeds of £7.62 million.

A loss of £3.16 million (2016: £1.94 million) has arisen on the revaluation of investment properties across the portfolio, comprising £1.66 million (2016: £5.64 million) of costs associated with asset purchases initially capitalised on acquisition and £1.50 million of unrealised losses (2016: £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 year, were £1.84 million (2016: £1.22 million). The Company's Ongoing Charges for the year is 1.52% (2016: 1.14%).

The Company has incurred finance costs of £0.76 million during the year under review (2016: £0.23 million).

The total profit before tax for the period of £6.10 million (2016: £4.64 million) equates to basic earnings per share of 5.04 pence (2016: 4.83 pence).

The Company's Net Asset Value as at 30 April 2017 was £118.67 million or 95.98 pence per share ('pps') compared with £116.38 million or 99.03 pps as at 30 April 2016. This reflected a decrease of 3.05 pps or 3.08%, with the underlying movement in NAV set out in the table below:

	Pence per share (pps)	£ million

NAV as at 1 May 2016	99.03	116.38
Change in fair value of investment property	(2.70)	(3.16)
Change in fair value of investments	(0.40)	(0.41)
Gains on disposal of investment property	0.59	0.73
Loss on disposal of investments	(0.09)	(0.11)
Income earned for the year	10.80	13.08
Expenses and net finance costs for the year	(3.31)	(4.03)
Dividends paid	(8.00)	(9.65)
Issue of equity (net of costs)	0.06	5.84
NAV as at 30 April 2017	95.98	118.67

Net revenue over the year was 7.49 pps which, based on dividends paid of 8 pps, reflected a dividend cover of 93.63%.

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 2017, the Company's portfolio had a fair value of £137.82 million (2016: £114.34 million).

Portfolio Activity

Our objective is to build a diversified portfolio of commercial properties throughout the UK. New acquisitions have been selected to provide an income return that is both sustainable and provides the potential for growth as well as limiting downside risk. The majority of assets that have been acquired are fully let and the portfolio had a vacancy rate (as a % of ERV) of 7.22% (2016: 3.16%) as at 30 April 2017. The following significant investment transactions took place during the year:

¾ Apollo Business Park, Basildon - In April 2017, the Company announced the acquisition of a c.69,000 sq ft multi-let industrial building in Basildon, Essex for £4.55 million, reflecting an attractive net initial yield of 7.8% and low capital value of £66 per sq ft Basildon has seen strong commercial rental performance over the past 18 months and the low passing rents currently received from the asset provide excellent potential for growth going forward.

¾ 1 Bentalls, Pipps Hill Industrial Estate, Basildon - In April 2017, the Company acquired a c.33,000 sq ft single-let industrial building located on the established Pipps Hill Industrial Estate. The purchase price of £2.00 million reflected an attractive net initial yield of 9.3%, a reversionary yield of 8.8% and a low capital value of £64 per sq ft. The building is let on a 10 year lease from the acquisition date at a rent of £6 per sq ft.

¾ Euroway, Bradford - In December 2016, the Company announced the acquisition of a c.144,000 sq ft logistics warehouse in Bradford for £4.95 million, reflecting a net initial yield of 8.1%, reversionary yield of 8.9% and capital value of £34 per sq ft. The tenant has recently signed a new eight year lease highlighting their commitment to the location.

¾ Pearl House, Nottingham - In May 2016, the Company announced the £8.15 million acquisition of a mixed use retail and office property in Nottingham, prominently located with frontage to Wheeler Gate and Old Market Square, within the retailing core of the City Centre. The property of 71,260 sq ft is let to six retail tenants, including Poundland, Costa and Lakeland, and nine office tenants, providing a WAULT at acquisition 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.

¾ Bank Hey Street, Blackpool - Also in May 2016, the Company acquired a retail and leisure asset in Blackpool, prominently located directly adjacent to the famous Blackpool Tower, for a price of £5.05 million. The property comprises 100,079 sq ft and has three retail units at ground floor and basement levels, which are let to the strong covenants of Poundland, Sports Direct and J D Wetherspoons, providing a WAULT of approximately 7.5 years to break and 10 years to expiry. The upper three floors of the property are currently vacant and have been de-listed for rating purposes but offer potential for alternative use occupation and future asset management due to their comparatively low acquisition price.

¾ 11-15 Fargate, Sheffield - During the year, the Company completed the leasehold disposal of vacant upper parts above prime rental units for a price of £710,000, against an assumed acquisition value of £250,000.

¾ Castlegate Business Park, Salisbury - In February 2017, the Company completed the disposal of its building in Salisbury, which had become vacant in September 2016, for a price of £2.05 million. The sales price exceeded both its valuation at the date of sale and the original acquisition price of the asset.

Asset Management

We undertake active asset management to seek opportunities to achieve rental growth, let vacant space and enhance value through initiatives such as refurbishments. During the year, key asset management initiatives have included:

¾ Valley Retail Park, Belfast - Planning consent has been granted for the development of two restaurant pods within the existing car park on the site. The addition of leisure units to the park would be expected not only to increase overall visitor numbers but improve dwell times on the park, leading to greater potential for rental growth. The fully let retail park is now under offer for sale following its successful repositioning and completed lettings to anchor tenants Go Outdoors and Smyths Toys.

¾ Eastpoint Business Park, Oxford - The Company has agreed a lease renewal on a 5,600 sq ft suite with the existing tenant. The new lease provides three years of additional income at a rent of £14.50 per sq ft, in line with ERV expectations.

¾ Queen Square, Bristol - The Company has secured a letting of over 5,000 sq ft of ground floor office space on a ten year lease with a tenant break option at year five, achieving a rental level that is £1.50 per sq ft ahead of the expected ERV at the time of purchase. The letting is the seventh occupational transaction to be completed by the Company since acquisition and takes the asset to an occupancy level of 94% as compared to 54% at the time of purchase in December 2015.

¾ Pearl House, Nottingham - The Company received consent for the change of use from office to 36 residential flats under Permitted Development Rights on the upper floors. However, the Company intends to keep the building in its current use as offices for the foreseeable future and as such signed a letting of the entire third floor for five years at a rent of £13.78 per sq ft against an ERV of c£12 per sq ft when the property was acquired in May 2016.

¾ Cranbourne House, Basingstoke - In return for receiving the landlord's consent to assign the lease to parent company HFC Prestige Manufacturing Limited, Wella Holdings Limited contracted to remove its 2017 break clause giving the Company two years of additional income to 2019, at £410,000 per annum, plus a six months rental guarantee. The tenant is now also carrying out refurbishment works to the building, further demonstrating its commitment to the location.

¾ Odeon Cinema, Southend - An uplift of £30,000 per annum was achieved for the outstanding 2012 rent review and taking the rent payable by Odeon from £505,000 to £535,000, backdated to 29 September 2012. Negotiations have now commenced on the 2017 rent review which could yield further uplift.

Financing

As at 30 April 2017, the Company had a £40 million (2016: £40 million) credit facility with RBSi, maturing in October 2020. On 8 May 2017, the Company completed an amendment to the terms of its facility with RBSi. The total commitment has been reduced from £40.0 million to £32.5 million and the availability period has been extended to 31 March 2019.

As at 30 April 2017, the Company has utilised £29.01 million (2016: £14.25 million) of its £40 million facility with RBSi. Gearing as at 30 April 2017 was 19.3% (2016: 10.5%) (Loan to GAV). The loan attracts interest at LIBOR + 1.4% (2016: LIBOR + 1.4%). To mitigate the interest rate risk that arises as a result of entering into a variable rate linked loan, the Company holds interest rate caps on £26.51 million (2016: £14.25 million) of the loan at a strike rate of 2.5% (2016: 2.5%), resulting in the loan being 91% (2016: 100%) hedged.

Transactions after Statement of Financial Position Date

On 4 May 2017, the Company acquired Unit 1005, Sarus Court which completes the Company's acquisition of the whole of the Sarus Court industrial estate, where the Company already owned five of the six units following acquisitions in 2015. The estate provides well specified, modern industrial units of between 11,000 and 17,000 sq ft, which are let to a number of light-industrial occupiers on a WAULT of over four years. Sarus Court forms part of the wider Manor Park industrial estate, strategically located to the west of Runcorn and five kilometres from the Mersey Gateway Project, a new six lane bridge over the River Mersey connecting the towns of Runcorn and Widnes and linking the M56 to the M62. The project is due for completion in autumn 2017.

On 9 May 2017, the Company sold its remaining units in the Core Fund for total proceeds of £7.62 million. The Company has held an ownership in the Core Fund since launch in May 2015 for the purpose of expediting its investment period and saw a total return of 13% over the hold period. The units have now been sold at a price in excess of the Core Fund's latest published NAV, with proceeds to fund direct investments in the portfolio.

On 29 June 2017 the Company acquired Unit 34, First Avenue, Deeside for £4.31 million. The property provides a WAULT of approximately 5 years to break and 10 years to expiry. The acquisition provides an initial yield of 7.9%, a reversionary yield of 7.9% and a capital value per sq ft of £45.

Market Outlook

UK Economic Outlook

We continue to see a mixed bag of economic indicators in the aftermath of Brexit and, although the process to leave the EU has now begun, the dominant theme remains that of uncertainty. Many economists had predicted an immediate and significant impact on the UK economy following the vote to leave the EU. Although these predictions did not come to pass, the UK economy suffered a slowdown in the opening months of 2017, as a rise in living costs impacted consumer spending. GDP growth fell to 0.3% in the first quarter of 2017 from 0.7% in the previous quarter (Office of National Statistics). The pound's sharp fall since the Brexit vote has lifted inflation to its highest level for more than three years (Office of National Statistics CPIH Measure of Inflation), putting pressure on consumers' incomes.

The general election on 8 June 2017 created further uncertainty around what happens next with the UK's negotiation to exit the EU, which is likely to continue to prolong caution from investors and tenants.

Brexit negotiations and political uncertainty may continue to slow down the UK economy but the impact on the real estate market should be mitigated by low interest rates. It is hoped that the UK economy will continue to show resilience and the International Monetary Fund has revised its UK growth forecast, now envisaging the economy expanding by 2.0% in 2017, compared with forecasts of 1.1% and 1.5% made in October 2016 and January 2017 respectively.

UK Real Estate Outlook

The property market has proven to be resilient following the initial shock of the Brexit referendum, with MSCI data showing that the market has started to regain the value it lost in the immediate aftermath of the Brexit vote. Central London has the greatest uncertainty over occupier demand but overseas investors are still showing a strong appetite for safe haven assets in the global hub. The shares of the major REITs with significant development exposure to the capital are, however, still at a substantial discount to pre-Brexit prices, reflecting the heightened uncertainty of future demand in the key occupier markets where rental growth is a more important driver of total returns due to the lower (prime) initial yields.

Outside central London there are fewer concerns about occupier demand and the greatest risk to property values is if the economy slips towards recession. Occupiers still seem to be adopting a pragmatic approach to their property needs and so portfolio income returns remain attractive to investors who continue to search for yield in this low interest rate environment. We sense that the weight of institutional money targeting the sector is back to pre-Brexit levels and, if anything, a low level of transactions is as much due to lack of willing sellers because multi-asset investors view property as an attractive alternative to historically low bond yields.

We are not surprised, however to see investors often focussing on the prime end of the market which, at times of uncertainty, tends to be redefined by length of lease and quality of tenant covenant rather than location. Pricing is then driven largely by the yield premium offered by property investments above gilts.

http://www.rns-pdf.londonstockexchange.com/rns/5151K_4-2017-7-7.pdf

We see risks to future returns from looking at property as being cheap (relative to gilts) rather than acknowledging that this period of historically low bond yields is unlikely to be maintained, particularly if inflation continues to rise. In our experience there are risks to capital preservation when strategies focus solely on relative income yields at the expense of property fundamentals. 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. In the Investment Manager's view, it is therefore not as susceptible to capital value erosion as will be experienced by holders of prime asset portfolios.

In terms of sector focus, we foresee the best total returns in the industrial and logistics warehousing sectors. This is driven in part by online retailers' requirements for distribution hubs around big cities and major infrastructure hubs to enable them to deliver goods more efficiently to shoppers' homes. Forecast total returns for industrial property are 7.1% annualised for 2016-2020 (Colliers International Real Estate Investment Forecasts Q3 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 Company 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 Company's maximum and actual leverage levels are as per below:

	30 April 2017		30 April 2016
Leverage Exposure	Gross Method	Commitment Method	Gross Method	Commitment Method
Maximum Limit	140%	140%	140%	140%
Actual	118%	124%	105%	112%

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

Remuneration

The AIFM has adopted a Remuneration Policy which accords with the principles established by AIFMD.

AIFMD Remuneration Code Staff includes the members of the AIFM's Management Committee, those performing Control Functions, Department Heads, Risk Takers and other members of staff that exert material influence on the AIFM's risk profile or the AIFs it manages.

Staff are remunerated in accordance with the key principles of the firm's remuneration policy, which include (1) promoting sound risk management; (2) supporting sustainable business plans; (3) remuneration being linked to non-financial criteria for Control Function staff; (4) incentivise staff performance over longer periods of time; (5) award guaranteed variable remuneration only in exceptional circumstances; and (6) having an appropriate balance between fixed and variable remuneration.

As required under section 'Fund 3.3.5.R(5)' of the Investment Fund Sourcebook, the following information is provided in respect of remuneration paid by the AIFM to its staff. The information provided below is provided for the year from 1 January 2016 to 31 December 2016, which is in line with the most recent financial reporting period of the AIFM, and relates to the total remuneration of the entire staff of the AIFM.

	Year ended 31 December 2016
Total remuneration paid to employees during financial year:
a) remuneration, including, where relevant, any carried interest paid by the AIF	£2,113,652
b) the number of beneficiaries	26

The aggregate amount of remuneration, broken down by:
a) senior management	£604,939
b) members of staff	£1,508,713

	Fixed remuneration	Variable remuneration	Total remuneration

Senior management	£604,939	-	£604,939
Staff	£1,212,913	£295,800	£1,508,713
Total	£1,817,852	£295,800	£2,113,652

Fixed remuneration comprises basic salaries and variable remuneration comprises bonuses.

http://www.rns-pdf.londonstockexchange.com/rns/5151K_-2017-7-7.pdf

The Company's top ten properties as at 30 April 2017 as set out below comprise 58.9% of the portfolio value:

Top Ten Properties

	Market Value Range
Property Name	(£)	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
Pearl Assurance House, Nottingham	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	<7.5m	Retail warehouse
Langthwaite Grange Industrial Estate, South Kirkby	<7.5m	Industrial
Odeon Cinema, Southend on Sea	<7.5m	Other
Oak Park Rylands Lane, Droitwich	<7.5m	Industrial

The table below sets out the Company's top ten tenants as at 30 April 2017, representing 38.9% of the passing rent of the property portfolio:

Top Ten Tenants

	Passing Rent	As % of Total
Tenant	(£'000)	Passing Rent
Ardagh Glass Limited	676	5.6
Egbert H. Taylor & Company Limited	625	5.1
Odeon Cinemas	535	4.4
The Secretary of State for Communities and Local Government	511	4.2
Advance Supply Chain (BFD) Limited	428	3.5
Poundland Limited	414	3.4
HFC Prestige Manufacturing Limited	410	3.4
Go Outdoors Limited	400	3.3
Barclays Bank plc	375	3.1
ROM Group Limited	350	2.9

The chart below shows the lease expiry profile tenants and the percentage of passing rent expiring at various intervals.

http://www.rns-pdf.londonstockexchange.com/rns/5151K_2-2017-7-7.pdf

AEW UK Investment Management LLP

7 July 2017

Principal Risks and Uncertainties

The Company'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 Company, including those that would threaten its business model, future performance, solvency or liquidity. Twice a year, the Audit Committee reviews the adequacy and effectiveness of the Company's risk management system. Some risks are not yet known and some that are currently not deemed material, could turn out to be material in the future. All principal risks are the same as detailed in the 2016 Annual Report, with the exception of the inclusion of political/economic risks that have been added following the EU referendum in June 2016 and a financial risk relating to the availability and cost of the credit facility. Financial risk management and objectives and policies are further detailed in Note 20 of the Financial Statements.

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 Company 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 team conducts 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 Company's profitability, the NAV 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 Company's profitability, the Net Asset Value and the price of the Company's Ordinary Shares.

The Company's due diligence relies on the work (such as legal reports on title, property valuations, environmental, building surveys) outsourced to third parties who have expertise in their areas. Such third parties 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 Company's properties may have a material adverse effect on the Company's profitability, the NAV, the price of the Ordinary Shares and the Company's ability to meet interest and capital repayments on any debt facilities.

The Company 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 addressed in our strategy.

Property market

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

The Company 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 Company's profitability, the NAV and the price of Ordinary Shares in cases where properties are sold whose valuations have previously been materially overstated.

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

Availability and cost of the credit facility

The term credit facility expires in October 2020. In the event that RBSi does not renew the facility the Company may need to sell assets to repay the outstanding loan. Any increase in the financing costs of the facility on renewal would adversely impact on the Company's profitability.

The Company maintains a good relationship with the bank providing the term credit facility.

The Company monitors the projected usage and covenants of the credit facility on a quarterly basis.

CORPORATE RISKS

Use of service providers

The Company 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 Company in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Company.

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 Company.

The future ability of the Company 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 Company 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 Company's ability to raise new capital.

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

TAXATION RISKS

Company REIT status

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

If the Company 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 UK tax legislation could impact on the Company's ability to achieve its investment objectives and provide attractive returns to shareholders.

The Company 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.

POLITICAL/ECONOMIC RISKS

Political and macroeconomic events present risks to the real estate and financial markets that affect the Company and the business of our tenants. The level of uncertainty that such events bring has been highlighted in recent times, most pertinently following the EU referendum vote (Brexit) in June 2016.

The Board considers the impact of political and

macroeconomic events when reviewing strategy.

Portfolio

1 Bentalls, Pipps Hill Industrial Estate, Basildon
New 10 year lease, very strong occupational market

Property characteristics		Adding value
Property type	Industrial	1. The tenant has been in occupation since the 1990s and will be investing in improvements to the building over the next year. 2. The lease provides for annual rental uplifts of 2% per annum.
Area	32,932 sq ft
Purchase price
£2.1m (£65 per sq ft)
Purchase yield	8.8%
Constructed	1980s
Vendor	Tenant

Lease		Investment summary
Tenants	New 10 year lease to Merson Signs Ltd.	1. Established industrial estate. 2. Lack of Grade A industrial floor space in the region has caused secondary rents to grow by c.10% over the past 12 months.
Rent	Passing rent of £6 per sq ft.

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 6.3 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 per sq ft.

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	1960s
Vendor	Property Company

Lease		Investment summary
Tenants	Single let for a further 12 years with a tenant break option in 9.5 years.	1. Prominent frontage to busy arterial route. 2. Tenant wedded to the location having significantly invested in the roof. 3. Low capital value per sq ft 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 per sq ft

Apollo Business Park, Basildon
Low passing rents, very strong occupational market

Property characteristics		Adding value
Property type	Industrial	1. Low passing rents of £5.50 per sq ft compared to ERV of £6.25. 2. 50% of the income secured against a very strong covenant.
Area	68,813 sq ft
Purchase price
£4.6m (£66 per sq ft)
Purchase yield	7.8%
Constructed	1970s
Vendor	Property Company

Lease		Investment summary
Tenants	Multi let to 4 tenants. WAULT of 3.4 years to breaks. Largest tenant is Amari Plastics Plc (53% of passing rent).	1. Established industrial estate. 2. Lack of Grade A industrial floor space in the region has caused secondary rents to grow by c.10% over the past 12 months.
Rent	Passing rent of £5.50 per sq ft.

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 per sq ft. 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 1.7 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 per sq ft.

Brockhurst Crescent, Walsall
Three fully let 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 4.9 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 per sq ft.

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

Property characteristics		Adding value
Property type	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 11.3 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 per sq ft.

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	1980s
Vendor	Private

Lease		Investment summary
Tenants	Single let with an unexpired term of 6.3 years. Secured against National Crash Repair Centre Ltd.	1. Strong covenant. 2. Income longer than portfolio level WAULT. 3. South east location.
Rent	Average passing rent of £4.73. per sq ft.

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. 3. Potential for rental growth against an ERV of £5.25 per sq ft.
Area	16,154 sq ft
Purchase price
£0.91m
Purchase yield	7.92%
Constructed	1990s
Vendor	Private

Lease		Investment summary
Tenants	Single let with an unexpired term of 3.9 years, 10 months 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 per sq ft.

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

Property characteristics		Adding value
Property type	Industrial	1. Removal of tenant break option has provided an additional two years term certain. 2. Assignment to new group parent company provides a more robust covenant.
Area	58,445 sq ft
Purchase price
£3.39m
Purchase yield	10.00%
Vendor	Property Company


Lease		Investment summary
Tenants	Fully let to HFC Prestige Manufacturing Ltd with a WAULT of 2.7 years to break and 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 per sq ft.

Euroway, Bradford
Located just off the M62, low passing rent

Property characteristics		Adding value
Property type	Industrial	1. Previous owner completed £400,000 of works to the roof and yard. 2. Tenant has been in occupation since 2009 and has recently extended the lease, creating an unexpired term of 8 years.
Area	143,765 sq ft
Purchase price
£4.95m (£34 per sq ft)
Purchase yield	8.1%
Constructed	1980s
Vendor	Property Company

Lease		Investment summary
Tenants	Fully let to Advanced Processing Ltd with 8 years unexpired.	1. Strong distribution location providing excellent access to the motorway network. 2. Located directly adjacent to regional hub for Marks & Spencer. 3. Low passing rent of £3 per sq ft is well below ERV due to lack of available stock in the area.
Rent	Passing rent of £3 per sq ft.

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.
Area	93,588 sq ft
Purchase price
£3.44m
Purchase yield	8.24%
Vendor	Property Company

Lease		Investment summary
Tenants	Single let to Kverneland Group UK Ltd with a WAULT of 8.4 years to expiry with no break option.	1. Established industrial location. 2. New lease to embedded tenant. 3. Attractive WAULT. 4. Strong tenant covenant.
Rent	£3.25 per sq ft.

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 of 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 5.5 years to expiry.	1. Established industrial location. 2. Fully let to a strong covenant. 3. High yielding and stable income stream.
Rent	Average passing rent of £3.29 per sq ft.

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 two further units on the same estate, to provide more efficient control of estate management. 3. Potential for rental growth against an ERV of £5.25 per sq ft.
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 3.7 years to break and 4.4 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 £4.80 per sq ft.

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

Property characteristics		Adding value
Property type	Industrial	1. Negotiations under way with the current tenant to extend the lease 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).
Area	230,850 sq ft
Purchase price
£5.80m
Purchase yield	11.00%
Vendor	Property Company


Lease		Investment summary
Tenants	Fully let to Ardagh Glass Ltd with a WAULT of 4 months to breaks and 6 months 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. 4. 5A1 covenant strength (Dun & Bradstreet).
Rent	Average passing rent of £2.95 per sq ft.

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	1980s
Vendor	Private

Lease		Investment summary
Tenants	Single let with an unexpired term of 6.3 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 per sq ft.

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

Property characteristics		Adding value
Property type	Office	1. Active asset management program to refurbish and relet vacant space has repositioned the asset and taken occupancy levels from 54% at purchase to 94%. 2. Improvements undertaken on the common facilities will continue to drive rental growth.
Area	38,326 sq ft
Purchase price
£7.20m
Purchase yield	8.70%
Vendor	Fund


Lease		Investment summary
Tenants	Multi-let to 8 tenants with 6% ERV vacancy. WAULT of 3.0 years to break and 4.9 years to expiry.	1. Prime office location in central Bristol. 2. Increasing levels of occupier demand is driving rental growth.
Rent	Average passing rent of £20.30 per sq ft (on let space).

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	1980s
Vendor	Fund

Lease		Investment summary
Tenants	Let to 4 tenants providing a WAULT of 3.2 years to break and 5.9 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 per sq ft.

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

Property characteristics		Adding value
Property type	Office	1. 12,700 sq ft under offer to an existing tenant for a new 10 year term. 2. Capital expenditure of £160,000 spent refreshing common parts.
Area	74,266 sq ft
Purchase price
£8.20m
Purchase yield	9.40%
Constructed	1980s
Vendor	Property Company

Lease		Investment summary
Tenants	5 tenants providing a WAULT of 6.5 years to break and 9.5 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 per sq ft.
Rent	Average passing rent of £10.30 per sq ft.

Pearl House, Wheeler Gate, Nottingham
Major city centre location, high passing footfall

Property characteristics		Adding value
Property type	Retail with office uppers	1. Complete office lease renewals. Various tenants have renewal leases in solicitors hands. 2. Change of use of the larger floor plate office accommodation to a gym, subject to planning. 3. Potential to sell of the office floors for change of use in the longer term, subject to planning.
Area	71,260 sq ft
Purchase price
£8.15m
Purchase yield	9.0%
Vendor	Property Company


Lease		Investment summary
Tenants	Multi let to 16 tenants with a WAULT of 5.1 years to break and 5.6 years to expiry. 50% of the income from national retailers including Poundland, Costa Coffee and Lakeland.	1. Major city centre retail pitch with high footfall. 2. Well configured retail units. 3. Office upper floors providing potential for a range of alternative uses. Prior approval consent received for change of use for 36 residential flats.
Rent	Office c.£12 per sq ft. Wheeler Gate Retail c.£100 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. 2016 break option was not operated. 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 2.7 years to break and to expiry.	1. Prime Birmingham office location. 2. Significant improvement in occupier demand over the past two 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 £14.90 per sq ft.

Vantage Point, Hemel Hempstead
Low capital value per sq ft, 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 per sq ft 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 5.4 years to break and 7.4 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 per sq ft.
Rent	Average passing rent of £10.49 per sq ft

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	Charity

Lease		Investment summary
Tenants	B&Q, Sports Direct and Poundland. WAULT of 6.9 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 6.9 years. 4. Attractive and stable yield profile.
Rent	Average passing rent of £11.97 per sq ft.

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 4.8 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 per sq ft.

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 per sq ft.

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

Property characteristics		Adding value
Property type	Retail	1. Sale of vacant upper parts to a student housing developer has been completed. 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 4.3 years to break and 7.0 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 per sq ft on the prime units.

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 4.2 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 per sq ft In Terms of Zone A ('ITZA').

Bank Hey Street, Blackpool
Strong tenant covenants, asset management opportunities

Property characteristics		Adding value
Property type	Retail with vacant uppers	1. Potential sale of upper parts (no rates liability) on a long-leasehold basis. 2. Sports Direct are also interested in expanding within the building.
Area	100,079 sq ft
Purchase price
£5.05m
Purchase yield	9.5%
Vendor	Property Company

Lease		Investment summary
Tenants	Multi-let to national occupiers JD Wetherspoon, Poundland and Sports Direct. WAULT of 6.7 years to break and 9.2 years to expiry.	1. Iconic location directly adjacent to the Blackpool Tower. 2. Blackpool has seen a resurgence in visitor numbers to 13 million in 2014. 3. Attractive net initial yield. 4. Tenants reporting very strong trade.
Rent	£5.80 per sq ft.

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

Property characteristics		Adding value
Property type	Leisure	1. Outstanding 2012 rent review now settled at an uplift of £30,000 pa. 2. 2017 rent review commenced which could yield further uplift. 3. Negotiate lease extension with the tenant. Potential to negotiate future lease extensions 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 5.4 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 (Dun & Bradstreet). 4. Tenant trading strongly. 5. Attractive yield and stable income steam.
Rent	Average passing rent of £13.16 per sq ft.

Diversity, Social and Environmental Matters

Diversity

In 2016, the Board approved and adopted a diversity policy. The policy acknowledges the importance of diversity, including gender diversity, for the Company.

The Board has established the following 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.

· Any long lists of potential directors to 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.

When selecting a new non-executive Director, the Board reviewed a list of candidates from diverse backgrounds and after meeting with several of them, selected Katrina Hart as she was the most qualified candidate.

The Directors do not have service contracts. There are three male Directors and one female Director.

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 respects and seeks to empower each individual and the diverse cultures, perspectives, skills and experiences within its workforce.

The Company is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover threshold and is therefore not obliged to make a slavery and human trafficking statement. The Directors are satisfied that, to the best of their knowledge, the Company's principal suppliers, which are listed below, comply with the provisions of the UK Modern Slavery Act 2015.

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 www.aewuk.com.

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 disclosures to GRESB, the Global Real Estate Sustainability Benchmark. 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 for the period from 1 May 2016 to 30 April 2017 and will receive the results of this assessment in September 2017 when it which will be made available on the Company's website.

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 61 and 62 of the Directors' Report in the full Annual Report and Financial Statements.

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

Mark Burton

Chairman

7 July 2017

Statement of Directors' Responsibilities in respect of the Annual Report and Financial Statements

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with IFRSs as adopted by the EU and applicable law.

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 Company and of the profit or loss of the Company for that period. In preparing these 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 Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect 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 complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the directors in respect of the Annual Report and Financial Statements

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company 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, together with a description of the principal risks and uncertainties it faces.

We consider the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board

Mark Burton

Chairman

7 July 2017

Non-statutory Accounts

The financial information set out below does not constitute the Company's statutory accounts for the period ended 30 April 2017 but is derived from those accounts. Statutory accounts for the period ended 30 April 2017 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.

Statement of Comprehensive Income

for the year ended 30 April 2017

			For the period
		Year ended	1 April 2015 to
		30 April 2017	30 April 2016
	Notes	£'000	£'000
Income
Rental and other income	3	12,503	7,185
Property operating expenses	4	(1,434)	(300)
Net rental and other income		11,069	6,885

Dividend income	3	576	653
Net rental and dividend income		11,645	7,538

Investment management fee	4	(1,034)	(653)
Auditor remuneration	4	(88)	(95)
Operating costs	4	(646)	(403)
Directors' remuneration	5	(71)	(72)
Operating profit before fair value changes and disposals		9,806	6,315

Change in fair value of investment property	10	(3,159)	(1,935)
Gains on disposal of investment property	10	731	-
Change in fair value of investments	10	(407)	482
Loss on disposal of investments	10	(113)	-
Operating profit		6,858	4,862

Finance expense	6	(759)	(226)
Profit before tax		6,099	4,636
Taxation	7	-	-
Profit after tax		6,099	4,636
Other comprehensive income		-	-

Total comprehensive income for the year/period		6,099	4,636
Earnings per share (pence per share) (basic and diluted)	8	5.04	4.83

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

Statement of Changes in Equity

for the year ended 30 April 2017

					Total capital
				Capital	and reserves
			Share	reserve and	attributable to
			premium	retained	owners of the
For the year ended 30 April 2017	Notes	Share capital £'000	account £'000	earnings £'000	Company £'000
Balance at beginning of the year		1,175	16,729	98,471	116,375
Total comprehensive income		-	-	6,099	6,099

Ordinary Shares issued	18/19	61	5,938	-	5,999
Share issue costs	19	-	(153)	-	(153)
Dividends paid	9	-	-	(9,646)	(9,646)

Balance at 30 April 2017		1,236	22,514	94,924	118,674

					Total capital
				Capital	and reserves
			Share	reserve and	attributable to
			premium	retained	owners of the
For the period 1 April 2015 to 30 April 2016	Notes	Share capital £'000	account £'000	earnings £'000	Company £'000
Balance at beginning of the period		-	-	-	-
Total comprehensive income		-	-	4,636	4,636

Ordinary Shares issued	18/19	1,175	116,505	-	117,680
Share issue costs	19	-	(2,211)	-	(2,211)
Cancellation of share premium		-	(97,565)	97,565	-
Dividends paid	9	-	-	(3,730)	(3,730)

Balance at 30 April 2016		1,175	16,729	98,471	116,375

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

Statement of Financial Position

as at 30 April 2017

		30 April 2017	30 April 2016
	Notes	£'000	£'000
Assets
Non-Current Assets
Investment property	10	135,570	114,387
Investments	10	-	10,109
		135,570	124,496
Current Assets
Investments held for sale	10	7,594	-
Receivables and prepayments	11	3,382	2,962
Other financial assets held at fair value	12	31	77
Cash and cash equivalents		3,653	7,963
		14,660	11,002

Total assets		150,230	135,498

Non-Current Liabilities
Interest bearing loans and borrowings	13	(28,740)	(14,250)
Finance lease obligations	15	(55)	(1,791)
		(28,795)	(16,041)

Current Liabilities
Payables and accrued expenses	14	(2,756)	(2,959)
Finance lease obligations	15	(5)	(123)
		(2,761)	(3,082)

Total Liabilities		(31,556)	(19,123)

Net Assets		118,674	116,375

Equity
Share capital	18	1,236	1,175
Share premium account	19	22,514	16,729
Capital reserve and retained earnings		94,924	98,471

Total capital and reserves attributable to equity holders of the Company		118,674	116,375

Net Asset Value per share (pence per share)	8	95.98 pps	99.03 pps

The financial statements were approved by the Board on 7 July 2017 and signed on its behalf by:

Mark Burton

Chairman

AEW UK REIT plc

Company number: 09522515

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

Statement of Cash Flows

for the year ended 30 April 2017

	For the year ended 30 April 2017 £'000	For the period 1 April 2015 to 30 April 2016 £'000

Cash flows from operating activities
Operating profit	6,858	4,862

Adjustment for non-cash items:
Loss from change in fair value of investment property	3,159	1,935
Loss/(gain) from change in fair value of investments	407	(482)
Gains on disposal of investment properties	(731)	-
Loss on disposal of investments	113	-
Change in fair value of interest rate derivatives	-	(14)
Increase in other receivables and prepayments	(438)	(2,962)
(Decrease)/increase in other payables and accrued expenses	(283)	2,936

Net cash flow generated from operating activities	9,085	6,275

Cash flows from investing activities
Purchase of investment property	(28,062)	(114,408)
Purchase of investments	-	(9,627)
Disposal of investment property	2,681	-
Disposal of investments	1,995	-

Net cash used in investing activities	(23,386)	(124,035)

Cash flows from financing activities
Proceeds from issue of ordinary share capital	5,999	117,680
Share issue costs	(153)	(2,211)
Loan draw down	14,760	14,250
Finance costs	(969)	(266)
Dividends paid	(9,646)	(3,730)

Net cash flow generated from financing activities	9,991	125,723

Net (decrease)/increase in cash and cash equivalents	(4,310)	7,963

Cash and cash equivalents at the start of the year/period	7,963	-
Cash and cash equivalents at the end of the year/period	3,653	7,963

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

Notes to the Financial Statements

for the year ended 30 April 2017

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.

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

2. Accounting policies

2.1 Basis of preparation

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

The prior period is for a period of greater than 12 months, being the first audited period from the date of incorporation. As a result the comparative information disclosed is not directly comparable.

These 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, and the investment in the subsidiary which is held at cost less impairment.

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

The Company is exempt by virtue of Section 402 of the Companies Act 2006 from the requirement to prepare group financial statements. These financial statements present information solely about the Company as an individual undertaking.

New standards, amendments and interpretations

There are a number of new standards and amendments to existing standards which have been published and are mandatory for the Company's accounting periods beginning after 30 April 2017 or later periods, but the Company has decided not to adopt them early. The following are the most relevant to the Company and their impact on the financial statements:

· IFRS 9 Financial Instruments. The standard will replace IAS 39 Financial Instruments and contains two primary measurement categories for financial assets (effective for annual periods beginning on or after 1 January 2018);

· IFRS 12 Disclosure of Interests in Other Entities: amended by annual improvements to IFRS Standards 2014-2016 cycle (effective for annual periods beginning on or after 1 January 2017);

· IFRS 15 Revenue from contracts. The standard replaces IAS 11 Construction Contracts, IAS 18 Revenue. The standard introduces a new revenue recognition model that recognises revenue either at a point in time or over time (effective for annual periods beginning on or after 1 January 2018);

· IFRS 16 Leases: introduction of a single, on-balance sheet accounting model (effective for annual periods beginning on or after 1 January 2019). The disclosure requirements of IFRS 16 will be considered in due course;

· IAS 7 Statement of Cash Flows: The amendments require disclosures that enable evaluation of changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes (effective for annual periods beginning on or after 1 January 2017); and

· IAS 40 Investment Property: Amendments by Transfers of Investment Property (effective for annual periods beginning on or after 1 July 2018).

2.2 Significant accounting judgements and estimates

The preparation of financial statements in accordance with EU IFRS requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future.

i) Valuation of investment property

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

ii) Valuation of investments

Investments in collective investment schemes are stated at fair value with any resulting gain or loss recognised in profit or loss. Fair value is assessed by the Directors based on the best available information.

The value of the Company's interest in the Core Fund is stated at NAV of the Core Fund as at 30 April 2017 (30 April 2016: single swinging price). The Directors, in consultation with the Company's professional advisers, have adopted the amended estimation technique from 31 October 2016 in order to provide a better reflection of fair value of the Company's holding in the Core Fund.

iii) Segmental information

In accordance with IFRS 8, the Company is organised into one main operating segment being investment in property and property related investments in the UK.

2.3 Going concern

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company 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 Company'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

These financial statements are presented in Sterling, which is the functional and presentational currency of the Company. The functional currency of the Company is principally determined by the primary economic environment in which it operates. The Company did not enter into any transactions in foreign currencies during the year.

b) Revenue recognition

i) Rental income

Rental income receivable under operating leases is recognised on a straight-line basis over the 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 or 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 financing expenses are recognised in profit or loss 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 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 independent valuer on the basis of a full valuation with physical inspection at least once a year. Any valuation of an Immovable by the independent valuer must be undertaken in accordance with the current issue of RICS Valuation - Professional Standards (the 'Red Book').

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, 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 fair value with any resulting gain or loss recognised in profit or loss.

Investments are derecognised when they have been disposed of or the rights to receive cash flow from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

g) Investments in subsidiaries

AEW UK REIT 2015 Limited is the subsidiary of the Company. The subsidiary was dormant during the reporting period. The investment in the subsidiary is stated at cost less impairment and shown in note 17.

As permitted by Section 405 of the Companies Act 2006, the subsidiary is not consolidated as its inclusion is not material for the purposes of giving a true and fair view.

h) Investment property and investments held for sale

Investment property and investments are classified as held for sale when it is highly probable that the carrying amount will be recovered principally through a sale transaction.

Investment property and investments classified as held for sale are included within current assets within the Statement of Financial Position and measured at the lower of their carrying amount and fair value less costs to sell. Any gains or losses between the fair value and the carrying value in the year are recognised in the Statement of Comprehensive Income under change in fair value.

i) Derivative financial instruments

Derivative financial instruments, comprising interest rate caps for hedging purposes, are initially recognised at fair value and are subsequently measured at fair value, being the estimated amount that the Company would receive or pay to terminate the agreement at the period end date, taking into account current interest rate expectations and the current credit rating of the Company and its counterparties. Premiums payable under such arrangements are initially capitalised into the Statement of Financial Position.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair value measurement as a whole. Changes in fair value of interest rate derivatives are recognised within finance expenses in profit or loss in the period in which they occur.

j) Cash and cash equivalents

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

k) 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 Company will not be able to recover balances in full.

l) Capital prepayments

Capital prepayments are made for the purpose of acquiring future property assets, and held as receivables within the Statement of Financial Position. When the asset is acquired, the prepayments are capitalised as a cost of purchase. Where a purchase is not successful, these costs are expensed within profit or loss as abortive costs in the period.

m) Other payables and accrued expenses

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

n) 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 Company. These balances are held as creditors in the Statement of Financial Position.

o) 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.

p) 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.

q) Provisions

A provision is recognised in the Statement of Financial Position when the Company 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.

r) Dividend payable to shareholders

Equity dividends are recognised when they become legally payable.

s) 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.

t) Finance leases

Finance leases are capitalised at the lease commencement, at the lower of fair value of the property and present value of the minimum lease payments, and held as a liability within the Statement of Financial Position.

u) Taxes

Corporation tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

As a REIT, the Company is exempt from corporation tax on the profits and gains from its investments, provided it continues to meet certain conditions as per REIT regulations.

Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and deferred tax. Current tax is expected tax payable on any non-REIT taxable income for the period, using tax rates applicable in the period.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax that is 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.

v) European Public Real Estate Association

The Company has adopted European Public Real Estate Association ('EPRA') best practice recommendations, which it expects to broaden the range of potential institutional investors able to invest in the Company's Ordinary Shares. For the year ended 30 April 2017, audited EPS and NAV calculations under EPRA's methodology are included in note 8 and further unaudited measures are included below.

3. Revenue

	Year ended 30 April 2017 £'000	Period 1 April 2015 to 30 April 2016 £'000

Gross rental income received	12,147	6,153
Surrender premium received	-	1,000
Dilapidation income received	301	19
Other property income	55	13

Total rental and other income	12,503	7,185

Dividend income:
Property income distribution*	552	629
Dividend distribution	24	24
	576	653

Total Revenue	13,079	7,838

* Property income distribution ('PID') arises on the investment in the Core Fund which holds property directly.

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

4. Expenses

	Year ended 30 April 2017 £'000	Period 1 April 2015 to 30 April 2016 £'000

Property operating expenses	1,434	300
Investment management fee	1,034	653
Auditor remuneration	88	95
Operating costs	646	403

Total	3,202	1,451

	Year ended 30 April 2017	Period 1 April 2015 to 30 April 2016

Audit
Statutory audit of Annual Report and Accounts	£66,000	£65,000
Statutory audit of initial accounts for the period ended 31 October 2015	-	£20,000
	£66,000	£85,000

Non-audit
Review of Interim Report	£22,000	£10,000*
Services provided as Reporting Accountant at IPO	-	£40,000
Renewal of Company's Prospectus	£20,500	-
	£42,500	£50,000

Total fees paid to KPMG LLP	£108,500	£135,000

Percentage of total fees attributed to non-audit services	39%	37%

* The lower fee for review of the Company's Interim Report for the period ended 31 October 2015 was agreed in consideration of the work already completed in the statutory audit of the initial accounts for that same period.

The Company has no employees.

5. Directors' remuneration

	Year ended 30 April 2017 £'000	Period 1 April 2015 to 30 April 2016 £'000

Directors' fees	68	69
Tax and social security	3	3

Total remuneration	71	72

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

The Company had no employees in either period.

6. Finance expense

	Year ended 30 April 2017 £'000	Period 1 April 2015 to 30 April 2016 £'000

Interest payable on loan borrowings	483	110
Amortisation of loan arrangement fee	78	40
Agency fee payable on loan borrowings	21	11
Commitment fees payable on loan borrowings	60	51
	642	212

Change in fair value of interest rate derivatives	117	14

Total	759	226

7. Taxation

	Year ended 30 April 2017 £'000	Period 1 April 2015 to 30 April 2016 £'000




Total tax charge	-	-

Reconciliation of tax charge for the year / period
Profit before tax	6,099	4,636

Theoretical tax at UK corporation tax standard rate of 19.92% (2016: 20%)¹	1,215	927

Adjusted for:
Exempt REIT income	(1,798)	(1,119)
UK dividend that are not taxable	(5)	(99)
Non deductible investment losses	588	291

Total tax charge	-	-

¹Standard rate of corporation tax 20% to 31 March 2017, 19% from 1 April 2017. The corporation tax rate is to reduce to 17% with effect from 1 April 2020.

Factors that may affect future tax charges

At 30 April 2017 the Company has unrelieved management expenses of £6,826 (30 April 2016: £4,182). It is unlikely that the Company will generate sufficient taxable income in the future to use these expenses to reduce future tax charges and therefore no deferred tax asset has been recognised.

Due to the Company's status as a REIT and the intention to continue meeting the conditions required to obtain approval as a REIT in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

8. Earnings per share and NAV per share

		Period
	Year ended	1 April 2015 to
	30 April 2017	30 April 2016
Earnings per share:
Total comprehensive income (£'000)	6,099	4,636
Weighted average number of shares	121,084,416	96,022,424
Earnings per share (basic and diluted) (pence)	5.04	4.83

EPRA earnings per share:
Total comprehensive income (£'000)	6,099	4,636
Adjustment to total comprehensive income:
Unrealised loss from change in fair value of investment property (£'000)	3,159	1,935
Realised gain on disposal of investment property (£'000)	(731)	-
Loss/(gain) from change in fair value of investment (£'000)	407	(482)
Realised loss on disposal of investments (£'000)	113	-
Change in fair value of interest rate derivatives (£'000)	117	(14)
Total EPRA Earnings (£'000)	9,164	6,075
EPRA earnings per share (basic and diluted) (pence)	7.57	6.33

NAV per share:
Net assets (£'000)	118,674	116,375
Ordinary Shares	123,647,250	117,510,000
NAV per share (pence)	95.98	99.03

EPRA NAV per share:
Net assets (£'000)	118,674	116,375
Adjustments to net assets:
Other financial assets held at fair value (£'000)	(31)	(77)
EPRA NAV (£'000)	118,643	116,298
EPRA NAV per share (pence)	95.95	98.97

Earning per share (EPS) amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period. As at 30 April 2017, EPRA NNNAV was equal to IFRS NAV and as such a reconciliation between the two measures has not been performed.

9. Dividends paid

For the year ended 30 April 2017
	£'000
Fourth interim dividend paid in respect of the period 1 February
2016 to 30 April 2016 at 2p per Ordinary Share	2,350
First interim dividend paid in respect of the period 1 May 2016 to 31
July 2016 at 2p per Ordinary Share	2,350
Second interim dividend paid in respect of the period 1 August
2016 to 31 October 2016 at 2p per Ordinary Share	2,473
Third interim dividend paid in respect of the period ended 1
November 2016 to 31 January 2017 at 2p per Ordinary Share	2,473

Total dividends paid during the year	9,646

Fourth interim dividend declared for the period 1 February 2017 to
30 April 2017 at 2p per Ordinary Share*	2,473
Fourth interim dividend declared for the period 1 February 2016 to
30 April 2016 at 2p per Ordinary Share	(2,350)

Total dividends in respect of the year	9,769

Paid as
Property income distributions at 6.95p per Ordinary Share	8,471
Ordinary dividends at 1.05p per Ordinary Share	1,298

Total	9.769

For the period 1 April 2015 to 30 April 2016
	£'000
First interim dividend paid in respect of the period ended 31 October 2015 at 1.5p per Ordinary Share	1,507
Second interim dividend paid in respect of the period 1 November 2015 to 14 December 2015 at 0.75p per Ordinary Share	754
Third interim 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 interim dividend declared for the period 1 February 2016 to
30 April 2016 at 2p per Ordinary Share	2,350

Total dividends in respect of the period	6,080

Paid as
Property income distributions at 5.5p per Ordinary Share	6,080

Total	6,080

*The fourth interim dividend declared is not included in the accounts as a liability as at 30 April 2017.

10. Investments

10.a) Investment property

	30 April 2017
	Investment property freehold	Investment Property leasehold	Total	30 April 2016 Total
	£'000	£'000	£'000	£'000
UK Investment property
As at beginning of the year/period	92,390	21,950	114,340	-
Purchases in the year/period	27,481	665	28,146	114,408
Disposals in the year/period	(1,950)	-	(1,950)	-
Revaluation of investment property	(2,076)	(640)	(2,716)	(68)
Valuation provided by Knight Frank	115,845	21,975	137,820	114,340

Adjustment to fair value for rent free debtor			(2,230)	(1,082)
Adjustment to fair value for rent guarantee debtor			(80)	(785)
Adjustment for finance lease obligations			60	1,914
Total Investment property			135,570	114,387

Change in fair value of investment property
Loss from change in fair value			(2,716)	(68)
Adjustment for movement in the year/period:
in fair value for rent free debtor			(1,148)	(1,082)
in fair value for rent guarantee debtor			705	(785)
			(3,159)	(1,935)
Gains on sale of the investment property
Proceeds from disposals of investment property during the year/period			2,681	-
Cost of disposal			(1,950)	-
Gains on disposal of investment property			731	-

Valuation of investment property

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 Company's investment property at fair value is determined by the external valuer on the basis of fair value in accordance with the internationally accepted RICS Valuation - Professional Standards (incorporating the International Valuation Standards).

The determination of the fair value of investment property requires the use of estimates, such as future cash flows from assets (based on 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 flows.

10.b) Investment

	Year ended 30 April 2017 Total	Period 1 April 2015 to 30 April 2016 Total
	£'000	£'000
Investment in AEW UK Core Property Fund
As at the beginning of the year/period	10,109	-
Purchases in the year/period	-	9,627
Disposals in the year/period	(2,108)	-
(Loss)/gain from change in fair value	(407)	482

Total Investment in AEW UK Core Property Fund	7,594	10,109

Loss on disposal of the investment in AEW UK Core Property Fund
Proceeds from disposals of investments during the year/period	1,995	-
Cost of disposal	(2,108)	-

Loss on disposal of investments	(113)	-

As at 30 April 2017, the investment in the Core Fund was held for sale and is measured above in accordance with IFRS 5, Non Current Assets Held for Sale and Discontinued Operations and reflected within Current Assets in the Statement of Financial Position. The remaining investment was disposed of on 9 May 2017 as described in note 24.

Valuation of investment

The value of investment in the Core Fund as at 30 April 2017 is based on the latest NAV (30 April 2016: single swinging price) of the Core Fund as the Directors consider this to be a more accurate approximation of fair value.

10.c) Fair value measurement hierarchy

The following table provides the fair value measurement hierarchy for investments:

	30 April 2017
		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 property	-	-	135,570	135,570
Investment in AEW UK Core Property Fund	-	-	7,594	7,594

	-	-	143,164	143,164

	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 property	-	-	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 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:

1) Estimated Rental Value ('ERV')

2) Equivalent yield

Increases/(decreases) in the ERV (per sq ft per annum) in isolation would result in a higher/(lower) fair value measurement. Increases/(decreases) in the discount rate/yield (and exit or yield) in isolation would result in a lower/(higher) fair value measurement.

The significant unobservable input used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the Company's investment is:

1) NAV

The Company has updated its accounting policy with regard to the value of investments in the Core Fund to now be based on NAV which is considered to be the best approximation of fair value by the Directors.

Increases/(decreases) in the NAV would result in a higher/(lower) fair value measurement.

The significant unobservable inputs used in the fair value measurement, categorised within Level 3 of the fair value hierarchy of the portfolio of investment property and investments are:

	Fair Value	Valuation	Significant
Class	£,000	Technique	Unobservable Inputs	Range
30 April 2017
Investment property	137,820	Income capitalisation	ERV	£2.00 - £160.00
			Equivalent yield	6.94% - 10.27%
Investments	7,594	NAV	NAV	£1.1942

30 April 2016
Investment property	114,340	Income capitalisation	ERV	£2.00 - £160.00
			Equivalent yield	6.70% - 11.90%
Investments	10,109	Market capitalisation	Single swinging price	£1.2581

The single swinging price on investments is equal to the last announced unit price for collective investment schemes as at the Statement of Financial Position date.

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

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 both investment property and investments, gains and 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 where applicable, are recorded in profit and loss.

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

	30 April 2017
	Change in NAV		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 property	-	-	143,606	131,979	129,906	145,906
Resulting fair value of investments	7,974	7,214	-	-	-	-

	30 April 2016
	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 property	-	-	119,303	109,166	107,815	121,126
Resulting fair value of investments	10,615	9,604	-	-	-	-

11. Receivables and prepayments

	30 April 2017	30 April 2016
	£'000	£'000
Receivables
Rent debtor	461	622
Dividend receivable	110	193
Other income debtors	192	-
Rent agent float account	57	92
Other receivables	213	29
	1,033	936

Rent free debtor	2,230	1,082
Rent guarantee debtor	80	785

	3,343	2,803

Prepayments
Property related prepayments	10	130
Capital prepayments	1	19
Depositary services	8	8
Listing fees	8	2
Other prepayments	12	-

	39	159

Total	3,382	2,962

The aged debtor analysis of receivables which are past due is as follows:

	30 April 2017	30 April 2016
	£'000	£'000

Less than three months due	910	573
Between three and six months due	1	331
Between six and twelve months due	122	32

Total	1,033	936

12. Interest rate derivatives

	30 April 2017	30 April 2016
	£'000	£'000
At the beginning of the year/period	77	-
Interest rate cap premium paid	71	91
Changes in fair value of interest rate derivatives	(117)	(14)

At the end of the year/period	31	77

To mitigate the interest rate risk that arises as a result of entering into variable rate linked loans, the Company entered into an interest rate cap with the combined notional value of £26.51 million (2016: £14.25 million) and a strike rate of 2.5% (2016: 2.5%) for the relevant period in line with the life of the loan.

The total premium payable in the year towards securing the interest rate caps was £71,304 (2016: £91,000).

Fair Value hierarchy

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

			Significant
	Quoted prices in	Significant	unobservable
	active markets	observable input	inputs
	(Level 1)	(Level 2)	(Level 3)	Total
Valuation date	£'000	£'000	£'000	£'000
30 April 2017	-	31	-	31
30 April 2016	-	77	-	77

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

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

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

13. Interest bearing loans and borrowings

	Bank borrowings
	30 April 2017	30 April 2016
	£'000	£'000

At the beginning of the year/period	14,250	-
Bank borrowings drawn in the year/period	14,760	14,250

Interest bearing loans and borrowings	29,010	14,250

Less: loan issue costs incurred	(388)	(40)
Plus: amortised loan issue costs	118	40

As at 30 April	28,740	14,250
Repayable between two and five years	29,010	14,250

Bank borrowings available but undrawn in the year/period	10,990	25,750
Total facility available	40,000	40,000

The Company entered into a £40 million credit facility with The Royal Bank of Scotland International Limited on 20 October 2015, of which £10.99 million remained undrawn as at the year end (2016: £40 million credit facility, £25.75 million undrawn and term to maturity of 4.47 years).

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

The term to maturity as at the year end is 3.47 years.

Since the end of the reporting period, the amount of the credit facility available has been reduced to £32.5 million.

The Company 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.

14. Payables and accrued expenses

	30 April 2017	30 April 2016
	£'000	£'000

Deferred income	1,513	1,675
Accruals	534	1,008
Other creditors	709	276

Total	2,756	2,959

15. 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:

	30 April 2017	30 April 2016
	£'000	£'000

Not later than one year	5	123
Later than one year but not later than five years	15	372
Later than five years	40	1,419
	55	1,791

Total	60	1,914

16. Guarantees and commitments

As at 30 April 2017, there were capital commitments of £48,628 relating to alteration and refurbishment works at the property 225 Bath Street, Glasgow.

Operating lease commitments - as lessor

The Company has entered into commercial property leases on its investment property portfolio. These non-cancellable leases have a remaining term of between zero and 23 years.

Future minimum rentals receivable under non-cancellable operating leases as at 30 April 2017 are as follows:

	30 April 2017	30 April 2016
	£'000	£'000

Within one year	11,878	9,902
After one year but not more than five years	37,936	31,651
More than five years	27,640	23,401

Total	77,454	64,954

During the year ended 30 April 2017 there were contingent rents totalling £169,724 (30 April 2016: £nil) recognised as income.

17. Investment in subsidiary

The Company has a wholly owned subsidiary, AEW UK REIT 2015 Limited:

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%

AEW UK REIT 2015 Limited is a subsidiary of the Company incorporated in the UK on 2 April 2015. At 30 April 2017, the Company held one share being 100% of the issued share capital. AEW UK REIT 2015 Limited is wholly owned by the Company and is dormant. The cost of the subsidiary is £0.01 (30 April 2016: £0.01). The registered office of AEW UK REIT 2015 Limited is 40 Dukes Place, London, EC3A 7NH.

18. Issued Share Capital

	30 April 2017		30 April 2016
		Number of		Number of
	£'000	Ordinary Shares	£'000	Ordinary Shares
Ordinary Shares (nominal value £0.01) authorised, issued and fully paid
At the beginning of the year/period	1,175	117,510,000	-	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
Issued on admission to trading on the London
Stock Exchange on 16 September 2016	24	2,450,000	-	-
Issued on admission to trading on the London
Stock Exchange on 10 October 2016	37	3,687,250	-	-

At the end of the year/period	1,236	123,647,250	1,175	117,510,000

On 16 September 2016, the Company issued 2,450,000 Ordinary Shares at a price of 97 pence per share in the form of a tap issue under authority granted on 7 September 2016 at the AGM. On 10 October 2016 the Company issued 3,687,250 Ordinary Shares at a price of 98.25 pence per share in the form of a tap issue under authority granted on 7 September 2016 at the AGM.

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

19. Share premium account

	Year ended 30 April 2017 £'000	Period 1 April 2015 to 30 April 2016 £'000

The share premium relates to amounts subscribed for share capital in excess of nominal value:
Balance at the beginning of the year/period	16,729	-
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)	(23)	(281)
Issued on admission to trading on the London Stock Exchange on 16 September 2016	2,352	-
Share issue cost (paid and accrued)	(42)	-
Issued on admission to trading on the London Stock Exchange on 10 October 2016	3,586	-
Share issue cost (paid and accrued)	(88)	-

Balance at the end of the year/period	22,514	16,729

20. Financial risk management and objectives and policies

20.1 Financing instruments

The Company's principal financial assets and liabilities are those derived from its operations: receivables and prepayments, cash and cash equivalents and payables and accrued expenses. The Company's other principal financial liabilities are interest bearing loans and borrowings, the main purpose of which is to finance the acquisition and development of the Company's property portfolio.

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

	30 April 2017		30 April 2016
	Book Value	Fair Value	Book Value	Fair Value
	£'000	£'000	£'000	£'000

Financial Assets
Investment in AEW UK Core Property Fund	7,594	7,594	10,109	10,109
Receivables and prepayments¹	1,033	1,033	936	936
Cash and cash equivalents	3,653	3,653	7,963	7,963
Other financial assets held at fair value	31	31	77	77

Financial Liabilities
Interest bearing loans and borrowings	28,740	29,010	14,250	14,250
Payables and accrued expenses²	2,156	2,156	2,712	2,712
Finance lease obligations	60	60	1,914	1,914

¹Excludes VAT, certain prepayments and other debtors

² Excludes tax and VAT liabilities

Interest rate derivatives are the only financial instruments classified as fair value through profit and loss. All other financial assets are classified as loans and receivables and all financial liabilities are measured at amortised cost. All financial instruments were designated in their current categories upon initial recognition.

Fair value measurement hierarchy has not been applied to those classes of asset and liability stated above which are not measured at fair value in the financial statements. The difference between the fair value and book value of these items is not considered to be material.

20.2 Financing management

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

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

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

20.3 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 Company diversifies its portfolio geographically in the United Kingdom and across property sectors.

The disciplined approach to the purchase, sale and asset management ensures that the value is maintained to its maximum potential. Prior to any property acquisition or sale, detailed research is undertaken to assess expected future cash flow. The Investment Management Committee ('IMC') of the Investment Manager, meets monthly and reserves the ultimate decision with regards to investment purchases or sales. In order to monitor property valuation fluctuations, the IMC and the Portfolio Management Team of the Investment Manager meet with the independent external valuer on a regular basis. The valuer provides a property portfolio valuation quarterly, so any movements in the value can be accounted for in a timely manner and reflected in the NAV every quarter.

20.4 Real Estate risk

The Company 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 Company. The value of any property can go down as well as up. Property and property-related assets are inherently subjective as regards value due to the individual nature of each property. As a result, valuations are subject to uncertainty.

Real property investments are subject to varying degrees of risk. The yields available from investments in real estate depend on the amount of income generated and expenses incurred from such investments.

There are additional risks in vacant, part vacant, redevelopment and refurbishment situations although these are not prospective investments for the Company.

20.5 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 Company by failing to meet a commitment it has entered into with the Company.

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

In respect of property investments, in the event of a default by a tenant, the Company will suffer a rental shortfall and additional costs concerning re-letting the property. The Investment Manager monitors tenant arrears in order to anticipate and minimise the impact of defaults by occupational tenants.

The table below shows the Company's exposure to credit risk:

	As at	As at
	30 April 2017	30 April 2016
	£'000	£'000

Debtors (excluding incentives and prepayments)	1,033	936
Cash and cash equivalents	3,653	7,963

Total	4,686	8,899

20.6 Liquidity risk

Liquidity risk arises from the Company's management of working capital and the finance charges and principal repayments on its borrowings. It is the risk the Company will encounter difficulty in meeting its financial obligations as they fall due as the majority of the Company's assets are investment properties and therefore not readily realisable. The Company's objective is to ensure it has sufficient available funds for its operations and to fund its capital expenditure. This is achieved by continuous monitoring of forecast and actual cash flows by management.

The table below summarises the maturity profile of the Company's financial liabilities based on contractual undiscounted payments:

	On	< 3	3 - 12	1 - 5
30 April 2017	demand £'000	months £'000	months £'000	years £'000	> 5 years £'000	Total £'000

Interest bearing loans and borrowings	-	-	-	29,010	-	29,010
Interest payable	-	134	395	1,306	-	1,835
Payables and accrued expenses	-	2,156	-	-	-	2,156
Finance lease obligations	-	-	5	20	425	450

	-	2,290	400	30,336	425	33,451

	On	< 3	3 - 12	1 - 5
	demand	months	months	years	> 5 years	Total
30 April 2016	£'000	£'000	£'000	£'000	£'000	£'000

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

21. Capital management

The primary objectives of the Company'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 Company utilises borrowings on a limited recourse basis for each investment or all or part of the total portfolio. The Company's policy is such that its borrowings will not exceed 25% of GAV (measured at drawdown) of each investment or the total portfolio. It is currently anticipated that the level of total borrowings will typically be at the level of 20% of GAV (measured at drawdown).

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

The monitoring of the Company's level of borrowing is performed primarily using a Loan to GAV ratio. The Loan to GAV Ratio is calculated as the amount of outstanding debt divided by the total assets of the Company, which includes the valuation of the investment property portfolio. The Company Loan to GAV ratio at the year end was 19.31% (30 April 2016: 10.51%).

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

22. 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 2017, 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 Company 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 fund raising proceeds) and paid quarterly. The investment by the Company into the Core 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 year, the Company incurred £1,033,637 (2016: £652,706) in respect of investment management fees and expenses of which £252,850 (2016: £230,631) was outstanding at 30 April 2017.

On 1 May 2016, the Company had a holding of 8,035,272 shares (share class E) in the Core Fund, which were purchased for a cost of £9,627,000 (net of equalisation) on 1 June 2015. The investment is deemed to be with a related party due to the common influence of the Investment Manager over both parties. During the year, the Company disposed of 1,675,832 shares in the Core Fund for consideration of £1,995,248. As at 30 April 2017, the Company held 6,359,440 shares in the Core Fund which were valued at £7,594,443. The Company disposed of its remaining holding in the Core Fund after the year-end, as detailed in note 24.

23. Segmental information

Management has considered the requirements of IFRS 8 'operating segments'. The source of the Company'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 Company as a whole directly to the Board of Directors. Therefore, the Company is considered to be engaged in a single segment of business, being property investment and in one geographical area, United Kingdom.

24. Events after reporting date

Dividend

On 30 May 2017, the Board declared its interim dividend of two pence per share, in respect of the period from 1 February 2017 to 30 April 2017. This was paid on 30 June 2017, to shareholders on the register as at 9 June 2017. The ex-dividend date was 8 June 2017.

Property acquisitions

On 4 May 2017 the Company acquired Unit 1005, Sarus Court for £0.61 million. This completes the Company's acquisition of the whole of the Sarus Court industrial estate. The property provides a WAULT of approximately 3.7 years to expiry. The acquisition provides an initial yield of 7.8%, a reversionary yield of 9.1% and a capital value per sq ft of £55.

Disposal of investments

On 9 May 2017, the Company sold its remaining investment in the Core Fund for £7.62 million. This sale represented a gain of £0.03 million based on its carrying value as at 30 April 2017.

Amendment to the Credit Facility

On 8 May 2017, the Company completed an amendment to the terms of its facility with RBSi. The total commitment has been reduced from £40.0 million to £32.5 million and the availability period has been extended to 31 March 2019.

EPRA Unaudited Performance Measures

Detailed below is a summary table showing the EPRA performance measures of the Company

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.

£9.16 million/7.57 pps

EPRA earnings for the year

ended 30 April 2017 (2016:

£6.08 million/6.33 pps)

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.

£118.64 million/95.95 pps

EPRA NAV as at 30 April 2017 (2016: £116.30 million/98.97 pps)

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.

£118.67 million/95.98 pps

EPRA NNNAV as at 30 April 2017 (2016: £116.38 million/99.03 pps)

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.

7.12%

EPRA NIY

as at 30 April 2017 (2016: 8.01%)

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.

8.27%

EPRA 'Topped-Up' NIY

as at 30 April 2017 (2016: 8.56%)

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.

7.22%

EPRA ERV

as at 30 April 2017 (2016: 3.16%)

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 15.37%

as at 30 April 2017 (2016: 12.23%)

9.54% EPRA Cost ratio excluding direct vacancy costs as at 30 April 2017 (2016: 10.90%)

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

		Period
	Year ended 30 April 2017 £'000	1 April 2015 to 30 April 2016 £'000

Investment property - wholly-owned	137,820	114,340
Allowance for estimated purchasers' costs	8,242	6,632

Gross up completed property portfolio valuation	146,062	120,972

Annualised passing rental income	11,283	9,842
Property outgoings	(884)	(148)

Annualised net rents	10,399	9,694

Rent from expiry of rent-free periods and fixed uplifts	1,685	655

'Topped-up' net annualised rent	12,084	10,349

EPRA Net Initial Yield	7.12%	8.01%

EPRA 'topped-up' Net Initial Yield	8.27%	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 2017, 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

	Year ended 30 April 2017 £'000	Period 1 April 2015 to 30 April 2016 £'000

Annualised potential rental value of vacant premises	951	342
Annualised potential rental value for the complete property portfolio	13,164	10,821

EPRA Vacancy Rate	7.22%	3.16%


Calculation of EPRA Cost Ratios

	2017	2016
	£'000	£'000

Administrative/operating expense per IFRS income statement	3,272	1,523
Less: Performance & management fees	(1,034)	(653)
Other fees and commission	(335)	(70)
Ground rent costs	(104)	(64)

EPRA Costs (including direct vacancy costs)	1,799	736

Direct vacancy costs	(682)	(80)

EPRA Costs (excluding direct vacancy costs)	1,117	656

Gross Rental Income less ground rent costs	12,148	6,089
Less: service charge costs of rental income	(104)	(70)

Gross rental income	12,044	6,019

EPRA Cost Ratio (including direct vacancy costs)	15.37%	12.23%

EPRA Cost Ratio (excluding direct vacancy costs)	9.54%	10.90%

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Share Information
Ordinary £0.01 Shares	123,647,250
SEDOL Number	BWD2415
ISIN Number	GB00BWD24154
Ticker/TIDM	AEWU

12 September 2017	Annual General Meeting
31 October 2017	Half-year end
December 2017	Announcement of half-yearly results
30 April 2018	Year end
July 2018	Announcement of annual results

	£
Interim dividend for the period 1 May 2016 to 31 July 2016	2,350,200
Interim dividend for the period 1 August 2016 to 31 October 2016	2,472,945
Interim dividend for the period 1 November 2016 to 31 January 2017	2,472,945
Interim dividend for the period 1 February 2017 to 30 April 2017	2,472,945

Total	9,769,035