Pricing and Valuation

The Fund had weaker relative performance this quarter, which reflects the dispersion of the valuers view’s post the Brexit vote

In July the manager accepted the Pricing Sub Committee’s (PSC) recommendation to switch the Fund’s swinging single price to bid and apply a 5% fair value dilution reduction.

In September the PSC reviewed the current market conditions including advice from independent valuers and the absence of redemption activity in the Fund and recommended to the Manager the fair value dilution be removed and to swing the Fund’s pricing basis back to offer. These changes were accepted and took effect as at 3rd October dealing.

Asset Management

Bold Street, LiverpoolWe have completed on the disposal of the property for a price of £700,000, £300,000 in excess of the valuation. A decision was made to sell the property as it is isolated from the main ownership.

Globe Square Industrial Estate, DukinfieldWe are imminently due to complete the regear of the lease to Bardsley Construction for a 5 year term at the current passing rent of £146,000 p.a. which is £20,250 p.a. above ERV. In doing so, we agreed to carry out some roof works in exchange for the tenant taking an FRI lease.

Investment Strategy

Brexit news still fills our papers and the minds of investors and tenants alike. The quoted stocks still discount the biggest risk to be in London with exposed companies at discount to NAV in the 20-30% range whilst regional REITs like AEW UK REIT have moved up to premium to NAV. Tenant activity in our regional properties remains resilient and private investor demand for our smaller assets seems to be good. We continue to let our recently refurbished properties at good rental levels, which together with sales, should see our vacancy reduce back within our target range over the next quarter. A number of units have traded on the secondary market from investors changing their positions post Brexit vote. These trades seem to have slowed to a trickle and pricing has moved back to offer price.

AEW UK Core Property Fund Investor Report – September 2016

Fund Highlights

• Four year track record - annualised return of 14.4% vs 9.5% for the benchmark 1

• Over three years the Fund was the top performing balanced fund with an annualised total return of 15.3%2

• Average outperformance of 3.9% over 3 years against the IPD benchmark2

• Annualised distribution yield of 6.8%2

• £0.3m redemption since Brexit• £7.6m traded on the secondary market

Acquisitions

Rising Sun Pub, Reading • Located directly adjacent to

Tangent House - owned since 2012

• Creation of a larger site on which to work up planning for office redevelopment before onward sale

• Surrounding prime office developments of circa 7 storeys hitting rental levels in the region of £37 psf

Cheney Manor, Swindon• Established industrial location

with low level of supply • Very low capital value of £12 psf• Potential to regear or extend the

lease with the existing tenant• Intial yield of 6%

1 Source: IPD Calculated2 Source: AREF/IPD UK Quarterly Property Fund Index – All Balanced Property – weighted average for the quarter to 30 September 2016

Investment

Performance %

3 months 6 months 9 months 12 months 3 years

% % % % %

AEW UK Core Fund -1.2 0.3 2.7 5.3 15.3

Weighted Average -0.7 -0.6 0.5 3.4 11.4

Upper Quartile 0.7 0.9 2.3 5.5 12.7

Median -0.6 -0.1 1.1 4.1 12.1

Lower Quartile -2.0 -1.1 0.0 3.0 10.5

Funds in Universe 25

Source: All Balanced Property Fund Index – IPD UK Pooled Property Fund Index for the period ending 30 September 2016.

10 largest assets Location Sector Value (GBPm) % of Fund ValueSpectrum Swindon Industrial 11.40 4.78%Trent House, Derwent House and

Cranfield Innovation Centre

Cranfield Office 10.30 4.32%

36–42 Old Christchurch Road Bournemouth Standard Retail 9.15 3.84%Pryzm Kingston

upon Thames

Other 8.75 3.67%

Belvedere House Basingstoke Office 8.55 3.59%1/16 Salter Row,

17/21 Woolmarket

Pontefract Standard Retail 6.80 2.85%

Eddie Stobart, Grandstand Road Wakefield Industrial 5.95 2.50%730 Aztec West, Waterside Drive Bristol Office 5.60 2.35%18/20 St Mary’s Square Swansea Standard Retail 5.55 2.33%Bridgefoot House Radlett Office 5.25 2.20%

Existing investors

Kari Clarkekari.clarke@aeweurope.com T: 020 7016 4804

Key contact

IMPORTANT NOTICE This is a communication issued by AEW UK Investment Management LLP, trading as AEW UK (“AEW UK”), a limited liability partnership registered in England and Wales (registration number OC 367686) whose registered office is at 33 Jermyn Street, London SW1Y 6DN, England. AEW UK Investment Management LLP is authorised and regulated by the Financial Conduct Authority. It relates to the AEW UK Core Property Fund (the “Fund”). An investment in the Fund can only be made on the basis of an information memorandum and the Fund documentation. This communication cannot be relied upon as the basis on which to make a decision to invest in the Fund. This communication does not constitute an invitation or inducement to subscribe to any particular investment. It is communicated to you on the basis that AEW UK believes you to be a qualified investor or a professional investor or any similar status in

another state or jurisdiction and thus entitled to receive this communication. If this is not the case and you have received this document in error, please delete or destroy and notify AEW UK immediately. This communication is forwarded to you for information purposes only and does not constitute a personal recommendation. You should seek professional advice before making any investment decision. The value of investments and the income from them can fall as well as rise. An investor may not get back the amount of money invested. Past performance is not a guide to future performance. AEW UK Investment Management LLP believes the information to be correct at the time of writing but does not make any representation as to the accuracy or completeness of the material and does not accept liability for any loss arising from the use hereof. It is under no obligation to ensure that updates to the document are brought to your attention.

Fund Facts

Portfolio ManagerRichard Tanner

Fund aimTo provide investors with exposure to a diversified, multisector portfolio of commercial property assets throughout the UK. The Fund seeks to achieve superior investment returns through relatively high income returns, strong stock selection and active management of all assets.

Launch date: Q1, 2012

Fund structureProperty Authorised Investment Fund

BenchmarkAll Balanced Property Fund Index – AREF/IPD UK Quarterly Property Fund Index – weighted average

Fund size (Net Asset Value): £241m

Triple net initial yield (% p.a.): 7.33%

Number of investors: 48

Number of AEW employee investors: 4

Number of properties acquired: 64

Number of properties under offer: 3

Gearing (% of NAV): 0%

Total expense ratio: 1.09%

Capital Cash holdings (% of NAV): 5.3%

Single price September NAV price – £1.1426 September single price – £1.2203

Annual management charge: 0.7% p.a.*

Distribution datesIncome is allocated to investors quarterly and paid within three months of the end of the quarter during which they were earned.

* The Authorised Corporate Director (ACD) is entitled to a performance fee of 0.25% of the Net Asset Value per annum, if the AEW UK Core Property Fund is ranked in the top ten funds of the All Balanced Property Funds Index – AREF/IPD UK Property Fund Index over a three year rolling period and if the return is positive.

Sector weightings Fund Relative weightings

Index Position

Offices 30.0% 27.1% 2.9%

Standard Retail 23.2% 11.1% 12.1%

Industrials 20.5% 21.4% -0.9%

Retail Warehouses 12.1% 15.9% -3.8%

Other 6.3% 9.3% -3.0%

Shopping Centres 2.4% 4.5% -2.1%

City 0.0% 4.8% -4.8%

Cash 5.3% 5.9% -0.6%

Geographical weightings Fund

West Midlands 18.83%

South West 18.58%

South East 17.25%

Eastern 11.81%

Yorkshire and Humberside 8.43%

North West 7.54%

Scotland 5.17%

Wales 4.60%

North East 3.90%

Rest of London 3.89%

Risk and volatility statistics

Annualised quarterly dataQ3, 2016 Q2, 2016

Absolute standard deviation 3.89% 3.25%Tracking error 2.01% 1.86%Information ratio 2.57 3.01Beta 0.95 0.83

Property 4

Property 3

Property 2

Property 1

Property 2

Property 1

Property 4

Property 3

Property 2

Property 1

Property 2

Property 1

Source: Based on annualised data since inception and calculated by the AEW Capital Management Research Team. The methodology used to calculate information ratio has been amended since last quarter. Benchmark is the All Balanced Property Funds Index – AREF/IPD UK Property Fund Index. These statistics are provided for information purposes only and cannot be relied upon in relation to any decision. All data provided should be considered in the light of the age and size of the Fund. The above statistics are based on annualised quarterly data since the Fund’s inception. It can be considered a small sample and as a result the statistics may not be meaningful.

Lease Profile – AEW UK Core Property Fund against

the All Balanced Property Fund Index – AREF/IPD UK PFI

AEW UK

Core Property Fund

UK PFI

Average weighted unexpired lease term to break 4.3 years 8.3 years

Average weighted unexpired lease term to expiry 5.3 years 9.5 years

Source: Figures calculated by IPD for AEW; IPD benchmark figures include funds within the All Balanced Property Fund Index. IPD ©2016 All rights reserved. AEW UK Core Property Fund data as at 30 September 2016 properties exchanged and completed. IPD data as at 30 June 2016.

South East exposure* 33.0%

New investors

Dana Eisnerdana.eisner@aeweurope.com T: 020 7016 4883

*Geographical restriction: not less than 25% exposure to the South East of the UK.