Shaftesbury : 2021

Shaftesbury PLC Annual Report 2020

Making a positive contribution to London's West End

Annual Report 2020

Shaftesbury Annual report 2020 Strategic Report

Shaftesbury is a Real Estate Investment Trust (REIT) which invests exclusively in the heart of London's West End.

Our 16-acre ownership of c.600 buildings is clustered mainly in Carnaby, Seven Dials and Chinatown, but also includes substantial ownerships in east and west Covent Garden, Soho and Fitzrovia.

Our purpose is to curate vibrant and thriving villages, making great places even better for the benefit of our stakeholders.

Strategic report	Governance
1	2020 summary	81	Governance overview
2	Q+A with the Chief Executive	82	Chairman's introduction
6	Covid-19: impact and response	84	Monitoring of culture and engagement
10	Exceptional portfolio in the heart of	85	with employees
	London's West End	The role of the Board and its Committees
14	Portfolio uses	86	Principal Board activities in 2019/20
20	Why London's West End?	90	Division of responsibilities
21	Making great places even better	93	Board evaluation
22	Business model and strategy	94	Nomination committee report
24	Measuring our performance	96	Audit committee report
27	Sustainability	100	Directors' remuneration report
29	Environment	103	Remuneration at a glance
34	Non-financial information statement	105	Remuneration policy
35	Stakeholder engagement	106	Annual remuneration report
42	Our people and culture	114	Directors' report
53	Strategy and Operations Executive	118	Directors' responsibilities
54	Committee	119	Independent auditor's report
Our Board

1. Portfolio valuation report

1. Portfolio activity report

1. Financial results

1. Financing

1. Risk management

1. Principal risks and uncertainties

1. Viability statement

Financial statements

1. Group statement of comprehensive income
2. Balance sheets
3. Cash flow statements
4. Statements of changes in equity
5. Notes to the financial statements

Other information

154 Climate risk and opportunity

1. Alternative Performance Measures (APMs)

1. Portfolio analysis

1. Basis of valuation

1. Summary report by the valuers

1. Debt covenants
2. Shareholder information
3. Glossary of terms

Iconic villages				16.0 acres
CARNABY
			and 1.9 acres owned in
COVENT GARDEN
		joint venture
CHINATOWN				1.9m sq ft
			commercial and residential space
SOHO
			and 0.3m sq ft in joint venture
FITZROVIA				c. 600
			buildings
Mix of uses % of wholly-owned portfolio ERV
37%	30%
FOOD, BEVERAGE
AND LEISURE	20%
	RETAIL

OFFICES	13%
	RESIDENTIAL

0.7m sq ft	0.4m sq ft	0.4m sq ft	0.4m sq ft
		Talented and
shaftesbury.co.uk	experienced
team	33%
follow @shaftesburyplc
		employees	male
carnaby.co.uk
39
sevendials.co.uk		9 years
chinatown.co.uk
thisissoho.co.uk	67%	average
theyardscoventgarden.co.uk	length
			of service

female

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Q+A with the Chief Executive

Brian Bickell answers questions on our performance and activities during this challenging year, the evolution of our business and longer-term challenges and priorities

Page 2

What are your reflections on the year?

Rarely in history has the world seen such widespread disruption to normal patterns of life, which came without warning from the beginning of 2020. In the UK, since 2016

Brexit and its political rami•cations dominated the national agenda but the result of the December 2019 general election brought certainty and early signs of a return of business and consumer con•dence. However, this was short-lived, as concerns regarding the Covid-19 virus grew rapidly, and governments around the world introduced measures never before seen in peacetime to address the pandemic. Only now are we seeing the •rst positive signs that the crisis could recede in the year ahead. However, the social and economic consequences of the disruption we have all experienced this year will be important factors in the pace of recovery in the months and years ahead.

How has London's West End been affected by the pandemic?

At the heart of one of the world's great cities, the West End's long record of success reˆects its domestic and global appeal to businesses, visitors and residents. In normal times,

its ˆourishing commercial and leisure economy draws over 200 million visits annually, which supports its rich and unrivalled o‰er of cultural and historic attractions, hospitality choices and shopping. The bedrock of this footfall are Londoners, its huge working population, and daily domestic leisure visitors.

Measures to contain the pandemic continue to have a material e‰ect on normally busy city centres around the world. Since March, there has been a material and sustained reduction in the West End's economy as a result of measures imposed to contain the spread of Covid-19 infections as a consequence of:

• Advice to avoid unnecessary travel and use of public transport;
• For o•ce-based workers, recommendation to avoid commuting and work from home wherever possible;
• Closure of non-essential retail and all hospitality from late March until the end of June, and again throughout November with capacity constraints when open to maintain social distancing;
• Continuing closure of theatres, bars and clubs, which has severely curtailed the West End's renowned evening and night-time economy; and
• A collapse in international leisure and business travel due to border control restrictions around the world.

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Shaftesbury Annual Report 2020 Strategic report Q+A with the Chief Executive

"Although near-term challenges will be with us throughout 2021, I am con•dent we are well placed, both •nancially and operationally, to return to long-term prosperity and growth as the current global and local pandemic disruption recedes into history."

Strategic report

Businesses across the West End which, either directly or indirectly, rely on its usually-predicable, exceptional daily levels of visitors and spending have seen their income and cash ˆow severely a‰ected by this pandemic-related disruption, resulting in growing levels of vacancy and a signi•cant reduction in demand for space due to uncertainty of the timing of a return to normalised conditions.

A large proportion of our 624 apartments are let to people from overseas, who come to London to work or study. Inevitably, as pandemic uncertainties grew, many chose for personal reasons to vacate and quickly return to their countries of origin.

How has Shaftesbury responded to this unprecedented situation?

In our long-term management strategy for our villages, we have always recognised our responsibility to our commercial occupiers to ensure the trading environments we curate,

and the support we o‰er, provide the conditions for their businesses to ˆourish. We are also conscious of our responsibilities to our residential tenants and a wide range of local stakeholders.

As soon as we saw the early, rapid impact of the pandemic in Chinatown, it became clear that we should o‰er occupiers across our locations, particularly those reliant on daily footfall, •nancial and other assistance to enable them to weather a prolonged period of business disruption and through the gradual return to more-normal trading. Similarly, we would support our residential tenants, including those from overseas who wished to return home or were a‰ected by reduction or loss of employment income, as a result of the pandemic.

Extensive engagement with our commercial occupiers has focused on providing •nancial assistance tailored to their particular circumstances to give them the con•dence to resume trading as and when conditions permit. This has principally been through rent waivers or deferrals, drawing on rent deposits and, where appropriate, restructuring and extending leases to provide greater certainty of occupation. We waived residential tenants' notice periods if they needed to vacate early, or provided rental support where appropriate.

The safety of those who work in, visit or live in our locations has been paramount. Working with our occupiers, we have implemented social distancing protocols across our buildings and public streets and spaces, including provision of outdoor seating, enhanced cleaning, hand sanitiser stations, signage and advice on Covid-safe operating procedures.

Inevitably, our usual programme of events and activities to promote our locations and our occupiers' businesses has been a‰ected by Government restrictions on public gatherings. We have refocused our marketing activities to use social media channels to maintain public engagement with our areas and occupiers, and provide information and advice on changing Government guidance.

How has this year's financial performance been affected?

The •rst half of the •nancial year saw relatively normal operating conditions, with the pattern of rent collection and expenditure largely una‰ected. However, there was a noticeable

decline in new lettings and enquiries from mid-February as pandemic concerns grew and business con•dence declined.

From March onwards, collections of rents and service charges have been materially a‰ected by occupiers' loss of trading and income. Despite Government •nancial assistance, and our own continuing initiatives to support occupiers, we are seeing an increase in business failures, and the handing back of space not only in our portfolio, but across the West End.

The uncertain near-term outlook is a‰ecting the prospects of collecting arrears and increasing the risk of tenant insolvency, leading to a high level of charges for expected credit losses and impairment of lease incentive and deferred letting balances totalling £21.9 million at the year end.

As a consequence of the unprecedented operating conditions throughout the second half, net property income fell to £74.3 million, a reduction of £23.7 million compared with last year. After a revaluation de•cit of £698.5 million, the loss after tax was £699.5 million (2019: pro•t: £26.0 million). EPRA earnings, which exclude revaluation gains and losses, declined to £29.4 million compared with £54.6 million in 2019.

Over the year, our portfolio valuation decreased on a like-for-like basis by 18.3% to £3.1 billion. This decline reˆects the expected loss of income until operating conditions recover, an increase in vacancy across the West End, particularly of retail and hospitality space, and subdued demand for space, which together are a‰ecting the near-term outlook for rental levels and investor demand. The valuation decreases in both our wholly-owned portfolio and the Longmartin joint venture were the main drivers in net assets declining by £726.6 million to £2,280.6 million. At 30 September 2020, EPRA NAV was £7.43 per share, down 24.3% over the year (2019: £9.82 per share).

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Shaftesbury Annual Report 2020 Strategic report Q+A with the Chief Executive

What steps have you taken to maintain the financial resilience of the business?

The Board has always followed a prudent, forward-looking approach to ensuring the Group maintains a resilient •nancial structure, with an appropriate mix of equity and debt to

minimise risk and support its long-term strategy.

Since April, with much-reduced income collection and growing vacancy, our focus has been to conserve liquidity, reducing non- essential expenditure, placing a moratorium on new schemes and acquisitions, other than by exception. In addition, the Board took the di•cult decision to suspend dividends in respect of the current •nancial year, with the intention of resuming distributions as soon as there is a sustained recovery in rental income to more-normal levels, whilst always complying with our REIT PID obligations. We have continued open and constructive discussions with our banks, term loan providers and bondholders to keep them appraised of operational conditions and the impact of Covid-19 disruption on their security. Where required, we have continued to agree waivers of income-related covenants.

Anticipating the consequences of a protracted period of pandemic- related disruption and recovery, and the potential near-term implications for revenue and property values, in October 2020, the Board announced a fully-underwritten equity issue to raise £297 million before costs, together with an open o‰er to raise a further £10 million. Completed in November, the issue was well-supported and raised £294.4 million net of costs which has reduced our leverage and re•nancing and asset-related covenant risks, as well as providing working capital to fund forecast operating losses and capital expenditure until macro and local conditions stabilise and business con•dence returns.

How have you supported your team through the pandemic?

An important factor in Shaftesbury's long-term success has been the experience, local knowledge and commitment of our team, and an open culture with a clear set of values

which guide behaviours across the business. Covid-19 disruption, and the priority of ensuring the safety of our people, has meant we have been unable to be physically together as a team since late March. Technology has enabled the business to continue to operate, and we have found ways to maintain close contact even while working remotely in this far from ideal situation. In particular, we have addressed well-being and stress issues, which arise in such unprecedented and uncertain times, with valued, spontaneous face-to-face interaction between colleagues being much reduced.

Being away from the o•ce for an extended period has allowed us to rethink our internal structure and procedures and review our people reward arrangements, sta‰ resource requirements and ways to build more ˆexibility into our working routine, in anticipation of returning to the o•ce.

How have sustainability priorities been addressed over the year?

Although Covid-19 issues have dominated our lives this year, we have not lost sight of the importance of advancing our initiatives to further reduce the environmental impacts of our

business operations, including action to address the global climate change emergency, and ensuring our support for local communities responds to the particular challenges they have faced this year.

Our approach to the sustainable re-use of existing buildings, through repurposing and improving their environmental performance, is a fundamental aspect of our strategy. We have now set ambitious targets for reducing our own direct carbon emissions and will be announcing Science Based Targets and a net zero carbon target in 2021. Air quality, greening, freight and waste consolidation and working with our occupiers to help address their environmental challenges and opportunities, will continue to be priorities in the year ahead.

During the pandemic, together with neighbouring owners, we have worked with Westminster and Camden councils to support the recovery of local hospitality businesses with the provision of outdoor seating to supplement their trading. This initiative has involved pavement widening and partial road closures, which have been generally well received, and have demonstrated how carefully managed, permanent public realm measures can improve the local environment for both residents and visitors.

Collaborating with our occupiers, neighbours and other stakeholders is integral to our approach. Based in Carnaby, "working above the shop", provides us with •rst-hand knowledge of local issues and opportunities. The Board was conscious at the outset of the March lockdown that communities around us, especially young people, would face particular challenges. We established a Covid-19 Community Fund, supported by waivers of 20% of Board remuneration from April to July, which has provided •nancial and in-kind support of over £310,000 to support local groups addressing urgent needs across Westminster and Camden. Together with our other donations, time and in-kind donations of space, our community support this year amounted to £866,000.

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Shaftesbury Annual Report 2020 Strategic report Q+A with the Chief Executive

Strategic report

How are you positioning the business for recovery?

In the years to come, 2020 may be remembered as "The Covid-19 year which changed the world". The extent of disruption the pandemic is having on the institutions of

Government, businesses and communities is challenging accepted certainties and norms, with long-term •nancial and other rami•cations which are only now beginning to become apparent. We are already seeing an acceleration of pre-pandemic trends in retail, spending habits, working practices and, perhaps, most importantly, how the priorities and aspirations of the younger generation are changing.

Embracing change and innovation have always been part of Shaftesbury's DNA. Our skills and approach in repurposing our buildings to adapt to trends in occupier demand, curating our locations to meet the ever-changing expectations of businesses and the millions who visit, and collaborating with a wide range of stakeholders, will enable us to navigate a fast-moving operating environment. We are preparing further changes in the year ahead to ensure we have the skill sets, data and agility to deliver the continual evolution of our business model and operational strategy.

In the year ahead, the widespread distribution of e‰ective vaccines will bring a gradual return of con•dence and activity across the West End and, a recovery in domestic footfall and spending to our villages. At the present time, it is not possible to predict at what point conditions will improve but it is likely social distancing and other restrictions, with the risk of further lockdowns, will continue into the spring and possibly early summer, putting further •nancial strain on many of our occupiers. The overhang of unusually high vacancy across the West End will take time to be absorbed, but the particular appeal of our carefully-curated locations, our innovative mid-market o‰er, modest rents and ˆexible leasing terms, will be an important advantage for us. Once stability has returned, we will consider strategic acquisitions to our portfolio, and selective disposals of buildings no longer considered core to our long-term strategy.

The direct and immediate impact of restrictions to control the pandemic are being seen in cities across the country and much of the world. However, the economies of London and the West End have a long history of structural resilience, having weathered many episodes of challenges and uncertainties. Their unique features, which come from a culture of constant evolution across a broad-based economy, attracting talent, creativity, innovation and investment from across the world, will hasten their recovery and reinforce their enduring appeal to businesses, visitors and residents alike. The long-term prospects for our portfolio, located in the busiest and liveliest parts of the West End, are underpinned by these valuable qualities, together with the experience, innovation and enthusiasm our team bring to its management.

Although near-term challenges will be with us throughout 2021, I am con•dent we are well placed, both •nancially and operationally, to return to long-term prosperity and growth as the current global and local pandemic disruption recedes into history.

Brian Bickell

14 December 2020

Peter Lawrence Levy OBE

The Board of Shaftesbury was saddened to learn the death of Peter Levy, the Company's founder and former Chairman, in November, following a short illness.

Peter and members of his family founded the Company in 1986, with an initial capital of £10 million. It was €oated in October 1987. Peter chaired the Board until his retirement in September 2004.

Peter was widely-known and well-respected across the real estate sector, particularly as a partner in DE & J Levy, the West End estate agency started by his father and uncle in the 1930s. He had a wide range of charitable interests, including the Cystic Fibrosis Trust, where his fundraising was recognised with the award of an OBE.

"Shaftesbury's reputation, culture and values owe much to Peter's foresight and commitment in the formative years of the business. He will be greatly missed not only by his family but all those who were fortunate to know him and work alongside him."

Brian Bickell

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Shaftesbury Annual Report 2020 Strategic report

Covid-19:

impact and response

			Lockdown	Begin to	F&B reopened	Enter 2nd	2nd
year	120%		(non-essential retail	unlock	UK High Street average	wave	Lockdown
	closed)		at 61% of 2019 level	Rule of six,
last	100%		UK High Street average		West End at 39%	work from
week		at 20% of 2019 level			home,
80%		West End at 8%			Tier 2
the same
60%
a % of	40%
as
footfall	20%						West End
2020
0%	February	March
	January

Source: New West End Company

Impact on West End footfall and trading

The success and prosperity of the West End is based on its huge, seven-days-a-week footfall comprising its large working population, residents and domestic and international visitors.

Inevitably, the Covid-19 pandemic and Government-imposed social distancing measures have had, and continue to have, a material adverse e‰ect on normal patterns of footfall, activity and business in the West End.

From early February, growing reports regarding the rapid spread of the Covid-19 virus began to impact leasing activity, with a number of negotiations put on hold or terminated. From early March there was a noticeable decline in visitor numbers and spending, both in the West End generally and our locations. The Government formally announced a lockdown on 23 March, although in the West End most activity had already ceased.

Following the •rst lockdown, footfall began to build over the summer months, reaching around 50% of pre-Covid levels. This was particularly noticeable in the vicinity of Oxford Street and Regent Street, the West End's major shopping streets, and Carnaby, Soho and Leicester Square, its major dining and leisure destinations. In Seven Dials, after a slower start, footfall patterns recovered in line with these locations.

As Government restrictions tightened from mid-September, footfall decreased again and then largely evaporated during the second lockdown in November. Together with restrictions on hours of trade and social distancing, this had a very challenging impact on all consumer-facing,footfall-reliant businesses, which are inevitably cash-ˆow sensitive. Consequently, this has presented material operational and •nancial challenges for our occupiers, particularly those in our restaurants, cafés, pubs and shops. O•ce occupiers, particularly those with direct or indirect exposure to consumer-facing businesses, and residential tenants have also been a‰ected, but to a lesser extent.

Covid-19 timeline

February 2020

• Global Covid-19 concerns grow
• Footfall and spending begin to decline, first in Chinatown, then across the
  West End
• Reduced leasing activity as global business confidence declines

March 2020

• Government restrictions to halt spread of Covid-19
• Footfall and commercial activity at negligible levels
• Construction activity halted

April -June 2020

• Plans begin to emerge for gradual relaxation of Government restrictions
• Non-essentialretail allowed to open from June 15

Portfolio activity report: page 59

Portfolio valuation report: page 56

Portfolio activity report: page 59

Portfolio activity report: page 59

Financial results: page 63

Portfolio activity report: page 59

Shaftesbury Annual Report 2020 Strategic report Covid-19:Impact and response

Strategic report

In turn, these challenges have a‰ected occupiers' ability to meet both rental and other lease obligations or remain solvent. For us, there have been a number of consequential outcomes:

• Rent collections have been signi•cantly below normal levels. For the second half of our •nancial year, cash collections represented 53% of

+contracted income.

• Reduced net property income as a result of rental income write-o‰s, impairment charges and additional costs, either due to increased vacancy or tenants' inability to pay for service charge expenditure. Net property income for the year was £74.3 million, down 24.2%

+year-on-year.

• The amount of vacant space across the West End, in general, and in our portfolio, has increased signi•cantly. At 30 September 2020, wholly-owned EPRA vacancy was 10.2%, compared with a 10-year+pre-Covid average of 2.9%. By 30 November 2020, it had risen to 12.0%.

• Occupational demand has slowed, with operators often not prepared to commit to leases until there is better visibility on the timing of the return to more-normal footfall and trading. The rental value of commercial leasing activity in the second half of our •nancial year was £4.8 million, compared with £16.9 million during the same period

+last year. Of the total, rent reviews accounted for £2.7 million.

• The change in the balance between supply of, and demand for, space has led to pressure on rental levels. Together with general uncertainty, this has resulted in an 18.3% like-for-like decrease in the valuation of our wholly-owned portfolio in the year, most of which

+occurred since pandemic concerns •rst materialised.

• With more competition for occupiers, we are now having to incur more capital expenditure on our vacant food, beverage and retail

+units to maximise their letting prospects.

The Government has announced that London and parts of the Home Counties will be moving to Tier 3 restrictions, beginning from 16 December 2020 until further notice. As a result, all hospitality businesses will close other than for takeaway or home delivery services and non-essential travel into or out of the Tier 3 area is discouraged.

Preserving long-term value by supporting tenants and maintaining occupancy

A key aspect of our strategic response has been to help our occupiers through this challenging period by providing •nancial and other practical support, alongside the Government's various initiatives such as the Coronavirus Business Interruption Loan scheme, business rates relief, furloughing employees, temporary VAT reductions and the "Eat Out to Help Out" scheme. Maintaining occupancy across our portfolio, wherever possible, will position Shaftesbury for sustained recovery over the medium and long-term, as the post-pandemic recovery progresses.

Our •nancial support predominantly has come through a combination of:

• Part waivers of contracted rents;
• Drawing on rental deposits, which we have not required to be replenished;
• Agreeing payment plans structured over a period which reˆects a gradual return to more normal trading; and
• Restructuring and/or extending leases, to provide greater certainty for occupiers.

The eventual recovery of amounts deferred and outstanding will depend on tenants' ability to meet these commitments. The future viability of their businesses will be inˆuenced by pandemic-related factors including further Government measures which could adversely a‰ect trading conditions and the pace at which footfall and spending recovers.

From 1 October 2020, we have o‰ered most commercial occupiers the option to pay rent and service charges monthly rather than quarterly in advance, in order to help align our revenue collection with occupiers' cash ˆows.

• Portfolio activity report: page 59

July -August 2020

• F&B permitted to reopen on 4 July
• Improvement as local and domestic day visitors return, followed by gradual return of office workers
• F&B trade benefits from "Eat Out to
  Help Out" scheme
• Footfall approaching 50% of pre- pandemic level

September 2020

• Concerns over a second wave grow with extensive "local lockdowns" in
  Scotland, Wales and the North
• Government imposes national 10pm
  F&B curfew, new "rule of six" restricting size of groups and return to work guidance reversed

October 2020

• Government introduces new three-tier alert framework to address regional outbreaks. London was placed in tier two, the "High risk" tier, which means two or more households are not permitted to mix indoors

Shaftesbury Annual Report 2020 Strategic report Covid-19:Impact and response

Food and beverage, leisure and retail

After an extended period of closure, most of our restaurants, cafés, pubs and shops reopened over the summer. They have adapted their operations to ensure e‰ective social distancing measures are in place, and many have adopted revised trading hours to reˆect footfall patterns. Food and beverage businesses have bene•ted from the use of outdoor seating, especially in our permanently pedestrianised streets and courtyards in Carnaby and Chinatown, as well as in streets where Westminster City Council granted temporary road closures and time-limited permissions to use external seating. The temporary closure by Camden Council of streets around Seven Dials outside servicing hours is presenting the opportunity to trial a tra•c-reduction scheme. With the second UK lockdown in November 2020, virtually all our food, beverage and retail premises closed, other than for takeaway service, although these are now back open and trading.

Despite the improvement in footfall during the summer, many of the Group's occupiers, particularly retailers, continued to report considerably lower turnover than in normal conditions. The sustained return to the healthy trading volumes across the West End will depend on Government decisions on social distancing measures in light of the future course of the pandemic, a recovery of con•dence in the use of public transport and a return to working in o•ces rather than from home. We have continued our dialogue with occupiers to agree bespoke packages of rental and other measures to support their recovery, including rent payment plans, waivers, deferrals, lease restructuring, service charge reductions and marketing initiatives.

In view of the uncertainty surrounding the timing of the return to more normal footfall and trading conditions in the West End and continuing Government restrictions, we extended our support arrangements to the end of 2020, and, for the period of the second lockdown, we provided further rent waivers. Now that London is to enter Tier 3 restrictions from 16 December 2020, we anticipate that further measures to support our occupiers will be required as trading conditions will be severely impacted during the important period leading up to Christmas and over the New Year, having already been disrupted by the second lockdown. The extent of any continuing measures of support will depend on the duration of these restrictions, as well as the prospects for the •rst half of 2021 and beyond.

Offices

Many of our o•ce occupiers are SMEs operating in the media, creative, fashion and technology sectors, and which often have direct or indirect exposure to businesses which themselves have been a‰ected signi•cantly by the pandemic, such as those in retail, food and beverage, and the performing arts. Despite this, rent collections have been signi•cantly less a‰ected than from our retail, food and beverage tenants and, accordingly, limited concessions have been granted on a case-by-case basis. However, we have experienced an increase in leases not being renewed, leading to growing o•ce vacancy.

• Portfolio activity report: page 59

Residential

Typically, our 624 apartments are occupied by those seeking a base in the West End for either work or study, and are particularly popular with younger people from overseas. As a result of the •rst lockdown restrictions, many tenants chose to return home, leaving ˆats unoccupied. With the continuing uncertainty, many chose not to return to the UK for the time being and vacated permanently. In these circumstances, the Group waived any commitments under their tenancy agreements. Where appropriate, the Group is o‰ering support to residential tenants to assist them in meeting their rental commitments.

Longmartin

Similar support has been granted by the Longmartin board to its food, beverage and retail occupiers, on a case-by-case basis.

Addressing financing risk

The adverse operating conditions impacted our •nancing arrangements with interest cover covenants under pressure, reduced loan-to-value headroom, an expectation that near-term liquidity needs would have to be funded by undrawn revolving facilities, upon which we were reliant on covenant waivers and increased re•nancing risk. With •nancing risk elevated beyond the Board's tolerance, in November 2020, we increased our capital by £294.4 million, net of expenses, through an equity issue to ensure we maintain a strong •nancial base, are positioned to return to long-term growth as pandemic issues recede and, should conditions improve, have capacity for portfolio investment.

• Financing: page 67

November 2020	December 2020	Outlook
• 2nd lockdown	• 2nd national lockdown	• Risk of further/continuing
	ends	restrictions and protracted
	• Stringent social distancing	recovery
	restrictions remain in place	• Vaccine possibility

• London back in Tier 2, rising to Tier 3 from 16 December

• Work at home advice

Shaftesbury Annual Report 2020 Strategic report Covid-19:Impact and response

Strategic report

Working with our other stakeholders

The importance of engaging and working collaboratively with our wide range of stakeholders has been more evident than ever during this challenging period.

We are ensuring appropriate service levels are maintained across our portfolio and have developed a comprehensive strategy to safeguard commercial occupiers, residents and visitors, as activity returns to our locations. This includes supplemental cleaning, hand sanitiser points, street and footfall management and signage. Occupier and visitor communications, as well as engagement with our local authorities are important aspects of this strategy.

Unlike most other city locations, the West End is unusual in its land ownerships. Our 16-acre portfolio is part of a patchwork of long- established privately-owned estates and other corporate owners. In addition, large areas are designated Business Improvement Districts, which bring together individual owners and their tenants. Together with our neighbours, we face common challenges arising from the impact of the pandemic, and are collaborating on initiatives to support the recovery of the West End.

Working with London & Partners, the Mayor of London's promotional organisation, we are part of a group of West End organisations funding the delivery of important marketing plans to encourage local and domestic leisure visitors back to London. While travel restrictions remain in place, London's international marketing is focused on reminding people about what makes London great to encourage them to visit when they are able to do so. Speci•cally for the West End, we are collaborating with other stakeholders on a campaign, #MyWestEnd, to encourage consumers back.

The pandemic period has presented challenges and opportunities for our team. We have focused on sta‰ well-being, clear and regular communications, investment in technology, regular consultation and how we can return to normal life in the recovery period.

• Our people and culture: page 42

Support for our local communities has continued, including the establishment of a fund to support our community partners and local not-for-pro•t organisations, and help people a‰ected by Covid-19 within the boroughs of Westminster and Camden, which, to date, has provided •nancial and in-kind support of over £310,000. Funding for this initiative came from savings made following the Board's decision to waive 20% of executive director base salaries and pension contributions and non-executive director fees for the four months from 1 April 2020.

• Remuneration report: page 100

Looking ahead to recovery

Recovery in footfall and business con•dence will be dictated by the course of the pandemic in the short and medium term, and the consequential restrictions imposed by the UK and other governments. The advent of e‰ective vaccines will boost con•dence once widely available and hopefully quicken the recovery, although, at this stage, it is too soon to predict the timing of the return of con•dence and footfall.

The pace of recovery in our villages will depend on:

• The end of tier 3 restrictions in London and surrounding areas;
• how quickly West End visitor volumes recover;
• the alleviation of social distancing measures;
• a recovery in public transport usage in and out of the West End, in light of the need to maintain social distancing;
• a return to more-normal levels of daily o•ce workers in the West End;
• a resumption and recovery in international business travel and tourism to the West End; and
• the relaxation on restrictions which prevent or discourage leisure visits to the West End's visitor attractions, such as theatres, cinemas, galleries, museums and historical sites.

With continuing operational uncertainty for our occupiers, we expect EPRA vacancy across our portfolio to increase in the short term, which, along with availability of space across the West End, will continue to put near-term pressure on rental levels and valuations. However, as footfall builds and con•dence recovers, occupier demand and vacancy will return to more normal levels. We are already seeing enquiries for space in our locations, but reˆecting current market conditions, many potential occupiers are currently looking for a higher speci•cation of landlord •t out and greater leasing ˆexibility.

We •rmly believe that our support for tenants, through good times and bad, is a key part of our brand and our values, and will attract occupier demand in our carefully-curated, lively locations.

Page 9

Since the early 1990s, we have invested exclusively in the heart of London's West End, concentrating on iconic, high-footfall locations

£3.3bn portfolio valuation1

TOTTENHAM COURT ROAD

GOODGE STREET

Fitzrovia

0.9 acres

4% of portfolio2

Residential

	13%
fices 20%		37%	Food
£140.3m	beverage
		and leisure
	ERV3

30%

Retail

1. Combined portfolio including our 50% share of Longmartin
2. % of combined portfolio
3. Wholly-ownedportfolio

Page 10

Covent Garden

5.0 acres

25% of portfolio2

			COVENT GARDEN
Longmartin
		LEICESTER SQUARE
1.9 acres
Chinatown
5% of portfolio2
Soho	3.8 acres
21% of portfolio2

1.5 acres	Carnaby
8% of portfolio2
	4.8 acres
	37% of portfolio2

OXFORD CIRCUS

Strategic report

PICCADILLY CIRCUS

Page 11

Shaftesbury Annual Report 2020 Strategic report ce tional o t olio in the hea t o on on s est n

Exceptional portfolio in the heart

Virtually impossible-to-replicate portfolio

Our portfolio has been assembled over 34 years. The buildings we seek to acquire are typically in long-term private, rather than institutional, ownership and existing owners are generally averse to selling assets which have a long history of high occupancy, reliable cash •ow and long-term growth prospects. Consequently, it would be virtually impossible now to assemble and replicate a portfolio such as ours in the West End.

om o n enefits o o ne shi cl ste s

Establishing and extending ownership clusters in our chosen locations enables us to implement a cohesive, long-term management strategy to unlock rental and capital value potential while compounding the bene•ts of individual improvements we make, such as increased footfall and spending, and higher rental tones, across our nearby holdings.

t ct	al im alance et een s l o	an
eman	o s ace ac oss the a eas in	hich
e in est

In the West End, listed building and conservation area legislation and local planning policies, together, limit the opportunity for large-scale redevelopment to increase the supply of new accommodation materially, particularly at lower-•oor levels. Against a backdrop of constrained supply of space, there is a long history, in the West End, of good occupier demand from a wide variety of national and international occupiers for food, beverage, retail and leisure accommodation, particularly in our carefully- curated, a€ordable locations. Consequently, our portfolio has historically bene•ted from high occupancy levels and growing income, which together underpin the long-term prospects for rental growth.

i e	se il in s ith mana ement
e i	ilit

Our portfolio of mostly smaller, mixed-use buildings provides considerable management •exibility. This includes the ability to improve, recon•gure and repurpose space, enabling us to adapt buildings to meet current demand and anticipate future market trends in occupier requirements.

Evolving the mix of uses is an important factor in the long-term growth in rental income and capital values. Over recent years, we have increased the number of interesting casual dining and leisure concepts in our villages through changes of use, repurposing less valuable retail space, extending existing units or by acquisition. Our 317 restaurants, cafés, pubs and bars are important drivers of footfall, dwell-time and trading in our villages and, at 30 September 2020, accounted for 37% of portfolio ERV, up from 32% at 30 September 2010. Over that same period, the proportion of ERV from retail has fallen from 40% to 30%.

Similarly, in recent years we have repurposed our smallest o‹ces, which no longer meet the needs of modern businesses, to residential accommodation.

Carnaby

Valuation £1.2bn

Our largest village, Carnaby is an iconic shopping and dining destination, a few minutes from both Oxford Circus and Piccadilly Circus. Famous for its history as the centre of "Swinging Sixties London", it has reinvented itself throughout the decades oda , its streets, the majority of which are pedestrianised for most of the day, showcase international and

ritish labels, rom flagships to independent brands and new concepts. It is also home to a lively cluster of restaurants, cafés and bars, centred on Kingly Court, Kingly Street and Ganton Street.

esidentialFood beverage and leisure

fices £58.0m

ERV

etail

hinato n

Valuation £0.7bn

Chinatown is a bustling village with a large far-eastern community at the heart of the West End's entertainment district, next to Leicester Square and Shaftesbury Avenue, and close to Piccadilly Circus. Its large concentration of restaurants and cafés offers an evolving mix of traditional and modern Chinese and pan-Asian culture and cuisines.

esidential

fices

etail

£30.1m

ERV

Food beverage and leisure

Page 12

Shaftesbury Annual Report 2020 Strategic report Exceptional portfolio in the heart of London's West End

of London's West End

Strategic report

Covent Garden

aluation bn

Our wholly-owned properties in Covent Garden are located in Seven Dials, the Opera Quarter and the Coliseum area. Seven Dials comprises a seventeenth century network of streets, courtyards and warehouse buildings radiating from the sundial monument, which have a mix of shops, restaurants, cafés, bars, theatres and hotels.

To the east and west of the Covent Garden Piazza, the Opera Quarter and Coliseum holdings have a high concentration of restaurants, cafés and bars reflecting their close proximit to ma or theatres, cinemas and hotels.

Soho

Valuation £0.3bn

South of Oxford Street and between Regent Street and Covent Garden, Soho is home to many creative businesses, independent boutiques, iconic restaurants, cafés, bars, and clubs. By day, Soho offers a wide variety of independent, quirky shops and is a hub for creativity with many small businesses, typically in the media, tech and fashion sectors. In the evening and night-time, its distinctive atmosphere and proximity to the West End's main leisure and cultural attractions, makes it a popular destination for visitors and the West End's large working population.

esidential

fices £35.4m

ERV

etail

Food beverage and leisure

esidential

Food beverage

fices £11.3m and leisure

ERV

etail

Longmartin

Food

esidentialbeverage and leisure

£8.8m

ERV

ficesetail

Longmartin

Joint Venture

Valuation £0.2bn

Longmartin owns a long leasehold interest in a -acre cluster o mixed-use buildings, centred on

St Martin's Courtyard in Covent Garden. This offers a range of food, beverage and retail concepts, alongside , s t o o fice space and apartments.

Fitzrovia

aluation bn

To the north of Oxford Street and close to Tottenham Court Road, Fitzrovia is London's oldest dining district, renowned for its abundance of small restaurants, bistros, cafés, pubs and bars. Its large residential, student and working populations add to the area's buzz and cosmopolitan feel. Our ownerships are on, or close to, Charlotte Street and Goodge Street.

esidential		Food
	£5.5m	beverage
	and leisure
fices	ERV
etail

• Our 50% share

Page 13

Shaftesbury Annual Report 2020 Strategic report Portfolio uses

Food, beverage and leisure

At the centre of London's food scene, the West End has a wide choice of high quality, creative and accessible dining experiences, from breakfast through to late night dining.

We are the largest single provider of food and beverage space in the West End, curating high-pro•le and busy destinations such as Chinatown, Kingly Court and Neal's Yard. In our experience, a strong food and beverage o‰ering has a halo e‰ect on footfall, attracting visitors, increasing dwell time and driving improved trading in our villages.

Across our villages, we are able to provide a broad range of unit sizes, ensuring we can attract a wide spectrum of food and beverage occupiers. The majority of our restaurants provide casual dining, with a focus on ambience, quality and experience, often with an all-day o‰er. We favour mid-market and distinctive formats, often supporting new independent concepts or international entrants, rather than formulaic chains.

Restaurant tenants invest considerable sums •tting out their space, sometimes spending the equivalent of three to •ve years' rent and, therefore, we grant longer leases than for shops, to provide an extended period over which occupiers can amortise this cost.

Historically, leases were often granted over whole buildings and provided tenants with renewal rights on expiry. We •nd that upper ˆoors often can be under-utilised and, where opportunities arise, in recent years, we have sought to negotiate the surrender of these leases to secure vacant possession. This has enabled us to improve the con•guration of space on the lower ˆoors, attract new operators on more bene•cial terms, and often release valuable upper ˆoors for other uses.

In recent years, we have also reduced the term of leases, introduced more ˆexibility at expiry and included turnover-related rental top-ups, giving us the higher of market rent and a percentage of sales. Before the onset of the Covid-19 pandemic, this had provided a useful contribution to both income and earnings. We believe that these arrangements will continue to deliver value when normal trading conditions return.

• Covid-19:impact and response: page 6

1. All data relates to wholly-owned portfolio
2. % of ERV
3. As at 30 September 2020
4. Leasing activity during the year ended 30 September 2020

37% of our portfolio2

0.7m sq ft

317 restaurants, cafés, bars and pubs

8 years weighted average unexpired lease term3

£8.2m lettings/rent reviews4

Fitzrovia 5%	Carnaby 27%
Soho 8%
£52.8m	Covent
ERV by village
	Garden
Chinatown	25%
35%

Typical restaurant lease terms

	Historical	New Leases
	Leases
Term	25 years	15 years
Rent reviews	Five-yearly,	Five-yearly,
	upward-only	upward-only
Security of tenure on	Yes	No
expiry
Turnover-related	No	Yes
top-up
Space leases typically	Whole	Operational space only
granted over	buildings	(i.e. not upper ˆoors)
Proportion of our	49%	51%
restaurant leases
(by ERV)
Incentives	N/A	Contribution to occupier
		•t out through rent-free
		period, and enhanced
		speci•cation of
		accommodation,
		depending on market
		conditions

Page 14

Shaftesbury Annual Report 2020 Strategic report Portfolio uses

Retail

A key element of the character of our villages is the wide range of shop sizes across the buildings and streets, from boutiques to larger flagships.

Ensuring we have a fresh and di‰erentiated retail mix is fundamental in ensuring we create and maintain distinctive locations. As with our food, beverage and leisure space, tenant selection is critical. We target brands with new concepts, or •rst stores and ˆagships, rather than formulaic national chains found in shopping centres and high streets. Many of our retail occupiers are independents, an important factor in making our villages distinctive destinations. There is a current trend away from "fast fashion", with shoppers in our areas preferring experience, wellness, sustainable products and brands with an ethical purpose.

Of our 294 shops, 72% by number are small to medium-sized (ERV < £150,000 p.a.). This allows us to provide a variety of rental levels and retail formats, from start-ups to more established operators, while o‰ering retailers ˆexibility to expand or introduce new concepts within the villages. Crucially, retail rental tones in our high-footfall and spending locations are competitive compared with nearby streets.

30% of our portfolio2

0.4m sq ft

294 shops

3 years weighted average unexpired lease term3 £6.9m lettings/rent reviews4

Carnaby 52%

Fitzrovia 2%

Strategic report

We are seeing a trend for retailers requiring smaller shops. This is driven by a lower overall commitment in rent and •t out, together with less need for storage space due to more e•cient stock replacement models. Our team is skilled in the recon•guration and repurposing of space to alternative uses, which allows us to respond to this changing

Soho 7%

£42.0m

ERV by village

demand.

Retailers, particularly those exposed to structural changes in shopping habits, nationally and internationally, are innovating and modifying their strategies more quickly, to respond to ever-changing consumer trends. Consequently, our ˆexible approach to leasing is becoming ever-more important. Our typical retail leases have always been relatively short, allowing us to keep the brand line-up fresh and interesting. We trial new concepts through pop-ups and short-term leases. As well as adding interest to our villages, this provides the opportunity to assess performance and the value they add to our streets. Currently, we are receiving enquiries from occupiers looking to secure space in our locations for the longer term, but require initial concessionary rents and/or turnover-linked elements, gradually rising to market standard terms.

We expect retail headwinds to prevail for some time and occupiers are likely to become ever-more discerning over the locations and stores they choose. With the combination of our high footfall streets, modest rents, ˆexible approach to leasing and reputation for encouraging innovation, we are well-placed to respond to these challenges.

• Covid-19:impact and response: page 6

1. All data relates to wholly-owned portfolio
2. % of ERV
3. As at 30 September 2020
4. Leasing activity during the year ended 30 September 2020

Chinatown 14%

Covent Garden 25%

Typical lease terms

Smaller shops: 3-5 years

Larger shops: 5-10 years

Contribution to occupier •t out through short rent-free period, and enhanced speci•cation of accommodation, depending on market conditions

Page 15

Shaftesbury Annual Report 2020 Strategic report Portfolio uses

fices

Offices are an intrinsic part of the mix of uses in our villages, bringing a working population which is an important source of customers for restaurants, cafés, pubs, bars and shops.

Our o•ce space is generally small, a‰ordable, and mostly situated on ˆoors above our restaurants, cafés and shops. We can o‰er a range of o•ce sizes, allowing our occupiers to grow within our portfolio.

Typically, our o•ces are occupied by small and medium-sized businesses in the media, creative, fashion and tech sectors. These have traditionally found their natural home in Carnaby, Soho and Covent Garden, and are attracted by the vibrant locations, ˆexibility and a‰ordable accommodation we provide, together with the community of similar businesses in this creative part of London.

Our average letting is 1,460 sq. ft. at £60 per sq. ft. (2019: £59 per sq. ft.)

and average ERV is £63 per sq. ft. (2019: £65 per sq. ft.).

The pandemic has accelerated existing trends in the o•ce market, with occupiers increasingly requiring •tted "plug and play" space and ˆexible lease terms. Furthermore, remote working may change the way o•ces are used once the pandemic recovery begins which may result in changes to space requirements. We are responding to new requirements by building on our successful trials of a ˆexible workspace concept which includes simple leases, •tted and cabled space, •xed costs and ˆexible terms. Our tenants' sta‰ already bene•t from privilege cards, o‰ering discounts in our shops, restaurants and cafés and we are now considering how we can introduce more amenities, for example, cycle parking facilities, showers and managed meeting room space.

• Covid-19:impact and response: page 6

1. All data relates to wholly-owned portfolio
2. % of ERV
3. As at 30 September 2020
4. Leasing activity during the year ended 30 September 2020

20% of our portfolio2

0.4m sq ft

2 years weighted average unexpired lease term3

£2.5m lettings/rent reviews4

Carnaby 67%

Fitzrovia £27.6m

2%ERV by village Soho 8%

Chinatown 4%

Covent Garden 19%

Typical lease terms

Standard smaller o•ces: 3-5 years

Standard larger o•ces: 5-10 years, with break options at year 5

Incentives: Market standard rent-free period. No contribution to •t-out costs

Page 16

Shaftesbury Annual Report 2020 Strategic report Portfolio uses

Residential

Our tenants are typically students or people working in London, often for a few years only, who like the convenience and bustle of the West End and the sense of community of being part of one of our villages.

Our residential portfolio comprises mostly mid-market ˆats - mainly studios and one or two-bedroom apartments, many of which have been created from the conversion of small o•ces back to their original residential use.

We let our apartments unfurnished, on three-year Assured Shorthold Tenancies. These leases are ˆexible, including rolling mutual break options after six months, and provide for annual RPI rent increases. Our experience is that, in normal times, there is a high incidence of leases that renew at the end of the term.

Most of the value of our buildings is in the commercial uses on the lower ˆoors. Consequently, we prefer to lease, rather than sell apartments in order to retain control over whole buildings to realise the long-term potential in those valuable lower ˆoors.

We have a rolling programme to upgrade our apartments. This presents opportunities to improve environmental performance, modernise layouts and upgrade their speci•cation to ensure they remain competitive and to maintain high occupancy rates.

13% of our portfolio2

0.4m sq ft

624 apartments £6.0m lettings/rent reviews3

Fitzrovia 9%

Carnaby 19%

Soho 10%

£18.0m

ERV by village

Strategic report

• Covid-19:impact and response: page 6

Chinatown 24%

Covent Garden 38%

Typical lease terms

Three year Assured Shorthold Tenancies Let unfurnished

Annual RPI uplifts

Mutual break options on a rolling two-month basis after the •rst six months

1. All data relates to wholly-owned portfolio
2. % of ERV
3. Leasing activity during the year ended 30 September 2020

Page17

Page 18

Making a positive contribution

+

Strategic report

Page 19

Shaftesbury Annual Report 2020 Strategic report

Why London's West End?

London's pre-eminent position amongst the world's leading cities continues to underpin the long-term prospects for our portfolio, which is located in the heart of the West End, a vibrant and popular global destination.

London

9.3 million

on on s o lation1
c. 23%	2
cont i tion to

315 million

domestic and international visits3 in 2019

21.7 million

inte national to ist isits to London4 in 2019

West End5

>200 million

ann	al	isits to the est	n 6
c
o	in	o lation in the	it o

Westminster7

Largest

evening & night time economy in the UK7

>200 million

assen e s se the si	n	e o n
stations closest to o	illa	es8

Global appeal brings prosperity a broad and resilient economic base

The largest city in Western Europe, London is a global creative, nancial and commercial centre and one of the world's most popular visitor destinations. In 2019, it attracted an estimated 315 million domestic and international visits and its economy generates 23% of UK Gross Value Added (GVA).

The city's population is currently around 9.3 million, with growth to

10 million¹ by 2030. Additionally, there is a similar, and growing, population in southern England within easy commuting or visiting distance.

The huge numbers of people choosing to spend their time in London for work, rest and play brings prosperity and gives it a broad and resilient economic base which is not reliant solely on the fortunes of the wider UK economy.

Seven-days-a-week economy with access to an a ent i e se c stome ase

The West End provides visitors with an all-round experience, from its unrivalled concentration of entertainment and cultural attractions, historic buildings and public spaces, to a world-class variety of shopping and some of London's best and most innovative restaurants, cafés, bars and clubs. It is also a location for a wide range of global, national and local businesses, and a popular place to live. This enduring appeal to a local, national and global audience has always been the cornerstone of its economy.

1	World population review 2020	4	Statista
2	O˜ce for National Statistics;	5	Data in normal times, pre Covid-19
3	data for 2018	6	New West End Company
London & Partners	7	City of Westminster
Page 20	8	Transport for London

In normal times, it is estimated the West End attracts in excess of 200 million visits annually, comprising Londoners, a large working population of over 750,000 across a wide range of sectors, and exceptional numbers of domestic and international tourists. Together, they provide a dynamic and prosperous seven-days-a-week economy with access to an a'uent, diverse customer base, and an economy, which is not solely reliant on national conditions and prospects. In turn, this drives sustained occupier demand in a market of constrained supply of commercial space which is fundamental to our portfolio's long-term prospects.

lose to hi h ofile locations an at the heart of the transport network

Our villages are all close to high prole locations (such as Regent Street, Oxford Street and Leicester Square) and are at the heart of the capital's underground and bus network. The six underground stations closest to our villages handle over 200 million passengers annually. Over the longer term, our portfolio is well-placed to benet from increased visits, spending and changing footfall patterns expected once the Elizabeth Line is fully operational. Whilst this has been delayed further, with the central section expected to be operational in 2022, when it is fully open, it will bring an additional 1.5 million people within 45 minutes of the West End.

ectation o et n to os e it in the post-pandemic recovery

The broad-based economies of London and the West End have a long history of structural resilience, having weathered many episodes of challenges and uncertainties. In the post-pandemic recovery, we believe that these economic characteristics will underpin the return to prosperity and sustained long-term growth.

The Shaftesbury proposition

Making great places even better

We adopt a holistic approach to making great places even better for the benefit of our stakeholders, through fostering our areas and providing inspiring experiences for visitors, occupiers and their customers, and residents.

Strategic report

Our values are fundamental to our behaviour, decision making and the delivery both of our purpose and strategic objectives.

• Our people and culture: page 42

By combining our strengths, culture and values, we achieve success beyond profit to:

• deliver sustainable, long-term benefits or our sta eholders and our people;
• build a thriving working culture; and
• make a positive, long-lasting contribution to London's West End.

Impossible-to- replicate portfolio

• Clustered in the busiest parts of the West End

• Focused on uses with a long history of occupier demand exceeding availability

• Small to medium-sized space with competitive rental levels

+ Exceptional portfolio: page 10

Long-term growth prospects

• Benefit from London's global city status, scale and economic outlook

• Exceptional locations bring long-term resilience

+ Why London's West End?: page 20

Experienced and innovative management team

• Forensic knowledge of the West End property and occupier markets

• Skilled in adapting our buildings and space to meet occupiers' evolving needs

+ Our people and culture: pages 53 to 55

Responsible

• Sustainable reuse of buildings

• Good relationships with occupiers, local authorities and communities

• Open and inclusive culture

• Effective governance and risk management

+ Environment: page 29; Stakeholder engagement: page 35; Our people and culture: page 42; Risk management: page 71; Governance: page 81

Long-term estate management strategy

• Focus on sustained income growth

• Adaptable portfolio with a mix of uses

• Modest capital expenditure model

+ Business model and strategy: page 22

Low risk

• Target stable long-term income and capital returns

• Prudent financial and risk management

• Tax-efficientREIT structure + Financing: page 67; Tax: page 64

Page 21

Shaftesbury Annual Report 2020 Strategic report

Business model and strategy

Curating vibrant and thriving villages in the heart of London's West End

Resources Exceptional portfolio

• See pages 10 to 13

Experienced, innovative team

• See pages 53 to 55

Financial resources

• See pages 67 to 69

Underpinned by:

Strategy

Through the holistic, long-term curation of our villages we provide distinctive, welcoming environments for visitors, commercial occupiers and residents. The combination of high-footfall,ever-evolving curation and competitively-priced space which meets the needs of occupiers provides our restaurants, cafés, pubs and shops with the ingredients to trade prosperously. While the Covid-19 pandemic has disrupted this performance over recent months, we believe the fundamentals remain intact to return to growth once the effects of the pandemic have in all significant respects receded

Effective governance and risk management

• See pages 71 to 77, 80 to 117

Culture and values

• See pages 42 to 44 , 84

Stakeholder relationships

• See pages 40 to 41

Page 22

See pages 35 to 37

See pages 29-30,61 to 62

See pages 14 to 16

See pages 14 to 15

See pages 10 to 17

Shaftesbury Annual Report 2020 Strategic report Business model and strategy

report

Investment strategy

Invest exclusively in the heart of London's West End

• Concentrating on iconic, high-footfall locations close to its major employment locations, transport hubs and visitor attractions

Establish ownership clusters

• Compounding benets of individual improvements across our nearby holdings

Mixed-use buildings, focused on food, beverage, retail and leisure

• Long history of occupier demand exceeding availability of space

• Oces and residential on upper oors

• Ecosystem of visitors, workers and residents +provides footfall and life to our areas

Management strategy

Occupier selection

• Preference for mid-market, innovative formats, rather than formulaic national chains

• Favour new concepts, independent operators and +international brands making their UK debut

Modern, flexible approach to leasing

• O-er occupiers greater exibility and less onerous lease commitments

• Trial concepts on short leases

+

Improve, reconfigure and repurpose space

• Provide accommodation which meets current requirements and anticipates market trends

• Sustainable reuse of buildings and materials

+

Promoting villages to a wide audience

• Targeted, multi-channel marketing

• Increased reach through collaboration with occupiers + See pages 8 to 9, 35-37

Improving the public realm

• Create safe and welcoming environments + See page 62

Engagement with local community and stakeholders

• Understand local expectations

• Good relationships with tenants, local authorities and local +communities

Creating value through

• Ensuring our areas remain distinctive, lively and popular
• Providing visitors with an interesting and enjoyable experience
• Attracting growing footfall and spending
• Sustained occupier demand
• High occupancy
• Adapting to ever-changing consumer trends and occupier requirements
• Unlocking latent value and enhancing long-term income prospects
• Extending buildings' useful economic lives
• Improving energy performance

Our long-term strategic objectives

Our long-term strategic objectives, delivered through the combination of our resources and investment and management strategies, are:

• Long-termgrowth in rents and portfolio value
• Grow recurring earnings and cash flow
• Minimise the environmental impact of our operations
• Attract, develop and retain talented people
• Deliver sustainable, long-term benefits for our stakeholders

Together, our aim is to make a positive, long- lasting contribution to London's West End.

Near-term strategic priorities are designed with our long-term objectives in mind, rather than for short-term gain. Value creation and success against our strategic priorities and objectives are measured using KPIs, which are reflected in remuneration.

• See pages 24 to 26

Strategic

Page 23

Shaftesbury Annual Report 2020 Strategic report

Measuring our performance

We use a balance of financial and non-financial metrics to measure our performance. These include both long-term performance and operational measures, aligned with our long-term strategy. A number of these metrics help determine executive and staff remuneration. Performance in the current year, inevitably, has been dominated by the effects of the Covid-19 pandemic.

Alignment with strategy and link to remuneration

Strategic objectives to deliver a positive, long-lasting contribution to London's West End

1		2		3		4		5		K
Long-term growth		Grow recurring		Attract, develop		Minimise		Deliver sustainable,		KPI
in rents and		earnings and		and retain		environmental		long-term benefits		R
portfolio value		cash flow		talented people		impact		for our stakeholders		Remuneration

• Business model and strategy; pages 22 to 23

Total Shareholder Return (%)	Total Accounting Return1 (%)	EPRA NAV1 growth (%)
1 2 3 4 5 K R		Shaftesbury	1 2 3 4 5 K R		Shaftesbury	1 2 3 4 5 K R		Shaftesbury
	Benchmark		Benchmark		Benchmark

					13.5
						8.9	8.7				7.2	6.9	6.3
							5.8			5.0	5.4
7.5						5.3
6.5		6.9		3.8					4.1	4.1
4.1				2.5		2.2
	3.6	2.4					1.0
							0.8					-0.9
-9.9		-9.4
				-16.9
				-44.7					-23.4						-24.3
2016	2017	2018	2019	2020	2016	2017	2018	2019	2020	2016	2017	2018	2019	2020

Measures shareholder value creation, taking into account share price movements and dividends in the period. We benchmark against the FTSE 350 REIT Index.

In 2020, our TSR was -44.7%, 27.8% below the benchmark, reˆecting the decrease in our share price during the year, which was largely fuelled by the impacts of the Covid pandemic on the West End.

• Covid-19:impact and response: page 6

Performance over three years relative to the benchmark is a measure in the LTIP scheme.

• Remuneration report: page 107

Overall measure of performance, taking into account growth in EPRA NAV plus dividends paid, as a ratio of EPRA NAV at the start of the period. For the benchmark above, we use a market capital-weighted index of FTSE 350 REITs.

In 2020, TAR was -23.4%, largely due to the decline in our property valuations, driven by the impact of the pandemic. The •nal dividend in respect of 2019 (9.0p per share) forms part of the return.

• Portfolio valuation report: page 56

For our LTIP, we measure TAR over three years relative to the benchmark.

• Remuneration report: page 107

Traditional real estate measure of valuation creation. For our LTIP, we benchmark three-year growth in EPRA NAV on an absolute basis against RPi+3%.

• Remuneration report: page 107

Following valuation declines, EPRA NAV decreased by 24.3% this year, underperforming the benchmark (+4.1%).

For 2021, we will adopt the new EPRA NTA metric rather than EPRA NAV. In 2020, EPRA NTA and EPRA NAV were the same.

• Financial results: page 63
• Portfolio valuation report: page 56

Page 24

Shaftesbury Annual Report 2020 Strategic report Measuring our performance

Rental growth	Like-for-like ERV growth2 (%)	Income
Commercial leasing vs ERV2 (%)	Net property income (£m)

1 2 K R	1 2 K R		1 2 K R		98.0
7.7					93.8
6.7			84.1	88.3		74.3
5.1
3.2	6.4
0.8	3.4	2.6	3.2

									-6.6
2016	2017	2018	2019	2020	2016	2017	2018	2019	2020	2016	2017	2018	2019	2020

Strategic report

Our strategy has delivered growth in annualised current income and rental values over many years. Through our leasing activity, we convert previously assessed rental potential into contracted income, whilst establishing new rental levels which provide evidence for leasing negotiations and for our valuers in assessing ERVs.

While leasing activity was considerably lower than normal during the year, commercial leasing transactions were concluded 0.8% above ERV at September 2019.

• Portfolio activity report: page 59

Wholly-owned portfolio leasing performance against previous year ERV is a performance criterion for the annual bonus.

• Remuneration report: page 108

Measures growth in the rental potential of our wholly-owned portfolio. In previous years, we included our 50% share of Longmartin in these •gures on a proportionally consolidated basis. This year, we have presented the information for the wholly-owned portfolio only, in line with our reporting on valuations and our remuneration metrics. The comparatives have been restated accordingly.

• Portfolio valuation report: page 56

Like-for-like ERV growth is an annual bonus metric. In 2020, it was -6.6% with the impact of Covid-19 increasing vacant space across the West End and reducing near-term occupier demand, putting pressure on rental values.

• Remuneration report: page 108

Growth in net property income is a key driver of earnings and dividends. This year, it decreased by 24.2% to £74.3 million largely due to rent waivers and Covid-19 related charges for expected credit losses and impairment. The relative increases in rental income and associated property outgoings are assessed as a bonus metric. In 2020, the ratio of property outgoings to rental income (before the charges noted above) decreased from 16.5% to 15.9%.

• Financial results: page 63
• Remuneration report: page 108

Occupancy											Energy performance
Quarterly average underlying	Weighted average vacant period2	% of demiseswith EPC rating A-E
EPRA vacancy2 (%)	1	2	K R	(months)	1	2	K	R		1 4	5
					6.3							4.5		74	78	81	83
													67
		2.9	3.1						2.5		2.6
	2.3				1.5
1.9					1.2
2016	2017	2018	2019		2020	2016	2017		2018		2019	2020	2016	2017	2018	2019	2020

High occupancy and letting property quickly are key factors in sustaining good cash ˆows from our portfolio. In 2020, EPRA vacancy increased from 3.2% to 10.2%, due to the impact of the Covid-19 pandemic, including a reduction in leasing activity, space handed back by commercial tenants and an increase in vacant apartments. Consequently, quarterly average underlying EPRA vacancy - a measure for the annual bonus - was up from 3.1% to 6.3%.

The average time that space has been available-to-let during the year, weighted by the ERV of that space, also is a measure for the annual bonus. This year, it was up by 1.9 months to 4.5 months, with the Covid-19 pandemic adversely impacting occupier demand.

• Portfolio activity report: page 59
• Remuneration report: page 108

• Alternative performance measure
  2 Wholly-owned portfolio
  3 Excluding exceptional larger schemes

Improving the energy performance of our space is an important factor in minimising the environmental impact of our operations. We aim to improve energy performance with each refurbishment scheme. This year, the number of demises with an EPC rating of at least E has increased by two percentage points to 83%.

• See page 29

Page 25

Shaftesbury Annual Report 2020 Strategic report Measuring our performance

Financial management

Loan-to-value1,3 (%)		Blended cost of debt2,3 (%)	Interest cover3 (x)
5					2	5					2	5
	26.7			31.5		4.5								2.6	2.7
												2.3
24.1
		23.9									2.1
	22.6				3.2	3.2	3.2						1.9
						2.9
2016	2017	2018	2019	2020	2016	2017	2018	2019	2020	2016	2017	2018	2019	2020

We operate with conservative leverage levels with long-term •xed interest arrangements forming the core of our debt •nance. In 2020, our loan-to-value ratio increased to 31.5%, predominantly due to an 18.3% like-for-like decrease in the portfolio valuation. Since 30 September 2020, we increased our •nancial resources by £294.4 million through an issue of equity. On a pro forma basis, our loan-to-value ratio decreased to 22.1%.

The blended cost of debt reduced from 3.2% to 2.9% during the year, following drawings made on our revolving credit facilities, which had a lower marginal cost than our existing long-term borrowings. However, with net property income decreasing due to the impact of the Covid pandemic growing, operating pro•t before investment property disposals and valuation movements decreased from £82.8 million to £59.9 million, leading to a decrease in interest cover to 1.9 times.

• Financing: page 67; Financial results: page 63

Other operational measures

In addition to our KPIs, other operational metrics we monitor in assessing the performance of the business include:

Portfolio management				2020	2019
Growth in annualised current income	1	+ See page 57	(6.4)%	2.4%
Reversionary potential	1	+ See page 57	5 + See page 61	27.7%	27.8%
ERV of space undergoing refurbishment	1	10.1%	10.4%
Our people		+ See page 43			2020	2019
Sta‰ retention	3			92%	97%
Financial				+ See page 63		2020	2019
EPRA earnings per share³	2		9.6p	17.8p
Sustainability and stakeholders			2020	2019
GRESB rating 4	R K	+ See page 28	+ See page 28	64%	75%
EPRA Sustainability BPR rating	4 R K	Gold	Gold
London Benchmarking Group contribution as a % of EPRA earnings 5 + See page 4	2.9%	1.5%

1 Based on net debt

2 Including non-utilisation fees on undrawn bank facilities 3 Alternative performance measure

Page 26

Shaftesbury Annual Report 2020 Strategic report

Sustainability

We are committed to being a responsible business. For us, that means investing for the long term, continuing to support our local communities and operating in an environmentally sustainable manner.

Strategic report

At the heart of our sustainability strategy is the long held policy of reducing the environmental impact of our operations by extending the useful economic lives of our buildings, through refurbishment, change of use and recon•guration. This enables us to protect the unique heritage of the West End whilst improving the energy e•ciency of our buildings and minimising the carbon emissions and waste that inevitably come with new construction.

Our corporate values recognise the importance of being community- minded. As a responsible, long-term investor in our areas, being a good neighbour and focusing on local issues is essential. We work with local charities and not-for-pro•t organisations to help them address these challenges. By partnering with grassroots operations, we can rely on their expertise to maximise the value of our support.

As a society, we're at a crossroads for sustainability. The impact of climate change, biodiversity loss and social inequality is being felt across the world. In response, governments, communities and businesses are taking action.

As a responsible business, we are committed to making a positive impact. This is the right thing to do for our planet, our stakeholders and our business.

We utilise the full reach of our operations, our inˆuence over partner organisations and the unique pro•le of our villages to achieve meaningful environmental and social outcomes. We believe that small actions add up and through our relationships we can have more impact than acting alone.

With much achieved to date, in 2021, we will take our sustainability aspirations to the next level. We will commit our business to long-term targets on carbon emissions and to continue working with our partners to make progress against the UN Sustainable Development Goals (SDGs).

As the demand for ethical consumption grows, we want to be the destination of choice for sustainable businesses in the West End. The pandemic has had a serious impact on our business, but our commitment to sustainability remains as strong as ever.

UN Sustainable Development Goals and Global Compact

We support the ten principles of the UN Global Compact on human rights, labour, environment and anti-corruption. We became a signatory in February 2015 and have since annually reviewed and updated our Sustainability Policy to reˆect our commitment. We have identi•ed the Sustainable Development Goals that are most relevant to our business,

integrating them into our sustainability policies and targets. Our Sustainability Data Report, which is available on our website, contains our UN Global Compact Communication on Progress.

Embedding sustainability in our business

Sustainability is embedded into our business and considered in major strategic and operational decisions. To continually improve environmental performance across our operations, we set annual targets and communicate our sustainability policies to our wide range of advisors, suppliers, occupiers and stakeholders. We believe that good governance also includes transparency and our Sustainability Policy is available on our website. This policy details our minimum expectations, our reporting requirements, and sets out annual performance including energy, carbon, water, waste and material use.

This year, we recruited a Head of Sustainability, who is responsible for setting and coordinating our strategy. We have a Sustainability Committee, chaired by our CEO, at which sta‰ from across the business consider all aspects of sustainability and review our policies. Our external sustainability advisor attends committee meetings to provide independent review and analysis.

Community engagement activities are coordinated by the Community Investment Committee, ensuring that we have a fair and consistent approach to the allocation of funds and in-kind support.

Our sustainability strategy, policies, action plan and overall performance are reviewed and considered annually by the Board. Progress against the strategy and material changes to sustainability related risks, including climate change, are considered by the Risk Committee and the Board.

• Community activities: pages 36 and 37
• Environmental activities: page 29

Page 27

Shaftesbury Annual Report 2020 Strategic report Sustainability

Sustainability Data Report

A full update of progress against our sustainability targets and associated data for the year ended 30 September 2020 can be found in our Sustainability Data Report which is available on our website.

Industry recognition and awards

We participate in a range of benchmarks to help guide our sustainability strategy and provide independent veri•cation of our progress.

We have increased our scores with FTSE4Good (95th percentile) and maintained our EPRA Gold status for a 3rd year and CDP score (B). We are also pleased that our sustainability performance has been recognised by our inclusion on the European Dow Jones Sustainability Index in 2020, one of only •ve companies in the UK Real Estate sector.

We have seen an overall reduction in our GRESB score. This is due mainly to changes in GRESB scoring methodology and the challenge of submitting asset level data now required across our portfolio of 600 buildings.

Industry collaboration

We continue to actively participate in a range of industry groups, to share experiences and promote the adoption of best practice for sustainable real estate.

Principal industry memberships include the Better Buildings Partnership, London Benchmarking Group and the Westminster Property Association. We also continue to be an active member of the Wild West End initiative, a partnership with neighbouring estates and business groups to improve biodiversity across the West End.

We continue to build partnerships with our occupiers, including initiatives like the Blue Turtle scheme, through which more than 35 of our Carnaby restaurants and bars pledged to reduce single use plastic and their impact on ocean health.

Modern Slavery and human rights

We have policies in place which address human rights, modern slavery and the ethical conduct of our business. Our sustainability policies and our Supplier Code of Conduct are provided to our key suppliers, who are required to adhere to the same high standards we set for ourselves. We have signed up to the Living Wage Foundation and require that workers in our supply chain are paid at least a London Living Wage. Our Modern Slavery Statement, updated in January 2020, is available on our website.

Health and Safety

Our Board has overall responsibility for health and safety. In our refurbishment projects, responsibility for health and safety is identi•ed in all pre-tender documentation and is monitored by site and project managers. Managing agents oversee day-to-day health and safety matters throughout the portfolio. There were no reportable health and safety incidents in the portfolio during the year. The accident frequency rate for employees was zero (2019: zero) and there were no health and safety prosecutions, enforcement actions or fatalities.

Our material issues

Our approach to sustainability is based on a clear understanding of the issues that are most relevant to our stakeholders and an appreciation of the environmental and social impacts of our operations.

During 2020, we undertook a further review of our sustainability priorities. This initial exercise comprised sta‰ interviews, desktop analysis and conversations with our contractors and managing agents. The research highlighted several key priorities:

• Continue with our community engagement, focusing on young people and our local communities in Westminster and Camden through grassroots organisations.
• Continue our policy of protecting and re-using buildings to maintain the heritage of our villages whilst minimising carbon emissions.
• Set ambitious targets to reduce our carbon emissions (operational and embodied) and continue to improve the energy e•ciency of our portfolio.
• Clarify and clearly communicate our exposure to climate risks.
• Continue to increase the area of green space across our portfolio and work with peers through the Wild West End.
• Engage with our occupiers and supply chain and use the public pro•le of our villages to promote sustainability.

In 2021 we will continue to develop our materiality analysis, ensuring that our sustainability strategy is aligned with the needs of our business and expectations of our stakeholders.

Page 28

Shaftesbury Annual Report 2020 Strategic report

Environment

Our most significant impacts on the environment are primarily from the day-to-day operation of our buildings but also from our refurbishment projects.

Strategic report

Our environmental strategy is built on the principle of extending the useful lives of our heritage buildings. Re-using and enhancing existing buildings, rather than demolition and redevelopment, is fundamentally the most sustainable approach; increasing energy e•ciency whilst avoiding carbon emissions and use of materials associated with new construction. Our recent refurbishment project at 50 Marshall Street, described on page 30, exempli•es this approach.

Through our programme of low carbon refurbishments, we preserve our buildings, protect the character of our areas and increase biodiverse green space.

Performance update

We have continued to make good progress against our environmental targets in a year that has inevitably been signi•cantly impacted by the Covid-19 pandemic. A comprehensive report on our sustainability performance can be found in our Sustainability Data Report on our website.

BREEAM

In order to meet environmental standards for good building design and operation, we follow BREEAM (Building Research Establishment Environmental Assessment Method) principles when refurbishing a building. For all refurbishment projects with a value over £1 million, we aim to achieve a minimum BREEAM certi•cation of Very Good. Since we introduced this requirement, we have had 20 schemes certi•ed, extending to approximately 10% of the portfolio.

EPCs

All buildings, other than listed buildings, are required to have an Energy Performance Certi•cate (EPC) to demonstrate their e•ciency. Under the Minimum Energy E•ciency Standards (MEES) regulations, all demised areas are required to have an EPC of grade E or above.

As at 30 September 2020, 83% of properties were A to E grade (c. 1,278 demises), an increase from 81% last year. All our residential properties now satisfy the MEES regulations. A small number of properties are exempted either because the buildings are listed or the costs of doing the works are prohibitive and would be too disruptive to occupiers. For commercial properties, there is a requirement that all properties should be at least a grade E by 2023. As part of the ongoing refurbishment programme, when they become vacant, we will undertake works to improve their ratings or we will work with tenants to meet the requirements of the regulations.

A-E

9%

F&G	8%
Unassessed

1,544

demises

Energy, water and greenhouse gases

Our direct energy consumption is relatively small as it only encompasses the common areas of our buildings. On a like-for-like basis, electricity consumption has dropped by 16% during the year, continuing our recent downward trend. This is due, in part, to the impact of our programme of refurbishments such as the installation of low energy lighting across the portfolio, but also reˆects a reduction in usage as Covid-19 has limited building occupation during the year.

We continue to purchase electricity sourced from renewables across all of our wholly-owned portfolio, including our Carnaby Christmas decorations. Excluding the impact of purchasing renewable electricity, we have still seen our greenhouse gas (GHG) emissions intensity drop by 7.7% from the previous year. These emissions relate to our direct combustion of gas, refrigerant losses (scope 1) and purchased electricity (scope 2). Further details are included in our energy and carbon statement on pages 116 and 117.

Our water consumption only relates to common parts and remains relatively low. Overall consumption has reduced by 24% during the year, much of which can be attributed to reduced occupation of our space during the pandemic.

100% renewable energy for our wholly-owned portfolio

11% reduction in absolute electricity use 7.7% reduction in carbon emissions intensity

Waste

The total volume of waste we collect across our portfolio has reduced by 42%, primarily due to lower footfall attributable to Covid-19 restrictions. However, the percentage of waste recycled has reduced by 3%, most likely as a result of single-use products, such as co‰ee cups, making up a relatively larger proportion of waste in the year

The amount of waste from refurbishment projects is minimised by reusing materials whenever possible. Where this is not feasible, material is sent to waste transfer stations which operate a zero waste to land•ll policy, where possible, achieving a combined total score of 88% diverted from land•ll. This year, the majority of waste sent to land•ll came from our 72 Broadwick Street scheme, which had an element

of contaminated waste material.

42% reduction in waste

83%	Page 29

Shaftesbury Annual Report 2020 Strategic report Environment

Valuing natural resources

We signi•cantly reduce our environmental impact by minimising the use of new materials in our refurbishment projects and responsibly sourcing, when new material is required. 98% of our timber is from sustainably certi•ed sources and the remaining small amount is sourced in line with EU Timber Regulations.

Retaining and reusing buildings' façades and primary structures is an important feature of our refurbishment schemes. During the year ended 30 September 2020, we achieved over 85% retention and reuse, across our schemes.

A full breakdown of our environmental impact can be found in the Sustainability Data Report on our website.

Action on climate change

We recognise the need to take urgent action on climate change, setting ambitious targets for reducing our carbon emissions and making sure that our business is resilient to climate-related risks.

The built environment accounts for approximately 40% of the UK's carbon emissions and will play a signi•cant role in the UK meeting its 2050 net zero carbon target and commitments under the Paris Agreement. It is also estimated that over 80% of current buildings will still be in use in 2050, and many of our buildings have been standing more than 150 years already. Therefore, the low carbon retro•t of current buildings will play a critical part in the process.

We have set annual carbon reduction targets for our own direct emissions (scope 1 & 2) and are calculating longer term targets (10 years) that reˆect the emissions reductions that scientists agree are needed to limit the worst impacts of climate change. These are referred to as being 'science based' and we have submitted our targets to the Science Based Targets Initiative (SBTI) for external validation.

We are continuing to improve the energy e•ciency of our buildings and have the opportunity to support and positively inˆuence the behaviour of our occupiers and contractors. Therefore, we consider it important that our medium term targets include emissions relating to our occupiers' energy use and those attributable to our refurbishment projects. These are scope 3 emissions.

Actions on climate change we have taken to date include:

• Setting operational carbon emissions reduction targets for our portfolio.
• Establishing a comprehensive carbon emissions baseline (2019) to include tenants' energy use in our buildings.
• Purchasing renewable electricity for our own supplies. However, we don't see this as a long-term solution as it is not increasing the overall renewable energy capacity of the grid.
• A rolling programme of energy e•cient retro•ts. We target a minimum of BREEAM Very Good rating on all projects with a value above £1m.
• Undertaking research into the embodied carbon of a typical refurbishment project to better understand our emissions and identify reductions opportunities.
• Undertaking an initial review of our climate change risks.

Case study:

50 Marshall Street

Shaftesbury's approach to the preservation and enhancement of existing buildings has been demonstrated this year with the refurbishment of 50 Marshall Street, a project now close to completion.

The building was constructed in the early 1980s, extending to 819m2 over 5 storeys. The reinforced concrete frame structure had relatively small ˆoor plates and, at an EPC rating of G, it was no longer •t for purpose as a modern space.

Working in partnership with our project manager and Architect, the original structure and much of the façade was retained, saving considerable carbon emissions and continuing to lock up carbon from the 1980s.

The ˆoor plates were expanded and an additional ˆoor added, along with a biodiverse green roof that will be accessible for all the occupants. The energy e•ciency of the building will improve dramatically. Improved glazing and low energy lighting, along with the addition of heat pumps, will enable this all-electric, naturally ventilated building to achieve an EPC level of B. We are also targeting a minimum of BREEAM Very Good with an aspiration to increase this to Excellent as the project completes.

Page 30

Shaftesbury Annual Report 2020 Strategic report Environment

Greening our portfolio

Increasing green space across our portfolio has a wide range of bene•ts. Aside from supporting wildlife, integrating nature can help limit the impacts of climate change, improve air quality and make the portfolio more attractive. London is home to greater breadth of wildlife than many people realise, with an estimated 14,000 species having been recorded living amongst its buildings, streets and parks. Studies also show that connecting with nature can reduce stress and boost wellbeing.

We continue to seek every opportunity to increase biodiversity across our portfolio, this year achieving a further 9% uplift in area. We have already exceeded our 5-year plan target (set in 2016), increasing biodiversity by 70% (target: 50%).

9% annual increase in biodiversity.

Biodiverse space has increased 70% since 2016

We have continued our partnership with other local landowners through the award winning Wild West End initiative. This enables us to share in best practice and play our part of creating wildlife corridors through the West End by connecting green spaces owned by di‰erent landowners. By working in partnership we can have a greater impact than working alone.

Air quality

Improving air quality across our portfolio remains critically important to support people's health, promote green transport and encourage visitors. We have partnered with other major West End landlords to consolidate deliveries, reduce vehicle movements and improve tenant engagement. In Seven Dials, we are working with community groups and the council to reduce tra•c and improve the area for walking and cycling. At the start of 2020, a workshop with local groups identi•ed a way forward, and Camden COVID Safe Travel initiative has seen the area experience lower tra•c levels and improved air quality. We will continue our proactive work with all local partners and the local community in 2021 to drive long-term improvements in air quality across London based on what we have learned during the pandemic.

Looking ahead

In the coming year, we have a number of strategic sustainability priorities:

• Develop our sustainability strategy to reˆect the unique nature of our business and the positive impact that we can have on all our stakeholders;
• Set an ambitious and transparent net zero carbon target based on a comprehensive understanding of our portfolio and our emissions reduction strategy.
• Continue our focus on building reuse and a commitment to understand more about the embodied carbon bene•ts of retaining buildings;
• Continue to invest in green infrastructure and set a new medium-term biodiversity target;
• Develop our climate risk reporting in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD);
• Continue to improve data collection across our portfolio; and
• Take action to improve water management, where we have control.

Strategic report

Case study:

The journey to 100% pollinator friendly planting

We are committed to protecting and increasing biodiversity across our estate, and in 2016 we set an ambitious ¢ve-year target to increase biodiverse space by 50%. The majority of our portfolio consists of buildings which sit on the public highway and many of our roofs are taken up with industrial plant, therefore we have had to think outside the box.

Across our portfolio we have 1,245 window boxes, 124 planters and 46 hanging baskets bringing splashes of colour to the streets. Our traditional selection of plants, such as begonias, look great from the pavement but unfortunately aren't particularly attractive or bene-cial to pollinating insects.

As we add more habitat for insects, such as natural log piles or the bee hives located on our roof tops, we need to ensure that we also provide su˜cient local food sources.

In 2019 we trialled 100% pollinator-friendly window boxes in Newburgh Street in Carnaby. The plants had a more natural colouring whilst also providing a critical food source. Based on the success of this trial, in 2020, all the window boxes, planters and hanging baskets have been planted with 100% pollinator-friendly species.

We have achieved our 5-year target early, with a 70% increase in biodiverse space since 2016. We will continue to look for new opportunities to bring nature to the streets of the West End.

Page 31

Making a positive contribution

+

Page 32

Strategic report

Page 33

Shaftesbury Annual Report 2020 Strategic report

Non financial in o mation statement

We are not required to comply with the non-•nancial reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006. However, the table below, and information to which it refers, is intended to help stakeholders understand our position on key non-•nancial matters. This builds on existing reporting that we already do under the following frameworks: Carbon Disclosure Project, Disclosure and Transparency Rules, Guidance on the Strategic Report (UK Financial Reporting Council), UN Global Compact, UN Sustainable Development Goals and UN Guiding Principles.

Reporting	Policies and standards which
requirement	govern our approach1, 2	Website information	Further information in this report
Environmental	Sustainability policy and action plan	https://www.shaftesbury.co.uk/en/	For more on sustainability, see pages
matters	Requirements for management of the	sustainability/our-approach.html	27 and 28
	portfolio	https://www.shaftesbury.co.uk/en/	For more on how we protect the
	Requirements for refurbishment	sustainability/environment.html	environment, see pages 29 to 31
	projects		For more on greenhouse gases,
	Supplier code of conduct		see page 116
Employees	Anti-bullying and harassment policy	https://www.shaftesbury.co.uk/en/	For more on our culture, values and
	Board diversity policy	sustainability/community/people.	people, see pages 42 to 45
	Data protection policy	html	For more on diversity and inclusion,
	Disability policy		see pages 44 and 95
	Equal opportunities policy
	Sustainability action plan
	Sustainability policy
	Health, safety and wellbeing policy

Human rights	Sustainability action plan
	Sustainability policy
	Modern slavery and human tra•cking
	statement
	Supplier code of conduct

https://www.shaftesbury.co.uk/	For more on modern slavery and
en/sustainability/modern-slavery-	human rights, see page 28
statement.html

Social matters	Community Investment Committee	https://www.shaftesbury.co.uk/en/	For more on our stakeholder
	terms of reference	sustainability/community.html	relationships, see pages 35 to 41
	Sustainability action plan		For more on our Covid-19 Community
	Sustainability policy		Fund, see pages 46 and 47
	Payment of suppliers policy		For more on sustainability, see pages
	Supplier code of conduct		27 and 28
Bribery and	Bribery and anti-corruption policy	https://www.shaftesbury.co.uk/	For our audit committee report, see
anti-corruption	Money laundering policy	en/investor-relations/corporate-	page 97
	Share dealing policy	governance.html	For more on modern slavery and
	Supplier code of conduct		human rights, see page 28
	Whistleblowing policy		For more on our behaviours, see
			page 89

Business model	https://www.shaftesbury.co.uk/en/
	about-us/how-do-we-add-value.
	html

For more on our strategy and business model, see pages 22 and 23

Principal risks and uncertainties

Non- financial key performance indicators

https://www.shaftesbury.co.uk/	For our risk report, see pages 71 to 77
en/investor-relations/corporate-
governance/principal-risks-and-
uncertainties.html
	For more on non-•nancial key
	performance indicators, see pages
	24 and 25

1. Certain group policies and internal guidelines are not published externally
2. Further information is available on our website, including our Supplier Code of Conduct and our Sustainability Policy

Page 34

Shaftesbury Annual Report 2020 Strategic report

Stakeholder engagement

We are committed to engaging with our stakeholders and building long-term relationships founded on respect, integrity and transparency. Through fostering our relationships and collaboration, we aim to make a constructive difference and deliver a positive long-lasting legacy for London's West End.

Our approach to our engagement and activities undertaken throughout the year can be seen below. More information on engagement with employees and shareholders can be found as follows:

Strategic report

Our people and		Monitoring		Consideration		Section 172		Relations with
culture		of culture and		of remuneration		Statement		shareholders
+ See pages 42 to 45		engaging with		and related		+	See pages 40 and 41		+	See page 89
	employees		policies below
		+ See page 84		the Board
				+ See page 102

Occupiers

Our long-term strategy has always recognised the importance of creating prosperous environments for our commercial occupiers as well as amenity for local residents.

Maintaining a continuing dialogue with our occupiers enables us to better understand their priorities and challenges as their businesses grow and evolve. Occupier prosperity, particular for our food, beverage and retail tenants, is important to our long-term success. A key aspect of our management strategy is the careful selection of these occupiers, focusing on what makes each village distinct and looking for interesting concepts which will bring footfall to our areas. A food, beverage or retail occupier's journey often with us starts with an interview so we can understand their business model and assess how their brand or concept will add value to our villages. This is the start of a relationship, which, similarly to our o•ce and residential occupier relationships, continues and evolves as our occupiers' needs change.

Engagement and activities during the year

During the year we undertook an occupier survey across Carnaby to understand the need for any further communal amenities and the importance of sustainability and wellness for our occupiers, which is helping inform our strategy.

Following a successful trial in Seven Dials in 2019, this year, we launched tenant portals for Carnaby, Soho and Chinatown to improve direct communication with our occupiers. The portals provide occupiers with regular updates on Government guidance, key information relating to the villages as well as upcoming events. In addition, the portals assist with turnover data collection and, in Seven Dials, provide regular footfall information.

This year, the impact of continuing Covid-19 restrictions and evolving Government guidance has led to intensive engagement to discuss the •nancial support as well as non-•nancial initiatives such as marketing and social media campaigns we could o‰er.

We have reduced service charge expenditure, where safe to do so, during the lockdown periods. From October 2020, we have provided the option for commercial occupiers to be invoiced and pay rent and service charge monthly, rather than quarterly in advance, better aligning our revenue collection with their cash ˆows.

During the •rst UK lockdown, we initiated promotional campaigns to maintain awareness of our villages and services provided by our occupiers. Our marketing team collaborated with occupiers on social media campaigns and online events. These included "Bringing Chinatown Home", "Seven Dials @ Home" and "Carnaby Together", with programmes of unique digital content to entertain, educate and inform consumers and local residents. In addition through our community portals and direct communications we have worked to provide practical support and guidance to our residential occupiers.

35

Shaftesbury Annual Report 2020 Strategic report Stakeholder engagement

In preparation for the relaxation of the lockdown, we worked with our occupiers to ensure returning sta and visitors could do so safely, implementing social distancing guidance, providing hand sanitisers and installing signage throughout the villages and within our buildings.

We also promoted our retailers and our F&B tenants' alfresco dining oers through social media, across our villages with campaigns such as "Love Chinatown" and "You are Brilliant" in Chinatown and Carnaby respectively. We have also created bike hubs in Seven Dials and Carnaby to support our clean air strategies and provide an additional amenity for local workers and visitors

Always keen to ƒnd and support new concepts, at the end of September we launched the "Start Up with Seven Dials" oer to provide brands starting up during lockdown with a physical space within Seven Dials, including support from retail experts.

Local residents are an important part of the community and we are seeking ways to improve how we engage with them on initiatives that might aect the areas in which they live. Looking forward into 2021, the focus of our engagement will be making sure occupiers are better aware of our plans and priorities and encouraging them to be part of our conversations with the local community.

accommodation, advice and time given by employees. We often link our community support with marketing events so that community groups are able to leverage from these activities, to raise awareness and the proƒle of their organisation. This year, including our Covid Community Fund, our ƒnancial, in-kind and employee time contributions totalled £866,000.

Management costs 10%

In-kind	How	Cash 51%
contributions
of space 31%
	Time 8%

Community

We aim to use our expertise, resources and inˆuence for wider public beneƒt. We work with a range of partners including non-for proƒt organisations, charities, educational establishments and other local community groups, recognising that our long-term support enables them to make a dierence through their activities.

In considering initiatives aecting our local area, we seek to engage with residents and other community groups for their views. In the year ahead we will be developing our engagement to ensure we better communicate with our local communities to explain work we are doing, show them how we can help and encourage them to work collaboratively with us.

The Community Investment Committee, chaired by one of our Property Directors, oversees our programme of community investment and activity. Our support takes a variety of forms, including ƒnancial and in-kind donations through provision of short and long-term

	Other 7%	Education 11%
		Health 8%
Emergency	What	Environment 13%
relief 24%

Arts/culture 9%

Social welfare 28%

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Shaftesbury Annual Report 2020 Strategic report Stakeholder engagement

Strategic report

Engagement and activities during the year

We have a range of community support activities across our villages. As part of our programme we •nance a daytime outreach worker from The Connection at St Martins, a homeless charity which focuses on help for rough sleepers. We are a founding member of the House of St. Barnabas and support their employability programme which helps homeless people into work.

In Chinatown, we fund a part-time advice worker at the Chinese Community Centre, who helps the Chinese speaking community with a wide range of issues. In addition, we support the Chinese Health and Wellbeing Clinic, which deals with physical and mental health. Across our other villages we contribute to a range of activities, including a grassroots community centre at the Dragon Hall Trust and, sponsoring the Donmar Theatre. As part of Silver Sunday we co-sponsored the Westminster Tea Dance for senior citizens and we helped pay for 1,000 afternoon tea gift boxes to elderly and isolated people in Westminster.

Supporting organisations which have a speci•c local expertise means that we can have more impact than acting alone. We partner with the Young Westminster and Young Camden Foundations in their work to support young people across the boroughs. At Westminster Kingsway College, our partnership since 2014 has enabled a number of educational projects for students in the Creative Arts Faculty. This year's project involved students designing a tote bag. Responding to a commercial brief set by our marketing team which challenged them to take inspiration from Seven Dials, and research of the area. Providing valuable practical experience, shortlisted students presented their ideas to our marketing team who gave feedback for the students to build on. We have continued our long-term relationship with Soho Parish Primary School and this year we contributed to their new website in addition to the provision of laptops and food vouchers provided through our Covid Community Fund.

As a result of the pandemic, many of our community partners' traditional sources of funding have been reduced and often there has been additional demand on the services they provide. In March 2020 we established our Covid Community Fund, to provide them with additional •nancial support.

• Covid Community Fund: pages 46 and 47

In addition, to help ensure that our communities remained connected, we ran a number of digital campaigns, including #CarnabyCares, across our village social media channels and websites which promoted the wide range of projects initiated by our occupiers across our villages. These included support for the NHS and key workers, and promotion of free well-being o‰erings.

Advisors, contractors and suppliers

Shaftesbury operates an out-sourcing model. Our small team of 39 employees is supported by a range of external advisors across various property and corporate disciplines. Operating in a small geographic area, we have always believed that access to the wider knowledge and experience of advisors across their •elds of expertise is of considerable long-term bene•t to the business. Our relationships with advisors are generally long term, based on mutual trust and respect. We value the contribution they make; our approach is collegiate, listening to and learning from them through open, constructive dialogue, rather than simply directing them to carry out our instructions. Some advisors, such as managing agents or project managers, may operate with delegated authorities, but in general, all decisions of any signi•cance remain with our in-house team.

Day-to-day operations across our portfolio are the responsibility of external managing agents, who on our behalf procure contractors and suppliers and other specialists to service and maintain our buildings, liaising with occupiers as a •rst point of contact. We engage project managers to oversee refurbishment projects, who similarly suggest and procure professional advice and building contractors to deliver the schemes.

As well as expecting our advisors, contractors and suppliers to comply with standards and codes that may be speci•c to their industry, we require them to adopt our standards of behaviour in relation to the environment, the community and employees set out in our Supplier Code of Conduct. These relationships are usually covered by clear contractual arrangements, which de•ne the rights and obligations

of each party. We are signatories to the Prompt Payment Code with our Payment of Suppliers Policy available from our website. To ensure that our suppliers and their employees feel safe to raise any concerns, we have a whistleblowing policy and helpline.

Engagement and activities during the year

Our team is in regular, often daily, contact with our external advisors. Working centrally within our portfolio, we aim to respond quickly to issues as they arise with clear instructions based on the advice we receive, our own experience and wider stakeholder consideration. Inevitably, the pandemic has presented challenges across all aspects of our business, which has required even greater engagement with our advisors to address a range of issues a‰ecting our commercial occupiers and their businesses, residential tenants, suppliers and contractors throughout the lockdown and reopening period.

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Shaftesbury Annual Report 2020 Strategic report Stakeholder engagement

Local authorities, neighbouring landowners and West End tourism partners

Working with Westminster City and Camden Councils, we identify and contribute to a wide range of matters through regular dialogue. This includes responding to draft policies and consultations to share our experience and knowledge to help shape public realm improvements and tra•c reductions across our areas.

• Public realm improvements page 62

We also work with neighbouring property owners, Business Improvement Districts, and our tourism partners to promote London's West End to a domestic and international audience.

Engagement and activities during the year

In response to Covid-19, we increased our collaboration with neighbouring estates and landowners, Business Improvement Districts, as well as Westminster City Council and Camden Council, on solutions for responsibly managing social distancing across the West End's streets.

To help encourage our local communities and Londoners to safely and responsibly return to our villages, we worked with Westminster City Council and Camden Council to secure a series of timed road closures and other street measures, during core trading hours for F&B and retail occupiers. This enabled our hospitality occupiers to trade from external seating whilst adhering to social distancing restrictions. In Carnaby, Chinatown and Seven Dials, we also provided our own additional communal seating for use by anyone visiting the area, bringing extra seating capacity for takeaway food. In addition, we took part in the working group convened by Camden Council to share best practice and co-ordinate opportunities and support to all occupiers across Camden.

During the year, we engaged with Westminster City Council on a number of policy reviews including their Busking and Street Entertainment Policy and the City Plan 2040 where we contributed to the Examination in Public with representations on a number of policy areas. We are members of the Soho Neighbourhood Forum which is developing a planning strategy for Soho. In Seven Dials, we have had regular dialogue with senior o•cers at Camden Council around issues a‰ecting the evening and night time economy and commented on their new external seating policy.

We have worked closely with our tourism partners, London & Partners, the Mayor of London's promotional agency, Visit Britain and other local property owners and Business Improvement Districts, to actively support the safe return of visitors to London. Working with London & Partners, we helped create the campaigns #virtuallylondon, and 'Because I'm A Londoner', to promote London to domestic and international visitors.

Together with our West End partners, we developed a West End initiative, #MyWestEnd, which was collectively supported through our own digital campaigns.

Through our membership of various bodies such as London & Partners, London First, Association of International Retail and Business Improvement Districts, we have supported various lobbying campaigns for the bene•t of our occupiers and the West End.

Finance providers

We maintain good, open relationships with our •nance providers.

Engagement and activities in the year ended 30 September 2020

This year we have proactively kept our •nance advisers informed of both our actions taken and planned to respond to the pandemic.

• s172 engaging with our Žnance providers: page 41

Joint Venture partners

We established our 50:50 Longmartin joint venture with The Mercer's Company in 2005 with the aim of combining and developing our interests on Long Acre and at the gateway to Seven Dials. Over the intervening years, overseen by the Longmartin board, the buildings held by the joint venture have been redeveloped to create St Martin's Courtyard, which adds to the vibrancy of our respective holdings. To ensure a high level of oversight, the Longmartin board formally meets •ve time a year with day to day operations managed by the joint venture's operating committee.

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Shaftesbury Annual Report 2020 Strategic report Stakeholder engagement

Strategic report

Engagement and activities during the year

To ensure the Longmartin board was kept fully apprised of the challenging market conditions, during the year it revisited the delegated authorities and introduced regular informal board calls between the scheduled board meetings involving our executive directors, Brian Bickell and Tom Welton and our portfolio director, Charles Owen. The Longmartin business plan was also updated to include new strategic priorities in light of the changing market conditions.

Matters relating to Longmartin's operations, •nancing and other matters are reported and regularly discussed at Shaftesbury Board meetings throughout the year.

Making a positive contribution

+

Page 38

Page 39

Shaftesbury Annual Report 2020 Strategic report Stakeholder engagement

Our S172 (1) Statement

The Board of Directors con•rm that during the year under review, it has acted in a way it considered in good faith to be most likely to promote the long-term success of the Company for the bene•t of members as a whole, whilst having due regard to the matters set out in section 172 (a) to (f) of the Companies Act 2006, being the:

1. likely consequences of any decision in the long-term;
2. interests of the Company's employees;
3. need to foster the Company's business relationships with suppliers, customers and others;
4. impact of the Company's operations on the community and the environment;
5. desirability of the Company maintaining a reputation for high standards of business conduct; and
6. need to act fairly between members of the Company.

Our stakeholders and Board processes

In making this statement, the Board considers that its key stakeholders include our shareholders and potential investors, employees, occupiers, visitors, local authorities, community partners, suppliers, •nance providers, and our joint venture partner. Building and nurturing our relationships with these stakeholders for the long term is key to our success.

• Stakeholder engagement: pages 35 to 39
• Employee engagement: pages 43 and 45
• Shareholder engagement: page 89

For Board approval of transactions, the elements of s172 are considered in assessing whether such actions are likely to promote the success of the Company for the bene•t of the members as a whole. Whilst the Board has direct engagement with our employees and shareholders, it receives a combination of reports from the executive directors, senior managers and advisors to understand the views of the Group's stakeholders regarding

day-to-day operations. A 'Stakeholder dashboard' summarising the key areas of engagement undertaken by the executive directors and the wider team across the business is considered at each scheduled board meeting.

For more on s172 matters and stakeholder engagement:

		Annual Report
	Name of Annual Report pages	page numbers
Key decisions for the	Q&A with the Chief Executive	+	See pages	2 to 5
long-term	Covid-19 impact and response		6 to 9
	+See pages
	Business model and strategy	+See pages 22 and 23
	Chairman's letter	+See pages	82 to 83
	Principal Board activities in 2019/20	+See pages	86 to 88
Employees	Our people and culture		See pages 42 to 44
	Making a positive contribution	+See page 45
	to our employees	+
	Monitoring of our culture and	+	See page 84
	engagement with employees
Fostering business	Stakeholder engagement		See pages	35 to 39
relationships with suppliers,	Making a positive contribution to	+See pages	48 to 49
customers and others	support our occupiers	+
	Principal Board activities in 2019/20	+See pages	86 to 88
Community	Stakeholder engagement		See pages 36 and 37
	Making a positive contribution to	+See pages	46 to 47
	our community	+
	Chairman's letter	+See page 83
Environment	Environment		See pages	29 to 31
	Making a positive contribution to	+See pages	50 to 51
	the environment	+
High standards of	Our people and culture	+	See pages	42 to 44
business conduct	Stakeholder engagement		35 to 39
	+See pages
	Our business conduct	+See page 89
Investors	Leadership and purpose	+See page 89
	Financing	+See page 67

The Board's engagement with stakeholders and decisions taken to promote the success of the Company as a whole for its members in response to Covid-19

Supporting our	Our purpose is to curate vibrant and thriving villages in the heart of London's West End for the bene•t of all our
occupiers	stakeholders. At its core is a holistic approach to patient, long-term curation of our villages by providing distinctive and
for the long-term	appealing experiences for visitors, occupiers, their customers and residents. A key component of this strategy is the mix
	and appeal of our restaurant, café, pub and shop occupiers. The e‰ective closure of the West End, starting in February,
	had an immediate and very challenging impact on all consumer-facing,footfall-reliant businesses, which are inevitably
	cash-ˆow sensitive. As a result, our team's focus, supported by the Board, since the beginning of the pandemic and
	lockdown has been to help our occupiers through this challenging period by providing •nancial and other practical
	support to retain occupancy, helping to preserve the long-term value and prospects of our exceptional portfolio.

From March 2020, the Board has supported the Strategic and Operations Executive Committee's recommendations on rent concession strategies. In addition it has supported a permanent change in policy, from October 2020, to vary our leases to provide the option for commercial lessees to pay rent and service charges monthly, rather than quarterly in advance, in order to align our revenue collection with the cash ˆows of our occupiers.

• Covid-19impact and response: pages 6 to 9
• Making a positive contribution to support our occupiers: pages 48 to 49

The Board was kept informed of other engagement and initiatives undertaken across the business with our local authorities, adjoining landowners and Business Improvement Districts to help support occupiers, and drive footfall across the portfolio.

Supporting our	Early in the pandemic, it became clear that our community partners' •nances could be materially a‰ected, either
communities	because their traditional sources of funding had been reduced and/or there would be additional demand on the
	services they provide. In response, the Company set up a Covid-19 Community Fund, in April 2020, to support these
	partners and help people a‰ected by Covid-19 within the boroughs of Westminster and Camden. The fund was
	administered by the Community Investment Committee. To date, the fund has made awards in cash and in kind to
	charitable partners totalling over £310,000 to 18 causes impacted by the pandemic. We have received positive feedback
	from the organisations supported by the fund.

Funding for this initiative came from savings made following the Board's decision to waive 20% of both executive director base salaries and pension contributions and non-executive director fees for four months.

• Making a positive contribution to support our community: pages 46 to 47

Page 40

Shaftesbury Annual Report 2020 Strategic report Stakeholder engagement

Retaining, protecting	As an organisation with under 40 employees, our people are fundamental to the success of our business.
and motivating our	During the •rst lockdown, when government guidance was to work from home wherever possible, regular all-
employees	employee presentations were held. Jonathan Nicholls, Richard Akers and Jennelle Tilling attended a number of
	sessions providing the opportunity for Q&A.
	Following the easing of the •rst lockdown, based on responses from an all-employee questionnaire and consultation
	with the members of the Strategic and Operations Executive Committee, the Board discussed and approved the
	Group's return to o•ce plan, which was implemented in September 2020 following an all employee presentation and
	Q&A session.

Having considered an employee reward survey in September 2020, the Remuneration Committee approved:

• a change in the structure of the employee annual bonus plan, to include an element of individual objectives; and
• the introduction of a recognition project, overseen by the Culture Group, made up of employees from across the business and sponsored by Richard Akers as our non-executive director responsible for employee engagement.

Communication of these changes was made through a combination of all employee meetings, feedback from Strategic and Operations Executive Committee members to their teams and employee workshops.

• Our people and culture: page 42 to 45

Engaging with our We maintain a dialogue with our •nance providers throughout the year. Since March 2020, we have kept them

¢nance providers apprised on the impact of the pandemic and the measures the business has been taking to service our •nancial obligations. In particular, our discussions have centred on interest cover covenant waivers.

We recognised that o‰ering some solutions to our lenders, rather than simply requesting waivers, was in the spirit of partnership. The Board agreed that, where possible, we should o‰er lenders cash deposits up to an amount equivalent to the interest payments during the term of the waivers. Our open and pragmatic approach has been well received and has resulted in constructive discussions and agreements on interest cover covenant waivers.

Whilst we remain compliant with the •nancial covenants in our bonds, the Board agreed that we should hold regular business updates while Covid-19 uncertainties persist and we gave bondholder credit updates in June and September. The next update will be in December 2020.

• Financing: pages 67 to 69

Strategic report

Balance sheet strength, consideration of our shareholders and governance

In responding to the pandemic, the Board's view is that maintaining occupancy across the Group's portfolio, wherever possible, will protect the long-term value of the business. When the post-pandemic recovery progresses, this approach, together with a strong •nancial base, should position the business to return to long-term growth.

With the prospect of reduced rent collections and growing vacancy, our strategy, since March 2020, has been to preserve liquidity, with a moratorium on non-essential expenditure, new schemes and acquisitions, other than by exception.

In view of the likely reduction in rental income and, in turn, adjusted EPRA earnings, the Board decided against paying an interim or •nal dividend in relation to the current year, but intends to resume dividend payments as soon as it considers it prudent, maintaining its policy of sustainable dividend growth over the long-term.

The Board assessed the Group's •nancial position in light of the implications of the Covid-19 pandemic, and considered a range of options to optimise the Group's long-term capital structure. It concluded that we should prioritise maintaining a strong •nancial base and appropriate liquidity levels, focusing on debt and gearing levels, and that a material level of disposals to address •nancing risks would not be in the long-term interests of the Group. Accordingly, it determined that it would be in the best long-term interest of the Group to raise equity.

• Financing: page 67

Extensive consideration was given to the most appropriate structure for an equity capital raise, balancing execution and equity market risks with our strong desire to ensure a share issue respected the pre-emption rights of shareholders as far as possible.

The Board's decision to structure the equity capital raising by way of a combination of a Firm Placing, a Placing and Open O‰er and an O‰er for Subscription took into account a number of factors. These included the dilution to shareholders not able, or only partially able, to take part in the Firm Placing, the total net proceeds to be raised and the advice that the structure provided a lower level of market risk than a rights issue in the then current market environment which had been impacted by a combination of uncertainties, including Covid-19, the US election and Brexit. The Board believe that the Firm Placing and excess entitlement facility of the Open O‰er has enabled the Company to satisfy demand from current shareholders wishing to increase their equity in the Company as well as potential new investors. Furthermore, the O‰er for Subscription allowed an opportunity for other potential investors, including employees and retail investors, to become shareholders in the Company. The Board also sought to balance the dilution to existing shareholders arising from the Firm Placing and O‰er for Subscription with the bene•t of bringing in substantial investors with •rm commitments to ensure the success of the capital raise. Shareholder approval of the arrangement was sought through a number of resolutions at a general meeting to enable the transaction. The resolutions were passed with a minimum vote in favour of 95.77%.

In undertaking the Firm Placing and Open O‰er, we required an independent report for our Prospectus. Whilst we believed that EY as our auditors were best placed to provide this, we were conscious that the fees might be seen as an impairment to their independence. We engaged with EY, who consulted with the FRC and obtained clearance in advance of being appointed to undertake the work.

• External auditors: page 99

Page 41

Shaftesbury Annual Report 2020 Strategic report

Our people and culture

We employ a diverse team of talented people, united by a shared ambition to make our places better for the benefit of our multiple stakeholders.

Our purpose, culture and values

Our purpose is to curate vibrant and thriving villages in the heart of London's West End. At its core is a desire to make great places even better for the bene•t of our stakeholders, through fostering our areas to provide inspiring experiences for visitors, occupiers and their customers, and residents.

How we work is just as important as the end result. Our values are fundamental to our behaviour, decision making and the delivery both of our purpose and strategic objectives.

Our •ve core values, set out to the right, guide our behaviours, ways of working, and demonstrate our commitment to doing the right thing

• for each other, our stakeholders, and our business. They are a critical part of our success; helping make Shaftesbury a great place to work and enabling us to deliver on our long-term strategic objectives.

We de•ne our culture as the "Shaftesbury Way". Our small, diverse team of talented people are united by a shared ambition to make great places even better. Aligning with our values, our culture is one of respecting tradition but bringing innovation, acting with courtesy, respect and integrity but not being afraid to embrace change, seeking challenge, trying new things and evolving. We are inclusive, encouraging di‰erence and welcoming new people, ideas and perspectives to enable everyone to be themselves, have a voice, and make an impact.

Combining our experience, enthusiasm, culture and values, we seek to achieve success beyond pro•t by delivering sustainable long-term bene•ts for our stakeholders and people, building a thriving working culture and making a positive, long-lasting contribution to London's West End.

Embedding values across our business

Having consulted with the Shaftesbury team and our key stakeholders, last year we articulated our purpose and values. This year, our focus has been on embedding these values in all aspects of our people proposition and practices. In the summer, we hosted a virtual culture event in July, taking the opportunity to reconnect as a team, to reˆect on what makes Shaftesbury special and to consider how we "live our values". We have recently launched a new performance review process, a key component of which is regular sta‰ review conversations which include how our people are demonstrating our values in their everyday work.

Human

• Building relationships based on openness, empathy, trust and respect - showing genuine interest and care for each other and those with whom we work.
• We celebrate difference and encourage diversity. A variety of backgrounds, experiences, characteristics and preferences leads to wider perspectives, increased creativity, better decision making and inclusive spaces where everyone can feel welcome, be themselves, and reach their potential.
• Outside of our workplace, we promote the diversity agenda, including gender, ethnicity, social background and orientation.

Original

• We see change as opportunity to arrive at fresh solutions and better outcomes.
• From finding and nurturing new talent to challenging and evolving our thinking, we welcome new ideas, approaches and perspectives and encourage ideas from our people, business partners and communities.
• This is an important aspect in the curation of our villages, including the events we organise, public art and the occupiers we choose, where innovative concepts are favoured over predictable formats found elsewhere.

Community minded

• As a responsible, long-term investor in our areas, being a good neighbour and focusing on local issues is essential.
• Working closely and collaboratively with our communities and local authorities, we combine our influence and expertise to address issues and challenges, promote public realm improvements and create vibrant places.

Responsible

• As long-term custodians of the areas in which we invest, we hold ourselves accountable to a wide-range of stakeholders. It is important that we do the right thing, in the right way, acting responsibly and with integrity.
• We invest in staff well-being and development, cultivate relationships with our business partners and stakeholders, holistically curate our villages and behave in a socially- responsible manner.

Long term

• We take a long-term, holistic approach to our villages.
• From our partnerships and people, to the impact we wish to make, our decision making is forward-looking; focused on long-term sustainable benefits rather than short-term gains.

Page 42

Shaftesbury Annual Report 2020 Strategic report Our people and culture

Strategic report

Employees

9 years average length of service

33%

Strategic People Plan

This was the second year of our Strategic People Plan, which is about ensuring Shaftesbury continues to be a great place to work, attracting, growing and retaining the best talent. It is based on •ve strategic pillars:

Engagement

To understand and drive high levels of employee engagement

39

male

Experience

To be recognised for providing a distinctive and positive employee experience, aligned with our purpose and values

People development and capability

headcount

67%

female

Representation on the Strategy and Operations Executive Committee

58%

To grow our capability now and for the future

People performance

To develop an active performance culture and practices

Sustainable workforce

To have a more healthy, inclusive and sustainable working environment

Whilst we made good progress across all •ve of the strategic pillars, the Covid-19 pandemic required a re-prioritisation of a number of planned activities. We continue to share progress against our strategic plan with employees and regularly monitor progress against our roadmap. Key progress highlights included a reward review and the launch of a new performance review process to replace annual appraisals.

In the coming year, we plan to:

• Develop a culture of recognition, acting on the feedback from

a project led by the culture group

• Launch an online reward portal to improve access to all

12

male

reward information

• Embed the performance review process within the business,

with all individuals having quarterly performance conversations

with their manager

members

• Learn from our working practices during Covid and apply

the positive outcomes to our future ways of working

42%

female

Employee engagement

A measure of positive employee engagement is our low levels of employee turnover. During the year, turnover was only 8%, and, at 30 September 2020, the average length of service was 9 years.

We are committed to gaining regular feedback from our team and to act on the feedback we receive. As well as pulse surveys on speci•c topics throughout the year, we conducted an all-employee survey in July. The results were positive, indicating high levels of sta‰ satisfaction.

100% of respondents strongly agreed or agreed with the statements:

'I am proud to work for Shaftesbury'

'I would recommend Shaftesbury as a great place to work'

The feedback identi•ed some areas for improvement, particularly around better clarity over the link between individual contribution and reward, and better recognition and more valuable performance conversations. We are already taking action to improve these areas.

Our culture group, which comprises a cross section of skills and levels of experience, is another way we listen to how our employees feel about working at Shaftesbury. This group was important in developing our purpose statement and values and they will be playing a key role in a project in the new •nancial year to develop a culture of recognition.

Richard Akers, the designated non-executive director for employee engagement, ensures that the views and interests of the team are considered in Board discussions and decision making.

Rewarding Performance

As at 30 September 2020, we had 39 employees including the Executive Directors. Employees receive a basic salary together with a pension contribution of 17.5% of salary, life and health insurance. All members of sta‰ who meet certain qualifying conditions are eligible to participate in our annual and long-term incentive schemes and the Sharesave Plan.

We remain committed to rewarding performance and to o‰ering highly competitive packages. Working with Innecto, a reward consultancy, we reviewed our existing reward package, considering how it aligned with our desired reward philosophy and di‰erent approaches to ensure it is valued both by employees and the Company. The project considered the feedback from the all-employee survey, and included employee focus groups and comprehensive benchmarking against the property market.

The review con•rmed that our reward packages are competitive and are highly valued by all the team, regardless of age or tenure.

As a result of the •ndings of the project, we will be implementing a number of changes in the year ahead, including the introduction of personal objectives as a part of our annual bonus scheme to reward individual performance, rather than basing bonuses solely on corporate performance.

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Shaftesbury Annual Report 2020 Strategic report Our people and culture

Developing talent for the future

Developing a diverse and inclusive team

We operate with an outsourced business model, employing a small team and working with a wider group of external advisors. Developing our talent for the future is an essential ingredient in our success and, due to our size, we are able to tailor development to the needs of individuals. This year saw the completion of our "Leading Self" programme, a nine month, modular-based leadership development course for rising talent. We plan to develop phase 2 of the programme for its participants, whilst introducing a new cohort in the coming year.

Recently, we launched 'Performance Conversations @ Shaftesbury', our new performance review process. Moving away from annual appraisals, we have introduced a focus on regular and better two-way performance conversations, which we feel will be more valuable to the whole team. As part of this, we have provided training for managers and their reports to ensure e‰ective outcomes.

We have a clear policy to promote diversity and inclusivity across the business, recognising that a group that is diverse in nature, irrespective of visible and non-visible di‰erences, backgrounds, gender, experience and orientation is able to provide di‰ering perspectives and challenge. The passion, expertise, warmth and diversity of our people is vital to our ongoing success.

We strive for an inclusive culture with a collaborative environment that is open to di‰erent ideas and styles of thinking, where all of our people feel they can be themselves and contribute to the Company's success. Whether someone has been here three days, three months or three years, we ensure everyone has a voice. We treat everyone with fairness, respect and openness, and encourage our people to share ideas, develop their skills and reach their potential. Our commitment extends to the standards we expect of the businesses with whom we partner and work.

Diversity is considered at every level of recruitment. All appointments are made on merit and based on objective criteria. We support initiatives to promote diversity within the real estate sector. We are a member of the 30% Club, which is a campaign to achieve a minimum of 30% representation of women on FTSE 350 boards. The Hampton- Alexander review, which is an independent, business-led initiative supported by the Government, aims to increase the number of women in leadership positions in FTSE 350 companies. In 2019, for the third year running, Shaftesbury was top of the FTSE 250 in the Hampton- Alexander review for the highest female representation on the executive committee and direct reports.

Page 44

Making a positive contribution to our employees

All our staff have continued to be employed on their full terms and conditions throughout the pandemic. Like most businesses, we had to quickly adjust our working practices to deal with remote working, and then socially-distanced wor ing in our o fice hilst this has presented challenges, it has prepared us or flexible wor ing once normal life returns.

The well-being of our people has been a key priority for the Board during this challenging year. Recognising that keeping everyone connected was a vital ingredient in managing this period as effectively as possible, we introduced bi-weeklyall-staff virtual updates and arranged regular virtual team "huddles" and social events.

We continued to support employees' well-being with monthly seminars, run by the FeelGood Company, covering topics specifically targeted at the challenges people may have been facing during the pandemic, including nutrition and optimising immunity, sleep and taking control of mental and emotional overdrive. We also encouraged the team to work with flexible start and finish times. Underpinning our actions, was a consultative approach where the team provided their input and feedback; this was particularly the case as we planned for a socially-distanced return to the office. In listening to concerns and perspectives we developed a plan which was supported by all and accommodated individual needs and circumstances.

Ahead of the return to office

We carried out a comprehensive risk assessment, following which we introduced:

• a temporary satellite office to provide more socially-distanced space;
• screens between all work-stations;
• increased cleaning protocols;
• the provision of face masks;
• hand sanitisers at the office entrances and hands-free taps in washrooms; and
• shared-spaceprotocols.

We also introduced a new working approach

Based on the 'bubble' concept to limit the number of people working in our offices at the same time and restrict the risk of transmission of the virus across the team, all employees worked a combination of days in the office and days at home.

Looking ahead

We are committed to reviewing the various lessons we have learned from the changes in our approach during this period and to applying these to improve our future ways of working.

Strategic report

Page 45

Making a positive contribution to our community

Seven Dials Community Centre food bank

Shaftesbury has a long-term commitment to London's West End and support for its local community is embedded in our values and strategy

Page 46

In addition to our normal work with not-for- profit organisations, charities, educational establishments and other local groups to make a positive contribution to the people and communities in our locations, this year, we created our Covid Community Fund to support young people and our communities affected by the pandemic in the boroughs of Westminster and Camden.

By 30 September 2020, we had provided cash and funding in-kind through the Covid Community Fund of over £310,000 to support 18 causes.

• Community engagement: page 36

Supporting young people and education programmes

To help young people across a range of ages, grants made included:

• the purchase of laptops for the Soho Parish Primary School to enable children to continue to learn remotely;
• assisting Young Westminster Foundation in a transitioning project to help year six students with the anxiety of moving to secondary schools, exacerbated by Covid-19; and
• supporting Westminster Kingsway College, in its employability enterprise programme aimed at 14-23 year olds.

Working with another longstanding community partner, we provided funding to the House of St Barnabas, a local homeless charity, to reopen its house and employment academy with Covid-19 secure measures.

Strategic report

Providing food and shelter

We made grants to the new Covent Garden Food Bank, created by our longstanding community partners, the Dragon Hall and Seven Dials Community Centre, to purchase equipment and contribute to running costs to help alleviate food poverty in the Seven Dials Community. Separately, we provided funding to the North Paddington Foodbank, to cover the cost of hiring temporary refrigeration equipment. In addition to our normal funding of an outreach worker, we provided funds to The Connection, our Westminster based homeless charity partner, to refit their premises to provide a Covid-19 safe environment for staff and clients.

Aiding well-being

We have provided funding to the Samaritans for materials to make their central London branch, in Carnaby, Covid-19 safe so they could remain open. In addition to our own monetary contribution, we were delighted that Blenheim Construction, the contractors at our 50 Marshall Street and 72 Broadwick Street schemes, undertook the works required at no cost. Recognising the widespread mental health impacts of Covid-19, we have helped fund the Young Camden Foundation in their support of local community organisations safeguarding the mental health and well-being of children, young people and youth workers during the pandemic and its aftermath.

Soho	Parish Primary School laptops	Page 47

Street furniture

Making a positive contribution to support our occupiers

Bike hubs in Carnaby and Seven Dials

Al fresco seating in Soho

Page 48

Shaftesbury Annual Report 2020 Strategic report Xxxxx

We believe that the West End, one of the world's great destinations, will weather this unprecedented period; its recovery is not a question of "If" but "When". Our priority is to support our occupiers until that recovery is established.

Strategic report

Street dressing in

Seven Dials

We are committed to supporting our commercial occupiers and residents through this period of unprecedented upheaval in normal patterns of life and business activit longside financial support, we have put in place a number of practical measures.

Virtual villages

We brought to life our villages virtually, with a programme of unique digital content to entertain, educate and inform people while they were unable to visit the villages in person.

Street closures and communal seating

We have worked with Westminster and Camden councils to identify and implement additional road space that can be used for both outdoor seating and pedestrians, providing additional trading capacity for our hospitality businesses and more space for pedestrians to maintain social distancing. In addition, we have installed communal tables and seating to provide socially-distanced outdoor amenity for visitors.

Safety and confidence

Across our villages, we have introduced social distancing messaging and hand sanitiser stations as well as providing cycle parking hubs, to give visitors confidence and reassurance to return to our villages.

Street dressing in Seven Dials, Carnaby and Chinatown

We dressed our villages and provided on-street activity to welcome back visitors.

Lobbying

We have collaborated with local stakeholders and partners on campaigns to support the West End's post-pandemic recovery including lobbying for extending short-term business rates relief and long-term reform, reversing the Government's decision to abolish tax-free shopping, and funding arrangements for London & Partners.

Page 49

Making a positive contribution to the environment

We are committed to having a positive impact on the local environment, from protecting and improving our heritage buildings to bringing wildlife back to the city.

Page 5034

22 Ganton Street roof terrace

Improving the local environment is not just good for biodiversity, it is also good for business, helping to create an attractive place that supports peoples' health and well-being whilst helping to reduce the impacts of climate change.

Green roof and planters

Increasing biodiversity

Since 2016, we have increased the area of biodiverse green space on our estate by 70%, providing valuable habitat for a wide variety of species. We now have more than 6,000ft2 of green roofs, 124 planters, 1,245 window boxes and 5 bee hives across the portfolio.

We continue to partner with other local landowners through the award winning Wild West End initiative.

Reducing carbon emissions

By extending the useful life of our heritage buildings, we improve their energy efficiency whilst avoiding carbon emissions associated with new construction. We are continuing to reduce carbon emissions from our own operations and where we purchase electricity, we do so from renewable sources.

Reducing waste

We retain as much of our buildings as possible during refurbishment projects. In 2020 we achieved 85% retention of primary structure and façade. Across our Carnaby estate we are also working in partnership with our occupiers to reduce the volume of single-use plastic and promote sustainable consumption through the Blue Turtle scheme.

Improving air quality

We are working to reduce the number of polluting vehicles in the West End by supporting schemes to consolidate deliveries, encouraging walking and providing facilities for cyclists.

Strategic report

Pollinator friendly window boxes

Page 51

Shaftesbury Annual Report 2020 Strategic report Our people and culture

Making a positive contribution

+

Page 52

Shaftesbury Annual Report 2020 Strategic report Our people and culture

Our people and culture

Strategy and Operations Executive Committee

The Strategy and Operations Executive comprises the executive directors and the senior leadership team.

Strategic report

Desna Martin	Julia Wilkinson
Company Secretary	Restaurant Director

Charles Owen

Property Director

Karen Baines

Head of Group

Date joined Shaftesbury

2020

Responsibilities

Leads on corporate governance within the Group and advising the Board. Company Secretary for the Longmartin joint venture.

Other committee memberships

Operations Committee

Risk Committee

Disclosure Committee

Community Investment Committee

Pension Committee

Date joined Shaftesbury

1997

Responsibilities

Group restaurant and leisure strategy and leasing.

Committee memberships

Operations Committee

Date joined Shaftesbury

2012

Responsibilities

Asset management of Covent Garden and a member of the Longmartin joint venture Management Committee.

Committee memberships

Operations Committee

Risk Committee

Sustainability Committee

Community Investment Committee

Marketing &

Communications

Date joined Shaftesbury

2016

Responsibilities

Group-wide strategic marketing and PR for consumer, trade and corporate communications.

Committee memberships

Operations Committee Community Investment Committee

Sam Bain-Mollison

Retail Director

Date joined Shaftesbury

2011

Responsibilities

Group retail strategy and leasing.

Other committee memberships

Operations Committee

Andrew Price

Property Director

Date joined Shaftesbury

2001

Responsibilities

Group-wide acquisitions strategy and asset management of Chinatown and Soho.

Committee memberships Operations Committee

Risk Committee

Community Investment Committee (Chair)

Pension Committee

Jenna Slade

Senior Portfolio Executive

Date joined Shaftesbury

2019

Responsibilities

Asset management of

Carnaby and Fitzrovia.

Committee memberships

Operations Committee

Risk Committee

Alastair Deutsch

Head of Finance

Date joined Shaftesbury

2020

Responsibilities

Financial planning and analysis, strategic commercial insights, treasury, tax, investor relations and IT.

Committee memberships

Operations Committee

Risk Committee

IT Committee

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Shaftesbury Annual Report 2020 Strategic report Our people and culture

Our people and culture

Our Board

Executive directors

Brian Bickell

Chief Executive

Date appointed to the Board

July 1987

Independent: No

Key strengths and experience

• a chartered accountant
• long tenure with Shaftesbury
• extensive experience within the property sector
• proven record of driving strategy, delivering success and setting an open and transparent culture

Brian joined Shaftesbury in 1986 and was appointed Finance Director in 1987. Brian was later appointed as Chief Executive in 2011.

Brian is responsible for implementing the Shaftesbury strategy and the day-to-day operations of the Group.

Committee memberships:

Strategic and Operations Executive

Committee (Chair)

Risk Committee

Disclosure Committee

Sustainability Committee (Chair)

Pension Committee

Current external appointments

Director of Longmartin Properties Limited, Board member of Westminster Property Association and Board member of Freehold. A trustee of Young Westminster Foundation.

Chris Ward

Finance Director

Date appointed to the Board

January 2012

Independent: No

Key strengths and experience

• a chartered accountant
• has •nancial and real estate experience, which contribute to the Group's strategy.

Prior to joining Shaftesbury, Chris was Finance Director of the UK and Nordic countries for Redevco for nine years.

Chris is responsible for •nancial accounting, tax and IT matters.

Committee memberships:

Strategic and Operations

Executive Committee

Risk Committee (Chair)

Disclosure Committee

Pension Committee (Chair)

IT Committee (Chair)

Simon Quayle

Executive Director

Date appointed to the Board

October 1997

Independent: No

Key strengths and experience

• a chartered surveyor
• long tenure with Shaftesbury
• knowledge of the West End property market which provides valuable knowledge and insight to our villages and strategy

Simon joined Shaftesbury in 1987 and was appointed as Property Director in 1997.

Simon is responsible for the asset management and operational strategy in Carnaby, Soho and Fitzrovia.

Committee memberships:

Strategic and Operations Executive

Committee

Operations Committee

Sustainability Committee

Current external appointments

Member of the Strategy Board for ZSL.

Tom Welton

Executive Director

Date appointed to the Board

October 1997

Independent: No

Key strengths and experience

• a chartered surveyor
• long tenure with Shaftesbury
• commercial experience and knowledge of the Group and West End property market provide value to our villages and strategy

Tom joined Shaftesbury in 1989 and was appointed as Property Director in 1997.

Tom is responsible for the asset management and operational strategy in Covent Garden and Chinatown.

Committee memberships:

Strategic and Operations Executive

Committee

Operations Committee

Current external appointments

Director of Longmartin Properties Limited.

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Shaftesbury Annual Report 2020 Strategic report Our people and culture

Strategic report

Non-executive directors

2 Richard Akers NAR

Senior Independent Director

Date appointed to the Board

November 2017

Independent: Yes

Key strengths and experience

4 Sally Walden NAR

Non-executive director

Date appointed to the Board

October 2012

Independent: Yes

Key strengths and experience

• provides knowledge and insight

1

3

5

Key to Committee Membership

1. Nomination Committee A Audit Committee
   R Remuneration Committee Committee Chair

2

4

1 Jonathan Nicholls N

Chairman of the Board

Date appointed to the Board

September 2016

Independent: Yes on appointment to the Board

Key strengths and experience

• over 21 years' experience of public company boards and their operations
• over 22 years' of experience within the property sector

Jonathan was •nance director of Hanson plc between 1998 and 2006, and of Old Mutual plc between 2006 and 2008.

Jonathan has been a non-executive director and chairman of the audit committee of Great Portland Estates plc (2009 to 2016), SIG Plc (2009 to 2017) and DS Smith plc (2009 to 2019), where he was also Senior Independent Director between 2013 and 2019.

Current external appointments

Chairman of Ibstock plc

• a chartered surveyor
• provides a broad range of real estate knowledge and experience at board level.

Prior to joining Shaftesbury, Richard was a senior executive of Land Securities Group PLC from 1995, and joined the main board in 2005 as managing director of the Retail Portfolio.

Richard was appointed Senior Independent Director and designated non-executive director for employee engagement in February 2019.

Current external appointments

Non-executive director, senior independent director and chairman of the remuneration committee and safety, health and environmental committee of Barratt Developments PLC. Non-executive director of The Unite Group plc.

3 Dermot Mathias NAR

Non-executive director

Date appointed to the Board

October 2012

Will retire from the Board in February 2021

Independent Yes

Key strengths and experience

• a chartered accountant
• provides recent and relevant •nancial experience to the board and the audit committee
• extensive experience in leadership and management

Prior to joining Shaftesbury, Dermot was a partner in the corporate •nance department of BDO LLP from 1980, and from 2004 to 2010 was senior partner of BDO and chairman of the Policy Board of BDO International.

Current external appointments

Non-executive director, senior independent director and chairman of the audit committee of JTC PLC, governor and vice chair of Activate Learning Education Trust.

into remuneration, •nancial

markets and fund management.

Sally held senior fund management roles in Fidelity International from 1984 to 2009.

Current external appointments

Trustee of the Fidelity Foundation and director of the Pantry Partnership

5 Jennelle Tilling NAR

Non-executive director

Date appointed to the Board

January 2019

Independent: Yes

Key strengths and experience

• Fellow of The Marketing Society
• over 25 years' experience of consumer marketing, digital and innovation within food retail brands, which complements the skills on the Board

Jennelle held a variety of senior marketing roles for over 17 years at Yum! Restaurants, and is the Founder and Chief Brand Strategist at Marketing with Insight.

Current external appointments

Non-executive director of Camelot and non-executive director of Butchies and Trustee for Guide Dogs to the Blind.

Page 55

Shaftesbury Annual Report 2020 Strategic report

Portfolio valuation report

Covid-19 has had a significant impact on our valuations this year. Reduced footfall, consequential occupier operational and financial challenges, increased vacancy across the West End, and other uncertainties have resulted in pressure on rental values and increased yields. The 18.3% valuation decrease in the wholly-owned portfolio has largely occurred since the beginning of March 2020.

Presentation of Longmartin joint venture information

Our property interests are a combination of the wholly-owned portfolio and a 50% share of property held in the Longmartin joint venture. The •nancial statements, prepared under IFRS, include our interest in this joint venture as one-line items in the Income Statement and Balance Sheet.

In previous years, our narrative has presented the combined portfolio valuation analysis and the •nance position on a proportionally consolidated basis. However, we now consider that it is appropriate to separately report Longmartin's activity, valuation and capital structure. We believe this presentation provides a clearer analysis and is consistent with the •nancial statements.

Wholly-owned portfolio

At 30 September 2020, our portfolio was valued at £3.1 billion. On a like-for-like basis, the valuation declined by 18.3%, principally due to uncertainties resulting from Covid-19. After allowing for capital expenditure, the revaluation de•cit was £698.5 million.

Whilst we saw some improvement in both the occupational and investment markets following the UK general election in December 2019, this started to decline from early February 2020 amid growing Covid-19 fears. Since then, Government restrictions have had a material e‰ect on trading conditions for all consumer-facing,footfall-reliant businesses, which are inevitably cash-ˆow sensitive, leading to near-term uncertainty, lower occupier demand, pressure on rents and increased vacancy.

• Portfolio activity report: page 59

The valuation decline during the year was driven by an increase in the portfolio equivalent yield of 48 basis points to 3.95% (2019: 3.47%), reˆecting:

• increased valuation yields applied to food, beverage, leisure and retail uses, and selected o•ces. Reducing values by around £371 million, this reˆected investor sentiment given Covid-19 economic uncertainties;
• a reduction of 6.6% in ERVs across the portfolio, equating to a decrease in valuation of approximately £195 million. This was largely driven by increased vacancy levels across the West End and reduced near-term occupier demand, which are consequences of operational challenges arising from the pandemic;
• a reduction in the valuation of our apartments of between 7.5% and 10%, equating to approximately £48 million. This reˆected increased near-term availability of residential space for rent in the West End which has led to more buy-to-let investor caution with an associated increase in required returns to reˆect current uncertainty; and
• the valuer's estimate of the short-term income impact of rental support likely to be granted to occupiers as a result of the pandemic and reduced occupancy, equating to a valuation decrease of approximately £57 million.

Wholly owned portfolio valuation

	Valuation	Annualised current			Topped-up net
	income	ERV	Valuation growth1	initial yield		Equivalent yield
	£m	£m	£m	%	%	%	Change2
Carnaby	†‡ˆ†ˆ‰Š	‹†‰Œ	Ž'‰'	(†Œ‰')•	Š‰†•	‹‰ˆ•	-Ž‹bps
Covent Garden	'‹'‰'	ˆ'‰'	ŠŽ‰‹	(†˜‰Ž)•	Š‰'•	Š‰™•	-Š‹bps
Chinatown	Œ''‰™	ˆ‹‰Œ	Š'‰†	(†Œ‰')•	Š‰ˆ•	Š‰'•	-‹Šbps
Soho	ˆŽ'‰Œ	†'‰‹	††‰Š	(ˆ†‰ˆ)•	Š‰™•	Š‰'•	-Š˜bps
Fitzrovia	†ˆŽ‰'	‹‰Š	Ž‰Ž	(†'‰Ž)•	ˆ‰˜•	Š‰'•	-ŠŒbps
	€'ƒ€"…†	ƒ‡ˆ…ˆ	ƒ†‡…€	(ƒŠ…€)Œ	€…ƒŒ	€…ˆŒ	-‹'bps
2019	Š‡Œ'‹‰ˆ	††Œ‰†	†‹˜‰Œ	('‰ˆ)•	ˆ‰˜•	Š‰Ž•

1. Like-for-like.Alternative performance measure. See page 156.
2. Expressed in basis points.

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Shaftesbury Annual Report 2020 Strategic report Portfolio valuation report

Valuation movements (£m)

3,784

	(371)			24	3,137
		(195)	(48)	(57)

Strategic report

2019	Yield	ERV	Residential	Short-term cash	Acquisitions and	2020
				€ow impact	capex impact

Cushman & Wake•eld, independent valuer of our wholly-owned portfolio, has continued to note that:

• our portfolio is unusual in its substantial number of predominantly restaurant, leisure and retail properties in adjacent, or adjoining, locations in London's West End; and
• there is a long record of strong occupier demand for these uses in this location and, as a result, high occupancy levels, which underpin the long-term prospects for rental growth.

Consequently, they have reiterated to the Board that some prospective purchasers may recognise the rare and compelling opportunity to acquire, in a single transaction, substantial parts of the portfolio, or the portfolio in its entirety. Such parties may consider a combination of some, or all, parts of the portfolio to have a greater value than currently reˆected in the valuation included in these results, which has been prepared in accordance with RICS guidelines.

Covid-19 impact on contracted rental income and ERV

Our strategy has delivered sustained growth in annualised current income and rental values over many years. However, since early March 2020, Covid-19 has had a negative impact on both. The chart below demonstrates the resilience displayed by the wholly-owned portfolio during the global •nancial crisis and the impact to date of the Covid-19 pandemic.

Annualised current income

During the year, annualised current income fell by 6.1% to £109.9 million (2019: £117.1 million). On a like-for-like basis, before the impact of acquisitions in the year, the decline was 6.4%. This decrease occurred since 31 March 2020, when annualised current income totalled £117.7 million, and largely reˆects increased EPRA vacancy.

• Portfolio activity report: page 59

ERV

A key output from our strategy is long-term growth in rents and ERVs. Through our leasing activity, previously assessed rental potential is typically converted into contracted rents, whilst establishing new rental levels, which provide evidence both for future leasing negotiations and for the valuers when assessing ERVs. Typically, our portfolio's reversionary potential is converted into contracted rent over three to •ve years.

Over the ten years to 30 September 2019, the wholly-owned portfolio delivered like-for-like compound annual growth in ERV of 4.7%. However, this year, the portfolio's ERV decreased on a like-for-like basis by 6.6% to £140.3 million (2019: £149.7 million), reˆecting pressure on rents as a result of higher availability of space across the West End together with ongoing operational and •nancial challenges faced by our occupiers. This was particularly the case for retail and food, beverage and leisure, where ERVs declined on average by 10.7% and 6.9% respectively. O•ce ERVs declined by 1.7%.

• Covid-19:impact and response: page 6

Long-term progression in ERVs and contracted rents

	Annualised current income (£m)	ERV (£m)
growth	7.4%		GFC					6.4%	6.8%	6.4%				Covid
			6.1%	6.0%
ERV	4.8%		1.6%	4.3%	3.4%	2.6%	3.2%
L-f-L			-3.9%											-6.6%
ERV											134	144	150	140
									129
								119			28%
							110
and
					93	98
				85
income	55	73	72	77
55	59	62	67	74	76	80	86	95	101	105	113	117	110
Contracted
2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020

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Shaftesbury Annual Report 2020 Strategic report Portfolio valuation report

Reversion components (£m)		14.3	140.3
		14.4
	4.2		-2.5
109.9
	% of ERV
	3.0%	10.2%	10.1%	-1.8%	L-f-L
L-f-L
				-6.6%
-6.4%

Annualised current	Contracted income	EPRA vacancy	Asset management	Over-rented leases	ERV
income		+ Page 60	schemes
		+ Page 61

At 30 September, the portfolio's ERV was 27.7% above annualised current income. The components of the reversion are set out in the chart above. Typically, our portfolio has a long history of being under rented. However, following the decrease in ERVs in the year, our valuers estimate that let accommodation is currently over-rented by £2.5 million in total. Depending on the path and pace of recovery, further pressure on ERVs would increase the over-rented element of our portfolio until such time as vacant space across the West End has been absorbed.

Food & beverage

During the year, the valuation of Longmartin's food & beverage accommodation decreased by 17.4% from £38.1 million to £31.5 million. This decrease was driven by an increase in equivalent yield of 51 basis points and a decrease in ERV, recognising existing vacant space in St Martin's Courtyard, following a scheme to create three restaurants, and disruption to the supply and demand balance caused by near-term food and beverage vacancy in the immediate surrounding area as

a result of Covid-19.

Longmartin valuation

In the narrative below, all •gures (except areas) represent our 50% share.

During the year Longmartin's long leasehold property decreased on a like-for-like basis by 16.9% from £209 million to £175 million. The revaluation de•cit, after capital expenditure, was £35.8 million, following a 12.0% decline in ERVs to £8.8 million (2019: £10 million) and an increase in equivalent yield of 17 basis points to 4.11% (2019: 3.94%). At 30 September 2020, annualised current income was £6.2 million, down 17.3% during the year (2019: £7.5 million).

The valuation decline was driven by retail and food & beverage, which decreased by 40.1%, and 17.4% respectively.

Retail

Retail values decreased on a like-for-like basis during the year by 40.1% to £41.9 million (2019: £70.0 million). In contrast to the Group's wholly-owned shops, Longmartin's retail space predominantly comprises large units on Long Acre, a street with relatively high overall rents, for which occupier demand continues to decline. Together with general uncertainty and further pressure on rents as a result of Covid-19, this has led to an increase in Long Acre retail equivalent yields of 50 basis points during the year, and further reductions in ERVs.

Residential and offices

The valuation of Longmartin's apartments decreased by 6.5% to £28.1 million (2019: £30.1 million), reˆecting a near-term increase in the availability of space and slowing of the investment market. The o•ces valuation increased by 3.7% to £73.5 million (2019: £70.9 million) following ERV growth of 3.2% and equivalent yield compression

of two basis points to 4.21% (30 September 2019: 4.23%).

Valuation outlook

We expect that the valuation of both the wholly-owned portfolio and Longmartin's property are likely to experience downward pressure in the near term. This is predominantly due to the growing availability of space across the West End and the continued impact of Covid-19 containment measures a‰ecting trading conditions for retail, food, beverage and leisure businesses, with the risk of further declines if the current market outlook worsens. The pace of pandemic recovery will be important in the extent and duration of downward pressure on valuations.

• Covid-19:impact and response: page 6

Page 58

Shaftesbury Annual Report 2020 Strategic report

Portfolio activity report

Following a largely "business as usual" first half of our financial year, the Covid-19 pandemic had a significant impact on our business during the second half, resulting in reduced rent collections, increased vacancy and reduced occupier demand.

Strategic report

Rent collection

Our key priority has been, and continues to be, supporting our occupiers through the period of pandemic disruption (pages 7 to 8). A signi•cant element of this support has been through rent concessions, often by way of waivers, deferrals and introduction of further lease ˆexibility including short-termturnover-related rents. In some cases, our concessions have provided the opportunity to restructure leases. Furthermore, we have drawn on tenant rent deposits to part settle their arrears and are not requiring these deposits to be topped-up.

In order to provide certainty for our food, beverage and retail businesses, our discussions and agreements with them initially focused on the six months to 30 September 2020. From 1 October 2020, we commenced providing commercial occupiers with the option to pay rent and service charges monthly rather than quarterly in advance, in order to help align our revenue collection with their cash ˆows. With England entering a second national lockdown on 5 November 2020, rent collections since 30 September 2020 have been further reduced and additional waivers have been granted.

Contracted rent and rent collection since the first UK

Covid-19 lockdown1

	6 months to 30	2 months to 30
	September 2020	November 2020
	£m	%	£m	%
Collected	Š'‰Š	ŽŠ•	™‰˜	ŠŒ•
Deferred	Ž‰ˆ	˜•	-	-
Waived	†‹‰Š	ˆŽ•	Œ‰‹	‹'•
Outstanding	Œ‰Š	†Š•	‹‰Š	ˆŠ•
Total contracted	ŽŒ‰†		†'‰™

By 30 November 2020, we had collected 53% of contracted rent for the six months to 30 September 2020, of which drawings against rent deposits accounted for £6.8 million (12% of contracted rent). At 30 September 2020, we continued to hold rent deposits totalling £14.3 million (2019: £20.7 million). 34% of contracted rent had been waived or deferred and 13% remained outstanding.

Rent collections for the two months to 30 November 2020, a period which included the second lockdown, were 37%, of which rent deposits accounted for £0.2 million (1% of contracted rent). 40% of rent has been waived and 23% remained outstanding.

The eventual recovery of amounts deferred or outstanding will depend on tenants' ability to meet these commitments. This will be inˆuenced by pandemic-related factors which continue to a‰ect the future viability of their businesses.

Rent collection rates have varied by use, with residential and o•ce collections being higher than those for food, beverage and retail businesses which inevitably are more footfall reliant.

% of contracted income collected1

6 months to 30 September 2020
2 months to 30 November 2020
	£9.5m
£7.4m		£7.5m
			£5.9m
33%	54%
	79%	83%
	£1.8m	£2.1m
£1.5m	£1.5m
31%	70%
19%	88%
Food,	Retail	O˜ces	Residential
beverage
& leisure

Looking ahead, our rental and service charge support is likely to continue through 2021, with our occupiers having reduced income in the important period leading up to Christmas and into the New Year, which traditionally has provided them with liquidity bu‰ers to withstand the normally slower quarter to March. The eventual return to more-normal rent collection levels will be highly correlated to the recovery in footfall.

Leasing and occupier demand

The decisive outcome of the December 2019 general election, and clarity regarding the UK's exit from the EU, brought welcome signs of an improvement in business con•dence and investment, as well as consumer activity. Our occupiers reported good footfall and spending in our locations in the important trading period over Christmas and the New Year, and in the early weeks of 2020, enquiries to lease space grew, and the availability of potential acquisitions picked up.

From early February 2020, growing reports regarding the rapid spread of the Covid-19 virus began to impact leasing activity and lower leasing volumes have continued since March 2020.

During the year, we concluded leasing transactions with a rental value of £23.6 million, 30% lower than the volume in 2019. The decrease in commercial letting activity was particularly noticeable in the second half of the •nancial year.

Letting activity during the year

				2020		2019
			H1	H2
			£m	£m	£m		£m	Change
Commercial			ƒƒ…†
Lettings and renewals	˜‰Š	ˆ‰†		†Ž‰™	(ˆŒ)•
Rent reviews	Š‰Ž	ˆ‰Œ	•…-		†'‰™	(‹ˆ)•
			†ˆ‰'	‹‰'	ƒ"…•		ˆ™‰ˆ	(ŠŠ)•
Residential	ˆ‰ˆ	Š‰'	•…‡		Œ‰Š	(†')•
			†Ž‰'	'‰™	-€…•		ŠŠ‰Ž	(Š')•
1. As at 30 November 2020

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Shaftesbury Annual Report 2020 Strategic report Portfolio activity report

The uncertain outlook for the national economy and consumer spending is having a signi•cant impact on business con•dence and investment, which is unlikely to improve materially until pandemic concerns abate. Retailers, particularly those exposed to structural changes in shopping habits nationally and internationally, which were clearly evident before the onset of the pandemic, have been accelerating their review of space requirements, both in terms of location and size of shops. Similarly, over-extended food and beverage chains continue to retrench their operations to focus only on the most pro•table locations and sites.

We have seen encouraging letting interest in recent weeks, with potential occupiers attracted by the curation of our normally buoyant and prosperous villages, with relatively a‰ordable rents. Generally, businesses remain cautious in taking on rental and capital expenditure commitments and occupiers are looking for greater ˆexibility when entering into new leases, including rent suspension in the event of further lockdowns. In the case of food, beverage, leisure and retail premises, a higher speci•cation of landlords' basic •t out, rather than taking space in shell condition, is becoming standard market practice. We are now providing fully •tted-out space in some of our o•ce schemes. We expect the demand for further lease ˆexibility to be prevalent until the West End fully recovers from the pandemic.

Occupancy

Although the West End has a long-term availability/demand imbalance, we have seen a decline in portfolio occupancy during the year. Compared with the 10-yearpre-Covid-19 average of 2.9%, EPRA vacancy rose to 10.2% during the year, with the majority of the increase since March 2020.

A‰ecting all uses, this was largely due to the impact of the Covid-19 pandemic, including the signi•cant reduction in letting activity since February 2020, completion of refurbishment schemes, space handed back by commercial tenants and an exceptional increase in vacant apartments.

Tenant insolvencies since the lockdown in March 2020 accounted for approximately 2% of ERV.

EPRA vacancy at 30 September 2020

							% of total ERV
		Food,
beverage			Residen-
and leisure	Shops	O˜ces	tial	Total	2020	2019
		£m	£m	£m	£m	£m	%	%
Under o›er	'‰˜	'‰‹	'‰ˆ	'‰ˆ	†‰Œ	ƒ…ƒŒ	†‰'•
Available-to-let	ˆ‰™	‹‰†	ˆ‰Š	Š‰Œ	†ˆ‰Œ	ˆ…ƒŒ	†‰˜•
		€…œ	†…œ	-…œ	€…ˆ	ƒ†…†	ƒ‡…-Œ	Š‰Œ•
2019		†‰‹	Š‰ˆ	'‰'	'‰†	Ž‰Ž
Area ('000 sq. ft.)
2020		†"	†œ	†‡	"-	-‡†
2019		†™	‹™	†ˆ	†	ŒŽ

Commercial vacancy

At 30 September 2020, commercial EPRA vacancy comprised:

• 22 restaurants and cafés (47,000 sq. ft.): total ERV of £3.5 million;
• 35 shops (45,000 sq. ft.): total ERV of £4.5 million;
• • 9 were larger shops (ERV > £150,000): total ERV of £2.7 million; and,
  • 26 were smaller shops: total ERV of £1.8 million; and
• 45 o•ce suites (40,000 sq. ft.): total ERV of £2.5 million.

EPRA vacancy history	Covid:
	Underlying		Larger schemes	+7.3% vs
		10 year
				average

										10.2%
										0.3%
							6.0%
Pre-Covid:								4.6%		9.9%
10 year							3.5%
quarterly								3.7%
average		3.2%
							0.5%
2.9%	2.9%		2.7%				1.9%
			2.3%
1.6%					1.6%	1.6%			3.2%
							2.5%
								2.7%
2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020

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Shaftesbury Annual Report 2020 Strategic report Portfolio activity report

Strategic report

Residential vacancy

Residential vacancy, which prior to the pandemic had typically been minimal, was unusually high at 137 apartments with an ERV of £3.9 million at 30 September 2020. This large increase in the second half of our •nancial year was mainly due to occupiers from overseas returning home when Government restrictions were introduced, and the collapse in demand from long-stay international business and leisure travellers.

Across the West End, many landlords who would usually let their ˆats short-term or let to serviced apartment operators have been attempting to •nd long-term tenants. This has resulted in a near-term increase in availability of apartments to let, causing downward pressure on rents. Given the long-term structural shortage of accommodation in the West End, we believe that this is a short-term challenge in respect of our residential portfolio.

Space held for or undergoing refurbishment at 30 September 2020

							% of total ERV
	Food,
beverage			Residen-		2020
and leisure	Shops	O¤ces	tial	Total	2019
		£m	£m	£m	£m	£m	%	%
72 Broadwick Street		Š‰‹	'‰‹	†‰Ž	'‰™	Ž‰˜	†…ƒŒ	‹‰†•
Other schemes		†‰†	†‰'	‹‰Œ	'‰'	'‰‹	•…‡Œ	™‰Š•
		†…œ	-…-	•…-	ƒ…†	ƒ†…€	ƒ‡…ƒŒ	†'‰‹•
2019		Ž‰‹	ˆ‰'	Ž‰Ž	†‰'	†Ž‰Ž
Area ('000 sq. ft.)
2020		•€	--	Šœ	€‡	-‡‡
2019		ŒŠ	ˆŒ	ŒŒ	Š™	ˆ†Š

Occupancy outlook

By 30 November 2020, EPRA vacancy had risen further to 12% of ERV. We expect near-term EPRA vacancy to increase through a combination of occupiers su‰ering further operational and •nancial challenges, occupier demand remaining subdued until there is a sustained recovery in footfall, spending and business con•dence, and the completion of schemes currently in progress. This will, inevitably, weigh on near-term rental levels across the West End. However, we are con•dent that our historically popular areas will continue to be destinations of choice for potential occupiers as recovery gets underway.

e ishment econfi ation an

redevelopment schemes

A key aspect of our asset management strategy is to carefully manage, re-use and adapt our portfolio of mostly smaller, mixed-use buildings. Through refurbishment, recon•guration and change of use, we improve our assets by:

• adapting our accommodation to meet current occupier requirements and anticipate market trends;
• extending their useful economic lives;
• improving income and rental prospects; and
• enhancing environmental performance.

Our schemes mostly are not capital intensive and take a relatively short time. Consequently, capital expenditure is modest, usually less than 1% of the portfolio value each year, an important factor in long-term shareholder value creation.

Capital expenditure during the year totalled £34.8 million, representing 1.1% of wholly-owned portfolio value. This included our project at 72 Broadwick Street, Carnaby.

At 30 September 2020, vacant space held for, or under, refurbishment extended to 200,000 sq. ft., and represented 10.1% of total ERV, down from 10.4% a year ago.

72 Broadwick Street, Carnaby

Works continue on our 77,000 sq. ft. mixed-use scheme to:

• introduce new retail, restaurant and leisure uses;
• relocate the o•ce and residential entrances to allow activation of the commercial frontage on Broadwick Street;
• extend and refurbish the remaining o•ce space; and
• reconstruct the residential accommodation, increasing the number of apartments from eleven to •fteen.

Of the repurposed and upgraded commercial accommodation, 48% by ERV is conditionally pre-let to Equinox, an American •tness and lifestyle brand. The o•ce space is no longer under o‰er.

Whilst site activity was suspended in March and April, due to lockdown restrictions, good progress is being made. The estimated overall scheme cost is now £35.7 million, of which £14.3 million had been incurred by 30 September 2020. We currently anticipate completion in phases from Summer 2021.

Other schemes

At 30 September 2020, we had 57 other schemes underway, extending to 123,000 sq. ft. and with an ERV of £8.4 million (6.0% of ERV). These included 17,000 sq. ft. of food and beverage space, 19,000 sq. ft. of retail, 67,500 sq. ft. of o•ce accommodation and 32 apartments.

Projects with an ERV of £5.1 million are anticipated to complete by 31 March 2021, and are likely to increase near-term EPRA vacancy, although will provide a useful contribution to income and earnings over the medium term.

Largest other schemes by cost

		Estimated	Cost to
Scheme	Description	cost	complete	Estimated
£m	£m	completion
50 Marshall Street,	Creation of retail unit;	Ž‰†	'‰Œ	Q†ªˆ'ˆ†
Carnaby	refurbishment/extension of
	o¤ce space
45/49 Charing Cross	Recon¬guration and	‹‰'	'‰ˆ	Q†ªˆ'ˆ†ª
Road, Chinatown	extension to provide new
	®agship restaurant space
	and ¬ve apartments at this
	gateway to Chinatown
16-20 Short's Gardens,	O¤ce recon¬guration and	ˆ‰ˆ	'‰‹	Qˆªˆ'ˆ†
Seven Dials	refurbishment

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Shaftesbury Annual Report 2020 Strategic report Portfolio activity report

Public realm improvements

London Borough of Camden's works to improve the northern entrance to Seven Dials on Shaftesbury Avenue are now substantially complete. This now provides a crossing directly on the main walking route between Seven Dials and Tottenham Court Road station, which should increase footfall into Monmouth Street and Neal Street once the Elizabeth Line opens.

Improvements to Rupert Street, south of Shaftesbury Avenue, have now completed, doubling pavement space and providing the opportunity for al fresco dining.

In Seven Dials, a Covid-related trial by Camden Council has removed all tra•c from Seven Dials from 10am until 6pm, and will be in place until September 2021, after which a permanent tra•c reduction scheme could be put in place, subject to public consultation.

We have commenced working on the concept designs for the space to the side of 72 Broadwick Street, with a view to removing tra•c and providing a new public space with ˆexible seating and greening at this important entrance into Carnaby.

We continue discussions with both Westminster City Council and the London Borough of Camden on how our food and beverage businesses can access more outdoor space, particularly in light of social distancing measures.

Looking ahead to the coming year

At any one time, we have schemes at various stages, from initial ideas, seeking planning approval, awaiting vacant possession or under construction. Over recent years, we have often sought to secure vacant possession of space where we could improve long-term income prospects through recon•guration and change of use schemes. Until the operating environment improves, we will focus on protecting existing income and preserving liquidity and new schemes will only

be considered where there is a compelling case.

Most of our current schemes will complete in 2021. In line with our strategy, we will continue to recon•gure buildings to meet changing occupier demands. This is particularly so for shops where we anticipate further downsizing of our bigger units, where appropriate, and, where space is released, introducing other uses.

With growing food, beverage and retail vacancy across the wider West End, it is likely that availability of space to let will exceed occupier demand for some time after the pandemic recovery starts. Whilst we believe our areas will continue to be seen as "best in class", in the short term, we expect to have to invest in elements of •t out in our vacant units to maximise their letting prospects.

Longmartin asset management

In the following narrative, all •gures (except areas) represent our 50% share.

For the six months to 30 September 2020, 81% of contracted rent has been collected to date. 16% has been waived and 3% remains outstanding. For the quarter to December 2020, 70% of rent has been collected so far. The higher relative collection rate, compared with that for the wholly-owned portfolio, mainly reˆects the higher proportion of o•ces and larger international retail in Longmartin.

During the year, lettings and rent reviews with a rental value of £1.6 million were concluded (2019: £1.4 million).

At 30 September 2020, the ERV of Longmartin's vacant space was £1.1 million (2019: £0.9 million) and there was space with an ERV of £0.1 million under refurbishment. Capital expenditure in the year was £1.6 million.

Acquisitions and disposals

Adding to our portfolio

We take a long-term view in our investment strategy. When seeking out new acquisitions, we adopt a disciplined approach, focusing on buildings:

• on busy streets in areas close to West End landmarks where, as a consequence of fragmented ownership and lack of strategic curation and investment, rental tones are signi•cantly lower than nearby prime locations; and
• which add to existing or emerging clusters of ownerships where we can, over time, compound the bene•ts of our activities to deliver long-term growth in rental and capital values through our holistic management strategies.

We have a preference for adaptable and often period buildings which either have, or have the potential for, a predominance of food, beverage, retail or leisure uses on the lower ˆoors. In the West End, these uses have a long history of occupier demand exceeding availability, underpinning their growth prospects.

With our focused acquisition strategy to establish and extend long-term ownership clusters, disposals are rare. However, we keep the portfolio under review to identify and sell individual buildings which, through change of circumstances, are no longer considered to be of core importance to our long-term strategy, and where disposals will not damage the integrity and long-term value of the wholly-owned portfolio.

During the year we added to our existing and emerging clusters in Carnaby and Soho, acquiring three buildings for £13.3 million:

• a dilapidated, mixed-use building fronting Kingly Street and Kingly Court in Carnaby, which had been in the same ownership since 1982. We have sought to acquire this property ever since our purchase of the Carnaby Estate in 1997. Plans are already being progressed for a refurbishment and recon•guration scheme extending to two adjoining buildings; and
• two freeholds in Berwick Street which adjoin existing ownerships and will o‰er the opportunity, in time, to recon•gure or add space.

With the West End's broad-based economy, global appeal and resilience, existing private owners are traditionally reluctant to sell other than in periods of uncertainty or •nancial pressure. The unprecedented operational disruption to West End footfall, trading, demand for space and occupancy resulting from pandemic-related measures, is beginning to unsettle current owners. This may present a rare opportunity to acquire key strategic additions to our ownership clusters.

• Financing: page 67

Since 30 September 2020, we have acquired a building in Seven Dials for £2.8 million.

90-104 Berwick Street

In 2017, we conditionally agreed to acquire this development in Soho. The vendor failed to meet contractual obligations to complete the sale to us by 30 April 2020. The scheme achieved practical completion in October. We continue discussions with the vendor, but a decision on acquiring this building will not be made until a number of important pre-purchase conditions have been ful•lled to our satisfaction.

Page 62

Portfolio valuation report: page 56

Shaftesbury Annual Report 2020 Strategic report

Financial results

The Covid-19 pandemic has had a material negative impact on our results this year, due to occupier operational and financial distress, increased vacancy, lower rent collections, charges for expected credit losses and impairment, and investment property valuation deficits.

Strategic report

esentation o financial in o mation

As is usual practice in our sector, we produce alternative measures for certain indicators, including earnings, earnings per share and NAV, making adjustments set out by EPRA in its Best Practices Recommendations. These recommendations are designed to make the •nancial statements of public real estate companies more comparable across Europe, enhancing the transparency and coherence of the sector. These measures are reconciled to IFRS in note 24 to the •nancial statements.

Further details on APMs used, and how they reconcile to IFRS, are set out on page 156.

Accounting for Covid-19 support provided to occupiers

The support we are providing to occupiers as a result of the Covid-19 pandemic is largely in the form of deferrals and/or waivers of rent and lease modi•cations. The accounting treatment depends on the type of support granted and often results in a mis-match between EPRA earnings and cash ˆows:

• Rent deferrals: income is recognised as normal and the deferred rent receivable balance is assessed for impairment.
• Rent waivers: the cost of rent waivers is deferred over the remaining term of the lease, in much the same way as a lease incentive. Any deferred cost is then assessed for impairment. The deferred cost balance, after amortisation or impairment, is deducted from the valuation of investment properties and, so, is initially charged to revaluation gains or losses. As the balance is amortised or impaired, there is a charge against revenue and an equal credit to revaluation gains or losses.

Where a lease is modi•ed, e.g. extended, in exchange for a rent waiver, the cost of the waiver is spread over the revised lease term.

The •nancial statements include signi•cant provisions for expected credit losses in respect of trade receivables and impairments of balances such as lease incentives and deferred letting costs. In assessing the provisions, we consider a number of factors including ongoing operational and •nancial challenges being experienced by tenants which reduce their ability to pay back arrears, including amounts deferred, and increase the risk of tenant default. Given the materiality of the charges for these provisions in the current year, they are presented separately on the face of the Income Statement.

• Preserving long-term value by supporting tenants to maintain occupancy: page 7
• Rent collection: page 59
• Occupancy: page 60

Income statement

	2020	2019	Change
	£m	£m	£m
Rental income	ƒƒ†…†	††Œ‰Š	(ˆ‰˜)
Service charge income	ƒ‡…ƒ	˜‰™	'‰Ž
Revenue	ƒ-†…œ	†ˆ™‰˜	(ˆ‰‹)
Charges for expected credit losses and impairments	(-ƒ…ˆ)	-	(ˆ†‰˜)
Service charge expenses	(ƒ‡…ƒ)	(˜‰™)	('‰Ž)
Other property charges	(ƒŠ…-)	(†˜‰Š)	†‰†
Net property income	"†…€	˜'‰'	(ˆŠ‰Œ)
Administrative expenses	(ƒ†…†)	(†Ž‰ˆ)	'‰'
Valuation de¬cits and disposal pro¬ts	(•ˆŠ…-)	(†ˆ‰Ž)	(™'Ž‰Œ)
Operating pro¡t	(•€Š…€)	Œ'‰Š	(Œ''‰™)
Net ¬nance costs	(€ƒ…Š)	(Š'‰Ž)	(†‰Š)
Share of Longmartin post-tax loss	(-ˆ…†)	(†Š‰')	(†Ž‰™)
Pro¡t before tax	(•ˆˆ…œ)	ˆ™‰'	(ŒˆŽ‰Ž)
Tax	-	-	-
Reported earnings for the year	(•ˆˆ…œ)	ˆ™‰'	(ŒˆŽ‰Ž)
Basic earnings per share	(--"…œ)p	'‰Žp	(ˆŠ™‰')p
EPRA earnings1	-ˆ…†	Ž‹‰™	(ˆŽ‰ˆ)
EPRA earnings per share1	ˆ…•p	†Œ‰'p	('‰ˆ)p

1. Alternative performance measure.

The loss after tax for the year was £699.5 million, compared with a pro•t in 2019 of £26.0 million. The year-on-year change was largely due to consequences of the Covid-19 pandemic and included:

• a revaluation de•cit, net of disposal pro•ts, of £698.2 million (2019: de•cit of £12.5 million);

• charges for expected credit losses and impairments totalling £21.9 million (2019: nil); and

• an increase in our share of the post-tax losses from the Longmartin joint venture, predominantly due to an increased investment property revaluation de•cit in the year, our share of which was £35.8 million

+(2019: £19.2 million).

Page 63

Shaftesbury Annual Report 2020 Strategic report Financial results

Revenue

During the year, rental income, before the impact of charges for expected credit losses and impairments, was £114.4 million (2019: £117.3 million), and included accrued income from lease incentives of £11.9 million (2019: £2.3 million). The increase in accrued income is a result of accounting for waivers of rent during the period.

In the •rst half of the •nancial year, our rental income (including accrued income) increased by 2.2% compared with the corresponding period in 2019. However, in the second half of the year, rental income decreased by 7.2%, compared with 2019, largely due to increased vacancy and rent waivers granted to tenants as a result of Covid-19.

Rental income

	2020	2019
	£m	£m	%
6 months ended 31 March	œˆ…ˆ	Ž'‰™	-ˆ‰ˆ•
6 months ended 30 September	œ†…œ	Ž'‰Œ	-Œ‰ˆ•
	ƒƒ†…†	††Œ‰Š	-ˆ‰Ž•

For the full year, the like-for-like decrease in rental income, excluding the impact of acquisitions, was £4.1 million (-3.5%).

After service charge income of £10.1 million (2019: £9.6 million), revenue

decreased by £2.4 million to £124.5 million (2019: £126.9 million).

Expected credit losses on trade receivables

Rent collections were signi•cantly reduced during the second half of our •nancial year. Given the uncertain trading outlook for many of our food, beverage and retail tenants, and the higher risk of occupier default, provisions have been made against amounts owing which have either been deferred as part of our Covid-19 occupier support package or remain unpaid without an agreed waiver. The charge to the Income Statement during the year was £13.0 million.

• Portfolio activity report: page 59

Impairment charges

The Income Statement includes a £8.9 million charge for impairments in respect of lease incentives, rent waivers and deferred letting costs (2019: £nil). These reˆect our assessment of the likelihood of future tenant default or failure, considering ongoing pandemic-related operational challenges.

• Portfolio activity report: page 59

Property charges and net property income

Property charges, excluding recoverable service charge costs, were £18.2 million, down 5.7% during the year (2019: £19.3 million). The decrease was due to reduced letting and marketing activity, partly o‰set by higher irrecoverable property operating costs, including those as a result of increased vacancy levels.

Net property income for the year was £74.3 million, down

£23.7 million compared with the previous year (2019: £98.0 million).

Administrative expenses

Administrative expenses, totalling £14.4 million, were £0.8 million lower than in the previous year (2019: £15.2 million).

Employee costs were £1.8 million lower at £8.2 million (2109: £10.0 million). This decrease was largely due to executive directors not receiving an annual bonus, together with all directors waiving 20% of salary, pension contributions and fees for four months in the year. These savings were partly o‰set by additional employee costs as

a result of higher headcount and the 2019 annual pay review.

Excluding employee costs, administrative costs were £6.2 million, £1.0 million higher than for the previous year (2019: £5.2 million), reˆecting increases in audit and professional fees, insurance costs and irrecoverable VAT, together with donations made from our Covid-19 Community Fund.

• Remuneration report: page 100

Valuation deficit and disposal profits

Our wholly-owned portfolio's revaluation de•cit was £698.5 million (2019: de•cit of £15.3 million). This represented a like-for-like valuation decrease of 18.3%, largely due to uncertainties as a result of Covid-19, leading to lower rent collections, increased vacancy, reduced rental values and an outward movement in yields.

• Portfolio valuation report: page 56

Residential long leasehold tenure extensions granted during the year generated a disposal pro•t of £0.3 million.

Net finance costs

Net •nance costs increased by £1.3 million to £31.8 million (2019: £30.5 million), largely due to drawings against our revolving credit facilities in March 2020, as part of a prudent approach to cash management and liquidity risk.

Finance income decreased by £0.3 million to £0.7 million (2019: £1.0 million) due to a combination of lower cash balances and reduced market interest rates.

Share of Longmartin post-tax loss

Revaluation de•cits resulted in the Longmartin joint venture reporting post-tax losses in both 2020 and 2019. Our share of the revaluation de•cit in 2020 was £35.8 million (2019: £19.2 million). Excluding these revaluation losses, and the related deferred tax credits totalling £5.1 million (2019: £3.1 million), our share of EPRA earnings from Longmartin decreased by £1.0 million to £1.3 million (2019: £2.3 million) largely due to lower net property income following charges for expected credit losses and impairments, of which our share was £0.6 million.

• Portfolio valuation report: page 56
• Portfolio activity report: page 59

Tax

The Group's tax strategy is to account for tax on an accurate and timely basis. Our appetite for tax risk is low and we structure our a‰airs based on sound commercial principles, rather than engaging in aggressive tax planning. We maintain an open dialogue with HMRC with a view to identifying and solving issues promptly. In 2019, HMRC con•rmed our status as a 'low risk' taxpayer. Despite the •nancial challenges in the second half of our year, we continue to meet the requirements in the REIT regulations.

Our detailed tax strategy is available on our website.

As a REIT, the Group's activities are largely exempt from corporation tax and, as a result, there is no tax charge in the year (2019: £nil).

As with most businesses, we do collect and pay other taxes and levies e.g. payroll taxes, VAT, stamp duty land tax, business rates, and withholding tax on Property Income Distributions. During the year, the total amount paid in respect of these taxes amounted to £13.3 million (2019: £23.5 million). In addition, our share of taxes, including corporation tax, levied on, or collected by, Longmartin was £1.0 million (2019: £1.6 million). The decrease in taxes paid is largely due to reduced output VAT, following the decrease in rent collections from commercial tenants in the second half of the •nancial year.

Page 64

Shaftesbury Annual Report 2020 Strategic report Financial results

EPRA earnings (£m)

54.6

(2.9)

(13.0)				0.8		29.4
	1.1
	(8.9)				(1.3)
				(1.0)

Strategic report

2019	Rental	Expected	Impairment	Property	Admin	Net -nance	Longmartin	2020
	income	credit losses	charges	charges	costs	costs

EPRA earnings

EPRA earnings are a measure of the level of underlying operating results and an indication of the extent to which dividends are supported by recurring earnings. In our case, EPRA earnings exclude portfolio valuation movements, pro•ts on disposal of investment properties, and deferred tax arising in the Longmartin joint venture.

In the year ended 30 September 2020, EPRA earnings decreased by 46.2% to £29.4 million (2019: £54.6 million), of which £25.3 million was earned in the •rst half of the •nancial year. EPRA earnings in the second half were impacted signi•cantly by the pandemic, which has resulted in reduced rental income and charges being made for expected credit losses and impairments. EPRA earnings per share amounted to 9.6p, 46.1% lower than the previous year (2019: 17.8p).

Dividends

As a REIT, we are required to distribute a minimum of 90% of net rental income, calculated by reference to tax rather than accounting rules, as a PID. Notwithstanding this, our policy is to maintain progressive growth in dividends, reˆecting the long-term trend in our income and EPRA earnings, adjusted to add back the non-cash accounting charge for equity-settled remuneration. To the extent that dividends for a year exceed the amount available to distribute as a PID, we pay the balance as ordinary dividends. Principal risks and uncertainties, including those which might a‰ect income and earnings, are set out on pages 73 to 77.

The Board monitors our ability to pay dividends out of available resources and distributable reserves. Our forecasts take into consideration future liquidity requirements, which include prospective dividend payments.

Where possible, subsidiary companies distribute the majority of their distributable pro•ts to Shaftesbury PLC annually. Currently, there are no restrictions on any subsidiaries' ability to distribute pro•ts. At 30 September 2020, we had distributable reserves of £261.4 million.

Following the outbreak of Covid-19, the Board announced on 24 March 2020 that, in view of the likely reduction in rent collections and, in turn, adjusted EPRA earnings, it had taken the decision not to declare an interim dividend in order to preserve liquidity. A further announcement was made on 25 September 2020 that no •nal dividend would be declared in respect of the year ended 30 September 2020.

The Board intends to resume dividend payments as soon as it considers prudent, maintaining its policy of sustainable dividend growth over the long-term. The pace of the post-pandemic income recovery, and our REIT PID obligations, will be key factors in the Board's near-term decisions on declaring dividends.

EPRA NAV (pence per share)

98210

Balance Sheet

	2020	2019
	£m	£m
Investment properties	€'ƒƒœ…œ	Š‡Œ™Ž‰˜
Investment in joint venture	ˆ•…Š	†ˆŒ‰™
Net debt	(ˆŠ"…‡)	(˜'Ž‰')
Other net assets	œœ…€	†˜‰Ž
Net assets	-'-Š‡…•	Š‡''Œ‰ˆ
EPRA NAV per share1	¥"…†€	´˜‰'ˆ
Total accounting return1	(-€…†)Œ	'‰'•

1. Alternative performance measure.

At 30 September 2020, net assets were £2,280.6 million, £726.6 million lower over the year (2019: £3,007.2 million). This decrease was largely due to the loss after tax of £699.5 million, and the dividend paid in respect of the previous year, amounting to £27.8 million.

Other net assets have increased by £35.8 million to £55.3 million (2019: £19.5m), largely due to a decrease in deferred income following our decision to o‰er most commercial tenants the ability to be invoiced monthly, rather than quarterly in advance from 1 October 2020, together with deposits made in respect of interest cover covenant waivers amounting to £8.7 million.

• Covid-19:impact and response: page 6

EPRA NAV

EPRA NAV makes adjustments to reported NAV to provide a measure of the fair value of net assets on a long-term basis. Assets and liabilities which are not expected to crystallise in normal circumstances are excluded. In our case, the calculation excludes deferred tax related to property valuation surpluses and de•cits in the Longmartin joint venture.

Total accounting return measures shareholder value creation, taking into account the movement in EPRA NAV together with dividends paid.

EPRA NAV per share decreased during the year by £2.39 (24.3%) to £7.43 (2019: £9.82), principally due to the revaluation de•cits, both in the wholly-owned portfolio and Longmartin. Together, these reduced EPRA NAV by £2.40 per share. EPRA earnings of 9.6p per share were o‰set by the payment of the •nal dividend for the previous year (9.0p per share).

(9)

743

(240)

2019

EPRA earnings

Dividend

Revaluation movements

2020

Page 65

Financing: page 67

Portfolio activity report: page 59

Shaftesbury Annual Report 2020 Strategic report Financial results

New EPRA net asset measures

In October 2019, EPRA introduced three new measures of net asset value:

Net Reinstatement Value (NRV)

This measures the value of net assets on a long-term basis, assuming no disposals. Assets and liabilities that are not expected to crystallise in normal circumstances, such as deferred taxes on property valuation surpluses, are excluded. It is a reˆection of what would be needed to recreate the company. Consequently, purchasers' costs which have been deducted in arriving at the fair value of investment properties are added back.

Net Tangible Assets (NTA)

This recognises that companies buy and sell assets and therefore takes into account deferred tax liabilities on sales, unless there is no intention to sell in the long run.

Net Disposal Value (NDV)

This represents the value of net tangible assets, assuming an orderly sale of the business' assets, achieving fair values as reported in the Balance Sheet. It includes deductions for liabilities that would crystallise in this scenario, including deferred tax and the di‰erence between the fair value and carrying value of •nancial liabilities.

At 30 September 2020, these metrics were: NRV: £8.16 (2019: £10.71)

NTA: £7.43 (2019: £9.82)

NDV: £7.29 (2019: £9.47)

• Financial statements: note 24

ash o s an net e t

Net debt increased by £81.2 million to £987.0 million (2019: £905.8 million). The major cash ˆows were:

• Net cash generated from operating activities: £2.5 million (2019: £50.6 million). The decrease was predominantly due to lower rent collections in respect of both rents due during the year and rents billed in advance at the end of the year, following the move to

+monthly invoicing from 1 October 2020.

• Net cash used in investing activities: £55.9 million (2019: £62.4 million). The main cash ˆows were net investment in the portfolio amounting to £44.2 million, deposits lodged with lenders in connection with securing interest cover waivers, totalling £8.7 million, and £2.9 million net cash outˆow to the Longmartin Joint Venture.

+ Portfolio activity report: page 59

+ Financing: page 67

• Net cash inˆow from •nancing activities: £72.2 million (2019: cash outˆow £52.7 million), comprising net drawings against the revolving credit facilities amounting to £100 million less dividends paid totalling

+£27.8 million (2019: £52.9 million).

Currently, for us, EPRA NTA equates to EPRA NAV and EPRA NDV equates to EPRA NNNAV. From the coming •nancial year, we will commence reporting on these new measures rather than EPRA NAV, with EPRA NTA becoming our main metric.

Net debt (£m)	44.2	8.7	2.9	0.1	987.0

905.8	27.8
	(2.5)

2019	Operating	Dividends	Net portfolio	Interest waiver	Net cash €ow with	Other	2020
	cash in€ow		investment	deposits	Longmartin

Page 66

Principal risks and uncertainties: page 73

Shaftesbury Annual Report 2020 Strategic report

Financing

Recognising our financing risk had increased as a result of reduced rent collections and low visibility over near-term income, in November 2020, we issued equity to ensure we maintain a strong financial base, are positioned to return to long-term growth as pandemic issues recede and, should conditions improve, have capacity for portfolio investment.

Strategic report

Financing strategy

Investment in our portfolio is funded through a combination of equity and debt, with equity providing the permanent capital to support our long-term strategy. Debt provides capital for investment in our portfolio. Under REIT rules, we are required to distribute the majority of our recurring earnings. Furthermore, the importance of our ownership clusters in long-term value creation means that opportunities to recycle capital are limited.

We adopt a prudent approach to our capital structure, seeking to minimise •nancing risk. Typically, when prospective •nancial ratios, including, but not limited to, gearing, approach the upper limit of our tolerance, we look to secure additional equity funding to mitigate these risks and provide •nancial capacity to support the operation and long-term growth of the business.

Key aspects of our •nancing policy include conservative leverage, diversi•ed sources of •nance and a spread of debt maturities. The core of our debt •nance is secured, long-term arrangements, consistent with the long-term nature of our business model, investment strategy and income streams, with the majority of interest •xed. Working capital is provided through secured, medium-term revolving credit facilities.

In managing •nancing risk, we aim to maintain:

• signi•cant levels of available liquidity to cover contractual commitments and provide us with speed of execution when acquisitions become available;
• a prudent loan-to-value ratio across the Group, with headroom above loan-to-value covenants in our debt facilities; and
• a pool of unsecured properties which could be used to top up debt security if necessary, to comply with loan-to-value covenants.

Position at 30 September 2020

At 30 September 2020, net debt was £987.0 million (2019: £905.8 million) and our loan-to-value ratio had increased to 31.5% (2019: 23.9%), largely due to the decline in the portfolio's valuation in the year. Available resources totalled £197.8 million, comprising £72.8 million of cash and undrawn revolving credit facilities amounting to £125 million. Committed capital expenditure, to be funded from these resources, totalled £31.0 million.

• Portfolio valuation report: page 56
• Portfolio activity report: page 59

Equity issue

The pandemic has had a signi•cant impact on our operating cash ˆows and has elevated our •nancing risks:

• with reduced rent collections and increased vacancy continuing to put pressure on the interest cover (ICR) covenants in our debt arrangements, we are currently reliant on ICR waivers from our revolving credit facility and term loan providers;

• decreased valuations have elevated our near-termloan-to-value risks; and

• re•nancing risk is growing with low visibility on near-term income and +the consequential implications for valuations.

Since March 2020, our strategy has been to preserve liquidity, with a moratorium on non-essential expenditure, new schemes and acquisitions, other than by exception, and the decisions to not pay dividends for 2020. Given the uncertainty over income levels, in March 2020, we drew £150 million against our revolving credit facilities, as part of a prudent approach to cash management. By 30 September 2020, we had repaid £50 million of these drawings.

• Covid-19:impact and response: page 6

Having assessed our •nancial position in light of the implications of the Covid-19 pandemic, on 22 October 2020, we announced details of an issue of equity with gross proceeds of £307 million, comprising £297 million by way of a •rm placing, placing and open o‰er, and £10 million by way of an o‰er for subscription. The purpose of the equity issue was to ensure we maintain a strong •nancial base, are positioned to return to long-term growth as pandemic issues recede and, should conditions improve, have capacity for portfolio investment.

Following approval by shareholders of certain resolutions to execute the transaction, on 18 November 2020, we issued 76.75 million shares, representing approximately 25% of our issued share capital, at £4 per share. After issue costs, the net proceeds were £294.4 million.

Use of net proceeds

	£m
Managing ¡nancing risks
Repay RCF drawings	†''
Potential cash deposits to remedy term loan ICR covenants	†ˆ
Liquidity maintenance
Fund potential operating cash out ®ows	‹Ž
Capital expenditure in 2021 and 2022	™Ž
Maintain prudent level of liquidity1	63
General corporate purposes	9
Net proceeds	294

1. But should conditions improve, provide some capacity for portfolio investment

Page 67

Shaftesbury Annual Report 2020 Strategic report Financing

Managing financing risks

• Revolving credit facilities

Following the completion of equity issue, we cancelled our £125 million revolving credit facility, which was undrawn and had a contractual maturity in May 2022. In doing so, we bene…ted from:

• removing of the risks associated with expected requests for further interest cover waivers until the contracted expiry of the facility and the need to either renew or re…nance this facility during a period of uncertainty regarding near-term income, cash ˆows, property valuations and, consequently, lenders' appetite to provide new credit;
• releasing £252 million of charged properties into our pool of uncharged assets; and
• eliminating the £0.8m p.a. commitment cost of this facility.

Furthermore, we have now repaid £100 million of drawings against our remaining revolving credit facility, which remains available to be re-drawn, provided that we remain compliant with all requirements in the loan agreement, including the …nancial covenants. Whilst undrawn, the annualised interest saving is estimated at £1.0 million. Since the equity raise, we have secured an extension to this facility's interest cover covenant waiver from January 2021 to October 2021.

In the event that we require further waivers which either are not granted, or are subject to restrictions we …nd unacceptable, the liquidity provided by the equity issue would allow us to part cancel or terminate the facility ahead of its contractual maturity.

• Term loans

In the absence of interest cover covenant waivers from the providers of our term loans, we can remedy interest cover ratio shortfalls with cash deposits, although there are restrictions on the number of times these remedies can be used, and would be subject to available liquidity. For the equity issue, we estimated that up to £12 million of liquidity would be required for ICR cash cures during the working capital statement period.

Since the equity raise, we have secured an extension to the ICR covenant in our £250 million term loans to January 2022, reducing the likelihood or scale of cash cures being required in the future. In consideration for this extension, we placed a further £4.4 million on deposit with the lender for the duration of the waiver.

The ICR waivers we now have in place for our term loans is set out below:

Facility amount	ICR waiver
£134.8m	July 2021
£250m	Jan 2022

• Bonds

At 30 September 2020, we remained compliant with the terms of the …nancial covenants under our bonds. However, given the uncertain outlook, we continue to monitor the covenants and will take appropriate action if required.

• Loan-to-value risk

Our individual debt arrangements have speci…cally charged assets as security, although the relative amounts of collateral charged, compared with the amount of each facility, are not uniform. At 30 September 2020, our pool of unsecured properties were valued at £434 million. Following the termination of our £125 million revolving credit facility, this pool has increased, on a pro-forma basis at 30 September 2020, to £686 million, providing further loan-to-value covenant headroom across our remaining borrowing arrangements.

• Viability statement: page 78

Impact of the equity issue

Impact on cash (£m)

Impact on liquidity (£m)

294.4

294.4

(100.0)
(12.0)				197.8
	(45.0)		145.2	Undrawn
			facilities
	(65.0)		125

72.8

Cash

72.8

(125.0)	(12.0)
	(45.0)	245.2
	(65.0)	Undrawn
		facilities
		100
		Cash
		145.2

30 Sept

Net

Repay

ICR

2021

Capital

Pro forma

30 Sept

Net

Terminate

ICR

2021

Capital

Pro forma

2020

proceeds

RCF

related

operating

expendi-

balance

2020

proceeds

£125m RCF

related

operating expenditure1

balance

drawings

deposits1

cash1

ture1

deposits1

cash1

€ ows

€ ows

1. In the reasonable worst-case scenario for the working capital statement in the prospectus

On a pro forma basis, adjusting for the net proceeds of the equity issue, the termination of the £125 million revolving credit facility and repayment of drawings under the £100 million revolving credit facility, at 30 September, net debt was £692.6 million, we had £367.2 million of available resources and our loan-to-value ratio was 22.1%.

Page 68

Shaftesbury Annual Report 2020 Strategic report Financing

Liquidity maintenance

The equity issue allows us to maintain a prudent level of liquidity. At 30 September 2020, we had available resources of £197.8 million. Following the equity issue, and allowing for the termination of our £125 million revolving credit facility, this increased on a pro-forma basis to £367.2 million.

Given the ongoing impact of the pandemic, we expect:

• a cash outˆow from operating activities in the coming year, reˆecting ongoing reduced rent collections, increased vacancy and consequential increases in costs, set against a •xed •nance cost base. In the reasonable worst-case scenario, prepared for the equity issue prospectus, this cash outˆow was estimated at approximately £45 million for the year ending 30 September 2021.
• capital expenditure over the coming two •nancial years of approximately £65 million, which includes capital commitments at 30 September 2020 of £31.0 million, new schemes and the estimated cost of refurbishing vacant space to maximise its letting prospects, given the increase in vacancy across the wider-West End, which has increased competition for occupiers.

The equity raise provided funds to ensure that our liquidity does not fall below levels we consider appropriate, after taking into account these estimated cash outˆows.

• Covid-19:impact and response: page 6

We will maintain our usual disciplined approach to acquisitions. Until such time as current trading conditions improve su•ciently, we shall continue to prioritise a prudent approach to maintaining liquidity.

However, by exception, should rare opportunities arise to secure particular, long-sought acquisitions in our core or emerging ownership clusters, which will provide valuable long-term compound bene•ts, we will consider deploying available liquidity. However, while the lack of visibility over our near-term income as a result of Covid-19 persists and we remain reliant on interest cover covenant waivers across our debt facilities, we will look to replace the liquidity used for acquisitions with selected disposals of assets no longer considered core to our long-term strategic objectives.

• Portfolio activity report: page 59

LIBOR replacement

LIBOR, the London Inter Bank O‰er Rate interest rate benchmark is expected to be discontinued after the end of 2021. In its place, a replacement 'risk free' rate, the Sterling Overnight Index Average (SONIA) will be used. There are two fundamental di‰erences between LIBOR and SONIA:

• LIBOR is an annualised forward-looking term rate, with several di‰erent tenors available ranging from one day to 12 months but SONIA is only available as an overnight borrowing rate. LIBOR is •xed in advance for a given term, meaning the interest amount can be calculated at the beginning of the interest period while SONIA will be compounded in arrears and therefore will not be precisely known until the end of the period.
• SONIA generally provides lower rates than LIBOR (which includes a banking sector risk or liquidity premium). Inevitably, this rate di‰erence will be priced into debt instruments in another way in future.

LIBOR is only used in our remaining £100 million revolving credit facility. Whilst the agreement does not have provisions to deal with this change, we will work with the providers of this facility to prepare for a smooth transition in readiness for the cessation of LIBOR.

Financing summary

The table below shows the position at 30 September 2020 as reported in the •nancial statements and pro forma for the net proceeds of the equity issue, the termination of the £125 million revolving credit facility and repayment of drawings under the £100 million revolving credit facility. It excludes our proportional share of Longmartin's non- recourse net debt.

	2020	2020	2019
	Reported	Pro forma
	£m	£m	£m,5
Resources
Cash	"-…Š	ˆ™Œ‰ˆ	Ž‹‰'
Undrawn ®oating rate facilities (£m)	125.0	100.0	225.0
Available resources	ƒˆ"…Š	Š™Œ‰ˆ	ˆŒ˜‰'
Commitments7	(€ƒ…‡)	(Š†‰')	('ˆ‰‹)
Uncommitted resources	166.8	336.2	196.6
Debt stats
Net debt	ˆŠ"…‡	™˜ˆ‰™	˜'Ž‰'
Loan-to-value1,2	€ƒ…œŒ	ˆˆ‰†•	ˆŠ‰˜•
Gearing1,2,4	†€…ƒŒ	ˆ™‰'•	Š'‰'•
Interest cover1,3	ƒ…ˆx	N/A	ˆ‰Œx
% drawn debt ¬xed	ˆƒŒ	†''•	†''•
Blended cost of debt1,6	-…ˆŒ	Š‰†•	Š‰ˆ•
Marginal cost of undrawn ®oating rate facilities	‡…"Œ	†‰'•	†‰™•
Weighted average maturity (years)	8.3	9.0	9.3
Sources of ¡nance (fully drawn basis)
Bonds	†ˆŒ	Ž‹•	‹˜•
Term loans	€-Œ	Š™•	Šˆ•
Revolving credit facilities	19%	10%	19%

• Alternative performance measure.
  2 Based on net debt.
  3 Ratio of operating pro•t before investment property disposals and valuation movements to net •nance costs.
  4 Based on EPRA net assets.
  5 Comparatives restated to reˆect that we are no longer presenting •nance ratios including our joint venture on a proportionally consolidated basis (see page 56).
  6 Including non-utilisation fees on undrawn bank facilities.
  7 Capital commitments at 30 September 2020. See page 136.

Debt maturity profile

Revolving credit facility

Bonds	290			285
Term loan
1251	1002		135	130		120
2022	2023	2027	2029	2030	2031	2035

1. Undrawn at 30 September 2020 and terminated since

2. Drawn at 30 September but repaid since + Summary of Žnancial covenants: page 162

Longmartin finance

The •gures below represent our 50% share.

The Longmartin joint venture has a £60 million •xed-rate term loan maturing in 2026 which is non-recourse to Shaftesbury.

At 30 September 2020, Longmartin's net debt was £57.9 million, representing a loan-to-value ratio of 33.1%, up from 28.4% in 2019 due to the property valuation decrease in the year.

• Portfolio valuation report: page 56

An ICR waiver to April 2021 has been agreed with Longmartin's lender and we are now discussing a potential extension.

• Summary of Žnancial covenants: page 162

Strategic report

Page 69

Making a positive contribution

+

Page 70

Shaftesbury Annual Report 2020 Strategic report

Risk management

Risk tolerance and management is embedded across the business, with the tone and culture set by the Board. Our near-term risk landscape has changed this year, with the pandemic presenting a number of issues. Navigating these challenges and being able to adapt to a rapidly-changing set of circumstances to manage risk has been key

Strategic report

Context

We invest exclusively in the heart of London's West End, concentrating on establishing ownership clusters in iconic, high-footfall locations. This investment strategy has delivered long-term success for the Group and whilst the Covid-19 pandemic has disrupted performance this year, we expect a return to growth once the e‰ects of the pandemic have, in all signi•cant respects, receded. Inevitably, the pandemic and social distancing policies have had a major impact on the West End and the Group's near-term risk landscape during the year, which the Risk Committee has considered in preparing this report.

Important factors in considering risk across the Group include:

• An experienced executive and senior leadership team, with an average tenure of over 14 years, and an in-depth knowledge of our business and the West End property market. We are based in one location, close to all our holdings;

+Senior leadership team: page 53

+Our Board: page 54

• The nature of our portfolio does not expose us to risks inherent in material speculative development schemes;

+Exceptional portfolio in the heart of London's West End: page 12

• Our diverse tenant base limits exposure to any single occupier;

• Our Balance Sheet is managed on a conservative basis with moderate leverage, long-term •nance, a spread of loan maturities, and with the majority of interest costs •xed;

+Financing: page 67

• A culture which encourages open dialogue within the whole team and with our wide range of external advisors;

+Our people and culture: page 42

Change in risk appetite during the year

High

Medium

Low

Geographic Development Tenant concentration

• A simple group structure; and

• A governance framework which includes clearly de•ned responsibilities and limits of authority.

+Governance overview: page 81

The Board's attitude to risk is embedded in the business, with the Strategy and Operations Executive, which includes executive directors, closely involved in all aspects of the business and signi•cant decisions. The whole Board approves capital, debt and non-routine transactions above a relatively low speci•ed level.

Incentive targets and bene•ts are set to achieve the Group's purpose, long-term strategic objectives and near-term priorities, whilst encouraging decisions to be made on the basis of long-term bene•t, rather than short-term gain.

Risk appetite

Inevitably, investing in one location presents an inherent geographic concentration risk and there are certain external factors which we cannot control. However, in executing our management strategy, we seek to minimise exposure to operational, reputational and •nancial risks, recognising that our appetite to risk varies across di‰erent elements of our strategy, as shown in the diagram below.

• Business model and strategy: page 22

Our appetite for development risk has reduced while near-term income and vacancy uncertainty persists. Currently, we are prioritising income and liquidity preservation over actively securing vacant possession of space for recon•guration and refurbishment schemes. At the same time, our appetite for tenant risk has increased, recognising high vacancy levels across the West End, and consequently more competition for occupiers.

Financing

Compliance

Reputation

Environmental

Page 71

Shaftesbury Annual Report 2020 Strategic report Risk management

Monitoring and managing risk

Our risk management and control framework is shown in the diagram below. It enables us to e‰ectively identify, evaluate and manage our principal and emerging risks.

Roles and responsibilities in managing our risk and controls framework are summarised below. Risk is considered as follows:

Informal consideration

• Daily at an operational level by senior management;
• Weekly at executive director meetings; and
• Monthly at Strategy and Operations Executive meetings.

Formal consideration

• Bi-annually(or as needed) by the Risk Committee.

The Board has overall responsibility for risk management and the systems of internal control. Such systems are designed to manage, rather than eliminate, the risks faced by the business and can provide only reasonable, not absolute, assurance against material misstatement or loss.

On a day-to-day basis, risks are addressed as they arise and, where signi•cant, are discussed more widely with the Strategy and Operations Executive. Issues that have arisen and how risks have changed are key inputs to the Risk Committee.

The day-to-day management of the Group's portfolio is outsourced to two managing agents. The Group monitors their performance and has established •nancial and operational controls to ensure that each maintains an acceptable level of service and provides reliable •nancial and operational information. The managing agents share their internal control assessments with the Group.

The Risk Committee meets twice a year, or more frequently as needed, and reports to the Audit Committee and Board.

Assessing risk and internal controls

Signi•cant risks and mitigating controls are detailed in the risk register.

Risks are considered in terms of the likelihood of occurrence and their potential impact on the business. In assessing impact, a number of criteria are considered including the e‰ect on our strategic objectives, operational or •nancial matters, our reputation, stakeholder relationships, health and safety, sustainability and regulatory issues. Risks are assessed on both gross (assuming no controls are in place) and residual (after mitigation) bases.

To the extent that signi•cant risks, failings or control weaknesses arise, appropriate action is taken to rectify the issue and implement controls to mitigate further occurrences. Such occurrences are reported to the Audit Committee.

The Group's processes and procedures to identify, assess, and manage its principal risks and uncertainties were in place throughout the year and remained in place up to the date of the approval of the Annual Report.

Assurance

Whilst we do not have a formal internal audit function, the Risk Committee oversees the provision of assurance on controls to the Audit Committee. Normally, this comprises a rolling program of external reviews on processes and the e‰ectiveness of controls, supplemented with controls testing by management. Results of the reviews and recommendations are reported to the Audit Committee, and followed up by the Risk Committee. This year, the e‰ectiveness of key controls was reviewed by management. Recognising the challenges that remote working would present, the programme of external reviews was paused, although we plan to recommence this in the coming year.

Oversight,	Governance	Board
assessment and		•	Set risk culture
mitigation at		•	Determine risk appetite
a Group level		•	Review principal and emerging risks
		Oversight	Risk Committee	Audit Committee
			•	Co-ordinate and develop risk	•	Monitor risk exposure and
			•	management process	•	appetite
			Assess control environment	Review the e£ectiveness of
Top
		and e£ectiveness of controls		the risk management and
Down		•	Co-ordinate the assurance	•	internal control framework
				reviews	Approve the assurance
			•	Review and assess risk register		programme

• Consider principal and emerging risks and mitigating

Bottom	internal controls
• Monitor risks and response
up
	plans

Assurance

• Internal and external reviews of processes and the e£ectiveness of key controls
• Observations from the external auditor

Ownership	Strategy and Operations Executive
	•	Oversee day-to-day monitoring and management of risk, including identi-cation and response
	•	Design and implementation of controls
Identi•cation,	•	Ensure key controls are operating and are e£ective
assessment and	•	Assist Risk Committee with identi-cation of principal and emerging risks
mitigation at an	•	Monitor performance of advisors including the Group's managing agents
operational	•	Brief Risk Committee on key issues that have arisen
level

Page 72

Shaftesbury Annual Report 2020 Strategic report

Principal risks and uncertainties

Strategic report

This report should be read in conjunction with the viability statement on pages 78 to 79.

Risk landscape

With our strategy of investing in one location, the risk of an event which prevents or deters people coming to the West End has long been on our risk register. The prosperity of the West End is based on high footfall volumes, seven days-a-week. In normal times, it is estimated that it attracts over 200 million visits annually, comprising Londoners, a working population of over 750,000 and exceptional numbers of domestic and international tourists. The Covid-19 pandemic has had a major impact on the West End and all aspects of our business, elevating a number of principal risks and presenting new challenges.

With the pace and scale of the impact of Covid-19, we have had to mobilise, assess, plan and respond to the multitude of challenges. Throughout the period since March, the Strategy and Operations Executive has met regularly to consider a rapidly evolving range of topics including occupiers, our people, communities, day-to-day operations, •nance, IT, communications, liaison with our neighbours and local authorities, regulations and recovery. The Board has also met regularly during this period and has received updates from management.

In November 2020, the Group strengthened its Balance Sheet through an equity raise, which has reduced its •nancing risk. However, while Government restrictions remain in place, operational risk remains high.

Principal strategic risks and uncertainties

The Board has carried out a robust assessment of the principal and emerging risks and uncertainties which might prevent the Group achieving its strategic objectives. These risks and uncertainties, their mitigation and the evolution of risk during the year are set out below.

Signi•cantly reduced footfall, together with restrictions on opening hours and social distancing measures have presented our occupiers with tough operational and •nancial challenges. For us, this has resulted in reduced rent collections, increased costs, a slowdown in occupier demand, increasing vacancy, pressure on rental values, decreased valuations and increased •nancing risks. Given the interdependence of many of our risks, exacerbated by the signi•cant decline in footfall this year, we have included the impact of Covid-19 in the individual risk analyses, rather than disclose it as a separate risk.

• Covid-19:impact and response: page 6

We cluster our principal risks in the following categories: external factors, geographic concentration, market and consumer, brand and reputation, governance, data and internal control, and people. Risks are scored on a scale from low to very high.

In assessing our principal risks, we considered the following strategic risks and, in view of mitigating controls, concluded they were not currently principal risks or uncertainties:

Geographic	• Destruction of multiple assets.
concentration

Brand and reputation • Misconduct or poor operational standards by third party agents.

• Damage to reputation with local stakeholders and communities.

Governance, data and	• Signi¬cant cyber security breach leading to
internal control	disruption and/or loss of data.

• Expulsion from REIT regime through non-compliance.

• Health and safety matters.

• Failure to meet our environmental, social and governance (ESG) responsibility objectives.

People	•	Attracting, retaining and developing talented
		people.
	•	Succession planning.

Emerging risks included:

• Failure to anticipate or understand changes in consumer and occupier trends in food, beverage and retail. This forms part of the regular Strategy and Operations Executive discussions.
• Failure to e‰ectively use, store and manage data. A review of how we can harness and make better use of management and commercial information is planned for the coming year.
• Cyber security risks. An overhaul and modernisation of our IT infrastructure is underway.

Strategic objectives

1		2			3
Long-term		Grow recurring			Attract, develop
growth in rents		earnings and			and retain
and portfolio		cash flow			talented people
value
4		5
Minimise		Deliver sustainable,
environmental		long-term benefits for
impact		our stakeholders

Evolution of risk

Risk increased

Risk unchanged

Risk decreased

Residual risk

Low Medium High Very high

Page 73

Shaftesbury Annual Report 2020 Strategic report Principal risks and uncertainties

1. External Factors

Macroeconomic factors

Potential causes

• Macroeconomic shocks or events.
• Uncertainty on trading and other relationships with the EU from
  1 January 2021:
• • Short-termdisruption to the UK economy.
  • Upward cost pressures.
  • Supply chain disruption.
• Longer-termCovid 19 impacts:
• • Higher in®ation.
  • Taxation increases.
  • Recessionary environment.
  • Higher unemployment.

Consequences

• Lower consumer con¬dence/spending.
• Reduced visitor numbers.
• Reduced business con¬dence and investment.
• Brexit-relatedoccupier supply chain disruption and higher import costs.
• Reduced tenant pro¬tability/increased occupier ¬nancial distress/tenant default.
• Reduced occupier demand.
• Higher vacancy.
• Downward pressure on rents.
• Reduced rental income and declining earnings.
• Reduced ERV, capital values and NAV (ampli¬ed by gearing).
• Risk of loan covenant breaches.

Commentary/Mitigation

• We focus on locations and uses which historically have proved to be economically resilient.

• We actively promote our areas to drive footfall.

• Covid-19 has resulted in increased macroeconomic risk.

• Operational impact, this year, has been signi¬cant and will continue through the recovery period.

• Longer-term economic pressures may temper occupier pro¬tability.

• Our equity raise in November 2020 has ensured our ¬nancial base remains strong.

+Covid-19: impact and response: page 6

+Viability statement: page 78

Strategic objectives

1 2 5

Evolution of risk:

Residual risk:

Decline in the UK real estate market

Potential causes

• Changes to political landscape.
• Increasing bond yields and cost of ¬nance.
• Reduced availability of capital and ¬nance.
• Lower relative attractiveness of property compared with other asset classes.
• Changing overseas investor perception of UK real estate.
• Covid-19accelerating structural changes in retail and o¤ce sectors.

Consequences

• Reduced property values.
• Decrease in NAV (ampli¬ed by gearing).
• Risk of loan covenant breaches.
• Ability to raise new debt funding curtailed.

Commentary/Mitigation

• We focus on assets, locations and uses where, in normal conditions, there is a structural imbalance between availability of space and demand.

• We regularly review investment market conditions including bi-annual external valuations.

• Our wholly-owned portfolio declined by 18.3% during the year.

• Further pressure on yields and ERVs is likely in the near term, predominantly due to surplus vacancy across the West End and the continued impact of Covid-19 containment measures a¼ecting our occupiers' trading conditions, with the risk of further declines if the current market outlook worsens.

• Increased competition for occupiers is likely to increase near-term capital expenditure requirements.

• An e¼ective vaccination programme, low ¬nance rates, and relative a¼ordability of London real estate for overseas investors could provide yield support.

• Recon¬guration of our buildings is important to respond to changing occupier demand.

• We operate with conservative levels of leverage, with a spread of both sources of ¬nance and loan maturities. Quarterly forecasts include covenant headroom review.

• We maintain a pool of uncharged assets to top up security held by lenders, if required. Our equity raise in November 2020 and subsequent cancellation of a revolving credit facility has increased our LTV covenant headroom.

+Portfolio valuation report: page 56

+Viability statement: page 78

Strategic objectives

1 2 5

Evolution of risk:

Residual risk:

Page 74

Shaftesbury Annual Report 2020 Strategic report Principal risks and uncertainties

1. External Factors continued

Changes in regulatory environment

Strategic report

Potential causes

• Unfavourable changes to national or local planning and licensing policies.
• Tenants acting outside of planning/licensing consents.
• Growing complexity and level of sustainability regulation.
• Increased stakeholder focus on ESG.
• Regulation/guidance in respect of social distancing both within our portfolio and in connection with domestic and international travel for the duration of the pandemic.

Consequences

• Ability to maximise the growth prospects of our assets restricted.
• Reduced tenant pro¬tability/increased occupier ¬nancial distress.
• Reduced occupier demand.
• Increased costs.
• Reduced earnings.
• Decrease in property values and NAV (ampli¬ed by gearing).
• Reduction of spending/ footfall in our areas.

Commentary/Mitigation

• All our properties are in the boroughs of Westminster and Camden: changes to local policies may limit our ability to maximise the long-term potential of our portfolio.

• We ensure our properties are operated in compliance with local and national regulations.

• We use specialist advisors on planning and licensing and make representations on proposed policy changes, to ensure our views and experience are considered.

• Tenant compliance with planning consents and licences is regularly monitored.

• The Town and Country Planning (Use Classes) (Amendment) Regulations 2020, e¼ective from September 2020, provide ®exibility to change uses of commercial, business and service accommodation, eg between retail and restaurants. Whilst this could increase the supply of certain uses, eg restaurants, in the West End over the longer-term, subject to other planning and licensing regulations being met, it also presents opportunities to evolve the use mix in our portfolio.

• Increasing national regulation, including corporate social responsibility targets and obligations raise costs and, in extremis, could limit the ability to maximise values and income.

• Head of Sustainability recruited to develop our long-term sustainability strategy and our already extensive community engagement.

• Sustainability targets are included in remuneration and for each refurbishment or recon¬guration scheme appraisal.

• Social distancing regulation continues to impact our occupiers' ability to trade.

+Sustainability: page 27

+Covid-19: impact and response: page 6

Strategic objectives

1 2 4 5

Evolution of risk:

Residual risk:

2. Geographic concentration

Reduction in spending and/or footfall in our areas

Potential causes

• Pandemics.
• Macro economic conditions including recession, declining disposable income, unemployment etc.
• Fall in the popularity of the West End and particularly our areas leading to decreasing visitor numbers.
• Changes in consumer tastes, habits and spending power.
• Terrorism or the threat of terrorism.
• Competing destinations.
• Possibility that Covid-19 induces permanent structural changes in frequency of visits and spending behaviour.

•UK plans to end tax-free shopping for overseas visitors.

Consequences

• Lower sales densities.
• Reduced tenant pro¬tability/increased occupier ¬nancial distress/ tenant default.
• Reduced occupier demand.
• Higher vacancy.
• Reduced rental income and declining earnings.
• Reduced ERV, capital values and NAV (ampli¬ed by gearing).
• Risk of loan covenant breaches.

Commentary/Mitigation

• Footfall and customer spending are important ingredients for the success of our restaurant, leisure and retail tenants.
• Key aspects of our management strategy are to: ensure our areas maintain a distinct identity; seek out new concepts, brands and ideas to keep our areas vibrant and appealing; and actively promote our areas.
• The Board regularly monitors performance and prospects.
• The pandemic, social distancing regulations and Government advice to work from home have dramatically reduced footfall.
• The new "normal" following Covid-19, including how people choose to work and shop, could reduce footfall and spending in the medium to long term. A signi¬cant proportion of our customer base is local workers and Londoners, and we expect footfall and spending to improve once the return to o¤ces commences, although ®exible home working may change the daily pattern of footfall. We will continue to adapt our portfolio to meet occupier requirements.
• Whilst being invested in one area is a risk, our ownership clusters are also a strength and an opportunity, allowing us to adopt a holistic curation of our villages.
• Public transport is important in making our areas more accessible to a wide range of visitors. Whilst delayed, Crossrail is now scheduled to open in 2022. This line is expected to bring an additional 1.5 million people within 45 minutes of the West End.
• It is too early to tell if or how the pandemic will impact long-term international travel patterns, particularly in the long-haul sector. The UK's plans to end tax-free shopping for overseas visitors, making it the only EU country to do so, could further impact overseas visits to the UK and the amount spent by international tourists. However, the impact on our areas is expected to be less signi¬cant due to our focus on local workers, Londoners and domestic tourists, and our mid-market o¼er.

Strategic objectives

1 2 5

Evolution of risk:

Residual risk:

• Changing leasing structure landscape (eg more ®exibility for occupiers and risk sharing) may lead to volatility in income and earnings.

+Covid-19: impact and response: page 6

+Why London's West End: page 20

+Business model and strategy: page 22

Page 75

Shaftesbury Annual Report 2020 Strategic report Principal risks and uncertainties

3. Market and consumer

Significant increase in tenant default/failure

Potential causes

• Decline in turnover (see Reduction in spending and/or footfall in our areas).
• Increasing cost base and supply chain disruption (see macroeconomic factors).
• Occupiers with limited Balance Sheet capacity are less likely to sustain a prolonged period of operational losses.
• Wind down of Government Covid-19 support, including business rates relief which ceases at the end of March 2021.
• Possibility that Covid-19 induces permanent structural changes in frequency of visits and spending behaviour.
• Economic headwinds including recession, declining disposable income, unemployment.

Consequences

• Lower sales densities, reduced tenant pro¬tability.
• Reduced income and earnings.
• Increased vacancy and related costs.
• Frictional cost of re-letting.
• Reduced ERV, capital values and NAV (ampli¬ed by gearing).
• Risk of loan covenant breaches.

Commentary/Mitigation

• This risk has increased substantially this year, and continues to rise.

• Tenant trading monitored regularly by the Operations Committee.

• Whilst the rent from any single tenant is not material - the top ten tenants represent less than 10% of our rent roll - many of our tenants are small, independent businesses, which have su¼ered signi¬cant operational and ¬nancial distress throughout the pandemic. Many have used debt to cover shortfalls. The longer Government restrictions persist, the greater the risk that their businesses become unviable.

• In normal times, occupier demand exceeds availability of space in our areas. Therefore, covenant has not been a major factor in when selecting tenants. Rather, we favour interesting concepts which help bring footfall to our villages. Currently, vacancy across the wider West End has led to available space exceeding demand, although we believe the supply and demand balance will revert once pandemic issues have receded and available space is absorbed.

• Our support through rent concessions has been critical to support our restaurant, retail and leisure occupiers in this challenging period. Despite this, we have seen a number of failures and tenants not wishing to renew at expiry.

• We continue to lobby Government on our tenants' behalf and provide marketing support.

• Tenant deposits held against unpaid rent obligations at 30 September 2020: £14.3 million.

+Covid-19: impact and response: page 6

+Portfolio activity report: page 59

Strategic objectives

1 2 5

Evolution of risk:

Residual risk:

We are unable to adapt to tenant demands/shifts in market offer by competitors, or we fail to anticipate changes in rental growth

Potential causes

• Rapidly changing occupier requirements.
• Structural changes in consumer behaviour and spending.
• Occupiers becoming increasingly cost conscious leading to:
• • reduced space requirements and consequential lower occupational costs, including investment in ¬t-out; and
  • an increased reluctance to contribute fully towards building service charge and insurance costs.
• Increased vacancy across the West End.
• Shaftesbury tenant proposition becomes uncompetitive.
• Flexible working could change o¤ce requirements.

Consequences

• Reduced income and earnings.
• Increased vacancy and related costs.
• Increased irrecoverable expenditure.
• Additional capital expenditure required to compete on ¬t-out standards.
• Pressure on ERV, leading to decline in capital values and NAV (ampli¬ed by gearing).
• Risk of loan covenant breaches.

Commentary/Mitigation

• The wholly-owned portfolio's ERV declined on a like-for-like basis by 6.6% in the year. We expect further pressure on rental values until a sustained recovery is underway and vacancy levels begin to subside.

• The current imbalance between availability of space in the West End and occupier demand is resulting in tenants and potential tenants being more demanding, especially given the competition for occupiers. We are having to spend more on unit ¬t outs to maximise letting prospects and more lettings are on an inclusive basis, where service charge and insurance costs are not necessarily fully recoverable.

• However, occupiers are still focusing on the quality of the location. Through the holistic curation of our villages, we have competitive advantage, compared with owners of single buildings in streets with fragmented ownerships.

• Our portfolio of mostly smaller mixed-use buildings provides considerable management ®exibility to adapt our accommodation to meet space requirements, an important factor with the current trend towards smaller-sized units where occupiers can retain a physical brand and product touch point for their customers.

• We typically seek innovative, mid-market concepts and brands for our villages. As footfall builds in the pandemic aftermath, the range of rental tones and unit sizes we can o¼er across our villages, together with our relatively a¼ordable rents and approach to leasing ®exibility will be more important than ever.

+Business model and strategy: page 22

+Portfolio activity report: page 59

Strategic objectives

1 2 5

Evolution of risk:

Residual risk:

Page 76

Shaftesbury Annual Report 2020 Strategic report Principal risks and uncertainties

4. Financing and capital structure

Strategic report

Financing risk

Potential causes

• Reduction in income or values as a result of other principal risks.
• Changing lease structure landscape to more ®exible leases and/or risk sharing.

Consequences

• Loan covenant breaches or reliance on waivers from lenders.
• Insu¤cient liquidity to meet obligations.
• Ability to raise new ¬nance or re¬nance existing debt may be impaired.
• Forced disposal of properties.

Commentary/Mitigation

• We review our capital structure and debt covenants regularly; quarterly forecasts include covenant headroom review.

• We maintain a pool of uncharged assets to top up security held by lenders, if required.

• We adopt a prudent approach to our capital structure to minimise ¬nancing risk. However, the prolonged period of reduced rent collections during the pandemic put stress on our debt covenants and the ability to re¬nance debt that was maturing in the near-term.

• Our equity raise in November 2020 ensured that we maintain a strong equity base and are positioned to return to long-term growth as pandemic issues recede.

• The pandemic continues to put pressure on net property income. However, throughout our viability assessment period, we currently expect to meet interest cover covenants in our debt facilities, either through secured waivers or by utilising cure mechanisms.

• Our pool of unsecured properties has been bolstered through the release of security following the termination of an undrawn revolving credit facility, providing further headroom in our loan-to-value covenants.

+Financing: page 67

+Viability statement: page 78

Strategic objectives

• 5

Evolution of risk:

Residual risk:

5. Sustainability

Climate risk

Commentary/Mitigation

We recognise that climate change and the transition to a low carbon economy will present signi¬cant long-term risks and opportunities for our business. Failure to identify and mitigate risks could lead to disruption to our operations, damage to our reputation, and inhibit our ability to attract visitors and occupiers, which ultimately could lead to a reduction in the value of our portfolio. We are continuing to de-carbonise our portfolio and will incur additional costs in the low energy refurbishment of buildings.

Our key risk indicators are: energy and carbon emissions, waste consumption, EPC ratings and green building certi¬cation. Our mitigation actions include:

• Our Sustainability Committee has oversight of climate related risks. The Committee is chaired by our CEO and led by our Head of Sustainability.

• The Sustainability Committee reports to both the Risk Committee, where climate change is a speci¬c risk, and the Board.

• We are setting science based targets for carbon emissions reductions and will develop a long term net zero carbon target.

• We have a clear sustainability policy and Action Plan that sets out our targets to reduce carbon emissions across our operations.

• Our refurbishment strategy, which addresses about 10% of the portfolio a year, increases energy e¤ciency and sets minimum expectations for EPCs and green building standards.

• We have third party veri¬cation of our carbon reporting.

• We implemented a ¬ve-year biodiversity strategy in 2016 with the objective to achieve a 10% year-on-year increase in quantity of biodiversity features across our estate.

+Sustainability: page 27

+TCFD statement: page 154

Strategic objectives

1 2 4 5

Evolution of risk:

Residual risk:

Page 77

Shaftesbury Annual Report 2020 Strategic report

Viability statement

The directors have assessed the Group's viability and confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three year period to 30 September 2023

Period of assessment

In light of the Covid-19 pandemic, the current level of uncertainty and the unprecedented pace of change in both our operating environment and the wider economy have resulted in reasonable expectations carrying a much lower degree of con•dence. Recognising this, the directors have reduced their period of viability assessment from •ve years to three years.

The •ve-year assessment period used previously reˆected lease lengths or rent review patterns across a large part of our portfolio, and corresponded with the Group's typical forecast period. Current short- to medium-term uncertainty over key assumptions such as lease terms, rent collection and occupancy render longer-term forecasts unreliable.

Whilst the Board monitors prospects over a longer period in the execution of the Group's strategy, in choosing a three year assessment period it considered that to make any meaningful longer-term forecast would require greater clarity with regard to the long-term implications of the Covid-19 pandemic on our occupiers, consumer behaviour and the wider economy.

The directors con•rm that they have no reason to expect a material change in the Group's viability immediately following the end of the three-year assessment period.

Assessment process

In assessing the Group's viability, the Board has considered a three-year review of the Group's viability, prepared by senior management.

The review considered the potential impact of the principal risks which could a‰ect solvency or liquidity in 'severe but plausible' scenarios for a range of public health and macroeconomic outcomes. The directors paid particular attention to those risks which could result in reduced income, pro•tability and capital values or a shortfall in liquidity.

Key assumptions

Key assumptions for the central viability scenario along with their link to the Group's principal risks are set out below. Each of these assumptions was also subjected to an extreme downside sensitivity analysis, ˆexing the key inputs, in unison, to model more severe adverse impacts and delays in recovery from the pandemic, assessing the Group's earnings, liquidity and debt covenant compliance in a downside scenario.

• West End footfall and consumer spend to recover slowly from the second quarter of FY 2021 onwards, returning to pre-pandemic levels in FY 2023

1 4 5 6 7

• Rent collection rates to recover gradually in response to improving footfall and consumer spending

1 4 5 6 7

• Portfolio vacancy to increase in FY 2021 reˆecting continued relatively low footfall levels, tenant failure, the continuing impact of the pandemic and the possibility of disruption at the end to the Brexit transition period

1 3 4 5 6 7

• Further decreases in rental values, crystallising as a reduction in income as tenancies reach breaks or expiries or tenants default, resulting in reduced capital values and rental income

1 2 4 5 6 7

• Increased tenant incentive packages including longer rent-free periods, increased landlord contributions and higher standard of •t-out, particularly for our food, beverage, retail and leisure space, coinciding with shortening lease lengths

1 2 5 6

• Increased non-recoverable property and service charge costs
  1 3 4 5
• Decrease in capital values reˆecting declining rental values and increasing yields

1 2 4 5 6 7

• No acquisitions or disposals are assumed. The completion of existing developments is assumed after which capital expenditure is assumed to continue broadly in-line with the historical trend.
• In view of the Group's Balance Sheet strength, following the November 2020 equity raise, no further change in the capital structure was assumed.

Principal risks

1		2		3		4
Macroeconomic factors		Decline in the		Changes in		Reduction in spending
		UK real estate market		regulatory		and/or footfall in our
				environment		areas
5		6				7
Significant increase in		We are unable to adapt to tenant demand/shifts in		Finance risk
tenant default/failure		market offer by competitors, or we fail to anticipate
		changes in rental growth

Page 78

Shaftesbury Annual Report 2020 Strategic report Viability statement

Strategic report

• Having cancelled the £125 million revolving credit facility following the equity raise, the remaining £100 million revolving credit facility is assumed to be re•nanced at maturity on a like-for-like basis but to remain undrawn throughout the viability period. No other changes to the Group's •nancing are assumed.

• Financing: page 67

Assessment

The Group's investment strategy is focused on food, beverage, retail and leisure uses which, in the West End, prior to the onset of the pandemic, had a long record of resilience and growth. Its management strategy had delivered high occupancy and sustained income growth over the long term. However, Covid-19 containment measures have resulted in an acute fall in income and severe operating and •nancial challenges for the Group's hospitality and retail occupiers.

• Covid-19:impact and response: page 6

It is the Board's expectation that the fundamentals of the investment strategy remain sound and that the e‰ects of the pandemic on the business will reverse in the medium-term.

The viability assessment assumes that Covid-19 containment measures are reduced in the coming 12-18 months and a recovery in West End footfall and spending will follow.

Recent announcements of successful vaccine trials and the Government's plans for a mass vaccination programme are •rst steps towards recovery but there remains signi•cant uncertainty over the timing and pace of the return of West End footfall and spending and an economic recovery.

The Group's food, beverage, retail and leisure operators face severe economic challenges from loss of trade, the accumulation of emergency loans and unpaid debts and the termination of government support schemes, including the business rates holiday from April 2021. The risk of Covid-19 related tenant failures is likely to remain elevated for some time.

If reduced earnings were sustained throughout the viability period this would be detrimental to the Group's ability to return to pro•t and recommence dividends. However, it would not threaten the Group's viability unless loan covenants were breached and were not capable of being cured.

A reduction in capital values might put viability at risk if loan-to-value covenants on the Group's debt cannot be satis•ed. Declining values may also curtail its ability to raise new debt funding, but no new funding is expected to be required due to the Group's cash reserves, following the equity raise in November 2020. Debt facilities due to be re•nanced in the viability period are not currently expected to be drawn.

• Financing: page 67

The downside scenario modelled asset value declines of up to 40%, resulting from increasing yields, together with decreases in ERVs.

In unison, the downside scenario considered sustained low levels of rent collection and increased vacancy, costs and tenant incentives

to the extent that the three year average net property income over the viability period would be 26% below the pre-pandemic level of the year ended 30 September 2019, with signi•cantly lower levels in the •rst eighteen months of the viability assessment period.

Under the downside scenario, the Group would not meet its interest cover covenants until the •nal six months of the viability period. However, for all drawn debt facilities, throughout the viability assessment period, the Group has either secured interest cover covenant waivers from its lenders or can make up income shortfalls using cash deposits or additional assets with su•cient contractual income from its pool of unsecured properties. The number of occasions on which cure rights may be used is limited but the directors expect to have su•cient use-rights to extend through the viability period.

Whilst this scenario would present signi•cant challenges over the viability period, the directors' assessment is that, in view of the Group's cash reserves, its expected covenant compliance and cure rights, and the reverse stress testing set out below, the Group would remain viable.

Reverse stress testing

The Board has used reverse stress testing to estimate the level to which capital values and income would need to fall before it was unable to cure a breach in its loan-to-value or interest cover covenants.

The Board estimates that the Group could withstand a further 41% overall decrease in valuations before reaching the limit of its loan-to- value covenants.

If it were to cancel the remaining revolving credit facility (which is not expected to be utilised in its downside scenario) and release its security to be charged against other loans, this tolerance would increase to 48%.

Assuming the allocation of uncharged assets to debt facilities that would be necessary to sustain these valuation declines, the Group re-calculated its forecast interest cover covenant headroom. At the point of lowest headroom in the downside scenario, when the relevant income is already assumed to be at approximately half of its pre-pandemic level, the Group could sustain a further income decline of up to 29%, with tolerance increasing to 46% in the event that the remaining revolving credit facility were cancelled and its charged assets made available to secure against other loans.

The Strategic Report on pages 1 to 79 was approved by the Board on 14 December 2020.

Brian Bickell	Chris Ward
Chief Executive	Finance Director

Page 79

Governance

Page 80

Shaftesbury Annual Report 2020 Governance

Governance overview

Leadership and purpose

An overview of how the Board monitors purpose and culture, its key activities throughout the year and its governance framework

Chairman's introduction

Monitoring of culture and engagement with employees The role of the Board and its Committees

Principal Board activities in 2019/20 Our conˆicts of interest procedures Our business conduct

Signi•cant votes against resolutions at our 2020 AGM Relations with shareholders

• Leadership and purpose: pages 82 to 89

Governance

Division of responsibilities
Describes the roles of the directors and	Board and Committee membership
review of director independence	Independence and e‰ectiveness
Roles and responsibilities of the directors
	+ Division of responsibilities: pages 90 to 92

Composition, succession and evaluation

Sets out our consideration of Board composition, succession planning and the Board evaluation

Board skills and experience

Our Board evaluation process

Nomination Committee report

• Composition, succession and evaluation: pages 93 to 95

Audit, risks and internal controls

Explains the role of the Audit Committee in ensuring the integrity of the financial statements and oversight of our risk management and internal control systems

Audit Committee report

• Audit, risks and internal controls: pages 96 to 99

Remuneration

Outlines our remuneration policies which support our strategy and promote long- term sustainable success

Directors' Remuneration report Remuneration at a glance Remuneration policy

Annual remuneration report

• Remuneration: pages 100 to 113

Compliance with the UK Corporate Governance Code 2018 (the "2018 Code")

This is the •rst year for the Company to report against the 2018 Code, and the Board considers it has complied in full with the Code throughout the year ending 30 September 2020, with the exception of Provision 38. This provision requires the alignment of executive director pension contributions with the wider workforce. As explained in the Directors' remuneration report on pages 101 and 105, we have committed to align the contribution levels of the current executive directors with the workforce contribution rate by the end of 2022. Any new executive directors will be aligned on appointment. The governance report on pages 81 to 113 set out how the Company has complied with the principles and provisions within the 2018 Code.

Page 81

Board members and meeting attendance

Scheduled Board	Additional
meetings	Board
(4 held)	meetings2
Chairman
Jonathan Nicholls	17/17
Executive directors
Brian Bickell	17/17
Simon Quayle	17/17
Tom Welton	17/17
Chris Ward	17/17
Non-executive directors
Richard Akers	17/17
Dermot Mathias	17/17
Sally Walden	17/17
Jennelle Tilling	17/17
Jill Little1	-

1. Jill Little retired from the Board on 31 January 2020 and could have attended a maximum of two meetings.
2. In response to the pandemic, frequent ad hoc Board calls were introduced to keep the Board informed of the changing market circumstances.

Shaftesbury Annual Report 2020 Governance

Leadership and purpose

Chairman's introduction

In this period of considerable uncertainty, good governance, the strength of our stakeholder relationships, maintaining a close dialogue with our talented team and living our values, is, I believe, fundamental to our long-term success

Dear shareholder

I am pleased to present our 2020 Governance report and, as this is our •rst year under which the revised UK Corporate Governance Code 2018 has applied to Shaftesbury, we have taken the opportunity to present some of our governance initiatives under the key themes of the new governance and reporting rules.

Our purpose, strategy and culture

Given the uncertain and evolving environment in which we have been living and working this year, I am pleased to be able to report that the Shaftesbury team's actions have been critical in delivering on short-term strategic priorities to support our long-term underlying purpose: to curate vibrant and thriving villages in the heart of London's West End. A key focus for the Board from the beginning of the Covid-19 disruption has been maintaining occupancy across the Group's portfolio. We believe this approach, underpinned by a strong •nancial base following our capital raise of £307 million through the Firm Placing, Placing and Open O‰er and O‰er for Subscription, which completed in November 2020, will position the business to return to long-term growth as the pandemic issues recede.

Fundamental to our purpose and strategy is their alignment with our culture based on our values of being human, original, community minded, responsible and long term. We are pleased that these have been a cornerstone to the Shaftesbury team's actions throughout the year and, in particular, in the period since the pandemic dominated the global agenda. How the Board has sought to achieve our purpose and discharge its duties under s172 of the Companies Act during the year, including in relation to the pandemic, and our successful post year-end capital raise, is covered in more detail in our s172 statement on pages 40 and 41.

• Our people and culture: pages 42 to 45
• Monitoring of culture and engagement with employees: page 84

Page 82

Shaftesbury Annual Report 2020 Governance Leadership and purpose

Board composition and changes

Succession planning is an important part of our Board governance. In order to phase our non-executive director retirements, Dermot Mathias, who continues to bring to the Board a strong level of skill and independence, but who will have served nine years on the Board in October 2021, will retire at our 2021 AGM. On behalf of the Board, I would like to thank Dermot for his valued contribution to the Board over the years and, in particular, his sage advice over the course of our recent capital raise. As Sally Walden will also have served nine years on the Board in October 2021, we have carried out a rigorous review of her contribution, and are satis•ed that Sally remains independent and objective. In order to provide an orderly succession, it is proposed that Sally will lead on the 2022 triennial remuneration policy review, shadowed by Jennelle Tilling, who will become our Remuneration Committee chair on Sally's retirement from the Board.

Following Jill Little's retirement at the 2020 AGM and in anticipation of Dermot Mathias' retirement at the 2021 AGM, we are delighted that Ruth Anderson will join us in December 2020 as a non-executive director and will bring to the Board her experience as a tax and business advisor to a range of UK and global businesses as well as previous Audit Committee chair roles at Ocado plc, Coats Group plc and Travis Perkins plc. From the 2021 AGM it is intended that Ruth will become Audit Committee chair.

Diversity and inclusion

Of our Strategy and Operations Executive Committee, and their direct reports, 42% and 74% respectively are female. Following the retirement of Dermot Mathias at the 2021 AGM, 33% of our Board will be female.

We appreciate that diversity extends beyond gender and we continue to actively consider diversity and inclusion in all Board and employee appointments.

Board evaluation

This year our Board evaluation was undertaken externally by Sean O'Hare of Boardroom Dialogue during the •rst lockdown and I am pleased to report that the Board and its Committee's were considered to be working e‰ectively.

Details of this process, the •ndings of the review and our progress against 2018/19 objectives can be found on page 93.

Risk management

One of the ways the Board has monitored the evolution of our risks and priorities to the challenging circumstances through the pandemic has been through the introduction of additional Board calls between our scheduled meetings. Through these additional 17 virtual meetings, the executive directors, wider team and advisers kept the Board fully apprised of the changing conditions and actions both taken and planned. As these more-frequent Board engagements regarding day-to-day operations have proved valuable, the plan is to continue to have monthly calls in between our scheduled Board meetings for the foreseeable future, enabling us to use our scheduled meetings to focus on more strategic matters.

Our consideration of risks is integral to the way we operate and is intrinsic in approval of any material transaction. Twice yearly, the Audit Committee and the Board formally review current and emerging risks. As the impact of the pandemic has been felt across our operations, we have considered this within each aspect of the business rather than treating it as a separate risk. See more on our risk management, principal risks and uncertainties outlined on pages 71 to 77.

Sustainability, the environment and the community

Whilst the pandemic has, and will continue to, impact our business, our commitment to sustainability remains as strong as ever. To ensure we meet the long-term expectations of our stakeholders, we continue to monitor our sustainability priorities, including actions we need to take to address climate change, minimise our environmental impact and invest in our local community.

• Sustainability: pages 27 to 28
• Environment: pages 29 to 31

As a result of the pandemic we have refocused our e‰orts on supporting young people and our communities in Westminster and Camden. Recognising the impact of Covid-19 on these groups, in April 2020, we announced our Covid-19 Community Fund and are pleased to report that we have provided support of over £310,000 for 18 causes. Part of the funding for this initiative came through savings made from waivers of directors' remuneration. Recognising that there will be ongoing implications for young people and our local communities, we have also made a commitment of a further £50,000 from our 2020/21 Community Investment budget split over the Young Westminster and Camden Foundations.

• Making a positive di-erence to our community: pages 46 and 47

Legal proceedings instigated by a major shareholder

As previously reported, on 11 June 2019, the Board was served with legal proceedings issued by companies controlled by Mr Samuel Tak Lee, who was at the time the bene•cial holder of 26.32% of our share capital. At the 2020 AGM, Mr Lee, by then the ultimate bene•cial owner of 26.15% of the issued share capital, voted against nine resolutions, of which only three, which were Special Resolutions, were not passed by the requisite 75% majority. Mr Lee did not vote on any other resolutions, all of which were passed with in excess of 98% of those voting in favour.

On 30 May 2020, we announced that entities bene•cially owned by

Mr Lee had agreed to sell their 26.3% interest in the Company. This was followed by an announcement on 1 June 2020 that legal proceedings had been withdrawn. Given the sale of his interest, no further action was taken in connection with engaging with Mr Lee on his votes against the 2020 AGM resolutions.

Engaging with our stakeholders

Critical to our long-term success is the strength of our stakeholder relationships. Whilst a large element of the Board's regular stakeholder engagement is with shareholders and employees, a key part of our role as a Board is oversight of the wider team's relationships with other stakeholders including occupiers, the local community, suppliers, •nance providers, joint venture partners, visitors, local authorities, adjoining property owners and industry associations. For more details on how we have engaged with stakeholders and the outcome of that engagement see our s172 statement on pages 40 and 41.

• Stakeholder engagement: pages 35 to 39

The Shaftesbury team's e‰orts this year have been unparalleled in navigating the challenges faced by the business and nurturing our relationships across all areas and I would like to thank them for their continued hard work and dedication. In addition, I would like to express my gratitude to my fellow Board members for their continued challenge, support and extra time commitment over the past twelve months.

Lastly, I would just like to say thank you to all of our shareholders for your continued support in these extraordinary times.

Jonathan Nicholls

Chairman

14 December 2020

Governance

Page 83

Shaftesbury Annual Report 2020 Governance Leadership and purpose

Monitoring of culture and engagement with employees

Key to the achievement of our purpose and strategy is Shaftesbury's culture and our aim to make a positive di‰erence. Our monitoring of culture has never been more important and extra Board meetings during the year provided further opportunities for your Board to see this culture in action through the Shaftesbury team living our values:

• Human. This has been demonstrated through our team's frequent communications with, and resulting actions in relation to, our occupiers, employees, the community, suppliers and lenders.
• Original. In these unprecedented times, our teams have worked hard to 'think outside the box' and we have strived to •nd creative solutions to sharing the pain of our occupiers and looking creatively as to how to maintain our visitors' interest in the West End. We have found opportunities to aid our occupiers during and post-lockdown, and are lobbying our local councils in respect of initiatives to support occupiers reopening and helping them implement the new social distancing measures.
• Community minded. We have proactively looked to support our long-standing community partners and reached out to help others through our Covid-19 Community Fund and our wider Community Investment Committee activities.
• Responsible. We have engaged with and supported our employees, with none being furloughed, continued to both assist our occupiers and pay suppliers promptly and created a Covid-19 Community Fund to help young people and our local communities.
• Long-term. Our actions to support occupiers are, in our view, the best way to preserve the long-term value of our business.

As a small team of under 40 people, there is high level of interaction with the executive directors in relation to both our various management committees and day-to day operations. In addition, with all employees based in one location, the non-executive directors take the opportunity to meet informally with the team.

In monitoring our culture, as part of the employee reward survey in September 2020, our sta‰ were asked additional questions about how they felt about Shaftesbury as a place to work and the level of recognition received. The Board was delighted with the level of employee response and the feedback that 100% felt both that they were proud to work for Shaftesbury and would recommend Shaftesbury as a place to work. However, there were areas identi•ed for improvement, particularly in recognising the e‰orts of our teams and individuals. As a result of this feedback, we have asked our Culture Group, a cross section of employees across the business, to address this as part of a recognition project which is sponsored by Richard Akers, our designated non-executive director for employee engagement. In addition, the Board has been able to monitor our culture and ensure engagement with employees through the attendance of non-executive directors, on a rotational basis, to some of the Shaftesbury all-employee meetings.

Human

Original

Community-minded

ResponsibleLong-term

Page 84

Shaftesbury Annual Report 2020 Governance Leadership and purpose

The role of the Board and its

Committees

	The Board
• Four scheduled meetings		•Considers the balance of interests between stakeholders for the
• Sets Group strategy		long-term success of the Company
	• Oversees the Group's governance
• Oversees the alignment of the Group's purpose, culture and values,
strategy and risk appetite	+ Division of responsibilities: on pages 90 to 92	+ Our Board: pages 54 to 55
+ Principal Board activities: pages 86 to 88

Governance

Audit

Committee

• Three scheduled meetings

•Oversees the Group's valuation and •nancial reporting process

•Reviews the adequacy and e‰ectiveness of internal •nancial controls and risk management systems including the need for internal audit

•Reviews the independence and e‰ectiveness of the auditors

+ Audit committee report: pages 96 to 99

Nomination	Disclosure	Remuneration
Committee	Committee	Committee
• Five scheduled meetings	• Meets as required	• Five scheduled meetings
•Reviews the structure, size	•Ensures compliance with the	•Determines the remuneration
and composition of the Board	Market Abuse Regulation	policy for executive directors,
•Oversees succession planning		Chairman and senior employees
and development of a diverse		• Ensures there is a link between
pipeline		culture, performance and
•Recommends appointments		remuneration
to the Board		• Monitors employee
+		remuneration and related
Nomination committee report:
pages 94 and 95		policies
		Directors' remuneration report:
		+ pages 100 to 113

Risk

Committee

• Meets at least twice a year

•Reviews and monitors the Group's principal current and emerging risks

•Oversees the e‰ectiveness of the Group's risk management systems

+ Risk management: pages 71 and 72 + Principal risks and uncertainties:

pages 73 to 77

Strategy and Operations

Executive Committee

• Meets fortnightly
• Develops and implements strategy, operational plans and policies
• Monitors operational and •nancial performance
• Monitors risks and opportunities
• Ensures appropriate team resourcing, development and succession planning

Pension

Committee

• Meets at least once a year
• Provides oversight of the governance of the Shaftesbury pension scheme

Operations	Community	Sustainability	IT Steering
Committee	Investment Committee	Committee	Committee
• Meets fortnightly	• Meets at least four times a year	• Meets at least four times a	• Meets at least four times a
• Oversees day-to-day	• Oversees the Group's	year	year
operations and procedures	community investment	• Sets the Company's	• Monitors the alignment of the
	strategy, programme and	sustainability strategy and	Group's IT needs and strategy
	activities	management approach	• Reviews the performance of
	+ Community: page 36 and 37	+ Environment: pages 29 to 31	the outsourced IT function
		+ Sustainability: pages 27 and 28

Page 85

Shaftesbury Annual Report 2020 Governance Leadership and purpose

Principal Board activities in 2019/20

At every scheduled Board meeting, the Board receives an update from the executive directors and the company secretary on the corporate equity markets, •nancial matters, portfolio activities and governance. The table below provides examples of signi•cant matters discussed and consideration of stakeholders and s172 matters in the year ended 30 September 2020. At the outset of the Covid-19 pandemic, the Board introduced additional Board meetings to provide updates on the impact of the pandemic to Shaftesbury's business, stakeholders and the Group's •nancial position. For more on how the Board engaged on these matters and key decisions taken by the Board in relation to s172 matters, please see pages 40 and 41.

Topic	Activity and outcome1	Stakeholders considered	Section 172 considerations
STRATEGY & OPERATIONS
Acquisitions and capital	• Approval of the acquisitions of three strategically important buildings in Kingly Street	Shareholders	Long-term consequences
expenditure	and Berwick Street	Occupiers	Environment
	• Regular updates on progress of the 72 Broadwick Street scheme and leasing strategy	Suppliers	Business relationships
	• Post the onset of Covid-19, all non-essential capital expenditure reviewed to	Lenders	Reputation
	preserve liquidity
Shaftesbury's o˜ce	• Consideration of the changing requirements of o˜ce tenants and how to evolve	Shareholders	Long-term consequences
o›ering	Shaftesbury's o›ering to meet these requirements	Employees	Employees
		Occupiers	Business relationships
Tax Strategy	• Approved the updated tax strategy	Shareholders	Business relationships
		Suppliers	Reputation
IT Strategy	• Updates and reviews of Shaftesbury's IT Strategy, cyber security, third party	Employees	Long-term consequences
	providers, working from home arrangements and IT Steering Committee actions	Suppliers	Employees
			Business relationships
			Reputation

Occupier support and post-lockdown recovery strategy

• Updates received and discussed in relation to: - proposed rent concession strategies

- our post-lockdown recovery strategy

- additional support being o›ered to occupiers and actions being undertaken in relation to engagement with local councils and social distancing measures to bene¡t occupiers

- external asset management teams' actions and cost saving measures + S172 statement: page 40

Shareholders	Long-term consequences
Employees	Employees
Occupiers	Business relationships
Local authorities/	Reputation
neighbouring landowners/
West End tourism partners
Suppliers

Stakeholder dashboard	• Consideration at each scheduled Board meeting of engagement activities	Shareholders	Long-term consequences
	undertaken by the executive directors and wider Shaftesbury team	Community	Employees
		Occupiers	Business relationships
		Employees	Community
		Local authorities/	Reputation
		neighbouring landowners/	Fairness between
		West End tourism partners	shareholders
		Suppliers
		Lenders
FINANCE
Capital structure and	• Regular consideration of the Group's liquidity, cash ²ow forecasts, covenants,	Shareholders	Long-term consequences
liquidity	covenant waiver discussions and balance sheet strength	Lenders	Fairness between
	•Process started for the November 2020 Firm Placing, Placing and Open O›er and		shareholders
	O›er for Subscription to raise gross proceeds of £307 million

• S172 statement: page 41

Dividend	•Recommended the payment of the 2019 ¬nal dividend	Shareholders	Long-term consequences
	• Review of the e›ect of Covid-19 on liquidity, and determination that no dividend		Reputation
	payments be paid or recommended in relation to the 2020 Half Year and Full Year
	results

• Dividends: page 65

Financial Reporting	• Review and approval of the Full Year results and January trading statements	Shareholders	Long-term consequences
	• Review and approval of the Half Year results and March and September trading	Lenders	Reputation
	statements

1. Matters impacted by Covid-19 in bold

Page 86

Shaftesbury Annual Report 2020 Governance Leadership and purpose

Governance

Topic	Activity and outcome1	Stakeholders considered	Section 172 considerations
RISK
Risk management	• Con¬rmed risk appetite based on recommendation from the Risk Committee	Shareholders	Long-term consequences
	• Deliberation of the principal and emerging risks and amendments made following	Community	Employees
	recommendations from the Audit and Risk Committees	Occupiers	Business relationships
	• Consideration of how the pandemic impacted the Group's risks	Employees	Environment
	+ Risk management and principal risks and uncertainties: pages 71 to 77	Local authorities/	Reputation
			neighbouring landowners/
			West End tourism partners
			Suppliers
			Lenders
SHAREHOLDERS
Shareholder engagement	• Discussion of planned investor meetings	Shareholders	Long-term consequences
	• Consideration of feedback from the investor presentations and roadshows		Reputation
	• Feedback from meetings with shareholders
	+ Relations with shareholders: page 89
GOVERNANCE
Internal governance	• Updates provided on temporary and permanent changes made to internal	Shareholders	Long-term consequences
	Committee structures	Community	Employees
	• Approval of the Strategy and Operations Executive Committee terms of reference	Occupiers	Business relationships
	• Minutes received from new Operating Committees	Employees	Community
			Local authorities/	Reputation
			neighbouring landowners/
			West End tourism partners
			Suppliers
External Board evaluation	• Feedback received from the external Board evaluation and actions agreed	Shareholders	Long-term consequences
	+	Board evaluation: page 93	Community	Employees
		Occupiers	Business relationships
			Employees	Community
			Local authorities/	Environment
			neighbouring landowners/	Reputation
			West End tourism partners
			Suppliers
			Lenders
Non-executive director	• Consideration of the experience required of a non-executive director to replace	Shareholders	Long-term consequences
succession	Dermot Mathias as Audit Committee chair		Reputation
	+ Nomination Committee report: pages 94 and 95
Division of responsibilities	• Reviewed and approved the updated terms of reference for the Audit, Remuneration	Shareholders	Long-term consequences
	and Nomination Committees	Community	Employees
	• Reviewed and approved the terms of reference and division of responsibilities for the	Occupiers	Business relationships
	Chairman, Chief Executive and Senior Independent Director	Employees	Community
	• Approval of the appointment of Brian Bickell as Deputy Vice Chair of the Westminster	Local authorities/	Environment
	Property Association and Jennelle Tilling as Trustee for Guide Dogs for the Blind	neighbouring landowners/	Reputation
	+ Roles and responsibilities of the directors: page 92	West End tourism partners

Suppliers

Lenders

1. Matters impacted by Covid-19 in bold

Page 87

Shaftesbury Annual Report 2020 Governance Leadership and purpose

Topic	Activity and outcome1	Stakeholders considered	Section 172 considerations
PEOPLE & CULTURE
Strategic People Plan	• Regular updates on the progress of the Strategic People Plan	Employees	Long-term consequences
	+ Strategic People Plan: page 43		Employees
Remote working, return to	• Consideration of:	Employees	Long-term consequences
o˜ce plans and employee	- working from home arrangements including actions proposed and undertaken		Employees
wellbeing		in relation to employee engagement and wellbeing;		Reputation
	- employee feedback and return to o˜ce plan
	• Attendance of all employee Shaftesbury presentations by Jonathan Nicholls,
	Richard Akers and Jennelle Tilling
	+ S172 statement: page 41
Reward survey	• Consideration of feedback from the all employee reward survey and focus groups and	Employees	Long-term consequences
	approval of actions proposed to address areas raised		Employees
	+ Consideration of remuneration and related policies below the Board: page 102
SUSTAINABILITY & COMMUNITY
Modern Slavery Statement	• Approval of our 2020 Modern Slavery Statement	Shareholders	Long-term consequences
	+ Modern Slavery and human rights: page 28	Community	Employees
			Occupiers	Business relationships
			Employees	Reputation
			Suppliers
Shaftesbury's	• Consideration of our sustainability approach, proposed underlying premise and priorities	Shareholders	Long-term consequences
sustainability approach	+ Sustainability: pages 27 and 28	Community	Employees
			Occupiers	Business relationships
			Employees	Community
			Local authorities/	Environment
			neighbouring landowners/	Reputation
			West End tourism partners
			Suppliers
Covid-19 Community	• Director remuneration waived to fund our Covid-19 Community Fund launched	Community	Long-term consequences
Fund	to assist local community during the pandemic	Occupiers	Employees
	•Updates received on how funds being utilised	Employees	Business relationships
	+	Making a positive contribution to our community: page 46 and 47		Community

Reputation

Our Community	•Approval of the revised terms of reference for Shaftesbury's Community Investment
Investment approach	Committee

Shareholders	Long-term consequences
Community	Employees
Occupiers	Business relationships
Employees	Community
	Reputation

1. Matters impacted by Covid-19 in bold

con ict o inte est oce es

The Company's Articles of Association allow for the Board to authorise any actual or potential conˆicts of interest that may arise from the directors' external relationships or commitments. Any potential conˆicts of interest are declared at the start of each Board meeting and a director who has a conˆict of interest is not counted in the quorum or entitled to vote when Board considers the matter in which the director has an interest. Actual and potential conˆicts are formally reviewed annually in respect of both the nature of individuals' roles and their time commitment. No actual or potential conˆicts arose during the year.

The external interests of new directors are considered as part of the recruitment process and, if appropriate, authorised by the Board on appointment. Any additional external appointments, which are subject to Board approval, are also considered by the Board in relation to the nature of the appointment and time commitment.

The Board considered these procedures to be working e‰ectively.

Page 88

Shaftesbury Annual Report 2020 Governance Leadership and purpose

Our business conduct

Our culture is founded on forging lasting relationships and partnerships based on respect, integrity and transparency and as a small team, our Board and Strategic and Operations Executive Committee have a high level of oversight over the group's activities, policies and procedures. Formal policies in place during the year in relation to anti-corruption and anti-bribery matters included our anti-money laundering, anti-bribery, share dealing, whistleblowing and anti-tax evasion policies. As part of their induction, training is given to new employees on key policies and for certain topics we require our employees to undertake annual compliance training.

We do not have a separate human rights policy, however, we support the ten principles of the UN Global Compact on human rights, labour, environment and anti-corruption and we expect suppliers, as a minimum, to adhere to all relevant human rights, employment and health and safety legislation and comply with standards and codes speci•c to their business. As our day-to-day property management is outsourced, it is important for us that the values and behaviours of our suppliers are consistent with our own and that new suppliers sign up to our Supplier Code of Conduct. Our Modern Slavery Act statement is also updated annually for actions undertaken during the year to prevent modern slavery and human tra•cking in our business and supply chain.

With our open and transparent culture, employees are encouraged to speak up if they witness any wrongdoing, or behaviour which does not align with our high standards. We have a formal whistleblowing policy under which employees and suppliers can report any concerns either through our senior independent director or through an independent hotline and online portal. Following receipt of a whistleblowing report, we have procedures to follow to ensure that appropriate investigation is undertaken. This policy is reviewed by the Audit Committee and the Board annually.

i nificant otes a ainst at o	nn al
General Meeting

At the 2020 AGM, the resolutions set out below received votes against in excess of 20%, which under the Investment Association guidance is a signi•cant vote against:

• Ordinary resolution - annual remuneration report
• Ordinary resolution - re-election of Jonathan Nicholls, Brian Bickell and Chris Ward
• Ordinary resolution - authority to allot shares
• Special resolutions - authority to allot shares on a non-pre-emptive basis
• Special resolution - authority to call general meetings on not less than 14 days' notice

Mr Samuel Tak Lee, the ultimate bene•cial owner of 26.15% of the issued share capital at the time, voted against these resolutions. As a result, the special resolutions listed above were not passed. Mr Lee did not vote on any other resolutions, all of which were passed with 98% or more of those voting, voting in favour.

On 30 May 2020, the Board was advised that entities bene•cially owned by Mr Lee had agreed to sell their interest in the Company. As a result, no further action was taken to engage with Mr Lee regarding the votes against certain 2020 AGM resolutions.

The Board considers that the authorities sought by the resolutions above continue to be in the best interests of the Company, and will be proposing them at the 2021 AGM for consideration by all shareholders.

Relations with shareholders

The Board considers the views of our shareholders and regular contact with potential investors to be an important aspect of corporate governance. The chief executive has day-to-day responsibility for investor relations and feedback is provided to the Board.

Notwithstanding the impact of the pandemic on our ability to physically meet shareholders and potential investors, and take them on tours of the portfolio during the year, the Chief Executive and executive directors held around 200 meetings with UK and overseas existing and potential institutional investors, as well as equity market analysts. Meetings involved either group or individual presentations and, prior to government social distancing restrictions as a result of Covid-19, tours of the portfolio which provide an opportunity to see our villages, understand management strategy, and to meet the senior leadership team.

A timeline of investor relations activities undertaken during the year is set out below.

November 2019	Results for the year ended 30 September 2019
	Analyst presentation
	Year end results investor roadshow
December 2019	Year end results investor roadshow
	European Public Real Estate conference
January 2020	Annual General Meeting
	Trading update statement
March 2020	Global Property Conference
	Covid-19 update statement
June 2020	Interim results
	Analyst presentation
	Interim results investor roadshow
September 2020	Trading update statement

For the November 2019 annual results presentation to analysts, a live video webcast with replay facilities was made available on our website. As a result of Government guidance on social distancing during lockdown in June 2020 this year, Brian Bickell and Chris Ward pre-recorded the half year results presentation and hosted a live Q&A session for analysts. The recordings were made available on our website.

Due to the continued Government pandemic guidance, shareholders were not able to attend our November 2020 General Meeting in relation to our capital raise in person. However, they were able to follow the proceedings at the meeting via a listen-only audio facility. To enable shareholders to be able to ask questions in advance of the meeting, a dedicated electronic mailbox was also made available.

All of the directors were present at the 2020 AGM, which provided shareholders with an opportunity to meet the Board. For our 2021 AGM, given the uncertainty in relation to Government social distancing to ensure shareholders' safety, shareholders will not be permitted to attend the AGM in person. However, shareholders will be o‰ered the opportunity to participate remotely and be able to ask questions and vote electronically. For more details, please see our Notice of Meeting.

During the year, we have undertaken a number of engagement activities, including consultation with:

• a number of our larger shareholders on the size and method of our capital raise in accordance with the requirements of the market abuse regulations; and
• a number of our large shareholders on a minor amendment to the calibration of our 2019 LTIP TAR performance measure.

Following our capital raise and the publication of the 2020 annual results we will be o‰ering general engagement meetings to our major shareholders with our Chairman, Jonathan Nicholls and Senior Independent Director, Richard Akers.

Governance

Page 89

Shaftesbury Annual Report 2020 Governance

Division of responsibilities

Committee membership

C Chair + Member

Board

Nomination Committee

CHAIRMAN

Jonathan Nicholls

C

C

Non-executive Chairman

EXECUTIVE DIRECTORS

Brian Bickell

+

Chief Executive

Simon Quayle

+

Executive Director

Chris Ward

+

Finance Director

Tom Welton

+

Executive Director

NONºEXECUTIVE DIRECTORS

Richard Akers

+

+

Senior Independent Director

Dermot Mathias

+

+

Non-executive Director

Jennelle Tilling

+

+

Non-executive

Director

Sally Walden

+

+

Non-executive

Director

STRATEGIC AND OPERATIONS EXECUTIVE COMMITTEE MEMBERS

Samantha Bain-Mollison

Retail Director

Karen Baines

Head of Group Marketing & Communications

Alastair Deutsch

Head of Finance

Desna Martin

Company Secretary

Charles Owen

Property Director

Andrew Price

Property Director

Jenna Slade

Senior Portfolio Executive

Julia Wilkinson

Restaurant Director

Audit Committee	Remuneration Committee	Disclosure Committee	Strategy & Operations Executive Committee (SOE)	Risk Committee

C

+ C +

					+
	+			+
					C
					+

+ +

• +

+ +

• C

+

+

+ +

+ + +

+ +

+ +

+ +

+

Community Investment Committee	Pension Committee	Operations Committee1	Sustainability Committee	IT Committee

• C

+ +

CC

+

						+
	+					+
						+				+
	+		+			+
	+					+		+
			+			+
	C
						+
						+

1. The Operations Committee is chaired on a rotating basis by members of the Strategy and Operations Executive Committee below the Board.

Page 90

Shaftesbury Annual Report 2020 Governance Division of responsibilities

There is clear division between executive and non-executive responsibilities which ensures accountability and oversight. During the year, the non-executive directors, led by the Chairman, regularly met without management present. The roles of Chairman, Chief Executive and Senior Independent Director are clearly de•ned, set out in writing and regularly reviewed by the Board and are available from our website under Corporate Governance. Similarly the Audit, Nomination and Remuneration Committees' terms of reference were reviewed by both the respective Committees and the Board during the year, and are available on our website under Corporate Governance.

Independence and effectiveness

In accordance with the Code, all directors are subject to annual re-election, and at least half the Board, excluding the Chairman, are independent non-executive directors.

The Board believes that it, and its Committees, have the appropriate combination of skills, experience and knowledge to enable them to carry out their duties e‰ectively. The biographies of all of the members of the Board, outlining their strengths and experience, can be found on page 54 and 55. The Nomination Committee keeps under review the tenure of all directors, Board diversity and the e‰ectiveness of individual directors.

All non-executive directors are considered by the Board to be independent.

The Board recognises the importance of all directors being able to dedicate su•cient time to e‰ectively discharge their duties and responsibilities. The commitment expected is considered by the Board on each director appointment and was a key consideration this year in the recommendation of Ruth Anderson's appointment to the Board. Directors undertake additional external appointments, which are periodically reviewed by the Nomination Committee and the Board. The Board is satis•ed that each has su•cient time to carry out their responsibilities.

During the year ended 30 September 2020, additional external Board roles for which Board approval was sought and received included Brian Bickell's appointment as Deputy Vice Chair of the Westminster Property Association and Jennelle Tilling's appointment as a Trustee for Guide Dogs for the Blind.

Governance

Director tenure

Independence of directors

Executive directors

Jennelle Tilling 2019

Chairman

1

Independent non-executive directors

Richard Akers 2017

Executive directors

Jonathan Nicholls 2016

Independent non-executive directors

Sally Walden 2012

4

Dermot Mathias 2012

Tom Welton 1997

Chris Ward 2012

4

Simon Quayle 1997

Brian Bickell 1987

Years

35

30

25

20

15

10

5

0

Page 91

Shaftesbury Annual Report 2020 Governance Division of responsibilities

Roles and responsibilities of the directors

Chairman:	In his role as Chairman, Jonathan Nicholls is responsible for:
Jonathan Nicholls	• Leading the Board in the consideration, challenge, support and oversight of the Company's strategy and its implementation
	• Promotion and oversight of the achievement of Company's purpose, values and culture
	• Monitoring the Company's risk pro¬le
	• E¼ective engagement between the Board, its shareholders and other key stakeholders
	• Leading on the review of the Board's e¼ectiveness
	• Oversight of succession planning
	• Ensuring regular discussion by the non-executive directors without management present
	As part of his role, Jonathan chairs the Nomination Committee
Chief Executive:	As Chief Executive, Brian Bickell is responsible for:
Brian Bickell	• Adapting and executing the Group's strategy and commercial objectives to ensure they evolve in anticipation of changing market
	conditions and risks
	• The operational and ¬nancial performance of the Group
	• Ensuring the Company's business is conducted with the highest standards of integrity, in keeping with the Company's culture and values
	• Oversight of the Group's skills, diversity, management development and succession
	• Communication with the Board, employees and other stakeholders
	As part of his role, Brian is a member of the Longmartin joint venture Board, chairs the Strategy and Operations Executive Committee and
	Sustainability Committee and has Board responsibility for HR matters
Finance Director:	As Finance Director, Chris Ward:
Chris Ward	• Supports the Chief Executive in developing and implementing strategy and managing risk
	• Provides ¬nancial leadership and the alignment of the Company's business and ¬nancial strategy and management of the
	Company's capital structure
	• Is responsible for ¬nancial planning and analysis, treasury, tax and IT functions
	• Is responsible for presenting and reporting accurate and timely ¬nancial information
	As part of his role, Chris chairs the Risk, IT and Pension Committees
Other Executive Directors:	As Executive Directors, Simon Quayle and Tom Welton:
Simon Quayle, Tom Welton	• Support the Chief Executive in developing and implementing the Group's strategy and objectives
	• Develop and execute business plans in collaboration with the Chief Executive, Finance Director and Senior management
	• Oversee the day-to-day activities of the Group in line with the Group's values
	As part of their roles, Tom is a member of the Longmartin joint venture Board and Simon is a member of the Sustainability Committee.
Senior Independent Director:	In his role as Senior Independent Director, Richard Akers:
Richard Akers	• Provides a 'sounding board' for the Chairman and acts as an intermediary for non-executive directors when necessary
	• Is available to shareholders as required as an alternative contact to the Chairman
	• Leads the non-executive directors in the evaluation of the Chairman's performance
	• Acts as an independent point of contact in the Group's whistleblowing procedures
Designated Non-Executive Director	In his role as Designated Non-Executive Director for employee engagement, Richard:
for employee engagement:	• Acts as Board sponsor for the Employee Culture Group
Richard Akers	• Attends Shaftesbury sta¼ presentations as appropriate
	• Monitors feedback from, and actions proposed as a result of, employee surveys, reporting to the Board or Remuneration Committee as
	appropriate
	• Reviews any whistleblowing matters raised by employees

Non-Executive Directors:In their role as Non-Executive Directors and members of the Nomination, Audit and Remuneration Committees, Richard Akers,

Richard Akers, Dermot Mathias, Dermot Mathias, Sally Walden and Jennelle Tilling:

Sally Walden, Jennelle Tilling • Give an external perspective and provide constructive challenge to the executive directors and members of the Strategy and Operations Executive Committee in the Board's discussions and decision making using their broad mix of business skills and experience

• Monitor performance of the Group's strategy within the risk management framework
• Promote the highest standards of integrity and corporate governance throughout the Company and particularly at Board level
• Review the integrity of ¬nancial reporting and that ¬nancial controls and systems of risk management are robust
• Determine appropriate levels of remuneration for the senior executives

Dermot Mathias and Sally Walden chair the Audit Committee and Remuneration Committee respectively

Page 92

Shaftesbury Annual Report 2020 Governance

Composition, succession and evaluation

Board evaluation

Board skills and experience

As part of the review Sean O'Hare:

Real estate

EXECUTIVE DIRECTORS

Brian Bickell

+

+

Simon Quayle

+

Tom Welton

+

Chris Ward

NONºEXECUTIVE DIRECTORS

+

Jonathan Nicholls

+

Richard Akers

Dermot Mathias

Sally Walden

Jennelle Tilling

Fund

Food,management beverage, Corporate Accounting/ /¬nancial Consumer

retail ¬nance ¬nance markets marketing

+	+	+
+		+
+		+
+	+	+
+	+	+
+
+	+
+	+	+
+		+

• interviewed each Board director and the Company Secretary;
• attended a meeting of each of the Board, Audit, Remuneration and Nomination Committees; and
• provided his feedback to a meeting of the Board in July 2020.

In addition to the evaluation of the Board and each of the Committees, individual feedback on the directors was provided to the Chairman, who after consideration of the recommendations from the Board evaluation process, met with the directors individually. Richard Akers as Senior Independent Director also led a discussion with the non- executive directors as to the Chairman's performance.

The review was focused on the following key areas:

•	Board leadership and company purpose - including strategy, values
	and culture, allocation of resources to deliver on the strategy,
	stakeholder (including workforce) engagement.
•	Division of responsibilities - the e‰ectiveness of the Chairman, size of

Governance

Our 2019/20 Board evaluation process

Board performance evaluation cycle

Year 1

Independent externally facilitated review

Year 3			Year 2
Internal review to			Internal review to
focus on progress			monitor progress and
against years 1 and 2			any new issues raised

As part of our three year external Board evaluation cycle, this year our Board and Committee evaluation process was externally facilitated by Sean O'Hare of Boardroom Dialogue and included matters arising as a result of the start of the pandemic. In considering the appointment, the Board believed that Sean O'Hare, having undertaken our 2017 Board evaluation, was best placed to consider how the Board had and should continue to evolve, to maximise its e‰ectiveness. Neither Sean O'Hare nor Boardroom Dialogue have any other connection with the Company or any director.

	the Board, quality of engagement in Board discussions, appropriateness
	of Board papers, frequency and length of Board meetings, and
	interaction of Board members outside of formal meetings.
•	Composition, succession and evaluation - e‰ectiveness of the
	Nomination Committee, appointments process for Board and senior
	management roles, induction and development of Board members,
	leadership development and action arising from the most recent
	internal and external evaluations; and
•	Committee e‰ectiveness - including the Audit Committee oversight
	of •nance, risk and controls plus the Remuneration Committee's
	e‰ectiveness in aligning remuneration with Company values and
	reviewing performance outcomes in light of market expectations.

The review concluded that the ˆow and activities of both the Board and Committees worked well. The Chairman's personal style of openness and supporting change enhanced the Board and the directors' e‰ectiveness in working in a collegiate manner with engaged and open discussions.

Reˆecting the timing of the review and the impact of Covid-19, recommendations of areas for the Board to keep under review included:

• regular consideration of the resilience of the business model;
• continued monitoring of the Group's culture;
• consideration of the Group's science-based targets as part of its Sustainability strategy;
• reviewing the strengths of the Group's stakeholder relationships; and
• capitalising on the learnings arising from the revised ways of working as a result of Covid-19 and streamlining of board processes.

Progress against the Group's 2019 evaluation:

Area of Focus	Objective	Progress
Director	Clarify the succession	Ruth Anderson to join the Board as a non-executive director in December 2020. To ensure a staggered succession, Dermot Mathias
succession	plans in place for both	will be retiring after 8 years at the 2021 AGM, and it is proposed that Sally Walden remain as Chair of the Remuneration Committee
	the non-executive and	until the 2022 AGM. Given her knowledge of the Group, Sally will lead on the 2022 Remuneration Policy, shadowed by Jennelle Tilling,
	executive directors.	who will succeed her as Chair of the Remuneration Committee.
		Changes made to internal management committees and recruitment of a Head of Finance to add resilience below Board level.
		Executive directors' succession kept under review.
Stakeholder	Improve reporting on the	A stakeholder 'dashboard' of engagement by the executive and non-executive directors and wider Shaftesbury teams is tabled at
engagement	stakeholder engagement	each scheduled Board meeting. As part of this, the Strategy and Operations Executive Committee and Board consider the strength
	and reporting to the Board.	of Shaftesbury's relationship with shareholders, employees, occupiers, our community, local authorities, London promotional
		groups and local property owners, suppliers and advisors, lenders and our joint venture partners.

Page 93

Nomination Committee members and attendance

Number of meetings attended (5 held)

Jonathan Nicholls (Chair)

Richard Akers

Dermot Mathias

Jennelle Tilling

Sally Walden

Key responsibilities

• Monitor and review the structure, size, composition (including skills, knowledge, experience and diversity) of the Board and its Committees
• To ensure that there are su˜cient plans in place for the orderly and e£ective succession of the Board and senior leadership team
• Keep under consideration directors' skills, experience and independence
• Lead the process for Board appointments
• Review the time commitment expected from directors
• Review the results of the Board performance evaluation that relate to its composition, diversity and how e£ectively members of the Board work together

2020 areas of focus

• Undertook the search and appointment process for a new non-executive director and recommended to the Board the appointment of Ruth Anderson
• Reviewed non-executive director succession plans
• Reviewed executive director succession
• Updated the Committee terms of reference
• Reviewed the Committee's e£ectiveness

Shaftesbury Annual Report 2020 Governance

Composition, succession and evaluation

Nomination committee report

As our business continues to evolve, and our operating environment becomes more complex, our focus this year has been on non-executive director succession and to ensure our management structure, skills and experience below the Board support the effective delivery of our long-term ambitions

Dear shareholder

As chair of the Nomination Committee, I am pleased to present our report for 2020, covering the work of the Committee during the year with our key focus on non-executive succession planning.

Succession planning and talent development

This year, following Jill Little's retirement from the Board at the January 2020 AGM, and in light of Dermot Mathias and Sally Walden's length of tenure and anticipated retirement from the Board over the course of the next two years, our focus was to •nd the right person to join our Board. We are delighted that Ruth Anderson, with over 20 years' experience as a KPMG partner acting as tax and business advisor to a range of UK and global businesses and previously Audit Committee chair of Ocado plc, Coats Group plc and Travis Perkins plc, will be joining the Board on 21 December 2020. As part of her induction, Ruth attended our December 2020 Board and Committee meetings.

Inzito, an external search agency, was engaged to undertake the search which started in February 2020 with the shortlist initially interviewed by Brian Bickell and myself. Inzito, are a signatory to the Voluntary Code of Conduct, and have no other connection with the Company or the individual directors. A key element of our consideration as to individual's suitability for the role was that candidates would be able to devote su•cient time to the role and which, on challenge, precluded a number of candidates. A shortlist was then interviewed by Chris Ward and the other non-executive directors. After due consideration, the Committee recommended the appointment of Ruth to the Board, which was approved at our December 2020 Board meeting.

Page 94

Shaftesbury Annual Report 2020 Governance Composition, succession and evaluation

Dermot Mathias, having served eight years on the Board in October 2020, will be retiring from the Board at our 2021 AGM. To ensure an orderly succession, we are proposing that Sally Walden, who has also served eight years on the Board as of October 2020, remain as chair of our Remuneration Committee until the 2022 AGM. In order to provide an orderly succession, it is proposed that Sally will lead on the 2022 triennial Remuneration policy review, shadowed by Jennelle Tilling, who will become our Remuneration Committee chair on Sally's retirement from the Board. As Dermot and Sally have been on the Board for more than six years, a rigorous examination of their continued e‰ectiveness and independence was considered by the Nomination Committee in considering the individual director reappointments at the AGM and the Committee concluded that they continue to be independent and e‰ective in their roles. As Senior Independent Director, Richard Akers, in consultation with the other members of the Board, keeps succession planning of my role as Chair under regular review.

During the year, the executive directors revisited our internal management committee structures and established two new committees, being our Strategy and Operations Executive Committee ('SOE') made up of our executive directors and senior management chaired by Brian Bickell and an Operations Committee, reporting into the SOE.

The Nomination Committee recognises that our executive directors have a long tenure with Shaftesbury and their succession remains under continual review. The clear roles and responsibilities of the SOE ensures that our key senior management team below Board work closely with the executive directors in the implementation of the Company's strategy and oversight of operations. This structure both ensures an appropriate breadth and depth below Board level and aids in the personal development of our senior management team. To provide additional resilience to our Finance team, we recruited Alastair Deutsch as Head of Finance and a member of the SOE in September 2020.

The whole Board has been kept informed of our development plans for all our employees through updates on our Strategic People Plan, which, as a result of Covid-19, has seen a re-prioritisation of a number of di‰erent actions.

• Our Strategic People Plan: page 43

Diversity and inclusion

The Board recognises the importance of diversity and a culture of inclusion, both in its membership, and the Company's employees. We have a clear policy to promote diversity across the business, which is available on our website. The Board feels that a group that is diverse in its nature, in respect of gender, race, religious beliefs, social background and personal and professional experiences is able to provide valuable di‰ering perspectives across the business as well as fostering constructive challenge to established behaviours and attitudes.

The Board considers that quotas are not appropriate in determining its composition and has, therefore, chosen not to set formal targets but keeps diversity under consideration in all aspects of Board composition. The Group is a signatory to the 30% Club which is a campaign to achieve a minimum of 30% women on FTSE 350 boards. Whilst we fell below this level as a result of Jill Little's retirement earlier this year, following Ruth Anderson's appointment we will again have 30% female representation on the Board which will increase to 33% after Dermot Mathias's retirement at the 2021 AGM.

Below Board level, we have a gender-diverse talent pool, with 63% female membership on our SOE (excluding the executive directors) and of direct reports to the SOE, 74% are female.

Diversity includes but is not limited to gender, and is considered at every level of recruitment. All appointments are made on merit and based on objective criteria. We support initiatives to promote diversity within the real estate sector:

• We are a member of Real Estate Balance whose objective is to achieve a better gender balance at board and executive management level, in the real estate industry, by supporting the development of a female talent pipeline across the sector.
• We are a corporate sponsor of Freehold, a London-based forum for LGBT real estate professionals.

i e sit fi es

Directors		7male
	10	(70%)
3female
		Governance
(30%) 21 December 2020
including Ruth Anderson, who will join the Board on
Strategy and		3male
Operations Executive
Committee (excluding	8	(37%)
executive directors)

5female

(63%)

Direct reports into the		5male
Strategy and
Operations Executive	19	(26%)
Committee

14female

(74%)

All employees		13male
	39	(33%)

26female

(67%)

Committee effectiveness

During the year, we updated our Nomination Committee terms of reference and, following the Board and Committee evaluation process, to respond to a number of challenges as to how the Nomination Committee could be more e‰ective we have:

• revisited our Board member skill matrix in advance of recruitment of a new non-executive director in 2021. Prior to this search being started, we will review, as a Board, any key areas of experience we believe we should be seeking that would add to the Board; and
• designed a programme between the non-executive directors and SOE to enable an informal forum for mentoring and engagement of our senior management team.

In a more challenging year than normal, I would like to thank my fellow Committee members for their support throughout the year.

Jonathan Nicholls

Chair of the Nomination Committee

14 December 2020

Page 95

Directors' responsibility statement: page 118

Audit Committee members and meeting attendance

Number of meetings attended (3 held)

Dermot Mathias (Chair)

Richard Akers

Sally Walden

Jennelle Tilling

Key responsibilities

• Review of the work of the external auditor and valuers and any signi-cant-nancial judgements made by management
• Advising the Board on various statements made in the Annual Report, including those on viability, going concern, risk and controls and whether, when read as a whole, the Annual Report is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy
• Responsible for the relationship with the external auditor and consideration of their reappointment, their reports to the Committee, performance, objectivity and independence including the level of provision of non-audit services
• Review of the Company's internal -nancial controls, and internal control and risk management systems
• Review of the Company whistleblowing policy and procedures
• Ongoing monitoring of the need for an internal audit function

Shaftesbury Annual Report 2020 Governance

Audit, risks and internal controls

Audit committee report

The Committee's role is to oversee the integrity of the Group's financial reporting, risk management and the external audit relationship

Dear shareholder

I am pleased to present the report of the Audit Committee for the year ended 30 September 2020 which provides an overview of key areas of focus during the year.

Financial reporting

Valuation of the portfolio, accounting considerations and key areas of judgement or estimation

The valuations provided by external valuers are signi•cant components of the annual and half year results. As such, the Committee focuses on the valuation process, the key judgements made by the valuers and their independence. Following our review, the Committee is satis•ed that the valuation process is robust, the assumptions and estimates used in the valuations are appropriate and the valuers remain independent and objective.

The Covid-19 pandemic created a number of matters for the Committee to consider, including:

• the going concern assessment and Viability Statement;
• accounting for rent concessions; and
• key areas of estimation uncertainty in the •nancial statements, particularly provisions for expected credit losses and impairments.

These matters are set out in the following report.

Viability and going concern statements

The Committee considered, together with their underlying assumptions, for the Interim Statements, the going concern statement and for the Annual Report, both the viability and the going concern statements. This included management's work on assessing the potential risks to the business (in particular, the impact of the Covid-19 pandemic) and the three-year period adopted in the Viability Statement. The Committee was satis•ed that management had conducted robust assessments and recommended to the Board that it could approve and make the viability and going concern statements.

Fair, balanced and understandable

The Board as a whole is responsible for determining whether the 2020 Annual Report and Financial Statements are fair balanced and understandable. The Audit Committee's role in this is covered on page 99. For the year ended 30 September 2020, the Committee con•rmed to the Board it was satis•ed that the Annual Report was fair, balanced and understandable.

+

Page 96

Shaftesbury Annual Report 2020 Governance Audit, risks and internal controls

2020 Annual Report

The executive directors have con•rmed to the Committee that they were not aware of any material misstatements in the Interim Statements and annual results and the external auditors con•rmed that they found no material misstatements in the course of their work.

After reviewing the reports from management and, following discussions with the external auditor and valuers, the Committee is satis•ed that:

• both the external auditor and valuers remain independent and objective in their work;
• the •nancial statements appropriately addressed the critical judgements and key estimates, both in respect of the amounts reported and the disclosures;
• the processes used for determining the value of the assets and liabilities had been appropriately reviewed, challenged and were su•ciently robust; and
• the Group has adopted appropriate accounting policies.

Independence and effectiveness of the auditor and auditor reappointment

In normal circumstances, non-audit fees form a relatively minor proportion of work carried out by EY. However, this year in undertaking the Group's equity issuance, we required the work of a reporting accountant, including an independent report on the working capital statement. Whilst we believed that EY as our auditors were best placed to provide these services, we were cognisant of auditor independence and, therefore, engaged not only with EY but also with the FRC on this matter. The FRC's clearance was obtained in advance of appointing EY to undertake the work. In seeking the FRC's clearance, given the timing of the work, an exemption was sought to exceed the 70% non-audit fee cap for both the year ended 30 September 2020 and the year ending 30 September 2021. Separately, the Audit Committee also considered the safeguards that EY put in place to ensure its independence in undertaking the work.

The Committee remains satis•ed with the e‰ectiveness of the external audit and its interaction with EY. It also remains con•dent that EY's objectivity and independence are not in any way impaired by the provision of non-audit services and based on the Committee's recommendation, the Board is proposing that EY be reappointed as the Company's external auditor at this year's AGM.

• External auditors: page 99
• Audit fees: page 99

How the Committee operates

The Audit Committee is composed solely of independent non-executive directors, with a good diversity of experience, including property, F&B, marketing and -nance. Dermot Mathias, as a chartered accountant with many years of senior -nancial experience, satis-es the requirement of having appropriate recent and relevant -nancial experience.

At the Audit Committee Chair's request, all meetings, or parts of meetings, are attended by the external auditor, the Chairman and members of the senior management team.

The Committee meets with the external auditor and the valuers, without management present, to discuss any matters they may wish to raise. The Committee receives comprehensive reports for consideration, on a timely basis, in advance of meetings. This facilitates a good quality of discussion and level of challenge by the Committee.

Throughout the year, the Audit Chair meets with executive directors, as appropriate, to obtain a good understanding of key issues a£ecting the Group which helps the Chair in his oversight of the agenda and discussions at Committee meetings.

Risk, control and assurance

The Risk Committee evaluates the Group's risk and control arrangements, reporting to the Audit Committee and the Board. In the current year, this evaluation has included the signi•cant impact of the pandemic on a wide range of aspects of the business.

Whilst we do not have a formal internal audit function, a rolling
programme of reviews of key controls is conducted through a combination
of assessments by external parties and reviews by management, as
Governance
appropriate, to provide assurance on the Group's risk and control
arrangements. In the current year, remote working has made external
reviews impractical and so a review of the e‰ectiveness of controls has
been performed by management. We anticipate supplementing
management's work with external reviews in the coming year.
+ Risk management: pages 71 and 72
Whistleblowing
Whilst accountability for whistleblowing is a Board responsibility, the
Audit Committee continues to review the whistleblowing policy on an
annual basis. There were no whistleblowing instances during the year.
+ Whistleblowing policy and procedures: page 89
Committee effectiveness
I believe that the quality of discussion and challenge by the Committee,
of management, the external audit team and individuals undertaking
reviews of the Group's internal controls, together with the quality of
papers received by the Committee, ensure the Committee is able to
perform its role e‰ectively. This year the Committee's e‰ectiveness was
formally reviewed as part of the external Board evaluation process and
I am pleased to be able to report that the feedback was that the
Committee was working e‰ectively.
I would like to thank the other members of the Committee,
management and our external auditors for their support during the year.
Dermot Mathias
Chair of the Audit Committee
14 December 2020

2020 areas of focus

Financial reporting

• Reviewed the half year and year end -nancial statements including key judgements, estimates and assumptions, going concern and viability statements
• Consideration as to whether the Annual Report was fair, balanced and understandable
• Meetings with the valuers in respect of the half year and year end portfolio valuations and directors' valuations included within the prospectus for the equity raise in November 2020
• Meetings with the auditors in respect of the half year and annual results

Audit

• Consideration of the independence and e£ectiveness of the external auditor
• Audit fees and non-audit fees
• Audit plan and strategy

Controls and assurance

• Review of risks and controls, including reports from the Risk Committee and management's testing of the operation of controls
• Review of ongoing GDPR programme
• Review of the Group's whistleblowing policy
• Consideration of the need for internal audit

Governance

• Updated the Committee's terms of reference
• Reviewed the Committee's e£ectiveness

Page 97