Redefine Inter national P.L.C. Annual Report 2016

Transcription

1 Annual Report 2016

2 Welcome to the Redefine International P.L.C. Annual Report 2016 Redefine International is a FTSE 250 UK Real Estate Investment Trust with a primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock Exchange. The Company is included within the EPRA index. The Group is focused on income driven total returns and is committed to delivering superior distributions to shareholders throughout the property cycle. The investment portfolio is diversified across the retail, commercial and hotel sectors and is geographically located in the UK and Germany. At a glance Earnings available for distribution Portfolio market value Dividend per share 39.1m 44.4m 52.2m 1,003m 1,045m 1,529m 3.2p 3.25p 3.2p m +17.6% % Like for like % Yield on NAV EPRA NAV per share Weighted average cost of debt LTV 37.7p 41.0p 40.0p 4.2% 3.9% 3.4% 55.8% 51.8% 53.4% p -2.4% % -0.5% % +1.6% A FTSE 250 Company

3 Annual Report Where we operate What s inside Our diversified portfolio is located in Europe s two strongest economies, being the United Kingdom and Germany Our Top 20 assets (by value) United Kingdom 15% 23% 27% Edinburgh Leeds Manchester Bristol 35% UK 1.2bn 77% Germany Hamburg Germany Berlin 0.3bn 23% Market value 1.5bn London UK Retail UK Commercial UK Hotels Europe Since 2006 we have transformed both the asset base and corporate structure of our business A decade of achievement page 6 Chief Executive s report page 2 Corporate social responsibility page 42 Our corporate social responsibility ( CSR ) strategy is to deliver lasting value to our stakeholders. In line with the International Integrated Reporting Framework, we integrate corporate social responsibility information in this report reflecting how CSR is integral to our business, strategy and governance. For more information visit Strategic report 02 Chief Executive s report 05 Investment proposition 06 A decade of achievement 08 Market context 10 Business model and strategy 12 Strategic priorities 14 Risk and viability 16 Portfolio overview 22 Business segments 24 UK Retail 28 UK Commercial 32 UK Hotels 34 Europe 36 Financial review 41 EPRA performance measures 42 Corporate social responsibility Directors report Governance 52 Chairman s statement 54 Board of Directors 56 Leadership structure 57 Board composition 58 Board operations 60 Nominations Committee Accountability 63 Investor relations 64 Audit and Risk Committee Remuneration 66 Directors remuneration 67 Remuneration at a glance 71 Policy report on remuneration 76 Annual report on remuneration 81 Additional disclosures Financial statements Group financial statements 83 Statement of Directors responsibilities 84 Independent auditor s report 86 Consolidated income statement 87 Consolidated statement of comprehensive income 88 Consolidated balance sheet 89 Consolidated statement of changes in equity 90 Consolidated statement of cash flows 91 Notes to the consolidated financial statements Company financial statements 124 Statement of comprehensive income 125 Balance sheet 126 Statement of changes in equity 127 Statement of cash flows 128 Notes to the financial statements Other information 139 Five year record 140 Portfolio analysis 142 Offices and advisers 143 Glossary Strategic report Directors report Financial statements Other information

4 02 Redefine International P.L.C. Annual Report 2016 Strategic report Chief Executive s report Repositioning for growth AUK acquisition significantly enhances growth prospects 50% Portfolio value increased by c. 50%, adding scale to enable more active recycling of mature assets. We are committed to driving Redefine International forward to become the UK s leading income focused diversified REIT. 75% 75% of the AUK portfolio is located in London, the South East and Big 6 cities of the UK. Mike Watters Chief Executive Officer This year was the tenth anniversary of the Company s listing on the London Stock Exchange. During this period the Company has achieved many milestones and grown into an established FTSE 250 UK REIT. Although we are focused on the future, it is important to recognise the recent growth and evolution of the Company which highlights our progress and ability to create value. We extend our sincere thanks to our shareholders, advisers and employees who have supported us throughout the last decade. The importance of liquidity and transparency in the property sector has recently been highlighted by the volatility caused by the EU referendum outcome which resulted in some open ended property funds closing to redemptions from investors. Listed real estate, and particularly REITs, are well placed to provide institutional and retail investors with access to commercial real estate returns with the benefit of both liquidity and transparency. As the REIT market matures in the UK, there is a growing emphasis on income returns and the ability of REITs to efficiently convert underlying property performance into shareholder returns. We aim to be the UK s leading diversified income focused REIT and believe our strategy of income focused total returns is well positioned at this point in the property cycle and in the current low interest rate environment. Results and dividends The year under review was characterised by the completion and integration of the transformational Aegon UK ( AUK ) portfolio acquisition, which increased the value of the portfolio to 1.5 billion amid the significant market volatility and uncertainty surrounding the EU referendum. Earnings available for distribution increased by 17.6 per cent year on year to 52.2 million (2015: 44.4 million). Distributable earnings per share were in line with the prior year at 3.2 pence per share, reflecting the increased number of shares in issue following the capital raise in February 2016 to part fund the AUK acquisition. EPRA NAV decreased by 2.4 per cent to 40.0 pence per share incorporating the one off impact of the AUK portfolio acquisition costs and the one per cent increase in UK SDLT. The Board has declared a second interim dividend of pence per share to be paid on 12 December Together with the interim dividend of pence per share, the total dividend for the year of 3.2 pence per share is 1.5 per cent below last year (2015: 3.25 pence). EU referendum The EU referendum result has had a significant impact on the real estate investment market with transaction volumes down materially immediately following the outcome. The uncertainty created by the result is likely to have a negative impact on near term economic growth as investment decisions are postponed. However, the resultant prospect of continued low interest rates and bond yields, as well as demand from foreign capital following the depreciation of Sterling, should offer encouraging support for the investment market.

5 Annual Report A pleasing set of results against a challenging economic and political backdrop, whilst significantly improving the quality of our portfolio and income streams. Since the EU referendum, we have concluded 25 leases totalling 2.6 million in annualised gross rental income with a number of further leases at various stages of negotiation or currently in solicitors hands. At present in the markets in which we operate, there appears to be little evidence to suggest a material change in occupational demand has occurred to date. We remain alert to opportunities that may present themselves in 2017 in the event of increased volatility and disconnects between market pricing and property fundamentals. Strategic priorities We have two key strategic priorities: reposition the portfolio through recycling capital into assets with stronger growth potential; and strengthen our balance sheet by reducing our LTV over the medium term to our target range of per cent Repositioning the portfolio for growth Our strategy remains clearly focused on income led total returns. To achieve this, we will continue to actively reposition the portfolio towards strong economic locations and assets supported by occupier demand. The recent AUK transaction has enhanced the quality of our portfolio and income growth opportunities significantly, not only improving the overall exposure to locations expected to deliver economic growth but also providing exposure to the distribution and industrial sectors which are currently experiencing strong occupier demand and rental growth. Priory Retail Park, Merton We have acquired a number of strategically located assets, including an office block on Charing Cross Road, London, which will benefit from large scale redevelopment underway in the area and from the neighbouring Tottenham Court Road Crossrail station opening in The Company s recently acquired retail parks are showing encouraging letting activity and the overall exposure to UK regional shopping centres has been diluted to 22 per cent of the total portfolio, down from 33 per cent in We have a number of asset management opportunities due to be delivered in 2017 as well as various longer term strategic redevelopment options. Extensions to a number of assets are underway including a 12 room extension to the Holiday Inn Express, Southwark, five additional pre let units across the retail park portfolio and 1,000 sqm of foodstore extensions in Germany. Capital recycling is expected to be more active in 2017, led by the disposal of mature assets and reinvestment into assets and locations which support sustainable occupier demand. The Hague, the last remaining legacy asset outside our core markets, was sold together with its associated bank debt during the year. Post year end we have also exchanged contracts for the disposal of two assets, namely Duchess Place, Edgbaston and Exchange House, Watford for 14.9 million, at a premium of 11.7 per cent to carrying value. Strengthening the balance sheet We have been active in strengthening our capital structure and securing attractive financing terms during a period of low interest rates and competitive lending. Over 160 million of banking facilities were refinanced, extended or repaid during the year, lowering our average cost of debt by 50 basis points to 3.4 per cent. The weighted average debt maturity is 6.9 years (2015: 7.8 years). We secured a million revolving credit facility as part of the AUK transaction which has enhanced our ability to manage cash and liquidity more effectively. This pro active refinancing activity has secured current low rates and ensured the Company has no material financing facilities maturing until The LTV ratio increased to 53.4 per cent primarily due to a decrease in property values after accounting for AUK acquisition costs and the recent SDLT increase. Net debt, including our share of joint venture net debt, increased by million during the year following the million AUK acquisition which was part funded by million of bank debt. Refinancing activity was typically completed at lower leverage with reductions in interest costs delivering attractive marginal returns on equity. Strategic report Directors report Financial statements Other information

6 04 Redefine International P.L.C. Annual Report 2016 Strategic report Chief Executive s report continued We expect our capital structure to continue evolving into a lower leverage model that supports sustainable income led total returns. In the medium term, we will continue to incrementally reduce our leverage to within our target LTV range of per cent through a combination of capital recycling, refinancing or reinvesting at lower leverage. Part of our repositioning requires us to reinvest for growth. To enhance the growth profile for future earnings and strengthen the balance sheet, we will base our distributions on an industry standard EPRA based earnings measure which will provide greater flexibility in managing cash flow and reducing leverage. Growing our business sustainably We value our relationships with all our stakeholders including customers, communities, partners, employees and shareholders. We drive and foster a culture of high performance through an entrepreneurial approach and are consistently looking to identify, recruit and retain key personnel to support the Company s growth and build a ready pool of talent for future years. The composition of the Group s Corporate Social Responsibility ( CSR ) Committee has recently been reviewed. Donald Grant will replace Stephen Oakenfull with effect from 1 December The Committee thanks Stephen for his guidance and support in establishing the Group s strategic CSR framework. As local property owners, we understand that our responsibility to our communities extends beyond our employees and investments. We are now GRESB participants and have already made significant progress in delivering our CSR strategy which may improve our current score of 50. The Company was awarded the top prize in the CSR category at both the BCSC Purple Apple Marketing Awards and the ICSC Solal European Marketing Awards. Recognised as demonstrating leadership and innovation in the area of corporate social responsibility, Weston Favell s Movie Hub gave 400 local children from the surrounding area the opportunity to work on the set of the first operational film studio located in a UK shopping centre. Overcoming strong competition in a record year of 238 entries from 21 countries, this award was a fantastic achievement and justifies the importance our team places on CSR initiatives and community engagement across the portfolio. Outlook We believe there is a unique opportunity to grow Redefine International into the UK s leading diversified income focused REIT. With interest rates across Europe at historic lows and an anticipated slowdown in capital value growth, income returns will be an increasingly important component of total returns for the foreseeable future. Following ten years of building the Company to become an established FTSE 250 REIT, culminating in the transformational AUK acquisition, we are now in the process of reviewing the portfolio and capital structure to ensure it supports the Company s long term commitment to deliver sustainable and growing income focused total returns. It is our objective to enhance the growth profile of future earnings and to strengthen our balance sheet to support our aim of becoming the leading diversified income focused UK REIT and to retain our position as a top quartile yield payer, relative to our peer group. By ensuring greater flexibility in how we manage our cash flow and reducing leverage, we expect to enhance our income led operational and investment strategy and drive dividend growth going forward. We aim to adopt a more active approach to recycling capital, including the disposal of lower growth assets, to reposition the portfolio for stronger income and capital growth over the medium term. Our key strengths include actively managing a diversified portfolio with an efficient cost base, so we are well suited to deliver on this strategy. The Company will host a capital markets day in early 2017 to provide more detail on our strategic priorities. Following a period of significant growth in which we have a demonstrable track record in delivering secure and superior dividends to our shareholders, we remain committed to delivering upper quartile income returns as measured against other UK REITs and have laid the foundations that will support future growth throughout our second decade. Mike Watters Chief Executive Officer 27 October 2016

7 Annual Report Investment proposition Focused on income driven total returns in a market where sustainable income is increasingly important. Returns are underpinned by a diversified portfolio and efficient capital structure. Repositioning portfolio to create value A transformed corporate structure and asset base establish the foundation to drive further value Secure income Diversified portfolio and tenant base, with WAULT of 7.8 years and average debt maturity of 6.9 years Opportunistic capital allocation Investment philosophy to recycle capital to sectors and locations with strong occupier fundamentals and asset management opportunities Market leading distributions Proven track record of delivering superior dividends throughout the property cycle Lean but intensive management structure Hands on opportunistic management style, with strong cost control Further income and value opportunities Deliver occupier led asset management initiatives and explore selective high yielding development opportunities Strategic report Directors report Financial statements Other information Schloss Strassen Center, Berlin

8 06 Redefine International P.L.C. Annual Report 2016 Strategic report A decade of achievement Since 2006 we have transformed both the asset base and corporate structure of our business. Included within the FTSE 250 and EPRA indices. Ciref floated on AIM in London. Ciref acquires an initial stake in Wichford. Initial acquisition of strategic stake in Cromwell. Ciref changes its name to Redefine International plc. Redefine Properties International Ltd is floated on the JSE as part of a dual listing structure for Redefine International plc. Greg Clarke appointed as Chairman. Repayment of legacy financing facilities in excess of 250m. 127m equity placement. Acquisition of German retail portfolio. 55m equity placement. Redefine International lists on the JSE. Acquisition of Weston Favell shopping centre. Completion of Hotel portfolio acquisitions with Earls Court Wichford expands into Europe and moves its listing to the main market of the LSE. Redefine Properties acquires a controlling stake in Wichford s Investment Adviser, and becomes a major shareholder in Ciref. Ciref acquires an initial stake in the Cromwell Property Group, Australia. Redefine International plc undertakes reverse takeover of Wichford to create a substantial yield focused mid-tier property investment company, named Redefine International P.L.C. Admitted to premium listing on the LSE. Part disposal of Cromwell securities. German shopping centre acquisition. REIT conversion and internalisation of management. 71m equity placement concluded. Transfer of listing category to Chapter 6 of the Listing Rules. Initial Hotel portfolio acquisition. Sale of Swiss portfolio. German retail portfolio acquired in joint venture. Disposal of Delta portfolio. Acquisition of the DoubleTree by Hilton Hotel in Edinburgh. Disposal of Cromwell shareholding.

9 Annual Report was the tenth anniversary of the Company s listing on the London Stock Exchange and a transformational year for the business. 2016: Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug EGM unanimously approves AUK acquisition. International Hotel Properties established and the Group acquires initial 25% interest. Signed 303m credit facility including the Group s first revolving facility. Successful 115m equity raise. Completion of transformational AUK acquisition. Disposal of final non-core asset (the Hague). Strategic report Directors report Financial statements Other information

10 08 Redefine International P.L.C. Annual Report 2016 Strategic report Market context Demand for distribution and industrial space continues to outweigh supply in prime locations which has a positive knock on effect on rental levels. The UK s decision to leave the EU will result in continued uncertainty for the country, the property sector and for the occupational market. Macro volatility Economic growth The importance of liquidity and transparency in the property sector has recently been highlighted in the volatility caused by the EU referendum outcome and open ended property funds closing redemptions to investors. Listed real estate, particularly REITs, are well placed to provide institutional and retail investors access to commercial real estate returns with the benefit of both liquidity and transparency. As the REIT market matures in the UK, there is a clear change in the importance being placed on income returns and the ability of REITs to efficiently convert underlying property returns into shareholder returns. Income returns are an essential part of our investment strategy. With performance in the next phase of the property cycle likely to be more weighted towards income returns and rental growth, our approach to recycling capital into assets with strong property fundamentals and occupier demand is now increasingly important. As widely anticipated, volatility increased during the year due to fluctuating market expectations prior to the EU referendum, and further by the vote to leave the EU. Investment market activity reduced sharply due to this uncertainty, although pricing has remained robust. There has been little evidence of any negative impact on occupational markets, however, it is still too early to understand the full impact of the vote and will be closely monitored. The Company s diversified portfolio and broad range of high quality occupiers provides significant resilience in a potentially volatile market. Combined with a focus on delivering secure income returns, this places the Company in a strong position to manage and capitalise on this volatility. Economic growth forecasts in both of our markets remain well below historic highs, however economic indicators post the EU referendum have generally surprised on the upside suggesting the UK economy has performed better than many had initially feared. The consensus view is that UK growth is expected to slow in the coming quarters. This is highly dependent on political decisions surrounding the result of the referendum, economic indicators and external global market factors. Inflation has remained at very low levels both in the UK and Germany. The recent devaluation of Sterling and its impact on producers input costs has seen consensus inflation increasing to 2.0 per cent in Retail sales have been robust with annual sales growth of 6.2 per cent for the year to August Higher inflation from weaker Sterling and increased import costs may lower this growth rate for the remainder of the year. The Company has over 30 per cent of its leases subject to inflation linked rent reviews. Our retail exposure is weighted towards convenience and non discretionary consumer spending and 23 per cent of the portfolio by value is in Germany, providing exposure to the Euro. UK unemployment rate during the three months to August 2016 was 4.9 per cent, its lowest rate in the last 11 years. Interest rates across Europe are likely to remain low which, together with the anticipated slowdown in capital value growth, makes secure income returns an increasingly important component of total returns for the foreseeable future.

11 Annual Report Our income focused diversified portfolio is well positioned to withstand this period of uncertainty with high occupancy on long leases, low exposure to Central London offices and financial services and reduced exposure to shopping centres. Occupational market There has not been any discernible slowdown in leasing activity to date, particularly in retail as occupiers generally continue with their plans. National vacancies in retail parks are at a 14 year low which is evidenced by our fully occupied portfolio with tenant demand exceeding supply. Outside the City of London office market, in which we have no exposure, leasing activity in regional office markets softened slightly but proved relatively resilient. Demand for distribution and industrial space continues to outweigh supply in prime locations which is having a positive knock on effect on rental levels. Overall, the UK regional outlook is mixed with performance heavily dependent on the fundamentals of specific assets. Demand from retailers in Germany continued to strengthen during the year, with interest improving from both local and international brands. The Company s ERV grew by 4.4 per cent across the portfolio with several occupier led initiatives underway to continue to support further growth. These include pre let expansions, reconfiguration and optimisation of existing space, improving the tenant mix, increased commercialisation activity and progress on filling regional office vacancies. Investment and capital markets The EU referendum had a sharp impact on investment market activity immediately before and after the vote. The reported subsequent rise in property yields were clearly impacted by the decision to exit the EU. It is likely there was already a moderate correction in values underway following a very strong investment market in the run up to the referendum. Banks exposure to the real estate sector is far lower than in 2008, with investment activity in recent years being driven by investors using significantly less leverage. Liquidity is expected to remain high, although banks are likely to focus on relatively low risk lending with margins for secondary assets or higher risk transactions increasing. The number of new entrants to the lending market including non bank funds has significantly enhanced the depth and liquidity of the market. UK commercial yields were over 4.0 per cent above ten year gilt yields, significantly higher than the long term average spread of between 1.0 per cent to 2.0 per cent. This suggests property pricing remains relatively good value compared to certain other asset classes. Uncertainty in the occupier market may also be reflected in lower investment volumes, although the continuing gap between property yields and interest rates suggests that UK property will continue to appeal to certain investor groups. In a market characterised by exceptionally low interest rates and low growth, our focus is on identifying assets with sound property fundamentals in locations that are supported by occupier demand. Technology Technology continues to transform the way we work, shop and travel. The internet has delivered greater access to information, providing instant information and more choice. Mobile continues to drive online shopper interaction and consumer behaviour as innovations including contactless and mobile payment become commonplace in the retail environment. Frictionless shopping continues to be an aspiration for retailers in response to the ever changing consumer demands, in both prime and secondary retail environments. Smartphones continue to provide the platform for delivery. Redefine International continues to develop its use of technology, particularly mobile, focusing on convenience and value to enhance the consumer journey. We have seen a 40 per cent increase in mobile usage across the UK retail portfolio. Optimisation of beacon technology in retail environments will continue to grow, with the aim to create a seamless, omni channel experience from screen to store. Social media has dominated and will continue to dominate the shopper journey and thus video content remains a powerful component for retail brands. Redefine International uses technology across its portfolio to stay in touch with all stakeholders. 51 per cent of all web traffic is from new visitors and there has been a 60 per cent increase of mobile device usage to access the corporate website. Strategic report Directors report Financial statements Other information

12 10 Redefine International P.L.C. Annual Report 2016 Strategic report Business model and strategy Strategic principles Enhance quality of portfolio Acquire assets with sustainable income potential and strong property fundamentals within the sectors and geographies expected to deliver the best income focused total returns. Reduce cost of capital Lower cost of capital to enable the Group to be more competitive in the investment market. We optimise debt and gearing to capitalise on the low interest rate environment. Careful debt and liquidity management mitigate interest rate and refinancing risk while avoiding unnecessary cash reserves wherever possible. Strategic actions Reposition portfolio Leveraging our diversified portfolio, we will reallocate capital to assets with stronger growth potential and occupational demand, reducing exposure to assets with maturing business plans. We will create value through active asset management and explore selective high yielding development opportunities. Strengthen balance sheet We will reduce gearing to within our target range LTV of between 40 and 50 per cent. We will continue to strengthen our capital structure and seek out attractive financing terms whilst maintaining financial flexibility. Open and transparent stakeholder engagement Sustainable and socially responsible investment

13 Annual Report The Group seeks to allocate capital to assets within sectors and locations that are expected to generate the best sustainable, risk adjusted returns. Strategic outcome Secure income focused total returns WAULT 7.8yrs index linked leases 30%+ Debt maturity 6.9yrs next significant maturity in 2020 The Group has clear visibility of income with long WAULTs supported by a well diversified portfolio and tenant base. A significant proportion of the portfolio is subject to index linked rent reviews. No significant near term debt maturity and over 95% of interest costs either fixed or capped. Market leading distributions for our shareholders Yield 8% In 2016 based on EPRA NAV Dividend growth +1 2% We target dividend growth of CPI +1 2% over the medium term The Group is committed to maintaining its position as a leading income focused UK REIT and targets growth in excess of inflation over the medium term. St. George s Shopping Centre, Harrow DoubleTree by Hilton, Edinburgh Lakeview, Warrington Strategic report Directors report Financial statements Other information

14 12 Redefine International P.L.C. Annual Report 2016 Strategic report Strategic priorities Targets Risks (1) Secure income focused returns Market leading distributions Enhance quality of portfolio Drive income focused total returns Reduce cost of capital Maintain investment market competitiveness through efficient capital structure Distribution growth Growing distributions in excess of inflation Reposition portfolio Recycle capital into assets with stronger growth potential Strengthen balance sheet Reduce gearing (LTV) Addition of new income producing space Occupancy >95% Understand occupier requirements High tenant retention Strategic tenant relationships Even spread of lease maturities Effective cost management Net investment into sectors with positive fundamentals Investment into existing assets to drive income and capital growth Cost effective borrowing Flexible funding terms and structure Support rental growth through investment in assets and occupier led strategies Earnings accretive acquisitions Distribution growth in excess of inflation Fixed rental/index linked uplifts Sale of mature assets Acquisitions of assets in locations which support sustainable occupier demand LTV between per cent Premium equity rating Avoid concentration of debt maturities Low inflation environment Weak occupier demand Changes in regulatory requirements Competition for investments Decline in market conditions Failure to anticipate changes in property cycle Development and construction risk Reduced availability of financing and refinancing at acceptable cost Increased cost of finance Adverse movements in share price Adverse interest rate movements Reduced occupier demand Tenant default Reducing LTV Failure to execute appropriate property investment strategies and take advantage of opportunities in the current economic climate Property cycle and investor sentiment Change in investor demand between real estate sectors Cyclical changes in property values Adverse foreign currency movements Decline in market conditions Significant external, political or financial event (1) Principal risks, their potential impact and mitigating factors are set out on pages 14 and 15.

15 Annual Report Key performance indicators Link to remuneration Outcomes Earnings available for distribution ( m) EPRA NAV per share (p) Weighted average cost of debt (%) Dividend per share (p) EPRA NIY (%) LTV (%) WAULT (years) Occupancy by ERV (%) EPRA NAV per share (p) LTIP STIP ELTI LTIP STIP ELTI LTIP STIP ELTI LTIP ELTI Portfolio WAULT of 7.8 years 75 rent reviews completed at 4.9 per cent above passing rent 64 new lettings or renewals completed at 4.4 per cent above ERV Mature asset disposals Acquisition of transformational AUK portfolio Portfolio valuation increase of 3.4 per cent like for like Weighted average cost of debt reduced to 3.4 per cent Weighted average debt maturity of 6.9 years Greater than 30 per cent of portfolio subject to index linked rents Occupancy increased to 97.7 per cent Ongoing investment programme into the retail portfolio to create space required to meet tenant demand STIP Significant level of capital recycling achieved Disposal of final non core assets STIP Group LTV of 53.4 per cent Secured 148 million revolving credit facility LTIP Part of Executive Directors long term incentive arrangements. STIP Part of Executive Directors annual bonus. ELTI Part of Employees long term incentive arrangements. Strategic report Directors report Financial statements Other information

16 14 Redefine International P.L.C. Annual Report 2016 Strategic report Risk and viability The Group seeks to minimise, control and monitor the impact of risks to profitability whilst maximising the opportunities they present. Redefine International acknowledges that it faces a number of risks which could impact the achievement of its strategy. While it is not possible to identify or anticipate every risk due to the changing business environment, the Group has an established risk management process to manage and mitigate risk. The Group s process for identifying and managing risk is set by the Board. Strategic The Board has delegated the oversight of risk to the Audit and Risk Committee. Risks are assessed bottom up throughout the business both gross and net of mitigating controls. The Audit and Risk Committee reviews the risk management plan bi annually with the design, implementation and monitoring being the responsibility of management on a day to day basis. Risks are considered in terms of their impact and likelihood from both a financial and reputational perspective. Although not exhaustive, the principal risks facing the Group are categorised into four broad risk types: Strategic, Financial, Operational and Legal and regulatory. The potential impact of these risks and the mitigating controls in place to manage their impact are as follows: Change Risk Impact Link to strategy Mitigation Failure to execute appropriate property investment strategies and take advantage of opportunities in the current economic climate Declining net asset value, total property return (income and capital) or shareholder returns (dividend and share price growth) Annual review of investment strategy Defined asset appraisal process Investment Committee reviews all opportunities against pre determined criteria Monitoring of macroeconomic and property market trends Significant external political or financial event, for example the UK s referendum on EU membership Significant business interruption General market dislocation leading to increased volatility with potential impact on property valuations and or share price Constrained access to debt or capital markets impacting ability to address liquidity or covenant concerns Inability to access or operate properties Operational interruption and disruption Good relationships with key shareholders and lenders Monitoring loan covenants and required cash cures in event of severe but plausible scenarios Facility headroom Adequate insurance cover Geographic diversity of portfolio Disaster recovery planning including frequent replication of data and offsite storage Financial Change Risk Impact Link to strategy Mitigation Decline in market conditions and structural changes in retail consumer behaviour Reduced availability of financing and refinancing at acceptable cost Inability to fund property investments Increased cost of finance Declining valuations leading to covenant breaches Mix of lenders and maturities of facilities Detailed capital planning and forecasting Sufficient liquidity maintained to meet commitments Early refinancing of debt Regular assessment of market conditions including bi annual external valuations and monitoring of covenants Portfolio diversified across sector and geography Adverse interest rate movements Increased cost of borrowing and hedging reducing financial and operational flexibility Interest rate hedging policy providing interest rate protection Target staggered debt maturities Geographic diversification Secure income focused returns Enhance quality of portfolio Reduce cost of capital Distribution growth Reposition portfolio Strengthen balance sheet

17 Annual Report Financial Risk Impact Link to strategy Mitigation Adverse foreign currency movements Change in investment strategy of significant shareholder Operational Decreased asset values Reduced operating income Adverse movement in share price Perceived loss of confidence Risk Impact Link to strategy Mitigation Failure to anticipate changes in the property cycle Reduced occupier demand for space, increased supply, or occupier defaults Development and construction risk including contractor solvency and availability, and planning risk including poor engagement with local communities Legal and regulatory Reduced investment demand and declining property values Potential pressure on banking covenants Reduced rental income and cash flow Increased void costs Declining property values Reduced development returns resulting from cost overruns, programme delays or failure to secure planning permission Existing tenant disruption Delayed or failed tenant installation Failure to obtain planning permission Risk Impact Link to strategy Mitigation Health, safety and environmental risk Changes in or breach of regulatory or legislative requirements Viability statement In the context of the above principal risks, the Directors have considered a three year time horizon in assessing longer term viability. This aligns with the Group s internal strategic plan and is underpinned by an average unexpired lease term and weighted average debt maturity comfortably exceeding three years. In reaching its opinion, the Directors considered the Group s internal control environment together with the results of plausible but Loss or injury to employees, tenants or contractors Impact on reputation, adverse publicity or financial impact Financial or reputational impact Reduced financial returns as a result of increased taxes across non REIT business conservative scenarios. In light of recent events, the Directors paid particular attention to the risk of a deterioration in economic outlook impacting property fundamentals, including the impact on property valuations of a weakening investor and occupational market, coupled with restricted availability of finance. Key inputs included extended vacancy periods, increased finance costs and lower levels of scrip dividend take up. In performing these tests, the Directors Change Debt facilities arranged in the currency of the related investment act as a partial hedge Exchange rates continuously monitored Amounts converted to Sterling at earliest opportunity Close relationships maintained with key shareholders Dedicated investor relations resource Income focused total return strategy maintaining upper quartile performance Bi annual external valuation of properties Diversified portfolio Active asset management Regular monitoring of covenants Diverse tenant base Long leases and strong tenant covenants Open dialogue with tenants Review consumer trends Regular monitoring of tenants at risk Change Strong supply chain and professional relationships facilitate assessment and monitoring Appropriate due diligence, procurement and consultation prior to placing contracts, including review of financial covenants Change Policies in place with audit and risk assessments undertaken Environmental programme in place All properties actively managed Appointed dedicated Health & Safety Manager Appointment of appropriately qualified corporate advisers and administrators in all jurisdictions with active engagement Regular review of compliance e.g. with REIT legislation Sound governance and internal policies considered the limit at which a threat to viability may crystallise. Having considered these factors both individually and collectively the impact on the Group s forecast cash flows and covenant compliance, the Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its debts as they fall due during the next three years. Strategic report Directors report Financial statements Other information

18 16 Redefine International P.L.C. Annual Report 2016 Strategic report Portfolio overview Camino Park Distribution Centre, Crawley

19 Annual Report Over the past year, Redefine s portfolio has been enhanced through active capital recycling and investment in high quality assets. This, combined with our strategic flexibility to invest across sectors, underpins the success of our income focused total return strategy. The AUK acquisition has significantly enhanced the quality of the portfolio, providing exposure to a number of high quality assets in sectors and locations expected to deliver economic growth. Over 58 per cent of the portfolio is located in Greater London, the Big 6 UK cities, southern UK and the Big 5 cities in Germany. The remainder of the portfolio is largely made up of dominant regional shopping centres and assets presenting specific income led asset management opportunities. In addition, we now have exposure to distribution assets and retail parks, all of which are showing evidence of strong occupier demand. Key statistics 1.5bn Total market value of portfolio 7.8yrs WAULT 97.7% Occupancy by ERV 5.8% EPRA net initial yield The market value of the portfolio, including our share of joint ventures, increased by 3.4 per cent on a like for like basis which included the effect of a 16.3 per cent increase in the value of the Euro relative to Sterling. UK valuations are down by 1.9 per cent on a like for like basis, driven by softer yields in the second half of the year and a one per cent increase in UK SDLT. Encouragingly, valuers supported the income outlook for our portfolio with ERV improving across all subsectors, other than our UK shopping centres, which declined 2.6 per cent over the last six months. 106m Annualised gross rental income 174 Properties in portfolio Strategic report Directors report Financial statements Other information

20 18 Redefine International P.L.C. Annual Report 2016 Strategic report Portfolio overview continued We have changed our occupancy metric to align with EPRA best practice recommendations which now reflects the vacant percentage by ERV instead of lettable space. Under this metric, occupancy increased by 20bps to 97.7 per cent. Our secure income stream is underpinned by a WAULT of 7.8 years (2015: 8.4 years). Annualised EPRA Weighted EPRA Market gross rental topped Reversionary average voids value income ERV EPRA NIY up yield yield lease length (by ERV) Indexed Values as at 31 August 2016 ( m) ( m) ( m) (%) (%) (%) (yrs) (%) (%) UK Retail UK Commercial UK Hotels Total UK 1, Europe Total 1, Wholly owned 1, Held in joint ventures (proportionate) Portfolio (excl AUK) 1, AUK Portfolio Resilient and secure income stream Our portfolio provides clear visibility on future rental income. Our WAULT of 7.8 years is backed by a diversified portfolio and high quality tenant base, providing a resilient and secure income stream. Just over 20 per cent of gross rental income is subject to break options or expiries in the next five years with no more than 6.8 per cent subject to tenant break options or expiries in any single year. Our occupier mix is not overly exposed to any single tenant or sector. Within retail we have actively targeted non discretionary food, value fashion and leisure offerings, all of which have proved to be resilient with a positive market outlook. Annualised Lease expiries to gross rental FY FY FY FY FY FY FY FY FY FY first break as at income August 2016 ( m) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) UK Retail UK Commercial UK Hotels Total UK Europe Total

21 Annual Report Income growth opportunities The repositioning of the portfolio is strategically focused on continued income sustainability and growth opportunities. We aim to be more active in recycling capital from mature assets with low growth prospects into assets with clearly identified asset management initiatives and income upside. We are making good progress in letting the remaining vacant space, particularly in regional offices. Several extensions, supported by tenant demand and pre let agreements, are at various stages of completion across the retail portfolio. We continue to drive commercialisation activity across the portfolio to maximise revenues from advertising, promotional space and short term lettings. Additionally, 34.7 per cent of gross rental income is subject to inflationary linked reviews or fixed increases. Driving cost efficiencies Our EPRA cost ratio (excluding direct vacancy costs) remains one of the lowest in the UK REIT sector at 14.9 per cent (2015: 15.3 per cent), a great result given the recent portfolio growth to over 1.5 billion. The agreement with Kames Capital to support our asset management function across the AUK portfolio for a minimum of 18 months was terminated in September 2016 and takes effect from April The termination will result in a one off termination fee of 1.2 million in the next financial year, however considerable savings will materialise following internalisation. During the course of 2016 we brought the commercialisation function for our retail assets in house. This includes revenues derived from marketing, promotions, advertising and leasing of mobile retail units. In doing so, we have enhanced both the quality of commercialisation within our centres and driven higher net commercialisation income. Leasing activity In the last 12 months, 75 rent reviews were agreed providing a total rent of 22.4 million, 4.9 per cent ( 0.9 million) increase above the passing rent. 64 new lettings or renewals were completed providing a total rent of 4.3 million ( 1.1 million increase on passing rent), 4.4 per cent ahead of ERV. Portfolio occupancy based on lettable area declined marginally to 97.1 per cent (2015: 98.1 per cent) driven largely by two units totalling 8,818 sqm (94,709 sqft) let to two tenants who went into administration during the last six months. Since the result of the EU referendum, we have concluded 25 leases totalling 2.6 million in annualised gross rental income, 4.5 per cent ahead of ERV, with a number of further leases at various stages of negotiation or in solicitors hands. Currently within the markets in which we operate, there is little evidence to suggest a material change in occupational demand. Key leasing activity completed during the year: Banbury Cross Retail Park a new 10 year lease for 464 sqm (4,998 sqft) with Tapi, the carpet and flooring supplier, on an agreed rent of 0.1 million which was in line with ERV. A lease renewal was also agreed with Poundstretcher at a rent of 0.2 million, 2.8 per cent ahead of ERV. Since the EU referendum result, DFS has signed a 10 year renewal on 1,863 sqm (20,056 sqft) of space at 0.3 million which is 4.9 per cent above ERV; Charing Cross Road, London two rent reviews with Superdrug for 460 sqm (4,953 sqft) and 3 Monkey Communications for 700 sqm (7,571 sqft), were agreed totalling 0.8 million, 0.2 million above passing rent; Swindon a new 15 year lease with Oxford Brookes University for 2,640 sqm (28,412 sqft) on an agreed rent of 0.3 million, 20.8 per cent above ERV; Omnibus building in Reigate Deutsche Leasing has signed a 15 year lease, with a 7.5 year break, on 1,023 sqm (11,015 sqft) of vacant space at an annualised rent of 0.3 million, 10.1 per cent ahead of ERV. 40 per cent of the vacant space on acquisition has now been filled, saving 0.1 million in void costs; Camino Park, Crawley Royal Mail has agreed a 10 year reversionary lease on 20,535 sqm (221,037 sqft) with a break option in five years; and Camino Park, Crawley post the EU referendum result, DFS has signed a 10 year lease on 2,537 sqm (27,306 sqft) at per sqft, a 15.5 per cent uplift to passing rent and 14.6 per cent above ERV. Strategic report Directors report Financial statements Other information

22 20 Redefine International P.L.C. Annual Report 2016 Strategic report Portfolio overview continued Acquisitions This year s activity was dominated by the acquisition of the million AUK portfolio and its integration into the business. The acquisition has been transformational, increasing our portfolio by approximately 50 per cent to 1.5 billion and enhancing its overall quality. Nearly 75 per cent of the assets in the AUK portfolio are located in areas expected to deliver future economic growth including London, the South East and the Big 6 UK cities. In addition, the portfolio brought exposure to the distribution and industrial sector which are currently experiencing strong occupier demand and rental growth. The AUK acquisition has added a significant and resilient long term rental stream with clear asset management opportunities. Despite market volatility, progress to date on asset management initiatives has exceeded management s initial expectations, with discussions and agreements ahead of the business plan for each property. The initial yield on acquisition of 5.0 per cent increased to 5.1 per cent following the early sale of 16 Grosvenor Street and successful letting activity with a further increase to 5.7 per cent anticipated following expiry of rent free periods. ERVs across the AUK portfolio have increased by 0.9 million (3.2 per cent). Contracted rent over the same period increased by 0.4 million (1.5 per cent), which was partly offset by the single tenant at Severalls Industrial Estate, Colchester going into administration. Annualised EPRA Weighted EPRA Market gross topped Reversionary average voids AUK Portfolio value rental income ERV EPRA NIY up yield yield lease length (by ERV) Indexed as at 31 August 2016 ( m) ( m) ( m) (%) (%) (%) (yrs) (%) (%) Retail Parks Retail Other Retail Portfolio Offices Greater London Offices Regional Offices Total Distribution and Industrial Automotive Other Total Commercial Portfolio Total Portfolio Tranche I Tranche II We remain confident in our ability to successfully execute the asset management opportunities we have identified. A further six leases totalling 5,874 sqm (63,226 sqft) in the AUK portfolio are in solicitors hands, with most expected to be signed with high quality national tenants for terms of at least 10 years. Following the completion of these leases, an additional 0.4 million of annualised gross rental income will be generated, with a further 377 sqm (4,062 sqft) being made available to let at Banbury Cross Retail Park. We now have the welcome challenge of creating additional space in our portfolio to meet occupier demand, which is being addressed by progressing planning permission on five additional pre let units to be built across the retail park portfolio. Disposals As a result of the prevailing low interest rate environment, assets with defensive but low growth income streams are being priced relatively aggressively. We plan to recycle out of mature and low growth investments into assets with stronger real estate fundamentals backed by sustainable occupier demand. Ten petrol filling stations were sold during the period for 12.0 million at a 6.0 per cent premium to book value. The Group s remaining petrol filling stations are let to BP with an average lease length of 16.1 years and subject to fixed five yearly rental uplifts. 16 Grosvenor Street, which formed part of the second tranche of the AUK portfolio, was sold prior to the transaction s completion for 35.6 million, 22.8 per cent above the purchase price. The Hague office building, our last remaining asset outside our core markets, was sold together with associated debt of 15.0 million for a nominal consideration. The sale has no material impact on key metrics.

23 Annual Report Development and capital expenditure Development activity is focused on refurbishing existing assets and adding incremental space and income to meet additional occupier demand. Capital expenditure Yield on cost Scheme Description ( m) Start Completion (%) City Arcaden, Ingolstadt Primark development 12.0 Q Q (1) Holiday Inn Express, Southwark 12 room extension and refurbishment 3.1 Q Q Albion Street, Derby Redevelopment (pre let) 2.3 Q Q (1) Retail Parks Five additional units 3.0 Q Foodstore extensions, Germany Six extensions 5.5 various various 8.3 Total (1) Yield on cost reflects the overall scheme yield. See also development and construction risk disclosures on page 15. City Arcaden, Ingolstadt The scheme, which incorporates a complete redevelopment of the existing shopping centre, is anticipated to complete during the first half of The introduction of Primark will significantly strengthen the retail offering in the town and surrounding areas and encourage additional footfall. Once complete, the Primark lease will deliver an additional 1.5 million of rental income per annum. The 2,687 sqm (28,923 sqft) H&M unit has been enhanced and refurbished with the lease being extended until May H&M has continued trading during the development period. The overall scheme, once complete, is anticipated to generate 2.1 million in annual rental income. Over 95 per cent of the scheme by rental income is either let or subject to pre let agreements. Holiday Inn Express, Southwark In July 2016 we commenced work at the Holiday Inn Express, Southwark to build 12 new bedrooms, improve 18 under sized existing bedrooms and refurbish the front and rear façade of the existing hotel. Total capex is expected to be 3.1 million. The extension is planned to complete by the third quarter of Albion Street, Derby Heads of terms have been agreed with an international discount fashion retailer to take up a large floor plate in a newly configured high street retail block. Planning permission has been submitted and we are actively engaging with the local council. The introduction of such a strong international discount fashion retailer will transform the high street in Derby and support letting activity at our neighbouring units. This reconfiguration is expected to yield in excess of 10 per cent on cost. Retail Parks Planning applications have been submitted to develop three additional units at Banbury Cross Retail Park, one unit at The Arches Retail Park, Watford and one unit in Priory Retail Park, Merton totalling 1,308 sqm (14,075 sqft). The new units are in advanced stages of negotiation with national operators and are expected to generate 0.4 million of additional rental income providing an approximate yield on cost of 12.7 per cent. With national retail park vacancy at a 14 year low, we have seen positive occupier demand across the majority of our recently acquired retail park portfolio. Foodstore extensions, Germany A number of extensions to standalone foodstore units are agreed or at advanced stages of negotiation with Edeka, Lidl and Netto. Extensions totalling in excess of 1,000 sqm (10,764 sqft) are planned which will deliver a return on cost of approximately 8.3 per cent. As part of the negotiations, the existing leases are typically being extended by 12 to 15 years. Strategic report Directors report Financial statements Other information

24 22 Redefine International P.L.C. Annual Report 2016 Strategic report Business segments The Group s diversified portfolio is focused on investing in large well developed economies with established and transparent real estate markets. UK Retail The UK Retail portfolio consists of six wholly owned regionally dominant shopping centres and five retail parks, in thriving communities throughout the UK. Key properties include St. George s Harrow, Weston Favell Northampton, West Orchards Coventry, Birchwood Warrington, Grand Arcade Wigan, Banbury Cross Retail Park Banbury, The Arches Retail Park Watford and Priory Retail Park Merton. The portfolio is tenanted by leading retailers including Asda, Tesco, Wilko, TK Maxx, B&Q, DFS, Boots, H&M, Next, Mothercare, House of Fraser and Currys. Occupancy (%) 98.7 Lettable area (m 2 ) 237,694 Annualised gross rental income ( m) 40.6 Properties 14 Market value 35% 537.1m St. George s Shopping Centre, Harrow Read more on pages UK Commercial The UK Commercial portfolio is diversified across the Office, Automotive and Industrial and Distribution sectors. Geographically spread throughout the UK, the portfolio includes 127 Charing Cross Road London, Camino Park Distribution Centre Crawley, Bridgwater Express Park Distribution Centre Bridgwater and 201 Deansgate Manchester. The portfolio is tenanted by local and international brands such as BP, Starbucks, Superdrug, DFS, Exel, Toolstation, Royal Mail, Evans Cycles and certain UK Government let tenancies. Occupancy (%) 94.6 Lettable area (m 2 ) 216,829 Annualised gross rental income ( m) 27.5 Properties 64 Market value 27% 417.5m Sytner Car Dealership, High Wycombe Read more on pages 28-31

25 Annual Report UK Hotels Holiday Inn Express, Earls Court Europe The UK Hotels portfolio comprises eight hotels in Greater London and the South East. These are branded Holiday Inn, Holiday Inn Express, Crowne Plaza and Travelodge. The portfolio also includes the DoubleTree by Hilton in Edinburgh. The Group has a 25.3 per cent shareholding in RedefineBDL, the UK s largest independent hotel manager, which leases and manages all of the Group s hotel properties with the exception of the Travelodge, Enfield. The Group also holds a 15.5 per cent shareholding in International Hotel Properties Limited. Occupancy (%) 100 Lettable area (m 2 ) 41,323 Annualised gross rental income ( m) 15.0 Properties 9 Market value 15% 229.2m The European portfolio is located in Germany and includes three shopping centres; Schloss Strassen Center located in Berlin, Bahnhof Center in Hamburg and City Arcaden in Ingolstadt. Other assets include retail parks, discount supermarkets and government let offices. Occupancy (%) 98.5 Lettable area (m 2 ) 186,061 Annualised gross rental income ( m) 22.8 Properties 87 Market value 23% 345.2m Read more on pages Strategic report Directors report Financial statements Other information Bahnhof Centre, Altona, Hamburg Read more on pages 34-35

26 24 Redefine International P.L.C. Annual Report 2016 Strategic report Performance review UK Retail St. George s Shopping Centre, Harrow

27 Annual Report The UK retail landscape continues to undergo significant structural change. Internet retailing is now estimated to capture 14 per cent of total retail sales and is forecast to reach 17 per cent by At the same time, established retailers and previously pure play internet retailers have recognised the importance of having both a physical and an online retail presence. As a result, larger retailers are targeting fewer stores but which are strategically located. Our portfolio of shopping centres and retail parks is predominantly focused on value and convenience retailers serving local communities, an element of the market which has proved relatively resilient. However, we are cautious in our outlook for certain shopping centre assets, particularly fashion anchored schemes which do not dominate their catchment areas and/or have a successful leisure element. The UK shopping centre portfolio now represents 22 per cent of the total portfolio compared to 33 per cent at the end of the 2015 financial year. Occupancy across the retail portfolio increased to 98.7 per cent (2015: 98.3 per cent) with three of the shopping centres and all of the retail parks now fully let. Exposure to the BHS administration was limited to one store at Grand Arcade, Wigan of 3,838 sqm (41,315 sqft) resulting in a net income loss of 0.6 million including void costs. Plans are in place to reconfigure the unit to support re letting options and early stage discussions are in progress with potential retailers. The internalised commercialisation function, branded as CentreStage Leasing, has delivered a marked improvement in the quality of commercialisation activity within our retail assets and delivered a 20.4 per cent increase in net commercialisation income to 1.0 million per annum. In the year ahead we see opportunities for reconfiguration and optimisation of space, further development and expansion activities as well as a drive to increase income from advertising and promotional space. Annualised Weighted gross EPRA average EPRA Market rental EPRA topped Reversionary lease voids UK Retail as at value income ERV NIY up yield yield length (by ERV) Indexed 31 August 2016 ( m) ( m) ( m) (%) (%) (%) (yrs) (%) (%) UK Shopping Centres UK Retail Parks UK Retail Other UK Retail Key statistics 40.6m Annualised gross rental income Opportunity for modest rental growth, reconfiguration of existing space and further development activity 98.7% Occupancy by ERV Shopping centres nearly fully occupied at 98.1% 8.8yrs WAULT Good quality tenants weighted towards non discretionary food retailers, discounters and leisure Strategic report Directors report Financial statements Other information

28 26 Redefine International P.L.C. Annual Report 2016 Strategic report Performance review UK Retail continued Case study Commercialisation Shopping Centres We have seen improved confidence from national operators willing to take additional space or renew leases in the majority of our shopping centres. Occupancy improved to 98.1 per cent (2015: 97.9 per cent). Contracted rental income at year end was higher in four of our shopping centres but offset by the BHS administration at Grand Arcade, Wigan and challenging trading at West Orchards, Coventry. To counteract these challenges, asset management activity is focused on introducing improved food and leisure offerings at both Grand Arcade and West Orchards. Retail Parks The retail park portfolio remains fully occupied with positive leasing activity during the year. Over the last 12 months, ERVs have grown by 1.1 per cent across the portfolio, providing evidence and supporting our view that the implied negative reversion of 1.0 million can be closed significantly once higher rents are proven. Asset management is focused on the creation of new units and additional revenue streams from advertising and ancillary income. Demand from national fast food and coffee operators has been strong with five units planned at Banbury Cross Retail Park, Priory Retail Park, Merton and The Arches Retail Park, Watford. Pre let agreements have been secured for 0.4 million of additional rental income. Key statistics 237,694 Square metres Supply demand imbalance and with long leases presents an opportunity to eliminate retail park over rent 6.3% EPRA net initial yield 6.5% EPRA topped up yield and 7.0% reversionary yield 14 Total number of assets Including six regionally dominant shopping centres, one in greater London and five well located retail parks Following an internal review of UK Retail commercialisation in 2015, Redefine International recognised an opportunity to drive revenue and improve the quality of ancillary income activity across its UK shopping centre portfolio. In September 2015 CentreStage Leasing, Redefine International s in house commercialisation function, was launched to enhance the Group s focus to effectively execute our commercialisation strategy with two clear objectives; maximise income opportunities across the portfolio and to deliver greater control on quality, added value experiential activities essential in thriving retail environments. Recognising the opportunity between consumer marketing and ancillary income activity, CentreStage Leasing operates as part of the marketing team function, overseen by the Group Head of Marketing, supported by a national Commercialisation Manager and a regional Commercialisation Assistant. This approach enables the team to maximise commercialisation opportunities in line with planned consumer marketing campaigns, matching potential operators to specific events and activities. The new approach and strategy focuses not just on mall space but extends the income potential across the UK Retail Portfolio by encompassing media space, air space and online space. It creates new income streams from areas including poster sites, lift and escalator branding, floor graphics, websites and social media platforms. CentreStage Leasing launched a marketing campaign targeting national brands and regional and local businesses, promoting the assets and opportunities to the sector, generating interest and bookings. This was supported with the development of an online booking platform which enables potential partners to view key information as well as the opportunities available at each scheme. This approach has enabled Redefine International to attract new operators on new long term leases, which ensure greater investment in retail delivery by the tenant and secure income for the asset, and shorter term licences for seasonal/specialist operators that continue to deliver variety and key trading activity at specific times such as Christmas and Easter. The team has also worked to retain successful existing operators, aiming to improve quality and increase rental levels. During its first year of operation, CentreStage Leasing has delivered 19 new long term leases across the portfolio, to both national and international operators including Sky, Auntie Anne s and Kono Pizza, as well as local and regional operators. Short term licences were also granted to 56 new operators, in addition to the circa 120 operators already taking space across the UK Retail portfolio. Our increased focus on commercialisation has resulted in income growing by 20 per cent compared to the previous year, with a corresponding reduction of 66 per cent in operating costs. Overall, it has been a hugely successful first year for CentreStage Leasing and we expect this trend to continue with further opportunities already identified.

29 Annual Report Strategic report Directors report Financial statements Other information Grand Arcade Shopping Centre, Wigan

30 28 Redefine International P.L.C. Annual Report 2016 Strategic report Performance review UK Commercial Camino Park Distribution Centre, Crawley newly refurbished unit pre-let to DFS, 14% ahead of ERV

31 Annual Report Overall, we believe our office portfolio is relatively well insulated from short term concerns surrounding the EU referendum. Our office exposure in London is concentrated around Charing Cross Road and Southbank with both areas currently undergoing regeneration. Charing Cross Road is due to benefit from the planned opening of the Tottenham Court Road Crossrail station in Spring 2017 while London s Southbank is witnessing significant change with many occupiers being priced out of Central London or the West End. Outside London, regional markets have experienced strong rental growth for most of 2016, however this appears to have slowed recently with supply shortages easing in key markets and demand moderating. Overall, we believe our office portfolio is relatively well insulated from short term concerns surrounding the EU referendum and the potential impact on key financial areas in the City of London and Canary Wharf. The distribution and industrial sectors present opportunities for rental growth potential. Demand from occupiers is being supported by retailers requirements to create efficient distribution networks with increasingly diverse occupational demand. The sector is also starting to show signs of supply shortages in certain parts of the market. This has been experienced in our own portfolio, in particular Camino Park, Crawley where letting has been competitive and rents are showing clear signs of growth. Annualised Weighted gross EPRA average EPRA Market rental EPRA topped Reversionary lease voids UK Commercial as at value income ERV NIY up yield yield length (by ERV) Indexed 31 August 2016 ( m) ( m) ( m) (%) (%) (%) (yrs) (%) (%) UK Offices Greater London UK Offices Regional UK Offices UK Distribution and Industrial UK Automotive UK Commercial Key statistics 27.5m Annualised gross rental income Increased by 2.3% on previous passing rents 94.6% Occupancy by ERV Progress in filling voids in regional offices to 90.5% occupancy (+500bps) 6.1yrs WAULT Since acquisition, the UK Distribution and Industrial WAULT increased by 30% Strategic report Directors report Financial statements Other information

32 30 Redefine International P.L.C. Annual Report 2016 Strategic report Performance review UK Commercial continued Office Portfolio Leasing activity and rent reviews, particularly within the AUK portfolio, have been encouraging. Two rent reviews at Charing Cross Road, London, were agreed at more than 29 per cent above passing rents. The four regional offices acquired as part of the AUK portfolio had over 6,500 sqm (69,966 sqft), 19.9 per cent of vacant space on acquisition in October Since then, 1,040 sqm (11,195 sqft) have been let at Lochside View, Edinburgh at two per cent above ERV. A further 1,022 sqm (11,001 sqft) was let to Deutsche Leasing at the Omnibus Building in Reigate and we continue to make good progress on the remainder of the vacant regional office space. A pre planning application has been submitted for a significant development scheme at Charing Cross Road in London to add an additional seven floors, in line with surrounding schemes. This has the potential to add significant value to the asset in the medium term. Distribution and Industrial Portfolio Four lettings have been agreed which have increased the portfolio WAULT by over 30 per cent to 6.0 years. At Camino Park, Crawley, DFS has signed a 10 year lease on 2,537 sqm (27,306 sqft) at per sqft, a 15.5 per cent uplift to passing rent and 14.6 per cent above ERV. At Express Park, Bridgwater, Exel has agreed a lease extension until 2019 on 12,407 sqm (133,550 sqft) at 5.70 per sqft, 8.6 per cent above ERV. This reversionary portfolio is continuing to benefit from strong tenant enquiries which are expected to drive future rental growth in the short to medium term. Key statistics Case study Capital recycling Capital recycling is a fundamental part of our investment strategy, enabling the Company to realise value and reallocate capital to assets and sectors expected to support sustainable income led total returns. Our ability to recycle capital has been enhanced by the additional scale of the portfolio following the AUK acquisition, allowing a more active approach to repositioning our portfolio. Our disposal strategy is driven by our expectation of the future performance of our assets. We will consider the sale of assets where the price that can be achieved for an asset reflects a value higher than that targeted by the business plan on a risk adjusted basis. Sales may be opportunistic, strategic or to realise value following the completion of asset management initiatives. Strategic disposals As part of our strategy to enhance the quality of the portfolio, mature assets and assets in weaker locations will be considered for sale. During the year ten petrol filling stations were disposed of for 12.0 million, a six per cent premium to book value. Post year end, a government let office in Edgbaston was sold for 1.6 million, an 6.7 per cent premium to book value. In both cases, there were limited asset management opportunities and uncertainty surrounding long term income growth potential. Several smaller regional offices are being actively marketed in line with our strategy of improving the overall quality and growth potential within the portfolio. Creating value through active asset management The ability to enhance income and value through asset management is a fundamental part of our investment strategy. Where asset values have been maximised through reconfiguration, refurbishment or leasing activity, these assets will be considered for sale. A number of key asset management initiatives are anticipated to be delivered in 2017, including the reconfiguration of the existing high street retail units in Derby into a 28,800 sqft floor plate retail unit for an international discount fashion retailer. Once completed, these assets will be considered for sale. 216,829 Square metres Market evidence suggests rental uplifts of over 20% at Camino Park, Crawley 5.4% EPRA net initial yield 5.9% EPRA topped up yield and 6.4% reversionary yield 64 Total number of assets Over 68% by market value in Greater London, Big 6 UK cities and UK South East Realising value We are consistently looking to generate value through alternative uses, income led asset management or opportunistic sales. Opportunities to recycle capital through disposals of assets at attractive prices are considered on a risk adjusted basis taking into consideration future capital commitments, planning and letting risk. 16 Grosvenor Street, London which formed part of the AUK transaction, was sold prior to completion for 35.6 million. The sale realised an immediate 2.8 million profit without undertaking the planned refurbishment works and planning risk on the listed building. Exchange House, Watford was sold for 13.3 million post year end reflecting a 12.3 per cent premium to book value. The sale crystallised much of the potential value from a planned residential conversion without having to achieve planning and commit significant capital to the development. Capital generated from asset recycling will be reinvested into properties supported by strong property fundamentals and clearly identified opportunities. The recent AUK acquisition provided exposure to distribution and industrial assets in addition to well located retail parks, which are all experiencing strong occupational demand and limited supply.

33 Annual Report Strategic report Directors report Financial statements Other information City Point, Leeds

34 32 Redefine International P.L.C. Annual Report 2016 Strategic report Performance review UK Hotels Travelodge, Enfield

35 Annual Report Demand continues to outperform supply despite certain locations coming under short term supply led pressure. London witnessed a strong increase in supply during 2016 with approximately 7,000 rooms forecast to open by the end of the year with more than half of these within the limited service sector. Despite this, aggregate demand has outperformed supply albeit certain locations and segments have come under pressure as they adjust to new room openings. Underlying trading performance within the RedefineBDL managed portfolio was mixed. A number of the London based hotels experienced a strong start to the financial year which moderated during the second half, possibly as a result of weaker tourism following terrorist attacks in Paris and Brussels and the impact on business travel in the immediate period post the EU referendum result. Conversely, underlying trading performance at the Crowne Plaza, Reading and DoubleTree by Hilton, Edinburgh delivered strong growth. The RedefineBDL managed portfolio delivered EBITDA growth of 2.2 per cent on last year, highlighting the resilience of the portfolio and the London budget hotel market. There has been a significant depreciation in Sterling which is expected to support tourism. Recent economic indicators also suggest that the UK economy has performed ahead of expectations immediately after the EU referendum which should support improved trading. We believe that the outlook for limited service branded hotels remains supportive of income growth. Average daily rates and revenue per available room ( RevPAR ) in London are forecast, by PwC, to increase 2.2 per cent per annum and 2.3 per cent respectively by the end of The Enfield Travelodge extension was completed during the first half of the year adding 632 sqm (6,800 sqft) to the existing hotel. The extension increased the annual rent by 0.1 million to 0.7 million for the term of the lease until 2047 and will include RPI escalations. Extension works at the Holiday Inn Express, Southwark commenced in July 2016 and further extensions to other hotels are currently under consideration. The Company s 25.3 per cent stake in RedefineBDL, the largest independent hotel management company in the UK, produced distributable earnings of 1.7 million during the period, an increase of 183 per cent since last year, following the receipt of a non recurring termination fee of 1.1 million (our share). The Company s 15.5 per cent investment in International Hotel Properties Limited ( IHL ) had a market value of 7.9 million at year end. Our investment strategy in respect of IHL is to support the establishment of a focused hotel investment company with a wide investment remit that can leverage the RedefineBDL management platform. Annualised Weighted gross EPRA average EPRA Market rental EPRA topped Reversionary lease voids UK Hotels as at value income ERV NIY up yield yield length (by ERV) Indexed 31 August 2016 ( m) ( m) ( m) (%) (%) (%) (yrs) (%) (%) Greater London RBDL Portfolio Edinburgh, DoubleTree by Hilton RBDL Managed Hotels (1) London, Enfield Travelodge UK Hotels (1) Subject to annual review with reference to forecast EBITDA of the RBDL managed portfolio. Key statistics 15.0m Annualised gross rental income Over 1,000 rooms with further development opportunities 9 Total number of assets Eight in Greater London and one in Edinburgh 10.3yrs WAULT Strategic report Directors report Financial statements Other information

36 34 Redefine International P.L.C. Annual Report 2016 Strategic report Performance review Europe Schloss Strassen Center, Berlin

37 Annual Report Economic recovery in Germany is expected to continue in 2017, albeit slowly. Growth is forecast to exceed that of the wider Eurozone supported by improving employment figures and rising incomes. This trend is being reflected in improved year on year retail sales growth which stood at 2.6 per cent in June Demand from international retailers remained robust with the food and beverage sector also showing positive demand from operators. Investment market activity has remained strong, supported by a significant amount of investment capital and a relatively limited supply of good quality assets. Similar trends to those witnessed in the UK are becoming apparent including increased investment activity outside of the traditional Big 5 German cities as well as increased investment into logistics and alternative sectors. Occupancy, excluding space under development, remains high at 98.5 per cent (2015: 98.9 per cent). Post year end the only vacant unit in the Schloss Strassen Center, Berlin has been let to a national food operator which is strategically aimed at strengthening the food court and footfall through increased commuter traffic. The new 5,200 sqm (55,973 sqft) development at Ingolstadt is subject to a 1.5 million pre let agreement with Primark and is expected to complete in the first half of Asset management activity is focused on attracting improved footfall to the shopping centres, by improving the tenant mix and optimisation of space. Additionally, a number of smaller foodstore extensions are underway, providing attractive incremental returns with development yields averaging 8.3 per cent. These extensions are often accompanied by extensions to the lease term over the whole store providing enhanced income security. The potential redevelopment of Bahnhof Center, Altona, Hamburg, remains a significant long term opportunity to drive value and income growth from a strategic location undergoing extensive regeneration. In the area, several significant development schemes are underway to deliver approximately 10,000 new residential units. We are actively engaging with the local authority on redevelopment opportunities in support of the area s regeneration. Annualised Weighted gross EPRA average EPRA Market rental EPRA topped Reversionary lease voids Europe as at value income ERV NIY up yield yield length (by ERV) Indexed 31 August 2016 ( m) ( m) ( m) (%) (%) (%) (yrs) (%) (%) Shopping Centres Supermarkets and Retail Parks German Retail German Offices Europe Key statistics 22.8m Annualised gross rental income 98.5% Occupancy by ERV German shopping centres nearly fully occupied at 99.4% 6.5yrs WAULT Significant development opportunity in Hamburg over the medium term 186,061 Square metres 87 Total number of assets Including three shopping centres in Berlin, Hamburg and Ingolstadt 5.6% EPRA net initial yield Strategic report Directors report Financial statements Other information

38 36 Redefine International P.L.C. Annual Report 2016 Strategic report Financial review A transformational year, delivering solid earnings and market leading income returns for our shareholders. With a strengthened balance sheet and portfolio, we have put in place a platform for future growth. Highlights Distributable earnings 52.2m +18% 2015: 44.4m Portfolio valuation increase 3.4% like for like 2015: 2.2% EPRA cost ratio 14.9% 2015: 15.3% excluding direct vacancy costs Donald Grant Chief Financial Officer Overview The first half of the year was characterised by the transformational Aegon UK ( AUK ) portfolio acquisition. The portfolio was acquired in two tranches with the first completing in October The second tranche completed on 1 March 2016 following a million equity raise through the placement of million ordinary shares at a placing price of 42.5 pence per share. The Group s property portfolio is now valued in excess of 1.5 billion. The result of the UK s referendum on membership of the European Union in June was a surprise for many in both the UK and elsewhere. Sterling came under pressure, weakening 14.0 per cent against the Euro across the twelve months to August. It is clear that business confidence has fallen since the referendum, with a noticeable decline in transactional activity across all sectors in which we invest. A number of debt facilities were refinanced during the second half of the year. Specifically, a 67.5 million facility secured against the Schloss Strassen Center, Berlin, Germany and 31.6 million within the UK Commercial portfolio (including the Enfield Travelodge). In total, 0.2 million was incurred as a cost of terminating existing facilities. In addition, the 38.1 million facility secured on St. George s, Harrow, which was due to mature this year, has been extended to In late August, the Group disposed of its final non core legacy asset, The Justice Centre in The Hague, Netherlands. As the asset was non recourse, the negative equity position has now been removed from EPRA NAV and it is no longer necessary to report an adjusted measure. LTV has increased marginally year on year to 53.4 per cent, primarily as a result of deploying cash reserves held at the prior year end. The weighted average cost of debt has fallen to 3.4 per cent following refinancing with further reduction expected as a result of post year end activity. The facility supporting the AUK acquisition includes a five year million revolving credit facility, a first for the Group, providing the means for more efficient use of cash and greater financial flexibility. AUK portfolio acquisition The AUK portfolio comprised 20 properties at an initial market value of million. On 7 September 2015, the Group completed the acquisition of the first of these properties, Banbury Cross Retail Park at a purchase price of 52.5 million and conditionally exchanged contracts for the acquisition of the remaining 19 properties. Banbury Cross Retail Park was funded entirely from existing cash resources and generates gross annual income of 3.8 million.

39 Annual Report Due to the nature and size of the transaction, shareholder approval was sought for the acquisition of the remaining properties. Shareholders approved the transaction at an Extraordinary General Meeting on 25 September 2015, at which point the contract became unconditional and the significant risks and rewards of ownership transferred. As agreed with the vendor, the remaining properties were scheduled to complete in two tranches, the first of which comprised nine properties, completed on 2 October 2015 at a purchase price of million. This was funded by both existing cash resources and million drawn against a new million facility which had been secured from a syndicate of four UK banks at an initial margin of 2.1 per cent. The facility comprises a million term facility and a million revolving credit facility. The nine properties acquired on this date generate gross annual income of 13.5 million. On 21 December 2015, the Group announced it had exchanged contracts to sell 16 Grosvenor Street, Mayfair which formed part of the second tranche of the remaining ten properties. The property was sold for 35.6 million realising an immediate profit for the Group of 2.8 million (including costs). On 1 March 2016 the last nine properties were acquired at a purchase price of million. The properties were funded by the proceeds of the February 2016 equity raise and the drawing of 97.0 million from the revolving credit facility referred to above. Following the completion of tranche two, the margin payable on the combined facility reduced to 1.9 per cent. The AUK portfolio was acquired for million and was valued at million at 31 August Acquisition costs of 22.6 million, predominantly SDLT, amounted to 4.9 per cent of the purchase price paid. Basis of presentation Internally the Board focuses on and reviews information and reports prepared on a proportionately consolidated basis, which includes the Group s share of joint ventures. To align with how the Group is managed, this review of performance and position is presented on this basis. Income statement In addition to EPRA earnings, the Group presents an underlying calculation of earnings. The Directors consider that this presentation provides useful information as it removes certain exceptional items and fair value adjustments and better reflects the recurring performance of the business. EPRA earnings decreased by 31.5 per cent to 44.1 million or 2.7 pence per share (2015: 4.7 pence) primarily as a result of the non recurring gain recorded on extinguishment of debt in the Delta portfolio during the prior year. Following the AUK acquisition, underlying earnings increased by 11.3 per cent to 49.4 million. The inclusion of a 2.8 million non recurring profit on disposal of 16 Grosvenor Street, Mayfair contributed to a 17.6 per cent increase in distributable earnings compared to The inclusion of this opportunistic profit goes some way towards normalising distributable earnings for the year for the impact of the phased completion of the AUK portfolio. On a per share basis, overall distributable earnings remain unchanged at 3.2 pence per share. 31 August August 2015 Joint Group Joint Group Presented on a proportionately IFRS Ventures Total IFRS Ventures Total consolidated basis m m m m m m Rental income Rental expense (6.2) (1.1) (7.3) (5.3) (0.7) (6.0) Net rental income Other income Administrative costs and other fees (10.9) (0.5) (11.4) (11.1) (0.3) (11.4) Net operating income Investment income Net finance expense (26.4) (6.7) (33.1) (24.0) (6.7) (30.7) Other finance expense (1.9) (0.1) (2.0) (3.6) (3.6) Gain on disposal of investment property Gain on disposal of subsidiary (The Hague) Fair value (loss)/gain on property (42.5) 1.3 (41.2) Fair value movement on derivatives (11.1) (1.7) (12.8) Foreign exchange gain Gain on extinguishment of debt Loss on disposal of Cromwell (17.6) (17.6) Tax, NCI and other 1.0 (1.8) (0.8) (13.7) (0.1) (13.8) IFRS profit attributable to shareholders Adjustments: Gain on disposal of investment property (3.2) Gain on disposal of subsidiary (The Hague) (12.2) Fair value loss/(gain) on property 41.2 (33.6) Tax on disposals (1.4) 3.2 Fair value movement on derivatives 12.8 (0.9) Derivative termination charges Loss on disposal of Cromwell 17.6 Tax, NCI and other (1.2) 6.4 EPRA earnings Company adjustments: Debt fair value adjustments Exceptional finance costs Gain on extinguishment of debt (29.8) Tax, NCI and other Underlying earnings Profit on disposal of 16 Grosvenor Street (non recurring) 2.8 Distributable earnings Weighted average ordinary shares in issue (millions) 1, ,383.3 Distributable earnings per share (pence) EPRA earnings per share (pence) Strategic report Directors report Financial statements Other information

40 38 Redefine International P.L.C. Annual Report 2016 Strategic report Financial review continued Gross rental income by segment is analysed below to illustrate the change in like for like income over the year. This analysis does not include AUK as these properties were not held in Considering just those that are comparable, like for like income increased by one per cent compared to Removing the impact of Euro denominated income which is benefiting from Sterling s weakness, like for like income has remained relatively flat. Gross income of 30.6 million was generated from acquisitions during the period, of which 21.0 million arises from the AUK portfolio. The increase in net rental income year on year should to be considered alongside the decrease in investment income. This results from recycling capital from the sale of the Australian listed security, Cromwell, into the first tranche of the AUK portfolio. Investment income now represents dividends received from the Group s 15.5% interest in International Hotel Properties Limited (previously International Hotel Group Limited). Other income includes management and consulting fees and can be expected to be recurring. Administrative costs have remained in line with the prior year. These are likely to increase marginally as the enlarged portfolio is we fully integrated. Net finance costs have declined relative to drawn debt as a result of a 50 basis point reduction in the weighted average cost of debt over the year. In absolute terms, finance costs increased following the AUK acquisition. Other finance costs include 1.5 million due to Aviva under the profit share arrangement in respect of the Grand Arcade, Wigan and 0.4 million incurred on early termination of facility and derivative contracts. Gains on disposal of investment property of 3.2 million arose following the sale of ten petrol filling stations in February 2016 and an early opportunity to realise value from within the AUK portfolio in December 2015 when 16 Grosvenor Street was sold pre completion. Gross rental Gross rental income income Local 31 August 31 August currency Presented on a proportionately Change change consolidated basis m m % % UK Retail (1.2) (1.2) UK Commercial UK Hotels UK Total Europe (1.7) Like for like gross rental income Acquisitions Disposals Development Total gross rental income Balance sheet EPRA adjusted, diluted net assets per share ( EPRA NAV ) decreased by 2.4 per cent to 40.0 pence (2015: 41.0 pence). Valuation losses of 41.2 million (including 22.6 million of acquisition costs incurred on the AUK transaction) have reduced EPRA NAV by 2.5 pence per share. This is offset by currency translation gains recorded on the Group s net investment in Europe and release of non recourse debt following the disposal of The Hague. Underlying earnings of 3.2 pence per share have been matched by the two dividend payments during the year. In February 2016, the Group completed the placing of million ordinary shares at a placing price of 42.5 pence per share (a 1.9 per cent premium to the 31 August 2015 net asset value) raising gross proceeds of million. Placing costs totalling 5.9 million included 2.5 million paid to Redefine Properties Limited, the Company s largest shareholder, for underwriting 70.0 million of the equity raise. Redefine Properties Limited subscribed for 34.6 million of the gross equity raised, maintaining its 30.07% shareholding. The capital raise generated net proceeds of million and completed on 23 February August August 2015 Joint Group Joint Group Presented on a proportionately IFRS ventures total IFRS ventures total consolidated basis m m m m m m Investment Property 1, , ,055.9 Net debt (733.6) (74.5) (808.1) (466.3) (65.8) (532.1) Cromwell and Swiss sale proceeds due Other assets and liabilities 37.0 (66.4) (29.4) 27.3 (55.7) (28.4) IFRS NAV Fair value of derivatives Deferred tax EPRA NAV Per share disclosure Fully diluted number of ordinary shares outstanding (million) 1, ,475.9 EPRA NAV per share (pence) Non recourse negative equity (pence) (1) 0.7 Adjusted NAV per share (pence) (1) As a result of the non recourse nature of the debt relating to The Justice Centre in The Hague, Netherlands, a negative equity position of 0.7 pence per share was adjusted for to arrive at an adjusted NAV measure in The property was disposed of in August 2016.

41 Annual Report Investment property On a like for like basis the Group s property portfolio increased in value by 3.4 per cent in the year to 31 August The UK portfolio experienced a decline of 1.9 per cent during the year, primarily in the second half as a result of the one per cent increase in SDLT and the significant uncertainty following the EU referendum. As has been the case since the start of 2015, the retail investment market continues to underperform other real estate sectors with IPD suggesting a five per cent decline in capital values in the second half of the year alone, four per cent in the three months since the EU referendum. The Group s commercial portfolio continues to benefit from well located offices, particularly in London, with a like for like increase in excess of 9 per cent recorded for the year. The November 2015 terrorist atrocities in Paris impacted UK Hotels with a considerable softening in occupancy rates from late November until February. Although occupancy has steadily recovered during the latter part of the year, revenue achieved per room continued to underperform expectations through the final quarter. Looking forward, a weaker Pound is expected to boost UK tourism into the new year. European valuations showed modest growth in underlying currency terms. Sterling s weakness in 2016 has reversed the losses recorded on the European portfolio in the prior year with the portfolio value increase almost 17 per cent. Acquisitions represent the AUK portfolio, while disposals comprise the ten petrol filling stations sold in February and The Justice Centre in the The Hague, disposed of in late August. Market value Market value Local 31 August 31 August Valuation (1) Valuation (1) currency Presented on a proportionately Gain/(loss) Gain/(loss) Gain/(loss) consolidated basis m m m % % UK Retail (15.5) (4.4) (4.4) UK Commercial UK Hotels (7.3) (3.1) (3.1) UK Total (13.7) (1.9) (1.9) Europe Like for like property portfolio 1, , Acquisitions Disposals 15.9 Total property portfolio 1, ,044.6 (1) Valuation includes the effect of capital expenditure, amortisation of head leases, lease incentives and foreign currency translation where applicable. Debt and Gearing The Group has had a particularly active year on the financing front through capital recycling, facility refinancing and extensions while capitalising on the prevailing favourable interest rate environment. Over 160 million has been repaid, prepaid or extended across six different facilities, including the Swiss and Australian facilities repaid early this financial year. The Group s weighted average cost of debt decreased to 3.4 per cent from 3.9 per cent in the previous year, a significant saving on recurring finance costs. Interest cover stands at 270 per cent, up from 230 per cent in 2015 while the weighted average debt maturity is just below seven years. The next significant refinancing is not now due until Group loan to value has increased marginally to 53.4 per cent, outside our target range of per cent. As we become more active in recycling capital from assets that have met their business plans and do not provide continued opportunity to deliver sustainable income, we expect to see capital reinvestment occurring at lower initial LTVs. The Group utilises derivative instruments, including interest rate swaps and interest rate caps, to manage its interest rate exposure. At 31 August 2016, the net fair value liability of the Group s share of derivative financial instruments was 12.4 million (2015: 4.5 million). Our hedging policy requires at least 75 per cent of all interest rate exposures exceeding one year to be on a fixed or capped rate basis. For facilities with interest rate swaps or caps attached, the interest rates are fixed or capped for the duration of the facility. The changes in the fair value of the Group s hedging instruments have been recognised in the income statement. Strategic report Directors report Financial statements Other information Charing Cross Road, London

42 40 Redefine International P.L.C. Annual Report 2016 Strategic report Financial review continued Key financing statistics 31 August 31 August Presented on a proportionately consolidated basis m m Nominal value of drawn debt Cash and short term deposits (34.3) (95.9) Net debt Property portfolio at market value 1, ,044.6 Loan to value (%) Weighted average debt maturity (years) Weighted average interest rate (%) Interest cover (times) (1) Debt with interest rate protection (%) (1) Net rental income divided by net finance cost Cash flow Cash flow from operating activities increased 4.0 million to 39.6 million for the year. Investing activities were characterised by the AUK acquisition ( million including costs). This was offset by proceeds from the sale of Cromwell, the Swiss portfolio, ten petrol filling stations and 16 Grosvenor Street ( million). Financing activities generated million, mainly the result of the equity placement (net proceeds of million) and borrowings drawn to finance the AUK acquisition of million. These inflows were offset by net debt repayments and prepayments totalling 54.2 million and dividends paid of 29.4 million. Cash at 31 August 2016 was 32.0 million ( 34.3 million when including the Group s share of joint ventures), with a further 23.0 million available within undrawn committed facilities. Going concern At 31 August 2016 the Group s cash and undrawn committed facilities were 57.3 million and its capital commitments were 15.8 million. Weighted average debt maturity of 6.9 years and LTV of 53.4 per cent provide sufficient headroom against financial covenants. Attention is also drawn to the viability statement contained within the Group s Principal Risk disclosures. After considering severe but plausible scenarios, the Directors are satisfied that there continues to be a reasonable expectation that the Group will have the resources it requires to meet on going and future commitments. Accordingly, the 2016 consolidated financial statements have been prepared on a going concern basis. Dividends The Directors have declared a second interim dividend for the year of pence per share making the total dividend paid and payable in respect of the year to 3.2 pence per share. This reflects an annualised yield of 8.0 per cent on EPRA NAV, 7.3 per cent based on the Group s share price at 31 August The Company is again offering shareholders the option of receiving a cash dividend or a scrip dividend by way of the issue of new Redefine International P.L.C shares. Full details including the tax components of the dividend and the timetable have been announced separately today. The dividend payment date is set for 12 December 2016 to shareholders on the register at 18 November In respect of the first interim dividend for the period ended 29 February 2016 which was paid to shareholders in June, the scrip take up was 51.4 per cent resulting in a cash saving of 12.5 million net of withholding taxes paid. Donald Grant Chief Financial Officer 27 October 2016

43 Annual Report EPRA performance measures Measure Definition of measure Earnings Earnings from operational activity 44.1m 64.4m Net asset value NAV adjusted for investments held at fair value and excluding items not expected to be realised 717.4m 604.9m Triple net asset value EPRA NAV adjusted to include fair value of financial instruments, debt and deferred taxes 657.4m 598.0m Net initial yield Annualised income based on passing rent less non recoverable operating expenses expressed as a percentage of the market value of property 5.8% 6.3% Topped up initial yield Net initial yield adjusted for the expiration of rent free periods or other incentives 6.1% 6.9% Vacancy rate Estimated rental value of vacant space divided by that of the portfolio as a whole 2.3% 2.5% Cost ratio (incl. direct vacancy costs) Administrative and operating costs expressed as a percentage of gross rental income 17.4% 18.3% Cost ratio (excl. direct vacancy costs) Administrative and operating costs expressed as a percentage of gross rental income 14.9% 15.3% EPRA capital expenditure analysis Joint Group IFRS ventures Total 31 August 2016 m m m Capitalised acquisition costs (1) Capital expenditure on like for like portfolio (2) Capital expenditure Joint Group IFRS Ventures Total 31 August 2015 m m m Capitalised acquisition costs Capital expenditure on like for like portfolio Capital expenditure (1) Acquisition costs Acquisition costs on the newly acquired AUK portfolio amounted to 22.6 million (primarily SDLT). Prior year acquisition costs relate to the purchase of the Leopard joint venture portfolio in January (2) Capital expenditure on the like for like portfolio includes; 2.0 million (31 August 2015: 2.2 million) expenditure on the phased redevelopment to modernise Weston Favell Shopping Centre, Northampton which was completed during the year. 1.0 million spend on the 632 sqm (6,800 sqft) extension to the Travelodge Hotel, Enfield and 0.7 million on the ongoing 12 room extension of the Holiday Inn Express, Southwark. 2.5 million (31 August 2015: 0.6 million) expenditure on the 5,200 sqm (56,000 sqft) redevelopment of the existing shopping centre in Ingolstadt, Germany. Prior year joint venture capital expenditure consisted of 0.7m subsequent expenditure on the newly acquired Leopard joint venture properties. Strategic report Directors report Financial statements Other information

44 42 Redefine International P.L.C. Annual Report 2016 Strategic report Corporate social responsibility

45 Annual Report As local property owners, we understand that our responsibility to our communities extends beyond our employees and investments. We value our relationships with all our stakeholders including customers, communities, partners, employees and shareholders. Recognition of our success includes winning two prestigious industry CSR awards, a fantastic achievement and a testament to the importance our team places on CSR. Mike Watters Chief Executive Officer and Chairman of the CSR Committee Key achievements in the year 100% RISK FREE EPC STRATEGY Following Phase one Minimum Energy Efficiency Standards review Read more on page 46 50% of our Shopping Centres now on Green Energy Tariffs Year on year UK electricity reduction of 1% with further savings likely from continued investment in LED lighting across our retail portfolio Read more on page 47 96% of our staff are either satisfied or very satisfied with their role at Redefine International Read more on page % of waste was diverted from landfill from 1 September 2015 to 31 August 2016 Read more on page % Overall GRESB score improvement compared to previous year and Two Star GRESB rating Redefine International s Weston Favell shopping centre wins CSR award at the BCSC Purple Apple Marketing Awards Read more on page 46 Absolute portfolio carbon footprint reduced by 4% Read more on page 44 Weston Favell s Movie Hub picks up its second CSR award at the ICSC Solal Marketing Awards in Berlin Read more on page 46 4% Redefine International participated fully in GRESB for the first time in 2016, completing a full disclosure of actions relating to sustainability activities undertaken for the period April 2015 to March The Global Real Estate Sustainability Benchmark ( GRESB ) assessment is used to review the performance of real estate asset management against a wide range of corporate and social responsibility ( CSR ) issues and demonstrates Redefine International s forward looking approach to CSR. The Company was awarded a two star GRESB rating for the period, with the overall GRESB score improving by an impressive 65% compared to the trial period of This is a significant achievement and a testament to the business s corporate social responsibility initiatives implemented in the past 12 months. Going forward, the Company will remain committed to maintaining its participation in GRESB, which has become a key tool for benchmarking and assists in planning for continued sustainability performance improvement. Key objectives and initiatives have been set for 2017 to deliver continued growth in sustainability, in line with the Company s CSR strategic framework. Strategic report Directors report Financial statements Other information

46 44 Redefine International P.L.C. Annual Report 2016 Strategic report Corporate social responsibility continued Resilient governance We will uphold the highest standards in ethical behaviour and support our workforce. We seek to operate in a manner that fosters open stakeholder engagement and demonstrates best practice in social and environmental risk management. Resilient governance Resilient investment Resilient investment We undertake to realise the full potential of our investments for both our shareholders and the communities in which we operate. Resilient assets Resilient assets We are mindful of our wider role as placemakers and we aim to contribute to the long term prosperity of the communities in which we invest. In doing so, we will undertake asset management which minimises risk and maximises asset value whilst providing the best experience possible for occupiers and visitors alike. Gender split across the Group 221 Employees WOMEN 9 Senior management WOMEN MEN MEN Men 65% Women 35% Men 56% Women 44% CSR strategy At Redefine International, CSR means understanding and actively managing the social and environmental risks and opportunities that can impact on income growth and net asset value, whilst also taking account of the Company s responsibilities towards stakeholders, in particular investors and shareholders, employees, the businesses with which we work and the communities in which we operate. The CSR Committee, which comprises three of the four Executive Directors and is attended by our CSR advisers, asset managers and the Company Secretary, was formed in 2014 to establish and implement a formal CSR strategy for the Company. The strategy seeks to ensure that our governance and risk management framework, together with our investment and asset strategy, continue to be resilient to the ever changing economic, social and environmental landscape and sets out a series of actions in the form of a CSR roadmap targeting both short and medium term strategic objectives. The CSR Committee implements the strategy using targets and carefully selected KPIs to measure progress, with various individuals within the business responsible for the day to day management of those targets. The CSR Committee meets regularly to review progress against the CSR roadmap, review environmental performance data and receive updates on UK and German CSR related legislation. During 2016 the Company has made several achievements, the most notable being: a significant increase in score, up 65 per cent on prior year trial period results, from our participation in the Global Real Estate Sustainability Benchmark ( GRESB ) survey; a four per cent absolute reduction in carbon emissions within the overall portfolio year on year, a significant achievement; a one per cent reduction in year on year electricity consumption at 18 of our UK based properties; systematic capture and reporting of environmental performance data for the UK and Germany; and appointment of a dedicated Group Health & Safety Manager.

47 Annual Report Resilient governance Approach Redefine International seeks to operate efficient processes and procedures that demonstrate social and environmental risk management, and foster open stakeholder engagement. The Group will also continue to uphold the highest standards of ethical behaviour and actively support our workforce. The Group s approach to maintaining these commitments include: complying with all applicable regulation and preparing for anticipated future regulation, and its implications; providing confidence to stakeholders of our sound management of CSR risks through our ongoing participation in the most prominent industry benchmark survey, the Global Real Estate Sustainability Benchmark ( GRESB ); ensuring employees receive appropriate training on social and environmental issues, and providing bespoke training on sustainability topics to those that require it; maintaining best practice in health and safety management to the benefit of tenants, contractors, customers and employees; appointing first class sustainability advisers to provide leadership and guidance on sustainability across the business; operating a robust data management system to ensure our disclosure and reporting is accurate; and fostering a culture of openness. With respect to our employees, the Group will: ensure that no applicant or employee is discriminated against either directly or indirectly; treat all employees, prospective employees, agents, contractors, tenants, and suppliers fairly and equally, regardless of their gender, age, race, sexuality or disability; promote staff training and development with a focus on fostering innovation; seek to diversify our workforce to support the nature of the Company s operations or the communities in which we operate, whilst maintaining our responsibility to select the best candidate; recognise our social and moral duty to offer opportunities to people with disabilities and doing all that is practicable to meet their needs; uphold our commitments under our Code of Ethics which promotes honesty and integrity in business dealings and conduct commensurate with an organisation of our size. Any breaches will lead to disciplinary proceedings and, if appropriate, disciplinary action; and all employees are provided with a handbook outlining the Company s key policies, which are designed to encourage a pleasant working environment, free from discrimination, undue stress or bullying. The Company recognises, respects and upholds all UK employment rights and human rights. Performance Solid progress was made during 2016 in relation to CSR governance. We recognise the importance of staying ahead of regulatory changes. The Company has therefore spent considerable time during 2016 compiling EPC data ahead of the Minimum Energy Efficiency Standards ( MEES ) regulations to identify and address those units where ratings had not been collected together with addressing those with F and G ratings. We have also conducted the Group s Energy Savings Opportunity Scheme ( ESOS ) assessment. Redefine International submitted its first fully participating response to the GRESB survey in We re extremely pleased to report a 65 per cent increase in the overall score achieved. Notwithstanding the work that still needs to be completed, this is a great result and demonstrates our commitment to sustainability in what we do and positions the Company well for the future. All employees and Directors received training on CSR issues during 2015 with training in 2016 being limited to new employees at our Shopping Centres. Training for all staff is scheduled to occur again during Redefine International is pleased to have appointed a Group Health & Safety Manager during the year whose role it is to provide guidance and support to tenants, contractors, customers and employees alike. During the year the Group changed its CSR advisers from Jones Lang LaSalle to Savills. Savills are the dominant property manager assigned to the Group s UK portfolio therefore it made sound commercial sense to combine the two from the perspective of efficient data management and reporting. The CSR Committee were extremely impressed with the high level of competency demonstrated by the Savills sustainability team who were appointed in March. Employees and diversity The Committee extends its sincere thanks to Jones Lang LaSalle for their support in development of the Group s CSR strategy and framework. The Group continues to reap the benefits of an environmental data reporting system which is able to collect and analyse quarterly performance data from a growing portfolio. The Company has met our obligations under the CRC Energy Efficiency Scheme with allowances purchased to cover 2016 emissions of 8,590 tonnes of CO 2 at a cost of 145,171. Redefine International is committed to maintaining its culture of openness and transparency. Team spirit is fostered through regular meetings and team building days to encourage the different departments to work together and for staff to discuss matters with the executives on an informal basis. As the Company expands, and the number of employees and responsibilities increase, the Board committees have ensured that the necessary internal controls have been implemented, and that executives and employees remain well rewarded. The Board recognises the importance of culture and providing a good working environment to attract and retain high calibre staff. To this end, a survey was undertaken during the year to ascertain whether employees felt valued and motivated. The Board was pleased that there was a positive response to the survey and it was noted that analysts regard Redefine International to have a high quality management team, that boasts one of the best net cost per head rates in the sector. The Company has sought to extend diversity within the Group. Board diversity is unchanged during the year and is being considered by the Nominations Committee. Diversity at senior management level has improved with the appointment of a female Head of Investor Relations during the year. Employee turnover has remained relatively high as in the previous year but in line with the pace of change the Group continues to experience. All employees are based in the UK or Germany, where there are few human rights issues. No human rights concerns or whistle blowing reports were received from employees during the year. Total (1) Men % (1) Women % (1) Board non executives 7 (7) 6 86 (86) 1 14 (14) Board executives 4 (4) (100) ( ) Senior management 9 (8) 5 62 (62) 4 40 (38) Other employees 207 (200) (65) (35) Total 227 (219) (67) (33) All employees working part time (2) 43 (45) All employee leavers (total) (2) 33 (24) (1) Figures for 2015 are shown in brackets. (2) All employees excludes Board non executives. Strategic report Directors report Financial statements Other information

48 46 Redefine International P.L.C. Annual Report 2016 Strategic report Corporate social responsibility continued Resilient investment Approach Redefine International seeks to implement an effective investment strategy that realises the full potential of our investments for both our shareholders and the communities in which we operate throughout the investment life cycle. The Group will achieve this by: identifying investment risks during acquisition due diligence and identifying opportunities to add value; considering the social and environmental performance of our assets; and monitoring and measuring our resource consumption to identify efficiencies, particularly relating to energy and reduce our carbon footprint and the operational costs for our tenants. Performance We have continued to take important steps in the deployment of our resilient investment strategy. Asset managers and agents have been given guidance to ensure social and environmental credentials are incorporated into sales and letting materials where available. The Group continues to progress the development and implementation of formalised jurisdiction specific acquisition checklists that include environmental and social criteria such as liabilities related to carbon and energy regulations and costs, energy labels and ratings, building certifications and flood risk. The Group continues to implement its phased roll out of LED lighting across our UK Retail portfolios. To date this has enabled an approximate 65 per cent reduction of power consumption and we will soon be able to calculate the further impact of this programme in terms of energy efficiency improvements and carbon emission reductions during The Group has completed the process of identifying metrics for each asset type that can be used to track and communicate improvements to rental income or capital value achieved because of environmental or social improvement measures. Asset specific examples of situations where CSR initiatives have resulted in both financial and social and environmental benefits, such as: St. George s Shopping Centre, Harrow: replaced all lighting in the common parts of the Mall from PL C compact fluorescent lighting to LED achieving a saving of 45,450kWh per year cutting maintenance costs on tube and lamp replacement by 90 per cent and reducing CO 2 emissions by 18,728kg per year. The planned car park LED replacement programme incorporating dimming functionality to 20 per cent when car bays are not in use should reduce the overall consumption by a further 5 per cent; and Grand Arcade Shopping Centre, Wigan: implemented an LED lighting retrofit programme which reduces energy consumption and has enabled cost savings of around 20,000 per year with a payback of less than 12 months. This is 85 per cent complete. Resilient assets Approach Redefine International will undertake asset management which maximises net asset value whilst providing the best experience possible for occupiers and visitors alike. Redefine International will uphold this commitment by: engaging with and contributing to charitable and community initiatives on an ongoing basis; engaging with local authorities and supporting their community campaigns; collaborating with tenants to conceive and promote joint community projects; understanding, enhancing and promoting the Group s role as a placemaker, with a focus on creating and maintaining prosperous communities in the local areas where we invest; ensuring key environmental and social risks are well managed when the Group is undertaking development activities and throughout the management of our portfolio; and engaging with tenants to better respond to their needs and position ourselves to anticipate future requirements. Performance Redefine International has continued to refine its procedures to manage environmental risks, reduce cost and future proof its assets across the portfolio. Specifically: the creation of an asset management working group; to ensure lessons learnt were discussed and best practice disseminated amongst the growing team. continued participation in the GRESB assessment process; completed an EPC risk review of the UK portfolio (see below); active participation in the CSR event Green Fest (see case study which follows); in each of our Shopping Centres, our customers have nominated a local charity of their choice which will benefit from all charitable activities undertaken at each Centre fostering a great community spirit; through the BCSC (now REVO, formerly the British Council for Shopping Centres); Redefine International won the Purple Apple award for marketing in relation to its CSR strategy and progress made; Weston Favell Shopping Centre s movie hub initiative won gold at the International Council of Shopping Centres European Marketing Awards. The Movie Hub initiative gave 400 local kids the opportunity to work on the preproduction of a feature film at the first operational film studio located in a UK shopping centre; and our tenant satisfaction survey, which incorporates sustainability and social responsibility issues, has been developed and will be carried out during Energy Performance Certification (EPC) risk Redefine International s exposure to risk from the forthcoming MEES legislation has been thoroughly reviewed for the UK portfolio with a view to identifying and integrating applicable EPC improvement measures into asset business plans ahead of legislative deadlines. Addressing the MEES risk is viewed as a necessary pro active step to take, and balances sustainability with regulation and stakeholders interests alike.

49 Annual Report Performance data Since November 2014, Redefine International has been completing a formal property level environmental performance data collection and reporting process. This year s results are shown below. Energy consumption 2015 v 2016 Total energy consumption (MWh) Water consumption ( 000m 3 ) Scope 1 and 2 emissions (tco 2 e) 25,000 20,000 15,000 10,000 5,000 0 Natural gas Electricity District steam Germany UK Total water consumption 2015 v Retail 70 Office Germany UK Total waste arising 2015 v 2016 % of asset waste by disposal route UK carbon footprint 2015 v ,000 8,000 6,000 4,000 2, % 96.85% 37.02% 62.98% 3.13% Germany UK 2015 Refuse Derived Fuel UK 99.9% 93.9% 5.8% Germany UK 2016 Recycling facility Incineration facility (with energy recovery) Retail Office Hotel During the year, the18 UK based properties which we are able to include in the like for like portfolio analysis led to a two per cent increase in energy consumption. Electricity consumption was found to have decreased in the UK portfolio by one per cent, with a rise in gas consumption being the main contributor to the overall increase. From 2015 to 2016, German based properties collectively achieved a five per cent reduction in energy use. Energy consumption was found to have decreased at three out of the six properties that we can report data from within our German portfolio. At these properties, electricity consumption in particular decreased by 14 per cent, while use of district steam decreased by one per cent. During the year, two German based properties and seven UK based properties, which are included in the like for like portfolio analysis are collectively responsible for a three per cent increase in water consumption. However, at asset level, water usage was found to have decreased at three of the nine sites reporting data, with the most significant reduction (1,506m 3, representing a circa 40 per cent decrease) achieved at our UK Office in Chatham, The Observatory. The German based properties collectively achieved a five per cent reduction in water consumption, while UK based properties were collectively responsible for a ten per cent increase. Comparative analysis undertaken on available waste data for our German assets has shown that 99.9% of waste has been incinerated at a waste to energy facility, whilst the small remainder is processed separately as either compost or recycled waste. The seven UK assets reporting waste data, achieved a rate of 93.9 per cent for waste recycled to Refuse Derived Fuel. Of the remainder, 5.8 per cent of the waste was sent to a recycling facility with the balance split between waste sent to an Incineration Facility (with energy recovery) and waste sent to an Off site Materials Recovery Facility. Across the board 100% of waste was diverted from landfill between 1 September 2015 and 31 August Waste data on the portfolio is limited, but improving and over the coming year, we target an increase in portfolio coverage. During the year, total carbon emissions generated from UK assets in the like for like portfolio rose by five per cent to 8,055 tonnes of CO 2 e on an absolute basis. The largest increase occurred in the hotel sector where properties collectively increased emissions by 538 tonnes of CO 2 e, representing a 15 per cent increase. The UK retail sector has however achieved a healthy carbon emissions reduction against the prior year. Strategic report Directors report Financial statements Other information

50 48 Redefine International P.L.C. Annual Report 2016 Strategic report Corporate social responsibility continued Case study Green Fest In June 2016, Redefine International s UK shopping centres hosted Green Fest, a festival of green themed activities and the very first group wide CSR campaign. The objective of Green Fest was to showcase the efforts taken by the centres and their teams to positively impact the communities in which Redefine International invests both environmentally and socially and to encourage shoppers to be more aware of the environmental repercussions of their actions, both locally and globally. The six shopping centres, Birchwood, Byron Place, Grand Arcade, St. George s, West Orchards and Weston Favell, launched Green Fest with the unveiling of their Green Walls, dedicated areas in each centre promoting the environmental and community focused achievements of each centre. The Green Walls included interesting facts and figures regarding energy usage, waste management and water consumption relating to each centre and case studies from local initiatives. Green Fest activities varied from centre to centre throughout the four day festival and included Green Heroes engaging with shoppers to explain the concept of Green Fest and to encourage them to be more environmentally friendly in their day to day lives. Other activities included pledge boards, where shoppers signed up to make small changes with a big impact on the environment; a plastic bag amnesty where shoppers were asked to swap their carrier bags for reusable cotton shopping bags; recycling bins were transformed with basketball hoops and targets to encourage shoppers to use them; and creative workshops were held where children were shown how to upcycle materials into fun crafts. Shoppers were encouraged to generate electricity by using specially adapted exercise equipment in order to charge their mobile phones and make delicious fruit smoothies a great way to demonstrate how much energy is needed to undertake simple tasks. All non essential lighting, heating and automatic doors were switched off for the duration of Green Fest. Escalators were turned off in some locations with shoppers encouraged to take the stairs, which was surprisingly well supported. These actions alone achieved a great result with a 4.1 per cent energy saving across the portfolio compared to an average four day period, with two centres achieving an impressive 15 per cent reduction in consumption. Green Fest attracted over 10,000 of PR coverage and resulted in almost 5,000 shoppers making an environmental pledge during the festival and 88 per cent of participants stating that they would make an extra effort to be more green after attending the event. The Green Walls received such a positive response from both shoppers and retailers that they will remain a permanent feature within each centre and will be updated regularly. Green Fest was considered a huge success by all involved, and has provided a solid platform for the UK Retail portfolio to continue in its quest to lead Redefine International s resilient assets strategy going forward. Young shopper making an environmental pledge at Birchwood Shopping Centre, Warrington Local school children with personalised reusable shopping bags at Byron Place shopping centre Shoppers create their own energy through pedal power at Weston Favell Shopping Centre

51 Annual Report Strategic report Directors report Financial statements Other information

52 50 Redefine International P.L.C. Annual Report 2016 Strategic report Corporate social responsibility continued Mandatory GHG emissions reporting table Direct greenhouse gas emissions in tonnes of CO 2 e (combustion of fuel and operation of facilities) Scope 1 2,089 1,904 Indirect greenhouse gas emissions in tonnes of CO 2 e (purchased electricity, heat, steam and cooling) Scope 2 7,422 8,074 Total carbon footprint in tonnes of CO 2 e 9,511 9,978 Scope 1 and 2 intensity (tco 2 e/ m net operating income) Methodology We have used the main requirements of ISO Part 1 and the GHG Protocol Corporate Accounting and Reporting Standard (Revised Edition) for our methodology, using energy consumption data from our owned properties and emissions factors from the UK Government s conversion factors for Company Reporting. In alignment with UK DEFRA Environmental Reporting Guidelines, we have used the conversion factor for the year the emissions took place. Note that different DEFRA factors have been used for UK and German based assets, as we have used the GHG Protocol s location based methodology for conversion factors for Scope 2 emissions. Data qualifying notes We have reported on all emission sources required under the Companies Act 2006 (Strategic Report and Directors Reports) Regulations We have chosen to report greenhouse gas emissions data under our operational control. These sources fall within our consolidated statement. We do not have responsibility for any emissions sources that are not included in our consolidated statement. Emissions figures for 2015 are based on 30 properties (14 per cent estimated data), from a total portfolio of 36 properties. Emissions figures for 2016 are based on 24 properties (four per cent estimated data), from a total portfolio of 30 properties. We are not responsible for the purchase of the energy supplied to our head office in London. For 2015 and 2016, there have been no reported fugitive emissions from air conditioning refrigerant leaks, and there has been no top up of refrigerant volume. For the same period, onsite energy generation has contributed to Scope 1 emissions of 3 tco 2 e each year, which has been included in the GHG emissions table above. CSR adviser s statement As Redefine International s strategic adviser on corporate social responsibility ( CSR ), Savills would like to acknowledge the positive steps that have been taken by Redefine International to implement, maintain and improve its CSR strategy. The continuation of robust data collection supported by core reporting systems provides a strong basis on which to focus environmental efficiency improvements and strengthen reporting against best practice standards and benchmarks, whilst the prompt initiation of an EPC risk review across the UK portfolio has put the Company in a good position to prepare for the upcoming MEES ( Minimum Energy Efficiency Standards ) legislation across England and Wales and Section 63 in Scotland. Redefine International is a dynamic company that takes the CSR agenda seriously. Our engagement with the Company has shown that staff have a very positive attitude to the CSR initiatives and are well equipped to proceed with their implementation and, by ensuring that sufficient time and resources are made available, Redefine International will effectively tackle both the straightforward and the more challenging targets which have been approved within the CSR roadmap for the 2017 financial year. We confirm that environmental data published in this report provides a true representation of the Company s current performance. Savills will continue to support Redefine International over the coming year to deliver their CSR programme and anticipate providing a more extensive report on progress within next year s Annual Report and corresponding updates to their website. Jonathan Hale Associate Director Savills 27 October 2016

53 Annual Report CSR target roadmap Progress against targets set for 31 August 2016 Resilient governance Resilient investment Resilient assets Proud owners of an accurate environmental performance data set, collected on a quarterly basis for all managed assets throughout the year. Redefine International participated fully for the first time in the annual Global Real Estate Sustainability Benchmark (GRESB) survey and are pleased to disclose an improvement in score of 65 per cent on base data. Induction pack developed for all new employees covering Redefine International s CSR strategy. Bespoke training on specific sustainability related procedures has been provided to relevant staff. Good progress Sound progress Some progress Targets for 2017 Two asset specific case studies are presented to illustrate practices where sustainability initiatives have created both financial and social/ environmental benefit. Key sustainability credentials are now incorporated into sales and marketing materials. Although developed, the implementation of formalised acquisition checklists that include sustainability criteria will be implemented during For UK shopping centres metrics are used to track and communicate improvements to profitability through sustainability improvement measures. Resilient governance Resilient investment Resilient assets Further improve GRESB score targeting three Green Stars for We will do this by a) broadening the available dataset to obtain greater coverage; b) setting corporate targets for example emissions and energy consumption; and c) implement green building certifications. We target 100 per cent compliance with Energy Performance Certifications ( EPCs ) ensuring all F and G ratings have ongoing action plans in place. The assessment will include FRIs and E or D rated EPCs if completed prior to Complete staff training for all staff on CSR and sustainability issues. Pro actively invest in sustainability measures within our portfolio and abide by EPRA guidelines. Conduct energy audits where appropriate for new investments. Ensure full data picture is available for all operational sites. Paying it back: 2016 was Redefine International s tenth anniversary so to celebrate we intend to run a community project we will call Ten for 10. Across our portfolio of shopping centres and at the Company s head office, we will invest ten days into initiatives designed to support the communities in which we operate. A baseline for energy, water and waste data has been identified and is subject to third party approval in A thorough EPC risk review has been conducted and improvement measures integrated into business plans, to meet legislative deadlines. The setting of energy and water reduction and waste recycling targets for the managed portfolio has commenced under the leadership of the CSR Committee. Although developed, the tenant satisfaction survey will be conducted during Maintain compliance and improve Health, Safety and Environmental audit scores. Improve tenant awareness and seek feedback for improvements through engagement in a satisfaction survey which will include sustainability and health and wellbeing aspects. Undertake fit out projects to SKA Assessment Bronze level as a minimum across all suitable properties. Strategic report Directors report Financial statements Other information

54 52 Redefine International P.L.C. Annual Report 2016 Directors report Governance Chairman s statement With the expansion of the portfolio, the Board has been particularly mindful that governance standards throughout the Company remain robust. Greg Clarke Chairman of the Board This has been a milestone year for Redefine International, with assets under management increasing by 50 per cent to 1.5 billion following the acquisition of the Aegon ( AUK ) portfolio and, with the expansion of the Company, the Board has been particularly mindful that governance standards throughout the Company remain robust. This is the first year that Redefine International will be reporting under the 2014 UK Corporate Governance Code (the Code ), and the Board has focused on the requirements to strengthen its operations. If the Company is to progress, strong leadership and Board effectiveness are foremost and thus an external Board evaluation has been undertaken for the first time to assess Board performance. The current Board comprises the Chairman, four executives, four independent non executives and two non executives (representing the Company s largest shareholder Redefine Properties). This evaluation has identified a strong Board with the necessary skills and cohesion to serve our shareholders interests. As the Company continues to grow, the importance of succession planning, both at Board and senior management level, is recognised and has been a focus during the year. The welfare of our employees has been monitored to ensure that staff feel valued, remain motivated and our culture of openness remains intact. The Company has also continued to raise its commitment to the welfare of its stakeholders and corporate social responsibility by participating fully in the GRESB survey for the first time this year. The Company will look to steadily build on its GRESB results each year. A larger portfolio brings a corresponding increase in risk and this has been a major focus for the Audit and Risk Committee during the year. Grant Thornton UK LLP has been appointed as the internal auditor and enhanced internal controls and risk management have been thoroughly reviewed by the committee. Their full report can be found on page 64 and the three year viability statement can be found on page has seen the third anniversary of the Long Term Incentive Plan which was implemented following the internalisation of management in The performance conditions produced a result of nil vesting for the CEO and deputy CEO which, given the evolution of the Company over the last three years, was clearly not a reflection of the executives performance nor in line with shareholder returns achieved for the same period. Although the use of discretion was considered by the Remuneration Committee, it was recommended that the result be upheld but the current policy be amended so as to better reflect underlying performance going forward. A resolution to approve the new remuneration policy will be proposed at the AGM on 23 January Investor engagement has been at the forefront of our actions during the year, and we wish to thank our shareholders for their continuing support and feedback. At the EGM in September 2015, an overwhelming vote in favour for the AUK acquisition was received, placing the business in a much stronger position from which to drive shareholder value. In March a successful 115 million equity placement was completed. There was strong demand from both existing shareholders and new investors, comfortably exceeding the 100 million target initially set by the Board. With the completion of the AUK acquisition, I am pleased to report that the Company has been able to deliver on every aspect of its strategy by providing sustainable income returns, recycling capital, delivering asset management opportunities and reducing its cost of capital. Investors on the whole have been complimentary of the Company s performance. With the portfolio now predominantly focused on the UK, it is clear that investors opinions are mixed as to whether further investment in Germany, or indeed Europe, should be pursued or reduced and this has been a major consideration of the Board, especially following the EU referendum.

55 Annual Report After the UK voted to leave the European Union in June, a surprise for many both at home and abroad, major shareholders were contacted. The current leverage position was considered to be the Company s greatest risk foremost among shareholders concerns. Management has re iterated the Company s commitment to reduce leverage to within a target range of 40 to 50 per cent in the medium term through a combination of capital recycling and refinancing at lower leverage. Since the referendum, the Company s performance, relative to the market and its peers, is reflective of the market s confidence in Redefine International to provide secure income, underpinned by a diversified, well-located portfolio of assets with attractive property fundamentals. Year end property values as a whole have remained broadly flat across the portfolio and, although the Company s UK asset values are down circa 1.9 per cent, the Company is well positioned to withstand a material reduction in values in terms of general covenant headroom and liquidity. In September 2016, our largest shareholder, Redefine Properties, issued EUR 150 million secured bonds exchangeable into Redefine International shares. Redefine International took steps to assure the market that the exchangeable bonds would have no impact on its capital structure, business plan or strategy. In light of current market conditions, the Board is pleased that the management team has continued to deliver a solid performance, to create a much stronger Company, portfolio and earnings performance. We are looking forward to building on these achievements as we enter our next decade as a public company. The Board has reviewed the Annual Report and Accounts, and considers them to be fair, balanced and understandable and provides shareholders with the necessary information with which to assess the Company s position and performance, business model and strategy. The Board recommends that shareholders vote to adopt the Annual Report and Accounts and support the re election of their Board at the AGM to be held on 23 January 2017, where Directors will be available to answer any questions shareholders may have regarding the operation of their Company. Greg Clarke Chairman of the Board 27 October 2016 Corporate governance statement Compliance with the UK Corporate Governance Code 2014 (the Code ) Redefine International is a UK REIT with a premium listing on the Main Market of the LSE and a secondary listing on the Real Estate Real Estate Holding and Development sector of the Main Board of the JSE. The Company was incorporated in the Isle of Man with registered number C in 2004 and was re registered under the Isle of Man Companies Act 2006 in December 2013, with registered number V. The Company s home state is the United Kingdom. Further to the secondary listing of the Company in South Africa on 28 October 2013, the JSE accepted that Redefine International will primarily comply with the Code as issued by the Financial Reporting Council in September 2014 ( as opposed to the provisions of the King III Report on Governance for South Africa The Company has substantially complied with the Code requirements for the reporting year ended 31 August 2016 and up to the date of this document. The only areas of non compliance are as follows: a. Code B.1.2: Half of the Board should comprise independent Non executive directors. Explanation: The Board currently comprises four Executives, four Independent Non executives and two Non executives who represent the major shareholder, Redefine Properties. A recruitment agency was appointed in order to assist with the search for a new independent director at the beginning of the financial year. Due to the pending requirement for a prospectus to support the February 2016 capital raise, for which a new director would have taken full responsibility, and due to the economic conditions at the time, it was considered in everyone s best interests that this matter be put on hold until after the conclusion of the Board evaluation. Although the current composition does not comply with the Code requirement, it does work well, with no block of individuals dominating the decision making process. To ensure there is enough independent oversight of related party transactions, a committee comprising solely of independent directors has been established to review such matters before deciding whether a transaction can progress to the Board for final consideration. b. Code B.2.3: Non executive Directors should be appointed for a specified term. Explanation: Directors are appointed for a term which expires when either the Director (i) is not re-appointed following retirement, (ii) is removed or vacates office, (iii) resigns or does not offer themselves for re election, or (iv) terminates their appointment on three months notice. It should be noted that the re appointment of any independent Non Executive Director who has served more than six years will be subject to a rigorous review when being considered for re election. Compliance with the Listing Rules During the reporting year, Redefine Properties had a per cent shareholding in the Company and was regarded as a controlling shareholder as defined in LR 6.1.2A. As a Chapter 6 Company with a controlling shareholder, Redefine International has complied with LR (14): 1. The Company entered into a relationship agreement with Redefine Properties on 17 November 2014 (the Agreement ) and the Board confirms that during the year under review: a. the Company has complied with the independence provisions included in the Agreement; b. as far as the Company is aware, Redefine Properties has complied with the independence provisions included in the Agreement; and c. the election and re election of independent shareholders at the AGM held on 26 January 2016 was conducted in accordance with the election provisions of LR E and LR 9.2.2F and approved by: i. the shareholders of the Company; and ii. the independent shareholders of the Company (all shareholders other than Redefine Properties and its associates). 2. No independent Director has declined to support the statements in (1) above. Compliance with the Disclosure and Transparency Rules The disclosures required under DTR 7.2 of the Disclosure and Transparency Rules are contained in this report. Strategic report Directors report Financial statements Other information

56 54 Redefine International P.L.C. Annual Report 2016 Directors report Governance Board of Directors GREG CLARKE MBA, BA (Hons) Chairman Age: 59 Appointed: October 2011 Committee: N Independent: Complied with independence criteria of the UK Corporate Governance Code on appointment as Chairman Skills and experience: Significant Board experience, including CEO and Chair roles Over 30 years experience of working for and running large international public corporations across Europe, Australia and South Africa Former CEO of Lend Lease Corporation, an ASX 50 international property corporation Former CEO of Cable and Wireless Communications Plc Former Chairman of The Football League and Chairman of the Meteorological Office External appointments: Chairman of the Football Association, Chairman of two private equity owned businesses. MIKE WATTERS MBA, BSc Eng. (Civil) Chief Executive Officer Age: 57 Appointed: December 2013 Committees: C I Skills and experience: Over 27 years experience in the investment banking and real estate industries Significant experience as a director of property and investment companies in UK and SA Former director of Sycom Property Fund and Hyprop Investments Limited in SA and Sapphire Retail Fund in the UK External appointments: Non executive director of Redefine Properties Limited and International Hotel Properties Limited. Chairman of Redefine BDL Hotel Group. STEPHEN OAKENFULL CFA, BSc (Hons) Construction Deputy Chief Executive Officer Age: 37 Appointed: December 2013 Committee: C Skills and experience: Over 16 years experience working in corporate finance and real estate Former COO of Redefine International Fund Managers Former analyst at DTZ Corporate Finance in London Former management consultant for Turner & Townsend External appointments: None. Key to committees: A Audit and Risk Committee C Corporate Social Responsibility Committee I Investment Committee N Nominations Committee R Remuneration Committee Denotes Chairman of a Committee All Directors served throughout the year. There were no appointments or resignations. ADRIAN HORSBURGH MRICS Property Director Age: 54 Appointed: March 2014 Committee: C Skills and experience: 30 years experience in the investment property sector specialising in retail and shopping centres Former Retail Investment Director and International Director at Jones Lang LaSalle Former Equity Partner and Trainee Surveyor in the investment department at King Sturge External appointments: None. DONALD GRANT CA Chief Financial Officer Age: 42 Appointed: August 2015 Committee: None Skills and experience: Over ten years experience working in various banking and broking institutions Over eight years experience working in the property sector Former financial controller of Capital & Counties Properties PLC, a FTSE 250 company External appointments: None.

57 Annual Report MICHAEL FARROW FCIS MSc (Corporate Governance) Senior Independent Non executive Director Age: 62 Appointed: August 2011 Committees: R A Skills and experience: Over 20 years experience of UK listed and private property companies and funds working as a director and a company secretary Former Group Company Secretary of Cater Allen, Jersey Founding director of Consortia Partnership Limited, a Jersey licensed trust company External appointments: Chairman of Bellzone Mining Plc, Non executive Director of RedT Energy plc and Circle Property plc. ROBERT ORR MRICS, BSc (Estate Management) Independent Non executive Director Age: 57 Appointed: April 2015 Committees: I R Skills and experience: Over 30 years experience of the German and European real estate markets Former Country Manager for Germany and former European CEO at JLL Founded the International Capital Group for JLL External appointments: Non-executive Director of Tishman Speyer Properties (UK) Limited and APCOA Parking Holdings GmbH. Adviser to UK and European Investments and EQT Real Estate 1 Fund. Senior Adviser to Canaccord Genuity Limited. Trustee of Dementia UK. GAVIN TIPPER MBA, CA, BCOM, BACC Independent Non executive Director Age: 51 Appointed: August 2011 Committees: A N Skills and experience: Over 20 years financial experience of companies listed in both the UK and South Africa. Former technical partner at KPMG Previously COO of the Coronation Group External appointments: Non executive Director of Hyprop Investments Limited, Interwaste Holdings Limited, AVI Limited, York Timber Holdings Limited and various private companies and trusts. MARC WAINER Non executive Director Age: 68 Appointed: August 2011 Committee: I Skills and experience: Over 35 years experience in the property industry in South Africa Founder of Investec Property Group, Investec Bank s property division Founder of Redefine Properties Limited External appointments: Executive Chairman of Redefine Properties Limited. Non executive Director of Cromwell Property Group. SUSAN FORD ACA BSc (Hons) Independent Non executive Director Age: 56 Appointed: December 2013 Committees: A R N Skills and experience: Over 30 years experience working within various leading organisations overseeing finance, strategy and governance matters Co founder and former finance director for Metric Property Investment plc, now LondonMetric Property plc, an income focused, diversified FTSE 250 REIT External appointments: None. BERNIE NACKAN BA (Econ), SEP Non executive Director Age: 72 Appointed: April 2014 Committee: None Skills and experience: Over 40 years working in finance, investment and property Former financial editor of the Rand Daily Mail, managing director of Sage Unit Trusts and Executive Director of Sage Group Former member of the Collective Investment Scheme Advisory Committee in South Africa External appointments: Lead Non-executive Director of Redefine Properties Limited and Non executive Director of Rezco Asset Management Group. Strategic report Directors report Financial statements Other information

58 56 Redefine International P.L.C. Annual Report 2016 Directors report Governance Leadership structure The Board is collectively responsible for the long term success of the Company. The Board Led by the Chairman, the Board strives to be effective by maintaining strong leadership and by providing transparency and accountability to shareholders for the management and control of the Company s activities. 4 meetings, (4 update telephone calls) page 58 Committee of the Board Approves ad hoc matters between Board meetings Subject to authority levels Directors Any two Independent Directors At least one Independent Committee of the Board To review any related party transactions Independent Non executive Directors Any 3 29 meetings page 58 1 meeting Audit and Risk Committee Nominations Committee Remuneration Committee Investment Committee Ensures that the Group s financial reporting and risk management is properly monitored, controlled and reported Considers the composition, skills and succession planning of the Board Determines the remuneration of the Executive Directors within the approved remuneration policy Assesses investment proposals as to whether they should progress to the Board Independent Non executive Directors Gavin Tipper (Chair) Sue Ford Michael Farrow Independent Non executive Directors Greg Clarke (Chair) Sue Ford Gavin Tipper Independent Non executive Directors Michael Farrow (Chair) Sue Ford Robert Orr Independent Non executive Director Robert Orr (Chair) Non Independent Directors Marc Wainer Mike Watters 5 meetings page 64 1 meeting page 60 3 meetings page 66 Informal meetings page 59 Corporate Social Responsibility Committee Safeguards the interests of stakeholders Executive Directors Mike Watters (Chair) Stephen Oakenfull Adrian Horsburgh Executive Committee Day to day management of the Company Executive Directors Mike Watters (Chair) CEO Stephen Oakenfull Deputy CEO Donald Grant Chief Financial Officer Adrian Horsburgh Property Director 2 meetings page 42 Weekly meetings

59 Annual Report Board composition Mike Watters CEO F P U S E Michael Farrow Senior Independent Director F P U Board tenure Appointment Executive 1 year Donald Grant 2 years Adrian Horsburgh 3 years Stephen Oakenfull, Mike Watters Chairman Greg Clarke F P U E Chairman of the Board since 1 December 2011 Responsible for leadership and governance of the Board There is a clear division of responsibilities between the Chairman who runs the Board and the CEO who runs the business 40% Executive Directors Day to day management of Company Stephen Oakenfull Deputy CEO F P U E Adrian Horsburgh Property Director 40% Independent Non executive Directors To constructively challenge the executives and represent the interests of the shareholders Key to skills: Gavin Tipper F S U P E Robert Orr 20% Non executive Directors Representing the Company s major shareholder Redefine Properties Marc Wainer F P S U P E Bernie Nackan F Finance P Property E Europe U UK listed companies S SA listed companies Appointment Non Executive 1 year Robert Orr 2 years Bernie Nackan 3 years Sue Ford 5 years Greg Clarke Michael Farrow, Gavin Tipper Marc Wainer Diversity 9% women 91% men S Average age <40 9% % % % >70 9% Donald Grant Chief Financial Officer F U Sue Ford F U Composition excluding Chairman 40% Executives 20% Nonexecutives 40% Independent Non executives Strategic report Directors report Financial statements Other information

60 58 Redefine International P.L.C. Annual Report 2016 Directors report Governance Board operations Directors consider that the current number of scheduled meetings each year gives sufficient time to discuss the matters pertinent to the Group. Meetings Four Scheduled quarterly Board meetings Four Scheduled quarterly conference calls to provide operational updates to directors 29 Ad hoc Board meetings responding to business needs One informal meeting to discuss strategy One Meeting of Independent Directors setting the price, size and the allotment of the shares relating to the equity placing in February 2016 One meeting to discuss the performance of the executives and other matters Attendance All Directors attended all the meetings All Directors participated in all the calls Attendance at ad hoc meetings is subject to authority levels requiring either a full Board or a committee of three directors, one of which must be independent Attended by all Directors Attended only by Directors not participating in the placing (the Independent Directors ) Chairman and Non-executives only Board meetings Notice Board packs are distributed seven days in advance of quarterly board meetings. Less notice may be given for ad hoc meetings, as these may be time sensitive or relate to routine matters e.g. allocation of scrip shares. Conflict of interest Directors are not, without the consent of the Board, permitted to accept any other appointment or enter any arrangement which might reasonably be expected to lead to a conflict of interest arising. Any possible appointments are discussed with the Chairman to ensure there are no conflicts of interest or that a director s independence is not compromised. In cases where a possible conflict arises the Chairman refers the matter to the Nominations Committee, and then to the Board. Before each meeting Directors are asked to confirm their directorships and shareholdings to ensure that any potential conflict of interest is disclosed before the meeting. The Articles of Association permit a Director who has disclosed an interest in a transaction to vote and count in the quorum in relation to any resolution of the Board concerning the related transaction, if the Board so approves. Conflicts of interest during the year include: Equity Placement In February 2016, there was a conflict of interest noted in connection with the placing of new ordinary shares in the Company to part fund the AUK acquisition. Those participating in the placing, namely, Redefine Properties Marc Wainer, Bernie Nackan, Mike Watters, Robert Orr, Gavin Tipper and Adrian Horsburgh were all excluded from a meeting to determine the particulars of the placing. International Hotel Properties Limited ( IHL ) During the year, the Company participated in private placements of IHL, of which Mike Watters is a Director. Matters reserved for the Board The Board operates under a formal quarterly schedule of matters reserved for the Board. This ensures that the Company s strategy and objectives, risks, Group operations, internal controls, policies and debt providers are all reviewed throughout the year. Quarter 1 Year end results and associated items Quarter 2 Review of all policies Evaluation of Board Quarter 3 Interim results and associated items Review of matters reserved for the Board Quarter 4 Review of Group strategy, objectives and corporate structure Review of internal controls and risk management Review of financial strategy Review of marketing strategy

61 Annual Report Board meetings Standard agenda items Decision making Related party transactions Corporate governance Market abuse regulations Committees Training and knowledge Evaluation Board committees Details of the Audit and Risk, Nominations and Remuneration Committees operations can be found on the following pages. Details of the Corporate Social Responsibility Committee can be found on page 42. Prior to each meeting, in addition to the scheduled matters, the directors receive up to date financial and commercial information in respect of the activities, in particular, quarterly management accounts and schedules of income and outgoings (each with comparisons against budget), schedules of acquisitions and disposals and relevant appraisals and cash flow forecasts, details of funding availability and matters relating to corporate governance. Standard agenda items include: Management report Report from the CEO Acquisitions and investments Disposals Portfolio report Special projects Finance and tax Financial results Banking facilities and derivatives Treasury and foreign currency exposure Shareholder and investor relations Shareholder information and trading statistics Reports on shareholders views Shareholder communications Marketing Report from Head of Marketing Administrative matters Corporate governance updates Corporate calendar matters Proposals regarding all significant or strategic decisions, including major acquisitions, disposals and financing transactions, are first reviewed by the Board, progressed through the Board s Investment Committee, and then presented to the Board for final consideration, which requires approval from the majority of its members. Any constructive challenges or unresolved issues raised by Non-executive Directors are recorded in the minutes. Decisions taken during the year include: Circular and approval of AUK acquisition for 490 million Approval of 303 million loan facility to finance the AUK acquisition Over distribution payment of 0.05 pence to shareholders to maintain a progressive dividend Sale of the Grosvenor Street for 35.6 million Sale of 10 Malthurst portfolio petrol stations for 12 million Prospectus, 115 million placing and issue of 170,588,236 shares Transfer of Zeta portfolio into the AUK finance facility Decisions are subject to agreed authority levels requiring either a full Board, a committee of three Directors comprising at least one independent Director, or executives and management. For related party transactions any director with a conflict of interest may be asked to leave the meeting whilst the matter is discussed and opinion letters from the Company s sponsor, ascertaining as to whether the transaction is fair and reasonable, are circulated for the independent directors consideration. All related party transactions will first be reviewed by a committee comprising solely of independent Non executive Directors to ensure the matter is given a measure of independent oversight before progressing to the Board for final consideration. The Company Secretary advises on updates of regulatory rules and corporate governance matters and any concerns or developments regarding inter alia insurance, health and safety, sustainability, bribery and whistleblowing, cyber security and the Modern Slavery Act, the policies of which are reviewed annually, or as necessary. Directors are reminded of closed periods, to request clearance to trade and to disclose any share dealing on their own account or that of persons closely associated with them. Dealings reported during the year are disclosed on page 82. The Executive Committee monitors proposed transactions which are likely to give rise to inside information. These are then tracked to ensure all inside information is properly recorded, and announced as appropriate. The chairmen of the Remuneration, Audit and Risk and Nomination Committees provide a summary of committee meetings held and any recommendations to be made to the Board. Advisers and managers may be asked to present at meetings to provide Directors with detailed information relating to the Company. Property tours are undertaken to enable Directors to view the Company s assets and discuss matters directly with the responsible asset manager. An external evaluation of the Board was conducted during the year and, as part of the process, an evaluator attended and observed the board and committee meetings. The Investment Committee operates in an informal manner to discuss all major acquisitions, disposals and capital expenditures. Its recommendations are forwarded to the Board for final consideration. The Executive Committee meets informally on a weekly basis to discuss acquisitions and disposals, finance, asset management activities and operational matters, and to consider the status of any potential inside information. Strategic report Directors report Financial statements Other information

62 60 Redefine International P.L.C. Annual Report 2016 Directors report Governance Nominations Committee The evaluation has identified a strong Board with the necessary cohesion to serve our shareholders. Greg Clarke Chairman of the Nominations Committee Appointed Meetings Greg Clarke MBA, BA (Hons) 25/10/2011 1/1 Gavin Tipper CA MBA Bcom BAcc 30/07/2014 1/1 Sue Ford ACA, BSc (Hons) 30/01/2014 1/1 The Committee operates within terms of reference, a copy of which is available at the website: Membership and meetings It is the responsibility of the Chairman of the Company to build a strong, effective and complementary Board to steer the business. The Nominations Committee is therefore led by the Chairman, Greg Clarke, and two independent non-executive Directors. All members have significant experience as Directors of listed companies and are therefore aware of the skills required to maintain an effective Board, and effective Board Committees, appropriate for a property company listed in the UK and South Africa. During the year, the Committee held one meeting, attended by all members. This meeting was to discuss the appointment of an additional independent non executive. However, due to the pending requirement for a prospectus to support the February 2016 capital raise, for which a new director would have taken full responsibility, and the economic conditions at the time, it was considered in everyone s best interests that the matter be put on hold. The Nominations Committee therefore focused on ensuring that the current Board worked well, had a good balance of skills, set the right tone and had a pipeline of succession. To confirm its analysis, it commissioned an external evaluation of the Board. Board Evaluation After considering several external facilitators, the Nominations Committee selected Independent Audit ( IA ) to assist with the external evaluation of the Board using an interview based approach. An in depth review of the Board and a high level review of the Committees were undertaken in order to examine the governance framework in its entirety and in particular the linkages and alignment between the Board and Committees in terms of accountability, information and communication. The results and recommendations were based on what was best for the Company and reflected IA s insights of good governance and best practice gained from board reviews across the FTSE. This delivered a review using the Board s perspective and informal benchmarking. A comparison of the Company s view on the Boards effectiveness and that of the evaluator, is shown opposite.

63 Annual Report Company view Board composition The current Board comprises the Chairman, four executives, four independent non executives and two non executives, which is not compliant with the Code. Although the Board works well, with no one block of individuals dominating decision making, the NomCo would like to recruit an additional independent Non Executive. Currently independent oversight of related party transactions is maintained by a committee of independent directors. Skills matrix The skills of the current directors can be found on page 57. The Directors collectively have extensive experience of finance, property and of listed companies in both the UK and South Africa. With 23 per cent of the property portfolio in Germany, and the consequential operational and commercial challenges this brings, the Committee last year identified the requirement to expand the breadth of European experience on the Board. Robert Orr, who has worked extensively in the German and European real estate markets, was appointed to the Board in Meetings At Board meetings, the Chairman encourages an open debate and for everyone to air their views, particularly on any topics which appear contentious, and he and executives are always available to non executives should they have any further concerns. Board and Company Culture The head office of the Company has historically comprised a small group of entrepreneurial people, with a strong work ethic, strong team spirit and open culture. Such a small group enabled the Company to be agile and take advantage of opportunistic situations. As the Company has grown, much of this culture remains, both in the head office and on the Board, primarily due to the quality of the personnel and good communication. Non executive Directors collectively have the skills to understand and constructively challenge or support situations and are kept well informed of the Company s operations. This allows Directors to quickly grasp situations as they arise, and retains the agility of the Board to make decisions quick when necessary. However, Non executive Directors question the process if they have not been provided with enough details to make a fully informed decision. At Board meetings, the Chairman encourages an open debate and for everyone to air their views, particularly on any topics which appear contentious, and he and the executives are always available to Non executive Directors should they have any further concerns. Diversity The Board currently comprises ten male directors and one female director, ranging in ages from 37 to 72. Directors are of UK, South African or New Zealand nationality, with a range of different educational backgrounds. The Board is committed to having an appropriate level of diversity that reflects the nature of the Group s operations and which best supports the achievement of the strategic objectives. Although the Board acknowledges the need to increase female representation when making appointments to the Board, the NomCo will also take account of relevant skills, experience, knowledge, personality and ethnicity. However, the strength of the board and the selection of the best candidate will always remain the priority. Although there are currently no female executives, the number of female senior managers has increased from 17 per cent in 2013 to 40 per cent in 2016, and this will provide a pipeline of succession for the future. Succession planning The NomCo has been actively engaged during the year in long term senior succession planning. In particular the Chairman has been personally managing the development of the Deputy CEO, Stephen Oakenfull. Stephen has attended external residential management development programmes and extensive external networking events. With the growth in the number of employees, succession planning for senior management and executives continues to develop. Committees The NomCo ensures that the Board committees are populated with individuals who have the requisite skills to carry out their delegated duties. Each committee chairman provides a summary of the committee s activities at Board meetings and advises of any recommendations. The reports of the Audit and Risk and the Remuneration Committees can be found on the following pages. Evaluation Directors are highly committed to their roles, but the Board is large, and independent Non executive Directors are in the minority. Different options should be explored in order to address this matter. The Board has a good balance of skills with a strong industry focus and deep financial expertise. No major skill gaps were observed. There is deemed to be sufficient knowledge of the European markets on the Board, but an additional Director with stronger corporate finance, investment banking or digital skills could be beneficial. The Chairman is an approachable, skilled professional who is respected by all his colleagues for his ability to manage discussions and steer the Board through UK governance. Meeting dynamics could be improved to ensure that they are not dominated by certain individuals. Different discussion formats should be explored for strategic decision making. The Chairman and CEO set a tone of openness and thoroughness which is upheld by the Board, and Directors hold themselves to a high standard of integrity. The Boardroom culture is good natured and constructive and relationships between Executives and Non executive Directors are good, although this does not deter the Non executive Directors from challenging the executives during meetings. The Board is very supportive towards management. There is diversity of thought, with directors representing a range of backgrounds who can tackle questions from a variety of standpoints. However, gender diversity is poor. A more rigorous and forward looking approach should be taken for succession and contingency planning for all Board members. Executives need to ensure that they are identifying and developing successors. Board committees are chaired well and provide good reporting feedback to the Board. All have access to external advice. The remuneration policy, but in particular the measures used for the Long Term Incentive Plan, have not worked well. Risk governance, which has been the focus of considerable effort by the Audit and Risk Committee, has improved but is still a work in progress. Strategic report Directors report Financial statements Other information

64 62 Redefine International P.L.C. Annual Report 2016 Directors report Governance Nominations Committee continued Conclusion Overall, the evaluation concluded that the Board has many strengths. The Board comprises high calibre individuals who take their roles seriously and contribute significantly in terms of their commitment, technical expertise and skills. The Directors enjoy being on the Board which is a key characteristic of a motivated and successful team. However, the evaluation also identified a number of matters to be addressed by the Board in the coming year, namely board composition and succession, meeting dynamics, strategic decision-making and risk governance, and progress on these matters will be disclosed to shareholders in the 2017 Annual Report. Further to the evaluation report the Chairman has evaluated the individual directors and considers that each of them are highly committed to their roles, with 100 per cent attendance at Board and committee meetings throughout the year. Directors continue to be effective members of the Board, who collectively hold the requisite range of skills to enable the Board to operate successfully, and therefore recommends all Directors for re-election at the AGM on 23 January Re election of Independent Directors The interests of each independent Directors are monitored to ensure their position is not compromised and reviewed each year against the requirements of the Code, to ensure their independence remains valid. The Chairman is satisfied that Michael Farrow, Gavin Tipper, Sue Ford and Robert Orr remain independent in both character and judgement and adhere to the independence criteria of the Code and recommends that independent shareholders vote in favour of their re election. Their biographical details can be found on pages 54 and are contained in the Notice of Meeting. Appointment terms Each of the current Directors has been provided with a letter of appointment or service contract detailing the terms of their appointment. All directors are expected to attend the quarterly Board meetings, quarterly update meetings, any committees of which they are a member and shareholder meetings. Non executive Directors are expected to make themselves available for a minimum of eight days per year in the discharge of their duties. The Board has agreed that any director, if necessary in the furtherance of their duties, may take independent professional advice at the Company s expense, subject to having first notified the Company Secretary. Any such payment by the Company would, of course, be subject to any restriction under company law. The Company has liability insurance which covers directors and officers of the Company and any subsidiary company of Redefine International. Directors induction and ongoing training For any new appointments to the Board the executive team provides an induction day for the new Directors, presenting an overview of the historical activities of the Group, current funding structure, stakeholders and property details. Further information is provided on the Company s key business risks and the latest financial information of the Group. Directors are given the terms of reference of the Committees and a list of matters reserved for the Board. Further information is provided, tailored to the needs of each director. Meetings with key advisers are set up, as required, and tours of the Company s properties undertaken. The Chairman reviews the training and development of each Director during the Company s evaluation process and encourages the Directors to update their skills, knowledge and familiarity with the Company to fulfil their roles on the Board. At each Board meeting a specialist speaker, such as lawyers, brokers and financial risk managers may be invited to present on a topic relevant to current Group issues, or a property tour will be organised so that the Directors can view the assets and meet the asset managers. Greg Clarke Chairman of the Nominations Committee 27 October 2016

65 Annual Report Accountability Investor relations The Board endeavours to regularly engage and communicate clearly with shareholders throughout the year, promoting dialogue with both existing and potential investors on Company strategy, management, remuneration and governance. The four executive directors, who act as the primary contact for institutional shareholders, are supported by the new Head of Investor Relations with Non-executive Directors attending and meeting investors at results presentations and property tours. Directors are kept informed of investor relations through a quarterly report and timely updates. They are provided with analyst coverage of the Company and any feedback received from investors. In addition, shareholders are invited to directly contact the Executives to raise any matters, opinions or issues of concern with the Company and are encouraged to attend the AGM to put any questions to the Board, in person. Shareholders meetings 2015 EGM The Company s EGM, held on 25 September 2015 in connection with the AUK portfolio acquisition, was called on 14 days clear notice in accordance with the Company s Articles of Association rather than the 14 business days required by the Code. This was due to the transaction being time sensitive and the Board was mindful that any delay would cause a transactional risk. 66 per cent of shareholders voted overwhelmingly in favour of the proposals AGM The AGM was held on 26 January 2016 at the head office in London. Approximately 65 per cent of all shareholders voted but it was noted that a significant amount of shareholders on the JSE register voted against Resolution 17, regarding Directors authority to allot shares and Resolution 18 regarding the disapplication of pre emption rights limited to a 10 per cent issuance of shares for cash. The proposed authorities were in line with current UK guidelines, but the Board is aware that such guidelines differ to those in South Africa and will continue to liaise with South African shareholders on such matters EGM An EGM was held on 15 February 2016, in connection with a prospectus and placing of new ordinary shares in the Company to part fund the AUK acquisition. This was again called on 14 days clear notice in accordance with the Company s Articles of Association due to the transaction being time sensitive and the Board was mindful that any delay would cause a transactional risk. 68 per cent of shareholders voted overwhelmingly in favour of the proposals and a total of 270,588,236 new Ordinary Shares in Redefine International were placed raising gross proceeds of approximately million AGM This year s AGM is due to be held on 23 January 2017, at 30 Charles II Street, London SW1Y 4AE. It will be held at the later time of 11am, as requested by shareholders at last year s meeting. The AGM Notice was sent to shareholders on 15 December 2016, more than twenty business days in advance of the meeting, and contained all the notes for the proposed resolutions rather than referencing sections in the Annual Report, for the shareholders convenience and consideration. Shareholders are encouraged to attend, or contact the head of investor relations if they wish to raise a question but are unable to attend. Website and App To enable the effective distribution of information to investors, all communications and related presentation materials are published on a timely basis on the website, which has been upgraded to promote ease of use: During the year an investor relations app, for both mobile and tablet, has been successfully rolled out to deliver easily accessible information on day-to-day operations and business performance. Key investor events 26 April 2016 Half Year Results Announcement April 2016 Results Roadshow United Kingdom ( UK ) 2 6 May 2016 Results Roadshow South Africa ( SA ) 1 June 2016 Property Day focusing on AUK assets with 15 SA investors and sellsiders 21 June 2016 Property Day focusing on AUK assets with UK investors and buysiders 24 June 2016 UK Shareholder Association 7 8 September September 2016 EPRA conference Property Day focused on Berlin & Hamburg with 3 SA investors 27 October 2016 Year end Results 27 October- 4 November 2016 Upcoming investor events Results Roadshow UK (including Edinburgh & Glasgow) 11 January 2017 JPM European Real Estate CEO Conference 23 January 2017 AGM 6 February 2017 Capital Markets Day in UK 7-17 February 2017 Strategy & Pre close Roadshow SA & UK Strategic report Directors report Financial statements Other information

66 64 Redefine International P.L.C. Annual Report 2016 Directors report Accountability Audit and Risk Committee (the Committee ) The Audit and Risk Committee of the Board oversees financial reporting and risk management for the Group. It monitors the effectiveness of internal controls, the internal and external auditors, the provision of non-audit services and ensures the independence of the external auditor is maintained. Gavin Tipper Chairman of the Audit and Risk Committee Appointed Meetings Gavin Tipper CA MBA Bcom BAcc 28/06/2012 5/5 Michael Farrow FCIS MSc 23/08/2011 5/5 Sue Ford ACA, BSc (Hons) 30/01/2014 5/5 The terms of reference for the Audit and Risk Committee can be found on the website: This is the first year that the Company has reported under the 2014 UK Corporate Governance Code and the Committee has focused on the new requirements. Grant Thornton UK LLP was appointed as the internal auditor during the year, enhancement to internal controls continued to be made and those controls and risk management systems were reviewed by the Committee. The Committee comprises three independent Non-executive Directors. Gavin Tipper and Sue Ford are both Chartered Accountants and are considered to have significant recent and relevant financial experience and the Committee as a whole has competence relevant to the property sector in which the Group operates. During the reporting year, five meetings were held, aligned to the Company s reporting and risk management cycle. All of the meetings were attended by the Chief Executive Officer and the Chief Financial Officer together with representatives of both the external auditors and the internal auditors, the latter of which were appointed during the year. The Company s valuers attended two meetings to discuss the processes undertaken in determining the market value of the property portfolio at each reporting date and one meeting was attended by Independent Audit, which performed an external evaluation of the Committee. The Committee s objective is to provide the Board with additional assurance regarding the efficacy and reliability of the financial information used by the Directors in the discharge of their duties relating to corporate accountability and to comment on the associated risk in terms of management, assurance and reporting. The Committee is responsible for reviewing and assessing the integrity of the risk control systems and for ensuring that risk policies and strategies exist and there is effective risk management. Details of the principal risks facing the Group are set out on page 14 and in note 27 to the financial statements. The Committee ensures it gives appropriate consideration to matters of importance to the Group. During the year the Committee: met with the external auditors at the audit planning and reporting stages to consider and discuss the audit strategy and plan, the results of the audit work undertaken and areas of significant complexity, judgement or uncertainty; monitored the effectiveness of the auditors and agreed their remuneration; monitored the level of non audit services provided by the external auditor; reviewed and assessed the effectiveness of internal controls, particularly financial controls, and confirmed to the Board that they remain appropriate;

67 Annual Report reviewed the systems of risk management with specific focus on the impact of the UK s decision to leave the European Union; appointed the Group s current internal auditor after a tender process; reviewed and approved the internal auditor s risk based audit plan for the financial year; met with independent property valuers to discuss the valuation process and consider the appropriateness of the assumptions underlying the property valuations; received and reviewed reports from the Group s Chief Financial Officer and Financial Controller; reviewed the interim and annual financial statements, approved the accounting policies used, and assessed the related judgements and estimates, and compliance with statutory and listing obligations; considered a report from the JSE on proactive monitoring; monitored REIT compliance; performed an annual review of the Group s whistleblowing and anti bribery policies; considered and recommended the dividend to the Board; considered the Group s viability statement, including the appropriateness of the underlying methodology, assumptions and stress tests applied (refer to page 15); performed an assessment of the appropriateness of the application of the going concern concept (refer to page 81); and recommended the annual report to the Board as a fair, balanced and understandable assessment of the Group s financial position and results for the financial year. Significant areas of judgement The Committee, in monitoring the integrity of the financial statements, has assessed whether suitable accounting policies have been adopted and whether management has made appropriate estimates and judgements. The Committee has identified the following key matters as material to the Group s results due to the level of complexity or estimation involved. Valuation of investment property Investment property is a significant component of the Group s balance sheet and changes to valuations may impact materially on its financial performance, hence property valuations are a key area of focus. Property valuations require significant judgements and estimates and are performed by appropriately qualified independent valuers, and reviewed by management. The Committee met with two of the Group s valuers during the year, in regard to the valuations of the recently acquired AUK portfolio and the Group s shopping centre portfolio. The meetings allowed the Committee to gain an understanding of the valuation process, and to assess and challenge the key assumptions underlying the valuations. The Committee was also provided with an overview of the market, relevant historic performance and indications of equivalent yields. The conclusion of the Committee was that: the valuation processes appeared to be thorough and meticulous; the assets were valued on a highest and best use basis, consistent with prior periods; the assets were valued using reasonable estimates and professional judgements; and the assets were valued on a basis which took account of comparable market transactions. Transactional risk and accounting for complex transactions A number of significant transactions occurred during the year. These included the phased acquisition of the AUK portfolio and the acquisition of the Group s interest in International Hotel Properties Limited ( IHL ). It was considered that the transactions had been accounted for appropriately, and that the accounting and disclosure were compliant with both IFRS and the Group s accounting policies. Effectiveness, independence and appointment of the external auditor KPMG was appointed via a tender process in 2010 and has expressed their willingness to remain in office. The Directors expect to next tender the audit in 2018, which aligns with the scheduled rotation of the audit partner. In assessing the effectiveness and level of service from the external auditor, the Committee considered KPMG s knowledge of the market and Group, the depth of understanding of the key accounting and audit judgements, the extent to which the audit plan was carried out, input from management and the content of the auditor s reports to the Committee. The Committee has undertaken its annual review, with the auditor, of any threats to its independence and assessed whether the auditor may continue to be considered as independent. The Committee is satisfied that KPMG is independent, and recommends the re appointment of KPMG at the Company s AGM on 23 January This position will be reviewed annually. KPMG has informed the Committee of the safeguards it has in place to maintain its independence, which include regular reviews of the composition of the audit team, including rotation in accordance with the relevant regulations. There was a change in audit partner in Having considered its safeguards and other relevant factors, KPMG is of the opinion that it is independent within the meaning of the regulatory and professional requirements, and the objectivity of the audit partner and audit staff are not impaired. The external auditors have direct access to the Audit and Risk Committee s chairman should they wish to raise any concerns outside formal Committee meetings. The Committee monitored the ratio of audit to non audit services, and related fees, and assessed the objectivity of the external auditors in conjunction with the senior management team. The Company s policy on non audit services is included in the Committee s terms of reference and can be accessed on the Company s website. The level of non audit services and fees incurred during the year was compliant with the Company s policy in that regard. Audit fees The following fees have been paid to KPMG during the year, and are included in net operating income in the consolidated statement of comprehensive income: Year ended Year ended 31 August 31 August m m Audit fees Total Non audit fees Reporting accountant under listing rules (1) 0.3 Total (1) required for the AUK acquisition and related capital raise. Internal audit Grant Thornton UK LLP has been appointed to act as the Group s internal auditor. Their audit plan and activities during the year covered control outputs of the following: payroll; accounts payable; financial close process; credit control; and risk management. Reports received from the internal auditor reflected no significant internal control failings or weaknesses which supported the Committee s conclusion that internal controls remained appropriate and robust. In the forthcoming year, it is expected that their plan will include a review of system implementations, human resources, project management and regulatory compliance. Gavin Tipper Chairman of the Audit and Risk Committee 27 October 2016 Strategic report Directors report Financial statements Other information

68 66 Redefine International P.L.C. Annual Report 2016 Directors report Remuneration unaudited Directors remuneration This has been an important year for the Remuneration Committee, 2016 being the first year that awards, made under the long term incentive plan, were to vest. Michael Farrow Chairman of the Remuneration Committee Appointed Meetings Michael Farrow FCIS MSc 23/01/2013 3/3 Robert Orr MRICS, BSc 23/04/2015 3/3 Sue Ford ACA, BSc (Hons) 10/09/2015 3/3 The RemCo operates within terms of reference, a copy of which is available at the website: Annual statement by the Chairman of the Remuneration Committee ( RemCo ) For the year ended 31 August 2016 (not subject to audit) Introduction On behalf of the Board, I am pleased to present the Directors Remuneration Report for the year ended 31 August It should be noted that, as an Isle of Man company, Redefine International is voluntarily reporting under the UK regulations in order to provide transparency to our shareholders. This has been an important year for the RemCo, 2016 being the first year that awards made under the long term incentive plan ( LTIP ) were to vest. The LTIP vesting levels were to provide an important insight into whether the remuneration policy had proved an appropriate indicator of performance that was suitably aligned with both strategy and shareholder interests and whether it had provided the executives with a fair and balanced remuneration package to reflect their results. During the three-year vesting period for the LTIP awards granted in 2013, the executives have made significant progress, clearly delivering on all strategic objectives, as evidenced from the metrics at the front of this Annual Report and on the page opposite, with a steady growth in distributable earnings and a reduction of both the weighted average cost of debt and the LTV across the period. The size and quality of the portfolio has been greatly enhanced following the successful completion of the 490 million AUK acquisition and through the sale of non core assets. The Company has achieved one of the highest dividend yields in its sector throughout the property cycle, produced a 24.7 per cent cumulative TSR for shareholders during the performance period and has entered the FTSE 250 EPRA and GPR indices.