AEW UK REIT plc

Annual Report and Financial Statements

for the year ended 31 March 2022

Strategic Report

Financial Highlights 2

Property Highlights 2

Chairman’s Statement 3

Business Model and Strategy 7

Strategy in Action 9

Key Performance Indicators 13

Investment Manager’s Report 16

Principal Risks and Uncertainties 30

Stakeholder Engagement 37

Governance

Board of Directors 40

Corporate Governance Statement 41

Report of the Audit Committee 47

Directors’ Remuneration Report 51

Directors’ Report 54

Statement of Directors’ Responsibilities 66

Independent Auditor’s Report to the members of AEW UK REIT plc 68

Financial Statements

Statement of Comprehensive Income 76

Statement of Changes in Equity 77

Statement of Financial Position 78

Statement of Cash Flows 79

Notes to the Financial Statements 80

EPRA Unaudited Performance Measures 112

EPRA Sustainability Performance Measures 118

Company Information 132

Glossary 134

Contents

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Financial Highlights

• Net Asset Value (‘NAV’) of £191.10 million and 120.63 pence per share (‘pps’) as at 31 March 2022 (31 March 2021: £157.08 million

and 99.15 pps).

• Operating profit before fair value changes of £11.75 million for the year (year ended 31 March 2021: £10.73 million).

• Profit before tax (‘PBT’)* of £46.70 million and earnings per share (‘EPS’) of 29.47 pps for the year (year ended 31 March 2021:

£22.17 million and 13.98 pps).

• EPRA Earnings Per Share (‘EPRA EPS’)* for the year of 6.79 pps (year ended 31 March 2021: 6.19 pps). See page 92 for the calculation

of EPRA EPS.

• Total dividends of 8.00 pps declared for the year (year ended 31 March 2021: 8.00 pps).

• Shareholder total return* for the year of 53.61% (year ended 31 March 2021: 33.72%).

• The price of the Company’s Ordinary Shares on the Main Market of the London Stock Exchange was 119.80 pps as at 31 March 2022

(31 March 2021: 83.20 pps).

• As at 31 March 2022, the Company had drawn £54.00 million (31 March 2021: £39.50 million) of a £60.00 million (31 March 2021:

£60.00 million) term credit facility with the Royal Bank of Scotland International Limited (‘RBSi’) and was geared to 28.26% of NAV

(31 March 2021: 25.15%) (see note 15 on pages 101 and 102 for further details).

• The Company held cash balances totalling £6.77 million as at 31 March 2022 (31 March 2021: £17.45 million).

Property Highlights

• As at 31 March 2022, the Company’s property portfolio had a valuation of £240.18 million across 36 properties (31 March 2021:

£179.00 million across 34 properties) as assessed by the Valuer

and a historical cost of £207.96 million (31 March 2021: £173.28 million).

• The Company acquired four properties during the year for a total purchase price of £38.23 million, excluding acquisition costs (year

ended 31 March 2021: one property for a purchase price of £5.40 million).

• The Company made two disposals during the year with total gross sale proceeds of £16.71 million (year ended 31 March 2021:

two disposals with total gross sale proceeds of £29.30 million).

• The portfolio had an EPRA Vacancy Rate** of 10.69% as at 31 March 2022 (31 March 2021: 8.96%). Excluding vacancy contributed

by Bath Street, Glasgow, which was exchanged to be sold with the condition of vacant possession, the vacancy rate was 5.42%

(31 March 2021: 5.58%).

• Rental income generated in the year under review was £15.92 million (year ended 31 March 2021: £15.71 million). The number of

tenants as at 31 March 2022 was 131 (31 March 2021: 99).

• EPRA Net Initial Yield (‘NIY’)** of 5.87% as at 31 March 2022 (31 March 2021: 7.37%).

• Weighted Average Unexpired Lease Term (‘WAULT’)* of 3.94 years to break (31 March 2021: 4.43 years) and 5.78 years to expiry

(31 March 2021: 6.71 years).

• The Company has achieved very high rent collection levels, which stand at over 98% for each quarter since March 2020 (excluding

current quarter where rent continues to be collected).

* See KPIs on pages 13 to 15 for definition of alternative performance measures.

** See Glossary on pages 134 to 137 for definition of alternative performance measures.

The valuation figure is reconciled to the fair value under IFRS in note 12.

Strategic Report

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Chairman’s Statement

Overview

This financial year has seen the gradual removal of restrictions that had been implemented as a result of the COVID-19 pandemic.

This has been a welcome change that has assisted the Company in producing a strong share price total return for the year of 53.61%

(31 March 2021: 33.72%). This return to normality has been particularly important for the sectors of the property market that were

hardest hit by the pandemic, most notably leisure and some parts of the retail market. The Company has continued to take a cautious

approach to cash and debt management, mindful that a degree of uncertainty remains. As is often the case, uncertainty has created

opportunities, and pragmatic choices have been rewarded with another year of strong performance for the Company. We are pleased

this has allowed the Company to be the only REIT in its peer group to continue paying its full 8p per share annual dividend. Indeed, the

Company’s dividend of 2p per share per quarter has now been paid consistently since Q1 2016 for 26 consecutive quarters, with the

Company’s EPRA earnings covering in excess of 98% of this amount.

For this financial year, the Company’s NAV per share has increased by 21.66%, providing a NAV total return for the year of 29.73%

(31 March 2021: 15.06%). This was the highest NAV total return recorded by any of the UK diversified REIT’s and, as a result, the

Company has been awarded the Citywire award for best generalist UK property trust for the second consecutive year. During the year,

the Company also received awards from EPRA, the European Public Real Estate Association, who awarded the Company a gold medal for

the standards of our financial reporting and a silver medal for the standards of our sustainability reporting. We are delighted that these

awards recognise the hard work and dedication that is put into the running of the Company by both my colleagues on the Board, and

the Company’s Investment Manager, AEW.

The Company has benefited from its defensively positioned portfolio which achieved, at property level, a total return of 25.87% over

the year, an outperformance of 0.51% relative to the MSCI Benchmark. This success further builds upon the outperformance of 10.7%

achieved in the prior year. Relatively small lot sizes, geographical diversification and valuations that are underpinned by alternative use

values have all contributed to the Company’s resilience during a time of protracted economic uncertainty. This strong performance

supports the Company’s long-standing strategy of diversification, benefitting both performance and risk mitigation.

Exposure to various key sectors of the property market via its diversified strategy has allowed the Company to maximise shareholder

returns with significant profits crystallised this year following the sale of two industrial assets that had seen large valuation uplifts. The

Company’s industrial assets at Bessemer Road in Basingstoke and Langthwaite Business Park, South Kirkby, were sold achieving sale

prices 1.7x and 1.9x ahead of their respective purchase prices.

The proceeds of these industrial sales have now been reinvested into the retail warehouse and leisure sectors in order to create

opportunities for future income and NAV growth. The Central Six Retail Park in Coventry was purchased in November 2021 for a price of

£16.41 million, producing a net initial yield of circa 11%. The site occupies a strategic and central location close to Coventry city centre

with an anticipated reversionary yield of circa 12.5%.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Active asset management continues to form a major part of the Company’s strategy where key targets are to improve the length

and quality of income streams, as well as maximising rental receipts. Notable successes within the year include the settlement of the

Company’s September 2021 open market rent review at its industrial holding in Knowles Lane, Bradford, at a level representing a 14%

increase over the three-year period. New high rental tones were also set at the Company’s multi-let industrial assets in Runcorn and

Basildon at £6 per sq ft and £8 per sq ft, respectively. At the Company’s office holding in Queen Square, Bristol, strong rental growth has

also been observed, with current rents being £30 per sq ft, almost doubling the rental value at acquisition.

The realisation of some business plans within the portfolio has led to periods of income volatility with total EPS of 6.79p achieved over

the four quarters of the year. The cause of this has been multi-faceted, with income subdued by the necessity of service charge works at

Blackpool, the removal of tenants in preparation for the vacant possession sale of Glasgow and the reinvestment of proceeds following

profitable sales. Once the sale of Glasgow completes and its sale proceeds are reinvested, EPS is expected to return to a level in line

with the Company’s target level of 8p per annum. Looking forward, the portfolio’s future income generation prospects appear strong

as assessed independently by Knight Frank, the Company’s valuer. As at year-end, the portfolio’s total estimated market rental value

remained 20% higher than its current gross income, demonstrating the portfolio’s inherent ability to grow income receipts over the

medium term.

The PRYZM Nightclub in Cardiff was purchased for a price

of £3.63 million, reflecting a net initial yield of 7.7%, with an

anticipated reversionary yield of circa 9.2% and a low capital value

of £92 per sq ft.

Two further assets were purchased in the year, also in the

leisure and retail warehousing sectors. The first of these was

ArrowPoint Retail Park in Shrewsbury which was acquired in

May 2021 for a price of £8.35 million. Secondly, the Company

acquired 15-33Union Street, Bristol in June 2021 for a price of

£10.19 million, providing a net initial yield of 8.0%.

All of these purchases deliver very attractive levels of income and

contribute immediately to the Company’s earnings, as well as

offering further opportunities to manage the assets proactively

to enhance NAV over the long term. Assets such as these form

the basis of an attractive pipeline which the Company is currently

pursuing in order to reinvest the sale proceeds that are due to be

received following the expected sales of assets in 225 Bath Street,

Glasgow and Eastpoint Business Park, Oxford. The Company

will continue to target acquisitions that offer the opportunity

to deliver both strong income and capital performance. The

Company’s Investment Manager continues to use its extensive

knowledge in both asset selection and asset management to select

each asset on its own specific merits, rather than being entirely

sector driven in its purchasing strategy.

AEW UK REIT plc Property Performance vs.

Benchmark for 12 months to 31 March 2022

Source: MSCI 31 March 2022

* the Benchmark refers to MSCI/AREF PFI Balanced Funds Quarterly

Property Index.

BenchmarkAEW UK REIT

Capital Growth Income Return Total Return

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Chairman’s Statement (continued)

Financial Results Summary

Year ended

31 March 2022

Year ended

31 March 2021

Operating Profit before fair value changes (£’000) 11,752 10,735

Operating Profit (£’000) 46,913 23,102

Profit before Tax (£’000) 46,695 22,172

Earnings Per Share (basic and diluted) (pence)* 29.47 13.98

EPRA Earnings Per Share (basic and diluted) (pence)* 6.79 6.19

Ongoing Charges (%) 1.35 1.36

Net Asset Value per share (pence) 120.63 99.15

* See note 10 of the financial statements for calculation.

Financing

The Company had a £60.00 million loan facility, of which it had drawn a balance of £54.00 million as at 31 March 2022 (31 March 2021:

£60.00 million facility; £39.50 million drawn), producing the following measures of gearing:

Year ended

31 March 2022

Year ended

31 March 2021

Loan to NAV 28.26 25.15

Gross Loan to GAV

22.48

22.07

Net Loan to GAV (deducts cash balance from the outstanding loan value)

19.67

12.32

The unexpired term of the facility was 1.6 years as at 31 March 2022 (31 March 2021: 2.6 years). The loan incurred interest at

SONIA+1.4%, which equated to an all-in rate of 2.20% as at 31 March 2022 (31 March 2021: 1.44%).

The Company had in place interest rate caps at the year-end a notional value of £51.50 million (31 March 2021: £51.00 million),

resulting in the loan being 95% hedged (31 March 2021: 130%). These interest rate caps were effective for the remaining period of the

loan.

As at 31 March 2022, the Company had £12.89 million of the facility available up to the maximum 35.00% Loan to NAV at drawdown.

Post year-end, the decision was taken to complete the refinancing of the portfolio, as announced in May 2022. The Company has

secured a new £60.00 million, 5-year term loan facility with AgFe, a leading independent asset manager specialising in debt-based

investments. The loan is priced as a fixed rate loan with a total interest cost of 2.959%. The existing RBSi loan facility, which was priced at

a floating rate according to SONIA, was due to mature in October 2023 and has been repaid in full by the new loan facility. Simultaneous

to the funding, the Company’s interest rate cap was sold for proceeds of £743,000. In the current inflationary environment, the

Company considers it prudent to fix the loan now, rather than run the risk of further rising rates. The Company intends to utilise

borrowings to enhance returns over the next five years.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Chairman’s Statement (continued)

Dividends

The Company has continued to deliver on its target of paying dividends of 8.00 pps per annum. During the year, the Company declared

and paid four quarterly dividends of 2.00 pence per share, in line with its target, which were 84.88% covered by the Company’s EPRA

EPS of 6.79 pence. It remains the Company’s intention to continue to pay dividends in line with its dividend policy. In determining future

dividend payments, regard will be given to the circumstances prevailing at the relevant time, as well as the Company’s requirement, as a

UK REIT, to distribute at least 90% of its distributable income annually, which will remain a key consideration.

Outlook

Post year-end, the Company made the announcement that Alex Short, joint Portfolio Manager, had taken the decision to resign from

her position within the Company’s Investment Manager and therefore also resigned her position in respect of the Company. Laura Elkin

continues as Portfolio Manager of the Company supported by the wider AEW UK team which remains unchanged. Laura has played a

key role in the portfolio management team since the Company’s launch in 2015 and as such, the Board have confidence in her abilities

to continue to lead the team at AEW. Laura will work alongside Henry Butt as Assistant Portfolio Manager. All investment decisions made

on behalf of AEW UK require the approval of AEW UK’s Investment Management Committee, which has remained unchanged for the

past 11years. My colleagues on the Board and I would like to take the opportunity to thank Alex for her involvement in the Company to

date and wish her the best for future endeavours.

Despite various headwinds facing the UK economy, the Board feels confident that the asset management opportunities inherent within

the portfolio and the Company’s investment pipeline provide a strong basis for the continuation of attractive returns to the Company’s

shareholders. The portfolio’s future income generation prospects appear strong as assessed independently by Knight Frank, the

Company’s valuer. As at 31 March 2022, the portfolio’s total estimated market rental value remained 20% higher than its current gross

income, demonstrating Knight Frank’s belief in the portfolio’s inherent ability to grow income receipts over the medium term.

In anticipation of capital receipts from the sale of Glasgow and Oxford later this year, AEW are pursuing an attractive pipeline of retail

warehousing, leisure and office assets across the UK, which offer income levels and capital growth opportunities in line with the existing

portfolio. Also, as part of the Company’s re-financing, the remaining £6.00m available in the loan facility was drawn post year-end,

which further extends purchasing capability.

We are pleased to see that the Company’s strong performance has been recognised in the rating of its shares, where demand has

delivered periods of a share price premium to NAV. With an attractive pipeline of opportunities, we hope the Company will be in a

position to take advantage of continued strong demand for its shares and grow its capital base in the future.

Mark Burton

Chairman

21 June 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Business Model and Strategy

Introduction

The Company is a real estate investment company listed on the premium segment of the Official List of the FCA 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 the necessary qualifying conditions to conduct its

affairs as a UK REIT and the Company intends to continue to do so.

Investment Objective

As a real estate investment company, the Company’s purpose is expressed in its investment objective, which 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, industrial/warehouse properties, retail warehouses and high street retail) resulting in a

diversified tenant base.

Investment Restrictions

The Company invests and manages 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 15.00% of GAV;

• the Company may commit up to a maximum of 10.00% of its NAV (measured at the commencement of the relevant 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 60.00% of GAV;

• investment in unoccupied and non-income producing assets will, at the time of investment, not exceed 20.00% of NAV;

• the Company may commit up to a maximum of 10.00% of the NAV (at the time of investment) in the AEW UK Core Property Fund

(the ‘Core Fund’). The Company disposed of its last remaining units in the Core Fund in May 2017 and it is not the current intention of

the Directors to invest in the Core Fund;

• 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, 35.00% 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 Corporation Tax Act 2010 (‘CTA’) (and the regulations made thereunder).

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 and will not, at any time, conduct any trading activity which is significant in the

context of the business of the Company as a whole.

In the event of a breach of the investment policy and investment restrictions set out above, the Directors upon becoming aware of such

breach will consider whether the breach is material, and if it is, notification will be made to a Regulatory Information Service.

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

shareholders.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Business Model and Strategy (continued)

Our Strategy

The Company exploits what it believes to be the compelling relative value opportunities currently offered by pricing inefficiencies in

smaller commercial properties let on shorter occupational leases. The Company supplements 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 is to

invest in properties which:

• typically have a value, on investment, of between £2.50 million and £15.00 million;

• have initial net yields, on investment, of typically between 7.50-10.00%;

• achieve, across the whole portfolio, an average weighted lease term of between three to six years remaining;

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

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

How we add value

An Experienced Team

The investment management team averages 20 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

Quarterly

joint reviews

by AM*, PM* &

*AM – Asset Management

*PM – Property Management

Investment teams

for the “Hold

Sell” review

Business

Plan updated

each year

with quarterly

reviews

Business plans

for all

new

acquisitions

Fortnightly

asset

management

updates

Analysing local market trends and

supply/demand dynamics, we identify the

most profitable and deliverable strategies

Detailed implementation plan, marketing

and leasing programmes, capital

expenditure forecasts and cash flows

Ongoing income and value creation

Agency appointments, letting

meetings, tenant negotiations, lease

re-structuring, dilapidations, claims,

rent reviews and valuations

The Investment Manager’s Asset

Management process incorporates the

Company’s Environmental, Social and

Governance (‘ESG’) Policy, which is found

in the Directors’ Report on pages 58 and 59.

The Company reports on its ESG

performance using EPRA Sustainability

Performance Measures on pages 118 to 131.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Strategy in Action

Industrial disposals in South Kirkby

andBasingstoke

Crystallising profits once accretive business plans

havecompleted

• During August 2021, a sale of the Company’s asset

at Langthwaite Business Park in South Kirkby was

completed for a price of £10.84 million, 87% ahead

of the 2015 purchase price.

• The tenant’s lease had been extended and rental

levels increased by 13%. Throughout its hold

period the asset remained income producing with a

minimum yield of 11% against the purchase price.

• In October 2021, the Company completed on the

sale of its warehouse at Bessemer Road, Basingstoke

for a price of £5.9 million, a 73% premium above the

2016 purchase price.

• The tenant’s lease had been extended for a period

of five years and rental levels increased by 16%.

Strategy in Action (continued)

Bristol, 40 Queen Square

Proving new high rental levels

• Two new lettings secured at £30 per sq ft.

• Rental growth of 29% seen since acquisition.

• Rental growth expected to continue based upon

ongoing conversations elsewhere in the building.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Strategy in Action (continued)

15-33 Union Street, Bristol

Lengthening income streams in economically

activelocations

• During Q4 2021, the Company completed a new

15year lease to Roxy Leisure Limited at a rent of

£10per sq ft.

• The lease provides for five yearly RPI linked reviews,

collared and capped at 1.5% and 4% respectively.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Strategy in Action (continued)

Knowles Lane, Bradford

Inflation beating rental growth

• During March 2022, the Company settled the

September 2021 open market rent review with

tenant, Pilkington United Kingdom Ltd.

• The agreed rent, reflecting £4.50 per sq ft,

represents a 14% increase in income over the

three-year period.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

KPI AND DEFINITION RELEVANCE TO STRATEGY TARGET PERFORMANCE

1. EPRA NIY

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 Company’s EPRA NIY demonstrates the

ability to generate income from its portfolio

in the short term in order to meet its target

dividend.

7.50 - 10.00%

5.87%

at 31 March 2022

(31 March 2021:

7.37%)

2. True Equivalent Yield

The average weighted return a

property will produce according to the

present income and estimated rental

value (‘ERV’) assumptions, assuming

the income is received quarterly in

advance.

The Company’s True Equivalent Yield

demonstrates the Company’s ability to

generate income, both from its existing

leases and its ERVs, in order to meet its target

dividend.

7.50 - 10.00%

7.55%

at 31 March 2022

(31 March 2021:

8.15%)

3. Reversionary Yield

The expected return the property will

provide once rack-rented.

A Reversionary yield profile shows a potentially

sustainable income stream that can be

used to meet dividends past the expiry of a

property’s current leasing arrangements.

7.50 - 10.00%

7.64%

at 31 March 2022

(31 March 2021:

8.18%)

4. WAULT 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.

> 3 years

5.78 years

at 31 March 2022

(31 March 2021:

6.71 years)

Key Performance Indicators

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

KPI AND DEFINITION RELEVANCE TO STRATEGY TARGET PERFORMANCE

5. WAULT 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 Manager’s 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.

> 3 years

3.94 years

at 31 March 2022

(31 March 2021:

4.43 years)

6. NAV

NAV is the value of an entity’s assets

minus the value of its liabilities.

Provides stakeholders with the most relevant

information on the fair value of the assets and

liabilities of the Company.

Increase year

on year

£191.10 million

at 31 March 2022

(31 March 2021:

£157.08 million)

7. Leverage (Loan to NAV)

The proportion of the Company’s net

assets that is funded by borrowings.

The Company has changed the measure of its

Leverage KPI from ‘Loan to Gross Asset Value

(‘GAV’)’ to ‘Loan to NAV’. This is in line with the

measure used in its banking covenants and

so is considered to be more relevant to the

Company’s position. The target of 35% Loan

to NAV, which is the gearing limit at drawdown

under the RBSi facility, approximates to

the previous target of 25% Loan to GAV,

which is the measure used in the Company’s

Investment Guidelines. Gearing will continue

to be monitored using both measures, but will

be reported on the Loan to NAV basis.

35%

28.26%

at 31 March 2022

(31 March 2021:

25.15%)

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.

< 10.00%

10.69%/5.42%

excluding vacancy

contributed by

Glasgow*

at 31 March 2022

(31 March 2021:

8.96%/5.58%

excluding vacancy

contributed by

Glasgow*)

* Glasgow has exchanged to be sold with the condition of vacant possession.

Key Performance Indicators (continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

KPI AND DEFINITION RELEVANCE TO STRATEGY TARGET PERFORMANCE

9. Dividend

Dividends declared in relation to the

year. The Company targets a dividend

of 8.00 pence per Ordinary Share per

annum. However, given the current

COVID-19 situation, regard will be had

to the circumstances prevailing at the

relevant time in determining dividend

payments.

The dividend reflects the Company’s ability

todeliver a sustainable income stream from

itsportfolio.

8.00 pps

for the year ended

31 March 2022

(year ended

31 March 2021:

8.00 pps)

10. Ongoing Charges

The ratio of total administration

and operating costs expressed

as a percentage of average NAV

throughout the year.

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.

< 1.50%

1.35%

for the year ended

31 March 2022

(year ended

31 March 2021:

1.36%)

11. Profit Before Tax (‘PBT’)

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 year in which its

strategy is exercised.

8.00 pps

£46.70 million/

29.47 pps

for the year ended

31 March 2022

(year ended

31 March 2021:

£22.17 million/

13.98 pps

12. Shareholder Total Return

The percentage change in the

share price assuming dividends are

reinvested to purchase additional

Ordinary Shares.

This reflects the return seen by shareholders

on their shareholdings through share price

movements and dividends received.

8.00%

53.61%

for the year ended

31 March 2022

(year ended

31 March 2021:

33.72%)

13. EPRA EPS

Earnings from core operational

activities. A key measure of a

company’s underlying operating

results from its property rental business

and an indication of the extent to

which current dividend payments are

supported by earnings. See note 10 of

the financial statements.

This reflects the Company’s ability to generate

earnings from the portfolio which underpins

dividends.

8.00 pps

6.79 pps

for the year ended

31 March 2022

(year ended

31 March 2021:

6.19 pps)

Key Performance Indicators (continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report

Economic Outlook

Despite COVID-19 restrictions finally being lifted, the anticipated post-

pandemic rebound appears to have slowed as UK GDP fell by a disappointing

0.1% month-on-month in March 2022. It is likely this is primarily due to

a significant increase in the rate of inflation with a 30-year high of 9.0%

recorded for April 2022. Russia’s invasion of Ukraine, and the consequential

sanctions imposed by the international community, continues to drive

up energy and commodity prices. There is a risk that, as well as affecting

manufacturing industries, this may further damage consumer and investor

sentiment as real income and wealth levels are reduced. Economic growth is

now forecast to slow to 3.8% by 2022 year-end.

(SOURCE – Oxford Economics)

With higher than expected inflation, the Bank of England has increased interest rates from 0.50% in February 2022 to 1.25% in

June 2022. Despite this backdrop of rising inflation and rising interest rates, over a five-year period, we consider that bond yields are

likely to remain low with central banks reluctant to push economies into recession, particularly in times of war.

Property Market Outlook

Industrial

The sector has seen significant growth for a number of years due

to the growth of e-commerce. The COVID-19 pandemic caused

an acceleration of this trend as lockdowns and social distancing

forced changes in shoppers’ habits. These trends have positively

impacted values throughout the industrial market from the prime

end to more traditional manufacturing accommodation as older

stock has been redeveloped and low rented accommodation has

become scarcer.

Strong investor demand in the sector has compressed yields

and driven much value growth within the Company’s portfolio

and, as a result of a number of the asset values being felt to have

been maximised, two industrial assets were disposed of during

the period. For this reason, we exercise caution when analysing

pipeline assets in the sector.

Attributes which we still find very compelling within the sector

are the historically low levels of availability of accommodation

and continued strong tenant demand. It is these attributes which

continue to drive rental growth and with the portfolio’s average

passing rent within the sector being only £3.30 per sq ft we believe that we are ideally placed to be able to benefit from this. This growth

potential has been demonstrated by a number of recent asset management transactions including the Company’s asset in Bradford

where the settlement of a rent review during the period resulted in a 14% increase in income over a three-year period.

The industrial sector represents the portfolio’s largest sector holding, making up 50.3% of the portfolio’s value as at year-end. The

Company’s industrial holding delivered a total return of 34.8% during the year and an income yield of 6.3%. In contrast, benchmark

total return was 46.5%, reflecting the very strong investor demand seen for prime assets, which delivered a significantly lower income

yield of 3.7%.

Benchmark*AEW UK REIT

Capital Growth

Income Return Total Return

AEW UK REIT Industrial Performance vs. Benchmark

Source: MSCI 31 March 2022

* the Benchmark refers to MSCI/AREF PFI Balanced Funds

Quarterly Property Index.

Laura Elkin

Portfolio Manager

Henry Butt

Assistant Portfolio Manager

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Office

Despite numerous lockdowns and work from home mandates

during the pandemic, we have not seen the significant decline in

office occupation that some had predicted. It is certainly the case

that hybrid working has become more commonplace, however

it is clear that at least some exposure to the physical office brings

numerous benefits over its more solitary alternative, including

increased collaboration and higher levels of personal wellbeing.

UK employment levels have also remained robust, rising to

pre-pandemic levels and showing a historic high level.

The office assets within the portfolio have been the subject of

much recent discussion with the proposed sales of the Company’s

assets in Glasgow and Oxford both into alternative uses. When

considering office assets for investment, we have often sought to

acquire those showing strong alternative use values and we believe

that this has assisted in delivering the benchmark outperformance

that we have seen from the sector over recent periods.

The investment pipeline for offices focuses on strong, regional

centres and a preference for town or city centres rather than

business park locations where alternative uses may be more limited.

Our office assets represent the second largest sector holding, with 18.0% of the valuation. This was the strongest performing sector

relative to the Benchmark, achieving an outperformance of 13.2%, which was largely driven by capital growth outperformance of 13.7%

resulting from key asset management transactions.

Alternatives

This is a sector in which AEW as Investment Manager has

significant expertise and has seen a number of compelling

opportunities in the market. The Company’s current alternatives

holding comprises assets within the leisure sector that have been

selected due to their defensive, value protection characteristics as

well as their high-income yield.

The leisure sector suffered significant strain during the pandemic

as lockdowns kept customers away for many months. However,

due to the high levels of cost involved in relocation and fit out,

occupiers tend to move accommodation far less than in other

sectors. This has been shown by the fact that, since the lifting of all

social distancing restrictions, headway has been made in various

asset management initiatives within the Company’s portfolio. We

also find the sector attractive on a selective basis going forward,

particularly those properties that occupy larger land holdings or

sites in economically active areas such that they can often be

underpinned by alternative use values.

Assets held in alternative sectors comprise 7.0% of the 31 March

2022 valuation, all of which is within the leisure sector. The

Company’s alternative holdings outperformed the Benchmark,

with a relative outperformance of 7.5%, driven by an income return

outperformance of 8.6%.

Benchmark*AEW UK REIT

Capital Growth Income Return Total Return

AEW UK REIT Office Performance vs. Benchmark

Source: MSCI 31 March 2022

* the Benchmark refers to MSCI/AREF PFI Balanced Funds

Quarterly Property Index.

Benchmark*AEW UK REIT

Capital Growth Income Return Total Return

AEW UK REIT Alternatives Performance vs. Benchmark

Source: MSCI 31 March 2022

* the Benchmark refers to MSCI/AREF PFI Balanced Funds

Quarterly Property Index.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Retail

The high street retail sector (referred to as ‘Standard Retail’) suffered

greatly during the pandemic and experienced an acceleration of

trends already present in consumer habits. Values in high street retail

have now stabilised somewhat and we believe that the sector is likely

to offer opportunities for repurposing to alternative uses over the

medium term.

By contrast, performance in the retail warehousing sector has

generally been significantly stronger than that seen on the high

street due to the ease of parking and open air environments which,

in a post COVID-19 world, have been perceived as more pleasant

and safer places to shop. This effect has been felt quite acutely in

the growing demand for investment properties within the sector

and we expect the Company’s recently purchased investments to

benefitaccordingly.

We are attracted to assets located within established commercial

locations with low passing rents and particularly where values

for warehousing assets have been surpassed by those within the

existinguse.

Retail represents 11.6% of the valuation and our retail assets have performed weaker than the Benchmark, as Central London retail,

where we have no exposure, props up the Benchmark performance to some extent.

Property Portfolio

The Company made four acquisitions during the year:

Arrow Point Retail Park, Shrewsbury

In May 2021, the Company acquired Arrow Point Retail Park in Shrewsbury for a purchase price of

£8.35 million. The established retail park is located on a busy commercial estate and is fully let. The

estate provides a net initial yield of 8.7%, with low passing rents compared with competing locations. It

comprises a modern purpose-built retail park constructed in 2007, arranged across nine units with 176

car parking spaces, and is prominently located within the main retail warehouse provision of Shrewsbury,

approximately 2.5 miles north east of the town centre.

Capital Growth

Benchmark*AEW UK REIT

Income Return

Total Return

Benchmark*AEW UK REIT

AEW UK REIT Retail Performance vs. Benchmark

Source: MSCI 31 March 2022

* the Benchmark refers to MSCI/AREF PFI Balanced Funds

Quarterly Property Index.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Union Street, Bristol

In June 2021, the Company acquired 15-33 Union Street for a purchase price of £10.2 million.

15-33Union Street occupies a prominent location in Bristol city centre, opposite The Galleries Shopping

Centre and near Cabot Circus, Bristol’s premier retail destination. Located on a busy thoroughfare for

pedestrians, the 65,238 sq ft site experiences high footfall and is ideally suited for retail or leisure units.

Constructed in 2001, the property currently comprises five purpose built split-level retail or leisure units

over four floors and road access to both Union Street and Fairfax Street. Four of the five units are let to

three household names and a successful local retailer. The location of the site has been identified as a

major regeneration area and it offers the ability for further growth through development.

Central Six Retail Park, Coventry

In November 2021, the Company completed the acquisition of the 11.9 acre Central Six Retail Park

in Coventry for a purchase price of £16.4 million. The purchase price reflects a net initial yield of circa

11%, with an anticipated reversionary yield of circa 12.5% and a capital value per sq ft of £110. The

site occupies a strategic and central location, approximately 0.7 miles away from Coventry city centre

and adjacent to Coventry Railway Station and the Friargate Regeneration area. The retail park is highly

accessible and provides 148,765 sq ft of modern purpose-built retail space with parking for 635

cars. Site coverage is low at just 27%. Units are let to TK Maxx, Next, Boots, Sports Direct, Burger King

and Poundland. The site presents opportunities to add value through active asset management by

renewing current tenancies and securing new tenants on the park. This purchase will be accretive to

the Company’s income return and it is anticipated that asset management initiatives will result in NAV

growth over the medium term.

Greyfriars Road, Cardiff

In February 2022, the Company completed the acquisition of PRYZM nightclub in Cardiff for a purchase

price of £3.6 million reflecting £92 per sq ft. The purchase price represents a net initial yield of 8%, with

an anticipated reversionary yield of circa 9%. The property is prominently located within the leisure and

late-night district of Cardiff city centre near the Principality Stadium and St David’s Shopping Centre.

Cardiff University and the University of Wales are located approximately 300m from the property,

contributing to the total student population of circa 75,000.

The property provides 39,469 sq ft of nightclub and bar accommodation and is single-let to a subsidiary

of Rekom UK (formerly The Deltic Group), providing over 14 years’ unexpired lease term. Rekom UK is one

of the largest specialist late-night operators in the UK with 46 clubs and bars across a number of brands.

The nightclub trades as “PRYZM” and “Steinbeck & Shaw”.

The Company made two disposals during the year:

Langthwaite Business Park, South Kirkby

During August 2021, a sale of the Company’s asset at Langthwaite Business Park in South Kirkby was completed for a price of

£10.84 million. The sale price achieved was 87% ahead of the purchase price paid by the Company for the asset in Q4 2015.

No capital expenditure had been invested into the asset during its hold period, however the tenant’s lease had been extended and rental

levels increased by 13%. Throughout its hold period the asset remained income producing with a minimum yield of 11% against the

purchase price.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Bessemer Road, Basingstoke

In October 2021, the Company completed on the sale of its warehouse at Bessemer Road, Basingstoke for a price of £5.9 million, a 73%

premium above the purchase price of £3.4 million paid in Q1 2016.

No capital expenditure had been invested into the asset during its hold period, however, prior to the sale, the tenant’s lease had been

extended for a period of five years and rental levels increased by 16%. Throughout its hold period the asset remained income producing

with a minimum yield of 9.8% against the purchase price.

Asset Management Update

The Company completed the following material asset management transactions during the period:

– Arrow Point Retail Park, Shrewsbury (retail warehousing) – During Q2 2021, the Company completed an agreement with tenant

British Heart Foundation to push its November 2021 break option out to December 2024 in return for four months’ rent free. The

majority of the rent free was used to write off rent arrears predating the Company’s ownership.

– Diamond Business Park, Wakefield (industrial) – During Q2 2021, the Company completed a new five year lease at Unit 14

reflecting a rent of £3.75 per sq ft. The annual rental of £41,866 pa sits 25% above the independently assessed March 2021

estimated rental value and six months’ rent free was given as an incentive. The lease was agreed outside of the provisions of the

Landlord and Tenant Act 1954 meaning that the Company benefits from greater flexibility upon expiry of the lease.

– Bristol, 40 Queen Square (office) – During Q2 2021, the Company completed a new five year lease to Brewin Dolphin at a rent of

£103,770 pa reflecting £30 per sq ft versus the previous passing rent of £22 per sq ft and the March 2021 ERV of £26 per sq ft. A

12 month rent free incentive was given.

– Vantage Point, Hemel Hempstead (office) – During Q3 2021, the Company completed a new five year lease to Netronix Integration

Limited at a rent of £33,683 pa reflecting £14.50 per sq ft. The rental level agreed reflects £3 per sq ft above valuers, ERV. Four months’

rent free incentive was given to the tenant who also has the ability to bring the lease to an end at the expiry of three years.

– Bristol, 40 Queen Square (office) – During Q3 2021, the Company completed a lease renewal to Candide Limited until

February 2025 at a rent of £30 per sq ft, £116,970 pa. The previous passing rent reflected £22.81 per sq ft and only 1.5 months’

rent free incentive was given.

– Sarus Court, Runcorn (industrial) – During Q3 2021, the Company completed a 10 year lease renewal with tenant NTT United

Kingdom Limited, trading as Dimension Data. Rental income from the lease was agreed at £5.75 per sq ft as compared to the

previous level of passing rent of £5.25 per sq ft. There is a tenant break option in December 2025. Five months’ rent free was given to

the tenant as an incentive.

– 15-33 Union Street, Bristol (Standard Retail) – During Q4 2021, the Company completed a new 15 year lease to Roxy Leisure

Limited, a “competitive social” leisure occupier, at a rent of £181,000 pa reflecting £10 per sq ft. The lease provides for five yearly

RPI linked reviews, collared and capped at 1.5% and 4% respectively. A 12-month rent free period was granted to the tenant as an

incentive along with a £300,000 capital contribution to the tenant’s fit out. On acquisition in June 2021, the 18,122 sq ft of upper

floor space was vacant, with the Company benefiting from a 12-month rental guarantee from the vendor of the asset with a value

of £190,000.

– Pearl House, Nottingham (Standard Retail) – During Q4 2021, the Company completed the renewal of Cancer Research’s lease

for a term of 5 years with a tenant break in year three, subject to a break penalty equivalent to three months’ rent. The rent agreed is

£21,000 pa. Three months’ rent-free incentive was given to the tenant.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

– Above Bar Street, Southampton (Standard Retail) – During Q4 2021, the Company completed a new straight five year lease

to Shoe Zone at its property at 69 Above Bar Street. The transaction will provide the Company with a rental income of £80,000 pa

with 12 months’ rent free incentive given to the tenant. The lease was agreed outside of the provisions of the Landlord and Tenant

Act 1954 meaning that the Company benefits from greater flexibility upon expiry of the lease. The transaction exchanged during

Q3 2021 and was subject to approximately £40,000 of landlord works which have now been completed.

– Walkers Lane, St Helens (industrial) – During Q4 2021, the Company reached agreement with tenant Kverneland in respect of its

October 2020 open market rent review. The review has been settled at £389,000 pa reflecting £4.16 per sq ft and representing a

£89,000 pa increase above the prior passing rent.

– Westlands Distribution Park, Weston-Super-Mare (industrial) – During Q4 2021, the Company completed a new letting to

North Somerset District Council at £20,000 pa, rising to £30,000 pa in April 2022. The lease provides for five yearly upwards only

rent reviews to the higher of open market or RPI (capped at 1.5% per annum) in 2027 and 2032. The lease expires in April 2037 with

mutual rolling break options in 2024, 2027 and 2032.

– Sarus Court, Runcorn (industrial) – During Q4 2021, the Company completed a new 10 year lease to KMS (Europe) Ltd at a

headline rent of £6 per sq ft reflecting an annual rental income of £95,000 pa. The letting set a new high rental tone for the estate

and far exceeds the prior passing rent of £4.83 per sq ft. The incoming tenant was given the benefit of a 12-month rent free period

spread out over the first three years of the lease.

– Knowles Lane, Bradford (industrial) – During March 2022, the Company settled the September 2021 open market rent review

with tenant, Pilkington United Kingdom Ltd, at our industrial unit in Bradford. The agreed rent is £208,000 per annum reflecting

£4.50 per sq ft. The previous passing rent was £182,500 per annum reflecting £3.95 per sq ft and representing a 14% increase over a

three-year period.

– Apollo Business Park, Basildon (industrial) – During March 2022, the Company completed a new 10-year letting at Unit 1 Apollo

Business Park, Basildon. The lease provides the tenant with a five-year break option and offers six months’ rent free. The letting

produces annual rental income of £240,750 and realises a new headline rent of £8 per sq ft versus an expected market rental value

of £7 per sq ft.

– First Avenue, Deeside (industrial) – In Q4 2021, incumbent tenant, Magellan Aerospace (UK) Ltd, served notice to bring its lease

to an end on 1 April 2022. Discussions have been ongoing since the service of the break notice to agree terms for a short-term lease

extension. This agreement has now been signed, extending the tenant’s occupation by six months. Upon completion of the new

lease, the tenant paid to the Company a dilapidations settlement of £250,000, three months’ rent up front at a rate of £6 per sq ft

(vs market rent value of £5.25 per sq ft and previous passing rent of £3.75 per sq ft) and a single lease premium of £50,000. The total

capital receipt from the tenant upon completion was £457,400 excluding VAT. The property continues to be marketed.

– Bath Street, Glasgow (office) – During February 2022, the Company received confirmation that planning consent had been

granted for the demolition and development of a 527-unit student accommodation scheme at 225 Bath Street in Glasgow city

centre. This follows the exchange of contracts for the sale of the site with a subsidiary company of IQ Student Accommodation in

October 2020. The sale of 225 Bath Street is expected to complete after the standard three-month judicial review period.

Once the sale of Bath Street completes, occupancy within the portfolio is expected to increase by just over 4% with a corresponding

decrease in the Company’s costs and associated increase in income once sale proceeds have been reinvested. Earnings are then

expected to normalise at a level much closer to the Company’s long-term target.

Vacancy

The portfolio’s overall vacancy level now sits at 5.42%, excluding vacancy contributed by the asset at 225 Bath Street, Glasgow, which as

discussed above, has now been exchanged for sale for alternative use redevelopment. As a condition of the sale agreement, full vacancy

had to be achieved in the building before the sale could be completed. Including this asset, overall vacancy is 10.69%.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Financial Results

The Company’s Net Asset Value as at 31 March 2022 was £191.10 million or 120.63 pps (31 March 2021: £157.08 million or 99.15 pps).

This is an increase of 21.48 pps or 21.7% over the year, with the underlying movement in NAV set out in the table below:

EPRA earnings per share for the period was 6.79 pps which, based on dividends paid of 8.00 pps, reflects a dividend cover of 84.88%.

The increase in dividend cover compared to the prior 12-month period has largely arisen due to improvements in rent collection levels,

along with successful legal outcomes that have recovered significant arrears. Income across the tenancy profile has remained largely

intact. Collection rates have reached 99% for both the March 2022 and June 2022 quarters, with further payments expected to be

received under longer term payment plans; of the outstanding arrears, £0.76 million has been provided for expected credit losses.

Financing

As at 31 March 2022, the Company had a £60.00 million loan facility with RBSi, which was due to be in place until October 2023, the

details of which are presented below:

31 March 2022 31 March 2021

Facility

£60.00 million

Drawn

£54.00 million

£39.50 million

Gearing (Loan to NAV)

28.26%

25.15%

Interest rate 2.20% all-in

(SONIA + 1.4%)

1.44% all-in

(LIBOR +1.4%)

Notional Value of Loan Balance Hedged

95%

130.4%

Due to GBP LIBOR ending at the end of 2021, the Company transitioned to SONIA on 20 July 2021, with a credit adjustment spread of

0.0981%. Post year-end, the Company secured a new £60.00 million, five-year term loan facility with AgFe. See page 5 for further detail.

NAV as at

1 April 2021

NAV as at

31 March

2022

Interim

dividend

paid

Expenses

for the

period

Income

earned for

the period

Valuation

change in

derivatives

Portfolio

acquisition

costs

NAV (PPS)

115

135

105

100

125

110

130

120

Capital

expenditure

Proﬁt on

sale of

investments

Valuation

changes

in property

portfolio

99.15

(1.60)

22.49 0.48

10.87

(4.07)

(8.00)

120.63

(0.49)

1.80

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Property Portfolio

Summary by Sector as at 31 March 2022

Sector

Number

assets

Valuation

(£m)

Area

(sq ft)

Vacancy

by ERV

(%)

WAULT

to break

(years)

Gross

passing

rental

income

(£m)

Gross

passing

rental

income

(£psf)

ERV

(£m)

ERV

(£psf)

Rental

income

(£m)

Like-

for-like

rental

growth

(£m)

Like-

for-like

rental

growth

(%)

Industrial 19 120.75 2,364,571 4.87 3.60 7.80 3.30 9.28 3.92 7.88

0.29 4.16

Office 5 43.28 251,812 31.59 3.88 1.58 6.27 3.64 14.47 1.74

(0.71) (28.89)

Retail

Warehouse 3 34.25 285,704 14.78 2.05 3.11 10.89 3.38 11.82 2.17

(0.01) (1.98)

Standard

Retail 6 24.98 237,792 2.53 5.03 2.58 10.87 2.33 9.79 2.59

(0.06) (3.19)

Alternatives 3 16.92 151,824 0.00 7.67 1.80 11.83 1.59 10.47 1.54 (0.05) (2.98)

Portfolio 36 240.18 3,291,703 10.69 3.94 16.87 5.13 20.22 6.14 15.92

(0.54) (3.91)

Summary by Geographical Area as at 31 March 2022

Geographical

area

Number

assets

Valuation

(£m)

Area

(sq ft)

Vacancy

by ERV

(%)

WAULT

to break

(years)

Gross

passing

rental

income

(£m)

Gross

passing

rental

income

(£psf)

ERV

(£m)

ERV

(£psf)

Rental

income

(£m)

Like-

for-like

rental

growth

(£m)

Like-

for-like

rental

growth

(%)

West Midlands 5 42.65 598,405 14.03 2.76 3.73 6.23 4.01 6.69 2.72 (0.12) (9.22)

South West 5 40.08 517,232 6.42 3.28 2.78 5.38 3.48 6.73 2.73 0.26 13.89

Yorkshire and

Humberside 7 38.02 791,858 6.75 2.44 2.23 2.81 3.33 4.20 2.54 (0.22) (8.77)

South East 4 27.90 137,026 5.01 5.06 1.36 9.91 1.72 12.57 1.85 (0.14) (8.07)

Eastern 5 26.90 344,339 0.00 2.19 1.99 5.78 2.12 6.16 1.85 0.19 11.51

Wales 3 23.13 415,607 0.00 7.50 1.76 4.24 1.84 4.43 1.35 0.00 0.12

North West 4 19.15 301,654 0.00 4.33 1.56 5.17 1.43 4.75 1.51 0.16 11.59

Rest of London 1 9.90 71,720 0.00 9.62 0.96 13.40 0.75 10.45 0.96 (0.04) (4.56)

Scotland 1 8.50 85,643 91.85 1.42 0.09 1.10 1.16 13.54 0.01 (0.64) (98.55)*

East Midlands

1 3.95 28,219 0.00 4.67 0.41 14.56 0.38 13.38 0.40 0.01 2.69

Portfolio

36 240.18 3,291,703 10.69 3.94 16.87 5.13 20.22 6.14 15.92 (0.54) (3.91)

* Excluding the vacancy from 225 Bath Street Glasgow, which has exchanged to be sold with the condition of vacant possession, the vacancy rate is

5.42%.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Property Portfolio (continued)

Properties by Market Value as at 31 March 2022

Property Sector Region

Market Value

Range (£m)

Top 10:

Central Six Retail Park, Coventry

Retail Warehouses

West Midlands 15.0 – 20.0

2. Eastpoint Business Park, Oxford

Offices South East 15.0 – 20.0

Gresford Industrial Estate, Wrexham Industrial Wales 10.0 – 15.0

40 Queen Square, Bristol Offices South West 10.0 – 15.0

Lockwood Court, Leeds Industrial Yorkshire and Humberside 10.0 – 15.0

15-33 Union Street, Bristol

Standard Retail

South West 10.0 – 15.0

London East Leisure Park, Dagenham

Alternatives

Rest of London 7.5 – 10.0

Arrow Point Retail Park, Shrewsbury

Retail Warehouses

West Midlands 7.5 – 10.0

Apollo Business Park, Basildon Industrial Eastern 7.5 – 10.0

10.

225 Bath Street, Glasgow Offices Scotland 7.5 – 10.0

The Company’s top 10 properties listed above comprise 49.4% (2021: 49.7%) of the total value of the portfolio.

Industrial

Offices

Alternative

Standard Retail

Retail Warehouse

Yorkshire and

Humberside

South East

Eastern

South West

West Midlands

East Midlands

North West

Wales

Rest of London

Scotland

Sector weighting by valuation –

high industrial

weighting and low exposure to retail

Geographical weighting by valuation –

highly diversiﬁed across the UK

50%

18%

11%

14%

16%

11%

17%

18%

10%

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Property Portfolio (continued)

Property Sector Region

Market Value

Range (£m)

11. Sarus Court, Runcorn

Industrial North West 7.5 – 10.0

12.

Storey’s Bar Road, Peterborough Industrial Eastern 7.5 – 10.0

13.

Euroway Trading Estate, Bradford Industrial Yorkshire and Humberside 5.0 – 7.5

14.

Westlands Distribution Park, Weston Super Mare Industrial South West 5.0 – 7.5

15. Brockhurst Crescent, Walsall

Industrial West Midlands 5.0 – 7.5

16.

Barnstaple Retail Park, Barnstaple Retail Warehouses South West 5.0 – 7.5

17.

Walkers Lane, St Helens Industrial North West 5.0 – 7.5

18.

Deeside Industrial Park, Deeside Industrial Wales 5.0 – 7.5

19.

Diamond Business Park, Wakefield Industrial Yorkshire and Humberside 5.0 – 7.5

20.

Mangham Road, Rotherham Industrial Yorkshire and Humberside < 5.0

21.

710 Brightside Lane, Sheffield Industrial Yorkshire and Humberside < 5.0

22.

Oak Park, Droitwich Industrial West Midlands < 5.0

23.

Pipps Hall Industrial Estate, Basildon Industrial Eastern < 5.0

24.

Pearl House, Nottingham

Standard Retail

East Midlands < 5.0

25.

Eagle Road, Redditch Industrial West Midlands < 5.0

26.

Cedar House, Gloucester Offices South West < 5.0

27.

PRYZM, Cardiff

Alternatives

Wales < 5.0

28.

69-75 Above Bar Street, Southampton Standard Retail South East < 5.0

29.

Clarke Road, Milton Keynes Industrial South East < 5.0

30.

Odeon Cinema, Southend-on-Sea

Alternatives

Eastern < 5.0

31.

Bridge House, Bradford Industrial Yorkshire and Humberside < 5.0

32.

Commercial Road, Portsmouth

Standard Retail

South East < 5.0

33.

Pricebusters Building, Blackpool

Standard Retail

North West < 5.0

34.

Vantage Point, Hemel Hempstead Offices Eastern < 5.0

35. Moorside Road, Swinton Industrial North West < 5.0

36. 11/15 Fargate, Sheffield Standard Retail Yorkshire and Humberside < 5.0

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Property Portfolio (continued)

UK property locations as at 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Top 10 Tenants as at 31 March 2022

Tenant Sector Property

Passing

Rental

Income

(£’000)

% of

Portfolio

Total

Passing

Rental

Income

Plastipak UK Ltd Industrial

Gresford Industrial Estate, Wrexham

883 5.2

Sports Direct Retail Various 678 4.0

Wyndeham Group Industrial Wyndeham, Peterborough 644 3.8

Poundland Limited Retail Various 631 3.7

Mecca Bingo Ltd Leisure London East Leisure Park, Dagenham 625 3.7

Harrogate Spring Water Limited Industrial

Lockwood Court, Leeds

603 3.6

Magellan Aerospace (UK) Ltd Industrial Excel 95, Deeside 580 3.4

Odeon Cinemas Leisure Victoria Circus, Southend-on-Sea 535 3.2

Wilko Retail Limited Retail

15-33 Union Street, Bristol

481 2.9

10.

Advanced Supply Chain (BFD) Ltd Industrial

Euroway Trading Estate, Bradford

467 2.8

The Company’s top ten tenants, listed above, represent 36.3% (2021: 38.8%) of the total passing rental income of the portfolio.

Lease Expiry Profile as at 31 March 2022

Approximately £3.85 million of the Company’s current contracted income stream is subject to an expiry or break within the 12-month

period commencing 1 April 2022.

< 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5-6 years 6-7 years 7-8 years 8-9 years 9-10 years 15+ years10-15 years

7.0

AEW UK REIT Lease Income to Break

£m

6.0

5.0

3.0

4.0

2.0

1.0

0.0

Contracted Rent ERV (excl. vacancy)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

Alternative Investment Fund Manager (‘AIFM’)

AEW UK Investment Management LLP is authorised and regulated by the FCA as a full-scope AIFM and provides its services to the

Company.

The Company has appointed Langham Hall UK Depositary LLP (‘Langham Hall’) to act as the depositary to the Company, responsible for

cash monitoring, asset verification and oversight of the Company.

Information Disclosures under the AIFM Directive

Under the AIFM Directive, the Company is required to make disclosures in relation to its leverage under the prescribed methodology

of the Directive.

Leverage

The AIFM Directive prescribes two methods for evaluating leverage, namely the ‘Gross Method’ and the ‘Commitment Method’. The

Company’s maximum and actual leverage levels are as per below:

31 March 2022 31 March 2021

Leverage Exposure Gross Method

Commitment

Method Gross Method

Commitment

Method

Maximum Limit 140% 140% 140% 140%

Actual 125% 129% 114% 125%

In accordance with the AIFM Directive, leverage is expressed as a percentage of the Company’s exposure to its NAV and adjusted in line

with the prescribed ‘Gross’ and ‘Commitment’ methods. The Gross method is representative of the sum of the Company’s positions

after deducting cash balances and without taking into account any hedging and netting arrangements. The Commitment method is

representative of the sum of the Company’s positions without deducting cash balances and taking into account any hedging and netting

arrangements. For the purposes of evaluating the methods above, the Company’s positions primarily reflect its current borrowings and NAV.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Investment Manager’s Report (continued)

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) incentivising staff performance over longer periods of time;

(5) awarding 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 for the year ended to 31 December 2021.

Year ended

31 December 2021

Total remuneration paid to employees during financial year:

a) remuneration, including, where relevant, any carried interest paid by the AIFM:

£2,938,680

b) the number of beneficiaries

The aggregate amount of remuneration of the AIFM Remuneration Code staff, broken down by:

a) senior management

£753,900

b) members of staff

£2,184,780

Fixed

remuneration

Variable

remuneration

Total

remuneration

Senior management £681,900 £72,000 £753,900

Staff

£1,615,193 £569,587 £2,184,780

Total

£2,297,093 £641,587 £2,938,680

Fixed remuneration comprises basic salaries and variable remuneration comprises bonuses.

AEW UK Investment Management LLP

21 June 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Principal Risks and Uncertainties

The Company’s assets consist of UK commercial property. Its principal risks are therefore related to the commercial property market in

general, but also to the particular circumstances of the individual properties and the tenants within the properties.

The Board has overall responsibility for reviewing the effectiveness of the system of risk management and internal control which is

operated by the Investment Manager. The Company’s ongoing risk management process is designed to identify, evaluate and mitigate

the significant risks the Company faces.

At least twice a year, the Board undertakes a formal risk review with the assistance of the Audit Committee, to assess the adequacy

and effectiveness of the Investment Manager and other service providers’ risk management and internal control processes. The Audit

Committee is responsible for reviewing the principal and emerging risks facing the Company and, in liaison with the Investment

Manager, advises the Board on these risks.

The Board has carried out a robust assessment of the principal and emerging risks facing the Company, including those that would

threaten its business model, future performance, solvency or liquidity.

An analysis of the principal risks and uncertainties is set out below. The risks below do not purport to be exhaustive as some risks are not

yet known and some risks are currently not deemed material but could turn out to be material in the future.

Principal Risks Key

1. Property market

2. Property valuation

3. Tenant default

4. Asset management initiatives

5. Due diligence

6. Fall in rental rates

7. Breach of borrowing covenants

8. Interest rate rises

9. Availability and cost of debt

10. Dependence on Investment Manager and other third

party service providers

11. Ability to meet objectives

12. Business interruption

13. Company REIT status

14. General political and economic risks

15. COVID-19

16. Environmental transition risk

17. Physical risk to properties

The matrix above illustrates the Company’s assessment of the impact and probability of the principal risks identified.

Probability

High

Impact

Low

High

1615

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Principal risks and their potential

impact How risk is managed Risk assessment

REAL ESTATE RISKS

1. 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; and

(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.

Probability: Moderate

Impact: Moderate to High

Movement: No change

2. 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

external valuer (Knight Frank LLP) to value

the properties at fair value in accordance

with accepted RICS appraisal and valuation

standards.

Probability: Low

Impact: Low to Moderate

Movement: Decrease

3. Tenant default

Failure by tenants to fulfil their rental

obligations could affect the income

that the properties earn and the ability

of the Company to pay dividends to its

shareholders.

Comprehensive due diligence is undertaken

on all new tenants. Tenant covenant checks

are carried out on all new tenants where a

default would have a significant impact.

The asset management team conducts

ongoing monitoring and liaison with

tenants to manage potential bad debt risk.

Probability: Moderate

Impact: Moderate to High

Movement: Decrease

4. 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.

Probability: Low to Moderate

Impact: Low to Moderate

Movement: No change

Principal Risks and Uncertainties (continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Principal risks and their potential

impact How risk is managed Risk assessment

REAL ESTATE RISKS (continued)

5. 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 NAV and the price of the

Company’s Ordinary Shares.

The Company’s due diligence relies

on work (such as legal reports on title,

property valuations, environmental and

building surveys) outsourced to third

parties who have expertise in their areas.

Such third parties have professional

indemnity cover in place.

Probability: Low

Impact: Moderate

Movement: No change

6. 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 builds a diversified property

and tenant base with subsequent

monitoring of concentration to individual

occupiers (top ten tenants) and sectors

(geographical and sector exposure).

The Investment Manager holds quarterly

meetings with its Investment Strategy

Committee and regularly meets the Board

of Directors to assess whether any changes

in the market present risks that should be

addressed in the Company’s strategy.

Probability: Moderate to High

Impact: Moderate to High

Movement: No change

BORROWING RISKS

7. Breach of borrowing covenants

The Company has entered into a term

credit facility with RBSi.

Material adverse changes in valuations

and net income may lead to breaches in

the Loan to Value (‘LTV’) and interest cover

ratio covenants.

The Investment Manager will maintain a

close relationship with its new loan finance

provider, AgFe, to ensure continuing

dialogue around 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.

Probability: Low to Moderate

Impact: Moderate to High

Movement: Decrease

Principal Risks and Uncertainties (continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Principal risks and their potential

impact How risk is managed Risk assessment

BORROWING RISKS (continued)

8. Interest rate rises

The Company’s borrowings through a

term credit facility are subject to interest

rate risk through changing SONIA rates.

Any increases in SONIA rates may have an

adverse effect on the Company’s ability to

pay dividends.

As detailed on page 5 (financing section of

Chairman’s Statement), the Company has

secured a new fixed rate loan facility with

AgFe which, by definition, protects the

Company from rising interest rates.

In the case of variable rate loans, the

Company uses interest rate caps on a

significant notional value of the loan to

mitigate the adverse impact of possible

interest rate rises.

The Investment Manager and Board of

Directors monitor the level of hedging and

interest rate movements to ensure that

the risk is managed appropriately.

Probability: Moderate

Impact: Low

Movement: Decrease

9. Availability and cost of debt

The RBSi loan facility was due to mature in

October 2023 and therefore, the Company

elected to undertake a re-financing

which concluded in May 2022, but

had not completed by year-end. The

re-financed loan is held with AgFe and is a

£60.00mfacility.

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.

The Company actively monitors the loan

term and engages in loan extension

negotiations far in advance of expiry.

Probability: Moderate

Impact: Low

Movement: Decrease

Principal Risks and Uncertainties (continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Principal risks and their potential

impact How risk is managed Risk assessment

CORPORATE RISKS

10. Dependence on Investment

Manager and other third party

service providers

The Company has no employees and

is reliant upon the performance of its

Investment Manager and third party

service providers. Failure by the Investment

Manager and/or 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 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.

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.

Probability: Moderate to High

Impact: Moderate

Movement: No change

11. 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 asset and 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.

Probability: Moderate to High

Impact: Moderate to High

Movement: No change

12. Business interruption

Cyber-attacks on the Investment

Manager’s and/or other service providers’

IT systems could lead to disruption,

reputational damage, regulatory

(including GDPR) or financial loss to the

Company.

The Investment Manager and other service

providers’ staff are capable of working

remotely for an extended time period.

The Investment Manager’s and other

service providers’ IT systems are protected

by anti-virus software and firewalls that

are updated regularly. Fire protection and

access security procedures exist at all the

Company’s managed properties, along

with the offices of its Investment Manager

and other service providers.

Probability: Low to Moderate

Impact: Moderate

Movement: No change

Principal Risks and Uncertainties (continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Principal risks and their potential

impact How risk is managed Risk assessment

TAXATION RISKS

13. 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 advisers to monitor REIT

compliance requirements.

Probability: Low

Impact: Moderate to High

Movement: No change

POLITICAL/ECONOMIC RISKS

14. General political and

economic risks

Political and macroeconomic events

present risks to the real estate and

financial markets that affect the

Company and the business of its tenants.

The level of uncertainty that such events

bring has been highlighted in recent

times, most pertinently the effects of the

UK’s exit from the EU in January 2021. In

addition, the current war in Ukraine and

associated sanctions on Russia continue

to drive-up energy and commodity prices.

This might further damage consumer and

investor sentiment as real income and

wealth levels are reduced.

The Board considers the impact of

political and macroeconomic events when

reviewing strategy.

Probability: Moderate to High

Impact: Moderate to High

Movement: No change

15. COVID-19

The economic disruption arising from

the COVID-19 virus could impact rental

income receipts from tenants, the ability

to access funding at competitive rates,

maintain the Company’s dividend policy

and its adherence to the HMRC REIT

regime, particularly if the UK government

restrictions are in place for a prolonged

period. Now that lockdown restrictions

have been lifted, the Company has

experienced a return to pre-COVID-19 rent

collection levels and a marked reduction in

the disruption caused by COVID-19.

The Investment Manager continues to

monitor the impact that COVID-19 has

had on the Company’s assets and its

tenants in order to protect the Company’s

cash flow regarding rent collection, impact

on dividends and banking covenants.

The Investment Manager continues to

monitor the financial health of its suppliers

to ensure the impact to the Company and

its service providers is minimised.

Probability: Low to Moderate

Impact: Moderate

Movement: Decreasing

Principal Risks and Uncertainties (continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Principal risks and their potential

impact How risk is managed Risk assessment

POLITICAL/ECONOMIC RISKS

(continued)

16. Environmental transition risk

Failure to identify and mitigate the

transition risk for climate change could

lead to the Company holding stranded

assets and lead to a negative impact on

its reputation. Failure by the Company to

meet required regulatory standards could

lead to increased stakeholder concern and

negative feedback.

The Company has engaged specialist

environmental consultants to advise the

Board on compliance with regulatory

requirements and adopting best

practice where possible. All prospective

acquisitions and asset management

initiatives are influenced by environmental

assessments undertaken by the Company,

such as ensuring they are in conformance

with the Minimum Energy Efficiency

Standard (‘MEES’) Regulations. An Asset

Sustainability Action Plan (‘ASAP’) initiative

has been introduced by the Company,

which tracks environmental initiatives

across the portfolio on an asset-by-asset

basis for targeted, relevant and specific

implementation of environmental

improvements.

Probability: Moderate

Impact: Moderate

Movement: No change

17. Physical risk to properties

The risk of physical damage to properties

as a result of environmental factors such

as flooding and natural fires. In the

long-term, changes in climate and/or

weather systems may mean properties

become unviable to tenants.

The Company obtains environmental

surveys for all acquisitions, which mitigate

the short-term risk of climate-related

damage to properties owned. The

Investment Manager’s asset management

team perform regular site visits to

the Company’s properties in order to

continually assess the physical risk posed

to them.

Probability: Low

Impact: Moderate to High

Movement: No change

Principal Risks and Uncertainties (continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

s172 Statement

The Directors’ overarching duty is to promote the success of the Company for the benefit of its shareholders, having regard to the

interests of its stakeholders, as set out in section 172 of the Companies Act 2006 (the ‘Act’). The Directors have considered each aspect

of this section of the Act and consider that the information set out below is particularly relevant in the context of the Company’s

business as an externally managed investment company which does not have any employees or suppliers.

We set out in the table below our key stakeholders, the nature of their relationship with the Company and Board, their key interests and

how we engage with those stakeholders.

Our relationships with stakeholders are factored into Board discussions and decisions made by the Board will consider the impact on the

stakeholders, in accordance with s172 of the Act.

Stakeholder Interests Engagement

Investors

Our shareholders are impacted directly by

the financial performance of the Company

through dividends and share price

movements.

They also play an important role in

monitoring the governance of the

Company.

– Sustainable growth of the Company

and achieving target returns

– Good relationship with the Company

and Board

– Effective structure and control

framework

– Impact of the Company on the wider

community and environment

– Reputation of the Company

– AGM, Annual Report, regulatory

announcements

– Quarterly update report and other

key information published on the

website

– Roadshows, meetings and

presentations via the Investment

Manager

Service providers

Key functions of the Company are

outsourced to third-party suppliers,

including investment management,

property management, administration,

company secretarial, registrar, depositary

and legal services. It is important to

develop strong long-term working

relationships with these providers to

enhance the efficiency of the Company’s

operations, as well as that of the providers

themselves.

– Relationship with the Company

andBoard

– Fair contract terms and service-level

agreements

– Reputation of the Company

– The Company’s performance and

long-terms prospects

– Effective and regular communication

– Service-level agreements

– Formal tender processes where

appropriate

Tenants

The Company’s strategy in relation to its

individual assets will directly affect the

tenants in occupation of those assets.

– Good communication and relationship

with the Company as landlord

– Fair lease terms

– Long-term strategy for the asset in

line with the objectives of the tenant’s

activities

– Site visits and face-to-face meetings

through the Investment Manager

– Formal negotiations

– Ongoing communication through

the property manager

Stakeholder Engagement

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Stakeholder Engagement (continued)

Stakeholder Interests Engagement

The wider community and environment

The Company’s physical real estate

assets have a direct impact on their local

communities depending on their primary

use and on the environment through their

emissions and energy usage.

– Impact of properties and their business

plans on the local economy

– Impact of properties on the

attractiveness and appeal of the

localarea

– Energy efficiency and greenhouse gas

emissions

– Publishing of Sustainability Disclosure

Report and Greenhouse Gas

Emissions Statement

– Global Real Estate Sustainability

Benchmark (‘GRESB’) reporting

– Communication with local authorities

via Investment Manager

Principal decisions made by the Board

The principal decisions made by the Board during the year are summarised below.

Dividends The Board is committed to delivering on its target of paying dividends of 8.00 pps per

annum, continuing the Company’s track record in paying dividends at this level.

Continued focus on sustainability

impact and GRESB score

The Board has continued its focus on responsible business practices. More details can

be found in the Directors’ Report on pages 54 to 65. The Investment Manager meets

regularly with its ESG consultant, Evora, to consider initiatives to improve the Company’s

GRESBscore.

Oversight of Investment Manager and

Review of Investment Activities

The Board is responsible for the ongoing review of investment activity and performance

and the control and supervision of the Investment Manager. During the year, the

following key investment activities were approved by the Board:

– The acquisition of Arrow Point Retail Park, Shrewsbury;

– The acquisition of 15-33 Union Street, Bristol;

– The disposal of Langthwaite Industrial Estate, South Kirkby;

– The disposal of Wella Warehouse, Basingstoke;

– The acquisition of Central Six Retail Park, Coventry;

– The acquisition of PRYZM Nightclub, Cardiff;

– The re-financing of the Company’s loan facility, which is now held with AgFe, having

previously been held with RBSi. Further information is provided on page 5.

Further details of the property transactions can be found in the ‘Property Portfolio’ section

of the Investment Manager’s Report.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Stakeholder Engagement (continued)

Principal decisions made by the Board continued

Consideration of the Company’s loan

facility arrangements

The Board considered the potential loan refinancing options and agreed to enter

into a loan agreement with provider, AgFe. The Board decided to secure new finance

for fiveyears, in advance of the end of the current loan term, being October 2023.

AgFe was primarily selected due to offering a lower margin than that offered by the

incumbent bank on a refinanced facility, based on prevailing market rates. Of the

various refinancing options explored, a lower overall cost of debt will be achieved with

AgFe, as the loan is based on five-year Gilts rather than five-year SONIA swaps. Further

information is provided on page 5. The re-financing was not concluded until post year-

end, however this was assessed during the year.

Further information on the Company’s engagement with stakeholders and its ESG policy can be found on page 57 to 59.

Approval

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

Mark Burton

Chairman

21 June 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Board of Directors

Mark Burton, non-executive Chairman

(aged 74)

Mr Burton currently serves as a board member of Value Retail plc and Atelier Capital

Partners Limited. He also sits on the real estate advisory board for Norges Bank Investment

Management. Mr Burton qualified as a Chartered Surveyor, has been a member of the UK

Government Property Advisory Group and was formerly chairman of The Investment Property

Forum and Urban Land Institute UK. In 2001, Mr Burton became chief investment officer of

the real estate department at Abu Dhabi Investment Authority, subsequently performing the

same role at Abu Dhabi Investment Council in 2007 from where he retired in 2010.

Appointed: 9 April 2015

Bimaljit (“Bim”) Sandhu, non-executive Director

(aged 60)

Mr Sandhu is chief executive officer and owner of The Santon Group which has developed

over £1.4 billion of property. The Santon Group has won a number of environmental

awards and has been involved in a number of regeneration schemes. He is an independent

non-executive director and chairman of the audit committee of Africa Logistics Properties

Holdings Limited and non-executive director and member of the audit committee of

The Conygar Investment Company PLC. Mr Sandhu was, until its sale in May 2021, a

non-executive director of, and major investor in, Hyperdrive Innovation, a multiple award

winning company, which seeks to provide more environmentally friendly energy solutions

for clients in diverse industries. He is chairman of The Sandhu Charitable Foundation that

supports a number of charities that have a social impact both in the UK and overseas.

Mr Sandhu was a founder and chief executive officer of Raven Mount plc, a co-founder of

Raven Property Group Limited (formerly Raven Russia Limited), which he helped to list on

AIM raising over £450 million, and chief executive officer of the external fund manager

to that company. In the 1990s, Mr Sandhu was managing director of the UK operations

of the then publicly listed Australian developer Hudson Conway and represented their

50% interest as a director of the 5,000 strong pub unit, The Courage Pub Company plc.

Mr Sandhu is a Fellow of the Institute of Chartered Accountants, having qualified as a

Chartered Accountant with KPMG in London. Following qualification, he became secretary

of the KPMG UK Property & Construction Group.

Appointed: 9 April 2015

Katrina Hart, non-executive Director

(aged 48)

Mrs Hart spent her executive career in corporate finance and equity research advising,

analysing and commenting on a broad range of businesses operating in the wealth

and asset management sectors. During this period, she accumulated an in-depth

understanding of the dynamics and operational drivers of fund management and worked

very closely with some of the most respected companies in the sector. Latterly, she was a

highly rated financials analyst at HSBC, Bridgewell Group Plc and headed up the financials

research team at Canaccord Genuity Inc. Mrs Hart was formerly a non-executive director

of Premier Miton Group Plc and had served on the board of Miton Group Plc since 2011.

MrsHart is a non-executive director of BlackRock Frontiers Investment Trust plc, Polar

Capital Global Financials Trust plc, Keystone Positive Change Investment Trust plc,

JP Morgan UK Smaller Companies Trust plc and Montanaro Asset Management Limited.

Appointed: 5 June 2017

Governance

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Corporate Governance Statement

This Corporate Governance Statement comprises pages 41 to 46 and forms part of the Directors’ Report.

Statement of Compliance

The Company is committed to maintaining high standards of corporate governance and considers that reporting against the principles

and recommendations of the AIC Code of Corporate Governance issued in February 2019 (the ‘AIC Code’), provides better information

to shareholders as it addresses all the principles set out in the 2018 UK Corporate Governance Code (the ‘UK Code’), as well as setting

out additional principles and recommendations on issues that are of specific relevance to investment trusts, and is endorsed by the

Financial Reporting Council (the ‘FRC’). The terms of the FRC’s endorsement mean that AIC members who report against the AIC Code

fully meet their obligations under the UK Code and the related disclosure requirements contained in the Listing Rules. The AIC Code is

available from the AIC website at theaic.co.uk. A copy of the UK Code can be obtained at frc.org.uk.

The Board recognises the importance of a strong corporate governance culture and has established a framework for corporate

governance which it considers to be appropriate.

The UK Code includes provisions relating to:

• the role of the chief executive; and

• executive directors’ remuneration.

For the reasons set out in the AIC Code, the Board considers these provisions not relevant to the position of the Company, being an

externally managed REIT. In particular, all of the Company’s day-to-day management and administrative functions are outsourced to

third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not

reported further in respect of these provisions.

The Board has reviewed the principles and recommendations of the AIC Code and considers that the Company has complied with these

throughout the year, except as disclosed below:

• given the size of the Board, it is not considered necessary to appoint a senior independent director; and

• given the structure and size of the Board, the Board does not consider it necessary to appoint separate management engagement,

nomination and remuneration committees. The roles and responsibilities normally reserved for these committees are matters for the

Board.

The Board of Directors

Under the leadership of the Chairman, the Board of Directors is collectively responsible for the long-term sustainable success of the

Company. It provides overall leadership, sets the strategic aims of the Company and ensures that the necessary resources are in place

for the Company to meet its objectives and fulfil its obligations to shareholders within a framework of high standards of corporate

governance and effective internal controls. The Directors are responsible for the determination of the Company’s investment policy

and investment strategy and have overall responsibility for the Company’s activities, including the review of investment activity and

performance, and supervision of the Investment Manager.

The Board consists of three non-executive Directors. It seeks to ensure that it has an appropriate balance of skills and experience, and

considers that, collectively, the Directors have substantial recent and relevant experience of the property sector, investment trusts, and

financial and public company management.

The terms and conditions of the appointment of Directors are formalised in letters of appointment, copies of which are available for

inspection from the Company’s registered office. None of the Directors has a contract of service with the Company. On appointment,

non-executive Directors undertake that they will have sufficient time to meet the expectations of the role. Directors are not entitled to

any compensation for loss of office.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Corporate Governance Statement (continued)

Chairman

The Chairman leads the Board and is responsible for its overall effectiveness in directing the Company. He promotes a culture of

openness and debate and facilitates constructive Board relations and the effective contribution of all Directors. In liaison with the

Company Secretary, he ensures that the Directors receive accurate, timely and clear information.

The Chairman was independent on appointment and is deemed by his fellow Board members to be independent in character and

judgement and free of any conflicts of interest. He considers himself to have sufficient time to spend on the affairs of the Company.

Mr Burton has no significant commitments other than those disclosed in his biography on page 40.

The document setting out the responsibilities of the Chairman is available on the Company’s website. The Board’s policy is that the

Chairman will serve for a maximum of nine years in order to be consistent with the requirement for regular Board refreshment and diversity.

Board Operation

The Board has adopted a formal schedule of matters reserved for decision by the Board, a copy of which is available on the Company’s

website. These matters include:

• responsibility for the determination of the Company’s investment objective and policy;

• overall responsibility for the Company’s activities, including the review of investment activity, gearing, performance and supervision

of the Investment Manager;

• approval of Annual and Half-Yearly Reports and Financial Statements and accounting policies, prospectuses, circulars and other

shareholder communications;

• raising new capital and approval of financing facilities;

• approval of the valuation of the Company’s portfolio of assets;

• approval of the NAV of the Company;

• Board appointments and removals; and

• appointment and removal of the Investment Manager, Auditor and the Company’s other service providers.

Board Meetings

The Company has four scheduled Board meetings a year with additional meetings held to approve NAVs and dividends and other

meetings arranged as necessary. At each Board meeting, the Directors follow a formal agenda which is circulated in advance by the

Company Secretary. The Administrator, Investment Manager and the Company Secretary regularly provide the Board with financial

information, together with briefing notes and papers in relation to changes in the Company’s economic and financial environment,

statutory and regulatory changes and corporate governance best practice. A description of the Company’s risk management and

internal control systems is set out on pages 45 and 46.

The Company’s main functions are delegated to a number of service providers, each engaged under separate contracts. The

management of the Company’s portfolio is delegated to the Investment Manager, who manages the assets in accordance with the

Company’s investment objective and policy. At each Board meeting, representatives from the Investment Manager attend to present

reports to the Directors covering the Company’s current and future activities, portfolio of assets and its investment performance over

the preceding period. The Board and the Investment Manager operate in a fully supportive, co-operative and open environment and

communication with the Board is maintained between scheduled meetings.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Corporate Governance Statement (continued)

Board Committees

The Company has one Committee, the Audit Committee. Given the composition and the size of the Board, the roles and responsibilities

normally reserved for the management engagement, nomination and remuneration committee are instead matters for the Board.

The Audit Committee’s delegated responsibilities are clearly defined in formal terms of reference, which are available on the

Company’swebsite.

The Audit Committee comprises all the non-executive Directors and is chaired by Mr Sandhu, who has recent and relevant financial

experience. Given the size and nature of the Board, it is felt appropriate that all Directors are members of the Audit Committee. The

Board is satisfied that the combined knowledge and experience of its members is such that the Committee discharges its responsibilities

in an effective, informed and challenging manner. The Committee as a whole has competence relevant to the investment trust sector.

Further details about this Committee and its activities can be found on pages 47 to 50.

Meeting Attendance

The table below sets out the number of Board and Committee meetings attended by each Director during the year ended 31 March 2022.

Board meetings Audit Committee meetings

Number of

meetings

Number

attended

Number of

meetings

Number

attended

Mark Burton 12 12 2 2

Bim Sandhu 12 12 2 2

Katrina Hart 12 12 2 2

Performance Evaluation

The Board has a formal process to evaluate its performance annually. The Chairman acts on the results of the evaluation by recognising

the strengths and addressing any weaknesses of the Board, as appropriate. The evaluation of the Chairman is carried out by the other

Directors of the Company, led by the Audit Committee Chairman. The evaluation covers:

• the performance of the Board and the Audit Committee, including how Directors work together as a whole;

• the balance of diversity, skills, experience, independence and knowledge of the Directors; and

• individual performance, particularly considering whether each Director continues to make an effective contribution.

The Board seeks to ensure that it has an appropriate balance of skills and experience, and considers that, collectively, it has substantial

recent and relevant experience of investment trusts, the UK real estate sector, and financial and capital markets.

Directors’ Independence

The Board considers and reviews the independence of each non-executive Director on an annual basis as part of the Directors’

performance evaluation. In carrying out the review, consideration is given to factors such as their character, judgement, commitment

and performance on the Board and Audit Committee. Following review, all Directors are considered to be independent of the Investment

Manager and free from any business or other relationship that could materially interfere with the exercise of his or her independent

judgement. The Board leads the appointment process for any new Directors.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Corporate Governance Statement (continued)

Diversity

The Board acknowledges the importance of diversity for the Company, including but not limited to gender diversity, ethnic and social

background, and has established the following objectives for achieving diversity, as set out in its diversity policy:

• 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;

• long lists of potential Directors will include diverse candidates of appropriate merit; and

• when engaging with executive search firms, the Company will only engage with those firms who have signed up to the Voluntary

Code of Conduct for Executive Search Firms on gender diversity and best practice.

As at 31 March 2022 the Board comprised of three members. The gender breakdown is as follows: 1 (33% female); 2 (67% male). Each

Board member is also a Director of the Company’s subsidiary, AEW UK REIT 2015 Limited.

Director Induction and Training

All Directors receive an induction on joining the Board and other relevant training as necessary. As the business environment changes,

it is important to ensure the Directors’ skills and knowledge are refreshed and updated regularly. Accordingly, the Company Secretary

ensures that updates on corporate governance, regulatory and technical matters are provided to Directors at Board meetings. In this

way, Directors keep their skills and knowledge relevant so as to enable them to continue to fulfil their duties effectively. Each Director

has access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures are

followed and that applicable rules and regulations are complied with.

Directors’ Conflicts of Interest

Directors have a statutory duty to avoid situations in which they have or may have interests that conflict with those of the Company,

unless that conflict is first authorised by the Board. This includes potential conflicts that may arise when a Director takes up a position

with another company. The Company’s Articles of Association allow the Board to authorise such potential conflicts and there is a

procedure in place to deal with any actual or potential conflict of interest. The Board deals with each appointment on its individual merit

and takes into consideration all relevant circumstances. A register of conflicts is maintained by the Company Secretary and is reviewed

at Board meetings to ensure that any authorised conflicts remain appropriate. The Directors are required to confirm at these meetings

whether there has been any change to their position.

Re-election and Tenure of Directors

The Board recognises the value of regular refreshment of its composition and remains committed to ensuring that it has the right mix

of skills and experience that are aligned with the evolution and strategic plans of the Company, while maintaining its independence of

character and judgement.

In accordance with the requirements of the AIC Code, the Board has adopted a policy whereby all Directors stand for annual re-election

and no Director will serve for a period of more than nine years.

On the basis of the performance evaluation process, the Board considers that all Directors continue to be effective, committed to their

roles and have sufficient time available to perform their duties. The Board therefore believes that it is in the best interests of shareholders

that each of the Directors is re-elected at the forthcoming AGM.

Succession Planning

The composition of the Board and succession planning are kept under review by the Board and reviewed annually as part of the Board

evaluation process in order to ensure an orderly refreshment of the Board.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Corporate Governance Statement (continued)

Culture

The Directors are aware that establishing and maintaining a healthy culture amongst the Board and in its interaction with the

Investment Manager, other service providers, shareholders and other stakeholders will support the delivery of the Company’s purpose,

values and investment strategy. The Board seeks to promote a culture of openness, transparency and integrity through ongoing

dialogue and engagement with its stakeholders, principally the Investment Manager.

The Company has a number of policies and procedures in place to assist with maintaining a culture of good governance including those

relating to diversity, Directors’ conflicts of interest and Directors’ dealings in the Company’s shares. The Board assesses and monitors

compliance with these policies as well as the general culture of the Board regularly through Board meetings and in particular during the

annual evaluation process.

The Board seeks to appoint the best possible service providers and evaluates their services on a regular basis as described on page

56 to 57. The Board considers the culture of the Investment Manager and other service providers, including their policies, practices

and behaviour, through regular reporting from these stakeholders and in particular during the annual review of the performance and

continuing appointment of all service providers.

Internal Control Review

The Board is responsible for the systems of internal controls relating to the Company, including the reliability of the financial reporting

process, and for reviewing the systems’ effectiveness. The Directors have reviewed and considered the guidance supplied by the FRC

on risk management, internal control and related finance and business reporting, and an ongoing process is in place for identifying,

evaluating and managing the principal and emerging risks faced by the Company. This process, together with key procedures

established with a view to providing effective financial control, was in place during the year under review and at the date of this report.

The internal control systems are designed to ensure that proper accounting records are maintained, that the financial information on

which business decisions are made and which is issued for publication is reliable, and that the assets of the Company are safeguarded.

The risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to

achieve the Company’s objectives. It should be recognised that such systems can only provide reasonable, not absolute, assurance

against material misstatement or loss.

The Directors have carried out a review of the effectiveness of the systems of internal control as they have operated over the period and

up to the date of approval of the Annual Report and Financial Statements. There were no matters arising from this review that required

further investigation and no significant failings or weaknesses were identified.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Corporate Governance Statement (continued)

Internal Control Assessment Process

Robust risk assessments and reviews of internal controls are undertaken regularly in the context of the Company’s overall

investmentobjective.

The following are the key internal controls which the Company has in place:

• a risk register has been maintained against which identified and emerging risks as well as the controls in place to mitigate those

risks can bemonitored. The risks of any failure of internal controls are identified in the risk matrix, which is regularly reviewed by the

Board through the Audit Committee and the impact of such risks is also assessed. The principal and emerging risks and uncertainties

identified from the risk matrix can be found in the Strategic Report on pages 30 to 36;

• a procedure to monitor the compliance status of the Company to ensure that it can continue to be approved as a REIT;

• the Investment Manager and the Administrator prepare forecasts and management accounts which allow the Board to

assessperformance; and

• the controls employed by the Investment Manager and other third party service providers, as evidenced by their ISAE 3402 or

equivalent reports, are periodically reviewed by the Audit Committee, and there are agreed and defined investment criteria, specified

levels of authority and exposure limits in relation to investments, leverage and payments.

Over and above the ongoing process, as part of the year-end reporting process, the Board receives letters of comfort from the

Investment Manager, Company Secretary, Administrator and Registrar regarding their internal controls, accompanied by their ISAE 3402,

or equivalent reports, if available. Following the review of these submissions from service providers, the Board has determined that the

effectiveness of the systems of internal control was satisfactory.

AGM

The Company’s AGM will take place on 7 September 2022. The notice of this meeting and details of the resolutions to be put to the

AGM are contained in the circular sent to shareholders with this report and are available on the Company’s website.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Report of the Audit Committee

I am pleased to present the Report of the Audit Committee for the year ended 31 March 2022.

Meetings

The Audit Committee met twice during the year and once following the year-end. Details of the composition of the Audit Committee

are set out in the Corporate Governance Statement on page 43 along with details on how the Committee’s evaluation process

wasconducted.

Role of the Audit Committee

The Audit Committee assists the Board in discharging its responsibilities with regard to financial reporting, external audit and internal

controls, including:

• monitoring the integrity of the financial statements of the Company, including its Annual and Half-Yearly Reports, and reviewing

significant financial reporting issues and judgements which they contain;

• reviewing the content of the Annual Report and Financial Statements and advising the Board on whether, taken as a whole, it is

fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and

performance, prospects, business model and strategy;

• keeping under review the adequacy and effectiveness of the Company’s risk management systems, reviewing the principal and

emerging risks facing the Company; and reviewing and approving the statements to be included in the Annual Report concerning

internal controls and risk management;

• reviewing the scope and effectiveness of the audit process undertaken by the Auditor;

• conducting the tender process and making recommendations to the Board in relation to the appointment, re-appointment or

removal of the Auditor and approving its remuneration and terms of engagement;

• reviewing and monitoring the Auditor’s independence, objectivity and effectiveness; and

• reviewing any non-audit services to be provided by the Auditor and monitoring the level of fees payable in that respect.

Matters Considered During the Year

The Audit Committee receives reports from external advisers and from the Investment Manager, as required, to enable it to discharge

itsduties.

The main activities undertaken during the year, and to the date of this Annual Report, were that the Audit Committee:

• reviewed the internal controls and risk management systems of the Company and its third party service providers;

• agreed the plan and fees with the Auditor in respect of the review of the Half-Yearly Report for the six months ended 30 September

2021 and the statutory audit of the Annual Report for the year ended 31 March 2022, including the principal areas of focus;

• considered the impact of the ongoing COVID-19 pandemic on the Company and its tenant base;

• received and discussed with the Auditor its report on the results of the review of the Half-Yearly Report and the year-end audit;

• reviewed the Annual and Half-Yearly Reports and recommended these to the Board for approval;

• reviewed the performance and effectiveness of the Auditor and considered its fees;

• reviewed the non-audit services provided by the Auditor and the associated fees incurred; and

• reviewed Knight Frank’s valuation of investment properties.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Report of the Audit Committee (continued)

Significant Issues Considered by the Audit Committee

Valuation of Investment Properties

The Audit Committee determined that the key area of risk in relation to the financial statements of the Company was the valuation

of the investment properties. The 36 properties in the portfolio as at 31 March 2022 were externally valued by qualified independent

valuers, using the internationally accepted Royal Institution of Chartered Surveyors (‘RICS’) Valuation – Professional Standards, and

whilst comparable market transactions provide valuation evidence, there are assumptions which involve significant levels of judgement.

The Audit Committee considered the quarterly and year-end valuations of the Company’s portfolio which were discussed with the

Investment Manager and the Auditor during the audit of the financial statements.

In addition, the Audit Committee considered the Company’s short and medium-term cash flows, dividend cover and Property Income

Distribution (“PID”) and non-PIDdistributions.

Internal Controls

The Audit Committee carefully considers the internal control systems by regularly monitoring the services and controls of its third party

service providers.

The Audit Committee reviewed and, where appropriate, updated the risk matrix during the year to take account of principal and

emerging risks. It received reports on internal control and compliance from the Investment Manager and the Company’s other service

providers and no significant matters of concern were identified.

Internal Audit

The Company does not have an internal audit function. During the year, the Audit Committee reviewed whether an internal audit

function would be of value and concluded that this would provide minimal additional comfort at considerable extra cost to the

Company. While the Audit Committee believes that the existing system of monitoring and reporting by third parties remains appropriate

and adequate, it will actively continue, on an annual basis, to consider possible areas within the Company’s control environment which

may need to be reviewed in detail.

Maintenance of REIT Status

The Audit Committee monitored the compliance status of the Company and considered the requirements for the maintenance of

REITstatus.

Going Concern and Long-term Viability of the Company

The Audit Committee considered the Company’s financial requirements for the next 12 months and concluded that it has sufficient

resources to meet its commitments. Consequently, the financial statements have been prepared on a going concern basis. The Audit

Committee also considered the longer-term viability statement covering a five-year period, and the underlying factors and assumptions

which contributed to the Committee deciding that this was an appropriate length of time to consider the Company’s long-term viability.

The Company’s going concern statement and the viability statement can be found on pages 54 to 56.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Report of the Audit Committee (continued)

Audit Fees and Non-audit Services

The Audit Committee has sole responsibility for agreeing the audit fee in consultation with the Investment Manager, based on the

scope of the audit. The total audit fees for the year ended 31 March 2022 can be found in note 5 to the financial statements. During the

year ended 31 March 2022, the Audit Committee reviewed the policy on the engagement of the Auditor to supply non-audit services,

taking into account the recommendations of the FRC. All non-audit services are reviewed by the Audit Committee, which makes

recommendations to the Board for the provision of each non-audit service and ensures that the statutory auditor is not engaged to

perform work that is prohibited under UK law.

The Auditor is permitted to provide non-audit related services where the work involved is closely related to the work performed in the

audit.

These include:

• reviews of interim financial information;

• reporting on internal financial controls when required by law or regulation;

• reporting required by law or regulation to be provided by the Auditor; and

• prospectus/capital markets reporting.

The policy was reviewed and its application monitored by the Audit Committee during the year and it was agreed that the policy

remained appropriate for the Company.

Year ended

31 March 2022

Year ended

31 March 2021

Audit

Statutory audit of Annual Report and Financial Statements

£120,000 £110,000

Non-audit

Review of Half-Year Report

£26,000 £25,000

Total fees paid to BDO LLP/KPMG LLP* £146,000 £135,000

Percentage of total fees attributed to non-audit services 18% 19%

* KPMG LLP conducted the audit for the year ended 31 March 2021.

Independence and Objectivity of the Auditor

It is the Audit Committee’s responsibility to monitor annually the performance, objectivity and independence of the Auditor. In

evaluating BDO LLP’s (‘BDO’) performance, the Audit Committee examined five main criteria – robustness of the audit process,

independence and objectivity, quality of delivery, quality of people and service, and value-added advice.

Having carried out the above review, the Audit Committee was satisfied with the Auditor’s performance and that the engagement of

BDO to provide the non-audit services were appropriate, and did not compromise its objectivity and independence.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Report of the Audit Committee (continued)

External Audit Tender

In March 2021, the Committee tendered the Company’s external audit through a competitive tender. Following this process, a

recommendation based on quality, knowledge and experience was made to appoint BDO as the Auditor of the Company for the

year ending 31 March 2022 and for the period ending 30 September 2021. The appointment of BDO was unanimously approved by

shareholders at the AGM held on 8 September 2021.

External Audit Process

The Audit Committee reviews the effectiveness of the external audit carried out by the Auditor on an annual basis. At least twice a year,

the Audit Committee meets with the Auditor, once at the planning stage before the audit and once after the audit at the reporting

stage. The Auditor provides a planning report in advance of the annual audit, a report on the annual audit and a report on its review of

the interim financial statements. The Audit Committee has an opportunity to question and challenge the Auditor in respect of each of

these reports.

During the period under review BDO carried out the half year review for the Company. The Chairman of the Audit Committee maintains

regular contact with the audit partner throughout the year. In addition, at least once a year, the Audit Committee has an opportunity

to discuss any aspect of the Auditor’s work with the Auditor in the absence of the Investment Manager. After each audit, the Audit

Committee reviews the audit process and considers its effectiveness. The review of the 2022 audit concluded that the audit process had

generally worked well and no significant issues were identified specifically in relation to the Company.

We consider that the audit team assigned to the Company by BDO has a good understanding of the Company’s business which

enables it to produce a detailed, high-quality, in-depth audit and permits the team to scrutinise and challenge the Company’s financial

procedures and significant judgments. We ask the Auditor to explain the key audit risks and how these have been addressed. We also

considered BDO’s internal quality control procedures and transparency report and found them to be sufficient. Overall, the Committee is

satisfied that the audit process is transparent and of good quality and that the Auditor has met the agreed audit plan.

Bim Sandhu

Audit Committee Chairman

21 June 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Remuneration Report

This Report is prepared in accordance with Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports)

(Amendment) Regulations 2013.

Statement from the Chairman

Given the structure and size of the Board, the Board does not consider it necessary to appoint a separate Remuneration Committee.

The Board consists entirely of non-executive Directors and the Board as a whole is responsible for determining the remuneration of

each Director and each Director abstains from voting on their own individual remuneration. Directors’ fees from 1 July 2021 to 31 March

2022 were at a level of £35,000 per annum for the Chairman, £32,500 per annum for the Audit Committee Chairman and £27,500 per

annum for the other Director. No changes to the Directors’ fees are proposed for the year ending 31 March 2023. Future increases to

Directors’ fees are currently limited to the prevailing Consumer Price Index (‘CPI’) as at the date of any decision.

The Company’s Articles of Association permit the Company to provide pensions or similar benefits for Directors and employees of the

Company. However, no pension schemes or other similar arrangements have been established and no Director is entitled to any pension

or similar benefits. The Directors are not entitled to any compensation for loss of office. No Director is entitled to any other monetary

payment or any assets of the Company. Accordingly, the Single Total Figure table on page 52 does not include columns for any of these

items or their monetary equivalents.

The Directors’ Remuneration Policy was last approved by shareholders at the AGM in 2020 and is available on the Company’s website.

No significant changes are proposed to the way in which the current Directors’ Remuneration Policy will be implemented during the

course of the next financial year.

An ordinary resolution to approve the Directors’ Remuneration Report will be put to shareholders at the forthcoming AGM to be held on

7 September 2022.

Voting at AGM

The Directors’ remuneration report for the year ended 31 March 2021 and the Directors’ remuneration policy were approved by

shareholders at the AGMs held on 8 September 2021 and 12 September 2020 respectively. The results taken on a poll were as follows:

Remuneration Report 2021

Number of

votescast

Percentage of

votes cast

For 43,627,861 99.39

Against 265,888 0.61

Total votes cast 43,893,749

Number of votes withheld 46,488

Remuneration Policy 2020

For 50,766,049 99.74

Against 133,940 0.26

Total votes cast 50,899,989

Number of votes withheld 36,276

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Remuneration Report (continued)

Performance of the Company

The chart below compares the share price total return (assuming all dividends re-invested) to shareholders compared with the total

return on the FTSE 350 and FTSE 350 Real Estate Indices over the period since inception of the Company. These indices have been

chosen as they are considered to be an appropriate benchmark against which to assess the relative performance of the Company.

Source: Bloomberg

Directors’ Remuneration for the Year Ended 31 March 2022 (audited)

Fees paid Total

Name of Director

Year ended

31 March

2022

Year ended

31 March

2021

Year ended

31 March

2022

Year ended

31 March

2021

% change in

Directors’

fees

Mark Burton £35,000 £35,000 £35,000 £35,000 –

Bim Sandhu £32,500 £32,500 £32,500 £32,500 –

Katrina Hart

£27,500 £27,500 £27,500 £27,500 –

£95,000 £95,000 £95,000 £95,000 –

There are no further fees to disclose as the Company has no employees, chief executive or executive directors. The figures detailed in the

Directors’ Remuneration Report disclose Director remuneration only. There are no variable elements payable to the Directors.

The Company is committed to ongoing shareholder dialogue and any views which are expressed by shareholders on the fees being paid

to Directors would be taken into consideration by the Board when reviewing the Directors’ Remuneration Policy and in the annual review

of Directors’ fees.

pence

Cumulative Share Price Total Return

AEW UK REIT plc

FTSE 350

FTSE 350 Real

Estate

110

130

150

170

190

210

230

Apr

2015

Sep

2015

Feb

2016

Dec

2016

May

2017

Mar

2018

Aug

2018

Jul

2016

Oct

2017

Jan

2019

Jun

2019

Nov

2019

Apr

2020

Sep

2020

Feb

2021

Jul

2021

Dec

2021

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Remuneration Report (continued)

Relative Importance of Spend on Pay

The table below sets out, in respect of the year ended 31 March 2022:

(a) the remuneration paid to the Directors;

(b) the management fee and expenses which have been included to give shareholders a greater understanding of the relative

importance of spend on pay; and

Year

ended

31 March

2022

Year

ended

31 March

2021

Directors’ fees*

£95,000

Management fee and expenses

£1,554,751

£1,228,849

Dividends paid

£12,673,980

£12,690,980

* As the Company has no employees, the total spend on remuneration comprises only the Directors’ fees.

Statement of Directors’ Shareholdings and Share Interests (audited)

Neither the Company’s Articles of Association nor the Directors’ Letters of Appointment require a Director to own shares in the

Company. The interests of the Directors and their persons closely associated in the equity of the Company at 31 March are shown in the

table below:

Number of Ordinary Shares % of Total Voting Rights

Director 2022 2021 2022 2021

Mark Burton 75,000 75,000 0.05 0.05

Bim Sandhu 1,005,839* 1,000,000** 0.63 0.63

Katrina Hart 19,145 19,145 0.01 0.01

* 100,000 Ordinary Shares held in Mr Sandhu’s spouse’s name, Mrs Pardeep Sandhu, 425,000 Ordinary Shares held in The Santon Pension Fund

(a small self-administered pension scheme (‘SSAS’) for him and his spouse), 355,839 Ordinary Shares held in The Sandhu Charitable Foundation

and 125,000 Ordinary Shares held in his own name.

** 100,000 Ordinary Shares held in Mr Sandhu’s spouse’s name, Mrs Pardeep Sandhu, 425,000 Ordinary Shares held in The Santon Pension Fund (a

small, self-administered pension scheme (‘SSAS’) for him and his spouse), 350,000 Ordinary Shares held in The Sandhu Charitable Foundation

and 125,000 Ordinary Shares held in his own name.

The Company has not been informed of any changes to the above interests between 31 March 2022 and the date of this report.

None of the Directors or any persons connected with them had a material interest in the Company’s transactions, arrangements or

agreements during the year.

Approval

The Directors’ Remuneration Report has been approved by the Board of Directors and signed on its behalf by:

Mark Burton

Chairman

21 June 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report

The Directors’ Report, prepared in accordance with the requirements of the Companies Act 2006 and the FCA’s Listing Rules and

Disclosure Guidance and Transparency Rules, comprises pages 54 to 65 and incorporates the Corporate Governance Statement on

pages 41 to 46.

Dividends

The Company pays dividends on a quarterly basis.

The interim dividends paid by the Company are set out in note 11 of the financial statements. No final dividend is being proposed.

Directors

The Directors in office at 31 March 2022 and the date of this report are shown on page 40.

Power of Directors

The Directors’ powers are determined by UK legislation and the Company’s Articles of Association. The Articles of Association may be

amended by a special resolution of the members. The Directors may exercise all of the Company’s powers provided that the Articles of

Association or applicable legislation do not stipulate that any such powers must be exercised by the members.

Indemnity Provisions

Save for such indemnity provisions in the Company’s Articles of Association, there are no qualifying third party indemnity provisions

in force. The Board has agreed to a procedure by which Directors may seek independent professional advice, if necessary, and at the

Company’s expense. The Company has also arranged for appropriate provision of Directors’ and Officers’ Liability Insurance.

Going Concern

The Directors assessed the Company’s ability to continue as a going concern, which takes into consideration the uncertainty associated

with the Ukraine war and current inflation levels, as well as the Company’s cashflows, financial position, liquidity and borrowing facilities.

As at 31 March 2022, the Company had a cash balance of £6.77 million. The Company’s existing RBSi loan facility in place at year-end

was due to mature in October 2023 and therefore, the Company elected to undertake a re-financing which concluded post year-end

in May 2022. The re-financed loan is held with AgFe and is a £60.00m facility with a five-year term. This is priced as a fixed rate loan

with a total interest cost of 2.96% and associated 10% projected debt yield and 55% Loan to NAV covenants. The Company reported a

Loan to NAV of 28.26% at year-end. Taking into account the further £6.00m debt drawn as part of the re-financing process, this would

give a Loan to NAV of 31.40%, all else equal. This provides room for a £92.92 million fall in NAV before reaching the 55% Loan to NAV

covenant. Moreover, based on the £54.00m of debt drawn as at year-end, the Company had a projected debt yield of 25%, comfortably

in excess of the 10% covenant.

The Company benefits from a secure, diversified income stream from a tenancy profile which is not overly reliant on any one tenant or

sector, which reduces risk. The Directors also noted that:

• The Company’s rent collection has been strong, with 93% of contracted rent either having been collected, or payment plans agreed,

for the March 2022 quarter.

• Based on the contracted rent as at 31 March 2022, a reduction of 64.58% in NOI could be accommodated before breaching the

debt yield covenant in the Company’s refinanced debt arrangements.

• Based on the property valuation at 31 March 2022, the Company had room for a £92.92 million fall in NAV before reaching the

maximum LTV covenant in the Company’s refinanced debt arrangements.

• The Company’s cash flow can also be significantly managed through the adjustment of dividend payments.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

Going Concern (continued)

Taking this into consideration, the Directors have reviewed a number of scenarios over 12 months from the date of approval of these

financial statements, including a worst case plausible downside scenario which makes the following assumptions:

• a reduction in NOI of 30%;

• no new lettings or renewals, other than those where terms have already been agreed;

• a 10% fall in property valuations; and

• no new acquisitions or disposals.

In the above scenario, the Company is forecast to generate a positive cash flow before dividend payments, however it would generate a

cash flow much lower than its target dividend of 8 pps per annum.

As part of the refinancing process, the remaining £6.00m of the loan facility was drawn. Taking this into account, the Company would

maintain a Loan to NAV ratio of no higher than 39% over the next 12 months, providing a headroom of over £47 million up to the 55%

covenant. The Company’s cash could be managed through a change to dividend policy, which would allow the existing cash resources of

circa £2.33 million at the date of approval of the financial statements to be maintained.

In the above scenario, the Company is forecast to pass the debt yield covenant during the 12-month period with a minimum projected

yield of 18%, compared with the limit of 10%, assuming that no repayments of the facility were to be made.

Given the Company’s substantial headroom against its borrowing covenants, the Directors believe that the Company is well placed

to manage its financing and business risks, including those associated with the Ukraine war and current inflation. The Directors are

confident that the Company will have sufficient funds to meet its liabilities as they fall due for at least 12 months from the date of

approval of the financial statements and therefore the financial statements have been prepared on a going concern basis.

Viability Statement

The Directors have also assessed the prospects of the Company over a period longer than the 12 months required by the ‘Going

Concern’ provisions. The Board has considered the nature of the Company’s assets, liabilities and associated cash flows, and has

determined that five years up to 31 March 2027 is the maximum timescale over which the performance of the Company can be forecast

with a material degree of accuracy and so is an appropriate period over which to assess the Company’s viability. Considerations in

support of the assessment of the Company’s viability over a five-year period include:

• the Company re-financed its debt post year-end in May 2022. A new £60.00 million, five-year term loan facility has been secured

with AgFe, a leading independent asset manager specialising in debt-based investments. The loan is priced as a fixed rate loan with

a total interest cost of 2.959%. In the current inflationary environment, the Company considers it prudent to fix the loan now, rather

than run the risk of further rising rates;

• the Company’s property portfolio has a WAULT of 5.78 years to expiry, representing a secure income stream for the period

underconsideration;

• the Company benefits from a portfolio which is diversified in terms of sector and location, mitigating the risk of tenant default during

the period; and

• most leases contain a five-year rent review pattern and therefore an assessment over five years allows the Directors to assess the

impact of the portfolio’s reversion arising from rent reviews.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

Viability Statement (continued)

In assessing the Company’s viability, the Board has carried out a thorough review of the Company’s business model, including future

performance, REIT compliance, liquidity, dividend cover and banking covenant tests over a five-year period. The business model is

subject to annual sensitivity analysis, which involves flexing a number of key assumptions underlying the forecasts both individually

and in aggregate for normal and stressed conditions. The five-year review also considers whether financing facilities will be renewed

asrequired.

The following scenarios were tested, both individually and combined, in an effort to represent a severe but plausible scenario, which

might reasonably be expected to arise as a result of the outbreak of the Ukraine war, amongst other factors:

• a reduction in NOI of 30%;

• a 10% fall in portfolio valuation; and

• increased periods of vacancy.

Based on the result of this analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation

and meet its liabilities as they fall due over the five-year period of their assessment.

Subsidiary Company

Details of the Company’s dormant subsidiary, AEW UK REIT 2015 Limited, can be found in note 19 to the financial statements.

Management Arrangements

AEW UK Investment Management LLP is the Company’s Investment Manager and has been appointed as the AIFM. Under the terms of

the Investment Management Agreement, the Investment Manager is responsible for the day-to-day discretionary management of the

Company’s investments subject to the investment objective and policy of the Company and the overall supervision of the Directors. The

Investment Manager is entitled to receive a quarterly management fee in respect of its services, calculated at the rate of one-quarter

of 0.9% of the prevailing NAV (excluding uninvested proceeds from fundraisings). There is no performance fee. Any investment by the

Company into the Core Fund is not subject to management fees or performance fees otherwise charged to investors in the Core Fund

by the Investment Manager. The Investment Management Agreement may be terminated by the Company or the Investment Manager

giving 12 months’ written notice.

Continuing Appointment of the Investment Manager

The Board has reviewed the appropriateness of the continuing appointment of the Investment Manager, ensuring the terms and

conditions of the Investment Management Agreement align with the investment policy and investment objective of the Company.

It is satisfied that the terms of the Investment Management Agreement remain fair and competitive, and in the best interests

ofshareholders.

In the opinion of the Directors, the continuing appointment of the Investment Manager is in the interests of shareholders as a whole.

This is due to the Investment Manager successfully managing the Company’s portfolio, and continuing to apply the Company’s

investment policy, thereby allowing the Company to continue paying dividends in accordance with the targeted investment objective.

Review of Service Providers

The Board reviews the ongoing performance and the continuing appointment of all service providers of the Company on an annual

basis. The Board also considers any variation required to the terms of all service providers’ agreements.

During the year, following a review of performance, the Board made the decision to change its Registrar to Link Group with effect from

19 July 2021. A review of all the other service providers was undertaken during the year which concluded that the services provided to

the Company were satisfactory and that their continued appointments were in the best interests of the shareholders.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

Review of Service Providers (continued)

As noted on page 50, the Audit Committee tendered the Company’s external audit through a competitive tender in March 2021.

Following this process, the decision was made to appoint BDO as the Auditor of the Company for the six-month period ending

30 September 2021 and the year ending 31 March 2022.

Financial Risk Management

The financial risk management objectives and policies can be found in note 22 to the financial statements.

Social, Community and Employee Responsibility

The Company is an externally managed REIT and has no direct employees. The management of the portfolio has been delegated to

the Investment Manager who provides the employees that support the Company. All other functions of the Company have also been

outsourced and as the Company has no employees, there is no further reporting in respect of these provisions.

The Investment Manager is an equal opportunities employer who respects and seeks to empower each individual and the diverse

cultures, perspective, skills and experiences within its workforce. For further information on the Investment Manager’s principles in

relation to people including diversity, gender pay, employee satisfaction surveys, wellbeing and retention, please refer to the ESG link

within the Corporate Responsibility area at www.aewuk.co.uk.

The Company is not required to produce a statement on slavery and human trafficking pursuant to the Modern Slavery Act 2015 as it

does not satisfy all the relevant triggers under that Act that required such a statement. The Company does, however, closely monitor the

policies of its suppliers to ensure that proper provisions are in place.

AEW UK Investment Management LLP, the Investment Manager to the Company, is part of the Natixis Group whose statement

on Slavery and Human Trafficking has been published in accordance with the Modern Slavery Act 2015.

https://www.natixis.com/natixis/en/modern-slavery-act-transparency-statement-in-2020-rqaz5_107684.html

How We Engage With Stakeholders

Investors

The Investment Manager maintains an open dialogue with shareholders and analysts. All feedback is provided to the Board on a

regularbasis.

The Company provides investors with regular updates on its business activity and financial performance. These quarterly factsheets

are available, along with Annual/Half Year accounts and London Stock Exchange RNS announcements, on the Company’s website at

www.aewukreit.com.

Shareholders are encouraged to contact the Investment Manager to raise any matters of concern and to attend the AGM where possible

to meet and discuss the Company’s operations with the Board.

The Chairman is available to meet with shareholders to understand their views on governance and the Company’s performance where

they wish to do so. With assistance from the Investment Manager, during the year the Chairman sought meetings with shareholders

who wished to meet with him.

Tenants

The Investment Manager, more specifically the Asset Management team, maintain an ongoing dialogue with tenants either directly

or through its appointed property manager. The property manager issues an annual satisfaction survey to all tenants which provides

qualitative feedback on their relationship with the property manager and Investment Manager.

Shareholder engagement and investor meetings

During the year, the Company held 16 meetings with approximately 58 potential and existing institutional shareholders. Due to the

COVID-19 restrictions in place during the year these engagements were mainly held via conference calls and virtual meetings and

were attended by the Investment Manager and Liberum, Broker to the Company. Quarterly, the Company also engaged with its retail

investors through virtual presentations held on the Investor Meet Company platform.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

How We Engage With Stakeholders (continued)

2022 AGM

The Company’s AGM will take place on 7 September 2022. The notice of this meeting and details of the resolutions to be put to the

AGM are contained in the circular sent to shareholders with this report and are available on the Company’s website.

The voting results of the AGM will be published on the Company’s website www.aewukreit.com.

MIFID II

As an externally managed REIT with a premium listing under Chapter 6 of the FCA’s Listing Rules, the PRIIPS (Packaged Retail and

Insurance-based Investment Products) regulation applies to the Company. The Company is required to publish a Key Information

Document (‘KID’) that is updated on a semi-annual basis on the Company’s website www.aewukreit.com.

Environmental, Social and Governance Policy

The Investment Manager is committed to creating long-term value for shareholders and adheres to a policy of sustainable and

responsible investment (‘SRI’). The Investment Manager’s SRI policy can be found within the Corporate Responsibility area on its website

www.aewuk.co.uk. The Investment Manager reviews its Sustainability Policy on an annual basis and it is approved by the Management

Committee of the Investment Manager.

Over the coming years, we believe that both occupiers and investors will increasingly focus on the way in which ESG issues are

managed. In turn, this is expected to impact on building obsolescence, lettability, rates of lease renewals and ultimately the rental and

capital values for individual assets. In recognition of this, the Board believes in open disclosure of ESG performance, including through

participation in the annual Global Real Estate Sustainability Benchmark (‘GRESB’) survey.

GRESB is the dominant global standard for assessing ESG performance for real estate funds and companies. GRESB requires the

Company to report against a wide array of ESG matters, and highlights areas for improvement and opportunities for growth. The

Company uses the annual outcome from GRESB as a benchmark to assess its own sustainability performance.

The Company was awarded two stars from GRESB for 2020 and improved its score to 65 (peer group average 61) from the score of

62 recorded in 2019. However, direct comparison to previous years is not representative given the substantial changes introduced by

GRESB during the 2020 assessment. With this in mind, it was particularly pleasing to increase our GRESB score.

A large portion of the GRESB score relates to data coverage; due to the high percentage of assets with tenant procured utilities, the

Company does not score as well as funds with a smaller holding of single-let assets.

Within GRESB, the Company is benchmarked against two dimensions:

(1) Management – relating to strategy and leadership management, policies, risk management and stakeholder engagement

completed at an entity level.

The Company achieved a score of 29 out of 30. This section is dependent on fund level policies and initiatives which are directly

applicable to the Company (e.g. Environmental, Governance and Employee Policies).

(2) Performance – relating to the measurement of the fund’s asset portfolio performance.

The Company achieved a score of 37 out of 70. This score is representative of the fund composition as the Performance dimension is

heavily influenced by the level of control landlords have across issues such as energy management, service charge budgets and access

to environmental data.

The Investment Manager is in the process of submitting the Company’s GRESB assessment for the year from 1 April 2021 to 31 March

2022 and expects to receive the results of the assessment in September 2022.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

Environmental, Social and Governance Policy (continued)

The Company is committed to improving its transparency of ESG performance and has adopted the European Public Real Estate

Association (‘EPRA’) Best Practice recommendations on Sustainability Reporting 2017.

The progress that the Company has made on ESG issues during the period has been recognised externally, most notably by being

awarded the EPRA Sustainability Best Practice Recommendations Silver Award and receiving its Most Improved Award for 2020. This was

awarded in addition to the EPRA Gold Medal for Financial Reporting received in the year.

Further information on the Company’s engagement with stakeholders can be found on page 57 to 58 and the full ESG disclosures for

the Company, including Streamlined Energy and Carbon Reporting disclosures, can be found in the EPRA Sustainability Performance

Measures on page 118 to 131.

Our fiduciary duty to shareholders will always come first in all investment decision-making. The Investment Manager offers clients

long-term value-based real estate investment solutions. This is delivered via stock selection and asset management of UK commercial

real estate. It is the Investment Manager’s belief that this financial objective can be achieved simultaneously with a constructive

engagement with environmental and social concerns.

The Board believes environmentally responsible fund management means being active, on the ground every day. As such, the

Company operates an Environmental Management Systems (‘EMS’) which is designed to be aligned with ISO4001, to integrate

sustainability objectives into the overall business strategy. Our property managers, MAPP, also apply their own internal EMS to all

managed assets across the portfolio. All members of the Investment Manager’s team have a sustainability objective within their

annual performance objectives.

Greenhouse Gas Emissions

Refer to the EPRA Sustainability Performance Measures on pages 118 to 131 for Greenhouse Gas Emissions disclosures.

Taskforce on Climate-Related Financial Disclosures

The Board recognises the importance of understanding the risks and opportunities presented by climate change and the impacts it

could have on its business operations.

The information below details where the Company is already aligned with Taskforce on Climate-Related Financial Disclosures (‘TCFD’)

reporting. We will continue our efforts on this over the next year to achieve full alignment in 2022/3, focusing on two priority areas:

(1) Establish risk exposures to the example risks highlighted, using both 1.5C and 2C warming scenarios.

(2) Quantify the risk exposures and fully incorporate the results into the risk management process.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

Taskforce on Climate-Related Financial Disclosures (continued)

1. Governance

Board oversight of climate-related risks and opportunities

The Board is ultimately responsible to stakeholders for the Company’s activities and for oversight of climate-related risks and

opportunities. The Board receives quarterly updates from the Investment Manager regarding climate-related issues, activities and

initiative progress reports against climate related goals and targets.

As part of the Audit Committee’s review of ongoing performance and continuing appointment of key service providers, consideration is

given to key service providers’ ESG credentials and expertise. The Audit Committee remains responsible for reviewing and approving the

content of the Company’s TCFD disclosure.

The knowledge of the Board on ESG-related matters continues to be enhanced through interaction with the Investment Manager and

training. In November 2021, the Board undertook TCFD and Net Zero Carbon training provided by Evora sustainability consultants to

support their understanding of climate change and other ESG risks and opportunities.

The Board will have regard to climate-related issues when considering the Company’s business model, strategy and risk management

policies.

The Investment Manager’s role in assessing and managing climate-related risks and opportunities

AEW’s Executive Committee in Europe is ultimately responsible for climate-related risks and delegates to a number of sub-committees

including:

• European Risk Committee

• European ESG+R Committee

• Investment Committee

The European ESG+R Committee is responsible for the delivery of the sustainability strategy, including climate change and its associated

risks and opportunities for AEW’s managed funds in Europe.

The European ESG+R Committee includes the European CEO, the Head of Socially Responsible Investment, country and function

representatives (investment, asset management, portfolio management, fund financial management, compliance and risk) and meets

every two months. Responsibility for specific climate risks and resilience are assigned to individual members of the committee. The

ESG+R Committee and the Executive Committee receive periodical reports on the status of defined indicators to monitor progress of

climate policy objectives and targets.

Climate-related risk consideration is integrated into the investment process, with property acquisitions being subject to ESG due

diligence assessments and audits. These inform the members of the Investment Committee and may impact the investment decisions.

In the UK, climate-related issues and risks are reviewed for the Company at the Portfolio Management Review Committee (‘PMRC’)

which includes the Head of Investment, Head of Asset Management and Head of Operations and Risk Management. PMRC report

to the local management board and Investment Committee, with material matters being escalated to the European Risk Committee

and Executive Committee. PMRC and staff of the Investment Manager engage with external consultants to receive advice on the

sustainability strategy and receive regular training from several specialist climate-related consultants.

AEW, as the Investment Manager of AEW UK REIT plc, is responsible for monitoring trends and developments in climate-related issues.

Any material changes are reported to the Company’s Board at each Board meeting, which occur quarterly.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

Taskforce on Climate-Related Financial Disclosures (continued)

2. Strategy

Impacts of climate-related risks and opportunities

TCFD identifies two types of risks associated with climate change. (i) Transition risks associated with the transition to a low or

ultra-low economy and (ii) Physical risks associated with physical effects of climate change. Climate related opportunities are

considered to be principally resource efficiency, energy source, property services and resilience. The Investment Manager is tasked

with developing these opportunities through on-going asset management initiatives and assessment of opportunities through

Asset Sustainability Action Plans.

During the year, the Investment Manager conducted a risk identification assessment to determine climate-related impacts and identify

the climate-related risk and opportunities which could materially impact the business. These are detailed in the table below. The focus

of reporting at this stage is on the key short and medium term transition risks and acute physical risks. Climate-related chronic physical

risks are considered longer term.

The Company has assessed climate-related risks and opportunities within the following time horizons:

• Short term horizon is three years or less

• Medium term horizon is three to seven years

• Long term horizon is over seven years

Transition Risks

Transition Risks Specific Risk Impact Time horizon

Policy & Legal Energy Performance Certificates

(EPCs): the existing MEES Regulations

proposed changes include increasing

the minimum standard to ‘C’ by 2027

and to a ‘B’ by 2030.

MEES non-compliance would

prevent the Company from leasing

non-compliant space, posing a risk

of revenue loss, increasing capex to

bring properties up to the required

standard, and potential liabilities from

non-compliance penalties.

Medium term risk.

Market High energy and utility consumption

may increase exposure to energy price

fluctuations.

Potential impact on service charge

affordability for tenants.

Medium term risk.

Technology UK Government requirement

to transition to lower emissions

technology (e.g. from natural gas

boilers to low-carbon heating

technologies).

Could lead to material capex

expenditure to meet requirements.

Medium term risk.

Reputation Fall in demand from tenants for

properties with inefficient building

performance.

Could leave the Company with

stranded assets, leading to negative

impact on its reputation, increased

stakeholder concern and poor

investor relations.

Medium term risk.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

Taskforce on Climate-Related Financial Disclosures (continued)

2. Strategy (continued)

Transition Opportunities

TCFD Category Opportunity Impact Time horizon

Resource

efficiency

Move to more efficient buildings. Reduce operating expenditure

through efficiency gains. Reduce

GHG emissions and possible future

carbon taxes.

Short/medium

term opportunity.

Energy source Installation of solar roofs. Investing in on-site renewable energy

generation could protect against

energy cost volatility for our tenants.

Short/medium

term opportunity.

Products and

Services

Improve building amenities

(e.g. EV charging, install LED lights).

Investing in on-site amenities could

improve the marketability of a property.

Short/medium

term opportunity.

Physical Risks

TCFD Category Risk Impact Time horizon

Acute (floods,

hurricanes,

windstorms,

heatwaves)

Increased frequency and intensity of

extreme weather events leading to

property damage.

Increased insurance costs. Inability to

sell or lease property.

Short/medium

term risk.

Chronic

(sustained higher

temperatures,

rising sea levels

and water stress)

Rising temperatures leading to

increasing insurance and utilities costs.

Potential impact on service charge

affordability for tenants.

Longer term risk.

Physical Opportunities

TCFD Category Opportunity Impact Time horizon

Resilience The development of net zero carbon

assets could future proof the

property portfolio against future

increasing regulation e.g. increasing

MEES standards.

Increased market valuation

of properties through

resilience planning.

Medium/longer

term opportunity.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

Taskforce on Climate-Related Financial Disclosures (continued)

3. Risk management

Our risk management process is designed to identify, evaluate, manage, and mitigate (rather than eliminate) the significant risks we

face. This process, as described on pages 45 to 46 includes transitional and physical climate-related risks.

At least twice a year, the Board undertakes a formal risk review, with the assistance of the Audit & Risk Committee, to assess the

effectiveness of our risk management and internal control systems.

4. Metrics and targets

Please see pages 118 to 131 for reporting on our climate change metrics and targets.

Share Capital

Share Issues

At the Company’s AGM held on 8 September 2021, the Company was granted the authority to allot Ordinary Shares up to an aggregate

nominal amount of £158,424.74 on a non pre-emptive basis. The Company was also granted authority to allot further Ordinary

Shares up to an aggregate nominal amount of £158,424.74 on a non pre-emptive basis. No Ordinary Shares have been allotted

under either authority during the year and both authorities will expire at the conclusion of the 2022 AGM. A resolution to renew the

Company’s authority to allot Ordinary Shares up to an aggregate nominal amount of £158,424.74 on a non pre-emptive basis will be

put to shareholders at the 2022 AGM alongside a resolution to allot further Ordinary Shares up to an aggregate nominal amount of

£158,424.74 on a non pre-emptive basis.

As at 31 March 2022, and the date of this report, the Company had 158,774,746 Ordinary Shares in issue, of which 350,000 (2021:

350,000) were held in treasury and therefore the total voting rights attaching to Ordinary Shares are 158,424,746.

Purchase of Own Shares

At the Company’s AGM on 8 September 2021, the Company was granted authority to purchase up to 23,747,869 Ordinary Shares

(being 14.99% of the Company’s Ordinary Shares in issue). No shares have been bought back under this authority during the year,

which expires at the conclusion of the Company’s 2022 AGM. A resolution to renew the Company’s authority to purchase (either for

cancellation or for placing into treasury) up to 23,747,869 Ordinary Shares (being 14.99% of the issued Ordinary Share capital (excluding

treasury shares) as at the date of this report), will be put to shareholders at the 2022 AGM. Any purchase will be made in the market and

prices will be in accordance with the terms laid out in the Notice of AGM (enclosed separately and available on the Company’s website).

The authority will be used where the Directors consider it to be in the best interests of shareholders.

Rights attached to Ordinary Shares

a) Income Entitlement

The profits of the Company (including accumulated revenue reserves) available for distribution and resolved to be distributed shall

be distributed in proportion to the amount paid up per share by way of interim and, where applicable, special or final dividends

among the holders of Ordinary Shares.

b) Capital Entitlement

After meeting the liabilities of the Company on a winding-up, the surplus assets shall be paid to the holders of different classes of

members and distributed among such holders rateably according to the amounts paid up or credited as paid up on their shares.

c) Voting Entitlement

Each Ordinary shareholder is entitled to one vote on a show of hands and, on a poll, to one vote for every Ordinary Share held. The

Notice of AGM and Form of Proxy stipulate the deadlines for the valid exercise of voting rights and, other than with regard to Directors

not being permitted to vote their Ordinary Shares on matters in which they have an interest, there are no restrictions on the voting

rights of Ordinary Shares.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

Share Capital (continued)

There are no restrictions concerning the transfer of securities in the Company or on voting rights; no special rights with regard to control

attached to securities; no agreements between holders of securities regarding restrictions on the transfer of securities or voting rights

known to the Company; and no agreements which the Company is party to that might affect its control following a successful takeover bid.

Requirements of the Listing Rules

Listing Rule 9.8.4 requires the Company to include specified information in a single identifiable section of the annual report or a cross

reference table indicating where the information is set out. The Directors confirm that there are no disclosures required in relation to

Listing Rule 9.8.4.

Substantial Shareholdings

As at 31 March 2022, the Company had been notified under Disclosure Guidance and Transparency Rule (‘DTR’) 5 of the following

significant holdings of voting rights in its Ordinary Shares. These holdings may have changed since notification, however notification of

any change is not required until the next applicable threshold is crossed.

Shareholder

Number of Ordinary

Shares held

% of total

voting rights

The Royal Bank of Scotland Group plc 13,570,464 8.6

Close Asset Management Limited 13,448,090 8.5

Old Mutual plc 11,087,801 7.0

Momentum Global Investment Management Limited 7,867,700 5.0

Schroders plc 7,643,485 4.8

Seneca IM Limited 7,602,200 4.8

Investec Wealth & Investment Limited 4,813,400 3.0

NatWest Group plc

4,747,598 3.0

The Company has not been informed of any changes to the above interests between 31 March 2022 and the date of this report.

Related Party Transactions

Related party transactions during the year ended 31 March 2022 can be found in note 24 to the financial statements.

Post Balance Sheet Events

Post balance sheet events can be found in note 26 to the financial statements.

Statement of Disclosure of Information to Auditor

So far as each Director is aware, there is no relevant audit information, which would be needed by the Company’s Auditor in connection

with preparing its audit report (on pages 68 to 75), of which the Auditor is not aware; and each Director, in accordance with section

418(2) of the Companies Act 2006, has taken all reasonable steps that they ought to have taken as a Director to make themselves aware

of any such information and to ensure that the Auditor is aware of such information.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Directors’ Report (continued)

Auditor

BDO has expressed its willingness to continue as the Company’s Auditor. As outlined in the Report of the Audit Committee on page47,

resolutions proposing the Auditor’s re-appointment and to authorise the Audit Committee to determine its remuneration will be

proposed at the forthcoming AGM.

The Directors’ Report has been approved by the Board of Directors and signed on its behalf by:

Mark Burton

Chairman

21 June 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Statement of Directors’ Responsibilities in respect of the Annual

Report and Financial Statements

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with UK adopted international

accounting standards and applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to

prepare the Company’s financial statements in accordance with UK adopted international accounting standards. 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 for 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 accounting estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with UK adopted international accounting standards, subject to any material

departures disclosed and explained in the financial statements;

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in

business; and

• prepare a Directors’ Report, a Strategic Report and Directors’ Remuneration Report which comply with the requirements of the

Companies Act 2006.

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 are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and

detection of fraud and other irregularities. The Directors are responsible for ensuring that 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

performance, prospects, business model and strategy.

Website publication

The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial

statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation

and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of

the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the

financial statements contained therein.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Statement of Directors’ Responsibilities in respect of the Annual

Report and Financial Statements (continued)

Directors’ responsibilities pursuant to DTR4

The Directors confirm to the best of their knowledge:

• The financial statements have been 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.

• The Annual Report includes a fair review of the development and performance of the business and the financial position of the

Company, together with a description of the principal risks and uncertainties that it faces.

The Directors consider that this 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.

This Statement of Responsibilities was approved by the Board and signed on its behalf by:

Mark Burton

Chairman

21 June 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Independent Auditor’s Report to the Members of AEW UK REIT plc

Opinion on the financial statements

In our opinion the financial statements:

• give a true and fair view of the state of the Company’s affairs as at 31 March 2022 and of its profit for the year then ended;

• have been properly prepared in accordance with UK adopted international accounting standards; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of AEW UK REIT plc (the ‘Company’) for the year ended 31 March 2022 which comprise

the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement

of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting

framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs(UK)) and applicable law. Our

responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements

section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion. Our audit opinion is consistent with the additional report to the audit committee.

Independence

Following the recommendation of the audit committee, we were appointed by the board of directors on 8 September 2021 to audit

the financial statements for the year ended 31 March 2022 and subsequent financial periods. The period of total uninterrupted

engagement is 1 year, covering the year ended 31 March 2022. We are independent of the Company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied

to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The

non-audit services prohibited by that standard were not provided to the Company.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to

continue to adopt the going concern basis of accounting included:

• using our knowledge of the Company and its market sector together with the current general economic environment to assess

the Directors’ identification of the inherent risks to the Company’s business and how these might impact the Company’s ability to

remain a going concern for the going concern period, being the period to 30 June 2023, which is at least 12 months from when

the financial statements are authorised for issue;

• obtaining an understanding of the Directors’ process for assessing going concern including an understanding of the key

assumptions used;

• obtaining the Directors’ going concern assessment and:

– assessing the Company’s forecast cash flows with reference to historic performance and challenging the Directors’ forecast

assumptions in comparison to the current performance of the Company;

– testing the inputs into the forecasts for reasonableness based on historic activity and corroboration to contractual

agreements;

– agreeing the Company’s available borrowing facilities and the related terms and covenants to loan agreements including

Company’s facilities refinancing post year end with AgFe;

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

• obtaining forecast covenant calculations to check for any potential future covenant breaches. We also considered the covenant

compliance headroom for sensitivity to both future changes in property valuations and the Company’s future financial performance;

• considering board minutes, and evidence obtained through the audit and challenging the Directors on the identification of any

contradictory information in the forecasts and the impact the going concern assessment; and

• analysing the Directors’ stress testing calculations and challenging the assumptions made using our knowledge of the business and

of the current economic climate, to assess the reasonableness of the downside scenarios selected and the appropriateness of the

Directors’ mitigating actions.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,

individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least

twelve months from when the financial statements are authorised for issue.

In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add

or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it

appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of

this report.

Overview

Key audit matters

2022

Valuation of Investment Property

Materiality

Company financial statements as a whole

£2.52 million based on 1% of total assets

An overview of the scope of our audit

Our Company audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s

system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk

of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have

represented a risk of material misstatement.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial

statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to

fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in

the audit, and directing the efforts of the engagement team. This matter was addressed in the context of our audit of the financial

statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

Independent Auditor’s Report to the Members of AEW UK REIT plc

(continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Key audit matter How the scope of our audit addressed the key audit matter

Valuation of investment

properties

As detailed in note 12 to the

financial statements, the

Company owns a portfolio of

investment properties which

are held at their fair value.

The Company’s accounting

policy for these properties is

described in note 2.5 to the

financial statements.

The key judgements and

estimates in arriving at the

fair values are set out in notes

2.2 and 12 to the financial

statements.

The Company has an

investment property portfolio

of commercial property

across a number of sectors

in the United Kingdom.

This comprises completed

investment property which

is let, or available to let and

is valued using the income

capitalisation method,

in accordance with RICS

methodology and IFRS 13.

The valuation of investment

property requires significant

judgement and estimates

by the Directors and their

independent external valuer

and is therefore considered

a significant risk due to the

subjective nature of certain

assumptions inherent in each

valuation.

Any input inaccuracies or

unreasonable bases used in

the valuation judgements

(such as in respect of estimated

rental value and yield profile

applied) could result in a

material misstatement of

the Company’s financial

statements.

There is also a risk that

management may influence

the judgements and estimates

in respect of property

valuations in order to achieve

property valuations and other

performance targets to meet

market expectations.

The valuation of investment

properties was therefore

considered to be a key audit

matter.

Our audit procedures included the following:

Experience of the independent external valuer and

relevance of its work

We assessed the valuer’s competence and capabilities and

read their terms of engagement with the Company, to identify

any matters that could have affected their independence and

objectivity or imposed scope limitations upon them.

With the assistance of our real estate specialists, we read

the valuation reports and assessed whether the valuations

had been prepared in accordance with applicable valuation

guidelines and IFRS 13 Fair Value Measurement and that they

were appropriate for determining the carrying value in the

Company’s financial statements.

Data provided to the valuer

We inspected that the data provided to the valuer by the

Investment Manager was consistent with the information

provided to, and tested by, us. This data included inputs such

as current rent and lease term, which we have agreed on a

sample basis to executed lease agreements.

Assumptions and estimates used by the valuer

We developed yield expectations for each property using available

independent industry data, reports and details of relevant

comparable transactions in the market around the year end date.

We compared the key valuation assumptions against our

independently formed market expectations (by reference

to market data based on the location and specifics of each

property) and challenged the valuer where significant variances

from these expectations were identified. We corroborated their

responses to supporting documentation where appropriate.

The key valuation assumptions were the equivalent yields

which we evaluated by reference to market data based on the

location and specifics of each property.

With the assistance of our real estate specialists, we met with

the Company’s valuers to discuss and challenge the valuation

methodology and key assumptions and considered if there

were any indicators of undue management influence on the

valuations.

Key observations

We did not identify any matters to suggest that the valuation

of the Company’s investment properties is inappropriate.

Independent Auditor’s Report to the Members of AEW UK REIT plc

(continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We

consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of

reasonable users that are taken on the basis of the financial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality

level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will

not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular

circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole and performance

materiality as follows:

Company financial statements

2022

Materiality £2.52 million

Basis for determining materiality 1% of total Assets

Rationale for the benchmark applied

We determined that total assets

would be the most appropriate

basis for determining overall

materiality as we consider it to be

one of the principal considerations

for users of the financial statements

in assessing the financial

performance of the Company.

Performance materiality £1.64 million

Basis for determining performance

materiality

Overall performance materiality for

the Company has been set at 65% of

materiality. This was on the basis of

our risk assessment, together with

our assessment of the Company’s

overall control environment, while

also considerating this is our first

audit of the Company.

Specific materiality

We also determined that for any items that could affect the calculation of the Company’s European Public Real Estate (“EPRA”)

earnings, a misstatement of less than materiality for the financial statements as a whole, specific materiality, could influence the

economic decisions of users. We consider EPRA earnings to be a key performance measure of the Company. EPRA earnings excludes

the impact of the net surplus on revaluation of investment properties, profit on disposal of investment properties and changes in the

fair value of interest rate derivatives. As a result, we determined materiality for these items based on 5% of EPRA earnings amounting

to £0.58 million for the Company. We further applied a performance materiality level of 65% of specific materiality to ensure that the

risk of errors exceeding specific materiality was appropriately mitigated.

Independent Auditor’s Report to the Members of AEW UK REIT plc

(continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £75,000 for items

audited to financial statement materiality, and £17,000 for items audited to specific materiality. We also agreed to report differences

below these thresholds that, in our view, warranted reporting on qualitative grounds.

Other information

The directors are responsible for the other information. The other information comprises the information included in the Annual Report

and Financial Statements other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements

does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form

of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other

information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise

appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required

to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have

performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Corporate governance statement

The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the

Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code

specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate

Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit.

Going concern and

longer-term viability

• The Directors’ statement with regards to the appropriateness of adopting the

going concern basis of accounting and any material uncertainties identified and

set out on pages 54 and 55; and

• The Directors’ explanation as to their assessment of the Company’s prospects, the

period this assessment covers and why the period is appropriate set out on pages

55 and 56.

Other Code provisions • Directors’ statement on fair, balanced and understandable set out on pages 66 and 67;

• Board’s confirmation that it has carried out a robust assessment of the emerging and

principal risks set out on pages 30 to 36;

• The section of the annual report that describes the review of effectiveness of risk

management and internal control systems set out on pages 45 and 46; and

• The section describing the work of the Audit Committee set out on page 47.

Independent Auditor’s Report to the Members of AEW UK REIT plc

(continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Other Companies Act 2006 reporting

Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies

Act 2006 and ISAs (UK) to report on certain opinions and matters as described below:

Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic report and the Directors’ report for the financial

year for which the financial statements are prepared is consistent with the financial

statements; and

• the Strategic report and the Directors’ report have been prepared in accordance with

applicable legal requirements.

In the light of the knowledge and understanding of the Company and its environment

obtained in the course of the audit, we have not identified material misstatements in

the strategic report or the Directors’ report.

Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been

properly prepared in accordance with the Companies Act 2006.

Matters on which we are required to

report by exception

We have nothing to report in respect of the following matters in relation to which the

Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit

have not been received from branches not visited by us; or

• the financial statements and the part of the Directors’ remuneration report to be

audited are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Responsibilities of Directors

As explained more fully in the Statement of Directors’ Responsibilities in respect of the Annual Report and Financial Statements, the

Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and

for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from

material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern,

disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either

intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Independent Auditor’s Report to the Members of AEW UK REIT plc

(continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a

high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,

they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our

procedures are capable of detecting irregularities, including fraud is detailed below:

• We gained an understanding of the legal and regulatory framework applicable to the Company and the industry in which it operates,

and considered the risk of acts by the Company that were contrary to applicable laws and regulations, including fraud.

• We considered the Company’s compliance with laws and regulations that have a direct impact on the financial statements including

UK company law, the applicable accounting framework, tax legislation (including the UK REIT regime requirements) and the relevant

Listing Rules, and we considered the extent to which non-compliance might have a material effect on the Company’s financial

statements.

• We designed audit procedures to identify instances of non-compliance with such laws and regulations. Our procedures included

reviewing the financial statement disclosures and accounting policies to identify instances of management bias, and agreeing to

underlying supporting documentation where necessary. We reviewed minutes of Board meetings held during and subsequent

to the year for any indicators of non-compliance and made enquiries of management and of the Directors as to the risks of

non-compliance and any instances thereof.

• We assessed the susceptibility of the financial statements to material misstatement, including fraud and considered the valuation of

the investment property portfolio, revenue recognition and management override of controls to be significant risks to the audit. Our

responses to the valuation of investment properties risk is set out in the key audit matters section above.

• We addressed the risk of management override of controls by testing a sample of journal entries processed during the year, agreeing

to supporting documentation and evaluating whether there was evidence of bias by management or the Directors that represented

a risk of material misstatement due to fraud.

• Our procedures regarding the risk of intentional misstatement of revenue included setting expectations for the annual revenue to be

recognised for the year for each property, comparing it to the actual amounts recognised and investigating variances. We confirmed

a sample of lease details back to the underlying signed agreements and to receipt of cash (where amounts had been received prior

to the year end). We also tested a sample of the rent smoothing adjustments to supporting documentation.

• We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and

remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Independent Auditor’s Report to the Members of AEW UK REIT plc

(continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of

not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve

deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit

procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected

in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council’s website at:

www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.

Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to

them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility

to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we

have formed.

Richard Levy (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London, United Kingdom

21 June 2022

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Independent Auditor’s Report to the Members of AEW UK REIT plc

(continued)

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Financial Statements

Statement of Comprehensive Income

for the year ended 31 March 2022

Notes

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Income

Rental and other income 3 19,911 17,491

Property operating expenses 4 (5,739) (3,754)

Impairment release/(loss) on trade receivables

9 (944)

Net rental and other income 14,181 12,793

Other operating expenses 5 (2,329) (1,958)

Directors’ remuneration 6

(100) (100)

Operating profit before fair value changes 11,752 10,735

Change in fair value of investment properties

12 32,317

5,324

Realised gains on disposal of investment properties

12 3,673 7,043

Costs in respect of investment property held for sale 12

(829) –

Operating profit 46,913 23,102

Change in fair value of interest rate derivatives 7 770 (16)

Finance expense 8

(988)

(914)

Profit before tax 46,695 22,172

Taxation 9

– –

Profit after tax 46,695 22,172

Other comprehensive income

– –

Total comprehensive income for the year

46,695 22,172

Earnings per share (pps) (basic and diluted) 10

29.47 13.98

The notes on pages 80 to 111 form an integral part of these financial statements.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Statement of Changes in Equity

for the year ended 31 March 2022

For the year ended

31 March 2022 Notes

Share capital

£’000

premium

account

£’000

Capital

reserve and

retained

earnings*

£’000

Buyback

reserve

£’000

Total capital

and reserves

attributable to

owners of the

Company

£’000

Balance at 1 April 2021 1,587 56,578 99,179 (265) 157,079

Total comprehensive

income – – 46,695 – 46,695

Dividends paid 11

– – (12,674) – (12,674)

Balance at 31 March 2022

1,587 56,578 133,200 (265) 191,100

For the year ended

31 March 2021 Notes

Share capital

£’000

premium

account

£’000

Capital

reserve and

retained

earnings*

£’000

Buyback

reserve

£’000

Total capital

and reserves

attributable to

owners of the

Company

£’000

Balance at 1 April 2020 1,587 56,578 89,698 – 147,863

Total comprehensive

income – – 22,172 – 22,172

Ordinary Shares bought

back 20 – – – (263) (263)

Share buyback costs 20 – – – (2) (2)

Dividends paid 11

– – (12,691) – (12,691)

Balance at 31 March 2021

1,587 56,578 99,179 (265) 157,079

* The capital reserve has arisen from the cancellation of part of the Company’s share premium account and is a distributable reserve.

The notes on pages 80 to 111 form an integral part of these financial statements.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Statement of Financial Position

as at 31 March 2022

Notes

31 March 2022

£’000

31 March 2021

£’000

Assets

Non-current assets

Investment property 12

211,710 169,092

Current assets

Investment property held for sale 12 25,414 7,251

Receivables and prepayments 13 7,584 6,977

Other financial assets held at fair value 14 831 61

Cash and cash equivalents

6,769 17,450

40,598 31,739

Total assets

252,308 200,831

Non-current liabilities

Interest bearing loans and borrowings 15 (53,757) (39,131)

Lease obligations 17

(174) (635)

(53,931) (39,766)

Current liabilities

Payables and accrued expenses 16 (7,264) (3,938)

Lease obligations 17

(13) (48)

(7,277) (3,986)

Total liabilities

(61,208) (43,752)

Net assets

191,100 157,079

Equity

Share capital 20 1,587 1,587

Buyback reserve 20 (265) (265)

Share premium account 21 56,578 56,578

Capital reserve and retained earnings

133,200 99,179

Total capital and reserves attributable to equity holders 191,100 157,079

Net Asset Value per share (pps) 10

120.63 99.15

EPRA Net Tangible Assets per share (pps) 10

120.10 99.11

The financial statements were approved by the Board of Directors on 21 June 2022 and were signed on its behalf by:

Mark Burton

Chairman

AEW UK REIT plc (Company number: 09522515)

The notes on pages 80 to 111 form an integral part of these financial statements.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Statement of Cash Flows

for the year ended 31 March 2022

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Cash flows from operating activities

Profit before tax 46,695 22,172

Adjustment for non-cash items:

Finance expenses 988 914

(Gain)/loss from change in fair value of interest rate derivatives (770) 16

Gain from change in fair value of investment property (32,317) (5,324)

Realised gain on disposal of investment properties (3,673) (7,043)

(Increase)/decrease in other receivables and prepayments (768) 374

Increase/(decrease) in other payables and accrued expenses

2,170 (647)

Net cash flow generated from operating activities

12,325 10,462

Cash flows from investing activities

Purchase of and additions to investment properties (41,437) (5,983)

Disposal of investment properties

16,446 29,049

Net cash (used in)/generated from investing activities

(24,991) 23,066

Cash flows from financing activities

Share buyback cash paid – (263)

Share buyback costs – (2)

Loan draw down/(repayment) 14,500 (12,000)

Arrangement loan facility fee paid (46) (13)

Collateral received 870 –

Premium for interest rate caps – (63)

Finance costs (772) (919)

Dividends paid (12,539) (12,691)

Amounts paid on finance lease

(28) –

Net cash generated from/(used in) in financing activities

1,985 (25,951)

Net (decrease)/increase in cash and cash equivalents (10,681) 7,577

Cash and cash equivalents at start of the year

17,450 9,873

Cash and cash equivalents at end of the year

6,769 17,450

The notes on pages 80 to 111 form an integral part of these financial statements.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Notes to the Financial Statements

for the year ended 31 March 2022

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 6

Floor, 65 Gresham Street, London,

EC2V7NQ.

The Company’s Ordinary Shares were listed on the Official List of the FCA and admitted to trading on the Main

Market of the London Stock Exchange on 12 May 2015.

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

pages 2 to 39.

2. Accounting policies

2.1 Basis of preparation

These financial statements are prepared and approved by the Directors in accordance with UK adopted

international accounting standards.

These financial statements have been prepared under the historical cost convention, except for

investment property and interest rate derivatives that have been measured at fair value.

The financial statements are presented in Sterling and all values are rounded to the nearest thousand

pounds (£’000), except when otherwise indicated.

The Company is exempt by virtue of Section 402 of the Companies Act 2006 from the requirement to

prepare group financial statements. These financial statements present information solely about the

Company as an individual undertaking.

New standards, amendments, and interpretations

The Company has considered and applied the following new standards and amendments to existing

standards which are required for the accounting period beginning on 1 April 2022:

• Amendments to IFRS 16 COVID-19 Related Rent Concessions beyond June 2021, the amendments

are an extension by one year to the amendments adopted in the prior year which were to provide relief to

lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as

a direct consequence of the COVID-19 pandemic. The Company has not received any concessions for its

ground rent costs and therefore accounting treatment has not been affected.

• Interest Rate Benchmark Reform – Phase 2 (Amendments to various standards:

IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial Instruments; Recognition and Measurement’,

IFRS 7 ‘Financial Instruments: Disclosures’, IFRS 4 ‘Insurance Contracts’ and IFRS 16 ‘Leases’), the

amendments focus on the accounting for the replacement of existing benchmark interest rates.

The Company has transitioned the interest rate on the loan from GBP LIBOR +1.4% to SONIA + 1.4% in

the financial year. The change in benchmark interest rates has had no significant impact on the finance

costs incurred by the Company.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

2. Accounting policies (continued)

2.1 Basis of preparation (continued)

There are a number of new standards and amendments to existing standards which have been published

and are mandatory for the Company’s accounting periods beginning on or after 1 April 2023 or later. The

Company is not adopting these standards early. The following are the most relevant to the Company:

• Reference to Conceptual Framework (Amendments to IFRS 3)

• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)

The Company does not expect the adoption of the new accounting standards issued but not yet effective

to have a significant impact on its financial statements.

2.2 Significant accounting judgements and estimates

The preparation of financial statements in accordance with IFRS requires the Directors of the Company

to make judgements, estimates and assumptions that affect the reported amounts recognised in the

financial statements. However, uncertainty about these assumptions and estimates could result in

outcomes that require a material adjustment to the carrying amount of the asset or liability in the future.

There are not considered to be any judgements which have a significant effect on the amounts

recognised in the financial statements, however, there is an estimate that will have a significant effect on

the amounts recognised in the financial statements:

i) Valuation of investment property

The Company’s investment property is held at fair value as determined by the independent external valuer

on the basis of fair value in accordance with the internationally accepted RICS Appraisal and Valuation

Standards. Details of the considerations made in respect of the estimation are further detailed in note 12.

2.3 Segmental information

In accordance with IFRS 8, the Company considers each of its properties to be an individual operating

segment, which are aggregated into one reporting segment, being investment in property in the UK.

2.4 Going concern

The Directors assessed the Company’s ability to continue as a going concern, which takes into

consideration the uncertainty associated with the Ukraine war and current inflation levels, as well as the

Company’s cashflows, financial position, liquidity and borrowing facilities.

As at 31 March 2022, the Company had a cash balance of £6.77 million. The Company’s existing RBSi loan

facility in place at year-end was due to mature in October 2023 and therefore, the Company elected to

undertake a re-financing which concluded post year-end in May 2022. The re-financed loan is held with

AgFe and is a £60.00m facility with a five-year term. This is priced as a fixed rate loan with a total interest

cost of 2.96% and associated 10% projected debt yield and 55% Loan to NAV covenants. The Company

reported a Loan to NAV of 28.26% at year-end. Taking into account the further £6.00m debt drawn as

part of the re-financing process, this would give a Loan to NAV of 31.40%, all else equal. This provides

room for a £92.92 million fall in NAV before reaching the 55% Loan to NAV covenant. Moreover, based on

the £54.00m of debt drawn as at year-end, the Company had a projected debt yield of 25%, comfortably

in excess of the 10% covenant.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

2. Accounting policies (continued)

2.4 Going concern (continued)

The Company benefits from a secure, diversified income stream from a tenancy profile which is not overly

reliant on any one tenant or sector, which reduces risk. The Directors also noted that:

• The Company’s rent collection has been strong, with 93% of contracted rent either having been

collected, or payment plans agreed, for the March 2022 quarter.

• Based on the contracted rent as at 31 March 2022, a reduction of 64.58% in NOI could be

accommodated before breaching the debt yield covenant in the Company’s refinanced

debtarrangements.

• Based on the property valuation at 31 March 2022, the Company had room for a £92.92 million fall in

NAV before reaching the maximum LTV covenant in the Company’s refinanced debt arrangements.

• The Company’s cash flow can also be significantly managed through the adjustment of

dividendpayments.

Taking this into consideration, the Directors have reviewed a number of scenarios over 12 months from

the date of approval of these financial statements, including a worst case plausible downside scenario

which makes the following assumptions:

• A reduction in NOI of 30%;

• No new lettings or renewals, other than those where terms have already been agreed;

• A 10% fall in property valuations; and

• No new acquisitions or disposals.

In the above scenario, the Company is forecast to generate a positive cash flow before dividend payments,

however it would generate a cash flow much lower than its target dividend of 8 pps per annum.

As part of the refinancing process, the remaining £6.00m of the loan facility was drawn. Taking this

into account, the Company would maintain a Loan to NAV ratio of no higher than 39% over the next

12months, providing a headroom of over £47 million up to the 55% covenant. The Company’s cash could

be managed through a change to dividend policy, which would allow the existing cash resources of circa

£2.33million at the date of approval of the financial statements to be maintained.

In the above scenario, the Company is forecast to pass the debt yield covenant during the 12 month

period with a minimum projected yield of 18%, compared with the limit of 10%, assuming that no

repayments of the facility were to be made.

Given the Company’s substantial headroom against its borrowing covenants, the Directors believe that

the Company is well placed to manage its financing and business risks, including those associated with

the Ukraine war and current inflation. The Directors are confident that the Company will have sufficient

funds to meet its liabilities as they fall due for at least 12 months from the date of approval of the

financial statements and therefore the financial statements have been prepared on a going concern basis.

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

2. Accounting policies (continued)

2.5 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

leaseterm. A rental adjustment is recognised from the rent review date in relation to unsettled rent

reviews, where the Directors are reasonably certain that the rental uplift will be agreed.

Lease incentives, including rent free periods and payment to tenants, are also allocated to the

Statement of Comprehensive Income on a straight-line basis over the lease term. The value of

resulting accrued rental income is deducted from the valuation as provided by the valuer to arrive

at the carrying value.

A modification to an operating lease in the form of a new lease incentive is accounted for as a new

lease from the effective date of the modification. Any lease incentive existing on a modified lease

will then be spread evenly over the new remaining life of the lease.

Contingent rental income is calculated based off actual turnover and is recognised when it is raised.

Amounts received from tenants to terminate leases or to compensate for dilapidations are

recognised in the Statement of Comprehensive Income when the right to receive them arises.

Service charge income receivable under operating leases is charged based on budgeted service

charge expenditure for a given property over a given service charge year. This income is recognised

on a straight-line basis over the service charge year and any balance credits or charges on

reconciliation following the end of the service charge year are recognised at the time they arise.

Insurance income is recognised in the accounting period in which the services are rendered.

ii) Deferred income

Deferred income is any rental income that has been invoiced to the tenant but relates to future

periods. It is reported as a current liability in the Statement of Financial Position.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

2. Accounting policies (continued)

2.5 Summary of significant accounting policies (continued)

c) Financing income and expenses

Financing income comprises interest receivable on funds invested. Financing expenses comprise interest

and other costs incurred in connection with the borrowing of funds. Interest income and interest payable

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

d) Investment property

Property is classified as investment property when it is held to earn rentals or for capital appreciation

or both. Investment property is measured initially at cost including transaction costs. Transaction costs

recognise transfer taxes and professional fees to bring the property to the condition necessary for it

to be capable of operating. The carrying amount also includes the cost of replacing part of an existing

investment property at the time that cost is incurred if the recognition criteria are met.

Subsequent to initial recognition, investment property is stated at fair value. Gains or losses arising from

changes in the fair values are included in profit or loss.

Investment properties are valued by the independent external valuer on the basis of a full valuation with

physical inspection at least once a year. 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 is based upon the income capitalisation approach. This approach

involves applying capitalisation yields to current and future rental streams net of income voids arising

from vacancies or rent-free periods and associated running costs. These capitalisation yields and

estimated rental values are based on comparable property and leasing transactions in the market using

the valuer’s professional judgement and market observation. Other factors taken into account in the

valuations include the tenure of the property, tenancy details, capital values of fixtures and fittings,

environmental matter and the overall repair and condition of the property.

For the purposes of these financial statements, the assessed fair value is:

• reduced by the carrying amount of any accrued income resulting from the spreading of lease incentives; and

• increased by the carrying amount of leasehold obligations.

Investment property is derecognised when it has been disposed of or permanently withdrawn from use

and no future economic benefit is expected after its disposal or withdrawal.

The profit on disposal is determined as the difference between the net sales proceeds and the carrying

amount of the asset at the commencement of the accounting period plus capital expenditure in the period.

Any gains or losses on the retirement or disposal of investment property are recognised in the profit or

loss in the year of retirement or disposal.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

2. Accounting policies (continued)

2.5 Summary of significant accounting policies (continued)

e) Investments in subsidiaries

AEW UK REIT 2015 Limited is the subsidiary of the Company. The subsidiary was dormant during the

current and previous reporting period. The investment in the subsidiary is stated at cost less impairment

and shown in note 19.

The Company has taken advantage of the exemption as permitted by Section 402 of the Companies

Act 2006, therefore the subsidiary is not consolidated as its inclusion is not material for the purposes of

giving a true and fair view.

f) Investment property held for sale

Investment property is classified as held for sale when it is being actively marketed at year-end and it is

highly probable that the carrying amount will be recovered principally through a sale transaction within

12months.

Investment property classified as held for sale is included within current assets within the Statement of

Financial Position and measured at fair value.

g) Derivative financial instruments

Derivative financial instruments, comprising interest rate caps for hedging purposes, are initially

recognised at fair value and are subsequently measured at fair value, being the estimated amount

that the Company would receive or pay to terminate the agreement at the period end date, taking

into account current interest rate expectations and the current credit rating of the Company and its

counterparties. Premiums payable under such arrangements are initially capitalised into the Statement of

Financial Position.

The Company uses valuation techniques that are appropriate in the circumstances and for which

sufficient data is available to measure fair value, maximising the use of relevant observable inputs and

minimising the use of unobservable inputs significant to the fair value measurement as a whole. Changes

in fair value of interest rate derivatives are recognised within operating costs in profit or loss in the period

in which they occur.

h) Cash and cash equivalents

Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and short-

term deposits with an original maturity of three months or less.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

2. Accounting policies (continued)

2.5 Summary of significant accounting policies (continued)

i) Receivables

Rent and other receivables are initially recognised at fair value and subsequently at amortised cost.

Impairment provisions are recognised based upon an expected credit loss model. The Company has

made an assessment of expected credit losses at each period end, using the simplified approach where

a lifetime expected loss allowance is recognised over the expected life of the financial instrument. Any

adjustment is recognised in profit or loss as an impairment gain or loss.

Expected credit losses are assessed based on the Company’s historical credit loss experience, adjusted

for factors which are specific to the tenant and current and forecast economic conditions in general. If

confirmation is received that a trade receivable will not be collected, the carrying value of the asset will be

written off against the associated impairment provision.

j) 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.

k) Other payables and accrued expenses

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

amortised cost.

l) Rent deposits

Rent deposits represent cash received from tenants at inception of a lease and are subsequently

transferred to the rent agent to hold on behalf of the Company.

m) Interest bearing loans and borrowings

All loans and borrowings are initially recognised at fair value less directly attributable transaction costs.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised

cost using the effective interest method. Borrowing costs are amortised over the lifetime of the facilities

through profit or loss.

When the lifetime of a floating rate facility is extended, and this is considered to be a non-substantial

modification, the effective interest rate is revised to reflect changes in market rates of interest.

n) 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.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

2. Accounting policies (continued)

2.5 Summary of significant accounting policies (continued)

o) Dividend payable to shareholders

Equity dividends are recognised when they become legally payable.

p) 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.

q) Leases

Leases where the Company is lessee are capitalised at the lease commencement, at present value of the

minimum lease payments, using the Company’s incremental borrowing rate as the discount rate, and

held as both a right-to-use asset and a liability within the Statement of Financial Position.

r) Taxes

Corporation tax is recognised in profit or loss except to the extent that it relates to items recognised

directly in equity, in which case, it is recognised in equity.

As a REIT, the 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 substantively enacted at the period end date.

s) European Public Real Estate Association

The Company has adopted European Public Real Estate Association (‘EPRA’) best practice recommendations,

which it expects to broaden the range of potential institutional investors able to invest in the Company’s

Ordinary Shares. For the year to 31 March 2022, audited EPS and NAV calculations under EPRA’s methodology

are included in note 10 and further unaudited measures are included on pages 112 to 117.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

2. Accounting policies (continued)

2.5 Summary of significant accounting policies (continued)

t) Capital and reserves

Share capital

Share capital is the nominal amount of the Company’s Ordinary Shares in issue.

Buyback reserve

Buyback reserve represents the cost of the Company’s Ordinary Shares reacquired by the Company

including directly attributable transaction costs. This reserve is not distributable.

Share premium

Share premium relates to amounts subscribed for share capital in excess of nominal value less associated

issue costs of the subscriptions.

Capital reserve

The capital reserve represents the cancelled share premium less dividends paid from this reserve. This is a

distributable reserve.

Retained earnings

Retained earnings represent the profits of the Company less dividends paid from revenue profits to

date. Unrealised gains on the revaluation of investment properties contained within this reserve are not

distributable until they crystallise on the sale of the investment property. The cumulative unrealised gains

contained within this reserve at 31 March 2022 is £26.88 million (31 March 2021: cumulative unrealised

losses of £5.44 million).

3. Rental and other income

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Rental income 15,920 15,714

Service charge income 1,768 1,535

Dilapidation income received 1,103 197

Insurance income 924 –

Lease surrender income 139 45

Other property income

57 –

Total rental and other income

19,911 17,491

All rental and other income is derived from within the UK. No single tenant accounts for more than 10% of

rental income.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

4. Property operating expenses

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Recoverable service charge expense 1,768 1,535

Non-recoverable service charge expense 1,231

1,166

Other property operating expenses 1,816 1,053

Recoverable insurance expense

924 –

Total property operating expenses

5,739 3,754

Of the £1,231,000 non-recoverable service charge expenditure (31 March 2021: £1,166,000) c. £778,000 relates to

BankHeyStreet,Blackpool (31 March 2021: £768,000) which includes costs relating to the remedial works as detailed in the

Investment Manager’s Report.

5. Other operating expenses

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Investment management fee 1,555 1,229

Operating costs 628

594

Auditor remuneration

146 135

Total other operating expenses

2,329 1,958

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Audit

Statutory audit of Annual Report and Financial Statements

120 110

Non-audit

ISRE 2410 review (interim review fee)

26 25

Total fees paid to BDO LLP/KPMG LLP

146 135

Percentage of total fees attributed to non-audit services

18% 19%

Details on how the investment management fees are calculated are disclosed in note 24.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

6. Directors’ remuneration

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Directors' fees 95 95

Tax and social security

5 5

Total remuneration

100 100

A summary of the Directors’ remuneration is set out in the Directors’ Remuneration Report on page 52.

There are no other members of key management personnel other than the Directors.

7. Change in fair value of interest rate derivatives

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Change in fair value of interest rate derivatives

770 (16)

Total

770

(16)

During the year, the company received £870,000 (31 March 2021: £0) in collateral payments relating to the

interest rate derivative.

8. Finance expenses

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Interest payable on loan borrowings 754 722

Amortisation of loan arrangement fee 126 97

Commitment fees payable on loan borrowings

58 95

Bank charges

1 –

939 914

Interest expense on lease liabilities

49 –

Total

988 914

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

9. Taxation

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Tax charge reconciliation:

Analysis of tax charge in the year

Profit before tax

46,695 22,172

Theoretical tax at UK corporation tax standard rate of 19.00% (2021: 19.00%)

8,872 4,213

Adjusted for:

Exempt REIT income

(2,210)

(1,863)

Non-taxable investment profit

(6,662) (2,350)

Total tax charge

– –

Factors that may affect future tax charges

Due to the Company’s status as a REIT and the intention to continue meeting the conditions required to obtain

approval as a REIT in the foreseeable future, the Company has not provided deferred tax on any capital gains

and losses arising on the revaluation or disposal of investments.

The Corporation Tax rate will remain at 19% for the next financial year. As announced by the Chancellor in the 2021 budget the tax rate

will increase to 25% from April 2023.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

10. Earnings per share and NAV per share

Year ended

31 March 2022

Year ended

31 March 2021

Earnings per share:

Total comprehensive income (£'000)

46,695 22,172

Weighted average number of shares

158,424,746 158,620,910

Earnings per share (basic and diluted) (pence)

29.47 13.98

EPRA earnings per share:

Total comprehensive income (£’000) 46,695 22,172

Adjustment to total comprehensive income:

Change in fair value of investment properties (£’000) (32,317) (5,324)

Realised gain on disposal of investment properties (£'000) (3,673) (7,043)

Realised loss on disposal of investment property held for sale (£’000) 829 –

Change in fair value of interest rate derivatives (£'000)

(770) 16

Total EPRA Earnings (£'000)

10,764 9,821

EPRA earnings per share (basic and diluted) (pence)

6.79 6.19

Net assets (£'000) 191,100 157,079

Ordinary Shares in issue

158,424,746 158,424,746

NAV per share (pence)

120.63 99.15

Earnings per share (‘EPS’) amounts are calculated by dividing profit for the year attributable to ordinary equity

holders of the Company by the weighted average number of Ordinary Shares in issue during the year.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

10. Earnings per share and NAV per share (continued)

Current measures Previous measures

As at 31 March 2022

EPRA NTA

£’000

EPRA NRV

£’000

EPRA NDV

£’000

EPRA NAV

£’000

EPRA NNNAV

£’000

IFRS NAV attributable to shareholders 191,100 191,100 191,100 191,100 191,100

Mark-to-market adjustment

ofderivatives (831) (831) – (831) –

Real estate transfer tax and other

purchasers’ costs

– 15,852 – – –

At 31 March 2022

190,269 206,121 191,100 190,269 191,100

Number of Ordinary Shares

158,424,746 158,424,746 158,424,746 158,424,746 158,424,746

NAV per share

120.10p 130.11p 120.63p 120.10p 120.63p

Current measures Previous measures

As at 31 March 2021

EPRA NTA

£’000

EPRA NRV

£’000

EPRA NDV

£’000

EPRA NAV

£’000

EPRA NNNAV

£’000

IFRS NAV attributable to shareholders 157,079 157,079 157,079 157,079 157,079

Mark-to-market adjustment

ofderivatives (61) (61) – (61) –

Real estate transfer tax and other

purchasers’ costs

– 11,814 – – –

At 31 March 2021

157,018 168,832 157,079 157,018 157,079

Number of Ordinary Shares

158,424,746 158,424,746 158,424,746 158,424,746 158,424,746

NAV per share

99.11p 106.57p 99.15p 99.11p 99.15p

EPRA Net Tangible Assets (‘EPRA NTA’) and EPRA Net Disposal Value (‘EPRA NDV’) are calculated using property values in line with

IFRS, where values are net of Real Estate Transfer Tax (‘RETT’) and other purchasers’ costs. RETT and other purchasers’ costs are added

back when calculating EPRA Net Reinstatement Value (‘EPRA NRV’) and have been estimated at 6.6% of the net valuation provided by

KnightFrank.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

11. Dividends paid

Dividends paid during the year

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Represents four interim dividends of 2.00 pps each

12,674 12,691

Dividends relating to the year

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Represents four interim dividends of 2.00 pps each

12,674 12,684

Dividends paid during the period relate to Ordinary Shares only.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

12. Investment property

12.a) Investment property

31 March 2022

31 March

2021

Total

£’000

Investment

property

freehold

£’000

Investment

property

leasehold

£’000

Total

£’000

UK investment property

As at beginning of the year 160,750 18,250 179,000 189,300

Purchases and capital expenditure in the year 13,530 28,017 41,547 5,983

Disposals in the year (8,237) (4,350) (12,587) (22,006)

Revaluation of investment properties

30,457 1,758 32,215 5,723

Valuation provided by Knight Frank

196,500 43,675 240,175 179,000

Adjustment to carrying value for lease incentive debtor (3,238) (3,340)

Adjustment for lease obligations*

187 683

Total investment property

237,124 176,343

Classified as:

Investment property held for sale** 25,414 7,251

Investment property

211,710 169,092

237,124 176,343

Change in fair value of investment property

Change in fair value before adjustments for lease

incentives

32,215 5,723

Adjustment for movement in the year:

in value of lease incentive debtor

102 (399)

32,317 5,324

Gains on disposal of investment property

Net proceeds from disposals of investment property

during theyear***

16,260 29,049

Fair value at beginning of period

(12,587) (22,006)

3,673 7,043

Costs in respect of investment property held for sale

(829) –

The costs in respect of investment property held for sale relates to severance payments made to tenants of Bath

Street, Glasgow, to vacate the property.

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

** 225 Bath Street, Glasgow and Eastpoint Business Park, Oxford, have been classified as held-for-sale as at 31 March 2022. Contracts to

sell 225 Bath Street were exchanged in October 2020 and terms have been agreed to sell Eastpoint Business Park. It is expected that both

transactions will be completed within the next 12 months.

*** Net proceeds include deductions for topped up rents and rent free periods of £207,000 (31 March 2021: £0).

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

12. Investment property (continued)

12.a) Investment property (continued)

Valuation of investment property

Valuation of investment property is performed by Knight Frank LLP, an accredited external independent valuer

with recognised and relevant professional qualifications and recent experience of the location and category of

the investment property being valued.

The valuation of the Company’s investment property at fair value is determined by the external valuer on the

basis of market value in accordance with the internationally accepted RICS Valuation – Professional Standards

(incorporating the International Valuation Standards).

The determination of the fair value is based upon the income capitalisation approach. This approach involves

applying capitalisation yields to current and future rental streams net of income voids arising from vacancies or

rent-free periods and associated running costs. These capitalisation yields and estimated rental values are based on

comparable property and leasing transactions in the market using the valuer’s professional judgement and market

observation. Other factors taken into account in the valuations include the tenure of the property, tenancy details,

capital values of fixtures and fittings, environmental matter and the overall repair and condition of the property.

12.b) Fair value measurement hierarchy

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

Quoted prices in

active markets

(Level 1)

£’000

Significant

observable

inputs

(Level 2)

£’000

Significant

unobservable

inputs

(Level 3)

£’000

Total

£’000

Assets measured at fair value

31 March 2022

Investment property

– – 237,124 237,124

31 March 2021

Investment property

– – 176,343 176,343

Explanation of the fair value hierarchy:

Level 1 – Quoted prices for an identical instrument in active markets;

Level 2 – Prices of recent transactions for identical instruments and valuation techniques using observable

market data; and

Level 3 – Valuation techniques using non-observable data.

There have been no transfers between Level 1 and Level 2 during either period, nor have there been any

transfers in or out of Level 3.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

12. Investment property (continued)

12.b) Fair value measurement hierarchy (continued)

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

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair

value hierarchy of the entity’s portfolio of investment property are:

1) ERV

2) Equivalent yield

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

measurement. Increases/(decreases) in the discount rate/yield in isolation would result in a lower/(higher) fair

value measurement.

The significant unobservable inputs used in the fair value measurement, categorised within Level 3 of the fair

value hierarchy of the portfolio of investment property are as follows:

Fair Value Significant Unobservable Inputs

Sector £’000 ERV range (per sq ft per annum) Equivalent Yield range

As at 31 March 2022

Industrial 120,750 £0.50 - £10.00 4.49% - 9.53%

Retail 59,225 £4.65 - £75.00 7.16% - 10.65%

Office 43,275 £8.50 - £30.00 4.78% - 9.62%

Alternatives 16,925 £8.50 - £29.60 7.30% - 10.43%

Portfolio* 240,175 £0.50 - £75.00 4.49% - 10.65%

As at 31 March 2021

Industrial 108,850 £0.50 - £10.00 5.76% - 10.02%

Retail 20,800 £4.65 - £75.00 8.46% - 10.30%

Office 36,800 £8.50 - £27.00 6.09% - 10.12%

Alternatives 12,550 £8.50 - £29.60 7.61% - 10.37%

Portfolio* 179,000 £0.50 - £75.00 5.76% - 10.37%

* Valuation per Knight Frank LLP.

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

held at the end of the reporting period.

With regards to investment property, 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 or loss.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

12. Investment property (continued)

12.b) Fair value measurement hierarchy (continued)

Change in ERV Change in equivalent yield

£’000 £’000 £’000 £’000

Sensitivity analysis +5% -5% +5% -5%

31 March 2022

Resulting fair value of investment property

250,408 230,258 230,818 250,477

31 March 2021

Resulting fair value of investment property

183,818 168,394 170,487 187,847

Change in ERV Change in equivalent yield

£’000 £’000 £’000 £’000

Sensitivity analysis +10% -10% +10% -10%

31 March 2022

Resulting fair value of investment property

260,668 220,355 222,326 261,938

31 March 2021

Resulting fair value of investment property

191,699 160,864 162,986 197,965

Change in ERV Change in equivalent yield

£’000 £’000 £’000 £’000

Sensitivity analysis +15% -15% +15% -15%

31 March 2022

Resulting fair value of investment property

270,943 210,468 214,571 274,743

31 March 2021

Resulting fair value of investment property

199,642 153,345 156,136 209,264

Given the current volatility in the property market, the above levels of sensitivity of unobservable inputs are

considered to demonstrate plausible scenarios in the near future and a reasonable resulting range of movement

in valuation.

12.c) Real estate risk

The Company has considered the risks specific to its investment property within note 22.2 Financing Management.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

13. Receivables and prepayments

31 March 2022

£’000

31 March 2021

£’000

Receivables

Rent receivable

1,716 3,252

Allowance for expected credit losses (756) (995)

Rent agent float account 1,227 724

Other receivables 1,087 627

Recoverable service charge receivable 660 –

Recoverable insurance debtor

287 –

4,221 3,608

Lease incentive debtor

3,238 3,340

7,459 6,948

Prepayments

Property related prepayments 52 4

Other prepayments

73 25

125 29

Total

7,584 6,977

The aged debtor analysis of receivables is as follows:

31 March 2022

£’000

31 March 2021

£’000

Less than three months 3,379 3,416

Between three and six months 842 192

Between six and twelve months

– –

Total

4,221 3,608

The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime

expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis,

trade receivables are assessed on an individual tenant-by-tenant basis. The risk of credit loss applied to

each tenant is assessed based on information including, but not limited to: external credit ratings; financial

statements; press information; previous experience of losses or late payment; discussions with the property

manager and the tenant.

The expected loss rates are based on the Company’s historical credit losses experienced over the three-year

period prior to the year-end. The historical loss rates are then adjusted for current and forward-looking

information on macroeconomic factors affecting the Company’s customers. The expected credit loss provision

as at 31 March 2022 was £0.8 million (31 March 2021: £1.0 million). No reasonably possible changes in the

assumptions underpinning the expected credit loss provision would give rise to a material expected credit loss.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

100

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

13. Receivables and prepayments (continued)

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

31 March 2022

£’000

31 March 2021

£’000

At the beginning of the year 995 190

Remeasurement of loss allowance

(239)

805

At the end of the year

756 995

14. Interest rate derivatives

31 March 2022

£’000

31 March 2021

£’000

At the beginning of the year 61 14

Interest rate cap premium paid – 63

Changes in fair value of interest rate derivatives

770 (16)

At the end of the year

831 61

The Company was protected from a significant rise in interest rates at the year-end as it had interest rate caps

in effect which capped the interest rate at 1.00% on a notional value of £ 51.50 million. As a result, the loan

was 95.37% hedged as at 31 March 2022 (31 March 2021: 130%). Post year-end, the Company entered into

a five-year fixed rate loan with AgFe. As part of this, the interest rate cap held was sold with total proceeds of

£743,395.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

101

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

14. Interest rate derivatives (continued)

Fair value hierarchy

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

Valuation date

Quoted prices in

active markets

(Level 1)

£’000

Significant

observable input

(Level 2)

£’000

Significant

unobservable

inputs

(Level 3)

£’000

Total

£’000

31 March 2022 – 831 – 831

31 March 2021 – 61 – 61

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 all assets and liabilities, detailed within the Statement of Financial Position, is

considered to be the same as their fair value.

15. Interest bearing loans and borrowings

31 March 2022

£’000

31 March 2021

£’000

At the beginning of the year 39,500 51,500

Bank borrowings drawn in the year 14,500 –

Bank borrowings repaid in the year

– (12,000)

Interest bearing loans and borrowings

54,000 39,500

Unamortised loan arrangement fees

(243) (369)

At the end of the year

53,757 39,131

Repayable between two and five years 54,000 39,500

Undrawn facility at the year-end

6,000 20,500

Total facility

60,000 60,000

The Company had a £60.00 million (31 March 2021: £60.00 million) credit facility with RBSi of which

£54.00 million (31 March 2021: £39.50 million) has been utilised as at 31 March 2022.

Under the terms of the Prospectus, the Company has a target gearing equivalent to 35.00% Loan to NAV. As at

31 March 2022, the Company’s gearing was 28.26% Loan to NAV (31 March 2021: 25.15%).

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

102

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

15. Interest bearing loans and borrowings (continued)

Under the terms of the loan facility, the Company could draw up to 35.00% Loan to NAV at drawdown. As at

31 March 2022, the Company could draw a further £6.00 million up to the maximum 35.00% (31 March 2021:

£15.48 million).

Borrowing costs associated with the credit facility are shown as finance costs in note 8 to these financial statements.

31 March 2022 31 March 2021

Facility £60.00 million £60.00 million

Drawn

£54.00 million

£39.50 million

Gearing (Loan to GAV)

22.48%

22.07%

Gearing (Loan to NAV)

28.26%

25.15%

Interest rate

2.20% all-in

(SONIA + 1.4%)

1.44% all-in

(LIBOR + 1.4%)

Notional Value of Loan Balance Hedged

95.37%

130.4%

Due to GBP LIBOR ending at the end of 2021, the Company transitioned to SONIA on 20 July 2021.

Reconciliation to cash flows from financing activities

31 March 2022

£’000

31 March 2021

£’000

Balance at the beginning of the year 39,131 51,047

Changes from financing cash flows

Loan drawdown 14,500 –

Loan repaid – (12,000)

Loan arrangement fees

– (13)

Total changes from financing cash flows

14,500 (12,013)

Other changes

Amortisation of loan arrangement fees 126 97

Interest expense 754 722

Interest paid (810) (824)

Changes in loan interest payable

56 102

Total other changes

126 97

Balance at the end of the year

53,757 39,131

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

103

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

16. Payables and accrued expenses

31 March 2022

£’000

31 March 2021

£’000

Deferred income

2,924 2,567

Other creditors

2,206 588

Accruals 1,474 783

Recoverable service charge payable

660 –

Total

7,264 3,938

17. Lease obligations as lessee

Leases as lessee are capitalised at the lease’s commencement at the present value of the minimum lease

payments. The present value of the corresponding rental obligations are included as liabilities.

The following table analyses the minimum lease payments under non-cancellable leases:

31 March 2022

£’000

31 March 2021

£’000

Not later than one year

13 48

Later than one year but not later than two years

Later than two years but not later than three years 11 41

Later than three years but not later than four years 10 38

Later than four years but not later than five years 10 36

Later than five years

131

476

Total

187 683

18. Guarantees and commitments

As at 31 March 2022, there were capital commitments of £nil (31 March 2021: £67,667).

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 28 years.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

104

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

18. Guarantees and commitments (continued)

Future minimum rentals receivable under non-cancellable operating leases as at 31 March 2022 are as follows:

31 March 2022

£’000

31 March 2021

£’000

Within one year 14,493 14,492

After one year but not more than five years 32,093 32,750

More than five years

19,303 22,726

Total

65,889 69,968

During the year ended 31 March 2022, there were contingent rents totalling £192,211 (year ended 31 March

2021: £204,623) recognised as income.

19. Investment in subsidiary

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

Name and company number

Country of registration

andincorporation Principal activity Ordinary Shares held

AEW UK REIT 2015 Limited

(Company number 09524699) England and Wales Dormant 100%

AEW UK REIT 2015 Limited is a subsidiary of the Company incorporated in the UK on 2 April 2015. At 31 March

2022, the Company held one share, being 100% of the issued share capital. AEW UK REIT 2015 Limited is

dormant and the cost of the subsidiary is £0.01 (31 March 2021: £0.01). The registered office of AEW UK REIT

2015 Limited is 6

Floor, 65 Gresham Street, London, EC2V 7NQ.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

105

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

20. Issued share capital

31 March 2022 31 March 2021

£’000

Number of

Ordinary Shares £’000

Number of

Ordinary Shares

Ordinary Shares (nominal value £0.01 per

share) authorised, issued and fully paid

At the beginning of the year

1,587 158,774,746 1,587 158,774,746

At the end of the year

1,587 158,774,746 1,587 158,774,746

Treasury Shares

At the beginning of the year (265) 350,000 – –

Share buybacks on 14 October 2020 – – (154) 200,000

Share buybacks on 3 November 2020

– – (111) 150,000

At the end of the year

(265) 350,000 (265) 350,000

Total Ordinary Share capital excluding

treasury shares

1,587 158,424,746 1,587 158,424,746

The allotted, called up and fully paid shares at 31 March 2022 consisted of 158,774,746 Ordinary Shares.

21. Share premium account

31 March 2022

£’000

31 March 2021

£’000

The share premium relates to amounts subscribed for share capital in

excess of nominal value:

Balance at the beginning of the year

56,578 56,578

Balance at the end of the year

56,578 56,578

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

106

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

22. Financial risk management objectives and policies

22.1 Financial assets and liabilities

The Company’s principal financial assets and liabilities are those derived from its operations: receivables

and prepayments, cash and cash equivalents and payables and accrued expenses. The Company’s other

principal financial liabilities are interest bearing loans and borrowings, the main purpose of which is to

finance the acquisition and development of the Company’s property portfolio.

Set out below is a comparison by class of the carrying amounts and fair value of the Company’s financial

instruments that are carried in the financial statements.

31 March 2022 31 March 2021

Book Value

£’000

Fair Value

£’000

Book Value

£’000

Fair Value

£’000

Financial assets

Receivables

4,221 4,221 3,608 3,608

Cash and cash equivalents 6,769 6,769 17,450 17,450

Other financial assets held at

fairvalue 831 831 61 61

Financial liabilities

Interest bearing loans

andborrowings 53,757 54,000 39,131 39,500

Payables and accrued expenses

3,802 3,802 1,064 1,064

Lease obligations

187 187 683 683

1 Excludes lease incentive debtor and prepayments.

2 Excludes tax, VAT liabilities and deferred income.

Interest rate derivatives are the only financial instruments classified as fair value through profit and loss.

All other financial assets and financial liabilities are measured at amortised cost. All financial instruments

were designated in their current categories upon initial recognition.

Fair value measurement hierarchy has not been applied to those classes of asset and liability stated above

which are not measured at fair value in the financial statements. The difference between the fair value

and book value of these items is not considered to be material.

22.2 Financing management

The Company’s activities expose it to a variety of financial risks: market risk, real estate risk, credit risk

and liquidity risk.

The Company’s objective in managing risk is the creation and protection of shareholder value. Risk is

inherent in the Company’s activities but it is managed through a process of ongoing identification,

measurement and monitoring, subject to risk limits and other controls.

107

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

22. Financial risk management objectives and policies (continued)

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

Market price risk

Market risk is the risk that the fair values of financial instruments will fluctuate because of changes

in market prices. The financial instruments held by the Company that are affected by market risk are

principally the Company’s cash balances, bank borrowings and its interest rate derivative held in order to

mitigate interest rate risk. The Company monitors its interest rate exposure on a regular basis.

To mitigate the interest rate risk that arises as a result of entering into variable rate loans, the Company

has an interest rate derivative. An interest rate cap has been taken out in respect of the Company’s

variable rate debt to fix or cap the rate to which three-month SONIA can rise. The cap runs coterminous to

the initial term of the loan. With effect from 20 July 2021, the interest rate derivatives were transitioned

to Sonia, as this is the risk-free rate now adopted by the Company’s variable rate loan facility. The interest

rate cap means that the Company’s borrowing facility at year-end had an all-inclusive capped interest

rate payable of 2.4% (31 March 2021: 2.4%). The total premium payable in the year towards securing the

interest rate caps was £nil (31 March 2021: £62,968).

Post year-end, the cap was sold for a total value of £743,395 as a result of the re-financing.

Real estate risk

Real estate risk is the risk that future values of investments in direct property and related property

investments will fluctuate due to changes in market prices. To manage market price risk, the Company

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

The disciplined approach to the purchase, sale and asset management ensures that the value is maintained

to its maximum potential. Prior to any property acquisition or sale, detailed research is undertaken to

assess expected future cash flow. The Investment Management Committee of the Investment Manager

meets twice monthly and reserves the ultimate decision with regards to investment purchases or sales.

In order to monitor property valuation fluctuations, the Investment Manager meets with the independent

external valuer on a regular basis. The valuer provides a property portfolio valuation quarterly, so any

movements in the value can be accounted for in a timely manner and reflected in the NAV every quarter.

Property investments are illiquid assets and can be difficult to sell, especially if local market conditions

are poor. Illiquidity may also result from the absence of an established market for investments, as well as

legal or contractual restrictions on resale of such investments. In addition, property valuation is inherently

subjective due to the individual characteristics of each property, and thus, coupled with illiquidity in the

markets, makes the valuation in the investment property difficult and inexact.

No assurances can be given that the valuations of properties will be reflected in the actual sale prices

even where such sales occur shortly after the relevant valuation date.

There can be no certainty regarding the future performance of any of the properties acquired for the

Company. The value of any property can go down as well as up. Property and property-related assets are

inherently subjective as regards value due to the individual nature of each property. As a result, valuations

are subject to uncertainty.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

108

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

22. Financial risk management objectives and policies (continued)

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.

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

which has an A3 long term credit rating.

In respect of property investments, in the event of a default by a tenant, the Company will suffer a rental

shortfall and additional costs concerning re-letting the property. The Investment Manager monitors

tenant arrears in order to anticipate and minimise the impact of defaults by occupational tenants.

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

As at

31 March 2022

£’000

As at

31 March 2021

£’000

Receivables (excluding incentives and prepayments) 4,221 3,608

Cash and cash equivalents

6,769

17,450

Total

10,990 21,058

Liquidity risk

Liquidity risk arises from the Company’s management of working capital, the finance charges and

principal repayments on its borrowings. It is the risk that the Company will encounter difficulty in

meeting its financial obligations as they fall due, as the majority of the Company’s assets are investment

properties and therefore not readily realisable. The Company’s objective is to ensure it has sufficient

available funds for its operations and to fund its capital expenditure. This is achieved by continuous

monitoring of forecast and actual cash flows by management.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

109

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

22. Financial risk management objectives and policies (continued)

Liquidity risk (continued)

The table below summarises the maturity profile of the Company’s financial liabilities based on

contractual undiscounted payments:

31 March 2022

demand

£’000

< 3

months

£’000

3–12

months

£’000

1–5

years

£’000

> 5

years

£’000

Total

£’000

Interest bearing loans and borrowings – 297 891 54,674 – 55,862

Payables and accrued expenses – 3,802 – – – 3,802

Lease obligation

– – 14 56 1,736 1,806

– 4,099 905 54,730 1,736 61,470

31 March 2021

demand

£’000

< 3

months

£’000

3–12

months

£’000

1–5 years

£’000

> 5

years

£’000

Total

£’000

Interest bearing loans and borrowings – 142 427 40,388 – 40,957

Payables and accrued expenses – 1,064 – – – 1,064

Lease obligation

– – 51 205 4,205 4,461

– 1,206 478 40,593 4,205 46,482

23. Capital management

The primary objectives of the Company’s capital management are to ensure that it continues to qualify for UK

REIT status and complies with its banking covenants.

To enhance returns over the medium term, the Company utilises borrowings on a limited recourse basis for each

investment or all or part of the total portfolio. The Company’s policy is to target a borrowing level of 35.00% Loan to

NAV and this was the maximum gearing permitted at drawdown under the terms of the RBSi facility.

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 year.

The monitoring of the Company’s level of borrowing is performed primarily using a Loan to NAV ratio and is

reported to the lender on a quarterly basis against the financial covenants of the facility. At the year-end, the

Company had a Loan to NAV ratio of 28.26% (31 March 2021: 25.15%).

Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings.

During the year under review, the Company did not breach any of its loan covenants, nor did it default on any of

its other obligations under its loan agreements.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

110

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

24. Transactions with related parties

As defined by IAS 24 Related Parties Disclosures, parties are considered to be related if one party has the

abilityto control the other party or exercise significant influence over the other party in making financial or

operational decisions.

For the year ended 31 March 2022, the Directors of the Company are considered to be the key management

personnel. Details of amounts paid to Directors for their services can be found within note 6, Directors’ remuneration

and the Director’s remuneration report on page 52. During the year the Directors who served in the year received

£80,233 gross in dividend payments (31 March 2021: £80,000).

AEW UK Investment Management LLP is the Company’s Investment Manager and has been appointed as AIFM.

Under the terms of the Investment Management Agreement, the Investment Manager is responsible for the

day-to-day discretionary management of the Company’s investments subject to the investment objective and

investment policy of the Company and the overall supervision of the Directors.

The Investment Manager is entitled to receive a quarterly management fee in respect of its services calculated

at the rate of one-quarter of 0.9% of the prevailing NAV (excluding uninvested proceeds from fundraisings).

During the year, the Company incurred £1,554,751 (31 March 2021: £1,228,849) in respect of investment

management fees and expenses, of which £422,282 (31 March 2021: £315,825) was outstanding as at

31 March 2022.

25. Segmental information

The Board of Directors retains overall control of the Company but the Investment Manager (AEW UK Investment

Management LLP) has certain authorities and fulfils the function of allocating resource to, and assessing the

performance of the Company’s operating segments and is therefore considered to be the Chief Operating Decision

Maker (‘CODM’). In accordance with IFRS 8, the Company considers each of its properties to be an individual

operating segment. The CODM allocates resources, and reviews the performance of, the Company’s portfolio on a

property-by-property basis and discrete financial information is available for each individualproperty.

These operating segments have similar economic characteristics and, as such, are aggregated into one

reporting segment, being investment in property and property-related investments in the UK.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

111

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

26. Events after reporting date

Dividend

On 21 April 2021, the Board declared its fourth interim dividend of 2.00pps in respect of the period from

1 January 2022 to 31 March 2022. This was paid on 31 May 2022, to shareholders on the register as at

29 April 2022. The ex-dividend date was 28 April 2022.

New debt facility

The Company has secured a new £60 million five-year term loan facility with AgFe, a leading independent asset

manager specialising in debt-based investments. The loan is a fixed rate loan with a total interest cost of 2.959%.

The existing £54 million RBSi loan facility, which was due to mature in October 2023, was repaid in full by the new

loan facility in May 2022. Simultaneous to the funding, the Company’s interest rate cap was sold for a total value of

£743,395.

Acquisition of Dewsbury retail park

On 9 June 2022, the Company completed the acquisition of a 6.04 acre Railway Station Retail Park in Dewsbury for a

price of £4,700,000. The purchase price reflects a low capital value of only £82 per sq ft and provides an attractive net

initial yield of 9.4%.

Notes to the Financial Statements (continued)

for the year ended 31 March 2022

112

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

EPRA disclosures are widely used across the listed property sector and, as such, have been presented below to aid comparison with

other companies in this sector.

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

All EPRA performance measures have been calculated in line with EPRA Best Practices Recommendations Guidelines which can be

found at www.epra.com.

MEASURE AND DEFINITION PURPOSE PERFORMANCE

1. EPRA Earnings

Earnings for operational activities. A key measure of a company’s underlying

operating results and an indication of the

extent to which current dividend payments are

supported by earnings.

£10.76 million/6.79 pps

EPRA earnings for year to

31 March 2022 (31 March 2021:

£9.82 million/6.19 pps)

2. EPRA Net Tangible Assets (‘NTA’)

Assumes that entities buy and sell

assets, thereby crystallising certain

levels of unavoidable deferred tax.

The EPRA NAV set of metrics make adjustments

to the NAV per the IFRS financial statements

to provide stakeholders with the most relevant

information on the fair value of the assets and

liabilities of a real estate investment company,

under different scenarios.

£190.27 million/120.10 pps

EPRA NTA as at

31 March 2022 (31 March 2021:

£157.02 million/99.11 pps)

3. EPRA Net Reinstatement Value

(‘NRV’)

Assumes that entities never sell assets

and aims to represent the value

required to rebuild the entity.

£206.12 million/130.11 pps

EPRA NRV as at

31 March 2022 (31 March 2021:

£168.83 million/106.57 pps)

4. EPRA Net Disposal Value (‘NDV’)

Represents the shareholders’ value

under a disposal scenario, where

deferred tax, financial instruments

and certain other adjustments are

calculated to the full extent of their

liability, net of any resulting tax.

£191.10 million/120.63 pps

EPRA NDV as at

31 March 2022 (31 March 2021:

£157.08 million/99.15pps)

5. 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.

5.87%

EPRA NIY as at 31 March 2022

(31 March 2021: 7.37%)

EPRA Unaudited Performance Measures

113

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

MEASURE AND DEFINITION PURPOSE PERFORMANCE

6. 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.

6.58%

EPRA ‘Topped-Up’ NIY as at 31 March

2022 (31 March 2021: 8.12%)

7. EPRA Vacancy Rate

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.

10.69%

EPRA Vacancy Rate as at 31 March

2022 (31 March 2021: 8.96%)

8. 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.

33.55%

EPRA Cost Ratio (including direct

vacancy costs) as at 31 March 2022

(31 March 2021: 32.94%)

18.16%

EPRA Cost Ratio (excluding direct

vacancy costs) as at 31 March 2022

(31 March 2021: 22.58%)

9. EPRA Capital Expenditure

Property which has been held at both

the current and comparative balance

sheet dates for which there has been

no significant development.

A measure used to illustrate change in

comparable capital values.

£41.55 million for the year ended

31 March 2022 (31 March 2021:

£5.98 million)

10. EPRA Like-for-like Rental

Growth

Net growth generated by assets

which were held by the Company

throughout both the current and

comparable periods which there has

been no significant development

which materially impacts upon

income.

A measure used to illustrate change in

comparable income values.

-£0.54 million/-3.91%% for the year

ended 31 March 2022 (31 March

2021: -£1.08 million/-6.80%)

EPRA Unaudited Performance Measures (continued)

114

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Calculation of EPRA NTA, EPRA NRV and EPRA NDV

The Company considers EPRA NTA to be the most relevant NAV measure for the Company and we are now reporting this as our primary

NAV measure, replacing our previously reported EPRA NAV and EPRA NNAV per share metrics. EPRA NTA excludes the cumulative fair

value adjustments for debt-related derivatives which are unlikely to be realised.

Current measures Previous measures

As at 31 March 2022

EPRA NTA

£’000

EPRA NRV

£’000

EPRA NDV

£’000

EPRA NAV

£’000

EPRA NNNAV

£’000

IFRS NAV attributable to shareholders 191,100 191,100 191,100 191,100 191,100

Mark-to-market adjustment

ofderivatives (831) (831) – (831) –

Real estate transfer tax and other

purchasers’ costs

– 15,852 – – –

At 31 March 2022

190,269 206,121 191,100 190,269 191,100

Number of Ordinary Shares (‘000)

158,424,746 158,424,746 158,424,746 158,424,746 158,424,746

NAV Per share

120.10p 130.11p 120.63p 120.10p 120.63p

Current measures Previous measures

As at 31 March 2021

EPRA NTA

£’000

EPRA NRV

£’000

EPRA NDV

£’000

EPRA NAV

£’000

EPRA NNNAV

£’000

IFRS NAV attributable to shareholders 157,079 157,079 157,079 157,079 157,079

Mark-to-market adjustment

ofderivatives (61) (61) – (61) –

Real estate transfer tax and other

purchasers’ costs

– 11,814 – – –

At 31 March 2021

157,018 168,832 157,079 157,018 157,079

Number of Ordinary Shares (‘000)

158,425 158,425 158,425 158,425 158,425

NAV Per share

99.11p 106.57p 99.15p 99.11p 99.15p

EPRA NTA and EPRA NDV are calculated using property values in line with IFRS, where values are net of Real Estate Transfer Tax (RETT) and other

purchasers’ costs. RETT and other purchasers’ costs are added back when calculating EPRA NRV, and have been estimated at 6.6% of the net

valuation provided by Knight Frank.

EPRA Unaudited Performance Measures (continued)

115

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Calculation of EPRA Net Initial Yield (‘NIY’) and EPRA ‘topped-up’ NIY

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Investment property – wholly-owned 240,175 179,000

Allowance for estimated purchasers’ costs at 6.6%

15,852 11,814

Grossed-up completed property portfolio valuation (B)

256,027 190,814

Annualised cash passing rental income 16,871 15,051

Property outgoings (1,818) (993)

Annualised net rents (A)

15,053 14,058

Rent from expiry of rent-free periods and fixed uplifts*

1,812 1,439

‘Topped-up’ net annualised rent (C)

16,865 15,497

EPRA NIY (A/B) 5.87% 7.37%

EPRA ‘topped-up’ NIY (C/B) 6.58% 8.12%

* Rent-free periods expire by September 2022.

EPRA NIY basis of calculation

EPRA NIY is calculated as the annualised net rent, divided by the grossed-up value of the completed property portfolio valuation.

The valuation of the grossed-up completed property portfolio is determined by the Company’s external valuers as at 31 March 2022,

plus an allowance for estimated purchaser’s costs. Estimated purchaser’s costs are determined by the relevant stamp duty liability, plus

an estimate by our valuers of agent and legal fees on notional acquisition. The net rent deduction allowed for property outgoings is

based on the Company’s valuers’ assumptions on future recurring non-recoverable revenue expenditure.

In calculating the EPRA ‘topped-up’ NIY, the annualised net rent is increased by the total contracted rent from expiry of rent-free periods

and future contracted rental uplifts.

Calculation of EPRA Vacancy Rate

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Annualised potential rental value of vacant premises (A) 2,161 1,482

Annualised potential rental value for the complete property portfolio (B) 20,215 16,538

EPRA Vacancy Rate (A/B)

10.69% 8.96%

EPRA Unaudited Performance Measures (continued)

116

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

EPRA Unaudited Performance Measures (continued)

Calculation of EPRA Cost Ratios

Year ended

31 March 2022

£’000

Year ended

31 March 2021

£’000

Administrative/operating expense per IFRS income statement 5,368 5,221

Less: ground rent costs

(15) (66)

EPRA costs (including direct vacancy costs) (A) 5,353 5,155

Direct vacancy costs (see Glossary on page 134 for further details)

(2,456) (1,622)

EPRA costs (excluding direct vacancy costs) (B)

2,897 3,533

Gross rental income less ground rent costs (C)

15,955 15,648

EPRA Cost Ratio (including direct vacancy costs) (A/C) 33.55% 32.94%

EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 18.16% 22.58%

The Company has not capitalised any overhead or operating expenses in the accounting years disclosed above.

Only costs directly associated with the purchase or construction of properties as well as all subsequent value-enhancing capital

expenditure are capitalised.

Like-for-like rental growth

The table below sets out the like-for-like for rental growth of the portfolio, by sector, in accordance with EPRA Best

PracticesRecommendations.

Sector

Rental

income from

like-for-like

portfolio

2022

£m

Rental

income from

like-for-like

portfolio

2021

£m

Like-for-like

rental growth

£m

Like-for-like

rental growth

Industrial 7.35 7.06 0.29 4.16

Office 1.73 2.44 (0.71) (28.89)

Alternatives 1.50 1.55 (0.05) (2.98)

Standard Retail 2.01 2.07 (0.06) (3.19)

Retail Warehouse

0.60 0.61 (0.01) (1.98)

Total

13.19 13.73 (0.54) (3.91)

The like-for-like rental growth is based on changes in rental income for those properties which have been held for the duration of both

the current and prior reporting years. This represents a portfolio valuation, as assessed by the valuer, of £198.30 million (year ended

31 March 2021: £173.60 million).

117

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

EPRA Unaudited Performance Measures (continued)

Capital Expenditure

The table below sets out the capital expenditure of the portfolio in accordance with EPRA Best Practice Recommendations.

Sector

2022

£’000

2021

£’000

Acquisitions 40,770 5,778

Investment properties – no incremental lettable space

777 205

Total purchases and capital expenditure

41,547 5,983

118

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

EPRA Sustainability Performance Measures (unaudited)

The Company has chosen to disclose sustainability information where material in accordance with EPRA Best Practice

Recommendations on Sustainability Reporting (sBPR) 2017.

EPRA use the following 28 performance measures as indicated, by code, in the table below:

Code Performance Measure

Environmental

Elec-Abs Total electricity consumption

Elec-LfL Like-for-like total electricity consumption

DH&C-Abs Total district heating & cooling consumption

DH&C-LfL Like-for-like district heating & cooling consumption

Fuels-Abs Total fuel consumption

Fuels-LfL Like-for-like total fuel consumption

Energy-LfL Building energy intensity

GHG-Dir-Abs Total direct greenhouse gas (GHG) emissions

GHG-Indir-Abs Total indirect greenhouse gas (GHG) emissions

GHG-Int Greenhouse gas (GHG) emissions intensity from buildings

Water-Abs Total water consumption

Water-LfL Like-for-like total water consumption

Water-Int Building water intensity

Waste-Abs Total weight of waste by disposal route

Waste-LfL Like-for-like total weight of waste by disposal route

Cert-Tot Type and number of sustainably certified assets

Social

Diversity-Emp Employee gender diversity

Diversity-Pay Gender pay ratio

Emp-Training Employee training and development

Emp-Dev Employee performance appraisals

Emp-Turnover New hires and turnover

H&S-Emp Employee Health & Safety

H&S-Asset Asset Health & Safety assessments

H&S-Comp Asset Health & Safety compliance

Comty-Eng Community engagement, impact assessment and development programs

Governance

Gov Board Composition of the highest governance body

Gov Selec Process for nominating and selecting the highest governance body

Gov CoI Process for managing conflicts of interest

119

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Sustainability Performance Measures (Environmental)

The Company has chosen to report GHG emissions using the ‘Operational Control’ approach for its reporting boundary (as opposed to

‘financial control’ or ‘equity share’). ‘Operational control’ has been selected as the reporting boundary as this reflects the portion of the

portfolio where the Company can influence operational procedures and, ultimately, sustainability performance. The operational control

approach is the most commonly applied within the industry. This boundary includes owned assets where the Company, acting as the

landlord, is directly responsible for electricity and/or gas supplies and/or has control of air conditioning equipment.

The Company has considered the seven main GHGs covered by the Kyoto protocol, including:

• Carbon dioxide (CO

)

• Methane (CH

)

• Nitrous oxide (N

• Hydrofluorocarbons (HFCs)

• Perfluorocarbons (PFCs)

• Sulphur Hexafluoride (SF

)

• Nitrogen Trifluoride (NF

)

Total GHG emissions are reported in terms of carbon dioxide equivalent (CO

e). Conversion factors have been sourced from the UK

Government’s Greenhouse Gas Reporting Factors for Company Reporting (2021).

The following sources of emissions have been considered as part of this review:

Scope 1

• Direct emissions from controlled gas boilers (converted from kWh usage)

• Fugitive emissions from air conditioning systems under landlord control (converted from kg refrigerant releases). The Company’s

property manager, MAPP, have confirmed that no fugitive emission (through refrigerant gases) were reported in 2021/22.

• Business travel through company owned vehicles (not relevant as the Company does not own any vehicles)

Scope 2

• Indirect emissions from electricity purchased by the Company and consumed within real estate assets owned by the Company

(converted from kWh usage)

• Greenhouse Gas (GHG) emissions from electricity (Scope 2) are reported according to the ‘location-based’ approach

EPRA Sustainability Performance Measures (unaudited)

(continued)

120

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

EPRA Sustainability Performance Measures (unaudited)

(continued)

As a property company, the majority of the Company’s emissions arise through assets that are owned and leased. At multi-let properties,

the Company, acting as the landlord, has control and influence over the whole building and/or shared services (including refrigerant

leakage), external lighting and void spaces. In this reporting year, the Company was responsible for Scope 1 and/or Scope 2 emissions at

the following assets:

Asset name Sector Scope 1 – Gas Scope 2 – Electricity

Included in

like-for-like

225 Bath Street Office Yes Ye s Yes

40 Queen Square Office Ye s Yes Yes

Eastpoint Business Park

– Meridian House Office No Ye s Yes (Elec)

Vantage Point Office Ye s Ye s Yes

Pearl House Retail Yes Yes Ye s

69-75 Above Bar Street Retail No Ye s No

11/15 Fargate Retail No Ye s No

Pricebusters Building Retail No Ye s Yes (Elec)

Barnstaple Retail Park Retail Warehouse No Yes No

Diamond Business Park Industrial Yes Ye s Ye s

Apollo Business Park Industrial Yes Ye s Ye s

London East Leisure 1 Leisure No Ye s Yes (Elec)

Emission sources listed in the above table relate to the managed portfolio only and the following sources of energy consumption within

each sector:

– Office; Whole building

– Retail; Whole building, tenant space and common areas

– Retail Warehouse; External lighting

– Leisure; External lighting, tenant space and common areas

– Industrial; Whole building and common areas

Emissions outside of operational control

The Company was not responsible for emission from gas and/or electricity use at any other owned asset or for head office operations.

The Company is not directly responsible for any GHG emissions/energy usage at single let/FRI assets nor at multi-let assets where the

tenant is counterparty to the energy contract. As these emissions are outside of our direct control, they form part of our wider value

chain (i.e. ‘Scope 3’) emissions, which are not monitored at present.

121

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Water Consumption & Waste Production

Alongside GHG emissions/energy usage, the Company has chosen to report water and waste consumption of assets where the

Company, acting as the landlord, is directly responsible for them.

Asset name Sector Water Waste

225 Bath Street Office Yes Ye s

40 Queen Square Office Yes Ye s

Eastpoint Business Park – Meridian House Office Yes No

Vantage Point Office Yes Ye s

Pearl House Office No Ye s

Diamond Business Park Industrial Yes Yes

Central Six Retail Park Retail Warehouse No Ye s

London East Leisure 1 Leisure Ye s No

Intensity Ratios

In addition to reporting relevant absolute GHG emissions (per scope and per sector), the Company has chosen to report intensity ratios,

where appropriate.

The denominator determined to be most relevant to the business is metres squared of the area served by the meter. The intensity ratio is

expressed as kilograms carbon dioxide equivalent per metre square (of area served by the meter) per year, or, kg CO

e/m

/yr.

Like-for-like intensity ratios have only been determined on relevant emissions, where each of the following conditions is met:

• No major renovation or refurbishment has taken place i.e. affecting more than 50% of the building by area or number of occupants

• At least 12 months data is available

Normalisation Factors

Normalisation of intensity ratios has been completed to account for year-on-year changes in annual temperatures. Annual gas usage

data has been compared to, and normalised against, the UK 20-year average degree day value. Degree days data are sourced from

www.degreedays.net using the closest and most reliable weather station to each asset.

No further adjustments are considered for this Annual Report, however, further evaluation concerning occupancy and/or operation

hours may be considered in the future, once a baseline year and/or target has been established.

EPRA Sustainability Performance Measures (unaudited)

(continued)

122

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Data Collection and Verification

Data has been sourced from the Company’s property manager, MAPP. As an independent consultancy, EVORA can provide verification

that GHG emissions have been calculated in accordance with the principles of ISO14064.

In summary, the applied process includes:

• Confirmation of asset location and scope of landlord impacts (Scopes 1 and 2)

• Input of Scope 1 and Scope 2 data (provided by MAPP)

• Completion of data accuracy checks (inbuilt function of SIERA with specialist consultant review)

• Verification of data against source evidence (invoices)

• Initial approval of data (by the Company and MAPP)

• Verification of data and publishing of results

EVORA has reviewed the accuracy of data as determined by actual or estimated kWh usage. As a percentage of the total kWh reported,

actual/estimated data was reported on the following basis for 2021/22:

• Scope 1 (gas) 100% actual data/0% estimated

• Scope 2 (electricity) 100% actual data/0% estimated

Company Targets

GHG Reporting Guidelines recommend establishing a target as a matter of good practice. Energy targets are typically measured via

changes to KWh usage and/or greenhouse gas emissions (in the form of carbon dioxide equivalent) compared to a baseline. Energy

targets help:

• Support identification of asset improvement opportunities

• Drive improvements in operational efficiency (and potentially lower costs)

• Futureproof asset against increased legislation and ‘brown discounting’ (on sale)

• Support overall good asset management

• Support GRESB

The Company has established absolute targets for energy, greenhouse gas emissions and waste covering the whole portfolio based on a

2018 baseline. The targets are outlined below:

• Energy consumption: 15% reduction in absolute energy by 2030 based on the 2018 baseline

• GHG emissions: 15% reduction in absolute energy by 2030 based on the 2018 baseline

• Waste: 100% waste diverted from landfill by 2020 based on the 2016 baseline

Environmental information in this report has been provided by EVORA Global, retained sustainability and energy management

consultants to the Company.

EVORA’s consultant statement is included below:

EVORA Global Limited has been appointed by the Company to complete verification of reported energy consumption data and

greenhouse gas (GHG) emissions presented within this report.

EPRA Sustainability Performance Measures (unaudited)

(continued)

123

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Methodology

Utility data is reported to EVORA by the Company’s property managers (MAPP) based on invoiced data. Data is reported and reviewed

by EVORA bi-annually. The Company utilises SIERA as its Data Management System platform, to enable capture and reporting of

sustainability performance data (including energy consumption and GHG emissions). I can confirm that EVORA has used ISO 14064

as the methodology for data collection, verification and calculation for energy and Greenhouse Gas emissions.

In summary, the applied process includes:

(1) Confirmation of asset location and scope of landlord impacts (Scopes 1 and 2)

(2) Input of Scope 1 and Scope 2 data (provided by MAPP)

(3) Completion of data accuracy checks (inbuilt function of SIERA with specialist consultant review)

(4) Verification of data against source evidence (invoices)

(5) Initial approval of data (by the Company and MAPP)

(6) Verification of data and publishing of results

Opinion

Data is accurately reported, based on the methodology applied above. The Company continue to work towards improving accuracy

of data. This will support improvement programmes going forwards.

About EVORA

EVORA is an independent, pan-European sustainability consultancy and software provider, specialising in the commercial real estate sector.

Chris Burgess

Director, EVORA Global Ltd

June 2022

EPRA Sustainability Performance Measures (unaudited)

(continued)

124

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Total energy consumption (Elec-Abs; Fuels-Abs, DH&C-Abs)

The table below sets out total landlord obtained energy consumption from the Company’s managed portfolio by sector:

Absolute Energy Usage (kWh)

Sector Energy Source 2021/22 2020/21

Office Gas 599,665 685,676

Electricity 1,108,321 1,419,504

Energy 1,707,986 2,105,180

Retail Gas 523,993 476,674

Electricity 340,043 266,878

Energy 864,036 743,552

Retail Warehouse Gas – –

Electricity 7,577 8,081

Energy 7,577 8,081

Leisure Gas – –

Electricity 38,677 46,335

Energy 38,677 46,335

Industrial Gas 865,007 1,349,479

Electricity 606,535 545,703

Energy 1,471,542 1,895,182

Total Gas 1,988,665 2,511,828

Electricity 2,101,153 2,286,501

Energy 4,089,817 4,798,330

The Company does not contain any managed assets that consume energy from district heating or cooling sources. Therefore, the EPRA

sBPR DH&C-Abs indicator is not applicable and not presented in this report.

EPRA Sustainability Performance Measures (unaudited)

(continued)

125

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Like-for-like energy consumption (Elec-LfL; Fuels-LfL; DH&C-LfL, Energy-Int)

The table below sets out the like-for-like landlord obtained energy consumption from the Company’s managed portfolio by sector:

Like-for-like/Degree Day Adj Usage (kWh) Like-for-like/Degree Day Adj Intensity

Sector Energy Source 2021/22 2020/21 Change 2021/22 2020/21 Change

Office Gas 640,491 731,058 (12%) 89.9 110.5 (19%)

Electricity 1,108,321 1,419,504 (22%)

Total 1,748,812 2,150,561 (19%)

Retail Gas 554,821 504,718 10% 71.2 61.9 15%

Electricity 319,991 255,711 25%

Total 874,811 760,429 15%

Retail

Warehouse

Gas – – – – – –

Electricity 7,577 8,081 (6%)

Total 7,577 8,081 (6%)

Leisure Gas – – – 10.1 8.8 14%

Electricity 13,443 11,742 14%

Total 13,443 11,742 14%

Industrial Gas 919,438 1,435,540 (36%) 77.6 100.8 (23%)

Electricity 608,535 545,703 (11%)

Total 1,525,974 1,981,344 (23%)

Total Gas 2,114,751 2,671,416 (21%)

Electricity 2,055,867 2,240,742 (8%)

Total 4,170,617 4,912,158 (15%)

The Company does not contain any managed assets that consume energy from district heating or cooling sources. Therefore, the EPRA

sBPR DH&C-LfL indicator is not applicable and not presented in this report.

EPRA Sustainability Performance Measures (unaudited)

(continued)

126

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

EPRA Sustainability Performance Measures (unaudited)

(continued)

Greenhouse gas emissions (GHG-Dir-Abs; GHG-Indir-Abs; GHG-Int)

The table below sets out the absolute, like-for-like and intensity of the GHG emissions per sector and for the Company overall:

Absolute Tonnes

of Carbon Dioxide

Equivalent (

Like-for-like/Degree Day Adj

Tonnes of Carbon Dioxide

Equivalent (

Like-for-like Degree Day Adj

Carbon Intensity (kg/CO

e/m

)

Sector Scope 2021/22 2020/21 2021/22 2020/21 Change 2021/22 2020/21 Change

Office Scope 1 – Gas 109.8 126.1 117.3 134.4 (13%) 18.1 23.9 (24%)

Scope 2 –

Electricity

235.3 330.9 235.3 330.9 (29%)

Retail Scope 1 – Gas 96.0 87.7 101.6 92.8 10% 37.8 34.5 10%

Scope 2 –

Electricity

72.2 62.2 67.9 59.6 14%

Retail

Warehouse

Scope 1 – Gas – – – – – – – –

Scope 2 –

Electricity

1.6 1.9 1.6 1.9 (15%)

Leisure Scope 1 – Gas – – – – – 2.1 2.0 4%

Scope 2 –

Electricity

8.2 10.8 2.9 2.8 4%

Industrial Scope 1 – Gas 158.4 248.1 168.4 264.0 (36%) 15.1 19.8 (24%)

Scope 2 –

Electricity

128.8 127.2 128.8 127.2 1%

Total Scope 1 – Gas 364.2 461.9 387.3 491.2 (21%)

Scope 2 –

Electricity

446.1 533.1 436.5 522.4 (16%)

Total 810.4 994.9 823.9 1013.6 (19%)

Water (Water-Abs; Water-LfL; Water-Int)

The table below sets out the absolute, like-for-like and intensity value water consumption from the Company’s managed portfolio by

sector. Two office assets met the criteria for like-for-like analysis.

Absolute Water Usage

)

Like-for-like Water Usage

) Like-for-like Intensity

Sector 2021/22 2020/21 2021/22 2020/21 Change 2021/22 2020/21 Change

Office 2,726 2,752 1,110 1,660 (33%) – – –

Industrial 23,465 4,626 – – – – – –

Leisure 119 365 – – – – – –

Total 26,130 7,743 – – – – – –

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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

EPRA Sustainability Performance Measures (unaudited)

(continued)

Waste (Waste-Abs; Waste-LfL)

The table below sets out the waste managed (absolute waste production and like-for-like) by the Company by disposal route and by

sector. This does not include waste disposal services procured directly by tenants. Whilst zero waste is sent directly to landfill, a residual

component of the ‘recycled’ and ‘incineration with energy recovery’ waste streams may end up in landfill:

Absolute Waste

(Tonnes)

Like-for-like

(Tonnes)

Sector Destination 2021/22 2020/21 2021/22 2020/21 Change

Office Incineration with energy recovery 25.5 32.3 25.5 24.3 5%

Recycled 37.1 69.4 37.1 62.0 (40%)

Anaerobic Digestion 7.4 9.8 7.4 9.8 (24%)

Total 70.0 111.4 70.0 96.0 (24%)

Recycling Rate 53% 62% 53% 65% –

Industrial, Business Park Incineration with energy recovery 2.0 2.0 2.0 2.0 –

Recycled 4.7 4.7 4.7 4.7 –

Anaerobic Digestion – – – – –

Total 6.8 6.8 6.8 6.8 –

Recycling Rate 70% 70% 70% 70% –

Industrial, Distribution

Warehouse

Incineration with energy recovery 8.0 – – – –

Recycled 0.5 – – – –

Anaerobic Digestion – – – – –

Total 8.5 – – – –

Recycling Rate 6% – – – –

Total Incineration with energy recovery 36.5 34.3 27.5 26.3 5%

Recycled 42.4 74.1 41.9 66.7 (37%)

Anaerobic Digestion 7.4 9.8 7.4 9.8 (24%)

Total 85.2 118.2 76.7 102.8 (25%)

Recycling Rate 49% 63% 55% 65% –

We present property energy, greenhouse gas (‘GHG’), water and waste data on both an absolute (‘abs’) and like-for-like (‘LfL’) basis,

covering assets in our UK based portfolio.

Our organisational boundary for environmental disclosure is based on the principle of operational control, and therefore includes all

property assets where we are responsible for the procurement of energy, water and waste services.

A total of 12 assets fell within the boundary for 2022 for GHG emissions (year ended 31 March 2021: 11 assets) and 8 assets for water

and waste services (year ended 31 March 2021: 6 assets).

The reporting scope for energy consumption and Scope 1 and 2 GH emissions covers 32% of the portfolio (year ended 31 March

2021: 32%).

The reporting scope for water and waste covers 22% of the portfolio (year ended 31 March 2021: 18%).

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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

During the year, the Company procured 4.1 million kWh (year ended 31 March 2021: 4.8 million kWh) of energy for use across the

managed portfolio, which is 14.8% (year ended 31 March 2021: 11.6%) less energy use than in the prior year. The reduction is largely

linked to the decrease in energy demand as a result of the impact of COVID-19 and reduced operational activity during this period. On a

like-for-like basis our portfolio has seen a reduction of 15% (year ended 31 March 2021: 14%) energy use during the year.

The Scope 1 and 2 GH emissions for the year totalled 810.4 tonnes CO

e (2021: 994.9 tonnes CO

e). The absolute Scope 1 and 2 and

the two year like-for-like emissions decreased by 18.5% and 18.7% respectively. These changes in the emissions footprint are strongly

linked to the operational restrictions due to COVID-19, as well as the UK grid decarbonisation and the associated decrease in the

electricity emission factors.

During the period, the total managed and reported waste amounted to 118.2 tonnes (year ended 31 March 2021: 85.2 tonnes), of

which none (year ended 31 March 2021: none) was sent directly to landfill.

Sustainability certification (Cert-Tot): Green building certificates

The Company does not have any developments or refurbishment projects in its property portfolio (year ending 31 March 2021:

None) and therefore does not have the ability to deliver any projects that could be measured against BREEAM (the Building Research

Establishment Environmental Assessment Methodology). The Company does not have any properties in its portfolio that could qualify

for a Green building certificate (year ending 31 March 2021: None).

Sustainability certification (Cert-Tot): Energy performance certificates

The Minimum Energy Efficiency Standards (MEES) Regulations stem from the Energy Act 2011, which has made it unlawful from April

2018 to let or renew leases at non-domestic properties in England & Wales with an Energy Performance Certificate (EPC) rating lower

than an E, subject to certain exemptions. This legislation is similar to regulations introduced in Scotland in September 2016. A ‘hard

backstop’ which brings into the MEES standards existing leases will be introduced from 2023, again, subject to certain exemptions.

The below table sets out the EPC rating by Estimated Rental Value (ERV). An A rating reflects the most efficient rating with a G being the

least efficient. 48% (by ERV) of the assets within the Companies portfolio have efficient A-C EPC ratings. The Investment Manager is

taking the necessary steps to address F to G rated EPCs (approximately 3% of ERV value) and remove MEES risk.

Portfolio by ERV (%)

Energy performance certificate rating 2021/22 2020/21

A-C 48% 44%

D 31% 35%

E 5% 4%

F 1% 1%

G 2% 3%

Exempt – –

No EPC 1% 1%

Expired 12% 12%

Coverage 100% 100%

EPRA Sustainability Performance Measures (unaudited)

(continued)

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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

• Energy Performance Certificate (EPC) records for the Company are provided as at 31 March by ERV.

• Data provided includes managed and non-managed assets (i.e. the whole portfolio).

• The information on EPCs is continuously reviewed and updated.

• The F EPCs relate to Brockhurst Crescent, Walsall (Unit 3 Building 2) and Westlands Distribution Park, Weston-super-Mare (Old Fire

Station and Unit 10). The G EPC relates to the Odeon Cinema, Southend. Actions plans are in place to improve the ratings of these

properties.

Sustainability Performance Measures (Social)

EPRA’s Sustainability Best Practices Recommendations Guidelines 2017 (‘EPRA’s Guidelines’) include Social and Governance reporting

measures to be disclosed for the entity i.e. the Company. The Company is an externally managed real estate investment trust and has

no direct employees. A number of these Social Performance measures relate to entity employees and therefore these measures are

not relevant for reporting at the entity level. The Investment Manager to the Company, AEW UK Investment Management LLP has

responsibility for the employees that support the Company. The Company aims to comply with EPRA’s Guidelines and therefore has

included Social and Governance Performance Measure disclosures in this report.

Employee gender diversity (Diversity-Emp)

As at 31 March 2022 the Company Board comprised three members: 1 (33% female); 2 (67% male).

For further information on the Investment Manager’s employee gender diversity please refer to the ESG link within the Corporate

Responsibility area at www.aewuk.co.uk.

Gender pay ratio (Diversity-Pay)

The remuneration of the Company Board is set out on page 52 of this Annual Report.

For further information on the Investment Manager’s gender pay ratio please refer to the ESG link within the Corporate Responsibility

area at www.aewuk.co.uk.

Training and development (Emp-Training)

Please refer to the Director Induction and Training section in the Director Report, on page 44, for details on training for the

Company’s Board members.

The Investment Manager requires employees to complete mandatory internal training and encourage all staff with professional

qualifications to maintain the training requirements of their respective professional body.

All employees of the Investment Manager who work on the Company’s activities hold professional qualifications and have completed

the relevant CPD for their respective professional bodies.

The Investment Manager also provides training to its employees to ensure that they understand and abide by the Anti-Bribery,

Insider Trading and GDPR regulations.

Employee performance appraisals (Emp-Dev)

The Investment Manager’s performance appraisal process requires annual performance objective setting and reviews for all staff.

For further information on the Investment Manager’s performance appraisal statistics please refer to the ESG link within the Corporate

Responsibility area at www.aewuk.co.uk.

The Investment Manager confirms that performance appraisals were completed for 100% of staff relevant to the Company in 2022.

EPRA Sustainability Performance Measures (unaudited)

(continued)

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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

Employee turnover and retention (Emp-Turnover)

For further information on the Investment Manager’s employee turnover and retention please refer to the ESG link within the Corporate

Responsibility area at www.aewuk.co.uk.

There have been no changes in the Investment Manager’s staff that work on the Companies activities during the year.

Employee health and safety (H&S-Emp)

For further information on the Investment Manager’s employee health & safety (being the absenteeism rate) please refer to the ESG link

within the Corporate Responsibility area at www.aewuk.co.uk.

Asset health and safety assessments (H&S-Asset)

All sites were inspected by MAPP’s during the reporting period and further Health & Safety audits were carried out at those sites that are

multi-let.

Asset health and safety compliance (H&S-Comp)

No incidents of non-compliance with regulations/and or voluntary codes were identified during the reporting period.

Community engagement, impact assessments and development programmes (Comty-Eng)

The Company, in conjunction with MAPP, participated in the KidsOut Charity ‘Giving Tree’ initiative. This initiative aims to provide

children living in local refuge homes with a present to open on Christmas Day. To facilitate this, decorative tags with a child’s name, age

and suggested gift are placed on Christmas trees in the receptions of participating offices throughout the Company’s portfolio. Tenants

of the offices can then use the details given on the tags to make a donation (£5-£10) to the KidsOut charity.

Sustainability Performance Measures (Governance)

Composition of the highest governance body (Gov-Board)

The Board of the Company comprised 3 non-executive independent directors (no executive board members) as at 31 March 2022.

• The average tenure of the three directors to 31 March 2022 is 6 years and 3 months (31 March 2021 is 5 years and 3 months).

• The number of directors with competencies relating to environmental and social topics is one and his experience can be seen in their

biography (31 March 2021: one director).

Process for nominating and selecting the highest governance body (Gov-Select)

The Company does not have a separate nomination committee, this role being carried out by the whole Board as chaired by Mark

Burton. The Board will consider and make recommendations on its composition so as to maintain an appropriate balance of skills,

experience and diversity, including gender, and to ensure progressive refreshing of the Board.

Before the appointment of a new director, the Board prepares a description of the role and capabilities required for a particular

appointment. Whilst the Board is dedicated to selecting the best person for the role, it aims to promote diversification and the

Board recognises the importance of diversity. The Board agrees that its members should possess a range of experience, knowledge,

professional skills and personal qualities as well as the independence necessary to provide effective oversight of the affairs of the

Company.

Process for managing conflicts of interest (Gov-Col)

The Company maintains a Conflicts of Interest register that is managed by the Company Secretary and is reviewed at each quarterly

Board meeting.

Please refer to the Director’s Conflicts of interest section in the Director Report (page 44) for further details.

EPRA Sustainability Performance Measures (unaudited)

(continued)

131

AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022

EPRA Sustainability Performance Measures (unaudited)

(continued)

Targets and progress

During the period we set the following long-term targets to support our strategic ESG objectives. Each year these will be reviewed, with

progress being regularly reported to the Board by the Investment Manager.

Area of focus Target Metric of Measure Year Progress

Health & Safety To ensure all incidents are

resolved within the required

timeframe.

Number of incidents per year. 2021/2022 MAPP track all instances via ‘risk

wise’ with priority 1 issues being

closed immediately.

Wellbeing To promote health and wellbeing

initiatives across all managed

assets.

100% of managed assets to

have a health and wellbeing

tracker in year 1.

2021/2022 Wellbeing tracker in place.

Social Value To develop a tenant and

community engagement

programme.

Number of managed assets to

have community engagement

programmes per year.

Yearly AEW initiatives working towards

giving up to 2 working days for

community engagement for

each AEW staff member.

ESG Disclosure

& Transparency

To achieve a Gold award for

disclosure in line with EPRA sBPR.

Gold Rating EPRA. 2022 Silver in 2021.

To continuously improve the

GRESB rating year on year.

GRESB star rating and score. Yearly Achieved two stars in 2021

GRESB assessment and

maintained 2020 score of 65.

To strengthen alignment with

the TCFD recommendations.

Align the TCFD by 2022 and

provide full publication by 2023.

2022 Updated in this Annual Report

in alignment with TCFD

recommendations.

Managing

environmental

impacts

To develop sustainability action

plans for all managed assets.

100% of all managed assets to

have a sustainability action plan

by 2022.

2022 Completed.

To maintain renewable electricity

for all landlord-controlled areas.

100% of all procured electricity

to be from renewable sources.

2021 Achieved, all suppliers providing

electricity from renewable

sources.

Energy consumption:

To achieve a 15% reduction in

absolute energy by 2030 based

on the 2018 baseline.

15% reduction 2030 Currently +5% (2021: +7.8%)

GHG emissions:

To achieve a 15% reduction in

absolute energy by 2030 based

on the 2018 baseline.

15% reduction 2030 Currently -14.9% (2021: -9.1%)

To improve the recycling rates on

all managed assets.

70% recycling rates on all waste

managed assets (Office). 55%

recycling rates on all waste

managed assets (Industrial).

Yearly 53% (2021: 62%) recycling rate

at office managed assets. 70.0%

(2021: 70%) recycling rate at

industrial managed assets.

To maintain zero waste to landfill

on all waste managed.

100% of waste diverted from

landfill on all waste managed

assets.

Yearly Currently 100% (2021: 99.8%).

To ensure there are no properties

in the portfolio with an EPC

below an E rating.

All non compliant EPC’s to be

improved to a minimum E rating.

Yearly There are currently two

properties in the portfolio with

an F EPC rating and one with a

G rating. Feasibility studies are

ongoing to improve the ratings of

these properties at leaseexpiry.

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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2022