Annual Report • Apr 14, 2022
Annual Report
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ifrs-full:SharePremiumMember 213800BXKQ9KZNUR1M61 2019-12-31 dln:CompanyMember ifrs-full:OtherReservesMember 213800BXKQ9KZNUR1M61 2019-12-31 dln:CompanyMember ifrs-full:RetainedEarningsMember 213800BXKQ9KZNUR1M61 2019-12-31 dln:CompanyMember ifrs-full:EquityAttributableToOwnersOfParentMember 213800BXKQ9KZNUR1M61 2019-12-31 dln:CompanyMember ifrs-full:NoncontrollingInterestsMember iso4217:GBP iso4217:GBP xbrli:shares Der went London plc Repor t & Ac counts 202 1 Der went Lo ndon plc Repor t & Ac counts 202 1 Fro nt co ver im age: S oho P lac e W1 Ce ntr e ima ge: 80 Ch arl ot te S tre et W1 The largest London-fo cused REIT w ith a d i sti n ctiv e 5. 6 m i ll io n sq f t off i ce-ba sed port fol io a cr oss 1 3 London ‘ villages’ . Our pur pos e Our pur pose is to imp rove and upgr ade the sto ck of of f icespac e in cent ral London , turning po orer qualit y ‘br own’ build ings into well-de signed, a daptable and ‘gre en’ work place s. This e nables our cus tomers to at tra ct and ret ain talent while bringing s ocial, environ mental an d econ omic ben efit s to all ourstakeh olders , revi talising neig hbourho ods an d benef it ting loc al communitie s. Our pat hway to bec oming net zero c arbon b y 2030 is suppo r tedby an op en and prog ressi ve cor porate cultur e andthe p romotion of v alues that inclu de building long-lasting relat ionships. We aim to prov ide our share holders w ith abov e avera ge long-term re turns while cont ributing to wor kf orce wellb eing and help ing maintain Londo n ’s posit ionasa leading global busi nes s l oc ation. Our cu lture — De dicated an d adaptab le — A pas sion to improve L ondon’ s of f ice sp aces — Strong cu stomer focus — Prog ressi ve and pra gmatic — ‘Op en door ’ and inclusi ve — Co llabor ative and sup por tiv e Our valu es — Re putatio n, integrit y an d good g overnan ce — B uilding long -ter m rela tions hips an d tru st — Fo cus on cr eative d esign and emb racing change — O penne ss and tr ansparenc y — S ust ainabili t y and re sp onsibili t y DE RW EN T L OND ON Contents ST RA TEGIC REPORT Summ ar y and f inancia l highlig hts .............................. 04 Rea sons to in ves t ........................................................... 06 Chair man’s state ment .................................................. 08 Chief Executive’ s statement ........................................ 10 Our p athway to n et zero c arb on .................................. 12 Central London off ice mark et ..................................... 14 A well p lac ed p or tf olio .................................................. 18 Res haping th e por t fo lio, re stoc king th e pipe line .... 20 De live ring ne t zero ca rbon b uildings .......................... 22 Pip eline pr ojec ts & ‘sup er-si tes’ ................................. 24 Our stakehold ers ............................................................ 26 Our b usine ss mo del ....................................................... 28 Pro viding e nhanc ed am enit y ....................................... 30 Our st rateg y ..................................................................... 32 Mea suring o ur per fo rman ce ........................................ 44 Res pons ibilit y ................................................................ 50 — Environmental .......................................................... 52 — So cial .......................................................................... 56 — Governance ............................................................... 64 Propert y review .............................................................. 76 — Valuation .................................................................... 77 — Ac quisit ions & dis pos als ........................................ 80 — Leasing, asset manageme nt & propert y management ....................................... 82 — Development & refurbish ment ............................. 85 Financial review .............................................................. 88 Goin g con cer n & viabili t y .............................................. 98 Our p rincip al risk s ....................................................... 100 GOVERNANC E Introduction from the Cha irman .............................. 122 Gov erna nce at a g lanc e ............................................. 123 Th e sec tion 17 2( 1 ) st ateme nt .................................... 124 Bo ard of Dire cto rs ....................................................... 126 Senior management ................................................... 128 Corporate governance statement ........................... 130 Nominati ons Commit tee report ............................... 144 Audi t Comm it tee re por t ............................................. 148 Risk C ommi tte e rep or t ............................................... 158 Res pons ible Busin es s Comm it tee rep or t .............. 166 Remuneration C ommittee repor t ............................ 172 Dire ctor s’ rep or t .......................................................... 194 FI NA NC IAL ST A TEM ENTS St ateme nt of Dire cto rs’ re spon sibiliti es ................ 200 Independent Audit or’s report ................................... 201 Gro up inco me st ateme nt .......................................... 209 Gro up state ment o f comprehensive i ncome ............................................. 210 Balance sheets ............................................................ 211 St ateme nts of c hange s in equi ty ............................. 212 Ca sh flow s tate ment s ................................................ 213 Note s to the f inanc ial sta temen ts ........................... 214 Other information T en-year summar y ...................................................... 268 EPR A summ ar y ............................................................ 269 Prin cipal p rope r ties .................................................... 272 Lis t of def initio ns ......................................................... 274 Communication with our shareholders .................. 278 Awards & r ec ognit ion .................................................. IBC 01 Financ ial Stat ements Governance Strategic repor t “ It w as g rea t bei ng pa r t of t he for ward thinking discu ssio ns onca rbon a nd di gita l isa ti on . Der went ’ s at titu de to c ollaboration & va lu i ng t he en ti re su ppl y ch ai n w il l a ll o w us t o tac kl e the ca rbon chall enges the industr y f aces . Atru ly fo r w ar d th i nk in g, i ncl us ive and sust ai nable developer . ” Steve Hol brook , Skanska St akeholder D ay 20 21 DL / 78 78 Char lo tt e St ree t W1 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 02 Summar y and f inancial high lights ............ 04 Reasons to invest ......................................... 06 Chairman’s stateme nt ................................ 08 Chief Exe cutive’ s statement ...................... 10 Our pathway to net zero carbon ................ 12 Central London of fice market ................... 14 A well place d por t folio ................................ 18 Reshaping the p or t folio, restoc kingthepipeline ............................... 20 De liv erin g net zero c arb on buildings ........ 22 Pipeline projects & ‘super-sites’ ............... 24 Our stakehold ers ......................................... 26 Our business mo del .................................... 28 Providing enhance d amenit y ..................... 30 Our s trate g y .................................................. 32 Measuring our per formanc e ..................... 44 Resp onsibilit y ............................................... 50 — Environmental ....................................... 52 — S ocial ....................................................... 56 — Governance ............................................ 64 Prope r ty re view ............................................ 76 — V aluation ................................................. 77 — Acquisitions & disposals ...................... 80 — Leasing, asset managem ent &proper t y managem ent ..................... 82 — Development & ref urbishment ........... 85 Financial review ........................................... 88 Going conc ern & viability ............................ 98 Our principal risks ...................................... 1 00 STR A TEG I C R E PORT 03 Financ ial Stat ements Governance Strategic repor t 202 1 SUMM A RY It w as a n activ e yea r fo r the G ro up , wit h anu mber o f ne w str at egi c i ni ti at iv es la u nched . The re w as a lso s i gn ifi can t res ha pi ng o f th e por t fo li o wh ich increase d the depth of the development pi peli ne. I n add iti on , we con ti nued t o su ppor t ou r man y stak ehol de rs, pr ogr essed ou r net z ero ca rbon p lan s a nd com men ced ou r next ma j or pr o j ect. Oper ating highlights — C omplete d £ 1 3. 7m of new lett ings, +3. 6% abo ve ERV — C ollec ted 98% of th e Group’ s 202 1 ren tal inco me — Fur the r progre sse d sche mes at S oho Pla ce W1 and Th eFe ather sto ne Buildin g EC1 — C ommen ced o ur newes t net zero car bon pr oject at 1 9-35 Baker S tree t W 1 , tak ing on-site proje cts to 7 46 ,000 sq f t — O btained d ual planning co nsent fo r the red evelopm ent ofNet work Building W1 (off ice or l ab-e nabled sc heme) — Sub mit ted planning app licatio n for an 1 8.4 M egaW at t sol ar park in Sc otlan d — C omplete d £4 1 7 .5m of ac quisitions and £ 405. 1 m of dispo sals, re shaping the p or t folio and ad ding to the futuredevelopment pipeline — Is sued n ew 1 .875% £350 m 1 0 -year gre en bo nd — S elec ted as the p referre d bidde r to acquire TheM oor fie ldsEstate EC1 — A pproved our Intelli gent Buil ding i nitiat ive roll-out St ak eholders and res ponsibi lit y — C onduc ted our f irst ne t zero carb on oc cupier sur ve y toidenti ty c ollab oration op por tunitie s — Re cei ved third p ar ty EP C upgrad e repor t — At taine d National Equalit y S tandard a ccre ditation – result s in top 5% of companie s — C onduc ted fo urt h employe e sur vey which in dicated highlevel s of staf f s atisfac tion — L aunche d new share d amenit y sp ace, DL / 78, and DL / Ap pfor our cus tomers — C ontinue d to suppor t t he supply chain by m aintaining supplie r payme nts at 20 days — C ommit ted £72 5k of c ommunit y and sp onsor ship donations for 2 02 1 — He ld our firs t Stake holder Day in S eptembe r 202 1 aswellas an Inve stor Day at DL / 7 8 NET ZERO CA RBON P A TH W A Y Submitted planning application for a n 1 8.4MW s olar p ark in Sc otl and 10 7 acres TO T A L PROPERT Y RE T URN T o tal p rop er t y ret urn of 6.3%, a bove ben chmar k MSCI C entr al Lon don O f fic es Index o f 5.9% 6.3 % EMPLO YEE SA T ISF A CTION The recent employee sur vey reporte d that overall employee satisfac tion remai ns ver y hi gh 90.5 % V ACAN CY RA TE Our EPR A vac anc y rate dec rea sed dur ing the ye ar 1.6 % EPC COMPL IANCE Per cen tag e of por t f olio by ERV EPC 2023 co mpliant 99 % NON -FINANCI AL HIGHLIGHT S De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 04 1 I nclu des 14p per s hare o f acc es s righ ts inc om e in 201 8 2 E xc lude s spe cia l divi den ds of 52p and 75p p er sh are re lat ing to 201 6an d201 7 ,re spe ct ive ly Net inter est c over ratio (% ) 300 200 100 400 0 Net Inter est cover r atio 2012 2013 2014 2015 2016 2017 2018 2019 2020 500 263 279 286 362 370 454 491 462 446 464 2021 TOT AL RETU RN 2 0 2 0 : -1. 8 % +7.6 % +5. 8 % Loa n- to -value ratio (% ) 30.0 28.0 24.0 17.8 17.7 13.2 17.2 16.9 18.4 20.8 30 20 10 40 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Loan-to- value ratio 2021 EPR A NET T ANGIBLE ASSET S (NT A ) 2020: 3,81 2p +3.9 % 3,959 P Net re ntal inco me (£m ) 1 60 1 40 1 20 1 80 100 Net rental income (£m) 2012 2013 2014 2015 2016 2017 2021 2020 200 114.1 121.7 128.7 138.7 145.9 161.1 161.1 178.0 174.3 2018 2019 178.2 NET R ENT A L INCOME 2020: £1 7 4.3m +2.2 % £ 178 . 2 M EPR A EPS ( p ) 80 60 40 100 20 Ordinary dividend (p) 2012 2013 2014 2015 2016 2017 2021 2020 120 50.4 53.9 57.1 71.3 77.0 94.2 113.1 1 103.1 99.2 2018 2019 108.8 EPR A EA RNI NGS P ER SH ARE (E PS ) 2020: 99.2p +9.7 % 1 0 8.8 P Ordinary dividend (p ) 56 44 32 68 20 Ordinary dividend (p) 2012 2013 2014 2015 2016 2017 2021 2020 80 33.70 36.50 39.65 43.40 52.36 2 59.73 2 65.85 72.45 74.45 76.50 2018 2019 DIV IDEND PER SH A RE 2020: 7 4 .5p +2. 8 % 7 6.5 P FINA NCIA L HIGHLIGH TS 05 Financ ial Stat ements Governance Strategic repor t RE AS O N S TO I NVE ST F OCU S ON LOND ON’S DYN AMIC OFF ICE MA RK E T I mpro ving market c ondition s and occ upier sentiment — F light to qualit y with mar ket pol arisatio n — Sup ply levelling of f wit h reduc tion intenant- contro lled availabilit y — O ccup ational take -up reco vering — Re ntal grow th ex pec ted in 2022 — Inve stme nt yields at trac tive in abso lute terms and r elativ e to otherg lobal citie s — A highly li quid and transp arent mar ket — S trong inve stmen t demand fo r long income or val ue-add oppor tunities 0 % to +3 % 2022 ER V 1 guida nce DEVE LO PI NG QUALIT Y , C R E AT I N G VA L U E D esign-led, amenity -rich ‘long- life, loos e-f it, low c arbon’ spa ce — Sup por ts o ccupier s in their retur n to the of f ice and ‘ war for talen t’ — Fo rwar d thinking, adap table spac e tha t e xceed s occu pi er e xpectat ion s — D evelopment pipeline restocked throug h 202 1 wi th fut ure ‘super- sites’ — T y pically t wo or thre e major sche mes on site wit h annual cape x of £1 50m- £2 50 m and at trac tive retur ns — C onfident commencing schemes on aspe culati ve basis, w ith a long trac k rec ord of pre -let ting succ ess — Fut ure projec ts net zero c arbon with ‘ whole-lif e’ carb on approac h 48 % Port folio under development or with re generat ionpotential RE L A T IONSHI PS A T OUR HE A RT L ong-t erm, collaborative relationships with a bro ad range of st akeholder s — V illage -base d appro ach to prov ide enhanc ed ame nit y — U tilising occ upier relati onships to mitigate vac ancies an d maintain or grow rental income — O f fering v alue for mon ey to our custo mers thro ugh af fordab le rents — Re nt colle ction clo se to pre - Co vidlevel s — Use of tier o ne cont ractor s and sub- con tractor s, paying a f air price to en sure high qualit y re sults and deli ver y on time — Sup plier pay ments at 20 days in 2021 — Di viden ds increas ed ev er y year since20 07 £115.5 M Cash rever sion from current rent to ERV 1 S T RONG FINAN CIALS M oderately lev erage d balanc e she et, withsub stantial avail able funds — Unc omplicate d, predominantly unse cure d deb t str uctur e — D ebut g reen b ond – £35 0m 1 0 -year bon d with 1 .875 % c oupon – is sued in November 20 21 — F itch: ‘ A-’ issuer r ating with ‘ A ’ S enior Unsecure d rating — F inanc ial disc ipline t hroug h capi talrec ycling — B usiness re silient thro ugh many economic cycles — Lo ng drawn debt matur it y of 7 .2 year s — Re lationship -drive n and long-ter m borrowing approach 2 0 .8 % L T V ratio at 31 Dec 2021 NE T ZE RO C A R BON IN FOCUS Sus taina bilit y e mbe dde d throughout busi ness — S et out c lear pathway to net zer o car bon by 2030 — Gr een Finan ce Framewor k and Gre endebt — Ro bust and tr ansparent G reen Financ e Framework r epor ting thr ough third par t y ‘reas onable’ ass urance — Well p lace d to deliv er the par tn ership appro ach nee ded to r each net ze ro car bon including S cop e 3 — S cot tish lan d oppo r tunit y delive ring car bon cre dits and wi th renewable energ y potenti al — Fut ure-pro ofing p or tf olio with EP C legisla tion comp liance 2 030 Net Zero C arbon Pat hway De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 06 ROBUST A SSE T BACKE D RE T URNS Delivering above a verage long-term total returns overse en byexp erienc ed man agemen t team with st rong track re cor d T otal return : 10.9% pa 10- year ave ra ge Buildi ng blo cks of to tal r etur n — EPRA earnings yield ( on NT A ) suppo r ted by as set rep ositioning and e f ficien t cos t base — Development returns as pr e-lets s ecure d and construc tion de-risk ed — Under lying market p olaris ation witha gents fo reca sting prim e r ent al grow th an d a ‘greenpr emium ’ 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 50 100 200 250 150 300 0 (2011 = 100) T otal return (indexed to 100) 100 281 Pr ogr ess ive , in no va tiv e, d esi gn- l ed &rela tio ns hi p-dr ive n Delivering above average long-t erm total retu rns E x trac ting val ue through asset management & development with c onser vative leverage F OCU S ON LOND ON’S DYN AMIC OFF ICE MA RK E T I mpro ving market c ondition s and occ upier sentiment — F light to qualit y with mar ket pol arisatio n — Sup ply levelling of f wit h reduc tion intenant- contro lled availabilit y — O ccup ational take -up reco vering — Re ntal grow th ex pec ted in 2022 — Inve stme nt yields at trac tive in abso lute terms and r elativ e to otherg lobal citie s — A highly li quid and transp arent mar ket — S trong inve stmen t demand fo r long income or val ue-add oppor tunities 0 % to +3 % 2022 ER V 1 guida nce DEVE LO PI NG QUALIT Y , C R E AT I N G VA L U E D esign-led, amenity -rich ‘long- life, loos e-f it, low c arbon’ spa ce — Sup por ts o ccupier s in their retur n to the of f ice and ‘ war for talen t’ — Fo rwar d thinking, adap table spac e tha t e xceed s occu pi er e xpectat ion s — D evelopment pipeline restocked throug h 202 1 wi th fut ure ‘super- sites’ — T y pically t wo or thre e major sche mes on site wit h annual cape x of £1 50m- £2 50 m and at trac tive retur ns — C onfident commencing schemes on aspe culati ve basis, wi th a long trac k rec ord of pre -let ting succ ess — Fut ure projec ts net zero c arbon with ‘ whole-lif e’ carb on approac h 48 % Port folio under development or with re generat ionpotential RE L A T IONSHI PS A T OUR HE A RT L ong-t erm, collaborative relationships with a bro ad range of st akeholder s — V illage -base d appro ach to prov ide enhanc ed ame nit y — U tilising occ upier relati onships to mitigate vac ancies an d maintain or grow rental income — O f fering v alue for mon ey to our custo mers thro ugh af fordab le rents — Re nt colle ction clo se to pre - Co vidlevel s — Use of tier o ne cont ractor s and sub- con tractor s, paying a f air price to en sure high qualit y re sults and deli ver y on time — Sup plier pay ments at 20 days in 2021 — Di viden ds increas ed ev er y year since20 07 £115.5 M Cash rever sion from current rent to ERV 1 S T RONG FINAN CIALS M oderately lev erage d balanc e she et, withsub stantial avail able funds — Unc omplicate d, predominantly unse cure d deb t str uctur e — D ebut g reen b ond – £35 0m 1 0 -year bon d with 1 .875 % c oupon – is sued in November 20 21 — F itch: ‘ A-’ issuer r ating with ‘ A ’ S enior Unsecure d rating — F inanc ial disc ipline t hroug h capi talrec ycling — B usiness re silient thro ugh many economic cycles — Lo ng drawn debt matur it y of 7 .2 year s — Re lationship -drive n and long-ter m borrowing approach 2 0 .8 % L T V ratio at 31 Dec 2021 NE T ZE RO C A R BON IN FOCUS Sus taina bilit y e mbe dde d throughout busi ness — S et out c lear pathway to net zero car bon by 2030 — Gr een Finan ce Framewor k and Gre endebt — Ro bust and tr ansparent G reen Financ e Framework r epor ting thr ough third par t y ‘reas onable’ ass urance — Well p lace d to deliv er the par tn ership appro ach nee ded to r each net ze ro car bon including S cop e 3 — S cot tish lan d oppo r tunit y delive ring car bon cre dits and wi th renewable energ y potenti al — Fut ure-pro ofing p or tf olio with EP C legisla tion comp liance 2 030 Net Zero C arbon Pat hway HIG H QUA LIT Y TE A M — A s trong bran d suppor te d by a well-es tablish ed and exp erienc ed team wi th custom er foc us at its he ar t — Re putatio n for thinking ahe ad to anticipate f uture tre nds and be ing agile enoug h to adapt quickly to chang e 1 ERV: E stim ated R ent al Value 07 Financ ial Stat ements Governance Strategic repor t C HAI RMA N ’ S S TAT E M E N T Der went London is an entrepr eneuria l bu si ness, w ith a n ope n, col labor a tiv e a ndi ncl usi ve a ppr oa ch. W ith co nfi den ce in the m e dium-te rm o utlo o k, d es pite some near-term uncer tai nt y , the Gr oup proc ee ded with por t folio reshapi ng a ndres toc ki ng t he pi peli ne. W e als o pr ogr essed o n- sit e and fut u re sc heme s while m aint aining a f oc us o n in c om e. Our financia l resul ts demonstrate the progress we have made. Mark Breuer Chairman Net pro per t y and oth er incom e increas ed to £1 87 .5m for t he year ende d 3 1 D ece mber 2021 from £1 83.0m in 2020. This was he lped by impairm ent charge s and write -of fs a gainst tenant re ceiv ables ofonly £0.8m a gainst £1 4.2m in 2020. Gross ren tal incom e fell 4.3%to £1 94.2m as we to ok lease sur render s for new s cheme s anddispo sed o f several hig her yielding low gr owt h prope r ties. EPR A earnings p er share incre ase d 9. 7% to 1 08 .8p from 9 9.2 p in2020 and the IFRS pro fit b efore ta x was £252.5m, more than reve rsing the £ 83.0m los s repor te d in 202 0. Capi tal values ac ross o ur £5.7 bn p or tf olio ros e by an underly ing 3.5% with the main dri vers b eing develo pment surp luses and downward valuatio n yield shif t . This has take n total net as sets to£4.4 bn with an incre ase in EPR A net t angible ass ets (NT A ) of 3.9% to 3,959p pe r share from 3,81 2p in Dec embe r 2020 . Rec ognising its imp or tanc e to our shareh olders , we propo se raisingthe f inal divid end by 1 .05p to 53.5p, in line with o ur progr essi ve and well c overe d divide nd polic y . It will b e paid on 1June 2022 to sharehold ers on the r egister of m ember s at 29Ap ril202 2. This t akes the f ull year ’ s div idend to 76.5p, an incre ase of 2.8% ove r the prior y ear . We have a stro ng team and a po r tf olio including many high qualit ybuildings which we b elieve me et the e ver more de manding requirem ents of o ccupier s. We have a pipe line of sche mes that willdeliv er mod ern, adapt able and sus tainable spac e. All of this issuppo r ted by a lowly ge ared bal ance sh eet with s ubstan tial cap acit y to finan ce grow th. The G roup has a long and c onsiste nt track re cord of value c reation and ef fe cti ve capit al alloc ation throug h proper t y c ycles . We also have c onsiderab le experie nce in ac quiring the right as set s in loc ations with sup por tiv e fundam entals . The Gro up is known fo r targe ting emerg ing sub-market s gaining early move r advant age, deli vering prime s pace in a supp ly-c onstraine d market . The s chem es create d by the Gro up over the lo ng term show a clearde termination to ens ure each is an impro vement on t he last and to f uture-p roof buildings as far as p ossible. T his may com e throug h the desig n, the tec hnolog y or th e green c reden tials. Ourinve stment ap proach is s uppor te d by our in-hous e prope rt y manag ement and a sset man ageme nt teams who fo cus on creat ingand stren gt hening clos e occ upier relatio nships. Sust ainabilit y has be en a cor e element of o ur activ it y for many year s, inco rporate d acros s all eleme nts of the bu siness f rom ourbuildings to our finan ces . We have clos e relation ships with as set owne rs, o ccupier s and loc alcommunitie s. Our tr ack rec ord and long- term col laborat ive appro ach has hel ped us un cover n ew of f-mar ket oppor t unities such as t he rec ent trans action s with La zari Inve stment s and 230Blac kf riars Roa d SE 1 . We have als o bee n selec ted as prefe rredbid der for T he Moor f ields Es tate EC1 . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 08 The 2021 employe e sur vey again de monstr ated a high leve l of engage ment and wid espre ad job satisf actio n and, as we com e back to gether af te r the lockdow ns of the las t two y ears, o ur comm on foc us and culture have b een p reser v ed and s treng then ed. I wish to thank all th e staf f at D er went Lond on for their c ontinuing hard wor k through 2021 . I would als o like to congrat ulate Emily Prid eaux on he r appointm ent as an E xecut ive Dire ctor in March 202 1 , and Sanje ev Sharma wh o joined th e Board as N on-E xecuti ve Direc tor in Oc tober . Simon Fras er retire d as Non-E xecu tive Direc torin Oc tober and t he Boar d thanks him for his sub stantial con tribution o ver nine year s. He was re place d as Se nior Indep endent D irector b y Helen Gor don. In addition , I would like to say thank y ou on beh alf of the Boar d to David Silverm an who has playe d an integral ro le in our investm ent acquisit ions and dispo sals and will be s tepping down as an E xe cutiv e Direc tor and leaving th e Group in A pril 2022. The B oard is c onfide nt that De rwe nt London h as the right strate g yand busine ss mo del to me et evolv ing occ upier and widers takeholde r requireme nts and to co ntinue to deli ver abov eaverage lon g-term retur ns for share holder s. Mark Breuer Chairman 80 Ch arl ot te S tr eet W1 i s our f irs t ne t zero c ar bon b uildin g, launched in September 202 1 09 Financ ial Stat ements Governance Strategic repor t CHIE F E XEC UTIVE’ S S TAT E M E N T The pa st yea r was a n im por ta nt o ne fo rDer w en t Lon don a nd wa s ou r bu si estper iod f or port fol i o acti vit y for many year s. Paul W illiams Chief E xe cuti ve The re was a signif icant re cove r y in net ass et values , valuations andprof itabili ty in 2021 . Th e improvem ent in occ upational an d inves tment mar kets, ba cked by ren tal colle ction r eturning to clos eto pre-pan demic leve ls, has gi ven us the c onfid ence to progr ess ac quisitions an d developm ent plan s. Projec ts includ e comm ence ment of 1 9-35 Baker S tre et W1 and design f inalisation following re solutio n to grant planning c onse nt at Net work Building W1 . In additio n, we are progr essing pl ans for Bus h House WC2 p lus other s maller projec ts including Enviro nmental P er forman ce Ce r tif icate (EP C) upgr ades . Inves tment ac tivi ty h as bee n focus ed on re stoc king our deve lopment pip eline with f uture ‘sup er-site s’ . T hese are subs tantial rege neration s cheme s where we s ee po tential to atleast d ouble the f loor area . We have favoure d loc ations ben efit ting f rom the t win driver s of stron g forec ast de mand and low availabilit y of high quali ty s pace. B ase d on early app raisals, th ese have potent ial for attractive development retu rns. Several should alsoapp eal to the L ife Sc ience s sec tor , a mar ket where we hav e under t aken consid erable res earch. We have s old £4 05. 1 m of buildings, for £ 9. 7 m abov e book v alue, where we ex pec ted to se elower return s. We sec ured £1 3.7 m of ne w lett ings in 20 21 at an average +3. 6%ab ove De cemb er 2020 estimate d rental value (ER V ) , with afur th er £31 .9m of as setmana gement a ctiv it y in linewith ERV . The re was a distinc t shif t of emphas is among our oc cupier s to taking a m ore strate gic and longer -term app roach toth eir oc cupational nee ds. Return to th e of fice and c hanging working p atter ns Our buildings are get ting busi er . Hy brid wor king is here to s tay , buto ur occupi ers are pl anning for peak o ccup ancy as daily utilisat ion varies t hrough the we ek . T enant s are increasing ly dem anding o f their spac e, re quiring it to f ulfil m ultiple f unc tion s. Of f ice s nee d to be de sign-led an d amenit y-ric h, and able to adapt to a more a gile work forc e. We believe o ur approac h of delive ring ‘long-lif e, loos e-f it, low car bon’ spac e with enhan ced am enit y , ‘Inte llige nt Building ’ inf ras tru ctur e, and e mploy ee we llb eing atitsc ore will exce ed the se evo lving requirem ents, a s we are se einginDL /78 in W1 . Lond on is a vibrant glo bal cit y , wit h world cla ss res taurants , the atres and c ulture, whose r esilienc e has be en under scor ed by the sp ee d with which ac tivi ty h as returne d. We look for ward to th e ope ning of the Elizabet h line and cap acit y retur ning to the wider transpor t network . Sust ainabi lit y and net zero carbon In 202 1 the Gro up made goo d progr ess towards i ts net zero car bonambiti ons following pub lication of o ur pathway in 2020. Inthe sho r t term, our p or tf olio emissio ns will likely increas e as of fic e oc cupation lev els co ntinue to rise, b ut we remain well withinour sc ience -base d targe ts. Our po r tf olio is 99% co mpliant with 2023 EPC le gislation (EP C ‘E’ orbe tter). Including projec ts, 61 % of th e por t folio is c ompliant wit h poten tial 2030 legislati on (‘ A’ or ‘B’) by ER V . T his compar es with JLL ’ ses timates fo r the wider Lo ndon of f ice market t hat only 23% is2030 co mpliant by f loor area . For tho se buildings with EP C ‘C’ or below, ex tern al consult ants have now c omplete d their initial rep or t into cap ex requireme nts to uplif t EP C ratings to ‘B’ or ab ove. In line with our p revious in dications , we expe ct to inve st c. £97 m to 2030, prior to any s er vic e charge re cove r y . A prop or tion is alre ady ref lecte d in our valuations and ex isting cap ex plans . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 10 As p ar t of our sust ainabilit y agenda , we progr esse d Co mpany-led initiative s this year as w ell as par ticip ation at COP 26 to bring greate r focus o n the acti ons require d acros s the indus tr y . Our inaugural S takehold er Day and net zer o carb on oc cupier sur vey identi fied a n umber of po tential coll aborati on oppor t unities to redu ce our c ombined imp act on the e nvironme nt, ambition s share dby many of our oc cupier s. We also suc ces sf ully issue d aGre en Bond, r aising £350m f or 1 0 y ears at a 1 .875% coupon . Thisincr ease d our total gre en debt p otential to £65 0m. Development projects We have t wo large de velopmen ts and one s maller refur bishment due to co mplete in H 1 2022. At Soho Pl ace W1 , th e of fic es are eith er pre -let or pre-s old with a ren t of £ 1 7 .0m, leav ing the ret ail element still availab le. We are conf ident of leasing th e retail sp ace giv en its excel lent locat ion and pros pec ts with t he opening this y ear of the Elizabet h line and a rec over y in inter national tourism . At The F eather stone Building EC1 , whic h has an ERV of £ 8.6m, thereh as bee n a marked inc rease in en quiries as the l atest wo rk from h ome ( WFH) guidanc e was lif ted . Interest ha s come fo r a range of size requirem ents and b usines s sec tors and we are in nodoub t as to the building’s prosp ec ts suppo r ted by a po sitive outlo ok for th e T ec h Belt. We have pre -let the entire ty of Fran cis House SW1 to Edelm an at a subs tantial premium to ER V . This f ollows our let ting ear lier in the year to Fo ra at our adjoining rec ently ref urbishe d 6-8 Gree ncoat Plac e SW1 , als o comfo r tably abo ve ERV . The c ombine d rent roll of the se tw o buildings is £5. 1 m. In Q4 we co mmenc ed our l atest major dev elopmen t at 1 9-35 B aker Str eet W1 which ex tend s to 298,000 s q f t. C ompletion is ex pec ted in 202 5. We also p rogre sse d plans fo r our nex t t wo projec ts. At Net work Building W1 , re solutio n to grant planning c onsen t was se cured fo r both of f ice s and a Life S cienc es sch eme. D epen ding onthe o utcom e of early oc cupier disc ussions f or each o ption, a dec ision will be mad e shor tly on which w e take for ward. At Bush Hous e WC2, we await the ou tcome of o ur planning applic ation for aref urbishment an d ex tension. T oget her , th ese t wo projec ts have the p otential to deli ver up to 267 ,000 sq f t of high qualit y sp ace. While the ec onomy is r ecov ering, s hor t- and me dium-term infl ationar y pre ssures ar e bec oming embe dde d in market exp ect ations. B uild cost inf lation pic ked up in the ye ar and we exp ect t his to rise fur th er . At 1 9-35 Baker S tre et, the de molitio n andbuild co ntract s have be en signe d and 97% of capex on t he of fic e eleme nt is now fi xed, within bu dget. Der went L ondon’ s high qualit y team The e vents of th e last t wo ye ars have prov ided c lear demon stration of the quali ty of t he Der went L ondon team . Employee s acros s the busine ss res ponde d with en erg y and c ommitment to minimise disruptio n and prov ide pragm atic and prac tical s olutions to th e challenge s that aros e. Der wen t London is an inc lusive and resp ec tf ul employe r that welco mes dive rsit y and pro motes equali ty. We were par tic ularly pleas ed that t he Group was awardedN ational Equalit y St andard ac credit ation in 202 1 , comingin th e top 5% of accre dited c ompanies . I am delighte d that Mark B reuer , Emily Pride aux and Sanjee v Sharma all j oined th e Board in the y ear . H elen Gord on was appointe d as Se nior Indepe ndent Dire ctor re placing Simon Fra ser who retire d. I was als o please d to announc e three inter nal promo tions to the E xec utive C ommit tee: Vasiliki Ar vanit i, Head ofAs set Mana gement; V ictor ia Steve nton, Head of P roper t y Manage ment; and, Jo hn Davies , Head of Sus tainabilit y. Finally, I want to thank David Silver man who will step d own from theB oard and, af ter alm ost 20 ye ars of ser v ice, will leav e the Groupin A pril 2022. David has mad e a conside rable cont ribution tothe Gro up’ s s ucc ess and w e wish him well for th e future . Outloo k Our for ward ER V guidanc e has improve d through t he last 1 2month s. We estimate o ur ERVs will grow in the range 0% to +3%i n 2022 as an avera ge acros s our por t foli o. As the e con omic rec over y gath ers pac e, we exp ec t this will translate into sus taine d fu ture grow th. Wi th continuing s trong inves tment de mand, we exp ect inve stme nt yields to rem ain firm. Lond on is firmly c oming back to lif e. It co ntinues to at trac t globalt alent as a leading cit y wh ere pe ople want to live an d work . Our ‘long-li fe, loos e-f it, low c arbon’ appro ach, c ombined wi th the deli ver y of distinc tive ne x t generatio n develop ments , puts us in an excel lent posi tion to ben efit f rom the em ergenc e of rent al grow th for th e bes t prope rt ies. Paul W illiams Chief E xe cuti ve So ho Pl ace W1 11 Financ ial Stat ements Governance Strategic repor t T o a ch ie ve ne t z er o carbo n by 2 03 0 , weh a ve em bedd ed sus tai na bi lity thr oughout our busi ness a nd a re en ga gi nga cti vel y w ith o ur occ up i ers. For many y ears we have b een wo rking on re ducing our c arbon foo tprint and in July 2020 we publish ed our roa dmap to achieving net zero c arbo n by 2030. This is a major c ommitmen t reflec ting theGro up’ s v iew that th e built environmen t has an impor t ant role toplay in mitigating t he risk fro m rising temper atures. T o ac hieve our ambit ions, we will ne ed th e suppor t and col laborat ion of our oc cupiers as o ver 60% of t he por t folio’s car bonemis sions fall und er Sc ope 3 (acti vities wh ere we have no direc t contro l). In Septemb er 202 1 we issu ed a net zero c arb on sur vey to o ur occupi ers. T his has give n us valuable insight into theirc arbon amb itions and p otential co llabor ation opp or tunities . Our ac tions fo cus on re ducing ope rational car bon thro ugh numero us por t folio initiat ives . An impor t ant eleme nt is the use ofrenewab le source s of powe r in our buildings. We are looking at ways of cre ating renewab le energ y on our S cot tish l and throug h deve lopment of a s olar par k. Our b usiness a ctiv ities ne ce ssitate the cre ation of so me embo died c arbon bu t we aim to proac tively redu ce it using altern ative mater ials and lower c arbon c onstr uctio n meth ods whe re appropriate . For tho se carb on emis sions we cann oteliminate, we will of fs et using repu table projec ts, su ch asthe wo odlan d we have plante d in Sc otland or ot her regis tered high quality schemes. The se ac tivitie s tie into our gre en finan cing, including o ur debut gre en bond is sue in 202 1 , which in turn c omplie s with our Gre en Financ e Framework . Bot h our gree n financing an d environme ntal data is ind epend ently ass ured by D eloit te. OUR P A T H W A Y T O NE T Z E R O C A R B ON Sit e of pr op ose d sol ar p ark o n Sco t tish l an d De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 12 Engaging with our o ccupier s In H 2 2021 we conduc ted an oc cupier sur v ey to bet ter und erst and their c arbon a spirations and to id entif y c ollabo ration opp or tunities . Of t he 49% (by ER V ) that resp onde d, many are alrea dy taking step sto reduc e carb on emissio ns and ther e is a willingnes s to worktog ether . Wha t act ions ar e you t aking t o red uce your c arb on fo otpr int? 0 20 40 60 80 100 Waste re du c t io n measures Empl oy ee / cu stom er en ga gement programmes E ne rgy e ffici ency measures Buyi ng ren ew able ene rgy Offse tti ng your ca rb on None of the mentioned Water ef fici en cy measures 71% 67% 63% 59% 51% 23% 4% Oc cupie r views on g ree n leas e cla uses 0 10 20 30 40 Not sure Yes – happy to develop a non-legally binding green partnership Yes – happy to review green lease clauses at regears or breaks Not applicable Other 31% 25% 20% 17% 7% Green Finance Framework and Green Bond Our Gre en Financ e Framework (GFF ) was orig inally launche d in Oc tober 201 9. It p rovide s a clear ser ies of ce r tifiable el igibilit y ben chmarks t hat projec ts are require d to meet to qu alif y as ‘gree n ’. Annual r epor ting is subje ct to third par t y ‘rea sonable’ ass urance. In Oc tober 201 9, we were t he firs t UK REIT to arrange a n ew revo lving cre dit facilit y (RCF ) wit h a ‘green’ tranc he. Of t he £4 50m RCF , £ 300m wa s clas sifie d as ‘green’ . In Nove mber 2021 , we issu ed a £350 m 1 .875% 1 0 -year g reen b ond. Th e ‘ A ’ rate d bond at trac ted strong investor dema nd. Cumulati ve Eligible Gre en Projec t (EGP) capex at 31 De cemb er 202 1 was £56 3m acros s four eligible p rojects – s ee pa ges 96 an d 9 7 for det ails. This c ompares to g reen f inance c apacit y of £ 650m. C apex to com e on commit te d eligible projec ts is es timated at £ 355m. Green bond Drawn Green RCF Undrawn Green RCF Green facilities Qualifying expenditure 100 200 300 400 600 500 700 0 £m E GP cape x v s g re e n de bt Sus ta inabilit y ini tiati ves in S cotl and Carbon Code accred ited w oodland In 20 1 5 we plan ted 1 07 acres of wo odland , which to date has deli vered c arbo n credit s equivalent to 1 27 t CO 2 e. As the w oodlan d mature s, the leve l of carb on cre dits will rise. T hes e credit s will be prior itise d for of fs et ting residual em bodie d carb on on fu ture projec ts as par t of o ur commitm ent to using veri fie d of fset sch emes . We are exploring opp or tunitie s to plant mo re woodl and. Proposed solar park In 202 1 we submit te d a planning applic ation fo r developm ent ofan1 8 .4 MegaW at t sol ar park on our S cot tish l and. The si te iswellloc ated f or conne ctio n into the elec tricit y g rid, which hasappr opriate cap acit y. Appraisal s tudies sh ow the sch eme couldg enerate 4 0%+ of the elec trici ty us ed acr oss our manag edpor t fo lio. We are excited by t he prosp ec t of providing self -generate d renewab le electr icit y of ce rt ifie d origin for ouro ccup iers . “ W e ar e loo ki ng f orwa rd t o col la bora ti ng ona m ore s tra teg ic a ppr oac h. It i s goodt oknow t ha t th i s is i mportant t oDer w en tLon do n too . ” Hobie Walker , AML (Der went London occupier ) EPC comp liance As at D ec ember 2021 , 40 % of the por t fo lio (by ERV ) had an EPCra ting of ‘B’ or abo ve and 39% was EP C ‘C’ to ‘E ’ . O n-site deve lopment s acco unted for a f ur ther 1 8%, wit h the remaining 3%eithe r under rev iew or exempt . In 20 23, Minimum Energ y Ef ficie ncy S tandard (MEES) legislatio n is changing, f ollowing which it will not b e pos sible to lease sp ace in a building where t he EPC rating is be low ‘E’; our por t folio is sub stantial ly 20 23 c ompliant. From 2030, the leg islation is ex pec ted to be t ightene d fur ther , withth e minimum E P C rating rising to ‘B ’ ; including proje cts, ourpo r tfo lio is 61 % 2030 c ompliant . For con text , JLL es timates that23% (by f loor area ) of the Lon don of fi ce market is c urrently 2030 compliant . In 202 1 we com missione d a third par t y rep or t to determine t he co sts of achie ving 2030 co mpliance . The rep or t es timates it will co st c. £97 m by 20 30 to upgrade th e af fec ted area an d bring all ourass ets to EP C ‘B’ or ab ove. Par t of this c ost is ex pec ted to bere cove rable throug h the ser v ice char ge. E xcluding the ass ets acquire d from L azari Inv estm ents, 1 0 buildings acc ount for jus t under 9 0% of anticipate d expe nditure. 38% of ex pendit ure to achiev e complian ce is con sidere d ‘mi nimal’ , for ex ample upgrading to LED lights . A fur the r 34 % is co nsidere d ‘signific ant ’ , an ex ample ofwhich is inst allation of n ew heat p ump system s. The re maining 28% is clas sifie d as ‘major works’. See pa ge 55 for f ur ther det ails. 13 Financ ial Stat ements Governance Strategic repor t Vacancy r ates remain high at 9.3% (De cemb er 2020: 7 .9% ) againstth e longer- term avera ge of 5.2% but emp t y space was con centr ated in the Cit y c ore and D ocklan ds which repr esent 56%of the to tal. Th e West End vac anc y rate was lower at 5.2% (De cemb er 2020 : 5.5%; long-term ave rage: 4.2% ). In line with rec ent trend s, lower qualit y tier t wo sp ace makes up th e majorit y of the vac ancy at 7 4% of the total. T enant- cont rolled sp ace ac counte d forov er one- third of the vac ancy at t he star t of 2021 , bu t since May there h as bee n a stead y removal of this s pace f rom the mar ket, finishing th e year at 29%. T his sug gests t hat oc cupiers v iew their spac e as incre asingly impor t ant. Availabilit y of tier o ne spac e remains re stric ted and b elow tren d emphasising a p olaris ation ofthe mar ket. Co mmitment to sp ecul ative de velopme nts thinne d through th e year wi th sever al schem es defe rred. At D ece mber 2020, CBRE est imated that 23.8m s q f t of spac e would comp lete bet ween 2022and 202 4 b ut by De cemb er 202 1 this had f allen by 1 1 % to 21 .3m sq f t . Of this, 1 1 .6m sq f t was un der con stru ction of whic h 4.0m sq f t (34 %) was pre-let and a f ur ther 9.7 m s q f t was prop ose d. This leave s 7 .6m sq f t of sp ecul ative sp ace which is b elow the longer -term tren d and les s than the leve l of acti ve demand est imated byJLL at 8. 3m sq f t. Headline p rime rent al grow th for c entral Lon don was 7 .4% in 202 1and t y pical rent- fre e incenti ves re duce d from c .27 months ona 1 0- year term to c .2 4 month s. This marke t average ma sks dif fere nces b y locatio n as well as a dive rgenc e bet ween t ier oneand t ier two s pace. R ents for t he form er per for med m ore stro ngly and we anticip ate this trend will c ontinue in the f uture. The re has be en much de bate abou t the ‘gre en premium’ versus the‘b rown disco unt’. Recent analy sis by bot h Knight Frank and JLL , cor robor ated by our own ex perie nce, sug ge st a building’s leasing poten tial is increasing ly influenc ed by en vironment al cred entials, such as B REEA M and EPC r atings and impor t antly wellne ss and amenit y pr ovision. A s change s to EPC legis lation draw clos er , thefo cus on sus tainabilit y is widely ex pe cted to inc rease. We have outl ined our exp ec tations f or rental g row th in 202 2 in theChief E xe cutiv e’ s s tateme nt. Whilst th e UK star te d 202 1 in lo ckdown this was gr adually ease d asthe ye ar progre sse d. With t he succ es s of the UK Gove rnment ’s vacc ination prog ramme, res tric tions were lif te d in July and only tempo rar y and les s severe r estri ctions re -impos ed in resp onse to emer gence of t he Omicro n variant in De cemb er . C onfid ence ha s subsequently rebounded. Ac cording to CBRE, of f ice t ake-up acro ss ce ntral Lond on in 202 1 was 9. 1 m sq f t , up 63% on 2020, 26% below the lon g-term avera ge ( 1 2.3m sq f t ) . This wa s well sprea d acros s a number of dif fe rent busine ss se ctors: Cre ative indu stries ( T MT ) acc ounted f or 22% with B anking & Financ e at 2 1 % an d Profes sional at 20%. A s 202 1 progr ess ed, the lev el of acti ve requirem ents ro se and dem and began to c r yst allise. Th e amount of spa ce under of f er at year en d near ly doubled f rom 2. 1 m sq f t at De cemb er 2020 to 3.8m sq f t, which is + 28% ab ove the long- term avera ge of 3.0m sq f t. 6-8 G ree nc oat P lac e SW1 re fur bish ed in 20 2 1 C E N T R A L L OND ON OF F ICE M A R K E T Wi th a st ron g fi ni sh i n Q4, bo th l ea si ng transactions and investment volu me s in 2 0 2 1 mor e cl ose ly r esem bled l ong -te rm a ver age s tha n in 2 0 2 0 wh en Covi d- 1 9 pan demic disrup tion was at it s g reate st . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 14 Cen tral Lon don of fice s tock The re is 234m sq f t of of f ice sp ace ac ross c entral Lon don. 72%is conce ntrated in th e Cit y and the Wes t End (see be low) . Our po r tf olio is princip ally in the West End an d the T e ch Be lt. We have no buildings in the Cit y c ore and D ocklan ds, and only one building in May fair , t he traditio nal hear t of the We st End. City 33 West End 39 Midtown 11 Docklands 9 Southbank 8 Central L ondon office st ock Percentage of floor area Source: CBRE London’ s of fice cycle Lond on’ s of f ice m arket had thre e major cyc les bet wee n 1 9 80and 200 9 ( se e below), when stro ng grow th was follow ed by a sudd en dec line. The se eve nts were t ypi cally ass ociate d with re ces sions and r ising interest r ates, and s ometime s exac erbate d by of fic e over supply and distr ess ed prop er t y dispo sals. T he lates t cyc le has bee n dif ferent wi th grow th rates p eaking in 201 5 and th en stabilising until 2021 . 50 100 150 200 300 350 250 400 0 (1980 = 100) London o ffice cycle – index Rental value growth Capital growth 2021 1980 1985 1990 1995 2000 2005 2010 2015 Source: MSCI London’ s vacant of fice spac e In 202 1 Lond on’ s v acanc y remaine d high, rising fro m 8. 1 % to9.3%. The re are three ke y trends, a s discuss ed abo ve. Firs t,availabilit y is not e venly spre ad with the Ci ty c omprising 45%vs th e West End at 24 %. Se con d, supply is dominate d by se condhan d space at 7 4% of the tot al. Third, tenant -con trolled ‘grey ’ spac e repre sents 29% of avail able space , a reduc tion from i ts pe ak of 34 % in Q1 20 21 . 25 15 10 0 Breakdown of available space Available space (million sq ft) % 5 20 100 60 40 0 20 80 City Docklands, Midtown & Southbank West End Tenant controlled (%) Secondhand (%) Source: CBRE 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Lond on a diverse c ity wi th broad ap peal to busine ss Lond on is a truly glob al cit y which app eals to a bro ad range of busine sse s. O ver the l ast fi ve year s, Busine ss Se r vice s has acc ounted f or 2 4% of take-up, Creati ve Industr ies 22% and Banking & F inance 20% . The l ast few y ears have s een a numb er of oc cupiers e schew traditio nal sub-mar kets in the f light to qualit y and fo cus on emer ging areas suc h as King ’ s Cro ss and Pad dington , which have resp onde d with subs tantial amo unts of new de velopme nt. The se new are as are approa ching their natural c apacit y an d the volume ofdeve lopment is c onse quently re ducing. Es tablish ed area s such as the T ec h Belt and em erging area s such as S outhbank , which ben efit f rom str ong transp or t links and co nnec tivi ty b ut which havenot s een th e same leve ls of overal l regener ation, are f irmly onoc cupiers’ ra dars. The p at tern of ‘ foot lo ose’ oc cupier s being loc ation agn ostic h as be en well do cumente d. Occ upiers are pr edominantly f ocus ed on the qualit y of s pace an d its enviro nmental c redent ials along with amenit y an d transpo r t links rather th an just loc ation. Since th e EU refere ndum in June 201 6, des pite cauti ous expec tations from a range of economic forecasters, London hasexp erien ced g row th in both it s popul ation ( + 233,00 0 bet wee n 201 6 and 2020) and jobs (+ 1 77 ,000 b et ween Jun e 20 1 6 and Sep tember 2021 ). The outlo ok for emp loymen t and ec onomic grow th is p ositiv e. Ox fo rd Economi cs and E xp erian bot h forec ast astro ng rec over y in ec onomic o utput an d employm ent for th e UK and for London. A stro ng London e con omy with high and g rowing employ ment issuppo r tive of th e of fice s ec tor over th e longer-te rm. With con straine d availabilit y of high qualit y sp ace, rent al grow th fore cas ts acros s the major f irms of age nts reb ounded t hrough 202 1 . Mos t now exp ect p ositi ve rental g row th in 202 2 and 2023. With o ur strateg y of pr oviding be st in clas s dif ferent iated buildings we are well p lace d to capture t his. Agile work ing & the war for t alent From engag ement with o ur occ upiers, i t is clear that th e of fic e fulf ils multiple func tions. I t is a place to w ork, c ollab orate, innovate, interac t, produ ce and me ntor . S ome of the se ta sks can b e fulfille d remote ly but of ten wit h less p ositiv e outco mes. We have al so heardc onsiste ntly how the of f ice n eeds to b e repre sent ative of a busine ss’ culture and b rand and our o ccupier s have st ated that returning to t he of fic e is posi tive fo r busines s. Global lo ckdowns have s hone the s potlight o n agile working b ut thisis not an en tirely new tren d. Employer s have resp onde d by of fering e mploye es greater f lexibilit y, i n par t to aid s taf f retent ion and re cruitm ent in the war for t alent, as te chnolog y has e merge d that supp or ts hyb rid work ing. Prior to t he reimpo sition of WFH g uidance at th e end of 202 1 , therew ere clear signs of a r eturn to the of f ice f or an increa sing propor tion of the work force. Few businesses had formally mandate d employe es to retur n given th e asso ciated ris ks, butof f ice u tilisation was on a c lear upward tren d with the WestEndb usier than th e Cit y core, in line w ith trend s seen acro ssour vill ages . Mid-week of f ice u tilisation was n oticeab ly higher th an on Mondays o r Fridays, de monstr ating more ag ilit y amongs t the work for ce. Our ex perie nce, in c ommon with f indings ofmarket re searc h by the age nts, is that o ccup ational de cisions are being b ase d on peak o ccup ancy re quirements an d mid-week util isati on lev els . 15 Financ ial Stat ements Governance Strategic repor t 2021 2019 2017 2015 2013 2011 2009 2007 2005 2003 2001 5 10 15 20 0 Floor area (million sq ft) Source: CBRE Central L ondon office tak e-up Central London average West End Rest of central London 2.5 3.0 4.0 4.5 3.5 5.0 6.0 5.5 2.0 Yield (%) European yields Cyclical Low Dec 21 yield Dec 20 yield Dublin City West End Madrid Amsterdam Milan Frankfurt Paris Berlin Source: CBRE 2025 2023 2021 2019 2017 2015 2013 2011 2009 2007 2005 2003 2001 6 9 3 12 3 9 6 12 0 0 Floor area (million sq ft) Vacancy rate % Source: CBRE Compl e te d Un der con st ru ction Pr opos e d V aca n cy rat e Compl e ted ave r ag e Central L ondon development pipeline 2021 2019 2017 2015 2013 2011 2009 2007 2005 2003 2001 5 10 15 25 20 0 £bn Central L ondon office in vestment transactions Average Source: CBRE Within our p or t folio we have s een a re conf iguration of s pace s with a shif t in the r atio away from f ixed de sks towards mo re coll aboration spac e and me eting room s with vide o- confer ence f acilities . At the same t ime, oc cupational de nsities ar e being re duce d in a revers al of the ‘ma x-pac king’ tr end fro m rece nt years . Our own exp erienc es show th at, as busine sse s return to loo king to the f uture, the re is a clear re cogni tion of the imp or tanc e of the role the of fic e plays in bringing p eople an d teams togeth er to enhanc e communic ation, mentor ing, cre ativit y an d impor tant ly produc tivi t y . London Underground usage ga thered momentum following the lif ting of WFH g uidance in July 2021 , reac hing in excess o f 60% of pre -Co vid level s in Octob er and Nov ember . Sinc e the late st WFH guidanc e was res cinded in mid- Januar y 2022, travel has b egun torec over . A return to n ormal se r vice le vels on th e broader t ranspor t net workwill b e cruc ial in facilitating th e return to th e of fic e. Thea dditional c apacit y that will b e create d with the o pening of theElizab eth line will also h elp. Prov ision of ‘end of tr ip’ amenit y , such as b ike facilities an d showers , has com e more into fo cus as incre asing number s have switche d away from p ublic transp or t tobicy cle commu ting. London an att ractive investment market Inves tment vo lumes were weig hted towards H2 202 1 and in par tic ular Q4 with t he comple tion of sev eral large de als. CBRE est imates £1 0.0bn of tr ansac tions co mpleted in the y ear , +33% abov e 202 0 altho ugh 1 6% b elow the lon g-term avera ge. Inves tor deman d is conc entrate d on eithe r high qualit y buildings with longleas es let to goo d cove nants or ‘ value-a dd’ oppo r tunities , including ‘build to pr ime’ schem es, with s trong c ompeti tion for the se b uildings. A cc ordin g to CBRE p rime y ield s com pres se d 25bpover th e year in the Ci ty an d West End to 3.7 5% and 3.25%resp ect ively. Lond on’ s p ositi ve yield gap c ompare d to other glo bal citie s, comb ined with i ts other at tr ibutes, n amely a high leve l of market transp arency, stron g historic liquidit y, long lease leng ths an d robus t legal sys tem, have hel ped i t retain its re lative at tr activ enes s to global inve stors . CBRE es timates ther e is c.£ 40b n of potential inves tment de mand targe ting Londo n of fice s which c ompares tocurren t supply of £3.7bn. Asian inve stors ac count f or 46% of overal l demand, fo llowed by Europ eans at 32%, Nor th A meric ans at1 7% and Mid dle Eastern inve stors at 5%. UK inve stors w ere mos t acti ve in 202 1 acc ounting for 35% of ac tivit y f ollowed by Nor th A meric ans at 26%, Europe ans at 22% and Asians at 1 4%. Asair trav el rest rictio ns continue to e ase, we ex pec t the leve l of internatio nal invest ment to rise . CE NT R A L L ONDON OFF ICE M A RK E T CONTINUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 16 PORTF OLIO S T A T IST ICS £ 1 78.4 M Co ntrac ted ne t rental in come 2020: £1 89.2m 3.3 % EPR A net ini tial yield 2020: 3. 7% 6.3 YE AR S Weighte d avera ge unexpir ed leas e term ( WAUL T ) 2020: 6.2 year s 7. 8 YE AR S WAUL T in cluding rent-fre e and pre-lets 2020: 7 .9 ye ars £29 3. 9 M Est imated ren tal value 1 2020: £291 .2m 4.50 % T r ue equi valent y ield 2020: 4.7 4% T en largest tenants % of rent al inco me 2 E xpe dia 8.6% Government & public admin 6 .4% Burberry 5.3% Boston Consulting Group 3.8% Ar up 2.8% Th e Of f ice Gro up 2.8% Publ icis Group e 2. 4% Acc enture 2 .1 % Ticketmaster 1. 6 % Adobe 1. 6 % 2 Ba sed u pon c ont rac ted ne t ren tal inc ome o f £1 78 .4m T enant diversit y % of rent al inco me 2 Me dia 21 Business se r vices 19 Onlin e leisure 10 Ret ail head of f ice 8 Government & publi cadmin 8 Ret ail & hospi talit y 8 T echnolog y 8 Financial 6 Flexibl e of fice providers 4 Finte ch 3 Other 5 ¹ A f ter ad diti onal c ape x of £36 5m Ci ty s k ylin e fr om Ol d Str ee t Central L ondon office r ent ‘T opped-up ’ income £0-£30 per sq f t 4% £30-£40 per sq f t 8% £40-£50 per sq f t 14% £50-£60 per sq f t 27% £60-£70 per sq f t 20% £70+ per sq f t 27% 17 Financ ial Stat ements Governance Strategic repor t Pimlico Vauxhall Wandsworth Road Brixton Cannon Street London Bridge River Thames River Thames P ADDINGTON BAKER STREET / MAR YLEBONE MA YF AIR VICTORIA SOHO/ COVENT GARDEN FITZROVIA CLERKENWELL SHOREDITC H WHITEC HAPEL SOUTHBANK OLD STREET THE CITY ISLINGTON NOR TH OF O XFORD STREET BRIXTON Liverpool Street Tower Gateway DLR Farringdon Angel T ottenham Court Road Paddington Marylebone Whitechapel King’ s Cross St. Pancras Victoria Euston Barbican Blackfriars Fenchurch Street Bond Street Elephant and Castle Waterloo 99 % o f ou r por tfol io i s l ocat ed i n1 3Lond on‘vi ll ages ’ , each w it h itso w nin di vid ua lide nt it y . 1 9 -35 Baker Stre et W1 On-si te works c ommenc ed at our l atest ne t zerocar bon de velopme nt in Q4 202 1 . Prior to comm ence ment, we re geare d the hea dlease withT he Por tman E state and c onver te d ourintere st in a 55: 4 5 inves tment into a who lly- owne d long headle ase. Th e schem e ex tends to 298,00 0 sq f t and re prese nts an uplif t in are a of1 08%. C ompletion is s che duled for H1 20 25. Weexpe ct go od leasing pr ospe cts f or this vibrantar ea of Londo n. Baker S tree t W 1 JV Loc ated diago nally oppo site our 1 9-35 Baker Str eet de velopme nt, we acquire d a 50% joint venture (J V ) interes t in this 1 22,200 s q f t block inQ4 202 1 f rom La zari Inves tment s. The si te haspo tential for a c.240,00 0 sq f t of f ice -led red evelopm ent from l ate 202 4 , subject to agre einga hea dlease rege ar with fre ehold er TheP or tman Est ate. Soho P lace W1 Soh o Plac e, which ex tends to 285,0 00 sq f t , is due to comp lete in H 1 2022. We pre-le t the of fic es to G-Res earch an d The A pollo Gro up early on in the deve lopment . The ret ail space r emains available but we b elieve t he loca tion has endur ing appeal and ret ailer interest will re cov er , aide d by ope ning of the Elizab eth line. Por t folio weighting West En d and othe r Lond on 69% City Border s 30% Prov incial 1% Principal properties page 27 2 Key Our vi llages Knowledge Quar ter T e ch Bel t Proper ties Ac quisi tion c omp lete d in 2022 Selected as preferred bidder A WELL P L AC ED PORT F OL IO Wes t End C entr al Fit zrov ia/ Nor th of O x ford S tre et 33% Vic toria 9% Pad ding ton 7% Soho/Covent Garden 7% Bake r St reet / Mar y lebo ne 3% May fair 2% Wes t End Bo rde rs & O the r Isling ton and Cam den 7% Brix ton 1% City Border s Old S tree t 12 % Cler kenwe ll 10 % Shoreditch/Whitechapel 8% Prov incial Pro vinci al 1% Te c h B e l t De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 18 Pimlico Vauxhall Wandsworth Road Brixton Cannon Street London Bridge River Thames River Thames P ADDINGTON BAKER STREET / MAR YLEBONE MA YF AIR VICTORIA SOHO/ COVENT GARDEN FITZROVIA CLERKENWELL SHOREDITC H WHITEC HAPEL SOUTHBANK OLD STREET THE CITY ISLINGTON NOR TH OF O XFORD STREET BRIXTON Liverpool Street Tower Gateway DLR Farringdon Angel T ottenham Court Road Paddington Marylebone Whitechapel King’ s Cross St. Pancras Victoria Euston Barbican Blackfriars Fenchurch Street Bond Street Elephant and Castle Waterloo 230 Black fria rs Road SE1 Sou thbank is our l atest ne w village f ollowing the ac quisition of 230 Bl ack friars R oad, which comp leted in Q1 202 2. This are a of Londo n is ben efit ting f rom stro ng occ upier demand across several knowl edge-based indu stries. Our cur rent plans f or this ‘super -site’ envis age comm ence ment of a new 20 0,000 + sq f t development scheme i n the longer-term. Knowledge Quar ter App roximately 34% of our por t folio lie s withinthe K nowledg e Quar ter which c over s theare a around King ’s Cross, Eus ton Road andBlo omsbur y en compa ssing our Fit zrovia , Isling ton and Cler kenwell vill ages . There is asignif icant c once ntration of Li fe Scie nces entiti esin this area . Netw ork Building W1 and250 Euston Ro ad NW1 off er near - andl onger-term development poten tial. £ 5 .7 BN Val ua ti o n 5.6 M SQ F T Net are a (includ es 0.8m s q f t ofon-s ite deve lopmen ts) 4 06 Te n a n t s 77 Buildings OUR PORT FOL IO IN N UMBE RS 19 Financ ial Stat ements Governance Strategic repor t The a cquisition of L ondon Mer chant Se curitie s in 2007 was transf ormati ve for De rwe nt Londo n in providing a lar ge stock of older b uild ings to rege nerate. Sinc e then, we h ave continue d to look for ne w acquisition s to meet t he Group’s l ong- term ambition t hat 50% or m ore of the p or tf olio has f uture rep ositioning p otential. In 202 1 we made th e decisio n to retain more of o ur larger re cent deve lopment s where we se e goo d grow th over t he nex t few ye ars. We will also dispo se of tho se few b uil dings wher e we believ e return s are more limite d, free ing up capaci t y to financ e deve lopment s and other ac tiv ities while maintaining mo dest gearing . We expe ct this st rateg y to improve tot al returns . 2 0 2 1 wa s ou r most a ctiv e yea r fo r the por tfol io s i nce 2 00 7 wit h the a cq ui sit io n of n ew ‘ su per- si tes ’ and d is posal o f non- core as set s. R E SH A PI N G T HE POR T F OL IO , R E S T OCK I N G T HE PIPE L I N E Th e Fea the rs ton e Build ing an d Whit e Co lla r Fac tor y EC1 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 20 20 2 1 restocking a ctivit y In 202 1 we agre ed to ac quire, mainly of f-mar ket, sev eral longer - term de velopme nt oppor t unities and a gree d the sale of thr ee ass ets wher e future up side was limite d. This res tocking of th e pipelin e with ‘super -sites’ has th e potential to de liver a signi fic ant uplif t in sp ace fro m the exist ing c.600,0 00 sq f t (inc luding the JV at1 00%). Plans for e ach ass et are at an early s tage an d subject to planning , but we are exci ted by the lo nger-te rm return p otential. T rans actio ns with L azari Inves tment s The a sset s acquired f rom L azari Inve stmen ts in H 2 202 1 have longer-term rep ositioning potential. Ba ker Str ee t W 1 joi nt vent ure At Baker S treet , the 202 4 bloc k date broadly c oincide s with comp letion of our adjoining sch eme at 1 9-35 Baker S tree t. The ex isting owne rship ex tends to 1 22,200 sq f t (at 1 0 0% ). Thisisl and site hasp otential for a ne w of fic e-led s cheme of around240,00 0 sq f t ( +97% ) subjec t to reaching ag reem ent with the f reeho lder , T he Por tman E state, wh o also owns a b uild ing within the si te. 250 Eus ton Ro ad NW1 Early app raisal stu dies sug gest t he site has p otential to incre ase sc ale from the ex isting 1 65,90 0 sq f t building to c.225,000 s q f t ( +35 %) . T he current le ase runs to 20 39 with tenant- only breaks ever y f ive y ears, t he nex t of which is in A pril 202 4. 1 71 - 1 7 4 T o tte nham C our t Roa d W1 This building for ms par t of an islan d site with long-te rm development potent ial. 230 Black fria rs Road SE1 Initial apprais al studies s ugge st the 6 0,300 sq f t of fic e building and30 sur fac e car p arking spa ces has p otential fo r a schem e inexces s of 200,00 0 sq f t, o r more than 3 x existing f loor area , excluding Qua drant House to th e rear . The Moo rf ields Es tate EC1 Der wen t London was c hose n as the pref erre d bidder in De cemb er 202 1 for t he acquisitio n of the 2.5 acre Mo or fie lds Estate site, withc ontrac ts exp ecte d to be exchang ed in H 1 2022. The purc hase is exp ecte d to comple te in 20 26 subjec t to vacant p oss essio n whenth e new hos pital in S t Pancras b ec omes op erational . Following e arly discus sions with lo cal st akeholder s, we intendtodel iver a sub stantial of f ice -led mixe d-use c ommercial sch eme. Pl ans include s ome Life S cienc es sp ace plus af fordabl eworkspace. Reshaping the portfolio Floorspace (million sq ft) Development potential (% of portfolio) 60 40 45 35 20 25 30 55 50 8 4 5 3 0 1 2 7 6 Core income Consented/Appraisal On-site Development potential 2021 2020 2019 2018 2017 2016 2015 2014 Ba ker S tre et W1 J V 230 Bl ac kf ria rs Ro ad SE1 Th e Moo r fie lds Es t ate EC1 21 Financ ial Stat ements Governance Strategic repor t D ELIV ERI N G N E T Z ER O C A R BON BUIL DI N GS On site 2022 2021 2023 SOHO PL A CE W1 T arget completion : H 1 2022 285,000 sq f t Deve lopment Green Finance – El ect ed BREE AM r ating – T arge t: Outs tanding (Site A)/E xce llent (Site B) Work is appro aching co mpletion ahe ad of hando ver to the tenant s. One S oho Pl ace comp rises 1 91 ,0 00 sq f t of of f ice s, fully pre -let to Apo llo Group and G-Re searc h, plus 36,00 0 sq f t of ret ail still to let. 2-4 Soh o Plac e, where we exc hanged on thes ale of the long lease hold in 2020, con sists of 1 8,00 0 sq f t of of f ices p lus a 40,0 00 sq f t th eatre. T ot al cap ex: £25 4m Plus s ite ac quisi tion a nd es timat ed ove rag e:£80m T HE FE A T HE RS T ONE B UIL DING EC1 T arget completion : H 1 2022 1 25,000 sq f t Deve lopment Green Finance – El ect ed BREE AM r ating – T arge t: Outs tanding The s chem e sits nex t to White C ollar Factor y by the O ld Stre et roundab out in thehe ar t of the T e ch Be lt. It inco rporate s many of White C ollar Fac tor y ’ s innovati ve feat ures: 3.3m floo r to ceiling height an d con crete co re coo ling. The b uildi ng is pre dominantly of f ices wi th 2,000 s q f t of ancillar y r etail. T he of fic es and re tail are stil l to let . T ot al cap ex: £83m FR ANCIS HOUSE SW1 T arget completion : H 1 2022 38,000 sq f t Re furbishmen t EP C ratin g – T arg et: B (from C) This building for ms a key par t of the Group’s larger holdings in V ictoria . Ther efurbishm ent projec t involve s retrof it ting the h eating sys tem to allelec tric b oilers. T he spac e was pre -let inQ4202 1 to Edelman at a rentahe adof the June 2021 ERV . T ot al cap ex: £15 m Soho Place Francis House The Feathers tone Build ing 1 9-35 B aker S tre et Net work Buil ding Bush House De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 22 Pot ential 2022 schemes Ou r a im i s to ha ve two or t hr ee ma jo r rede vel opme nt s ons it e a t an y on e ti me . I ncl udi ng ou r pi pel i ne of s ma ll er re fur bi sh ment p ro jects, w e inc ur ca pe x of £ 1 50m t o £ 2 50m per a nn u m. On co mp le ti on , the se asse ts mo ve i nt o ou r c o re i ncome po r t fol io wh er e the y cont i nu e to generate at tracti ve returns f or shareholders. 2024 2025 2026 19- 35 B AKER S TRE ET W1 T arge t completion : H1 2025 298,000 sq f t D evelopment Green Finance – El ect ed BREE AM r ating – T arge t: Exc ellent On-si te works c ommenc ed in Q4 2021 . Itwill prov ide a mix of 21 8,00 0 sq f t of f ice s, 28,000 s q f t retail an d 5 2,00 0 sq f t residential. Prior to comm encement , ourintere sts with t he fre eholder we re res truc tured wit h the site now wh olly owne d on a 1 2 9-year le aseho ld interest . T ot al cap ex: £283m Plus e st imate d over age: £1 8m NET WOR K BUILDING W1 T arge t completion : 2025 Development Dual pl anning cons ent se cured in 2021 — Of fice-l ed ( 1 37 ,000 sq ft) — L ab-e nabled (1 1 2,0 00 sq f t ) Up to 96% uplif t o n existing f loor area Plann ed co mmenc ement: H2 2022 T o tal c apex : £ 109m (Of fic e sch eme) BUSH HOUSE WC2 Potential commencement : H2 20 22 Refurbishment and e x tension Sch eme size c. 1 30,0 00 sq f t (subjec t to planning ). Up to 25% uplif t on existing flo or area . 1 9-35 B aker S tre et Net work Buil ding Bush House 23 Financ ial Stat ements Governance Strategic repor t 48% o f ou r por t fo li o ha s re posi ti on i ng po te nt i al. W e al so acq u i red 2 30 B lac k fri ars R oad S E 1 in Q 1 20 2 2 an d ar e th e pre fe rred b id der f or The M oorfiel ds E sta t e EC 1 . PIPE L I NE PROJE C T S & ‘SUPE R - SI T E S’ Development E xisting sp ace: 54,0 00 sq f t P ro po s e d: c. 1 10, 0 00 sq f t S tat us: Appraisal studies Timin g: Medium-term Derwent London was sel ected as the preferr ed bidder in 2021. Acquisition of the site in2026 is conditional on exchang e of contracts and receipt of vacant possession. Development E xisting sp ace: c. 400, 000 s q ft P ro po s e d: 7 50,0 00 sq f t+ S tat us: Appraisal studies Timin g: Long -term T HE MOOR F IE L DS E S TAT E E C 1 BLUE S T A R HOUSE SW9 BAK ER ST REE T W1 JOINT VENT URE De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 24 Development E xisting sp ace: 60,30 0 sq f t P ro po s e d: 2 00, 000 s q ft+ S tat us: Appraisal studies Timin g: Long -term These are income- producing buildings with 30car parking spaces. Ithas potential for a significant uplift in space. Development E xisting sp ace: 90,00 0 sq f t P ro po s e d: 1 50,0 00 s q f t S tat us: Consented Timin g: Long -term E x tension E xisting sp ace: 273, 0 00 sq f t P ro po s e d: c.420,00 0 sq f t S tat us: Appraisal studies Timin g: Long -term HOLDEN HOUSE W 1 THE WHI TE CH APE L BUILDING E1 Development E xisting sp ace: 1 22,200 s q f t P ro po s e d: c .2 40, 000 sq f t S tat us: Appraisal studies Timin g: Medium-term Ac quired from L azar i Inves tments in Q 4 20 21 in a50: 50 J V , th ere is potent ial todouble the f loor area . Thelate202 4 b lock date broadlycoinc ides with ourtarget c ompletion of 1 9 -35 Baker S tree t. 230 BL A CK F R I A RS RO A D SE 1 25 Financ ial Stat ements Governance Strategic repor t OUR S T A K E HOL DE RS Proactive and positive stakehol der engageme nt help s to sec ure our lon g-term succ ess . Each s takeholde r group re quires a distinc t approac h to fos ter ef fe ctive an d mutually b enef icial relatio nships. B y under standing o ur stakeho lders and f actoring th em into our de cisions, we c an se cure our long-ter m succ ess . Our se ction 1 72 ( 1 ) s tateme nt for the ye ar ende d 3 1 De cemb er 202 1 is on pa ges 1 24 and 1 25 and de monstr ates how our stake holders inf luenc ed so me of the de cisions take n by theB oard in 202 1 . Act ing in a fair and resp onsible manner isa cor e element of our b usines s practic e as se en in the Resp onsibilit y se ction o n page s 50 to 75. We rec ognise that we h ave a resp onsibilit y to all our stakeholders. Through our engagement strat eg y , exist ingrelations hips with our s takeholde rs and, with an under standing of t heir conc erns an d issue s, we were able to work clo sely alongside t hem during the p andemic an d, wherever possible, o f fer proactive suppor t. We held our f irst S takeholde r Day on 29 Se ptember 2021 to engage wi th and infor m our stakeh olders on o ur intentions and f uture projec ts. T his include d our Net Zero C arbon Pathway, how we plan to gen erate gre en energ y f rom ourSc ot tish land an d our Intelligent B uild ing st rateg y . Witho ver 1 00 at tende es, r epres enting the majori ty o f our stake holder gro ups, our S takeho lder Day rec ognise d that ‘relatio nships are at the c ore of what we do’ (see p age 1 34) . Our key s takeholders Their material issues How we engage 2021 outcomes and highlights Further links OCCUPIERS Our s ucc es s is dep end ent on ou r abili t y to und ers t and and r esp ond t o our o ccup ier s’ needs and aspirations — T he he alth and w ellb eing of emp loyee s and v isitor s — C ontin uit y of busin es ses duringt hepan demic — S uitab le lease te rms — We ll-des igne d and sus taina ble ( gree n) buildings — T alent attrac tion/retention — A meni ties f or emp loyee s and v isitor s We com munic ate reg ularly w ith our ex istin g occ upier b ase v ia our de dicate d Lea sing, A ss et and P rope r t y Manag ement t eams , toget her wit h clos e Direc tor invo lveme nt. We do t his throu gh cal ls, me etin gs, enga gem ent eve nts an d for ums. Dur ing 2021 , we pr ovid ed pr oac tive s uppor t to o ur oc cupie rs. O ccup ier sur v eys were c ommis sion ed to gat her fe edb ack an d to mea sure our re spo nse to t he pan demic . In Oc tobe r 202 1 , we l aunch ed DL / 78, a new a menit y av ailable to al l De rwe nt Lon don of f ice o cc upiers w hich ref lec ts our d esig n-led a ppro ach to cre ating ins piring sp ace f or oc cupie rs, whi ch is bo th usef ul and e ngagin g. — L aunc h of DL / 78 and the DL / A pp (see p age 30) — Re nt def erral s and c onc essi ons giv en to oc cupie rs tha t were mo st impa cte d by the p andem ic — £1 3.7 m of let ting s — 1.6% EPR A vac ancy r ate — 7 7% tenant r etenti on/re- lets Providing en hanced amenity pa ge30 Asset management pa ge 82 Executive annual bonus voi dman agem ent t ar get page 1 84 EMPLO YEE S We have a n exp eri enc ed, div ers e and d edic ate d wor kf or ce whi ch we re cog nise a s a key as se t ofou r busin es s — O ve rall he alth and we llb eing — A gile an d flex ible wor king pra ctic es — O ppo rt unitie s for t raining, development and progression — O ppo rt unitie s to shar e ideas andm ake a dif fere nce — A di ver se and in clusiv e wor kenviro nmen t We have an o pen an d col labo rati ve mana geme nt str uct ure and e ngage reg ular ly with ou r employ ees . Engag emen t meth ods in clude , but are not lim ited to , employ ee sur v eys , CEO town ha ll mee tings, C omp any pre sent ation s, our in trane t site, n ewslet ter s, away days an d our well being pro gramm e. Employ ee en gagem ent is f requ ently m easur ed an d we have emp loyee r epre sent ativ es on o ur Resp onsib le Busine ss C ommi tte e, whic h ischa ired by t he des ignate d Non- Exe cut ive Dir ect or (Dam e Cilla Sn owbal l) forga ther ing the v iews of ou r work for ce. — Fe edback from employee sur ve ys(se e page 6 0) — At t ained Na tional Eq ualit y St andard accre ditation — 13% of our emplo yee s are tra ined as me ntal h ealth ch ampion s — 13 town hall m eetin gs were ho ste d to shar e news an d prov ide sup por t Staf f satisfac tion KPI pa ge 49 Diversit y and inclusion pa ge57 Employee engagement p a g e 13 5 LOCA L COMMUNITIE S & OT HERS We are c ommi t ted t o suppor ting the communities in whi ch we op era te, inc luding t he NHS, l oca l businesse s, residents and the wider public — Minimi sing loc al disr uption — Imp act o n the lo cal e con omy — D er went L ondo n being a res pons ibleneig hbo ur — Ef fec tive communication andengagement We enga ge with t he loc al co mmunit y thr ough t he pla nning pro ce ss, our C ommuni t y Fund, vo luntee ring, c hari table d onatio ns and pr ovidin g emp loyme nt and w ork exp eri enc e oppo r tunitie s. We als o liais e with No n- Governmental Organ isations (NGOs ), Business Improvement Districts and indus tr y bo dies to e nhanc e the p osi tive imp act w e have on t he com munitie s inwhic h we ope rate. — Us e of 1 6 fl ats do nated t o Univ ersi ty C olle ge Hos pita l — C ommi tte d £725,000 of co mmunit yan d spon sors hip donations for 202 1 — 19 commun it y proje cts supp or te din 202 1 Communi ty Fund p ag e 61 Charities and sponsorships p ag e 61 Our p athw ay to ne t zer o carbon page1 2 SUPPLIERS We out source ma ny of our activi ties to third par ty suppliers and prov iders. As a r esu lt, it i s cru cial t hat we develop strong working relationships — Long-term par tnerships — C ollaborative a pproach — O pen te rms of b usine ss — Fair p aym ent ter ms Thr ough ef f ec tive c oll abor ation, w e aim to build long -term r elat ionship s with o ur supp liers s o that w e can de velop a nd ope rate gr eat sp ace s for our o cc upiers . We are sig natori es to th e CICM Pr ompt Pay men t Co de and are c lear ab out our p ayme nt prac tic es. We ex pe ct our s upplie rs to ado pt simila r prac tice s thro ugho ut the ir supply c hains to e nsure fa ir and pro mpt tre atme nt of all creditors. Our S upply Ch ain Sust ainabil it y St andard s ets o ut our pr inciple s and exp ec tati ons in ter ms of the e nviro nment al, so cial , ethic al and go vern ance iss ues whi ch rel ate to our sup ply ch ains. — Our average payment t erm was20day s — £1 73.7 m cap ital ex pen diture — Re vis ed our S upply Ch ain Sus tainab ilit y St andar d — P ublish ed o ur 202 1 Mo der n Slaver y Statement Supply chain governance pa ge65 Supply Chain Sustainabilit y Stand ard p a g e 16 9 Responsible pa yment prac tices p a g e 16 9 CENTR AL & LOCA L GOVERNMENT As a responsible employer and b usin ess , we are co mmit te d to e ngag ing constr uctively with the ce ntr al and l oc al gove rnm ent to en sur e we supp or t th e wider communit y — O pennes s and transpare ncy — Pro active engagement with loc alauth ori ties — Suppor t for local economic pla nsands trateg ies — C ompliant with legisl ation — T iming of th e ec onomi c rec over y aspe ople r eturn t o cit y ce ntre s for wor k and to sup por t bu sines se s Dur ing 2021 , we ha ve supp or ted ini tiati ves to re op en ce ntral Lo ndon af ter loc kdown. We t ake a con str uct ive an d posi tive a ppro ach to wo rking wi th loc al auth ori ties to e nsure hig h-qua lit y plan ning appl icat ions are s ubmit te d. Similar ly, we maintain p roac tiv e relat ionship s with g over nment d epar t ment s suc h as HMRC, v ia reg ular dialo gue an d corr esp onde nce . Paul Will iams (CEO) is Chair man of th e West minste r Prop er t y As soc iation ( WPA), a no t-fo r-pro fit adv oc acy gr oup, whic h foc uses o n poli cy, rese arch an d maint aining exc ellent relationships with central London’ s local authorities. Der went London became a par t of L ondo n Boro ugh of Is ling ton’s Londo n Liv ing Wage A ctio n Group to supp or t Islin g ton to be com e a Lond on Li ving Wag e Boro ugh. — Ma intaine d our ‘l ow-ris k’ t ax ratin gwith HMR C — P rovi ding a the atre an d public real m as par t of t he So ho Pla ce development — A chiev ed dual p lannin g for th e Net wor k Building W1 Our j ourn ey to C OP26 pa ge54 Working w ith local authorities pa ge 62 T a x governance pa ge 65 DEB T PROVIDE RS We main ta in clo se and suppor tive relationshi ps wit h this g roup o f lon g-term stakeholders, characterised by o penness, t ransparency and mutual unders tanding — Financial per formance — O pennes s and transpare ncy — Pro active approach to communication — C redit r ating — L ow gear ing — In crea se in gre en f inanc e lending We arra nge deb t facili ties f rom a di vers e group o f prov ider s ranging f rom bank s to insti tuti onal p ensio n fund s. We enga ge with t hes e prov ider s and our cr edit r ating ag enc y throug h reg ular me etings a nd pre sent ation s to ens urethat t hey re main ful ly infor med o n all relev ant are as of our b usines s. This h igh leve l of enga geme nt hel ps to supp or t our c redi t relat ionship s. — Ra ised £ 350 m via a gre en b ond — E x ten ded o ur Revo lving Cr edit Facili ties w ith our UK b anking par t ners f or a fur t her ye ar to 2026 — 20.8% loan- to-value ratio — Interest cover 464% — F itch c orp orate c redit r ating of A- KP I – inte res t cov er ra tio pa ge 46 Debt and financing pa ges 94 an d 95 Green Finance Framework pa ges 1 3, 96 a nd 97 SHA REHOL DERS We ado pt an op en an d transpar ent approach with our in ves tor s wit h fre que nt co nt act . The y pl ay an imp or ta nt ro le in he lping sha pe our s tr ate g y and monitoring ou r governance — Financial per formance — S trate g y and bu sines s mo del — En vironm ent al, so cial and g over nanc e (ESG) p er for manc e — Div idend Thr ough o ur inves tor rel ation s prog ramme , which inc lude s RNS anno unce ment s, me etings , prop er t y tour s and our A nnual G ene ral Me eting ,we ensur e share holde rs’ vie ws are br ought in to our bo ardro om andc onsid ere d in our de cision m aking . — H eld an Inve stor D ay on 28 Se ptemb er at DL / 78 — 2. 8% incre ase in di vide nd — We re ce ive d votes f rom 8 4.7% of sha rehol ders f or the 2021 AGM KP I – T o tal S har eho lder Re turn ( TS R) pag e 46 Shareholder engagement p a g e 13 7 Annual General M eeting pa ge1 97 We he ld our f irs t S take hol der D ay at DL / 78 in 2021 , f ur the rdet ail sare o n pa ge 1 3 4 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 26 Our key s takeholders Their material issues How we engage 2021 outcomes and highlights Further links OCCUPIERS Our s ucc es s is dep end ent on ou r abili t y to und ers t and and r esp ond t o our o ccup ier s’ needs and aspirations — T he he alth and w ellb eing of emp loyee s and v isitor s — C ontin uit y of busin es ses duringt hepan demic — S uitab le lease te rms — We ll-des igne d and sus taina ble ( gree n) buildings — T alent attrac tion/retention — A meni ties f or emp loyee s and v isitor s We com munic ate reg ularly w ith our ex istin g occ upier b ase v ia our de dicate d Lea sing, A ss et and P rope r t y Manag ement t eams , toget her wit h clos e Direc tor invo lveme nt. We do t his throu gh cal ls, me etin gs, enga gem ent eve nts an d for ums. Dur ing 2021 , we pr ovid ed pr oac tive s uppor t to o ur oc cupie rs. O ccup ier sur v eys were c ommis sion ed to gat her fe edb ack an d to mea sure our re spo nse to t he pan demic . In Oc tobe r 202 1 , we l aunch ed DL / 78, a new a menit y av ailable to al l De rwe nt Lon don of f ice o cc upiers w hich ref lec ts our d esig n-led a ppro ach to cre ating ins piring sp ace f or oc cupie rs, whi ch is bo th usef ul and e ngagin g. — L aunc h of DL / 78 and the DL / A pp (see p age 30) — Re nt def erral s and c onc essi ons giv en to oc cupie rs tha t were mo st impa cte d by the p andem ic — £1 3.7 m of let ting s — 1.6% EPR A vaca ncy r ate — 7 7% tenant r etenti on/re- lets Providing en hanced amenity pa ge30 Asset management pa ge 82 Executive annual bonus voi dman agem ent t ar get page 1 84 EMPLO YEE S We have a n exp eri enc ed, div ers e and d edic ate d wor kf or ce whi ch we re cog nise a s a key as se t ofou r busin es s — O ve rall he alth and we llbe ing — A gile an d flex ible wor king pra ctic es — O ppo rt unitie s for t raining, development and progression — O ppo rt unitie s to shar e ideas andm ake a dif fere nce — A di ver se and in clusiv e wor kenviro nmen t We have an o pen an d col labo rati ve mana geme nt str uct ure and e ngage reg ular ly with ou r employ ees . Engag emen t meth ods in clude , but are not lim ited to , employ ee sur v eys , CEO town ha ll mee tings, C omp any pre sent ation s, our in trane t site, n ewslet ter s, away days an d our well being pro gramm e. Employ ee en gagem ent is f requ ently m easur ed an d we have emp loyee r epre sent ativ es on o ur Resp onsib le Busine ss C ommi tte e, whic h ischa ired by t he des ignate d Non- Exe cut ive Dir ect or (Dam e Cilla Sn owbal l) forga ther ing the v iews of ou r work for ce. — Fe edback from employee sur ve ys(se e page 6 0) — At t ained Na tional Eq ualit y St andard accre ditation — 13% of our emplo yee s are tra ined as me ntal h ealth ch ampion s — 13 town hall m eetin gs were ho ste d to shar e news an d prov ide sup por t Staf f satisfac tion KPI pa ge 49 Diversit y and inclusion pa ge57 Employee engagement p a g e 13 5 LOCA L COMMUNITIE S & OT HERS We are c ommi t ted t o suppor ting the communities in whi ch we op era te, inc luding t he NHS, l oca l businesse s, residents and the wider public — Minimi sing loc al disr uption — Imp act o n the lo cal e con omy — D er went L ondo n being a res pons ibleneig hbo ur — Ef fec tive communication andengagement We enga ge with t he loc al co mmunit y thr ough t he pla nning pro ce ss, our C ommuni t y Fund, vo luntee ring, c hari table d onatio ns and pr ovidin g emp loyme nt and w ork exp eri enc e oppo r tunitie s. We als o liais e with No n- Governmental Organ isations (NGOs ), Business Improvement Districts and indus tr y bo dies to e nhanc e the p osi tive imp act w e have on t he com munitie s inwhic h we ope rate. — Us e of 1 6 fl ats do nated t o Univ ersi ty C olle ge Hos pita l — C ommi tte d £725,000 of co mmunit yan d spon sors hip donations for 202 1 — 19 commun it y proje cts supp or te din 202 1 Communi ty Fund p ag e 61 Charities and sponsorships p ag e 61 Our p athw ay to ne t zer o carbon page1 2 SUPPLIERS We out source ma ny of our activi ties to third par ty suppliers and prov iders. As a r esu lt, it i s cru cial t hat we develop strong working relationships — Long-term par tnerships — C ollaborative a pproach — O pen te rms of b usine ss — Fair p aym ent ter ms Thr ough ef f ec tive c oll abor ation, w e aim to build lon g-term r elat ionship s with o ur supp liers s o that w e can de velop a nd ope rate gr eat sp ace s for our o cc upiers . We are sig natori es to th e CICM Pr ompt Pay men t Co de and are c lear ab out our p ayme nt prac tic es. We ex pe ct our s upplie rs to ado pt simila r prac tice s thro ugho ut the ir supply c hains to e nsure fa ir and pro mpt tre atme nt of all creditors. Our S upply Ch ain Sust ainabil it y St andard s ets o ut our pr inciple s and exp ec tati ons in ter ms of the e nviro nment al, so cial , ethic al and go vern ance iss ues whi ch rel ate to our sup ply ch ains. — Our average payment t erm was20day s — £1 73.7 m cap ital ex pen diture — Re vis ed our S upply Ch ain Sus tainab ilit y St andar d — P ublish ed o ur 202 1 Mo der n Slaver y Statement Supply chain governance pa ge65 Supply Chain Sustainabilit y Stand ard p a g e 16 9 Responsible pa yment prac tices p a g e 16 9 CENTR AL & LOCA L GOVERNMENT As a responsible employer and b usin ess , we are co mmit te d to e ngag ing constr uctively with the ce ntr al and l oca l gove rnm ent to en sur e we supp or t th e wider communit y — O pennes s and transpare ncy — Pro active engagement with loc alauth ori ties — Suppor t for local economic pla nsands trateg ies — C ompliant with legisl ation — T iming of th e ec onomi c rec over y aspe ople r eturn t o cit y ce ntre s for wor k and to sup por t bu sines se s Dur ing 2021 , we ha ve supp or ted ini tiati ves to re op en ce ntral Lo ndon af ter loc kdown. We t ake a con str uct ive an d posi tive a ppro ach to wo rking wi th loc al auth ori ties to e nsure hig h-qua lit y plan ning appl icat ions are s ubmit te d. Similar ly, we maintain p roac tiv e relat ionship s with g over nment d epar t ment s suc h as HMRC, v ia reg ular dialo gue an d corr esp onde nce . Paul Will iams (CEO) is Chair man of th e West minste r Prop er t y As soc iation ( WPA), a no t-fo r-pro fit adv oc acy gr oup, whic h foc uses o n poli cy, rese arch an d maint aining exc ellent relationships with central London’ s local authorities. Der went London became a par t of L ondo n Boro ugh of Is ling ton’s Londo n Liv ing Wage A ctio n Group to supp or t Islin g ton to be com e a Lond on Li ving Wag e Boro ugh. — Ma intaine d our ‘l ow-ris k’ t ax ratin gwith HMR C — P rovi ding a the atre an d public real m as par t of t he So ho Pla ce development — A chiev ed dual p lannin g for th e Net wor k Building W1 Our j ourn ey to C OP26 pa ge54 Working w ith local authorities pa ge 62 T a x governance pa ge 65 DEB T PROVIDE RS We main ta in clo se and suppor tive relationshi ps wit h this g roup o f lon g-term stakeholders, characterised by o penness, t ransparency and mutual unders tanding — Financial per formance — O pennes s and transpare ncy — Pro active approach to communication — C redit r ating — L ow gear ing — In crea se in gre en f inanc e lending We arra nge deb t facili ties f rom a di vers e group o f prov ider s ranging f rom bank s to insti tuti onal p ensio n fund s. We enga ge with t hes e prov ider s and our cr edit r ating ag enc y throug h reg ular me etings a nd pre sent ation s to ens urethat t hey re main ful ly infor med o n all rele vant are as of our b usine ss. This h igh leve l of enga geme nt hel ps to supp or t our c redi t relat ionship s. — Ra ised £ 350 m via a gre en b ond — E x ten ded o ur Revo lving Cr edit Facili ties w ith our UK b anking par t ners f or a fur t her ye ar to 2026 — 20.8% loan- to-value ratio — Interest cover 464% — F itch c orp orate c redit r ating of A- KP I – inte res t cov er ra tio pa ge 46 Debt and financing pa ges 94 an d 95 Green Finance Framework pa ges 1 3, 96 a nd 97 SHA REHOL DERS We ado pt an op en an d transpar ent approach with our in ves tor s wit h fre que nt co nt act . The y pl ay an imp or ta nt ro le in he lping sha pe our s tr ate g y and monitoring ou r governance — Financial per formance — S trate g y and bu sines s mo del — En vironm ent al, so cial and g over nanc e (ESG) p er for manc e — Div idend Thr ough o ur inves tor rel ation s prog ramme , which inc lude s RNS anno unce ment s, me etings , prop er t y tour s and our A nnual G ene ral Me eting ,we ensur e share holde rs’ vie ws are br ought in to our bo ardro om andc onsid ere d in our de cision m aking . — H eld an Inve stor D ay on 28 Se ptemb er at DL / 78 — 2. 8% incre ase in di vide nd — We re ce ive d votes f rom 8 4.7% of sha rehol ders f or the 2021 AGM KP I – T o tal S har eho lder Re turn ( TS R) pag e 46 Shareholder engagement p a g e 13 7 Annual General M eeting pa ge1 97 27 Financ ial Stat ements Governance Strategic repor t Our pur pos e T o help improve a nd upgrade the stock of of fice spac e in central London, providi ng above average long -term returns to ou r shareholders while b ring ing s oc ial an d econ om ic benef its to all our st ak eholders. By promoting values that inc lude building long- term relationships and set ting anopen and progressive corp orat e culture , our design-l ed e thos has created a brand of well - designed, f lexib le and ef f ic ient buildin gs at a f fo rdab le ren ts . OUR BUSIN E S S MODE L DR IVEN B Y Our envir onment The London of f ice market and its wider context page 1 4 Our assets and resour ces Prop er tie s page 1 8 Financial resources page 88 Pe op le and rel atio nship s page 56 The views of our stakeholder s Und ers ta nding the ir key issues through ef fec tive engagement page 2 6 I MPA C T E D B Y Our core activities DE VEL OPMENT & RE FURBISHMENT Our focus on de sign, in novation and value for money creates sust ainable and adap table buildin gs cha rac teris ed by generous volumes, go od natural light and high qua lit y amenities and wellnes s facilities page 8 5 ASSE T M ANAGEME NT Understand ing o ur occupie rs helps us tailor build ings and leases to their nee ds thereby growing our income st reams andadding val ue page 8 2 I NVESTME NT A CTIVIT Y We r ec ycle capital, acqui ring proper tie s with future regeneration oppor tunities to build a pi peline of project s and disposing of those which no longer meet our investm ent criteria page 80 Strong g overnance and risk management pag e 1 0 0 and page 1 21 HOW W E ADD V A LUE W e a ppl y ou r asset m an age men t a nd re gen er at io n sk il ls t o the Gr ou p ’ s 5. 6m sq f t pr ope r t y por tfol io us in g ou r peopl e, re la ti ons h i ps an d fin an ci al r esou rces t o add v a lu e a nd gr ow i nco me wh il e bene fiti ng t he com mu nit i es in w hi ch we o per at e and t he w id er environment bey ond. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 28 6 5 2 ,7 0 0 SQ F T Rent re views, lea se renewal s andlease r egears a greed in 202 1at a re nt of £3 1 .9m pa 7 46 ,000 SQ F T On -s ite p roj ects, 38% pre-let + 9. 3 % Average annual ordinar y dividendg row th over 1 0ye ars + 1 0.9 % Average annual tot al return over 1 0 years £725 K Communit y Fund plus sponsorshipand donations V A LUE CRE A TE D FOR OUR ST A KEHOL DERS Measured via our KPIs page 44 Driven by our fiv e strat egic objectives 2. TO GR OW RECU RRIN G E A RNINGS AND CASH FLOW 1. TO OP TIMISE R ET URNS AND CREA TE V AL UE FRO M A BA L ANCE D PORTF OLIO 3. T O AT T R A C T, R E TA I N AND DE VEL OP TA L E N T E D EMP LOYEES 4. TO DE SIGN, DELIV ER A N D O P E R AT E OUR BUILDINGS RE SPON SIBL Y 5. TO MAI NT AI N S TR ONG AND F LE X IB LE F INA NCING page 3 8 page 40 page 4 1 page 4 2 page 43 PRIOR IT IES Annua l priorit ies are se t for eac h strateg ic ob jec tive RISKS Risk ma nagement is integr al to the deli ver y of our st rateg y pag e 44 and p age 1 7 4 page 1 00 page 34 KPI s & RE MUNE R A T ION Succ ess a gainst our objec tives i s measure d using our KPIs and reward ed through o ur incentive schemes 29 Financ ial Stat ements Governance Strategic repor t Der wen t London ha s a long track re cord of p roviding high qualit y ameniti es. Ro of terrace s, c afés, third p ar t y co-wo rking spa ces among ot her ser v ice s have be en available for many y ears, a s well as ge nerous re cep tion areas and a daptabilit y wit hin the customer space. The C ovid - 1 9 pand emic has broug ht the qualit y of sp ace to the foref ront of oc cupier s’ minds as they s eek to bring e mployee s backto t he of fic e and as par t of t he ‘war for t alent’. Occ upiers incre asingly deman d amenit y that go es be yond the ir own space . Our vill age-le d approa ch, comb ined with a lon g-term inves tment horizon, allows u s to suppor t c ommunities in an d around our buildings, work ing in par tner ship with loc al busines ses to de liver ser v ices to o ccupie rs while creating value f or loc al stakeho lders. In 202 1 we launc hed se veral new init iatives aime d at enhanc ing custome r exper ience an d driving en gagemen t. DL / 78 , in Fit zrovia , is a shared c ommunit y amenit y sp ace that prov ides a club lounge an d worksp ace available f or use by our oc cupiers , and include s boo kable mee ting rooms , a wellne ss areaand c atering se r vice s. Oc cupier en gagemen t and fee dback todate is ver y en coura ging. As the fl i ght t o qu al it y i n Lond on off i cesga ther s pace , the f ocu s on a men ity pro vis io n ha s been i nc rea si ng, en comp ass i ng se r vices bo th w ith in th e buildin g a nd o ut sid e. PROV IDI NG E NH A NC E D A M E NI T Y De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 30 Intelli gent Buil ding sys tem arc hitec ture will allow us to bet ter inte grate dif feren t building sof t ware and sy stems. T he data capt ured will hel p us identif y way s to impro ve buil ding ef f icie ncy a nd re duc e ope rational c arbon emis sions. We are targe ting 55% of the po rt fo lio to be Intelligent B uild ing enab led by the e nd of2023. Cust omer DL / App b rings the p or tf olio togeth er to prov ide oc cupiers wi th a seamles s exp eri enc e show ing avail able ‘Furnishe d + Flexible’ spac e and me eting room s, plus of fer s and even ts acros s thep or tf olio. Furnished + F lexible is one of our re spon ses to the f lexible of fic e market. T ot alling 6 1 ,40 0 sq f t, mainly in buildings with smal l floor p lates, t his allows for quic k, eas y and ef fic ient oc cupation on an all-inclusive re nt including fur niture and fi ttings an d with flex ible lease term s. Pocket P arks ser v e a dual func tion. In addition to th eir bene ficial impac t on wellb eing and the wid er communit y, gre en spac e also adds to a b uild ing ’ s sustainabilit y credentials. End of trip am enities like bike facilitie s and showe rs, which we have lon g provid ed, is incre asingly in demand a s employe es re turn to the of f ice. Th e Whit e Cha pel B uildin g E1 19 Fit zroy S tr ee t W1 Th e Poe ts’ P ark - 8 0 Char lo tt e St ree t W1 Th e Fea the rs ton e Build ing EC1 – Int ell igen t Buil ding 31 Financ ial Stat ements Governance Strategic repor t OUR S T R A T E GY Our st rateg y is we ll e st ablis he d an d ex pla i ns ho w we a im t o f u l fi l ou r pu rpose fo r the be nefi t of a ll o ur s tak ehol ders . Du ri ng 2 0 2 1 , ou r pr ior it ies w er e ad a pt ed t o su it i nvest me nt, occu pi er a nd su st ain abili t y re quir em en ts . This s tr ateg y is d efin ed thr ough o ur five s tr ategic o bjec tive s: 1. T o op timise return s and create value f rom a bal ance d por t folio 2. T o g row recur ring earnings and c ash f low 3. T o at tra ct, ret ain and deve lop talented e mployee s 4. T o de sign, del iver and o perate our buildings res ponsibly 5. T o maint ain str ong an d flex ible f inanc ing Our st rategic journ ey star t s with the ac quisition of c entral Lond onprope r ties at low cap ital value s where we se e potent ial to add value thr ough rege neration. Hav ing a pipeline of c urrent and fu ture projec ts is a key par t of our s trateg y and we aim fo r this to repre sent app roximately 50% of o ur por t folio by are a. Value- enhanc ing project s may take sev eral year s with prof its der ived from a c ombination of p lanning uplif t, t he rege aring of lease s and ref urbishment o r redev elopment . Goo d design an d the ne eds of our custo mers are at th e hear t of our p lans. T he returns g enerate d by our sc hemes h ave help ed us out per for m our ben chmarks (pr incipally the MS CI Cent ral Londo n Of f ices Ind ex). Balan cing the inhere nt risk of our de velopme nt projec ts are the ‘core inc ome’ prop er ties , which repre sente d 5 2% of our p or t folio as at 3 1 D ece mber 2021 . Here th e focus is o n custome r relation ships and maint aini ng or g rowing recur ring earnings and c ash f low throug h activ e asse t managem ent. Our as set mana gers wo rk clos ely with our cus tomer s to meet th eir nee ds, for ex ample by of fering a wi de range of leas e terms, pr oviding adapt able spac e andexc ellent amenit ies while helping to cre ate a work env ironment that supp or ts innova tion, pro ducti vit y and well being. Whet her planning , designing or d eliver ing sche mes, we t ake a long-ter m view, looking to ide ntif y risk s to income or v alues early on. A n annual fi ve-ye ar plan is pre pared to as ses s risks and opp or tunities , and ensure o ur produc t is for ward-look ing and appe als to a wide range of te nants. Suc ces sful implem entatio n of our strateg y r equires our te ams to work tog ether wit h a shared v ision and c ommon value s. The se include f ocusing on c reativ e design and e nsuring sust ainabilit y andre sponsibilit y are e mbed ded in eve r y thing we do. We have fos tered an inc lusive culture th at is progre ssive an d hard-wor king, building a team pas sionate abo ut improving L ondon’s off ice sp ace. Delivering our 202 1 priorities Our primar y goal fo r 202 1 wa s to seek o ut new ac quisitions to he lp resh ape our po r tfo lio towards a gre ater propo r tion of prop er ties of fering f uture ‘ value- add’ opp or tunities . Agains t a compe titive market b ackdrop we had to wor k hard to fin d primarily of f-m arket opp or tunities using o ur skills and long- term rel ationships, an d were pre pared to s acrif ice s ome shor t- term inco me. During 2021 , we ag reed m ore such ac quisitions t han in any year since t he transf ormational m erger wit h London M erchant Se curitie s PLC in 2007 . T he 202 1 ac quisitions are s et out in mor e det ail on pages 8 0 and 81 . Ac quisitions tot alled £4 1 7 .5m, exc luding The M oor fie lds Estate EC1 which w e expe ct to acquire in 2026. We also anno unce d a nuance d shif t in our str ateg y to hold onto som e of our rec ent high qualit y dev elopmen ts for longe r than prev iously follow ing completio n. The se prop er ties are in re lative ly shor t sup ply and of fer s tate of the ar t ac comm odation, g ood environ mental p er forman ce and am enities . As a res ult, we belie ve they will o utpe rf orm the c entral Lo ndon of f ice market o ver the ne x t few ye ars. C onver sely , in an incre asingly po larise d of fic e market, we identi fie d a small number of o ur older buildings requiring c apital inves tment as p otential under per fo rmers whi ch we will gradually look to div est of. Johnson B uild ing and A ngel S quare comp leted in the ye ar and con tract s were exchange d in Januar y 2022 for the s ale of New Riv er Y ard EC1 . Tho ugh signif icantly le ss impac ted than 2020, Cov id- 19 continue d to cas t a shadow thr ough 202 1 . De spite this, wor k continu ed suc ces sfully at all o ur on-site proje cts. F ollowing the re stru cturing of our 55% interes t with Th e Por tman Es tate, we c ommenc ed a subs tantial new s cheme at 19-35 Baker Stre et W1 . Ac tions under o ur Net Zero Car bon Pathway hav e continue d throug h 202 1 an d we were involve d in a number of c limate changeinit iatives inc luding COP26. S ee pa ges 1 2, 1 3 and 54 formo re details . Ma ximising oc cupanc y remains ver y imp or tant and, in 2021 , ourass et manag ers co ntinued to fo cus on supp or ting our oc cupiers while als o ex tending lease s and remo ving break option s.At the sam e time, our prop er t y and fac ilities mana gers have wor ked with o ccupier s to deal with t he ongoing chal lenges and re stric tions res ulting from the p andemic . Our year en d EPR A vac ancy rate rem ains low at 1 .6%, c onsiderab ly below the wi der London of fice market. OUR 202 2 PRIORI TIE S — T o prog ress f uture pr ojects an d cons olidate exist ing plans including EP C upgrade s , plus deliv er y and exec ution acro ssthe b usiness . This include s work ing up planning applic ations on s everal pr ojects an d clearing impe diments to deve lopment as we ll as managing le ase bre aks andexpir ies — T o co mplete Soh o Plac e W 1 — T o co mplete and let Th e Feathe rston e BuildingEC 1 — T o fur t her deli ver on our ne t zero carb on progr amme and deve lop our soc ial and communit y e ngageme nt activ ities — Re tain and grow inc ome and c ash f low from the p or t folio — S eek ne w acquisitio n oppor tuni ties with upg rade pote ntial — C ontinue to wor k with oc cupiers an d employe es to addre ss their ne eds an d maintain high satis factio n ratings De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 32 Further polaris ation i n the London of fice market We made a nuanc ed ch ange to our strate g y and will now hold rec ently co mpleted de velopme nts for long er , re cognising t he gap bet wee n prope r ties which of f er high qualit y , adap table, mod ern spa ce appe aling to the mo st disce rning oc cupiers and other o f fice p roper ti es ope ned f ur ther in 202 1 . The se top tier p roper tie s are incre asingly soug ht af ter by oc cupiers an d investor s alike and of fer st rong flexibili ty in us e, high level s of wellbe ing and excellen t energ y/ESG cr edential s as well as go od de sign. Th ey are in relati vely shor t s upply and we are se eing stren gt hening deman d from o ccupier s who wish to at tract an d retain the m ost t alented emp loyees , and we exp ec t to se e rental gro wth f or such p roper tie s in 202 2. In additio n to rec ently co mpleted de velopme nts, we als o include high quali t y older ref urbishm ents or de velopme nts in this categ or y . The s ec ond cate gor y eithe r require signif icant c apital inves tment to re ach the highe st st andards or may n ot be cap able of reaching th at level . Vacanc y rates are rising f or the seprop er ties as o ccupier s choo se mor e moder n spac e or more f lexible solu tions and we ex pec t to see re nts and value s under per for m. The p roper tie s that we ac quire tend to be of se condar y qu alit y where we se e opp or tunit y to add value throug h creating t yp ically high qualit y D er went Lon don produ ct. Brun el Building W2 It was an ac tive ye ar of refinan cing with our t wo revo lving bank facilit ies ex tende d for anot her year to n ew fi ve-ye ar terms and asuc ces sful de but gre en bon d of £350 m with a 1 0-y ear term. Thel at ter was unsec ured and re sulted in prog ressi ve improve ments to our G reen Finan ce Framewo rk, f irst pub lished in201 9. The se acti vitie s have fur th er stren gt hene d our balan ce she et and f inancial pos ition. More d etails are on p age 94. In terms of oth er prior ities, w e were ver y ple ased to ob tain cer ti fic ation against t he National Equalit y S tandard whic h refle cts the hard w ork under t aken acros s the busin ess in this imp or tant area , with input f rom our Res ponsible Busin ess C ommit tee and ourDiv ersit y & Inclusi on Working Gro up. Our manage ment trainingprog ramme also c arrie d on in 202 1 with a f ur ther 26staf fme mber s benef it ting. Risk management Risk mana gement is an integ ral par t of our busin ess and is monitor ed reg ularly. This is split into c ategorie s conside ring thelikely impac t on str ateg y , op erations, f inancial p osition andst akeholder s. Our proje cts ge nerally take many y ears to comp lete, requiring long- term planning , risk mitigatio n and fin ancia l discip line. Per formance measurement and remuneration Key Per f ormanc e Indicator s (KPIs) help us me asure our per f ormanc e and ass ess th e ef fec tive ness of o ur strateg y. The se are liste d on pa ge 44 fo r each objec tive , but the pr incipal meas ures that we app ly to asce r tain overall b usiness p er form ance are total re turn ( TR), total pro per t y retur n (T PR) and tot al shareholder return (TSR). — T R combine s our divide nds with th e grow th in net as set valuepe r share (measure d using the EPR A NTA metric) toprov ide an overall r eturn for t he year and is m easure d against a p eer gr oup. — T PR measur es the inc ome and gr owt h in value from our prop er ties and is m easure d against an index of o ther relevantp roper tie s. — TSR c ompare s our divid ends and sh are price p er form ance meas ures with th e relevant inde x. TR, T PR and TSR are th e main per for mance m easure s we use todetermin e the majorit y of th e variable eleme nts of exec utive remune ration to ensure t here is stro ng alignment b et ween th e interes ts of shareh olders an d our decisio n makers. T here are als o non-f inancial t argets re prese nting 25 % of the p otential b onus which me asure our suc ces s in mee ting ESG and climate changere spon sibilities and th e nee ds of other s takehold ers. 33 Financ ial Stat ements Governance Strategic repor t OUR S TR A T E GY CONTINUED 2021 priorities 2021 progress Priorities for 2022 Key perf ormance measures Risks 1. T O OPT IMISE RE TURNS AND CRE A TE V A LUE FROM A B AL ANCED PORT FOLIO pa ge38 Se ek new ac quisiti ons in eme rging area s of Lond on with p otential to a dd value eit her by inc reasing flo or area o r upgrading to hig her quali t ystock Co mplete d £4 1 7 .5 m of acquisi tions (inc luding co sts) with inh erent va lue- add op por tuni ties and a gre ed to ac quire 230 Blac kf riars R oad SE 1 and T he Moo rf ields E state EC1 (se e page 21 ) — C omplete de velopm ent of S oho Pl ace andT he Feat hers tone Building an d letrem aining spac e — A ppoint m ain contr actor an d progr ess thes chem e at 1 9 -35 Baker S tree t — C ommen ce on-s ite work s at Net wor kBuilding — Pro gres s plan s for Bush H ouse, BakerS tre et joint ve nture and Th eMoor f ields Es tate — S eek f ur ther op por tuni ties wit hin thep or t folio to upg rade or r epos ition ass etstoma ximis e retur ns — Disp os e of prope r ties th at no longe r me etour inve stme nt crite ria — T otal r eturn — T otal p rope r ty r eturn — T otal s hareho lder ret urn — EPR A ear nings per s hare — Reversionar y percentage — Dev elopment potential — Void management — Pr incipal ri sks: 1 , 2, 3, 4 A , 4B, 4C , 5A , 5B, 5C, 6, 7 , 8 A — Emerging risks : A , D, E, F , G Disp ose of p rope rt ies that n o longer m eet o ur inves tmen tcriter ia Co mplete d £4 05. 1 m o f dispos als, in cluding John sonBuilding EC1 and A ngel Squa re EC1 which were d eem ed to have limi ted ups ide pote ntial Prog res s Soho P lac e W1 and The Fe athe rston e BuildingEC1 Bot h projec ts are on t rack to co mplete in H1 202 2. S oho Pl ace 87% is pre -let orpre -sold Se cure pre -lets at T he Fe ather stone B uilding In discus sions w ith a numb er of intere sted p ar ties fo r a range of re quireme nts Co mmenc e on-si te works at 19-35 Baker S tree t W1 Dem oliti on works c omme nce d Oc tober an d prefe rre d main build con tracto r was identified Prog res s regen eration o ppor t unities wi thin thep or t folio Suc ces sf ully obtain ed dual p lanning pe rmiss ion for re deve lopme nt of Net work Building W1 , b ough t in leaseh old intere st at Bus h House WC 2 and adv ance d ex tensi ve ref urbishm ent wor ks at Francis Ho use SW1 which i s 1 0 0% pre -let 2. TO GROW RECURR I NG E ARNI NGS AN D CASH F LOW pa ge40 Incre ase our am enit y and c ustom er exp erienc e of fer ing totenant s Op ened D L /78 in Oc tobe r , our f irs t hybri d amenit y sp ace avail able to our com munit y of cus tomer s, and la unche d new DL / A pp for t heir use — C ontinue to e nhance a menit y and cus tomer ex peri ence a cros s the po r tf olio — Ret ain and gro w incom e by proa ctiv ely mana ging voids an d expirie s while bot hex tending and in crea sing incom e where vi able — Lo ok to upgra de exis ting stoc k where opp or tunitie s arise to m ax imise inc ome — T otal r eturn — T otal p rope r ty r eturn — T otal s hareho lder ret urn — EPR A ear nings per s hare — Reversionar y percentage — T e nant ret ention — Void management — Pr incipal ri sks: 1 , 2, 3, 4 A , 4B, 4C , 5A , 5B, 5C, 6, 7 , 8 A — Eme rging risk s: A, B, C , D, E, F , G , H, I Co ntinue to wor k with ten ants to ens ure the saf e re- oc cupatio n of their wo rk plac es Maintain ed co ntinuou s dialogue wit h tenants a round C ovid-1 9 saf et y mea sures and intr oduc ed air quali ty m onitor ing in comm on areas of a ll buildings Manag e voids an d expirie s with a fo cus on ex tending in com e through r enewal s and rege ars Car ried o ut ass et mana geme nt acti vitie s over 6 5 2,700 sq f t, in creas ing rent by 9.2% fro m£29.2m to £31 .9m. O ur reten tion and re -let rate f or 202 1 was 77% and th e avera ge lease le ng th incre ase d from 6.2 y ears to 6. 3 year s Co nsider o ppor tuni ties to up grade ex isting s tock to optimis e inco me as vac ancie s occ ur Spe nt £1 7 m of c apex on s maller proje cts a cros s the po r tf olio during 2021 to improv e spac e and ame nit y of fering 1 Failure to implement th e Group’ s st rateg y 2 Risk of tenant s defaulting or tenant f ailure 3 Incom e declin e 4A Reduced development returns 4B ‘On-si te’ risk 4C C ontractor /su bc ontractor defau lt 5A C y ber at tack o n our IT sy stems Key to risks Principal risks (p ages 1 08 to 1 1 9 ) 5B C yb er at tack on our b uildi ngs 5C Signif icant bu siness inter ruption 6 Repu tational dam age 7 Our re silience to clima te change 8A Non -com pliance wit h health and s afet y legisl ation 8B O ther re gulato r y non- comp liance De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 34 2021 priorities 2021 progress Priorities for 2022 Key perf ormance measures Risks 1. T O OPT IMISE RE TURNS AND CRE A TE V A LUE FROM A B AL ANCED PORT FOLIO pa ge38 Se ek new ac quisiti ons in eme rging area s of Lond on with p otential to a dd value eit her by inc reasing flo or area o r upgrading to hig her quali t ystock Co mplete d £4 1 7 .5 m of acquisi tions (inc luding co sts) with inh erent va lue- add op por tuni ties and a gre ed to ac quire 230 Blac kf riars R oad SE 1 and T he Moo rf ields E state EC1 (se e page 21 ) — C omplete de velopm ent of S oho Pl ace andT he Feat hers tone Building an d letrem aining spac e — A ppoint m ain contr actor an d progr ess thes chem e at 1 9 -35 Baker S tree t — C ommen ce on-s ite work s at Net wor kBuilding — Pro gres s plan s for Bush H ouse, BakerS tre et joint ve nture and Th eMoor f ields Es tate — S eek f ur ther op por tuni ties wit hin thep or t folio to upg rade or r epos ition ass etstoma ximis e retur ns — Disp os e of prope r ties th at no longe r me etour inve stme nt crite ria — T otal r eturn — T otal p rope r ty r eturn — T otal s hareho lder ret urn — EPR A ear nings per s hare — Reversionar y percentage — Dev elopment potential — Void management — Pr incipal ri sks: 1 , 2, 3, 4 A , 4B, 4C , 5A , 5B, 5C, 6, 7 , 8 A — Emerging risks : A , D, E, F , G Disp ose of p rope rt ies that n o longer m eet o ur inves tmen tcriter ia Co mplete d £4 05. 1 m o f dispos als, in cluding John sonBuilding EC1 and A ngel Squa re EC1 which were d eem ed to have limi ted ups ide pote ntial Prog res s Soho P lac e W1 and The Fe athe rston e BuildingEC1 Bot h projec ts are on t rack to co mplete in H1 202 2. S oho Pl ace 87% is pre -let orpre -sold Se cure pre -lets at T he Fe ather stone B uilding In discus sions w ith a numb er of intere sted p ar ties fo r a range of re quireme nts Co mmenc e on-si te works at 19-35 Baker S tree t W1 Dem oliti on works c omme nce d Oc tober an d prefe rre d main build con tracto r was identified Prog res s regen eration o ppor t unities wi thin thep or t folio Suc ces sf ully obtain ed dual p lanning pe rmiss ion for re deve lopme nt of Net work Building W1 , b ough t in leaseh old intere st at Bus h House WC 2 and adv ance d ex tensi ve ref urbishm ent wor ks at Francis Ho use SW1 which i s 1 0 0% pre -let 2. TO GROW RECURR I NG E ARNI NGS AN D CASH F LOW pa ge40 Incre ase our am enit y and c ustom er exp erienc e of fer ing totenant s Op ened D L /78 in Oc tobe r , our f irs t hybri d amenit y sp ace avail able to our com munit y of cus tomer s, and la unche d new DL / A pp for t heir use — C ontinue to e nhance a menit y and cus tomer ex peri ence a cros s the po r tf olio — Ret ain and gro w incom e by proa ctiv ely mana ging voids an d expirie s while bot hex tending and in crea sing incom e where vi able — Lo ok to upgra de exis ting stoc k where opp or tunitie s arise to m ax imise inc ome — T otal r eturn — T otal p rope r ty r eturn — T otal s hareho lder ret urn — EPR A ear nings per s hare — Reversionar y percentage — T e nant ret ention — Void management — Pr incipal ri sks: 1 , 2, 3, 4 A , 4B, 4C , 5A , 5B, 5C, 6, 7 , 8 A — Eme rging risk s: A, B, C , D, E, F , G , H, I Co ntinue to wor k with ten ants to ens ure the saf e re- oc cupatio n of their wo rk plac es Maintain ed co ntinuou s dialogue wit h tenants a round C ovid-1 9 saf et y mea sures and intr oduc ed air quali ty m onitor ing in comm on areas of a ll buildings Manag e voids an d expirie s with a fo cus on ex tending in com e through r enewal s and rege ars Car ried o ut ass et mana geme nt acti vitie s over 6 5 2,700 sq f t, in creas ing rent by 9.2% fro m£29.2m to £31 .9m. O ur reten tion and re -let rate f or 202 1 was 77% and th e avera ge lease le ng th incre ase d from 6.2 y ears to 6. 3 year s Co nsider o ppor tuni ties to up grade ex isting s tock to optimis e inco me as vac ancie s occ ur Spe nt £1 7 m of c apex on s maller proje cts a cros s the po r tf olio during 2021 to improv e spac e and ame nit y of fering Achie ved On t arge t Not achieved A The f uture of of f ice s B Long-te rm implicat ions of Co vid- 1 9 o n our por t folio C Politic al risk arising f rom gover nment re spons e to issue s D The ris ing cos t of obtaining planning p ermiss ion E Diminis hed deve lopm ent pip elin e F In creasing imp or tanc e of amenitie s Key to risks Emerging risks (p ages 1 04 and 1 05) G Adoption of technolog y H The imp or tanc e of ESG-rel ated c oncer ns to our key stakeholders I Impac t on busines ses ar ising from th e UK’s commitme nt tobe ne t zero carb on by 2050 Key to progre ss 35 Financ ial Stat ements Governance Strategic repor t 2021 priorities 2021 progress Priorities for 2022 Key perf ormance measures Risks 3. TO A T TR ACT , RE T A I N AND DEV ELOP T A LENTE D EMPLOYEE S pa ge4 1 Co ntinue ‘F it for th e Future’ pro gramme A fur th er 26 emplo yee s par ticip ated in the F it for t he Future p rogramm e — Fur the r embe d diver sit y and in clusion intothe b usines s — Es tablis h focu s group to re view st af f sur ve y results a nd put f or ward recommendations to the E xecu tiveC ommit te e — Co ntinue with health and wellbeing initiati ves wi th a stro ng foc us on ment alhealt h and wor k-life bal ance — Co ntinue regular town hall meetings toret ain high level s of comm unicatio n andcol laboratio n — Hold o ur third all emp loyee c ompan y awayday — T otal r eturn — T otal s hareho lder ret urn — St aff satisf action — Pr incipal ri sks: 5A , 5B, 5C, 6, 7 , 8A , 8B — Eme rging risk s: B, H, I Co ntinue c ore skill s ses sions and te chnic al work shop s and res ume unc onscio us bias training Co nduc ted nine c ore skill s ses sions an d fiv e technic al wor kshop s during the y ear . 53pe ople re cei ved un cons cious bia s training in co llabo ration withC hickensh ed Continue health and wellbeing initiatives Various he alth and we llbeing e duc ation se ssio ns con ducte d, fur th er Work plac e Ment alHealth F irst A id Champio ns app ointed, c are pac kage s sent to t hose liv ing alone durin g lockdow n Ensure s afe re -oc cupati on of our of f ices a nd rev iew hybr id work ing arrang ement s to ensure co llabo ration ismain taine d All s taf f prov ide d with upd ated of f ice pr otoc ols and at ten ded 30 -minute onl ine induc tion on C ovi d- 19 safet y me asures b efor e returning to t he of fi ce Work towar ds achiev ing Nation al Equalit y St andards acc reditatio n Gaine d Nationa l Equalit y St andard c er tif icat ion in De cemb er and ran ked in top 5% of all co mpanies s ur veye d – se e page s 58 and 59 Co nduc t our four th f ull emp loyee s ur vey in Oc tobe r202 1 Co mplete d sur vey in Q4 2021 . 94% of resp ondent s agre ed th at they ar e ‘proud to work f or De rwe nt Lond on’ – see p age 60 4. TO DESIGN, DELI VER A ND OPER A T E OUR BUILDIN GS R ESPONSIBL Y pa ge42 Co ntinue to emb ed o ur Net Zero C arbon P athway requirements acros s the busi ne ss Publ ished o ur revis ed Re spon sible Dev elopm ent Framew ork ou tlining new minimum net ze ro require ments f or our de velopm ent proje cts . Launc hed n et zero c arbo n occ upier sur ve y (see pa ge 1 3) to gain gre ater unde rst anding of how we c an work to gethe r to achiev e goals . Submit te d planning ap plica tion for a s olar fa rm on our S cot tish l and. L aunche d Intellige nt Building initiat ive to capture operational energy consumption of managed proper ties — Pro gres s ass et spe cif ic net zer o carb on act ion plan s, inclu ding fut ure EPC requirements — Review a nd commence im plementati on offin dings from n et zero c arbo n oc cupiers ur vey — Pro gres s our ren ewable en erg y and c arbo n of fs et proje cts on o ur Sc ot tish lan d — C ontinue to p rogre ss real igning our Scie nce-Ba sed T arget s in accor dan ce withe merging s ec tor guidan ce — C ontinue to d evelop, re fine an d embe d ourapp roach to c arb on acc ounting — Implement recomm endations from Chicke nshe d’ s re view of our Co mmunit yFund — De velop an ap proac h to meas uring our soc ial value — T otal r eturn — T otal s hareho lder ret urn — BREE AM r atings — Ene rg y per fo rmanc e cer t ific ates — Ene rg y intensit y — C arbon in tensit y — Ac ciden t fre quenc y rate — Pr incipal ri sks: 1 , 4B , 4C, 5 A, 5B, 5 C, 6, 7 , 8 A , 8B — Eme rging risk s: A, B, D, F , H , I Co ntinue to pro gres s realig ning our Sc ience -Bas ed T ar gets in ac cor dance wi th guidan ce Est ablish ed building sp eci fic op eratio nal ener g y targe ts, alig ned wi th a 1 .5°C science -based scenario De velop, ref ine and e mbed o ur appro ach to carb onaccounting Co nduc ted vari ous intern al works hops De liver t he nex t roun ds of our C ommunit y Fund and c ontinue to ex te nd our cr iteria to c onside r charities facingfinancial hardship Supp or ted 1 9 dif f erent pr oject s during 2021 with a foc us on well being 5. TO M AINT AIN ST RO NG AND FLE XIBLE FINANCI NG pa ge43 Maintain o r stren gt hen availa ble facili ties Iss ued our f irs t sterlin g-den ominated g reen b ond fo r £350 m for a ter m of 1 0 y ears . Bot h the £ 450m a nd £1 0 0m Revo lving Cre dit Facili ties wer e ex tende d by one y ear to 2026 — Maint ain or stre ng then avail able facili ties — Maint ain suf fi cient he adroo m on financialcovenants — Ensure, where reasonable, green finance isuse d to fun d eligible gr een pr oject s, andth at the Gre en Finan ce Frame work isco nsisten tly applie d — T otal r eturn — T otal s hareho lder ret urn — Ge aring and av ailable resou rces — Interest cover rati o — Pr incipal ri sks: 1 , 2, 3, 4 A , 4B, 5A , 5B, 5C , 6, 7 , 8A ,8B — Eme rging risk s: B, C Maintain s uf fic ient he adroom o n financ ial cov enants Intere st co ver rem ains stron g at 464%; prope r ty in com e could fa ll by 69% be fore breaching the interest cover covenant T r ansition a ll relevan t loans and s waps fro m LIBOR to SONI Abase d All L IBOR linked lo ans and swap s were tr ansitio ned to a S ONIA ba sis during they ear OUR S TR A T E GY CONTINUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 36 2021 priorities 2021 progress Priorities for 2022 Key perf ormance measures Risks 3. TO A T TR ACT , RE T A I N AND DEV ELOP T A LENTE D EMPLOYEE S pa ge4 1 Co ntinue ‘F it for th e Future’ pro gramme A fur th er 26 emplo yee s par ticip ated in the F it for t he Future p rogramm e — Fur the r embe d diver sit y and in clusion intothe b usines s — Es tablis h focu s group to re view st af f sur ve y results a nd put f or ward recommendations to the E xecu tiveC ommit te e — Co ntinue with health and wellbeing initiati ves wi th a stro ng foc us on ment alhealt h and wor k-life bal ance — Co ntinue regular town hall meetings toret ain high level s of comm unicatio n andcol laboratio n — Hold o ur third all emp loyee c ompan y awayday — T otal r eturn — T otal s hareho lder ret urn — St aff satisf action — Pr incipal ri sks: 5A , 5B, 5C, 6, 7 , 8A , 8B — Eme rging risk s: B, H, I Co ntinue c ore skill s ses sions and te chnic al work shop s and res ume unc onscio us bias training Co nduc ted nine c ore skill s ses sions an d fiv e technic al wor kshop s during the y ear . 53pe ople re cei ved un cons cious bia s training in co llabo ration withC hickensh ed Continue health and wellbeing initiatives Various he alth and we llbeing e duc ation se ssio ns con ducte d, fur th er Work plac e Ment alHealth F irst A id Champio ns app ointed, c are pac kage s sent to t hose liv ing alone durin g lockdow n Ensure s afe re -oc cupati on of our of f ices a nd rev iew hybr id work ing arrang ement s to ensure co llabo ration ismain taine d All s taf f prov ide d with upd ated of f ice pr otoc ols and at ten ded 30 -minute onl ine induc tion on C ovi d- 19 safet y me asures b efor e returning to t he of fi ce Work towar ds achiev ing Nation al Equalit y St andards acc reditatio n Gaine d Nationa l Equalit y St andard c er tif icat ion in De cemb er and ran ked in top 5% of all co mpanies s ur veye d – se e page s 58 and 59 Co nduc t our four th f ull emp loyee s ur vey in Oc tobe r202 1 Co mplete d sur vey in Q4 2021 . 94% of resp ondent s agre ed th at they ar e ‘proud to work f or De rwe nt Lond on’ – see p age 60 4. TO DESIGN, DELI VER A ND OPER A T E OUR BUILDIN GS R ESPONSIBL Y pa ge42 Co ntinue to emb ed o ur Net Zero C arbon P athway requirements acros s the busi ne ss Publ ished o ur revis ed Re spon sible Dev elopm ent Framew ork ou tlining new minimum net ze ro require ments f or our de velopm ent proje cts . Launc hed n et zero c arbo n occ upier sur ve y (see pa ge 1 3) to gain gre ater unde rst anding of how we c an work to gethe r to achiev e goals . Submit te d planning ap plica tion for a s olar fa rm on our S cot tish l and. L aunche d Intellige nt Building initiat ive to capture operational energy consumption of managed proper ties — Pro gres s ass et spe cif ic net zer o carb on act ion plan s, inclu ding fut ure EPC requirements — Review a nd commence im plementati on offin dings from n et zero c arbo n oc cupiers ur vey — Pro gres s our ren ewable en erg y and c arbo n of fs et proje cts on o ur Sc ot tish lan d — C ontinue to p rogre ss real igning our Scie nce-Ba sed T arget s in accor dan ce withe merging s ec tor guidan ce — C ontinue to d evelop, re fine an d embe d ourapp roach to c arb on acc ounting — Implement recomm endations from Chicke nshe d’ s re view of our Co mmunit yFund — De velop an ap proac h to meas uring our soc ial value — T otal r eturn — T otal s hareho lder ret urn — BREE AM r atings — Ene rg y per fo rmanc e cer t ific ates — Ene rg y intensit y — C arbon in tensit y — Ac ciden t fre quenc y rate — Pr incipal ri sks: 1 , 4B , 4C, 5 A, 5B, 5 C, 6, 7 , 8 A , 8B — Eme rging risk s: A, B, D, F , H , I Co ntinue to pro gres s realig ning our Sc ience -Bas ed T ar gets in ac cor dance wi th guidan ce Est ablish ed building sp eci fic op eratio nal ener g y targe ts, alig ned wi th a 1 .5°C science -based scenario De velop, ref ine and e mbed o ur appro ach to carb onaccounting Co nduc ted vari ous intern al works hops De liver t he nex t roun ds of our C ommunit y Fund and c ontinue to ex te nd our cr iteria to c onside r charities facingfinancial hardship Supp or ted 1 9 dif f erent pr oject s during 2021 with a foc us on well being 5. TO M AINT AIN ST RO NG AND FLE XIBLE FINANCI NG pa ge43 Maintain o r stren gt hen availa ble facili ties Iss ued our f irs t sterlin g-den ominated g reen b ond fo r £350 m for a ter m of 1 0 y ears . Bot h the £ 450m a nd £1 0 0m Revo lving Cre dit Facili ties wer e ex tende d by one y ear to 2026 — Maint ain or stre ng then avail able facili ties — Maint ain suf fi cient he adroo m on financialcovenants — Ensure, where reasonable, green finance isuse d to fun d eligible gr een pr oject s, andth at the Gre en Finan ce Frame work isco nsisten tly applie d — T otal r eturn — T otal s hareho lder ret urn — Ge aring and av ailable resou rces — Interest cover rati o — Pr incipal ri sks: 1 , 2, 3, 4 A , 4B, 5A , 5B, 5C , 6, 7 , 8A ,8B — Eme rging risk s: B, C Maintain s uf fic ient he adroom o n financ ial cov enants Intere st co ver rem ains stron g at 464%; prope r ty in com e could fa ll by 69% be fore breaching the interest cover covenant T r ansition a ll relevan t loans and s waps fro m LIBOR to SONI Abase d All L IBOR linked lo ans and swap s were tr ansitio ned to a S ONIA ba sis during they ear 37 Financ ial Stat ements Governance Strategic repor t OUR S TR A T E GY CONTINUED 1. T O OPT IMISE RE TURNS AND CRE A TE V A LUE FROM A B AL ANCED PORT FOLIO 48 % UNDER DEV EL OPMENT / POTE NTIAL 52 % CORE INCOME F ut u r e ap pra isal 24 % Under a pp ra is al 7 % Consen ted 3 % On-s it e d ev el o pm en ts 13 % Co r e incom e 52 % 5.57 M SQ FT 1 £178.4 M rent A B C D E G F On -si te re f urbishm e nt s 1 % 1 Com pri se s 4.82m sq f t o f exi st ing bu ildin gs plu s 0.75m sq f t o f on-s ite d eve lopm en ts an d on-s ite r ef urb ishm ent s De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 38 Ou r por tfol io i s con sta nt ly c ha ng in g but pr ope r ti es fa ll i nt o one o f sev era l mai n cat ego rie s. The ch art sho wn , wh ic h we re fe r to a s the ‘ Derwen t do ug hn ut’ , sho ws ho w ou r 5. 6m sq f t por tfol io i s ba la nced betwee n pro per t ies w ith pot ent i al t o add fur ther va lue through re generation and th ose wh ich h av e a lr eady bee n im prov ed but w he re ou r asset m an ag eme nt sk i lls can co nt i nu e to g ro w va l ue a nd i ncom e. Th is sect io n set s out t he t ypi c a l li fe cyc l e (A to G ) o f ou r pro per t ies , exp la in in g ho w ma in tai ni ng por tfol io ba lan ce is a k ey factor i n our strateg y . S takeholder , cl i ma te c ha ng e a nd wi de r E SG i mpa cts are also k ey considerations in the s trat eg y we p ur sue f or ea ch i nd ivid ua l pro per t y . 48% UNDER DE VEL OPMENT / POT ENTI AL A Acquiri ng oppor tunities Our pro per t y life c ycle st ar ts with the a cquisition of b uild ings orsites w ith mod est c apital value s. The se are usually in come pro ducing but are of te n charac terise d by low rents p er sq f t. Wepar ticul arly look fo r potential to add ar ea to the building and/orto improve th e qualit y , amenit y an d environme ntal per f ormanc e of the spac e. Th ey may also b e in locatio ns that haveunde rper fo rme d or are due to ben efit f rom infras truc ture upgrad es. If th ese fe atures are no t apparent or w e do not se e goo d value, we are disc iplined in our c apital allo cation an d are not ‘ forc ed buy ers’ . As p reviou sly noted, 2021 was a par ticular ly acti ve year fo r us in se curing new opp or tunitie s for fu ture sch emes , including new ‘super -sites’ of fe ring consid erable sc ale for the f uture. B The impor t ance o f cash f low By a cquiring pre dominantly oc cupied p roper ti es that pro vide ca sh flow, we have time to w ork up our plan s while en joy ing an incom e yield. T his give s us the ne ces sar y f lexibilit y to asse ss what to do an d when to do i t. Our pl ans for a building regul arly go throu gh seve ral iterations before set tling on a n optimal soluti on. C Dialogue with t enants a ndlandlor ds When ex ploring the b est p lan for th e building, we spe ak with exis ting tenants an d, where app ropriate, any ultimate lan dlord or other relevant s takeho lder . T his helps us ex te nd incom e but we gen erally also a gree l andlord break s at future d ates to provi de us with flexibili ty o ver the timing of vac ant po sse ssion. T his may involve acc epting inc ome be low market level s but he lps us ret ain cash f low until we are read y to comm ence a s cheme . During this pe riod, we willnegot iate with landlords i f we do not hold t he prop er t y free hold, and will wor k with our many de sign team rel ationships , including exp er ts in minimising any adver se so cial and environm ental impa cts, to arri ve at a firm de sign. T his also require s liaising with the re levant planning au thoritie s to see k planning co nsent and c onsulting wit h loc al communitie s and othe r key stakeh olders . D Risk mitigation We tr y to achieve t he approp riate balanc e of risk and re turn for thebu siness . This enable s us to star t s cheme s spe culativ ely , i.e.with out any pre -let ting in place . By ens uring the end -produc t will appe al to as many oc cupiers as p oss ible, we of ten rec eive earlyinter est f rom potent ial tenants onc e we are on site. D esign and c onstr uction of t hese l arge and c omplex projec ts require s con siderable sk ill, expe rienc e and teamwork s o we have dev elope d long-st anding relati onships with a c hose n group of co nsultants , con tractor s and subc ontrac tors to minimise risks o f delive r y . Tho se risks pr incipally rel ate to time delay s and/or cost o verrun s, but there ar e many technic al and physi cal con straints to o. Prepar ation of an annual ‘ fi ve-ye ar plan’ help s us anticipate and m aintain a balan ce be twe en incom e/ divi dend grow th an d value adding throug h our higher risk p roject s, both n ow and into the f uture, influen ce d by our resp onsibilities to o ur various st akeholder s. E Pre-let ting during construction Suppo r ted by our re putatio n for deli vering well-d esigne d and af fordab le buildi ngs, w e frequ ently de-r isk projec ts by agr eeing pre -lett ing terms with on e or more tenan ts during the c onstr uctio n phas e. The mo mentum that t his provide s enc ourage s us to con sider the n ex t phase of our p roject pip eline too, ad ding fur ther value wher e we see op por tunitie s and planning m any years into thef uture. 52% COR E IN COME F Income and reversion Onc e a building is complete d and let, i t moves to th e ‘core inc ome’ par t of our ‘doughnu t’ c har t. Here, we f ocus our p or t folio manag ement sk ills on satisf ying our ten ants’ nee ds, gro wing or maintaining inc ome and minimising voids , and adding fur th er value where we s ee opp or tunitie s. In the C ovid-impac ted wor ld, we have foc used o n ex tending lease s or remov ing lease br eaks, s ometime s for re lative ly shor t terms , to help our o ccupier s bet ter und erst and their ev olving ne eds while keeping o ur vacanc y rate low. G Recycling a sset s We will of ten look to disp ose of a pro per t y when w e believ e that we have ex trac ted mo st of the up side in value, or wh ere it no longe r satis fies o ur investm ent crite ria. This f rees up t ime and finan ce forth e nex t gener ation of acquisi tions and proje cts . In today’s marketp lace wh ere top qualit y buildings of fer ing adaptabilit y, environ mental b enef its and exc ellent ame nities are in sho rt s upply , we anticipate o utpe rf ormanc e against b enchmar ks over th e shor t- to m edium-term s o are elec ting to hold c er tain tier one prop er ties fo r longer than pr eviously. 39 Financ ial Stat ements Governance Strategic repor t OUR S TR A T E GY CONTINUED 17 11 14 13 11 4 39 47 5 12 9 9 9 – 15 10 35 30 20 40 25 45 5 0 2021 2022 2026 2025 2024 2027+ Contracted r ental income (%) 2023 Change in lease expiry profile a t December 2021 (vs December 2020) 31 December 2020 31 December 2021 2. TO GROW RECURR I NG E ARNI NGS AN D CASH F LOW Prop er t y valuations are e ssen tially determine d by con tracte d and exp ecte d fut ure cash f lows in combinat ion with a market y ield which take s acc ount of risk , grow th exp ect ations, quali t y , environ mental c onsider ations and oth er fac tors. Creating and then capturi ng reversion By e stab lishing the right c onditio ns for a prop er t y , we c an both add value over t he longer -term and inc rease c ash flow, bu t they c an oc cur at dif feren t times of the p roper t y c ycle. Th e value creatio n norm ally come s firs t as expe ct ations of rent al grow th eme rge there by giving r ise to what we c all ‘reversi on’ , i.e. th e expe ctat ion that inc ome will grow f rom its c urrent pas sing level . Asset mana gement ac tions Our as set mana gers se ek to cap ture incom e rever sion through r ent revi ews, lease r egears o r other fo rms of leas e restr uctur ing. This is under pinned by s trong rel ationships wi th occ upiers and always with a fo cus on th e nee ds of our loc al communitie s and othe r stake holders . In rece nt years , we have be en suc ces sful at capt uring rever sion. Rent al grow th, howe ver , h as bee n slow sincet he EU refere ndum in 20 1 6 and ren ts have fallen in inf lation- adjusted ter ms (see Lon don market re view on pa ges 1 4 to 1 7). What we do to c apture r eversion — we wo rk with tenant s and con sultants to arr ive at appro priate rent review outc omes; — we n egotiate to ex tend lea ses or re move bre ak clause s; — we ar range ‘blo ck dates’ to gain pos ses sion of buildings whenas cheme is p lanne d ; — we re view leve ls of ‘grey ’ spac e, i.e. flo or area that is let butwhic h is not curre ntly oc cupied or is b eing markete d byatenant; — we tr y to anticipate o ur tenants’ ne eds, th ereby opt imising inco me. E xamples are f ixed o r minimum rental uplif t s and a flexib le approach to dilap idations and alie nation claus es in lease s; and — o ccupier s are incre asingly looking f or flexibili ty an d adapt abilit y . We have long taken a f lexible appro ach at many of our ass ets, f or example at T ea Building E 1 . We als o lease sp ace to flexib le off ice p rovide rs and have an e stablis hed ‘Furnish ed and Flexib le’ off er which we are adding to. At oth er buildings, we aim for longe r leases , par ticul arly on large r lett ings. PERFORMAN CE M E ASU RES We use like-f or-like rent analys is ( se e EPR A definit ions on pa ge 27 4) to mea sure how gro ss and ne t rental inc ome has g rown within the n on-de velopme nt segm ent of the p or tf olio. We monitor ir rec overable c osts t hrough the EPR A c ost r atio and void p ercen tage s. We also pl ace co nsiderable em phasis on growing EPR A ear nings and return s to shareholde rs over thelong- term. 53 36 7 11 29 34 9 17 2 2 30 20 50 60 40 70 10 0 Up to 5 5 to 10 15 to 20 Over 20 Contracted r ental income % 10 to 15 Years to expi ry Profile of rental income expi ry No lease breaks exercised Lease breaks exercised at first opportunity De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 40 3. TO A T TR ACT , RE T A I N AND DEV ELOP T ALENTED EM PLOYEES Our emp loyees ar e hugely valuable in the su cce ssf ul deli ver yofDe rwe nt London’s strateg y and o ur long-term busine sspe rf ormanc e. We are an inclusiv e and resp ect f ul employer t hat welcom es diver sit y and prom otes equ alit y . We have a high pe rf orming, progr essi ve and co llabor ative culture, c oupled w ith a cons ultative and prof essio nal leader ship st yle – one th at focus es on teamwo rk and ac ting with integr it y to build long-term rel ationships wi th our col league s and othe r stakeho lders. O ur employe es are our br and ambas sador s and we ther efore inve st cons iderable time an d res ource s in developm ent and grow th o ppor tunit ies. Whe n we rec ruit ex ternal ly , w e look for ou tst anding individual s who bring new ide as, skill s and comp etencie s to the busine ss. The G roup’ s repu tation s tems from b ehavio urs and value s promo ted by the B oard and t hese are r einforce d through o ur induc tion progr amme, pe rf ormanc e manage ment pro ces s, cor eskills work shops an d our manage ment and lea dership development progra mmes. Our structure enables compl ex trans action s to be manage d ef fe ctiv ely and de cisions made quicklywith t he overall aim of cr eating value and dri ving inc ome grow th acr oss our p or t folio. Alth ough we are organis ed by discipline , we assem ble teams for sp ecif ic projec ts that draw onexp er tise f rom acros s the bus iness to inc rease c reativ it y and innovatio n. Coll aborati on is also fac ilitated t hrough a numbe r of suppo r ting commit te es (for example th e Cos t, Cre dit, Sust ainabilit y and Health an d Safet y C ommit tee s) which, togethe r with the projec t teams, re por t into our E xec utive C ommit tee . Der wen t London c onduc ted anot her st aff s atisfac tion sur ve y in Q42021 which achieve d ver y high sc ores an d a resp onse rate of 97%. Thes e sur veys ar e a forum fo r staf f to pro vide hon est, o pen fee dback , helping us i dentif y are as where we h ave made a po sitive impac t and oppo r tunities f or improvem ent going for ward. T he Group enjoy s a high rate of staf f re tention with 29 % having be en with th e busines s for more t han ten year s but we are ple ased to have als o welcom ed 30 new em ployee s in 202 1. We want all our employ ees to b e able to bring their t rue selv es towork , fee l valued and b e par t of a happy an d suppor ti ve team. Asare sult, diver sit y and well being remain high on t he agen da and we were de lighted to b e awarded th e National Equalit y St andard acc reditat ion for e qualit y , diver sit y and inclusio n at the end of 202 1 ,a signif icant miles tone in our journ ey . We remain fo cuse d on building on this stro ng foundati on and embe dding our dive rsit y and inclusion ambi tions thro ughout t he busine ss with me chanisms in plac e for c ontinuous re view and me asureme nt of progre ss. 90.5 % Overall employee satisfaction 94 % Pro ud to work at D er went Lo ndon 89 % St af f retent ion 25 Sav ile Ro w W1 41 Financ ial Stat ements Governance Strategic repor t OUR S TR A T E GY CONTINUED 4. TO DESIGN, DELI VER A ND OPER A T E OUR BUILDINGS RESPONSIBL Y Deli vering we ll - designe d, adaptab le, occ upier-fo cuse d buildings is an integral p ar t of our busines s mod el. We beli eve the se buildings of fer b et ter long-term v alue for oc cupiers , reduc e let ting risk and void leve ls and co mmand be tte r rents, y ields and value s. Set ting high s tandard s in terms of desig n and environm ental res pon sibilit y builds f lexibil it y , lo ngev it y an d climate resil ienc e intoour por t fo lio, not just in our n ew develop ments b ut also in the prop er ties we man age. T o m eet our t arget of be coming a n et zero car bon busin ess by 203 0 (see pa ge 52 for more det ails) , we must de velop buildings that are even m ore ener g y ef ficie nt, powe red by re newable ener g y and have ver y low emb odie d carb on foot prints. L ikewise, we must r educ e our manag ed prop er ties’ relian ce on natur al gas and fur th er improve their energy c onsum ption. We want to ensure our p or t folio is f it for purp ose o ver the long- term and c ontinues to gen erate the re turns we exp ec t. Our appr oach to be coming n et zero car bon is set o ut in fur th er det ail in our Respon sibilit y sec tion on pa ges 52 to 55, togethe r withour f ull TCFD ( T ask F orce on C limate-rel ated Financial Disclo sures) disclos ure on page s 68 to 73. We work with o ur stakeho lder group s to ensure we are me eting their ex pec tations an d stan dards, as well a s acting re sponsibly. This c an range fro m engaging with t he loc al communitie s in and around o ur buildi ngs , through using th e bes t designe rs and con tractor s, to ensure o ur buildi ngs me et the s tandard s we set (see pag es 26 and 27 for mor e information o n stakeho lder engage ment). An ex panding bo dy of ev idenc e shows that a b uild ing ’ s leasing cre dentials are inc reasingly inf luence d by its e nvironmen tal cre dentials. EP C ratings are a v isible and comm only used sust ainabilit y metri c. For thc oming chang es to MEES legislation arese en as an impor t ant mome nt for the s ecto r . Our p or tf olio is comp liant with 2023 legislat ion (EPC ‘E ’ or above) and 4 0% 2030 comp liant (EPC ‘B ’ or above) excluding proje cts whic h acco unt for afur th er 1 8%. In 202 1 we com missione d a third par t y rep or t to determine t he upgrad e cos ts to ensure 2030 c omplianc e acros s our por t fo lio. Weestimate i t will cost c .£97 m by 2030 of w hich par t may be rec overab le through the s er vic e charge. A n exercis e is now under way to prio ritise th e order of wor ks. S ee pa ge 55 for fur th erdetails . Mem ber s of t he Sus t ainab ilit y a nd 80 Ch arl ot te S tr ee t Build ing Man age men t tea ms De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 42 5. TO M AINT AIN ST RO NG AND FLE XIBLE FINANCI NG We financ e our busine ss using e quit y and a mod erate level of de bt from a wi de variet y of so urces . We are relation ship driven and v alue con sistenc y and reliabilit y with o ur lenders b ut we also lo ok to be progressive and in novative. Our ove rriding princ iple is one of mod est f inancial lever age and gene rous interes t cove r , to balan ce the r elativ ely higher risk at tach ed to our rege neration s chem es. Using a c ombination of unse cured f lexible revo lving bank fac ilities and long er-ter m fixe d rate debt (b oth se cured an d unsec ured), we can adjust th e level of drawn debt to o ur day-to- day requiremen ts. We aim to maintain consi derable he adroom unde r our facilitie s to enable us to mo ve quickly when a cquisition o ppor tunit ies arise. This has a c ost in ter ms of non-u tilisation fe es bu t also demo nstrates t hat cash f lows can b e fund ed with out del ay and reas sures our man ageme nt team and our s takeholde rs that the deve lopment pip eline is cap able of being f inance d and deli vere d witho ut over stretc hing the balan ce she et. In 202 1 , we e x tended o ur long-term uns ecure d fixe d rate debt por t fol io with a debu t gree n bond is sue of £35 0 million. This was suppo r ted by so me updates to o ur Green F inance Framew ork, originally ad opted in 201 9. Th e bond is sue was ver y well re ceiv ed and pri ced at jus t under 2% pa f or a 1 0 -year te rm. It lower s our weighte d average c ost of b orrowing while ex ten ding our financing headr oom and op ening up a new for m of fixe d rate debt to supplem ent the c onver tible b ond and pri vate plac ement m arkets where we ar e already we ll known . We also ex tende d our tw o revo lving bank fac ilities, re paid a small b ank loan sec ured on theB aker Stre et prop er ties pre viously h eld in joint owner ship withT he Por tman E state and c onver te d our bank fac ilities fro m LIBOR to S ONIA . Der wen t London’s financing mo del is ba sed on t he fol lowingp rincip les: — c onser v ative f inancial levera ge to balan ce the b usiness’ relatively h igh operational leverage; — a s trong fo cus on intere st cov er to suppor t o ur credit ra ting (Fitch is suer def ault rating of ‘ A-’ with a n egative ou tlook ) ; — b orrowing f rom a diver se group of re lationship len ders, b oth banks an d institu tions, wh o unders tand and sup por t our busi ness model; — man aging the c ost of de bt but als o looking to hav e signif icantpro tecti on against p ossible intere st rate rise s andlong ave rage debt m aturitie s; — ke eping str ucture s and cov enants simple an d unders tandable and thinking ah ead; and — en suring the Gro up’ s f inancing s trateg y supp or ts and is con sistent with o ur overall bus iness go als. This app roach pro vides f inancial st abilit y and he lps us when con sidering is sues suc h as going con cern an d viabilit y st atements . Our unse cure d debt facili ties have similar f inancial co venants an d we value long-te rm relatio nships with o ur lenders , valuing the stab ilit y and mutual und erst anding that this cre ates over an appro ach that se eks the v er y lowes t funding co st. OUR REIT S T A T US Der wen t London p lc has bee n a Real Est ate Investm ent T r ust (REIT ) since J uly 2007 . T he REIT reg ime ( se e pag e 27 6) was launch ed to prov ide a str uctur e which close ly mirrors th e ta x po sition of an inve stor holding pro per t y direc tly and remo ves ta x inequali ties be twe en dif fere nt real es tate inves tors. REI T s are principal ly proper ty investors with tax-exempt propert y rental busine sse s, but re main subject to c orpo ration ta x on no n- exempt inc ome and gains . In addition, we are re quired to dedu ctwithh olding ta x from c er tain shareh olders o n proper t y inco me distribu tions and in 2021 , £8.6m was p aid to HMRC. Sources of drawn debt 1 Revolving credit facilities 10.0 Secured loan 83.0 US private placement notes 455.0 Secured bonds 175.0 Unsecured green bonds 350.0 Unsecured convertible bonds 175.0 1,248.0 £m 2029 2030 2031 2033 2032 2034 2025 2026 2027 2028 2023 2024 2022 Debt maturity profile 1 £m 83 175 10 30 230 118 475 127 540 Fixed rate bonds and loans Drawn bank loans Headroom 1 E xclud es ot her lo ans of £1 2. 3m 1 E xclud es ot her lo ans of £1 2. 3m 43 Financ ial Stat ements Governance Strategic repor t ME A S UR I NG OUR PE R F OR M A N CE KPIs Non-financial Financial Gearing measures Ge aring and avail able resou rces Interest cover ra tio Operational m easures T o tal ret urn T o tal pro per t y ret urn T o tal shar eholde r return EPR A ear nings per sh are Operational m easures Reversionary perc entage Developme nt potential T enant retention Void manage ment Responsibil it y measures BREE AM ra tings EP C Ener g y intensit y Car bon inte nsit y Ac cident Fre quen cy Rate Staf f satisfac tion We use a bal ance of f inancial and no n-finan cial key per for mance indicato rs (KPIs) to meas ure our per fo rmance an d asse ss the ef fe ctiv enes s of our strate g y . The y are also use d to monitor t he impac t of the princ ipal risks that h ave bee n identif ied and a n umber are use d to determine r emuneration . So ho Pl ace W1 * KPI in trod uce d in 2021 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 44 Financial KPIs Our performance St rate gic obje ct ives O ther TOT AL RETU RN 1. 2. 3. 4. 5. R T o tal ret urn equa tes to the com bination of N A V gro wt h plus divi dends p aid during th e year . We aim to exce ed our b ench mark, which is t he avera ge of othe r major real e state c ompa nies. Our tot al retur n in 202 1 was 5.8 %, agains t a benc hmark of 1 7 . 8%, as th e per f orman ce of se veral of o ur pee rs was po sitiv ely impac ted by t heir inves tmen t in oth er pro per t y s ect ors inc luding th e indus trial se ctor. Despi te this, De rw ent Lon don’ s aver age annual r eturn of 4.7% over the p ast f ive y ears a gainst a ben chmar k of 1 .2% d emons trates t he abilit y of our b usine ss mo del to gen erate abo ve avera ge long-te rm retur ns. 2021 2020 2019 2018 2017 Derwent London Weighted average of major UK real estate companies % (20) (15) ( 10) (5) 0 5 10 15 20 7.7 6.6 5.3 0.7 6.6 (3.9) (1.8) (12.8) 5.8 17.8 TO T A L PROPERT Y RE T URN 1. 2. R T o tal pro per t y ret urn is use d to ass ess p rogre ss again st our proper t y-focused strategic objec tiv es. We aim to exc eed t he MSCI Central London Of fice s I ndex on an annual b asis and t he MSCI UK All P roper t y In dex on a thre e- year rolli ng bas is. Th ere was a 9.2% valuati on uplif t ac ros s our thre e major sc heme s in the ye ar – Soh o Plac e W1 , T he Fea thers tone Building EC1 and 1 9-35 B aker St reet W1 – due to goo d prog ress o n deliv er y and de risking of the p roject s. Th ese d evelop ments con tribu ted signif ic antly to the p or t folio’s revalu ation pe r forman ce and w ere the main rea son fo r the 0.4% outpe r forman ce of the MS CI Ce ntral Lo ndon O f fic es Ind ex during 2021 . Th e three -year r olling ave rage of 4.7% pa de mons trates o ur abilit y to gene rate retur ns agains t a back groun d of rela tively st able rent s and yie lds. This wa s a 0.4 % unde rper f ormanc e agains t the MSC I UK All P roper t y In dex and was m ainly due to the s treng th of t he indus trial se ctor in 2020 and 2021 . 2021 2020 2019 2018 2017 Derwent London MSCI IPD Central London Offices Index % (3) (2) (1) 0 1 2 3 4 5 6 8 7 8.0 7.1 6.0 5.3 7.4 6.3 5.9 4.1 0.3 (2.4) XX Annual 2021 2020 2019 2018 2017 Derwent London MSCI IPD UK All Property Index % 0 2 4 6 8 10 12 14 16 10.3 8.9 5.6 6.6 7.1 5.8 4.6 1.6 4.7 5.1 Three-year rolling Key Stra tegic objectives 1. T o opt imise r etur ns and c reate v alue fr om a bal anc ed p or tf olio 3. T o at tra ct, r etain a nd de velop talented em ployees 5. T o maintain strong and f lexible f inancin g 2. T o grow recurring earnings and c ash f low 4. T o de sign, d eli ver an d ope rate our buildingsre spo nsibly R Remuneration 45 Financ ial Stat ements Governance Strategic repor t ME A SURIN G OUR PE RF ORM ANCE CONTINUED Financial KPIs Our performance St rate gic obje ct ives O ther TO T A L SHA REHOL DER RE T URN (T SR) 1. 2. 3. 4. 5. R T o m easur e the Gro up’ s suc ces s in provid ing above average long- term re turns to i ts share holder s, we co mpare our p er for manc e agains t the F TSE UK 35 0 Super Se ctor Re al Est ate Index , using a 30- day avera ge of the r eturns in acc ordan ce with in dustr y be stprac tic e. Th e fall in the sh are pric e during th e year, i n c ompar ison to tho se of our pe ers mainly in veste d in othe r prope r t y se ctor s, has me ant that t he Group unde rper f orme d its b enchm ark index in 202 1 . D espite t his, the Gr oup has deli vere d long-ter m retur ns slight ly abo ve the b enchma rk index , which is dem onstr ated by th e fac t that £1 0 0 inves ted in D er went Lon don at th e st ar t of201 2 was wo r th £27 1 at the e nd of 2021 ,co mpare d with £266 fo r the ben chmark index . 2021 2020 2019 2018 2017 Derwent London FTSE UK 350 Super Sector Real Estate Index % (30) (25) (20) (15) (10) (5) 0 5 10 15 20 25 30 35 40 15.6 13.1 0.9 (9.2) 36.3 26.4 ( 1 6.6) ( 1 4. 1) 10.3 27.2 EPR A EA RNI NGS P ER SH ARE (E PS ) 1. 2. EPR A EPS is t he prin cipal me asure use d to ass ess t he Group’s ope rating p er form ance an d a key dete rminant of t he annual divi dend. A re co nciliation o f this fig ure bac k to the IFRS p rofi t can be f ound in note 4 0. EPS o n an EPR A basis inc reas ed 9.7% to 1 08.79p per s hare in 202 1 . Thi s is mainly due to t he 2020 EPS b eing impac ted by 9 p per sh are of write -of f s/ impairm ent of re cei vable bal ance s, to ref lect t he weake ned f inancial p osit ion of som e of our tenan ts. In 2021 , wri te- of f/impair ment was o nly 1 p p er share. Thiswa s due to the impr oved f inanc ial po sition of m any of our tenan ts. Note t hat the 201 8 EPS in clude d a one- of f rec eipt of 1 4p per share. 0 20 60 40 80 100 120 2018 p 2017 2021 2020 2019 113.07 103.09 99.19 108.79 94.23 GE ARING AND A V A ILA BLE R ESOURCES 5. Th e Group mo nitors c apita l on the basis o f NAV gearing and t he L T V ratio. We al so moni tor our undraw n facili ties an d cash , and the lev el of unch arged p roper t ies, to e nsure that we h ave suf f icient f lexibilit y to take advan tage of ac quisition and development opportunities. Cas h and undrawn f aciliti es incre ase d in the y ear follo wing the £ 350m gre en b ond iss ue. This wa s par tially of f set by n et inves tmen t in our por t fo lio. Th e acquisit ions in the y ear led to an incre ase in th e NAV gearing and LT V ratio s, bu t both re main at low leve ls. 2020 20 21 LT V r a t i o 18 . 4 % 20.8 % N AV ge a r i ng 2 4.3% 28.2% Cas h and undrawn f aciliti es £ 476 m £608m Uncharged prope rtie s £4,329m £ 4,7 69 m INTE RES T CO VER RA T IO (ICR ) 5. We aim for inter est p ayable to be cov ered a t least t wo time s by net rent s. Th e basis of c alculat ion is similar to th e cov enant inc luded in the lo an docum entat ion for ouruns ecure d bank f acilitie s. Se enote 42 for the c alcul ation ofthis me asure. Th e net intere st co ver rati o (ICR) incre ase d again in 202 1 , mainly du e to write -of f/imp airment o f the re ceiv able bal ance s in 2020, which was inclu ded in net p roper t y in come . As a re sult of the improv ed f inancial p ositi on of many of our tena nts in 2021 , the re have be en les s wri te-o f fs/ impair ment s requir ed in th e year.Rental inc ome wo uld nee d to fall by 69% b efore t he main ICR c ovena nt of 1 4 5% was bre ache d. 0 100 300 200 400 500 2018 % 2017 2021 2020 2019 491 462 446 464 454 Benchmark De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 46 Non-financial KPIs Our performance St rate gic obje cti ves Other RE V ERSIONARY PERCENT AGE 1. 2. This is t he per cent age by whi ch the c ash f low from r ental inc ome would grow were the passing rent to be inc reas ed to th e estima ted rent al value (ERV ) an d assum ing the on -site sc heme s are com pleted and let . It is use d to monito r the potential future income grow th ofthe G roup. Th e Group’s ERV incre ase d by £2. 7m during 2021 to £293.9m. T his was hel ped by the up lif t and f ull inclus ion of 1 9-35 Baker S tre et, pa r tly of fs et by dispo sals in the y ear . The 2021 ERV inc luded p otential reve rsion of £1 1 5.5m, 65% of t henet pas sing rent of £1 78.4m, ofwhic h 4 7% isco ntrac ted. 2 017 2 018 2 019 2020 2 021 % 69 72 79 54 65 DEVELO PM ENT POTE NTIAL 1. R We monito r the pro por tio n of our por t fo lio with th e poten tial for refurbishment or redeve lopment to ensur e there ar e suf fi cient opp or tunitie s for f uture valu e cre ation in the p or t folio. With on-site developments repres enting 1 4% of the p or t folio at t he end of 2021 , and a f ur ther 34% ident ifie d as po tential schemes, there a re considerabl e opp or tunitie s to add value t hrough regeneration. Following the reshaping of the p or t folio in th e year , whic h includ ed se lling som e non- core a sset s and ac quiring f uture de velopm ent opp or tunitie s, our b alanc e bet we en cor eincom e and dev elopm ent pote ntial isclos e to 50/50. 2 017 2 018 2 019 2020 2 021 % 44 41 43 43 48 TENA NT R ETENTIO N 2. R Max im ising tenant retention follo wing tenant le ase bre aks or exp iries wh en we do not h ave red evelop ment p lans minimise s void p erio ds and c ontribu tes towards n et rent al inco me. Our re tention an d re-let r ate was 77% in202 1 , whic h is below o ur averag e of 87% over th e past 5 y ears . This is mainly due to mino r refur bishmen t works b eing car ried o ut on a numb er of unit s in which leas es expir ed during t he year. 2 017 2 018 2 019 2020 2 021 E xpo sure (£m p a)¹ 6.4 14 . 6 10. 4 12 . 5 19. 7 Reten tion (%) 57 76 83 65 47 Re - le t ( %) 35 14 7 22 30 To t a l ( % ) 92 90 90 87 77 1 E xcl . prop er tie s so ld durin g the y ear an d spa ce ta ken ba ck forp roje ct s. 80 Ch arl ot te S tr eet W1 47 Financ ial Stat ements Governance Strategic repor t ME A SURIN G OUR PE RF ORM ANCE CONTINUED Non-financial KPIs Our performance St rate gic obje cti ves Other VOID M AN AGE MENT 1. 2. R T o o ptimise o ur rental in come we pl an to minimise the sp ace imme diately availab le for let ting . We aim for this to b e belo w 1 0%ofth e por t foli o’ s est imated rent al value. Our abili t y to retain ten ants and let s pac e, par tic ularly at o ur on-si te develo pment s and major r efurb ishment s, has kep t the vac ancy r ate low. At the end of 2021 , o ur EPR A vac ancy r ate was under 2 %, this was he lpe d by the su cce ssf ul let ting of all of 6- 8 Green coa t Plac e SW1 prior to co mpletion . Additi onally, our asse t mana gers hav e foc used o n tenant reten tion and th e re-g earing of le ases wher e pos sible acro ss th e por t foli o. 0 0.5 1.5 1.0 2.5 2.0 3.0 2018 % 2017 2021 2020 2019 1.8 0.8 1.8 1.6 1.3 B R E E A M R AT I N G S 4. BREE AM is an e nvironm ental im pact a ssessmen t met hod for c ommer cial buildings. Per fo rmanc e is mea sured a cros s a ser ies of ratin gs: ‘Pass’, ‘Goo d’ , ‘ V er y g ood’, ‘E xcellen t’ an d ‘Ou tst anding ’ . We t arget minimum BREE AM ra tings of ‘E xcelle nt’ f or major developments and ‘Ver y goo d’ for m ajor refur bishmen ts. Our thr ee dev elopm ents cur rently on site wer e rated or e xpe cte d to be rate d BREE AM ‘O uts tanding ’ or ‘E xce llent ’ at Desig n Stage. Follo wing the c ompletio n of 80 Char lot te St reet in 2020, it re cei ved a f inal BREE A M rating of ‘ Exc ellent ’ in 2021 . Completion Rating Soh o Plac e W1 H1 20 22 1 Ou tst anding 2 The Featherstone Building EC1 H1 20 22 1 Ou tst anding 2 1 9-35 Bake r Stre et W1 H1 20 25 1 E xce llent 1 1 Ta r g e t e d 2 Ce r tif ied a t Des ign S tag e EN ERG Y PERFO RMAN CE C ERTIFI CA TES (EPC ) 4. EPC s indic ate the en erg y ef f icienc y of a building by as signing a ra ting fro m ‘ A’ (ver y ef fic ient) to ‘ G’ (inef f icien t). We target a minimum cer t ific ation of ‘A ’ fo r major new- build sc heme s and ‘B’ f or major refurbishments . Our thr ee on-s ite deve lopme nts, S oho Pla ce, T he Feat hers tone Building an d 1 9-35 Bake r Stre et are all t arget ing a cer t ific ation of A o r B. Completion Rating Soh o Plac e W1 H1 20 22 1 B 1 The Featherstone Building EC1 H1 20 22 1 A 1 1 9-35 Bake r Stre et W1 H1 20 25 1 A 1 1 Ta r g e t e d ENERGY INTENSIT Y 4. R This is a n ew KPI f or 202 1 , and is measured by energ y consumption (kWh) p er squar e metre of l andlord - con trolle d flo or area ac ross o ur manage d like-for-like por t folio. Our t arget is an ann ual dec rease of bet we en 2% and 4% pa. In 202 1 la ndlord en erg y intensi t y in the like-f or-like p or t folio inc reas ed by 3%. This wa s outsi de our tar get range m ainly due to inc rease d oc cupat ion level s acro ss the p or t folio. T he 28% red uctio n achiev ed sinc e our bas e year of 201 3 mean s we are on c ours e to meet o ur 2027 energ y intensi t y target . In 2022, we will cont inue to rev iew our tar gets to e nsure the y are in line wit h our Net Zero C arb on Pathway. 2027 2025 2023 2021 2019 2017 2015 2013 1.20 1.00 0.60 0.20 0.40 0.80 0 (2013 = 1.00) Derwent London IEA ETP emissions De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 48 Non-financial KPIs Our performance St rate gic obje cti ves Other CA RBON INTENSIT Y 4. R This is m easure d by emis sions intensi t y per sq uare metr e of landlord-controlled floor area acro ss our m anage d like-f or-like por t fo lio. Our t arget is an ann ual dec reas e of bet wee n 5% and 1 0%pa . In 202 1 la ndlord (Sc ope 1 & 2) e mission s intensi t y in the like-f or-like p or t folio dec reas ed by 2% . Desp ite an incre ase in ener g y intensit y as a r esult of the re oc cupati on level s acros s the por t fo lio, we are b enef it ting fro m the dec arb onisati on of the g rid and th e star t of our tr ansition t o all elec tric he ating and c ooling s ystem s. Th e 55% redu ction achie ved sin ce our b ase yea r of 201 3 mea ns we are on c ourse to m eet o ur 2027 emis sions ta rget. In 2022, we will c ontinue to rev iew our tar gets to e nsure the y are in line wit h our Net Zero C arb on Pathway. 2027 2025 2023 2021 2019 2017 2015 2013 1.20 1.00 0.60 0.20 0.40 0.80 0 (2013 = 1.00) Derwent London IEA ETP emissions ACCIDENT F REQUE N CY R A TE ( A FR ) 4. R This is a n ew KPI f or 202 1 , and is calc ulated b ase d on the num ber of RIDDO R injuries during t he year multip lied b y 1 ,0 00,0 00 an d divid ed by the n umber of h ours wor ked. In 202 1 , th e AFR was 1 .26 wit h only tw o RIDDO Rs repo r ted. T his is down fr om 2.7 2 in 2020, in which six RIDD ORs wer e rep or ted. T he re ductio n has co me mainly as a re sult of making h ealth & saf et y a prio rit y on all pr oject s and ens uring the exp ect ations and st andards are com municate d early o n and inclu ded inall tend ers. 2020 20 21 % 2 .72 1. 2 6 S TA F F S AT I S F A C T I O N 3. R Th e satisf actio n of our emplo yee s is ass es sed th rough a numb er of ques tions in t he staf f s ur vey. We aim to keep t he satis fac tion rate above 80%. De spite ano ther ye ar of signif ican t challe nges fo r indivi duals and t he busin ess , staf f s atisfa ction in 2021 remain ed high at 91 % . We belie ve the se fig ures ref lec t our co llab orativ e and supp or tive w orkp lace c ulture and t he prid e our st af f feel in w orking f or Der we nt. 2 017 2 018 2 019 2020 2 021 % 96.0 90.4 92 .5 96.3 90.5 49 Financ ial Stat ements Governance Strategic repor t R E S PO NSIBIL I T Y In 202 1 we intro duce d proc esse s to monitor an d track our p rogres s to be ne t zero car bon by 2030, we s ur veye d our oc cupiers on t heir own ESG pl ans, at tende d COP26 highlig hting our plans for ren ewable ener g y on our Sc ot tish land an d commis sioned a d etailed sur vey of t he cos ts involve d in upgrading the p or tf olio to EPC B b y 2030. Health, we llbeing and s afet y of our s taf f and pe ople in and aro und our buildings remaine d a core f ocus . In addition, we achiev ed a stro ng National Equalit y St andard res ult, cond ucted o ur four th independent bien nial empl oyee sur vey andsupp or ted our c ommunitie s through our C ommuni ty Fund, sp onso rships and donations. During 2021 we hoste d in-per son stake holder and inve stor days , rec eive dindep endent as suranc e ofourgre en finan ce rep or ting and continued mandatory compliance training acro ss the Gr oup. U nde rsta nd i ng a nd ba la nci ng th e en vi ro nme nta l, soci a l an d go ver na nce i ssu es speci fic t o our b us i ness i s fund ame nta l t o ope ra ti ng res pon si bly . W e bel ie ve t hi s a ppr oac h en ab le s us t o con ti nue t o del iver l ong -te rm va lu e for a ll ou r sta k eho ld ers . ESG R EPORT I NG S TRUCT URE AND 202 1 HIGHLIGHT S EN V IRONM EN T A L P ag e s 52 to 75 — Clima te ch ange — Ne t zero carb on — O ur journey to C OP26 — O f f ice b uildings’ ener g yper for mance SOCI AL Page s 56 to 75 — O ur pe ople — C ommunit y, occupier s and other stakeholders — He alth & safet y GOVERNAN CE Page s 64 to 75 — Clima te ch ange — Gr een f inance — Sup ply chain — Human r ights — Ta x 7 % Re duct ion in like -for -like waterc onsumpt ion 3 % Red uctio n in landlord e missio ns 42 % Women o n the Bo ard 4 Employee representatives on t he Resp onsib le Busines s Co mmit tee “ The delight and enthusiasm from pupils is p alpable! T his is an exciting new in itiative for us a t Mou set ra p an d we a re so g ra te ful t o Der w ent fo r ma ki ng i t possi bl e ” Mous etr ap Th eatr e Proje ct s De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 50 OUR 7 ES G PRIORIT IES Our Resp onsi bilit y Policy and Strateg y ( ava i labl e on ou r webs it e ) set s out wh at oper at in g res pons ib ly m ean s to u s. Ther e ar eseve n lo ng -t erm pr ior iti es i ntr in si c to ou r bus i ness an d the need s of ou r stak ehol ders : 1. DE SIGNING AND DEL I V ER ING BUILDINGS RESPONSIBL Y 2. MA NAGING OUR ASSE TS RESPONSIBL Y 3. CRE A T IN G V A LUE IN THE COMMUNIT Y AND FOR OUR W IDER S T A KE HOLDERS 4. SE T TING THE HIGHES T ST ANDA RDS OF HEA L T H AND SAFE T Y 5. ENG AGING AND DE V EL OP ING OUR EMPL OYEE S 6. PR OTECTI N G HUMA N RIGHT S 7. SE T TING THE HIGHES T ST ANDA RDS OF CORPOR A TE GO VERN ANCE ESG in our busine ss Der wen t London t akes a resp onsible appro ach to busine ss by se eking to ma ximise our p ositi ve impact o n stakeho lders, w hile minimising the negati ve one s. Our long-ter m approac h to investing in Londo n ‘vill ages’ an d foster ing relation ships with our o ccupier s, suppo r ted by innova tive des ign, combin e to provide u s with a plat for m to make a meaning ful imp act. We rec ognise the imp or tanc e of transp arent and inde pend ently assur ed rep or ting and the n eed to b e bold, su ch as being th e fir stUK REIT to publish i ts Net Zero C arbon P athway . We continu e to learn, an d rec ognise the imp or tanc e of work ing with our stake holders an d other s acros s our industr y to a chieve the be stresults . We also kn ow that this disciplin e is fast ev olving which m eans our fram eworks n eed to f ollow suit. Wi thin our industr y we ar e in a relat ively go od po sition to adapt a s we are well res ource d and havethe r elevant exp erienc e and exp er tise. ESG is emb edde d through out our bu siness to e nsure its ef fe ctiv enes s. Altho ugh ESG asp ect s are of ten discus sed indivi dually , they n eed to w ork togeth er to ma ximise our impac t onso ciet y and the e nvironmen t. This bro ader vie w improves o ur abilit y to manag e risk and cre ates value for all o ur stakeho lders. Our late st Resp onsibilit y Rep or t is available to downlo ad at ht tps:/ /rr .derwentlondon.com Clear and ro bust me asureme nt and rep or ting underpins o ur work .We adopt a varie t y of repor ting f ramewor ks enabling o ur per f ormanc e to be mea sured acr oss dif fe rent ESG pl atf orms (seepa ge 66) . Our env ironment al, health and s afet y and gr een f inance data is as sured at th e reaso nable level by D eloit te LLP . Our auditor ’ sopinions c an be fo und with th eir assuranc e state ments inthe late st Resp onsibilit y Rep or t (http s :/ /rr .der wentlondon. com) . 2021 RA TIN GS GRESB (Global Real Es tate Sustainability Benchmark) 202 1– sc ore o f 8 1 , Gr eens ta r st atu s, ' A'rate d public dis clos ure CDP 2021 – 'C' ratin g DISCL OS URE INSIGHT AC TI ON ISS O ekom – Pr ime st atus MSCI – ' A A' rating EPR A Sus taina bilit y Rep or ting Award s 202 1 – Gold awa rd 51 Financ ial Stat ements Governance Strategic repor t 2 0 21 P r o g r e s s The f ocus f or the year wa s to put robu st proc es ses in pla ce to enable us to mo nitor and trac k our progre ss towards b eing net zero car bon by 2030. Inves tme nt por t fol io Commi tment Our inve stment p or t folio, inclu ding both mana ged and unman aged prop er ties (see g loss ar y) , will be o perate d on a net zero c arbon basis by 20 30. This involve s driving do wn our energ y c onsumptio n signif icantly, upgrading and ret rofit ting s ome of our pro per ties to remo ve gas use and impro ve ef fic iency, as well as c ollabo rating with o ur oc cupier s. Progres s Sc ope 3 (see g loss ar y) emissions ar e a signific ant par t of our car bon fo otprint. S teps t aken to addres s thes e in 20 21 include d : — S et ting building spe cific op eration al energ y t argets align ed with a 1 .5ºC sce nario. This pro vides an ann ual roadmap fo r each b uildi ng to re ach its 2030 t argets — Und er taking an EP C repo r t to identif y e nerg y sav ings and to ensure we are m eeting th e Minimum Energ y Ef ficie ncy Regul ations for 2023 and 20 30 — Re cog nising that coll aboratio n is the way to achiev e the be st net zero o utcom e, in Septemb er 202 1 we laun ched a n et zero car bon oc cupier sur v ey (see pa ge 1 2) whic h focus ed on ge tt ing a bet ter un derst anding of how we c an suppor t o ur occ upiers to achiev e their net zero go als A key me ssag e from th e sur vey is that o ur occupie rs are keen to work wi th us. This was e vident in th e engaging que stions t hey raise d such as: ‘wh ere do we st ar t’, ‘where do th e landlord’s emissio ns end and o ccupie rs’ begin’ , and ‘h ow do we integrate carb on reduction into day-to-day acti vities’ . The b enef it of get ting this lev el of detail f rom a wide sp ect rum ofoc cupiers is th at it help s us identif y where to c once ntrate ouref fo rt s. So me easy wins in clude informing o ur occ upiers of whatwe’re already d oing, suc h as providing re newable elec trici ty. We can als o share with th em details of o ur key facilitie s manag ement c ollabo rators who s uppor t sus tainable op erations . 202 1 HIGHL IGHT S — P ublishe d revise d Resp onsible De velopme nt Framework — C onduc ted ne t zero carb on oc cupier sur ve y — Es tablish ed building spe cifi c operati onal energ y t argets inline with 1 .5ºC scien ce-b ased s cenar io Climate change Global war ming is a material issu e for our busin ess and s ociet y. In 2020 we publishe d our Net Zero Car bon Pat hway which sets o ut howwe inten d to lesse n our impact o n climate warming. We use theT ask Forc e for Climate -relate d Financial Dis closure s (TCF D) rec ommen dations and re por ting fr amework to d emonst rate our appro ach to managing c limate-rel ated risks (se e page s 68 to 73 ). Net Zer o Carbo n Pathway 202 1 marke d the f irst full y ear following t he releas e of our Net ZeroCar bon Pathway, which is aligne d to the Be tter B uildi ngs Par tne rship (BBP)’ s Net Zero C arbo n Pathway Framewor k. As p ar t of our commi tment, we an alyse our ac tivi ties to ensureweare r educing our c arbo n footp rint acros s all our sphe resof influe nce. O ur strateg y fo cuse s on three p rincipal areas:inve stment p or t folio, de velopmen t pipeline and corp orateactivities . The G roup repo r ts annually on it s progre ss towards ne t zero by 2030. A brief o utline of our 2021 progre ss is set o ut below an d a more de tailed rev iew can b e found in our Re spons ibility R epor t. Inaddition , since 201 8, we have dis close d our ener g y per for mance atpor t fo lio and indivi dual asset le vels, a s well as the emb odie d car bon of our l atest dev elopmen ts (see Resp onsibilit y Rep or t). RE SPON SIBILI T Y CONTINUED E N V I RONM E N T A L Incor porating the right environmental a ndcl i ma te c ha ng e mea su res a cr oss ou rbu si ness en ab le s us t o ope ra te res pon si bl y and m iti g at es pot en ti al neg at ive im pacts. 6-8 G ree nc oat P lac e SW1 EPC r at ing ra ise d fr om E to B in 20 2 1 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 52 Our oc cupier s are at dif ferent s tage s of their jour neys, an d thissur vey w as for many the f irst s tep in working to gether wi th us.In2022 we will use the sur v ey results , as well as fo llow up conv ersat ions, to guide o ur action s so that toget her we c an help lower operationa l carbon. Development pi peline Commi tment New dev elopmen ts and major ref urbishment s will be net zer o car bon on c ompletion. Emb odie d carb on produ ced in th e deve lopment pr oce ss will be of f set and t he buildings will be ope rated using ren ewable ener g y and have appro priate energ y redu ction t argets in pl ace. Progres s In Apr il 20 21 , we pub lished our up dated Re sponsible D evelop ment Framewor k, which s ets new n et zero minimum requireme nts for our dev elopment s. This inc ludes, b ut is not limite d, to : — D esigning and c onstr ucting o ur buildings for oper ational ef fi ciency. We have set a minimum NA BERS UK 4-st ar rating for f uture sc heme s — C onside ration of emb odied c arbon a sse ssmen ts and lower car bon de sign options , including ref urbishment — Lower operational wat er consumption targets — A sse ss fe asibilit y of suitable re newable tec hnolog y — C arr ying o ut pos t comp letion evaluation s 1 2 mo nths af ter f ull oc cup ation We unders tand th e whole indust r y nee ds to make signifi cant change s in the nex t de cade i f we are to colle ctiv ely mee t our net zero car bon c ommitmen ts. Th erefore , when set ting s tandards f or our new p rojects , we emphasis e engaging wit h other s takeholde rs so that to gether we c an have a st ronger impac t. Thr oughou t 202 1 we spo ke to many contra ctors to und erst and what was p ossible, as well as th e challenge s prese nted by th e use of innovati ve materials such as low c arb on or cem ent-fr ee con crete or cr oss-l aminated timber . T his work con tinues as we s eek to be tte r unders tand the impac ts of using non- traditional m aterials. In H 2 2021 we set embo died c arbon t argets b ased o n our ownexp erienc e since 201 3, as we ll as industr y guidanc e. Adeve lopment ’s embodie d carb on, par tic ularly the b uild ing ’ s str ucture , makes up a signif icant par t of t he carb on fo otprint. Wework clo sely with o ur design and c onstr uctio n team to ass ess and re duce this . However , we re cognis e that the supp ly chain will also n eed to ad apt to fully achie ve our aims. Th erefore , our targe ts are phas ed as fo llows: — C ommerc ial Of f ice New B uild developme nts com pleting from 202 5: < 600 kgCO 2 /m 2 — C ommer cial Of f ice New B uild developme nts com pleting from 203 0: < 500 kgCO 2 /m 2 We are also intro ducing tar gets for o ur major refurbis hments , which will be b ased on o ur latest p roject s, as well as indu str y st andards. 19-35 Bake r St re et W1 is th e Gr oup's fi rs t NAB ERS-U K pro jec t 53 Financ ial Stat ements Governance Strategic repor t RE SPON SIBILI T Y CONTINUED EN V IR ONMEN T A L Our journey to C OP26 O ver its 26- year histor y t he Conf erenc e of the Par tie s (COP) has be en the c entral for um driving na tions’ progre ss in deal ing with climate chang e. COP 26 was the firs t time the c onferen ce was he ld in the UK and b usiness es and p olicy maker s were brou ght togeth er to galvanise ef fo r ts to limit global war ming to 1 .5ºC. The r un up to the con ferenc e enable d the Group to lear n from and broa den its c ontac ts with lea ding exper ts an d other b usiness es tack ling climate change, a s well as highlighting t he work going o n acro ss our indus tr y . A s par t of this, we shar ed our own ex perien ces of our net zer o carb on journe y to date. This work c ontinue d throug hout th e year with s ome Dire ctors an d membe rs of the Sust ainabilit y team sit ting as pan ellists in v ir tual confe rence s or con tributing ar tic les to various jo urnals. In th ese, we gave insig hts into our rec ent wor k in the por t foli o and gree n financ e, of ten suppo r ted by oc cupier s or funde rs. T he overr iding theme was t he impor t ance of c ollab oration to optimis e environme ntal outc ome s. This was als o the the me of our St akeholder D ay where we ex plored mutual o ppor tunit ies to be st ef fe ct chang e. At COP 26 itself we highligh ted the wor k we are under t aking loc allyon our Sc ot tish land as p ar t of our net zero c arbo n journey. T wo ex amples are our pl ans for a so lar park whic h, if suc ces sful , could p ower up to 6,30 0 home s, and the p otential exp ansion of our tre e planting pro gramme. In addit ion, during the d edicate d ‘Citie s, Region s and the Built Environm ent ’ day , our Chief E xec utive Paul Williams, p resen ted in the c onferenc e’ s main discus sion arena . Whilst th e confe rence f ailed to achieve a c ommitm ent by all nation s to limit global war ming to the 1 .5ºC scenar io, more pro gress w as made in climate c hange rep or ting with the d ecision to s et up a sys tem of univer sal sust ainabilit y disclosur es which will be gover ned by Inte rnational F inancial Repo r ting Stan dards (IFRS). This will lead to impr oved tr ansparen cy and c onsistenc y acro ss theglob al ec onomy. For f ur ther det ails of our car bon dat a and climate-re lated disclos ures se e page s 67 to 7 5 and our Re spon sibilit y Repor t . Pau l Will iams b eing i nte r vie wed on C OP T V Corporate ac tivities Commitment to renewa ble energ y Our c ommitment is to e nsure that all th e energ y we pr ocure is fromr enewable so urces (b oth ele ctrici t y and gas) . Progres s We continue to p rocure 1 0 0% renewab le, REGO backe d elect ricit y. T o date 23% of our gas s upplies are f rom gre en gas sourc es and weare rev iewing how we c an increas e this. O ther ac tivit ies during the ye ar include d : — O ur renewable en erg y feas ibility s tudy c ontinue d — Sub mit ted planning app licatio n for an 1 8.4MW s olar p ark at Loc hfaulds Farm. Subjec t to planning p ermissio n, this could prov ide the e quivalent of 4 3% of the elec tricit y ne eds of o ur managed por t folio based on 20 1 9 consumption Co mmitme nt to of f se t ting Where w e are unable to manage o ut or eliminate car bon f rom our busine ss ac tivitie s thes e emission s will be of fs et using robus t, verif ied c arb on of fse t schem es. Progres s In 202 1 we com pleted the f ollowing sch emes an d of fset t he residual c arb on through o ur provide r Natural Capit al Par tner s: — 1 9-23 Fitzro y Stre et – 1 8 0 tCO 2 e — 3-5 Rat hbone P lace – 1 61 tCO 2 e — 6 -8 Green coat P lace – 763 t CO 2 e — DL / 78 – 93 tC O 2 e The a dopted s cheme r elated to re fores tation proje cts in East A fric a and is validated un der VC S and CCB . We are also loo king at of fs et ting in the UK. We pl anted 30h a of tree s in Sc otland in 201 5 and hav e now rec eive d our fir st car bon of f set cre dits. We are inves tigating plant ing a fur ther 425ha acros s our Sc ot tish land (equiv alent to 794 footb all fields). Ass uming only halfour plan s prove to be f easible, 25 year s af ter planting th e se quester ed car bon f rom this woo dland would b e suf f icient to of fs et over fo ur years of o ur current anti cipated annual re sidual emissio ns acros s the who le por t folio. For a mo re detailed b reakdown of our p athway see o ur Respo nsibil it y Rep ort . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 54 OFF ICE BUILDINGS’ ENERGY PE RFOR MA NCE – LOOK I NG TO THE FU TUR E T o ad dress th e signific ant par t th e built environme nt plays inthe UK ’ s car bon fo otprint, t he UK Gove rnment c onsulted onthe de sired lev els of buildings' mini mum en erg y ef f icienc y . It co nclude d that from 20 30 the minimum energ y p er form ance cer ti fic ate (EPC) rating sho uld be increa sed to B (fro m E in 2023 ). This repre sent s a major transfo rmation, as t he averag e EPC ra ting acros s London’s of fice p roper tie s is curren tly D. Theo utcom e was not unex pec ted and tig hter legislati on is include d in our risk analys is. During 2021 we commissio ned a comp rehensi ve repo r t of the fea sibilit y and co sts of achie ving a minimum grade of B acr oss our p or t folio by 2030, as we ll as identi f ying tho se prop er ties th at could be com e strand ed as a result of n ot being able to be up grade d. The r epor t c onclude d that the e stimated c ost s of improvem ent were c. £97 m, in line with o ur previo us guidanc e, and with no building expe cte d to be stran ded. T he majorit y of th ese additio nal cos ts relate to upg rading lighting to LED, new on-f loor e quipment, su ch as fan c oil units, and re placing heating an d coo ling plant. We envisa ge a prop or tion of the se co sts will b e reco verable from s er vic e charge s and some e lements h ave alread y bee n include d in our valuations . We believe t hat the initial co sts will be of f set by th e benef it of high er fut ure income r eturns. In addition to raising t he minimum EPC rating , the gove rnment is also c onsulting on th e propo sed intr oduct ion of a building per f ormanc e stand ard which would enab le public disclo sure of a building’s actual e nerg y pe r formanc e, similar in appro ach to the Disp lay Energ y C er tif icate (DEC). Like the EPC ch anges, we be lieve this will be com e a feature of th e prope r ty m arket. Within th e BBP we help ed bring an e stabl ished Aus tralian sch eme, NA BERS, to th e UK. NA BERS wor ks on a rating sys tem of 1 - 6 star s, with th e score in depen dently ver ifie d in ope ration. Our 1 9 -35 Baker Stre et sch eme is one of t he firs t UKprojec ts to adopt t his system . Also, as a c orp orate targe t, we have se t a minimum 4-star rating on al l our new sch emes . Francis House SW1 T ar get ing EP C B in 2022 Environme ntal per f ormance in 202 1 Carbon O verall, 2021 saw a double digit ris e in re-o ccup ation number s. Thisled to a s light incre ase in energ y inte nsit y , howe ver , we ar e ben efit ting f rom the de carb onisatio n of the grid an d the st ar t ofourtransi tion to all elec tric he ating and co oling sy stems, andthe refore s aw a 3% reduct ion in our Sc ope 1 -3 emission s (bas ed on S cop e 1 and 2 market-b ased e missions). Formo reinformatio n see th e Respo nsibilit y Repor t . Energ y Our total e nerg y c onsumption (in cluding tenant and l andlord) incre ased by 1 %. In 202 1 , our A sset an d Prop er t y Manageme nt teams c ontinued to w ork clos ely with our tenan ts to under stand their wor k from ho me plans , reviewing o ur chiller strateg ies to diver t s er vic es to only ac tive or o ccupie d zones whe re pos sible andenhan ced o ptimisation of p lant sch edules. T he impac t of incre ased o ccup ation was of fs et by the disp osal of A ngel S quare and dem olition of th e existing b uild ings on th e 1 9-35 B aker Stre et deve lopment . As a res ult, we remain within our 2021 and longer- term en erg y redu ction t argets (se e below). A po sitive s tep is that our lan dlord-only ele ctri cit y cons umption dec rease d in 202 1 , b enef it ting from t he manage ment of our par tlyo ccupie d buildings, whilst tenant e lectr icit y con sumption (lighting an d small powe r) i nc rease d signif icantly, emphasising theimp or tanc e of our occ upier engage ment st rateg y which we willcont inue to develop o ver 2022. 40 80 120 200 160 0 kWh/m 2 T otal building energy intensity Actual % Target reduction year-on-year 2030 2029 2028 2027 2026 2025 2024 2023 2022 2021 2020 2019 Baseline Target -4% -4% -4% -4% -4% -4% -5% -4% -4% Source: Derwent London Wate r In 202 1 our water c onsumption inten sit y increas ed by 3% comp ared to 2020. This clo sely follows o ccup ancy lev els, in so f ar as fro m April toD ece mber la st year our wate r consumpt ion was up from 2020, howe ver , Januar y-March le vels in 202 1 were signif icantly b elow thepre -c ovid leve ls of early 2020. Was te Our re cycling r ate was 65% compare d to 66% la st year . Them ajorit y of rec yclable was te come s from o ccupie r waste stre ams, i.e. fo od was te, cof fe e cups, p aper , pack aging and glas s.A s a result, our re cyc ling rate remains be low our 75% target. This is exp ec ted to improv e with higher re -oc cupatio n levels , and will be a fo cus for o ur occ upier engagem ent str ateg y for 2022. 55 Financ ial Stat ements Governance Strategic repor t 11 Internal promotions during 2021 89 % Employ ee rete ntion rate St af f sur v ey 88 % Agre ed 81 % Agre ed OUR PEOPL E W e a im t o attra ct, i ns pi re an d en gag e ata l ent ed and d iverse w or k fo rce , one th atfl ou ris hes a nd i s pr oud t o wo rk fo r Der went London. Health and wellbe ing 202 1 was anot her unusually ch allenging year an d we have all be enaf fec ted by th e pandemi c in diff erent ways . Our teams worke d ex tremely h ard in dif ficult circ umstanc es and we r emained foc used o n safeg uarding and suppo r ting the health an d wellbe ing of our employ ees . We provid e our employe es with a r ange of ben efit s, ser v ices an d suppo r t whilst enc ouraging t hem to take a pro acti ve role in their own wellb eing. We co ntinue to ensure indi vidual physi cal and psy chologic al safe ty an d to embe d ‘agile’ ways of working to ensure o ur employe es have a go od work-life b alanc e. Prior to r eturning to the of f ice, we up dated our of f ice p rotoco ls and implem ented a c ompulso r y 30-minute online in ductio n cours e to pres ent our C ovid- 1 9 safet y m easures . The se proto cols c ontinue to be re gularly re viewed w ith updates c learly co mmunicate d. Our rec ent employ ee sur ve y found 81 % of resp onde nts belie ved th at ‘ the C ompany is co mmit ted to ensuring t he health an d wellbeing of empl oyee s ’ . O ther ac tivitie s foc used o n resilienc e and all asp ect s of posi tive wellb eing (phys ical, p sycho logical and f inancial ) including: — O ur Occ upational He alth provide r prese nted on var ious topic s including long C ovid, va ccines , variants , respo nsible behav iour and supp or ting othe rs — T he Group’s intranet prov ided n ewslet ters, p odc asts an d webinars , as well as links to we bsites , mental h ealth chari ties and oth er ser v ices — C are pack ages we re sent to emp loyees l iving alone, sing le paren ts or tho se in caring ro les — O ver 10% of employee s are now traine d as Workp lace Me ntal Health Fir st Aid C hampions — S eparate ‘Me n’ s He alth’ and ‘Women’s Health’ workshop s were con ducte d and well at tende d — A f inancial wellb eing seminar was r un by our pe nsion prov iders — So cial Commi tte e event s rest ar ted in per son, en abling relat ionships to be b uilt i n a re la xed enviro nment (espe cially impor t ant for new jo iners) — Se veral ‘lunch an d learn’ ses sions were r un including topic s such as m ental he alth (run by a TED talk s peaker), resilienc e and bo ost ing happines s — C ontinuing involve ment with c ommunit y projec ts and voluntee ring (see pa ge 61 ) Going fo rwar d, we continue to r eview wor kloads, e ncoura ging a goo d balanc e bet we en work and p erso nal commit ments , whilst fo stering we llbeing and m ental he alth. RE SPON SIBILI T Y CONTINUED SOCI A L 202 1 HIGHL IGHT S — Re cei ved Nation al Equalit y Stan dard acc reditat ion, our result s place d us in the top 5% of all c ompanies sur v eyed — Voted top in th e sec tor and 38 th overall in Mana gement T o day Brit ain ’s Most Admire d Comp anies — C onducted our fou r th bienn ial i ndependent employeesu r vey — C omplete d ‘Fit fo r The Future’ pro gramme fo r third groupof em ployee s — Maint ained he alth and wellb eing initiative s and incre asedo ur mental he alth champion s’ netw ork DL / 78 Cu sto mer t eam . DL /78 h os ted a n umbe r of st af fan d cus tom er ev ent s dur ing th e yea r “I fe el that I c an make a vali d contribution to the success of Der went London ” “I fe el that t he Co mpany is com mit ted to ens uring the h ealth and we llbeing of e mploye es” De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 56 Diversit y and inclusion (D& I) Der wen t London is a re spe ct ful emp loyer that we lcome s diversi ty and prom otes e qualit y , acc eptan ce and teamw ork. I t is impor tant that we cre ate an inclusive w orkpl ace in which o ur peop le can bringth eir whole selve s to work , feel v alued and b e able to make age nuine imp act . The G roup’ s be lief in ‘ dive rsit y of tho ught’ e x tends bey ond the traditio nal face ts of gend er , ethnic it y , age and s exual ori entation toinclude p erso nalit y , co mmunication an d work st y les. We rec ognise th at diversi t y enriche s our creati vit y and ad ds value forour s takehold ers. Our gen der diver sit y data c an be foun d on page 1 71 . D&I strateg y to ppe d our agend a in 20 21 as we worked to wards achiev ing the National Equali ty S tan dard (NES ). Seve n areas wereas ses sed by E Y: core c ompon ents, t alent, busine ss, pe ople,leade rship, relatio nships and rev iew and me asuremen t. InDe cembe r , we were d elighted to b e rec ognise d for our commi tment (see p age 58). Our st rong result ref lec ted the p assion an d hard work of o ur pe ople who are c ommit ted to st reng thening our D&I c ulture. We continue to e mbed t hese amb itions thro ughout t he busine ss,whils t regular ly reviewing an d measur ing our progr essand imp act on all o ur stakeho lders. 202 1 D&I FOCUS — D eveloped a comprehensive D&I strat eg y — Inter nal promot ions, ef fe cti ve from 1 Janu ar y 202 2, improve d the gen der diver sit y of the E xec utive C ommit tee and achie ved th e Hampton-Alexand er Review t arget (seepa ge 1 47) — We are c ompliant with t he Parker Rev iew in resp ect o f Boar d ethnic diver sit y in advan ce of the 1 Januar y 2024 deadl ine ( see page 1 4 7) — Enhan ced ex isting gen erous family-f riendly p olicies , including 26 wee ks full pay f or maternit y, adoption an d share d parent al leave — C ontinue d uncons cious bias aware ness t raining for allst aff in c ollab oration wit h Chickenshe d — Nur ture d a culture of trans parenc y and ope nnes s to enc ourage p eople to rais e conc erns an d speak ou t abou tbias or discr imination — C ontinue d to of fer Paren tal T ransi tion Co aching for employe es b efore, during an d when retur ning from an ex tende d per iod of leave — Enc ourag ed wome n into our industr y th rough wor k experience and mentori ng oppor tuniti es — Maint ained a dive rsit y dashb oard to be tter un ders tand our own busin ess an d whether ke y talent pro ces ses are deli vering equi table outc omes f or dif feren t demogr aphics within Der went London — T he E xecut ive Co mmit tee at tende d Inclusive L eader ship T raining to gi ve them th e tools and te chnique s to manage diverse team s and perso nalit ies — O ur ‘Fit for t he Future’ prog ramme was enhan ced to include an Inc lusive Mana gement mo dule — A ctiv ely promote d D&I via the web site and so cial me dia — Inc orp orated D&I into our supp ly chain quest ionnaire to ensure bes t practice Give n these init iatives , it was enc ouraging to s ee the re sults from o ur rece nt employe e sur vey re garding D&I and the po sitive imp act that this h as had throug hout th e company (seethe c ase s tudy on p age 59). “ It w as a n abso lu te p l eas ur e wo rki ng with D er went London on their Nation al Equalit y S tand ard ass essme nt. De r w ent L ond on h as made enor mous s trides, embraci ng leadi ng D& I practic e acro ss the NE S framework . D er went London’ s cer t ifica ti on, a nd th e am ou nt o f wo rk th ath as g one i n to a ch ie vi ng i t, pa ys t esta men t to t he i mpor ta nce i t pla ces on h a vi ng a d ive rse a nd inclusive wor kpl ace cul ture. ” Simon Manterfield, Senio r Manager , E Y Th e Soc ial C ommi t tee a rr ange d a fo otb all to urn ame nt with Derwent London’s stakeholders 57 Financ ial Stat ements Governance Strategic repor t RE SPON SIBILI T Y CONTINUED IMP A C T OF OUR DI V E RSI T Y & INC L U S I ON W O R K DUR I NG 20 2 1 “ Derwen t Lo ndo n sh ou ld be immensely proud of their Nationa l Equalit y St andar d c er tif ic atio n, n ot on l y becau se of t he i r ach iev eme nt its el f but a lso becau se t hey res pon ded t o E Y ’ s feed bac k wi th ab so lute ri gour an d d ete rmin atio n and as a c onsequenc e their res u lt sar e som e of t he best weh a veev er w itn essed. ” Arun Batra, CEO and fo under of the UK Natio nal Equalit y St andard. Our initial Nation al Equalit y Stan dard ass essm ent by E Y took pl ace b etwe en Oc tober 2020 and F ebruar y 2021 . Thispro vide d us with an indep enden t review of o ur Divers it y andInclusio n (D&I) policies an d pract ices , with rec ommen ded areas for i mprovement. O ver the nex t 10 months a new D&I Work ing Group es tablish ed clear pr ioritie s promoting D&I wit hin Der went Lon don throug h det ail e d measure s set ting ou t respo nsibilities and K PIs with timeline s. We have now b een ac cre dited with a re sult which plac esus in the to p 5% of the c.40 0 comp anies sur vey ed. D&I Wor king G ro up re cei vin g our certif icate from Arun Batra De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 58 The l atest emp loyee sur v ey car ried ou t in Octob er 202 1 include d ques tions on D&I to es tablish what imp act our wo rk has had ove r the pas t 1 2 m onths. Fo r the fir st time the s ur vey aske d par ticip ants for th eir gender , ethnic it y , disabilit y and s exual orient ation as wel l as open D&I c omment b oxes. T he results are anony mous and inc luded a ‘rath er not say ’ optio n. Give n our rec ent work it wa s pleasing that 87% of res ponde nts beli eved th at the ‘Dire ctors v isibly suppo r t the Co mpany ’ s commi tment to D&I’. Progres s was also ref lec ted in that ne arly half of resp ondent s agre ed that ‘ th e work on D&I over t he past 1 2month s has made th em think dif ferent ly and/ or ha d an impact on the m pers onally .’ O ther po sitive r esults fo und: — 82% agr eed ‘D er went Lon don was an inclusi ve plac e to work ’ — 8 4 % agre ed ‘I f eel I c an be mys elf at work ’ — 8 4 % felt ‘able to spe ak up in my team if I witne sse d or exp erienc ed be haviour whic h was not inclusi ve or resp ec tf ul’ We also aske d our employe es to de scrib e the culture of Der went London. The most mentioned words were ‘passionate’ , ‘reput able’ , ‘ hard work ing’ and ‘prof essio nal. ’ O ther at trib utes where t he prof ile i nc rease d subst antially from p revio us years were‘inc lusive’ and ‘divers e’ which is enco uraging in light of o ur rec ent in itiative s. 59 Financ ial Stat ements Governance Strategic repor t During 2021 , we co ntinued to en sure open lin es of comm unication to enable our e mployee s to stay p ositiv e, conn ecte d and pro ductiv e, whilst fe eling value d and suppo rte d. A valuable met hod to gathe r fee dback and as ses s engage ment, isour indep ende nt biennial employe e sur vey. The l atest sur ve y was in Q4 202 1 and we w ere delighte d to achieve a 97% resp onse rate which, we b elieve, d emons trates an op en culture. T he results we re equally p ositi ve with 94% agre eing that they ar e ‘proud to work f or Der went London ’ , 87 % ‘would recommend Der went London as a great p lace to wo rk’ an d 88% ‘enjoy their day-to -day role’ . Our CEO leads m onthly vir tual tow n halls, supp or ted by D irector s and our He ad of HR. The se me etings prov ided up dates on str ateg y , per f ormanc e and initiative s, as wel l as Q&A s essio ns, team pres entatio ns and sev eral excel lent gues t speake rs. We intend to con tinue with the se following t he sur vey fe edb ack as 96% of resp onden ts ‘ find th e town hall gatherings us eful’ and 80% f eel ‘adequate ly informe d about o ur strategi c direction’ . Attr acting and o ptimising talen t We rec ognise that o ur employe es are es sential to th e succ ess ofthe Gro up, therefo re aim to create a culture which e nables ourtalente d and dive rse wor kf orce to thri ve. De rwe nt Londo n stre sse s the impor t ance of s taf f fe edbac k and enc ourages r egular per f ormanc e conve rsation s with line mana gers thro ughout t he year , in additio n to formal biannual re views. The G roup suppo r ts our employ ees to de velop and gr ow their care ers . There we re 1 1 intern al promotio ns in 202 1 in cluding a newE xec utive Dire ctor . In additio n, a fur the r eight prom otions weremad e from 1 Januar y 2022, including thre e new E xecu tive Commit tee members. Comprehensive l earning and development progr ammes c ater to all levels . The se include a sui te of core sk ills training, o ur induction p rogramme , internal tec hnical work shops , 1 -1 coaching , mandator y c omplianc e training ( se e page 16 1 ), be spoke building manag er training and 360° fe edb ack. Our ‘Fi t for the Fut ure’ programme h as bee n running for thre e year s and is an impor t ant aid to succ ess ion planning. T o date, 5 1 employe es have b enef it ted. Ea ch group is me ntored by a d edicate d co ach and sp onsore d by t wo membe rs of the E xec utive C ommit tee . The l at ter are heavily invo lved in the d esign and c ontent of ea ch module whic h includes p ers onal deve lopment, n egotiation s kills and c ollabo ration. Th e modules ar e supplemente d with on e-to- one and gro up coaching s essio ns. Th e programm e will be rev iewed during 2022, with the aim of rel aunching in 2023. Altho ugh we have a go od rec ord in rec ruiting fr om a diver se range of can didates, the G roup releas ed new r ecrui tment guid elines in 202 1 to for malise our appr oach. T hese s afeguar d against bias, an d our dive rsit y dashb oard monito rs outc omes to e nsure thes e are propor tionate for dif ferent groups. Our reten tion rate is high at 89%. 29% of o ur employe es have mo re than 1 0 year s’ ser vi ce, and 42% joined us ov er the pa st three y ears (see pa ge 1 71 ). We belie ve this prov ides th e right level of c ontinuit y and busin ess k nowledge, b alanc ed with f resh ide as, sk ills and exp erien ce. Employ ee engagement Our culture s tems from o ur values and is a key s treng th of th e busine ss. We st ress th e impor tan ce of inclusi vit y , c ollabo ration, and prof essio nalism to help build long- term relat ionships with o ur col league s and othe r stakeho lders. Emp loyee en gagement an d comm unication is ve r y impor tant . We have an ‘open- door ’ poli cy and are fo r tunate 80% of our emp loyee s are base d at our head of fic e, 25 Savile Row W1 , whic h enables ef f ect ive, fac e-to -fac e interac tion. Th ese fa ctors , together w ith a range of fo rmal and inform al communic ation channe ls (see pa ge 1 35), have create d ahighly engag ed work fo rce. On e of the S t af f Sur v ey wor kin g gro ups RE SPON SIBILI T Y CONTINUED SOCI AL St af f sur v ey 94 % Agre ed 87 % Agre ed 90 % Ver y satisf ied or satis fied “I am pr oud to wor k for Der went London ” “I wo uld reco mmend Der went London as a gre at pl aceto work ” O verall satisf action with working for Der went London De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 60 OUR COMMUNITIE S, OCCUPIERS AND OT HER S T A KEHOL DERS W e reco gn is e ou r rol e in e ns ur i ng ou r bu i l di ng s ar e a n in t egr a l par t o f th e com mu nit i es the y si t wi th i n and s tri ve t ocre at e val ue wh er e possi bl e for a l l ourst ak eholders. Com munit y Fund Our C ommunit y Fund supp or ts projec ts which b enef it the are as inwhich we op erate. In 202 1 we co nsidere d applic ations for c ore funding as w ell as gras s roots p roject s in reco gnition of th e impact of the p andemic, wi th many comm unit y groups f ighting for s ur vival . The f und supp or ted 1 9 projec ts acro ss the p or t folio wit h a mix of exist ing and new re cipients. A ll sele cted pr ojects aim to supp or t wellb eing, to improv e peo ple’ s fu tures and to e quip peop le with skills f or life. Since inc eption in 201 3 o ur Communit y Fund ha s introduc ed ustomany loc al groups in F itzro via and the T ec h Belt. T his has broa dened o ur pers pec tive s and help ed us b et ter unders tand th e issu es af fec ting loc al peo ple. We are proud of what t he fund h as achiev ed to date but n eed to e nsure it remains f it for p urpo se. T oh elp achieve t his we asked Chic kenshed ’ s Y outh T ask forc e torevie w our proc ess es and to ref resh our t hinking around ‘C ommunit y’. We wi ll implem ent som e of the con clusions of thisrev iew in 202 2. Focus o n the homeles s, ment al health and D&I During 2021 our Spons orships an d Donation s Commit te e suppo r ted the wo rk of numero us charit able organisation s. We con tinued with t he foc us on suppo r ting the hom eless an d mental health b y commit ting ove r £7 0,00 0 to charitie s working in th ese tw oareas. O ur suppor t f or increas ed D&I within th e proper t y se ctor , a s well as fur t her afie ld, has resulte d in a commitm ent of over £1 30,0 00 in 202 1 to organisa tions se eking to redr ess th e balan ce, including a 3-y ear burs ar y suppo rt ing an undergra duate stud ent at the Re ading Real Est ate Foundatio n and suppo r ting thee stablish ment of Th e Acad emy of Real A sset s ( se e pag e 62) . Der wen t London e mployee s volunteer t heir time in numero us ways, suppo r ting local e ducat ion and co mmunit y work (see p age 62). The y also supp or t event s organise d by other p ar tners s uch as Th e Padding ton Par t nership whe re they c ollec ted plas tic waste and rubbish p olluting th e local c anal as par t of T he Great B ritish Spr ing Clean. In Re cycle We ek a Der went L ondon team , together wi th our waste c ontrac tor Paper Ro und, remo ved disc arded p lastic an d glas s from a s tretch of b each along t he River T hames . Working with our o ccupiers During th e pandemic w e have be en suppor t ing our occ upiers withth eir evolving sp ace re quirement s and provi ding financial suppo r t for tho se mos t in nee d. We also work to gether to sup por t our loc al communit ies such a s the Writing Par tne rs initiativ e at TheW hite Chapel B uildi ng E 1 , a litera cy prog ramme facilit ated byT o wer Hamlets Educ ation Busine ss Par tn erships n ow known asTh e Switch. Our inaugural o nline charit y auc tion in aid of T e enag e Canc er T rus t and Mind was a tr uly coll aborati ve event invo lving supplie rs and oc cupiers f rom acro ss the p or t folio. Many of our sup pliers and other s takeho lders gen erously don ated items f or the auc tion whichwas op en to our oc cupier s and staf f. We were delighte d toraise ove r £ 1 3,500 f or thes e two c harities . Our Gl asgow of f ice has als o bee n engaging wit h a number of chari ties and gr oups that supp or t the lo cal co mmunities in and around o ur Scot tish p or t folio, don ating £ 1 5,00 0 to 1 1 chari ties in202 1 . 202 1 HIGHL IGHT S — Maint ained our supp or t for lo cal co mmunities — Re viewe d our Communi ty Fund in c ollab oration wit h Chickens hed, an inclusi ve the atre comp any — Initiate d 3-year Re ading Real Est ate Foundatio n bursar y — Fo under Memb er of the A cade my of Real As sets Charities and sponsorships £1 05 K 202 1 C ommunit y Fun d com mit ted £85 0 K Give n to c. 1 30 proje cts s ince inception 19 Proje cts s uppor te d in 202 1 £620 K Addi tional c ommunit y and sponsorship donations for 202 1 St aff volunteering at The Great British Spring Clean at Paddington 61 Financ ial Stat ements Governance Strategic repor t Working with loc al authori ties The G roup also supp or ts loc al autho rit y initiativ es. We joine d the Lond on Liv ing W ag e Foundatio n in 20 1 7 . In 2021 , alongside ot her loc al stakeho lders, we s uppor te d Isling ton in bec oming a Lond on Liv ing Wage Boro ugh. As p ar t of Liv ing Wage Week 202 1 , we ho sted an even t at White Coll ar Factor y, bringing toge ther som e of the Isling ton busine sse s that be cam e Living Wage a ccre dited employe rs during the y ear . We rec ognise the v alue of working wi th likeminded b usiness es andbe ing able to share kno wledge and id eas. B eing a membe r of Westmins ter’s Resp onsible Busine ss Net work e nables us to me et other lo cal bus iness es to learn whic h local gr oups ne ed supp or t. For ins tance , along with indiv idual staf f do nations, we s uppor te d Westmins ter’s appe al for fund s to provide d aily items for ref ugee families f rom Afgh anistan. Eve nt at W hite C ol lar Fa ct or y dur ing Is ling t on Li vin g Wage We ek 2021 Supply cha in The G roup also en coura ges its c ontrac tors to supp or t loc al comm unities aroun d our develop ments by p roviding loc al employ ment. We are p leased t hat both T he Feat hersto ne Buildingand Soh o Plac e excee ded t heir targe ts in this regard. FOUNDER MEMBE R OF THE ACADE MY OF RE A L ASSE TS The A cade my of Real As sets wa s est ablishe d in 20 21 to enc ourage s tudent s from les s advant age d back grounds to con sider real e state as a wo rkpl ace and to intro duce m ore diver sit y and inclusio n into the sec tor; so mething which Der wen t London b elieve s is key for the in dustr y. We hosted thef irst me mbers hip event at DL / 78. Der wen t London ac tive ly par ticipate s in the Aca demy ’ s acti vitie s, such a s scho ol talks an d caree r insights which complements our staf f volunt eering programme en gaging withsc hool s and colle ges. We hoste d the Ac ademy ’s first C of fe e Broadc ast in De cemb er , one in a se ries aime d at informing young s tuden ts age d 1 5- 1 9 year s old abou t the prop er t y sec tor . T hey are b eing deliv ered inpar tne rship with Sp eakers fo r Scho ols and c over th e whole UK. T his was an opp or tunit y for st udents to s ee som e of the broa der oppo r tunities wit hin the industr y and to ask th e team ques tions abo ut care ers in re al estate an d sustainab ility. Members of Ch ickenshed and Der went London staff LI VING LET T ERS, A COLL ABOR A T ION WI TH CHICKENSHED Som e Der went Lo ndon st af f were anony mously matc hed wit h 1 6 - 1 9 ye ar olds on Chickensh ed’s BTEC edu cation pr ogramme, taking t he role of vir tual m entors shar ing corre spon denc e. The f irst let ter r aised the is sues of dif feren t perc eptions . Thes ec ond let ter foc used m ore on hop es, c once rns and aspiration s. This pro gramme c ontinues wi th the hop e for fac e-to- face m eetings in 2022. RE SPON SIBILI T Y CONTINUED SOCI AL De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 62 HE AL T H & SAF ET Y E nsu ri ng t he hea lt h and s af et y ( H &S ) ofo u r em pl oyees a nd bu i ld in g s is fun da me nta l t o ou r bus ine ss. W e str ive t odel ive r gr eat w or ki ng pl aces a nd re duc e r isks . 202 1 HIGHL IGHT S — Intro duce d a new c omplianc e system — Cr eated a B enchmar king Group to share H&S data wit h our propert y peer s — Enhan ced F ire Risk As ses sments in line wi th the f uture Fire Saf et y Act — Fo cus on wo rking safe ly at height acr oss our p or t folio — Intro duce d monthly ‘ Safet y Sur geries’ The ‘D er went Way’ The ‘ Der went Way ’ communic ates our inclusi ve H& S culture an d objec tive s to all our stakeh olders . Our A im is to provid e healthy, safe and se cure enviro nments f or ourpe ople, cus tomers an d contr actor s to work, li ve, visit an d rela x. Our P eople are fundame ntal to the su cce ss of our bu siness , which is why we inves t to ensure he althy and safe wo rk environm ents. Enhanced compliance plat form In 202 1 the Gro up migrated th e whole por t fo lio to an enhance d H&S complianc e plat form in c ollab oration wit h internal and ex ternal s takeholde rs. O ur current c ombined c ommerc ial and resid ential prop er t y H &S co mpliance s core is 98% . We continue toreinforc e our st aff an d contr actor s’ health and saf et y culture, assis ted by a tran sparent app roach wit h our supply chain. The H&S team wor ks with Pro per t y Manage ment to ens ure that ourbuildings and projec ts are op erated s afely with out he alth risks ,including mee ting the additi onal challenge s create d by the glob al pandemi c. We consid er health, s afet y and wel lbeing at eve r y sta ge of a building’s life cy cle : f rom acquisit ion, throug h developm ent, manag ement, le asing and dispo sal. T his requires de signing, building , main taining a nd op erat ing our b uildings usin g be st prac tice s. It also in cludes sp ecif ying the ap propriate mate rials andde sign to ensure f uture saf e and healthy mainten ance and management ac tivities . Our appr oach is ce ntred o n peop le, asse ts and dev elopment s. Peop le Our st af f are update d on H& S mat ters t hrough reg ular training. During 2021 new training cont inued to be r olled ou t to the Prop er t y Manage ment and D evelopm ent teams . T raining include d St atutor y Co mpliance, C ons truc tion De sign and Fire Mar shals. T he Cov id- 1 9 pand emic has ment al as well as phy sical he alth impact s. In resp onse, a f ur ther 1 4 employ ees we re trained to b ec ome Ment al Health Fir st Aid ers, t aking the tot al to 20. Employe es also at ten ded ex ter nal H& S co urse s, such as NEBO SH, IOSH, m ental he alth firs t aid, water hygien e and tall building fire manag ement. C ollec tive ly , 88 training wor kdays were co mpleted in202 1 . Assets Ensuring our o ccupie rs, visi tors and th ose who li ve and wor k in and around o ur buildi ngs are s afe and he althy is critic al. We introdu ced a new rep or ting sy stem, RiskW ise, in June 2021 which has enhanc ed our H&S data . Our Fire S afet y Manage ment S ystem c ontinues to e volve in line with B S 9997 , m eeting th e requireme nts of the n ew Fire Safe ty an d Building Safet y A cts exp ec ted to be int roduc ed by the e nd of 2022. Ever y pr oper t y in our po r tf olio had a prop er t y health c heck an d roof sur vey. In addition, we re viewe d our buildings’ physical we llbeing , foc using on lighting , air and water qualitie s. Where n ece ssar y we instigate d improveme nts. T his ensures a m ore holist ic approac h toenhanc ed well being as well a s risk. Developments Our site s continue d to follow th e Cons truc tion Lea dership C ouncil’ s Co vid- 1 9 Si te Operating P roc edures an d levels of infe ction s on our sites re mained re lative ly low . This wo uld not have b een po ssible witho ut col laborat ion with our c ontrac tors and supp ly chain. T o gether , we have en sured a st rong resp onse to mit igate the risks gene rated by th e pandemic . We continue to r aise the signif ican ce of he alth issue s on our con struc tion proje cts , att ributing to the m the sam e impor tanc e assafe t y . T o h elp tackle s ome of the se iss ues, during 2021 we suppo r ted the He alth and Safe t y Exe cutiv e’ s (HSE) c ampaigns in ment al health, mus culoskelet al disorder s and resp irator y health. Our H&S data is on pa ge 66 and in the Re spon sibility R epor t. 1 .26 Ac cident Fre quen cy Rate 3 14 H& S inspec tions 5 , 8 42 Indu cti ons 63 Financ ial Stat ements Governance Strategic repor t A t Derwen t Lo ndo n, a cti ng i n a fai r and res pon si bl e ma nn er i s a cor e el eme nt of o u r bus i ness p ra cti ce. OUR ESG GOVERN ANCE FR AME WOR K RE SPON SIBILI T Y CONTINUED G OV ERNAN CE 202 1 HIGHL IGHT S — D eloit te per fo rme d an indepen dent as surance ass essm ent of our gre en finan cing arrangem ents — C ontinue d mandator y c omplianc e training programm e forall emp loyee s (including Direc tors) which c overe d topic s such as so cial me dia awarenes s, data pr ivacy an d unco nscious bia s/respe ct in the wor kf orce (se e page 1 61 ) — HMRC c onfir med our ‘ low-risk ’ ta x rating st atus until 2022 — Ho sted S takeho lder and Inves tor Days A responsible business The o versight o f ESG mat ters is cri tical. I t not only allows th e Boar dto unders tand mo re holistic ally the imp act of its d ecision s onkey st akeholder s and the env ironment , but als o ensures i t is kept aware of any signif icant c hanges in th e market. T his includes the ide ntific ation of em erging tren ds and risks , which in turn c an befa ctore d into its str ateg y discus sions. ESG is ove rsee n principally b y the Bo ard, Resp onsible Busine ss Co mmit tee and Sus tainabilit y Co mmit tee (see our ES G governan ce fram ework ) . Our C hief Exe cuti ve, Paul Williams, h as overall acc ountabilit y f or ESG mat ters ho wever , the re sponsibilit y f or over seeing i ts day-to -day manag ement is de legated to Nigel Ge orge (E xecu tive Dire ctor). Paul Williams over see s the revi ew andpe r formanc e of our res ponsibilit y wor k as chair of the Sust ainabilit y Commi tte e and as a memb er of the Re spon sible Busines s Commit tee. ADDI TIONA L GOV ERN ANCE DISCLOSUR ES The s ec tion 1 72( 1) stat emen t page 1 2 4 Whistleb lowing page 1 36 Anti-briber y and corruption page 1 65 T a x ri sk page 1 06 Compliance train ing page 1 61 The Board O verall r espon sibilit y fo r ESG mat ter s Audit Commit tee Monit ors a ssuran ce and internal financia l control arrange ments Rep or t pa ge 1 4 8 Remuneration Commit tee Ensure s ESG fac tor s are included in the ex ecu tive remuner ation fram ework Rep or t page 1 72 E xecutive Dir ector s with as sist ance fr om the E xecutive Commit tee Resp onsible fo r over seeing th e Group’s ESG initiati ves Sus ta inabilit y Commit tee Responsible for implemen ting the Boar d’ s ESG s trate g y Health and S afet y Commit tee Responsible for monit oring healt h and safet y management and per fo rmance Sponsor shi p and Donations Committe e Resp onsible fo r the Group’ s charit able activ ities and donations Soc ial Commit tee Aims to encourage tea mwork ing and collabor ation between depar tment s through social activ ities Risk Commit tee Identifies and evaluates key ESG ris ks (prin cipal and emerging ) ensu ring they are appropriately managed Rep or t pa ge 1 58 Responsible Business Commit tee Monitors the Group’ s corpor ate responsibil it y , sust ainabil it y and st ak eholder engagement activ ities Rep or t page 1 66 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 64 Climate change governance The g overnan ce of climate ch ange risk and op por tunitie s is ultimately the re sponsibili ty of t he Boar d. However , day-to -day manag ement is de legated to the E xec utive C ommit tee an d senior man agement. The B oard mo nitors the G roup’ s prog ress thr ough our sc ience - bas ed targ ets, whic h were indep endent ly validated and ap prove d by the S cienc e-Bas ed T arget initiati ve (SBTi) in 201 9. In additio n, per f ormanc e is ex ternally as sured by D eloit te LLP an d our 202 1 Sc ope 1 , 2 and 3 GHG emis sions dat a, intensit y rati o and energ y data re cei ved ‘P ublic Reas onable As surance’. Our st rateg y and tar gets for e nerg y c onsumption an d carb on emissio ns are set an d monitore d by the Bo ard. The B oard, Resp onsible Busine ss C ommit tee and E xec utive C ommit tee rec eive re gular upd ates and pre sentat ions on env ironmental andsus tainabilit y per f ormanc e from th e Head of Sus tainabilit y. Climate change governance Sust ainabi lit y Committee Infor ms the E xecu tive C ommit te e and Resp onsible Business Commit tee on climate risk and appropriate management measures taken Sust ainabi lit y team Develops and implements appropriate management mea sures ac ros s the busine ss and i dentif ies clim ate risk to info rm the r isk manag ement pr oce ss We repor t un der sev eral fram eworks to pro vide a c omplete pict ureof our progre ss and ac tiv ities and to allow c omparis on withour p eer s and other c ompanie s ( se e page s 67 to 7 5). Oursus tainabilit y work h as drawn ex ternal re cogni tion. Wemaintain Gre enstar s tatus in th e Global Real E state Sust ainabilit y Benc hmark (GRESB) index with a sc ore of 81 , weareliste d in the F TSE4Go od index an d have a CDP rating of C. SECR dis clos ure page 7 4 Climate change risk and oppor tuniti es page 1 03 Green finance governance Our Gre en Financ e Framework al lows us to clearly link our finan cing to the env ironmental b enef its our ac tiv ities gen erate. The A udit Commi tte e rec eive s annual updates on o ur green f inanc e initiative s, including in re spe ct to our rep or ting disclos ures. Our Gre en Financ e Framework r ecei ved ind epen dent ass urance from D eloit te LLP t hat it is aligne d with the L oan Market As sociat ion’ s Ex te nded G reen Lo an Principle s and the c omplete assur ance st atement is avail able on our websi te. Fur ther inform ation on our Gre en Financ e Framework is o n page s 1 3, 96 and 97 . Supply cha in gov ernance It is impor t ant to us that our sup pliers and c onst ruct ion par tne rs ope rate ethically an d share our ESG bu siness p rinciples . Our supp ly chain govern ance pro ce dures ensure o ur supplier s are aware of the s tandards we ex pec t from t hem and th e busines s prac tice s which we will not tolerate . All supplie rs with who m we spe nd more than £20,00 0 per annum are r equired to pr ovide evid ence of h ow they are c omplying wi th our Supply Chain Sust ainabilit y St andard (the S tandard), which se ts out our princip les and exp ect ations in term s of the enviro nmental , social , ethic al and gover nance is sues whic h relate to our sup ply chains. Supp ly Chai n Sust aina bilit y S tan dard page 1 69 D u r i n g 2 0 2 1: — We rev iewed b est pr actic e in terms of sus tainable supply ch ain manag ement (e.g. B S 8903 an d the Ethical T rading Initiati ve (E TI) Bas e Cod e ), to unders tand ho w we can improv e our per f ormanc e and that of our sup ply chains. — We re queste d evide nce th at our major supplier s were comp liant with the S tand ard. This involve d comp letion of aques tionnaire and pro viding cop ies of key po licies and proc edure s ( se e pag e 1 69). — We publis hed a re vise d Stan dard which now inc ludes our exp ect ations in res pec t of diver sit y and inclusion , environmental issues, and preventing modern slaver y . Ensuring our p ayment p ractic es are ethic al is a key re quirement ingover ning our supply chain. T his was of par ticul ar impor tan ce due to the C ovid- 1 9 pan demic and it s impact on b usines ses. Responsible payment practices page 1 69 Prote cting human rights The p rotec tion of human right s and fun damental f ree doms is one of our key ESG pr ioritie s which we manag e from an inter nal ( wit hin our busine ss) and ex ternal p ersp ec tive (within our supply c hain andour re lationships w ith cont ractor s ) (see p ages 67 and 16 7). Bas ed on our on going risk ass ess ment, we c ontinue to be lieve the risk of any sl aver y or human traf f icking in re spe ct of our emp loyee s is low. The risk as ses sment of o ur supply chain indic ated the greate st pote ntial risk exis ted in the use of b uildi ng c ontrac tors for our d evelopm ent sche mes, a s their work invo lves the u se of subc ontrac tors. T his risk also ex ists in so me of the c ompanies that pro vide De rwe nt Londo n with ser v ices s uch as cleaning an d se curit y. W e ens ure all of thes e suppliers ar e aware of the Mod ern Slave r y Act 201 5 and w e require them to f ormally c onfirm th ey are in comp liance with t he legislat ion. We monitor an d cross -che ck our supply ch ain, from procurement to deliver y . T a x governa nce We take our obligatio ns as a ta xpay er serio usly and fo cus on ensuring t hat, acro ss the wid e range of ta xes th at we deal with , we have the g overnan ce and ris k managem ent proc es ses in pla ce to allow us to me et all our co ntinuing ta x obligations . The B oard has overal l respo nsibilit y for our t ax s trateg y, risk asse ssmen t and ta x comp liance. O ur statem ent of ta x princ iples, which is ap prove d by the B oard, is available on o ur website. We have an ope n and transp arent rela tionship with HMRC an d se ek to anticipate any t ax ris ks at an early s tage, inc luding clar if ying area s of uncer t ainty wi th HMRC as the y bec ome ev ident. We keep HMRC infor med of h ow our busine ss is str ucture d and resp ond to all que stions or r eques ts promp tly . Our He ad of T a x alsore gularly e ngages wit h HMRC via his roles wi th the Char tere d Instit ute of T a x and the B ritish Pr oper t y Fe deration to s uppor t con sultations or to s eek legis lative c larif ication in are as that co uld poten tially impact o ur busines s. 65 Financ ial Stat ements Governance Strategic repor t RE SPON SIBILI T Y CONTINUED GOVERNAN CE Repor ting fr ameworks and ES G data Non-financial repor ting As we h ave fewer than 5 00 emplo yees , the non- financial r epor ting re quirement s cont ained in the C ompanie s Act 200 6 do not app ly to us. Howeve r , due to our c ommitme nt to promoting t ranspare ncy in our rep or ting and bus iness pr actic es, we hav e electe d to provi de fur the r inform ation in the tab le below. Our key p olicie s and s tan dar ds Additional information Environme ntal mat ters — Resp onsibility Polic y — Net Ze ro Carb on Pathw ay — Scienc e-based c arbon targets — T ask Fo rce on Cl imate-re lated F inancial Disc losure s ( TCFD) — S treamlin ed Ene rg y and C arbon R epor tin g (SECR) disc losure — Resp onsibility Repor t ( ht tps:/ /rr .derwentlondon.com ) — Our p athway to ne t zero car bon (se e page 1 2 ) — Clima te change go verna nce (se e page s 65, 68 an d 69) andris k manage ment (se e page s 72 and 1 02) — E xec utive D irec tors’ annual b onus (se e page 184) — TCFD (se e pag es 68 to 73) — SECR (se e page s 7 4 and 75) So cial an d employee aspec ts — Voluntee r Polic y — Equal O ppor tuni ties an d Diver sit y Pol icy — Pro fes sional D evelop ment an d T raining — Shar ed Pare ntal Le ave — Flexib le Wo rking Poli cy — C ommunit y Fund (se e pag e 6 1 ) — Our p eop le ( s ee pa ges 56 to 6 0) — Di versi t y and inclusi on (see pa ges 57 to 5 9 and 1 69 to 1 7 1 ) Respect for huma nrigh ts — Indi vidual Righ ts Poli cy — He alth and Saf et y Polic y St atemen t — Supp ly Chain Sus tainabili ty S tan dard — Modern Slaver y Statement — He alth and s afet y (see p age 63) — Human r ights an d mode rn slav er y (see pa ges 65 a nd 1 67 ) — Supp ly Chain Sus tainabili ty S tan dard (see p age 1 69) Anti-corruption and bri ber y is sue s — A nti-brib er y Poli cy — Whis tleblowing P olic y — E xpenses Policy — Mon ey Laun dering an d T er roris t Financ ingPolic y — Preventing Facilitation of T a x Evasion Polic y — Audi t Commi tte e rep or t (see pa ges 1 4 8 to 1 57 ) — Risk C ommit te e repo rt (se e pa ges 1 58 to 1 65) — Our p rincipal r isks (se e page s 1 0 0 to 1 19 ) — C omplian ce training (se e page 16 1 ) Health and s afet y dat a The t able below d etails our key h ealth and safe t y statis tics . Our accid ent fre quenc y rate (A FR) is giv en for 2021 and for deve lopment s only in 2020. This data allows us to ide ntif y tren ds and highlight s where we sh ould focus . Employe es Managed por t folio D evelopments 20 21 2020 20 21 2020 20 21 2020 Per son ho urs wor ked 1 266 ,96 0 n /a 31, 9 6 0 n /a 1, 5 91, 416 2,204,49 9 Minor accidents 2 0 1 9 10 42 46 RIDDORs 2 0 0 0 5 2 6 Dangerous occ urrences 1 0 0 0 0 0 0 Fatalities 2 0 0 0 0 0 0 Improvement notices 2 0 0 0 0 0 0 Prohibition notices 1 0 0 0 0 0 0 Injur y rate 1, 3 0 n /a 0 n /a 26.39 n /a Los t day rate 1, 4 n /a n /a n /a n /a 5.6 6 n /a Se verit y ra te 1, 5 n /a n /a n /a n /a 0 .1 3 n /a RIDDOR AFR 1, 6 0 n /a 0 n /a 1. 2 6 2.72 Not es: 1 Dat a has b ee n audit ed to th e rea son able le vel by D elo it te LL P only in 2021. 2 Dat a has b ee n audit ed to th e rea son able le vel by D elo it te LL P in 2021 and 2020. 3 Injur y ra te - (injuri es exc ludin g RIDD OR and lo st ti me injur ies)/ (tot al ho urs wo rke d)1 ,0 00,0 00. 4 Lo st day r ate – (lo st tim e injuri es exc luding R IDDO R)/ (tot al ho urs wo rke d) 1 ,0 00,0 00. 5 Se ver it y rate – to tal n umbe r of los t wor k days (exc ludin g RIDD ORs)/ tot al num ber of i ncid ent s. 6 RIDD OR ac cid ent f requ enc y rate ( A FR) – th e numb er of RID DOR s/(tot al ho urs wo rke d) 1 ,0 00,0 00. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 66 UN SDG d isclo sure s The Uni ted Nations Su stainable D evelopm ent Goal s (SDG) are an internation al standar d develop ed to supp or t global c hange and sust ainable grow th. We be lieve that we hav e a role in suppor ting t he UK in respo nding to this stan dard and hel ping af fec t change. We have rev iewed the s uite of 1 7 goal s and have se lecte d thos e goals which alig n most c losely to our ESG p rioritie s, which are s et out inthetab le below with a s ummar y of our progr ess a gainst the goal s which are par tic ularly signif icant to o ur busines s. Our ESG priority UN Goal Applicable ta rget Applicable indicator Ou r e ffo rts Creating value i n the co mmunit y an d for o ur wider st akehol ders 4.4 4.4. 1 Throu gh our C ommunit y Fund we inv est in an d suppo r t youth and adult I CT edu catio n and skill s training – bot h techni cal and vo cati onal. A re cen t example of thi s is the Shad ow Hero es proje ct we have s uppor te d. This p rojec t uses c reativ e transl ation work shop s as a way to enc ourag e children who h ave English a s an addit ional lan guage to e mbrac e their ling uistic an d cultural iden tities w ith the aim of b ringing ab out inc lusive cl assr ooms , fos tering a s ense of b elongin g amongst m arginalis ed la nguag e user s and to ultimate ly improve y oung pe ople’s sens e of con fide nce in sc hoo l and be yond. 4.a 4 . a .1 Thro ugh our C ommunit y Fun d we inves t in and supp or t projec ts which lo ok to upgra de and impr ove you th edu catio n facilit ies. A rec ent exa mple of this is th e Doo rstep L ibrar y proje ct whic h aims to impro ve litera cy skil ls by prov iding traine d volunte ers for f amilies who se childre n nee d ex tra he lp with th eir reading . Inplac e of fac e-to -fac e ses sions , soc ially dista nce d boo k swapso n families’ d oors teps hav e taken pl ace, b ook s have be enpo sted to c hildren as wel l as one -on- one onlin e reading se ssions b et ween f amilies an d volunte ers. T he se r vice g ive s children t he conf ide nce to thr ive at ho me and at s choo l and help sthem h ave abet ter f utur e through im prove d litera cy skill s. Protec ting hu man rights, Engaging and developing ourem ploye es 5 .1 5 .1 .1 Bey ond any leg islati ve req uirement we a re acti ve in ensur ing mea ningf ul gen der equ alit y in our busin ess . Whet her that is making s ure our bus iness s tru cture is re pres entat ive or ma king sure our s upplier s have th e same p olicie s and appr oache s in their busin ess es. T o he lp guide us , our Div ersi ty & In clusion Wor king Group is t aske d with rev iewing b est pr actic e and to ch allenge our bus ines s to ensure we ad dres s equali ty r obust ly . In 2021 we achie ved th e National Equ alit y St andard wi th our res ults ranke d in the top 5% of a ccre dited c ompani es. 5.5 5.5.2 32% (33% in 2020) of the wome n within our bu sines s are in managerial roles/ po sitions. Designing and delivering buildings responsibly , Mana ging o ur ass et s respo nsibly 7. 2 7. 2 .1 Our aim is to e nsure we pur chase r enewab le energ y f or our por t fo lio. All o ur elec trici ty c ontra cts whi ch supply o ur buildings are now R EGO backe d. As p ar t of our ne t zero car bon pr ogramm e we are lo oking to how w e proc ure renewa ble gas suppl ies and inco rpo rate higher le vels of o n-site re newable en erg y gen eratio n. 7. 3 7. 3 . 1 As p ar t of our sc ience -bas ed t argets we h ave a spe cif ic ene rg yintensit y t arget d esigne d to hel p us redu ce our en erg y intensi t y . Se e Resp onsibili ty R epor t f or the la test pr ogres s on these targets. Creating value i n the co mmunit y an d for o ur wider st akehol ders 11 . 7 1 1 . 7. 1 W e ac tive ly promo te the inclus ion of publi c spac es in and aro und our buildings an d ensure t hey are f ully acc es sible to tho se with dis abilitie s. In addit ion, we are p ar t of the Lo ndon Mayo r’s Busin ess Cl imate Lead ers Gro up which was s et up to help L ondon be com e a zero car bon ci t y by 2030. Mana ging o ur ass et s respo nsibly 12 . 5 12 . 5 .1 We hav e est ablishe d a por t fo lio-wid e minimum rec ycling t arget of75% and a no was te to landf ill po licy. 12 . 6 12 . 6 .1 We integ rate co mprehe nsive s ustaina bilit y rep or ting infor mation into our pub lic rep or ting. Designing and delivering buildings responsibly , Mana ging o ur ass et s respo nsibly 13 . 2 1 3 .2.2 We have ind epen dently ve rif ied sc ienc e-bas ed c arbo n targe ts which ar e set to a 2°C re duc tion sc enario . This me ans we are com mit ted to re ducing our c arb on emis sions and m aking sure ourp or tf olio is clim ate resilie nt. We are rev iewing th ese t argets toalign th em with a 1.5 °C s cenar io. 67 Financ ial Stat ements Governance Strategic repor t RE SPON SIBILI T Y CONTINUED GOVERNAN CE The T a sk For ce on Cli mate -rel ate d Finan cial Di sclo sure s (T CFD) The G roup has use d TCFD guide lines as par t of i ts environm ental re por ting sinc e 20 1 8. Our late st disclo sures, o n page s 68 to 73, are con sistent with t he TCFD rec ommen dations and th e rec ommend ed disclo sures. Fur the r informatio n on the TCFD c an be foun d on the Financial S tabilit y B oard’s website at: www . fsb - tc fd .o rg . Governance pa ge1 21 Describe the Board’ s oversight ofc lima te- rel ate d ris ks andopportunities Th e Boa rd has ov eral l resp ons ibilit y fo r clima te-r elate d ris ks and o ppor t uniti es. Th e Resp ons ible Bus ines s Co mmit te e (RBC), a prin cipa l comm it tee of t he Bo ard (se e rep or t on pa ges 166 to 1 71 ), mo nitor s the man agem ent of o ur clima te-r elate d ris ks and o ppo rt uniti es and m ee ts at lea st t wice a y ear. One of it s role s is to en sure th at the B oar d ade quatel y refl ect s clim ate-r elat ed is sue s in its de cisi on mak ing. In t urn, th e RBC i s kept inf orm ed by th e E xecu tiv e and S ust ainabil it y Com mit tee s whic h are se parat ely re spon sible f or ove rse eing an d imple ment ing clim ate- rela ted ac tion s and m eet m onth ly and qu ar terly r esp ec tiv ely. Chief E xe cuti ve, P aul Willi ams, an d Hea d of Sus taina bilit y, John D avie s, are mem ber s of the E xe cut ive an d Sus tainab ilit y C ommit te es an d prov ide re gul ar upda tes to th e RBC an d the B oard o n our clim ate-r ela ted wo rk and t he as soc iated r isks an d opp or tuni ties . Dur ing the y ear, the Bo ard an d vario us co mmit tee s co nside red t he fo llowing c limate -re late d issu es: Responsible Busi ness Commit tee – the c urren t prog res s of our n et zero c arb on pr ogra mme and t arge ts, m os t nota bly th e se tt ing of en erg y re duc tion t arge ts for o ur mana ge d prop er tie s and ou r net zer o car bon o cc upier su r vey. Risk Commit tee – t he late st p osi tion of t he Gro up with r egard s to the f or thc oming E nerg y P er for manc e Ce r tif icate ( EPC) cha nges f rom 1 A pril 202 3 i.e. th e minimum EP C rat ing of E app lying t o all op erab le leas es les s than 9 9 yea rs and g reate r tha nsix mo nths . Likewi se, ou r prep arati ons an d fina ncial im pac ts fo r the pr opo sed 2 030 ch ange s and re quirem ent s for th e minimu m EPC ra ting to ch ange f rom E to B – a ke y trans itio n risk id enti fie d in our s cen ario an alysi s (see pa ge 16 1 ). Audit Committee – th e curre nt pro gre ss of o ur gre en fin anc e initiat ive s, inc luding o ur new £ 350 m gre en bo nd, whic h are fun ding ou r late st net ze ro ca rbo n building s. In add ition , the C ommi tt ee re cei ved t raining o n the a ssur ance w e curr ently und er take o n our env ironm ent al dat a which in clud es en erg y and c arb on an d our sc ienc e-b ase d tar gets , and w here we c ould exp and th is ass uranc e in the f ut ure to co ver ot her c limate -rel ate d areas e .g. TC FD. Dur ing the y ear th e Bo ard ag ree d on th e appo intme nt of Jo hn Dav ies to th e E xecu tiv e Com mit tee , stre ng the ning it s clima te ris k expe r tise a nd exp eri enc e at this le vel . An o ver v iew of th e Boa rd's clim ate-r elat ed sk ills , expe rien ce an d kno wled ge is det ailed i n the ch ar t on pa ge 1 40 . Day -to- day ov ersi ght of c limate -rel ated a spe ct s is unde r taken b y the S usta inabili t y Com mit tee wh ich c ompr ises ke y depar tment l eaders: — P aul Will iams (Chi ef Ex ecu tiv e) — J ohn Dav ies (H ead of S ust ainabil it y) — Nige l Geor ge ( Executi ve Di recto r) — D avid L awle r (Comp any S ecr etar y) — R ichar d Baldw in (Dire cto r of Dev elop ment ) — K at y Lev ine (He ad of HR) — V ictoria Steventon (Head of Propert y Management) — Vasi liki A r vanit i (Head o f As set Ma nage ment ) Th e Sust ainab ilit y Co mmit te e rev iews th e prog res s and p er for manc e on cl imate -rel ated is sue s e.g . ene rg y ef f icien cy, emb odie d ca rbo n and leg isla tion su ch as th e minimum e ner gy e f fic ienc y st andar ds. A t arget p er fo rman ce an d data das hboa rd (inc lusiv e of clim ate- rela ted t arget s/met ric s) is pro duce d fo r discu ssio n and ana lysis d uring th e Sus taina bilit y Co mmit te e and re late d sust ainab ilit y pe r form anc e mee tings . T o emb ed a f ur the r leve l of ove rsig ht ove r climat e-re late d iss ues , we have l inked p er for manc e me asure s to the E xe cut ive Dire cto rs' ann ual bo nus ca lcula tions w hich f ocus o n the im prov emen t of car bon a nd ene rg y inte nsit y, acc ount ing for 5% a nd 2.5% re spe cti vel y of the b onus w eight ing. S ee p age 184 for f ur the r deta ils. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 68 Governance continued De scr ibe m ana geme nt’s r ole i n assessing and managing climate-related risks and oppor tunit ies Our C hief E xec uti ve, Pa ul Willia ms, ha s over all ac cou ntabi lit y for ES G mat ter s whic h includ es cl imate -rel ated is sue s. Howe ver, the re spo nsibili t y for ov ers eein g its day -to -day ES G mana gem ent is de legate d to Nige l Geo rge (E xe cut ive Dir ec tor). Paul W illiam s over se es th e revi ew and p er for manc e as Ch air of the S ust ainabil it y Co mmit te e and as a m embe r of the m ain Bo ard and R esp onsib le Busi nes s Com mit tee . In addi tion, Ni gel Ge org e sits o n the m ain Boa rd, E xec uti ve and S ust ainable Co mmit te es. T her efor e, he is ac co unta ble for c limate -re late d issu es whi ch, if s ignif ic ant, ar e brou ght dire ct ly to the at te ntion of th e main Bo ard. Joh n Davie s, He ad of Su sta inabili t y , ha s resp onsib ilit y fo r deve lopin g, lea ding and , toget her wi th his te am, imp leme nting th e bus ines s-wi de sus taina bilit y pr ogra mme (in clusi ve of all c limate -re late d asp ect s) and re por t s to Nigel G eor ge. A s a res ult, Nige l has a co mpre hens ive o vers ight of a ll our cl imate -rel ated w ork . As m enti one d abov e, th e Sust ainabi lit y Co mmit te e comp ris es key d epar tm ent re pre sent ati ves wh o eac h have a re sp onsibil it y for o ver sight a nd imple men tatio n of clim ate rel ated i ssu es wit hin the ir dep ar tmen t: — D avid L awle r (Comp any S ecr etar y) – i s resp ons ible for e nsur ing clim ate-r ela ted is sue s are ade quate ly ref lec ted w ithin ourc orp orate g ove rnan ce st ruc ture e .g. o ur risk m anag emen t pro ces se s — R ichar d Baldw in (Dire cto r of Dev elop ment ) – is re spon sible f or ens uring o ur deve lopm ent s chem es em be d the re quire dclimat e resil ienc e and ne t zero c arb on asp ec ts wi thin th eir des ign and d eli ver y pr ogra mmes e .g. hi gh EP C and BREE AM ra tings — V ic toria S tev enton (H ead of P rop er t y Mana geme nt) – is r esp onsib le for e nsur ing our pr ope r ties ar e ope rate d ef fi cient ly e.g . the y are re ducin g their e ner g y con sumpti on in line w ith ou r ener g y targ ets — Vasi liki A r vanit i (Head o f As set Ma nage ment ) – is re spon sible (to geth er wit h John D avie s) for en suring E PC s are tra cke d and m onito red a cros s the i nves tme nt por t fo lio. L ikewis e, that o ur as set ma nage ment p lans i nco rpo rate th e nec es sar y impr ovem ent m easur es an d budg ets to al low our c ompl ianc e with t he for t hco ming EP C legis lati on chan ges f or 2030 a nd our n et zero c arb on co mmit ment As s et ou t abo ve, th ere is a cl ear top d own – bo t tom up ‘lin e of sig ht’ f or clim ate- rela ted as pec ts f rom th e Boa rd to th e Sus taina bilit y C ommi tte e (se e page 6 4 and o ur ESG G over nanc e Fram ewor k). T arg et pe rf orm ance a nd dat a dashb oar ds (inc lusi ve of clim ate- rela ted t arget s/met ric s) are disc uss ed an d analy se d during t he Sus taina bilit y C ommi tte e and r elate d sus tainabili ty p er for manc e meet ings. Se e the Ri sk Mana gem ent se ct ion on p age 103 for a n outl ine of ho w we appr oac h the as se ssme nt and m anag eme nt of climate-rel ated risk. Strateg y p ag e 32 Describe the climate-related risks and oppor tunities the organisation has identified over the short, medium and long-term We co nside r shor t -, mediu m- and lo ng-te rm time h orizo ns to be 0 -5, 5 - 1 5 and 15+ year s res pe cti vely, re cog nising t hat clim ate-r ela ted is sue s are of ten ( but n ot excl usiv ely) linke d to th e medi um- to long -ter m, and o ur prop er tie s hav e a life of many dec ades. Shor t -term – we have s een a g reat er shif t in t erms o f legis latio n, fi rst wi th th e intro duc tion in t he UK of th e Minimum En erg y Ef fi cien cy St and ards (MEES) f or com merc ial and d ome stic p rop er t y and mo re re cen tly, the pro po sed 20 30 minimu m EPC rati ng chan ges lin ked to t he ac cele ratio n of the g over nmen t’s ambi tion to a chie ve net ze ro ca rbo n by 2050 . In addit ion, cus tome r dema nd co ntinu es to dri ve th e req uireme nt for b uildings w ith ro bust s ust ainabil it y cre den tials , which a re co st ef fe ct ive to o ccu py and p romo te highe r leve ls of we llbe ing and p rodu cti vit y. Our c limate s cen ario an alysi s show ed us th at the se tr ansi tion ri sks are f ocu se d prima rily on th e sho rt -ter m, wit h EPC r egul ation , emis sion s of fse ts an d cos t of raw mate rials p res entin g them sel ves as ke y risk s af ter ap plyin g vario us mit igatio n meas ures f rom o ur Net Zer o Car bon P athway. By m anag ing th ese r isks ad equ ately, we be liev e the fo llowin g opp or tunit ies c ould in clude: — En erg y e ff ici ent ‘gr een’ bu ildings wi th be tte r EPC s co uld be le t more q uickly, co mman d highe r rent s and enjo y lower t enant turnover . — In ves ting in th e ove rall en erg y ef f icie ncy o f our buil dings als o impro ves a sse t value b y redu cing o ur mainte nanc e co sts an d ex tend s a building’s lif e. — Wo rkin g clos ely wit h tenan ts to ma nage b uilding ef f ici enc y shoul d lead to c lose r lan dlord /tena nt rel ation ships . Medium-term – we h ave id entif ie d the s ame is sue s as tho se th at oc cur in th e shor t -ter m. We mus t con tinuall y inves t in and dev elop o ur new an d exis ting pr ope r ties to e ver hi gher r egul ator y s tan dards an d leve ls of ef f icie ncy t o ensur e we are ab le to op erate e ff ec tiv ely and a tt rac t occ upie rs. T his pe rio d cov ers ou r pathw ay to be com ing a net ze ro bus ines s and i t is impo r tant tha t we minimis e the am ount of r esid ual ca rbo n nee de d to be of f set . Long-term – we n ee d to inve st in our e xist ing po r tf olio an d our de velo pmen t pipe line to e nsure t hey ar e climat e resil ient su ch tha t our ce ntral L ond on buildin gs rema in oc cupiab le. It is p os sible, d epe nding o n what ch ange s act ually o ccu r , t hat clim ate cha nges m ay impa ct so me of ou r prop er tie s which in t urn c ould hav e a fin ancia l impac t on our b usine ss e .g. in crea se d insu ranc e prem iums or lo ss of re ntal i nco me. Ou r sce nari o analy sis sho wed us t hat th e phys ical r isks ar e mos t mate rial in thelo ng-te rm an d pres ent t hems elve s mo st ev iden tly in the 4°C sc ena rio (alig ned wi th th e IPC C’s RCP 8 .5), with h eat s tres s, flo odin g and sub side nc e being t he mo st sig nif ican t. B y follo wing our N et Zero C arb on Pat hway an d cont inuing to un der t ake reg ular c limate r isk as ses sme nts , we be lieve w e will be i n a bet ter p osi tion to m anag e the se po tenti al risk s. Th e opp or tuni ties tha t might p rese nt th emse lves i nclud e: — T he ava ilabili t y of buildin gs whic h bec ome s tran de d bec aus e of phy sica l risk imp act c ould p rov ide us wi th ac quisit ion oppor tun ities at l ower prices. — In ves ting in th e ove rall cl imate re silie nce of o ur buildin gs als o impro ves as set v alue by r edu cing our m ainten anc e cos ts and e xt ends a b uilding ’s life. Th e pro ces se s use d to dete rmine t he clim ate ris ks whic h are mate rial to o ur busi nes s are se t out in t he Risk M anag emen t se cti on on pa ge 103. In addi tion, s ee t he Pri ncipa l Risks s ec tion o n pag es 1 08 t o 1 1 9 whi ch det ails o ur over all ris k prof ile and app roac h to risk m anag emen t. We be liev e that pr ope r ty p or t foli os th at are abl e to mee t the se ch alleng es will r emain at tr act ive to o cc upier s and inv esto rs and in g ood d eman d. Thi s tren d pre sent s opp or tuni ties f or the G roup (se e pa ge 1 0). 69 Financ ial Stat ements Governance Strategic repor t RE SPON SIBILI T Y CONTINUED GOVERNAN CE Str ategy continued De scr ibe th e imp act o f climate-related risks and oppor tunit ies on the organisation’ s businesses, strateg y , and financia l planning As a c ent ral Lon don f ocu sed r eal es tate i nves tme nt tru st (REI T ), we inves t in, de velop, a nd man age pr ope r ty in c ent ral Lo ndon and , as suc h, clim ate-r elat ed is sue s af fec t the wa y we dev elop n ew buildin gs, ref urb ish and m anag e our ex istin g por t fol io and enga ge wit h our o ccup iers . This in t urn af f ect s the k inds of s uppli ers an d con sult ants we u se in th ese ac ti viti es to en sure we have t he re quisi te leve l of exp er tis e. As d esc ribe d on p age 6, t his is dri ven b y an eve r-inc reas ing dem and f rom our o cc upier s and o ther s take hold ers wa nting b uildings wi th high er lev els of s ust ainabili t y cre dent ials, a s well a s the re gula tor y lan dsc ape be co ming toug her an d mor e dema nding . Th e rec ogni tion t hat clim ate ch ange ha s a mater ial impa ct on o ur busi nes s and ou r stake hold ers le d us to de velo p our Ne t Zero C arb on Pat hway to b eco me a ne t zero c arb on bus ines s by 203 0 (aligne d to a 1 .5°C c limate s cen ario). Our p athway c ove rs the b read th of o ur busin es s acti vit ies to e nsure w e are re ducin g our ca rbo n foo tprin t and ex pos ure to ri sk, ex ample s inclu de: Fin anc ial pl anni ng (ope ra ting c os ts , cap it al exp end itur e and a llo cat ion) – to e nsure w e are ca pturin g the c ost o f car bon app ropr iately w e are dev elop ing our ap proa ch to c arbo n acc ount ing suc h that w e are inc luding th e co st of c arb on in our fin anci al appr aisal s and fo rec ast ing, s o we und ers tand a nd ca pture t he co st of c arb on in our n ew sc hem es and b usine ss ac tiv itie s. In add ition , we are un der ta king sp ec ifi c revi ews to he lp us un ders tan d the c ost o f cer t ain tran siti on risk s. D uring 2021 we co mmiss ione d a rep or t to und ers tan d the ac tion s and c ost s req uired to e nsur e our po r tf olio wo uld rem ain co mplian t wit h the pr opo se d chang es to th e minimum EP C rat ings re quire d from 2 030 – se e pa ge 55 fo r fur th er de tails . Ac ce ss to c api ta l – we bel ieve in t he fu ture i t will be h arde r to acc es s goo d quali t y , af fo rdab le fina nce wi tho ut be ing able to dem ons trate h ow we are a ddre ssing a nd ef fe ct ivel y mana ging cl imate ri sk. In r esp onse , our Gr een F inanc e Frame wor k has be en sp eci fic ally d evel ope d to allow u s to link our f inan ce s to our ne t zero am bitio ns by se t ting ou t per f orma nce c rite ria and a gov erna nce f ram ewor k which e nable us t o clear ly sho w the lin k bet we en the u se of ou r debt f acili ties to o ur dev elop ment a nd ref urbi shme nt act ivi ties . T o date w e have t wo sp eci fic f acili ties w hich ar e linked t o our fr amewo rk – th e £30 0m ‘gr een’ ele men t of our m ain co rpo rate £ 450 m revo lvin g cre dit fac ilit y and a £ 350 m gre en bo nd is sue d in 2021 . T hes e are he lping t o fund o ur late st e ligible p roje cts – s ee p age s 22 to 25 for f ur ther d etail s. Acquisitions and divestmen ts – our bus ines s mo del is b ase d on ac quiring o lder b uildings an d impro ving t hem to a dd value . Pri or to a ne w purc hase w e now und er take c arb on ap prais als to e sta blish t he inc umbe nt car bon l iabili ty a llowing a m ore hol isti c under st anding o f cos t. In ad ditio n, we al so es tabl ish th e EPC re late d risk a nd, if t he rat ing is low, wha t acti ons an d cos t will b e req uired to i mprov e it. We h ave disp os ed so me as set s wher e the e stima ted ad ditio nal co st s ass ociat ed wi th the transition to bet ter energy per formance influenced our decision. Developments – our Re spo nsib le Dev elopm ent Fr amewo rk and N et Zero C arb on Pat hway en sure we s et th e right d esig n brie f for o ur dev elop ment p ipel ine. T hes e ensur e that t he pro per ti es are m ore cl imate re silie nt suc h as buildin g the m for a lon ger lif e, to be m ore f lexib le to oc cupy an d ope rate, le ss re liant o n mec hanic al c oolin g and f ree f rom fo ssil f ue l use i.e . all ele ctr ic heating and cooling. Managing ass ets – our Re spo nsibl e Framew ork f or As set s and Ne t Zero C arb on Path way ens ure we hav e plan s and t arget s in pl ace fo r eac h mana ged a sse t which s et ou t how we w ill red uce e nerg y c ons umpti on/car bon e miss ions ef f ec tive ly to me et our overarchi ng targets. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 70 Str ategy continued Describe the resil ience of the organisation’ s strateg y , taking into consideration different climate-related scenarios, inc ludi ng a 2°C or l ower s ce nari o Our p rop er ties a re subje ct to c limate -rel ate d risks , suc h as inc reas ing temp erat ures , whic h coul d lead to g reate r phys ical str es ses an d, in tur n, inc reas e our c ost s e.g . mana geme nt and u tilit y c os ts. Our b usine ss m ode l involv es b oth inv esti ng in new d evel opme nts an d acq uiring ol der pr ope rt ies wh ich ho ld fu ture reg ener atio n pote ntial . We ensur e a high de gre e of res ilien ce in our n ew de velop men ts and r egen erat ion of old er pr oper t ies byse t ting hig h stan dard s for su stain abili ty, whic h inclu des c limate -rel ate d aspe ct s. Wh en man aging o ur co re inc ome po rt f olio, we h ave a sig nif ican t foc us on en erg y an d car bon re duc tio n, ens uring o ur building s ope rate as ef f ici ently a s po ssib le. As a r esult , our s trate g y cen tres a round t he co nce pt of c ontin ual impr ovem ent whi ch ens ures a h igh de gree o f bot h clim ate and f inan cial re silie nce . Ultimate ly, we do not e nvis age h aving to m ake cha nges to o ur app roac h when c ons ider ing climate-rel ated scenar ios. We re cog nise th at clim ate chan ge do es hav e an impa ct on o ur busin es s and pa rt o f our st rateg ic res pon se has b ee n the co mmitm ent to b ec oming a n et zero c arb on bu sine ss by 20 30 suc h that we c an tr ansp arent ly addr ess t he tra nsiti onal an d phy sic al risk s and op por tu nitie s which a pply to o ur busi nes s. Th is is in addi tion t o our exi sting s cien ce -bas ed t arge t, whic h isalr ead y align ed to a 2°C s ce nario . In 2020 Wil lis T owe rs Wats on pro vid ed a de taile d analy sis of th e Grou p's climate -re late d risk s, se t acro ss dif f eren t clima te sc enar ios – a 2° C sce nario f or tr ansit ion ris k (align ed wit h IPC C’s RC P 2.6) and a 2°C an d 4 °C s cen ario f or phy sic al risk (align edwi th the IP C C’s RCP 8 .5). Set o ut be low is a su mmar y of th eir f indings: T r ansition risk Pol icy & l egal — P ricin g of GHG em issi ons — Energ y Per formance C ertif icate rating requirements — Emissions off sets — P lanning approval change s — Climate change l itigation — Enhance d em issions repor ting obli gations Market — Change in customer demands — C os t of deb t — In cre ase d cos t of raw m ateri als Reputation — Investment risk Physical risk Th e phys ical r isk as ses sme nt was un der t aken thr ough t wo p lausib le clim ate sc enar ios – IP CC R CP 2.6 and 8 .5, wit hin whic h the analysis focuse d on three time horiz ons: 1 . Cur rent c limate (202 0 to 2030) 2. Me dium-t erm cl imate ch ange im pac t (2050) 3. Lon ger -ter m impac t (2080 to e nd of c entu r y) wher e mod els we re avail able fo r key pe rils a nd whe re a cle ar clima te chan ge sign al warr ante d mod ellin g of the ti me hor izon or s cen ario Th e ass ess ment a lso in clud ed a re view of c urre nt clim ate exp osu res , climat e chang e impli cati ons fo r tho se exp os ures , indic ati ve los s mo dell ing and an alysi s and fo rec ast s of the l ikely ele ct rici t y and gas us age f or se lec ted p rope r ties . The physical risks were identified acros s two typ es: Chronic — H eat st res s — S ubsiden ce — C oa stal f loo ding an d sea le vel r ise Acute — F loodin g — Storm s — Infrastr ucture As p ar t of our a ppro ach to m anagi ng bot h tran sitio n and ph ysic al ris ks, we ar e com mit ted to b ec oming a n et zer o car bon bus ines s by 203 0. Our Ne t Zero C arbo n Path way set s out a c lear p lan on h ow we will t ransi tion to wards t his by: — R educ ing th e ener g y con sumpt ion and i mprov ing th e ef fi cien cy of ou r ass ets — Increasing renew able energy procurement e.g. green gas procurement, self-generated energy managing the future risk ofhig her en erg y c ost s — A dopt ing ca rbo n acc ount ing to ena ble us to an ticip ate the f ut ure co st of c arb on so we c an inf orm o ur dec ision -maki ng — R educ ing th e embo die d car bon as so ciate d with o ur dev elop ment s che mes — C arb on of f set tin g via ve rif ied re mov al sch eme s for th ose e miss ions we c ann ot elimi nate Th ese c ommi tmen ts, c oup led wi th our Re spo nsible D eve lopm ent Fra mewo rk and S ust ainable Fr amew ork f or As set s and ne t zero a ctio n pla ns for in divi dual as set s, sup por t t he bus ines s in addr ess ing and m anag ing the a bov e risks a nd ena bling i t to mov e towar ds net ze ro ca rbo n. 71 Financ ial Stat ements Governance Strategic repor t Risk management p a g e 10 0 Describe the organisation ’s proces ses for identifying and assessing clima te-related risks. Describe the organisation ’s processes for manag ing climate-related risks. Describe how processes for identif ying, assessing and managing climate-related risks are integrated into the organisation’s overall r isk management. (As all recommend ed dis closures are heavily i nterrelated we have op ted t o com bine o ur dis clo sure) Th e resp ons ibilit y fo r mana ging o ur cor por ate risk l ies wi th the E xe cut ive C ommi tt ee, B oard a nd Risk C ommi t tee. E ach ye arthe E xe cuti ve C ommit te e co llate an d ass es s the ke y risks , whic h inclu de sus taina bilit y/climate c hang e rela ted ri sks. Thi sass ess ment s ee ks to und ers tand r isk se ver it y and like liho od as w ell as t he opt imal co ntro ls and /or mitigat ion ac tion s re quire d. This a ppro ach all ows the e f fec ts of a ny mitig ating pr oc edure s to be c ons idere d pro per ly, rec ognis ing that r isk ca nnot b e elimin ated in e ver y cir cums tan ce. T he ris k regi ster i s then p ut fo rwa rd to th e Boar d and Ris k Com mit tee f or consideration, review and ultimatel y adoption. Climat e-related risks and opportunities are also h ighlighted and d iscuss ed byth e Resp ons ible Bus ines s and S ust ainabili t y Com mit tee s whe re appr opri ate. Th es e risks c an inc lude t ransi tion r isk (e.g .regu lator y r isk an d repu tati onal r isk) a nd phy sic al env ironm enta l risk . T o as ses s the m ateri alit y of cl imate -rel ated r isk we wo rke d with Wi llis T ow ers Wat son in 2020 to s pe cif ical ly exp lore clim ateris k and op por tun it y. This fo llowe d a str uc ture d iden tifi cat ion and a sse ss ment of t he tr ansit ion and p hysi cal r isks app lica ble to our b usine ss a cros s tw o clima te sc enari os, n amel y 2°C and 4°C sc enar ios al igne d with t he IP CC ’ s R CP 2.6 and 8.5 pathwa ys respectivel y . As p ar t of th e sce nario a nalys is, th e tran sitio n risk s iden tif ied wi thin th e 2°C sc enar io es timate d the f inan cial ma terial it y for eac h risk u sing a st ruc ture d temp late to c apt ure any imp act s to the p rof it and lo ss (re venu e and ex pen ditur es) and im pac ts to the b alan ce sh eet (a sse ts and l iabili ties an d cap ital /f inan cing ). High a nd low imp act e sti mates w ere gi ven to ap plic able c os t co mpon ent s dep ending o n the s ucc es s of plan ned m itigat ing ac tions , and r isks gi ven a 1 to 5 i mpac t ratin g acc ordin g to a def ine d ratin g crit erio n. Work ing thr ough t he as ses sme nt pro ce ss and a pply ing mit igatio n meas ures a lrea dy ca pture d wit hin the s co pe of ou r Net Zero C arb on Pa thway an d tho se wit hin our ex istin g busin ess p roc es ses , dem ons trate d that f ew of th ese ris ks had a re sidu al impa ct. T hos e whic h remain ed we re: Energy Per formance Certificate rating requirements Whe n we und er too k the as se ssme nt, to ugh er minimum e ner gy p er fo rman ce c er tif ica te sta ndard s were in dica ted by t he Go vern ment . The se ha ve now b ee n conf irm ed an d will be p hase d in dur ing the p eri od up to 20 30. It was a ss ess ed th at co mply ing wit h the ne w mea sures w ould re sult in si gnif ica nt addi tiona l inves tme nt acr oss o ur po rt f olio. To addre ss thi s, in 2021 we co mmiss ione d a rep or t to re view t he ac tions a nd co sts r equir ed to m eet t hes e new s tand ards – se e pa ges 52 to 55 for furth er detai ls. Co st o f raw m ater ial s Clim ate cha nge co uld af fe ct th e inpu t cos ts of t radit ional d eve lopme nt rel ate d mater ials or b uilding s er vic es e .g. en erg y an d wate r . U tilis ing mor e innov ativ e low ca rbo n mater ials c ould allo w us to mit igate so me of th e pote ntial im pac ts this r isk mig ht po se. To monit or the e ff ec ts of th is on our b usine ss , we trac k the c ons tru ctio n co sts (of wh ich mate rial c os ts are a p ar t) and inf lati onar y imp act s on th ose c os ts to und ers tand t he imp act o n our bus ines s. S ee th e Chief E xe cut ive s tate ment f or fu rt her det ail (se e pag e 1 0). Emissions of fset s Th e cos t of high -qua lit y ca rbo n of fs et ting is like ly to co ntinu e to ris e due to sup ply c onst raint s. How ever, the en erg y/carb on re duct ion ini tiati ves an d inve stm ent in ou r por t fol io sho uld ena ble us to re duc e our re lianc e on of f set tin g and ex pos ure to sign ifi cant c os t move men ts. We p ublish d etai ls of our a nnual of f set tin g prac tic es, (s ee pa ge 54). Wh ere we p urcha se any newo f fse ts, we w ill st ate the c os ts tog ethe r with a ny appl icab le infl atio nar y co mmen tar y. Th e phys ical r isks a sse ss ed wit hin the 2° C sc enari o highl ighte d: Storms Many of o ur buildi ngs co uld be ex po sed t o winds torm d amage e sp ecia lly durin g the win ter se ason . This w as the m ost sign ifi cant r isk in thi s sce nari o and me ans we n ee d to ensur e we have t he rig ht fe ature s in pla ce to pr otec t our b uilding façade s. Heat stress Whil st wit hin this c limate s cen ario, a nd co uple d with o ur mana geme nt app roac h, this i s not a hig h risk to o ur busin es s, we rem ain vig ilant to a ny incr ease i n temp eratu re and th e ef fe ct it c ould h ave e. g. inc reas ed c ool ing dem ands an d sub seq uent increases in energ y consumption. Subsidence Alt houg h not a sig nif ican t risk to o ur busi nes s in this s cen ario, te mpe rature i ncre ase s in dif fe rent c limate s cen ario s, co uple d wit h incre ase d rainf all or f loo ding , coul d af fec t som e of our o lder p rope r ties . Wit hin the 4°C sc enar io the r isks a sse ss ed hig hligh ted: Heat stress Hot ter s umme rs (1 0 - 20 da ys of he at wave pa in L ond on) will imp act o ur bus ines s, by in cre asing c ool ing dem ands an d the reby inc reas ing ene rg y co nsump tion an d mainte nanc e co sts f or our b uildings . Floodi ng In this c limate s cen ario, f lo od def enc es su ch as th e Tha mes B arri er co uld be p lac ed un der inc reas ed s tre ss whic h co uld lead to fail ures , albe it this w ould p oss ibly onl y af fec t fou r of our pr ope rt ies . In addit ion, f las h flo od ri sk co uld incr eas e. Subsidence/ critical infrastr ucture In this c limate s cen ario, i nst ance s of sub side nce a nd cri tic al infr astr uc ture dis rupt ion are m ore pr obab le. RE SPON SIBILI T Y CONTINUED GOVERNAN CE De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 72 Met rics a nd ta rge ts pa ge 44 Disclose the metrics used by the organisation to as sess climate-related risks and oppor tunit ies in line with its strateg y and risk management process T o ena ble our s take hold ers to un der sta nd our c limate -rel ated im pac t and su bse quen t per f orma nce, t he dat a se ctio n of our Responsibilit y Repor t ( https:/ /rr .der wentlondon.com ) inc lude s an ex ten sive r ange of c ons umptio n and int ensi ty m etr ics f or ene rg y, carb on, w aste an d water, and ref lec t tho se hig hligh ted in th e buildin gs and ma terial s gro ups, n amel y: — Total e nerg y c ons umed , broke n down b y sour ce (e.g . purc hase d ele ctr icit y an d ren ewable s ourc es) — Total f uel c ons umed p erc ent age f rom c oal, n atura l gas, oil , and re newa ble so urce s — B uilding en erg y in tensi ty ( by squ are are a) — B uilding wa ter inten sit y (b y squar e area ) — G HG emis sion s intens it y fro m building s (square a rea) a nd fr om new c ons tru cti on and re dev elop ment — F or eac h pro per t y t yp e, th e perc ent age c er tif ie d as sus tain able All t he ab ove me tric s are p res ente d in the da ta se cti on of our l ates t Res pon sibilit y R epor t w ith at le ast t he pre viou s year ’s dat a to allow f or co mpar ison . In addit ion, o ur pre viou s rep or ts are av ailab le on our w ebsi te whic h cont ain se vera l year s’ wor th of dat a, all owing fo r histo ric al tre nd analy sis . As i dent ifie d in our m ateri alit y re view, re sour ce ef f icie ncy (wh ich inc lude s ene rg y ef fi cien cy, gre enho use ga ses , clima te cha nge and w ater) is a ma teria l issu e for ou r busin ess a nd, as s uch, i s clas sif ied a s a prin cipal r isk (se e pag e 1 1 6). Fur the r to this , per f orma nce a gains t our sc ienc e-b ase d car bon t arge ts fo rm a pa rt o f our E xec uti ve Dire cto rs’ re muner ation – d etai ls of whic h can b e foun d on pa ge 1 84 . In addi tion to t he ab ove me tri cs, w e also u se our s cien ce -bas ed c arb on tar gets a nd a sp eci fic s cen ario an alysis t ool to supp or t us in t he st rateg ic pla nning of o ur por t fo lio and un der t ake fu ture p rojec tion s of car bon i ntens it y red ucti on se t agains t re cog nise d 2°C tra nsit ion sc enar ios , name ly the IE A E TP 2D S and th e natio nally d eter mine d UK clima te chan ge co mmitm ents modelling traj ec tory. Dis clo se S cop e 1 , S cop e 2, an d, if appropriate, Scope 3 greenhouse gas (GH G) emis sio ns, a nd th e related risks We pub lish a de taile d data r epo r t which s ets o ut our e nviro nmen tal dat a pe rf orm anc e. This in clud es ex te nsiv e car bon rep or ting a cro ss all s cop es: S cop es 1, 2 and 3 using t he Gr eenh ous e Gas (GHG) P roto col C or pora te Ac coun ting an d Repo r ting St anda rd. Like wise , we prov ide t rend a nalys is acro ss s ever al yea rs to sh ow pro gres s and hi stor ical p er fo rman ce. Ref er to th e data s ec tion of o ur late st Re spo nsibil it y Rep or t for o ur car bon r epo rt ing whic h als o includ es f ull det ails of t he ag gre gatio n and c alcul ation m eth odo log y. More over, we publ ish a summ ar y of our c orp orat e car bon f ootp rint o n page 7 4. De scr ibe th e ta rge ts us ed by t he organisation to manage climate-related risks and oppor tunit ies and performan ce agai nst targets Fol lowing o ur rev iew of th e Pari s Intern atio nal Clim ate Chan ge A gre emen t in 201 6 , we dev elop ed a s et of sc ienc e-b ase d ca rbo n targ ets to e nsure w e align o ur car bon re duc tio n prog ramme t o its obj ec tive s, as w ell as mini mising o ur risk ex po sure toclim ate ch ange on o ur mana ged p or t fol io. Th ese w ere ve rif ied b y the S cien ce- Bas ed T arg et init iativ e (SBTi ) in 201 9 and ar e: “ We comm it to re duce S co pe 1 an d 2 GHG emis sion s 55% pe r squa re met re by 2027 fr om a 201 3 ba se ye ar . De rw ent Lo ndon als o com mits to r edu ce Sc op e 3 GHG emis sio ns 20% pe r squa re met re by 2027 f rom a 201 7 ba se ye ar .” As p ar t of our r evis ed n et zero a mbiti on, we wil l be re view ing the se ta rget s to alig n them w ith a 1 .5°C c limate w arming s ce nario and w e will pro vide f ur th er upd ates wh en this i s com plete. T o se e the l ates t prog res s again st th ese t arge ts ref er to th e scie nce -ba se d carb on t arget p er fo rman ce se ct ion of o ur late st Responsibilit y Repor t. 73 Financ ial Stat ements Governance Strategic repor t Str eamli ned Energ y and Carbon Repor ting (SECR)discl osure In line with th e SECR regulati ons, we pre sent b elow our disclo sure which is c omprise d of our car bon emis sions acro ss Sc ope s 1 and 2 togeth er with an appr opriate intensit y rat io – tCO 2 e/m 2 . We also se t out o ur Scop e 3 emissio ns and global e nerg y use ( kWh) use d to calc ulate o ur emissi ons. New for t his year , we h ave expan ded our rep or ting to prov ide a morede tailed p erspe cti ve on our c arbon emis sions, likewis e the emissio ns and ene rg y which we are not dire ctly re sponsible f or butde rive f rom our buildings i.e. the en erg y con sumption of our oc cupiers an d the ass ociated e missions . GHG and energ y data Sc ope 1 an d 2 emiss ions 1 tCO 2 e Difference 2 021 2020 Sc ope 1 (combustion of fuel) Manag ed po r tf olio gas us e and f uel use in D er went Lon don owne d vehic les Loc ation- based 3 ,1 7 3 3, 326 - 5% Emissi ons ass ociate d with cer t ifie d gre en gas use Marke t- based 2,428 3, 291 -2 6 % Scope 1 (operation off acili ties) Manage d por tf olio ref rigeran t loss f rom air con ditioning s yste ms – – Sc ope 2 ( purc has ed electricit y , heat, steam and c ool ing for o ur ownus e) Manage d por tf olio electricit y use for common par ts a nd share d ser v ice s (landlord-controlle d areas ) - no he at, ste am or co oling was/is purchased Loc ation- based 1 ,678 1, 9 47 -14% Emissi ons ass ociate d with renewabl e REGO backed elect ricit y use Marke t- based 63 0 T ot al Sc ope 1 an d 2 emissions Loc ation- based 4, 852 5 ,273 -8% Marke t- based 2, 491 3 ,2 91 -24% Carbon intensity ratio (tCO 2 e/m 2 ) Der ive d from to tal Sc ope 1 and 2 emis sions Loc ation- based 0 . 013 0.01 5 Propor tion of Scope 1 and2 e missi ons as sur ed by an in depe nden t thir d par t y (se e dat a not es ta blebe low) 10 0 % 10 0 % 1 Numb ers m ay not s um due t o roun ding Scope 3 emissions 1 Categ or y Notes tCO 2 e Difference 20 21 2020 Purchased goo ds andse r vic es N /A Capital go ods Se e note be low on emiss ions outside of curr ent sc ope Fuel an d energ y related acti vities 3,06 3 2 ,11 8 45% Upstrea m transpor tation &dist ribu tion N /A Waste ma nagem ent 25 25 -1% Business tr avel 6 14 Employee commuting Measure d but dee med to b e de minimu s <5% <5% – Upstrea m lea sed assets N /A Downstre am transpor tation & dist ribut ion N /A Pro ces sing of so ld products N /A Use of s old pro duct s N /A End-of -life treatme nt of sold p roduc ts N /A Downstre am leas edas sets Emissio ns fro m tenant electricit y consumption 5,09 9 5, 555 -8% Franchise s N /A Investments N /A Wate r 16 37 T ot al Sc ope 3 emissions 8,20 8 7, 7 4 9 6% Propor tion of Scope 3 em issi ons ass ured byan in depe nden t thir d par t y (se e dat a notes table) 10 0 % 10 0 % Ou tside o f curr ent Sc ope 3 e missi ons Categ or y Notes tCO 2 e Differenc e 20 21 2020 Capital go ods Embodie d car bon from major developments and refurbishments 1, 0 3 6 19 , 79 0 -95% Energ y ef ficienc y actions During 2021 we saw an increa se in the re- oc cupation of o ur buildi ngs as the C ovid- 1 9 lockd own measure s were eas ed and o ur occ upiers return ed to the ir workpl aces . Throug hout this tim e, we were and s till are ope rating a range of C ovid- 1 9 bas ed safe t y measure s to maintain a safe wo rking env ironment fo r our occ upiers. A s a result , we saw ener g y consump tion levels s tar t to retur n to levels mo re consis tent with f ully occ upied buildings and not t he signif icant re ductio ns see n in 2020 at the star t of t he pande mic. Howev er , this has n ot stopp ed us impleme nting a range of ene rg y ef fic iency m easures like ins talling ener g y ef ficie nt air handling unit filter s and optimising pl ant and building mana geme nt sc hed ules an d, whe re po ssib le, alig ning themwi th the re -oc cupation p lans of our oc cupier s. RE SPON SIBILI T Y CONTINUED GOVERNAN CE De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 74 ESG FOCUS ARE AS FOR 2022 EN VI RONME NT A L — P rogres s asse t spe cific n et zero car bon (NZC) actionplan s — S tar t to impleme nt findings f rom NZC occupie r sur vey — C ontinue to pro gres s realigning scie nce -base d targe ts inacc ordanc e with emer ging guidanc e — C ontinue to de velop our appr oach to c arbon ac counting — Inc rease o ur waste rec ycling rate SOCI AL Peop le — Fur the r embe d D&I into the busine ss — C ontinue he alth and wellb eing initiative s with a fo cus onmen tal health an d work-life bal ance — D elive r our third all-employe e awayday Community — C ontinue our C ommunit y Fund in it s 1 0 th year — Par t icipate in #1 00 00Bl ackIntern s programm e — D evelop an app roach to me asuring our s ocial impac t Health and S afet y — A dditional fo cus on b oth physic al and men tal health across o ur activities — Br oaden th e use of RiskWis e to assis t const ruc tion and desig n, as well as c ontrac tor , water and e nvironme ntal management — Maint ain our overall H&S complian ce pla tfo rm sc ore at aminimum of 95% GOVERNANC E — P ublish our 2022 Moder n Slaver y S tatem ent and agr ee foc us areas to f ur ther str eng then our p roce sse s — Enga ge with our major share holder s in respe ct to our 2023 Remunerati on Polic y — Re view the f inal rec ommen dations arising f rom the BEIScons ultation on audit r eform and a gree a tim etable for implem enta tion — C ontinue our m andator y co mpliance p rogramme By d oing this, we were ab le to rationalise th e increas ed ene rg y deman d from our o ccupier s and bal ance the r equired C ovid- 1 9 ventilation safet y measures . We measure t he embo died c arbon f ootprint of al l our develop ment sch emes whic h would be rele vant for inclusio n in the capi tal goo ds categ or y . Howe ver , th ere are as yet n o agre ed prop er t y-sp ecif ic acc ounting prin ciples in plac e to captur e the foo tprint of the se emissio ns appropr iately , which avoi d the under or o ver infl ation ofthe S cop e 3 figure s on an annual basis . kWh 20 21 2020 Dif ference Gas (co mbuste d on a whole building b asis) 1 7, 2 8 8 , 7 1 9 18 , 0 6 9 , 8 4 6 - 4% Electricit y ( consumption from landlord-controlle d areas ) 7, 9 5 3 ,1 1 4 8, 398,6 62 -5% Electricit y ( consumption from tenant-controlled areas) 2 4 , 0 1 6 ,11 5 2 2 , 3 15 , 6 9 7 8% T otal energ y (consumpt ion from landlord-controlled area s for ele ctri cit y and gas) 25,24 1,833 26,4 68,50 8 -5% T otal b uilding en erg y (consumpt ion from landlord and tenant-controlled areas for e lect ricit y and ga s) 49,2 57 ,948 4 8, 784,2 05 1% Data notes Repor ting period 1 Januar y to 31 De cemb er 2021 . Boun dar y (consolidation approach) We use an op eratio nal con trol b oundar y app roac h bas ed on o ur corp orate ac tiv ities an d manag ed central London (UK) proper ty p ort folio. Alignment with financial repor ting Th e only variati on is that our G HG emissio ns/energ y data p rese nted do es not a cco unt for sing le-let prop er tie s or prop er ties f or which we d o not have mana gemen t contr ol. T his is bec ause we h ave no control or influence over the uti lit y consumption i n the se buildings. H oweve r , the r ental in come o f thes e prop er tie s is include d in our co nsoli dated f inancial statements. Repor ting method We arrang e our GHG emis sions re por ting in lin e with t he Gre enhous e Gas (GHG) Pro toco l Cor porate Ac count ing and Rep or ting S tandar d. For fur t her det ails on our dat a calc ulation m etho dolog y v isit the data s ec tion of our l atest Re spo nsibilit y Rep or t. Emiss ions fa cto r sour ce DEFR A , 202 1 - ht tps:/ /ww w.g ov. uk / government / collections/government -conversion-factors- for -company-repor ting for a ll emissi ons fac tors apar tf rom the S cop e 2 marke t base d fac tors whichar e base d on the p rovena nce of our e lec tricit y and s ome gas supp lies whic h are fro m renewab le/ gre en sour ces . Independent assu rance Publ ic reas onable as suranc e (using ISA E 3000) is prov ide d by Deloi tte L LP ove r all Sc ope 1 , 2 and 3 GHG emis sions dat a, inten sit y ratio an d energ y d ata. Our as suranc e sta tement c an be f ound in our l atest Respon sibi lit y Repor t. For mo re analysis of our GHG emis sions, e nerg y c onsumption an d renewab le energ y gen eration, us e and pro curemen t visit the dat a se ction of our l atest Re sponsibilit y Re por t. 75 Financ ial Stat ements Governance Strategic repor t PROP E R T Y R E V IE W V aluation ................................................. 77 Acquisitions & disposals ...................... 80 Leasing, ass et management & proper t y managem ent ..................... 82 Developme nt & refurbishment ........... 85 The Featherstone Building EC1 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 76 V A LUA T I O N The G roup’ s inves tment p or t folio was value d at £5.7 bn on 3 1D ece mber 2021 . The re was a valuation surp lus of £ 1 4 2.9m forth e year , w hich af ter acc ounting adjustme nts of £9.8m (se e note1 1 ), give s a repor te d surplus of £1 33. 1 m. This p er forman ce repre sents an un derlying v aluation increa se of 3.5%, and a reve rsal of the 3.0% de cline se en in 2020. By loc ation, our c entral Lo ndon prop er ties, w hich repre sent 99% of th e por t folio, inc rease d in valueby 3.4% with the West En d + 3.9% and Ci ty B order s + 2.5%. The b alanc e of the por t fo lio, our Sc ot tish holdings, was up 9.9%. Our po r tf olio’ s under lying capi tal grow th ou tper fo rme d the MSCIQ uar terly Index f or Cent ral London O f f ices , at 2.5%, but under per for med th e wider UK All P roper t y Index w hich increas ed by an exce ptional 1 1 .5%. Loo king at EPR A metri cs, our e stimate d rental value s (ERV ) in 202 1 fell mar ginally by 0.2% against a de cline of 2.8% in 2020. Our of f ice ERVs were up slight ly at 0.2%. Our retail ren tal values , where our exp osure is limited , fell by 5.8% f ocuse d in H 1 . The inv estme nt market rem ained buo yant, esp ecially f or qualit y buildings and se cure incom e stream s, which he lped dr ive the por t fol io’ s v aluation yields lowe r . Ac cordingly, the tr ue equivalen t yield tig htened 24 basis p oints from 4 . 7 4 % to 4.50 % over the y ear . Itis wor th n oting that the 250 Eusto n Road NW1 acquisitio n acc ounted f or 7 basis p oints of the y ield movem ent. T he EPR A initial yield is 3. 3% which, af ter allowing for th e expir y of rent- free s and c ontrac tual uplif ts , rises to 4.4% on a ‘ toppe d-up’ basis. The to tal prop er t y return fo r the year was 6 .3%, which co mpares tothe MS CI Index of 5.9% for C entral L ondon O f fic es and 1 6.5% forUK All P roper t y, the lat ter dri ven mainly by ver y s trong yi eld comp ressi on and rent al grow th for indus trials and log istics . We are on site with t hree major dev elopment s, eac h at dif ferent sta ges of de liver y. Soho P lace W1 and T he Feath erston e Building EC1 are nearing c ompletio n with deli ver y sch eduled f or H 1 2022. Following de merger of o ur prope r ties held wit h The Po r tman Est ate, we obtaine d vacan t pos ses sion of 1 9 -35 Baker Str eet W1 inSepte mber 2021 , comm ence d demo lition and hav e rece ntly signe d the main building con tract . Complet ion is sche duled fo r 2025. Fu r th er details o n all these p roject s are set ou t under ‘De velopme nt & Refurb ishment ’ below. Co mbined, th ey were valued at £ 577 . 1 m in D ece mber 2021 and delive red a 9.2% valuation uplif t ov er the ye ar , af ter adjusting fo r capit al expen diture. An additio nal £355m is re quired to co mplete thes e projec ts. Th eir comb ined ERV is £ 4 7 . 1 m , of which 36% is pre -let. E xcluding thes e deve lopment s, the p or tf olio valuation inc rease d by 2.9% on an under lying basis . Por t folio reversion Our c ontrac ted annualise d cash re nt on 3 1 D ece mber 2021 was £1 78.4m. T his 5. 7% de creas e in the year was p rincipally due to thelos s of incom e from th e dispos al of the Johns on Building EC1 and A ngel Squar e EC1 and obtaining vac ant pos ses sion of 1 9-35 Baker S tree t, ahead of r edeve lopment . (10) 6.0 5.3 6.0 6.3 5.9 16.5 7.4 4.1 1.2 0.3 (2.4) (2.3) 0 (5) 10 5 15 % T otal pr operty return 2020 2021 2019 2018 2017 Derwent London MSCI Central London Offices 1 MSCI UK All Property 1 1 Quarterly Index 8.0 7.1 10.2 Nigel G eor ge Execut ive Dir ecto r 77 Financ ial Stat ements Governance Strategic repor t V A LUA TIO N CONTINUED With a p or t folio ERV of £293.9 m there is £1 1 5.5m of pote ntial cash reve rsion. Wi thin this, £5 4.6m is contra cted thr ough rent- free s, fi xed uplif t s and indexatio n. Under IFRS , a large pro por tion of t his con tracte d incom e is already re cog nised wit hin the acc ounting gros s rent al income. O ur on-site de velopme nts and major ref urbishment s could add £ 50.0m, of which £1 7 .0m is pre -let tings at Soh o Plac e W1 and £2.9m at Francis House S W 1 . Th ere is then £7 .2m of potential inc ome f rom seve ral ongoing smaller p roject s acro ss the p or t folio. ERV on s pace avail able to occ upy is relati vely small at £ 3.8m, ref lecting o ur EPR A vacanc y rate of 1 .6%, w hich is down sligh tly from th e 1 .8% at th e star t of th e year . With S oho Pl ace and T he Feat hersto ne Building being deli vere d in the nex t f ew months , if no f urt her pre -lets are se cured t he vacan cy rate would ris e to 5.9% upon th eir completi on. The re is then £5 .8m of reve rsion fr om anticipate d rent rev iews and expirie s. Howe ver , this is of fs et by £5.9 m already in cluded wi thin contra cted upli f ts where t here is rent al indexation an d minimum uplif ts on rent revi ews to levels ab ove their c urrent ERV . 70 0 140 210 280 350 24 0 48 72 96 120 Portfolio income potential 2021 2020 2019 2018 2017 Reversion % Rental income £m Contractual rental uplifts (including pre-lets) Available to occupy Under refurbishment/development Rent reviews and lease renewals Reversion Contractual rent 7.5 6.5 7.0 5.5 5.0 6.0 4.5 4.0 T rue equivalent yield (83) (55) ( 12) ( 12) ( 4) ( 3) ( 3) ( 3) ( 24) ( 26) ( 29) ( 4) 6 25 ( 4) ( 6) ( 3 ) 3 1 (3) (9) 0 3 ( 1 5) ( 1 7) 15 % 5-year movement -33 basis points 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 2020 Valua tion yields 0 8 6 4 2 % Derwent London T rue Equivalent Yield (TEY) Derwent London Initial Yiel d 10-year Gilt Average gap (285 bp) Gap between DL TEY and 10-year Gilt 2021 2019 2017 2015 2013 2011 2009 2007 2005 2003 2001 (3) (2) (1) 1 0 2 Rental value growth Half-yearly rental value gr owth (%) H1 21 H2 21 H1 17 H2 17 H1 18 H2 18 H1 19 H2 19 H1 20 H2 20 (0.7) 1.1 0.6 0.5 0.6 0.4 (0.3) (2.1) 0.1 1.0 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 78 Por tf olio statist ics – valuation Valuation £m Weighting % Valuation 1 per formance % Let f lo or area 2 ’0 00 s q ft Vac an t availab le fl oor ar ea ’0 00 s q ft Vac an t refurbishment fl oor ar ea ’0 00 s q ft Vac an t pro ject fl oor ar ea ’0 00 s q ft To t a l fl oor ar ea ’0 00 s q ft Wes t En d Ce ntral 3,4 83.6 61 4.2 2,5 73 38 15 7 334 3 ,1 0 2 Borders 4 3 1. 4 8 1. 5 41 9 10 0 0 42 9 3,91 5.0 69 3.9 2,9 92 48 15 7 334 3 , 531 Cit y Borders 1, 6 9 8 . 7 30 2.5 1, 41 5 96 79 12 5 1, 715 Central London 5 , 6 13 . 7 99 3.4 4, 407 14 4 236 459 5 , 24 6 Pro vinci al 83.0 1 9. 9 326 2 0 0 328 T ot al port folio 2 0 21 5,696. 7 10 0 3.5 4 ,73 3 14 6 236 459 5 , 5 74 2020 5,355.5 10 0 (3.0) 5 ,11 0 16 9 54 2 31 5,56 4 1 Und erly ing – pr ope r tie s held t hrou gho ut the y ear 2 Includ es pre -lets Ren tal inc ome p rof ile Rental uplif t £m Rental per annum £m Ann ualise d contr acte d renta l incom e, net of g round ren ts 17 8 . 4 Contrac tual rental increases across the p ort folio 54 .6 Co ntrac tual rent al fro m 287 ,0 00 s q f t pre-le ts on de velopm ents 19 . 9 Let ting 1 46 ,000 s q f t available f loor ar ea 3.8 Co mpletion a nd let ting 236,0 00 sq f t of r efurb ishment s 7. 2 Co mpletion a nd let ting 45 9,000 s q f t of deve lopmen ts 3 0 .1 Ant icipate d rent re view and le ase ren ewal rev ersion s 5.8 Future c ontr acte d grow th ab ove ERV (5 .9) Por tfolio r eversion 11 5 . 5 Potential por tfolio rent al value 293.9 Por t fol io st atis tic s – rent al inc ome Net contracted ren tal in co me per annum £m Average ren tal in co me £ pe r sq f t Vaca nt sp ace ren tal v alue per annum £m Le ase reversion per annum 1 £m Por tfolio est imated ren tal v alue per annum £m Average unexp ired leas e lengt h 2 Y ears Wes t En d Ce ntral 9 0 .1 35.2 9 26.3 62.2 17 8 . 6 7. 0 Borders 21. 3 5 1 .11 0.4 0.4 2 2 .1 7. 3 111 . 4 3 7. 5 1 26 .7 62.6 20 0 .7 7. 0 Cit y Borders 62.5 4 4.92 14 . 4 11 . 5 88.4 5 .4 Central London 17 3 . 9 39. 89 4 1.1 74 .1 2 8 9 .1 6.4 Pro vinci al 4.5 13 . 9 4 0.0 0.3 4.8 2.8 T ot al port folio 2 0 21 17 8 . 4 38. 1 0 41 .1 74 . 4 293.9 6.3 3 2020 18 9 . 2 3 7. 4 0 23.9 7 8 .1 2 91. 2 6.2 1 Contrac ted uplifts, rent reviews/lease renewal reversion and pre-lets 2 Le ase le ng th wei ghte d by re ntal in co me at ye ar en d and as sumin g tena nts br eak at f irs t opp or tun it y 3 7 .8 y ear s af ter adju stin g for ' top ped -up' re nts an d pre -let s 79 Financ ial Stat ements Governance Strategic repor t A CQUISI T ION S & DISPOS A L S Thro ugh 202 1 , a n uance d change was mad e to the Group’s strateg y. For th e time being we ex pec t to retain mo re of our larger r ece nt deve lopment s where we se e goo d grow th. At the s ame time, we may look to s ell som e of those b uildi ngs whe re we belie ve return s will be mo re limited. Disp osal p roce eds will b e reinves ted into new acquisi tions and the d evelopm ent prog ramme. Our inve stme nt acti vit y thro ugh 202 1 has b een clo sely aligne d to this. The G roup’ s inves tment team h ad a ver y bus y year . We investe d £4 1 7 .5m in the a cquisition of e ight buildings. The L azar i Baker Str eet J V and 230 Blac kf riars Roa d are potential f uture ‘sup er- sites’ wh ere we see s ubst antial uplif ts in f loor area wh en comp aredto th e existing buildings. In addition , the Group was s elec ted as pref erred b idder for TheM oor fie lds Estate EC1 in De cemb er 202 1 . Th e c.40 0,000 sq f t of buildings, on a 2.5 acre si te, has poten tial for a subs tantial red evelopm ent and is co nsidere d another f uture ‘sup er-site’. Major dispos als co mpleted in 202 1 re alised ne t proc ee ds of £396 .4m, rising to £4 05. 1 m in cluding smaller sale s. Af ter ye ar end, con tract s were exchange d for the s ale of New Rive r Y ard EC1 for netpr oce eds (af ter rent al top ups) of £66.0m. Rest ructuring o f The Por tma n Est ate Baker S tree tho ldings At the end o f Q3 202 1 , o ur Baker St reet ho ldings with The P or tman Est ate (T PE) wa s restr ucture d. This was a lon gstanding 55: 4 5 jointly owne d comp any with TP E which owne d prope rt ies in BakerS tree t W 1 and t he surroun ding area. Th e rest ruct uring involve d Der went L ondon bu ying in the 4 5% of shares pre viously owne d by TPE, re sulting in the Group t aking full o wnership of th e deve lopment si te at 1 9-35 Bake r Stre et and TPE g ranting a new 1 29-y ear headle ase over t he site. O ther pro per tie s owned wi thin the c ompany were t ransfer red to TP E and the Gro up made a balan cing paym ent of £6.2m. Refe r to the Financ e sec tion fo r fur ther detai ls. David Silv erman Execut ive Dir ecto r Capital expenditure Acquisitions Disposals 0 (500) 200 300 100 400 Net pr operty investment 2017 2018 2019 2020 2021 (200) (100) (300) (400) £m De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 80 Major acquisiti ons Proper ty Date Ar ea sq f t To t a l cost £m Net y iel d % Net rental inc ome £m p a Net rental inco me £p sf H1 20 21 Holfo rd Works WC1 1 Q2 41 , 6 0 0 23.7 6.9 1. 6 40.00 H2 20 21 Bush H ouse WC2 2 Q3 10 3 ,7 0 0 14 . 5 – – – 250 Euston R oad NW1 Q3 16 5 , 9 0 0 19 0 . 3 2.5 4 .7 28.30 1 71 -1 7 4 T ot tenham C our t Ro ad W1 Q3 16 , 2 0 0 2 4.3 2 .6 0.6 5 7. 5 0 Baker S tre et W1 JV (50% s hare) Q4 6 1 ,1 0 0 6 4.0 3 4.0 2.6 42 .5 0 388,500 3 16. 8 – 9.5 – 1 9-35 Bake r Stre et W1 (hea dlease r egear) Q4 – 10 0 .7 – – – 388,500 4 17. 5 – 9.5 – 2022 to da te 230 Bl ack friar s Road SE1 Q1 60,30 0 58.3 3.5 2 .1 41 . 0 0 1 Long leasehold 2 Leas ehold 3 Subje ct to r ece iv ing pl anning a nd reg ear of t he he adle ase an a ddit iona l £7 .25m is p ayab le Major disposal s Proper ty Date Ar ea sq f t Net proceeds £m Net y iel d to purchaser % Ren t £m 20 21 John son B uilding EC1 Q1 19 2 , 70 0 16 5 . 6 4 .1 7. 3 Ang el Squa re EC1 1 Q3 12 6 , 2 0 0 85.0 – – The Por tman Estate properties 2 Q4 50,60 0 4 5 .1 – – 369,5 00 2 95 .7 – 7. 3 1 9-35 Bake r Stre et W1 (hea dlease s urrend er) Q4 – 10 0 .7 – – 369,5 00 396.4 – 7. 3 2022 exchange d New Ri ver Y ard EC1 Q1 70 ,700 66.0 3 4.5 3.3 1 So ld wit h vac ant po ss es sion 2 Inc lude s 1 6-20 Bak er St ree t, 27-33 Rob er t Ada m Str eet , 1 7-39 Geo rge S tre et an d 26-27 Cas tlere ag h Str eet W1 3 Af te r rent al top up s 250 Eus to n Roa d NW1 81 Financ ial Stat ements Governance Strategic repor t L E A SI NG, A SSE T M ANAG E M ENT & PROPE RT Y M ANAG E M ENT Rent colle ction Prior to C ovid - 1 9, the Gro up ty pically c ollec ted ove r 99% of its rent from te nants within t wo wee ks of the quar ter date, wi th negligib le bad de bts. T his pat tern chang ed in early 2020 with th e pandemi c and subs eque nt lockdown as we s uppor te d those of o ur occ upiers mos t in nee d. Stay ing close to o ur custome rs, c ombined wi th the subs equent re cov er y in 202 1 , h elpe d us deliv er a high level of rec over y of de ferrals a gree d in 2020. Through 2021 , of f ice col lectio n rates improve d and have n ow returne d to pre- Co vid level s while retail (only 8% of income) co ntinued to la g. Le tt ings Leasing a ctiv it y in 202 1 to talled £1 3.7 m ac ross 5 0 transac tions desp ite having lit tle spac e available. A ctiv it y , howev er , pic ked up following p ublicatio n by the Gov ernmen t of the ‘Roadm ap out of lockdow n ’ at th e end of Q1 . T hree deal s – to Dep op at 20 Farringdon Road EC1 , Fora at 6 -8 Green coat P lace SW1 and Ede lman at Francis Hou se SW1 – acco unted for h alf of new rent se cured. Onaver age, new le ases wer e signed at +3.6% above D ec ember 2020 ERV . P re-let tings ac counte d for £5.8m o r 43% by value in sixtransactions. Since th e star t of 2022, a fur th er four leas es acro ss 28,300 s q f t have be en signe d with a ren t roll of £1 .9m pa at +8.7% above Decembe r 20 21 ERV . Le tt ing ac tivi ty 2021 Let Performance against De c 20 ER V (%) Area sq f t Inco me £m p a Op en marke t Overall 1 H1 79,20 0 3.9 (1. 0 ) (1. 6 ) H2 1 59, 000 9. 8 5.9 5.9 20 21 238,200 13 . 7 3.9 3.6 1 Inc lude s sho rt -ter m let tin gs at pro per t ies e arma rked f or re dev elop men t Asset mana gement At the st ar t of 202 1 , 1 7% of pas sing rent was subje ct to break o r expir y in the y ear . In a ggr egate, 77% of breaks an d expirie s were retain ed or re -let in the year . Lo oking for ward, br eaks and ex piries in 2022 account f or 9% of pas sing rent, alre ady c onsiderab ly belowt he 1 3% at June 2021 . In Q1 , renew als and rege ars were mainly sho r t-term ro ll overs asoc cupiers c ontinue d to adopt a ‘ wait and se e’ approach to theirof f ice sp ace. A s the year p rogres se d, there was a n otable shif ttowards lon ger-ter m solutio ns. 27 lease re newals and 43le ase rege ars comp leted in 202 1 . Th e table below p rovide s fur ther detai ls. Asset management 202 1 Ar ea ’0 00 s q ft Previous ren t £m p a New r ent £m p a Uplif t % New r ent vs D ec 20 ERV % Rent reviews 2 51, 5 0 0 9.9 11 . 9 20.2 1.1 Lease renewal s 1 1 4,000 5.2 5.5 7. 3 (0. 9) Lease regears 2 8 7, 2 0 0 14 .1 14 . 5 2.3 (0.5) To t a l 6 52,7 0 0 29.2 31. 9 9.2 0.0 E xclud es tr ans act ions o n ass ets s ubse que ntly s old or t aken b ack f or majo r redevelopment Emily Prideau x Execut ive Dir ecto r De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 82 Princ ipal let tings in 202 1 Proper ty Te n a n t Area sq f t Rent £ ps f To t a l annual rent £m Le ase term years Le ase break year Rent-free equivalent months H1 20 Farrin gdon Roa d EC1 Depop 33,50 0 52. 50 1. 8 5 3 9, plus 4 if no b reak T e a Building E1 Soho House 7, 6 0 0 50.00 0.4 10 - 24 H2 Francis House SW 1 Edelman 38 ,200 76 .0 0 2.9 15 10 25, plus 9 if n o break 6-8 Gr eenc oat P lace S W1 Fora 32, 40 0 68.5 0 2.2 15 - 34 Char lot te Building W1 T he & Par tn ership 14 , 9 0 0 6 7. 5 0 1. 0 5 - 10 80 Cha rlot te Str eet W1 (resi) Q A par tme nts 13 , 4 0 0 5 2 .1 0 0 .7 10 - 3 Th e White Chap el Building E 1 Empe ror De sign 12 , 7 0 0 49.50 0.6 10 5 1 2, plus 6 if n o break To t a l 15 2, 7 0 0 62.9 0 9.6 2 8 4 6 0 Y ears Dec 2016 Jun 2017 Dec 2017 Jun 2018 Dec 2018 Jun 2019 Dec 2019 Jun 2020 Dec 2021 Jun 2021 Dec 2020 Averag e unexpired lease length West End City Borders Central L ondon 0 2 0 4 0 6 0 8 0 1 00 2017 20 18 2019 2020 10 14 76 10 7 83 13 22 65 23 30 47 2021 Retaining occupier s – L ease expiry and break analy sis Percentage of income Vacant 8 35 57 Retained Re-let Mem ber s of t he Le asin g, A ss et an d Proper ty Management teams 83 Financ ial Stat ements Governance Strategic repor t 1 2 9 7 8 6 3 5 4 0 % Dec 2016 Jun 2017 Dec 2017 Jun 2018 Dec 2018 Jun 2019 Dec 2019 Jun 2020 Dec 2020 Jun 2021 Dec 2021 Five-year vacancy trend Derwent London (by rental value) Derwent London (by floor area) CBRE Central London (by floor area) LE ASI NG , ASSE T MANAGEMEN T & PR OPERTY M ANAGEME NT CONTINUED Proper ty mana gement Prop er t y manage ment is the m ain point of cont act wi th our oc cupiers . 2020 and 20 21 were busy y ears fo r the team who resp onde d proac tively to p rovide pr agmatic an d practi cal solut ionsfor o ccupier s while also rolling ou t and maintaining Co vid- 1 9 s ecure pr otoco ls acros s our es tate. We have also embrac ed ne w techno logies to enhan ce cleaning and air s afet y . The te am has introdu ced n ew initiative s to drive cu stomer engage ment. A s well as en coura ging a return to th e of fic e, some ofthe se event s have help ed rais e money to sup por t loc al charit ies. We re-ten dere d major contra cts to ens ure high and con sistent qualit y and value f or our oc cupiers an d to ensure that high stan dards of cus tomer exp erienc e are deli vered c onsiste ntly . Ourpro per t y manag ers work c losely wi th our Sust ainabilit y teamtodeli ver on our n et zero car bon ambitio ns, for ex ample throug h co- ordination of pl ant maintenanc e. The Featherstone Building EC1 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 84 DE V E L OPMEN T & R E F UR BISHMEN T At the end o f 20 21 we were on site at thr ee major projec ts: Soh oPlac e W1 , The F eather stone Building EC1 and 1 9-35 BakerS tree t W 1 . Soh o Plac e is due to comp lete in H 1 2022. The of fic e spac e at 1Soh o Plac e was pre-le t to Apol lo Group and G-Re search in 201 9. When c ombine d with the fo rwar d-sale of 2 & 4 Soh o Plac e, which comp rises 1 8,4 00 sq f t of of f ice s and a 40,0 00 sq f t th eatre pre -let to Nimax , all of the of f ice sp ace is eit her pre -let or for ward-s old. Sch eme prof itabili ty h as benef it ted f rom the s trong pe rf ormanc e of the of f ice elem ent. T he marketing c ampaign fo r the 36,00 0 sq f t of retail sp ace is due to b e launche d in Apr il. We are conf ident in the long-ter m att raction s of this retail loc ation abo ve the Elizab eth line sta tion at the junc tion of O xf ord St reet and C haring Cros s Road. The ER V of this spac e stabilis ed throu gh H 2 2021 with CBRE’s rent al expe ctati on now £3. 1 m. Th e develop ment will be n et zero car bon and we are t argeting a BREE A M ‘Outs tanding ’ rating on thec ommercial e lement. The F eather stone B uild ing is due to re ach prac tical c ompletion inH 1 2022 with an ERV of £ 8.6m. The s pace inc orp orates many ofthe fe atures of Whi te Coll ar Factor y EC1 , s uch as co ncrete c ore co oling, op enable window s and gener ous flo or to ceiling heig hts as well as high qual it y amenitie s. Com bined with t he loc ation in the hear t of t he T e ch Belt, we r emain conf ident in the p rospe ct s for thisbuilding. Curr ent enquirie s are for a range of dif f erent size requirem ents and we h ave see n an increas e over re cent we eks inenquir y leve ls. Th e developm ent will also b e net zero c arbon , while al so inc orp ora ting our ‘Intell igent B uilding ’ infr astr uc ture andwith WEL L ‘Enabled’ c reden tials. We are targe ting a BREE AM ‘Ou ts tandin g’ r ating . On-si te works at 1 9-35 Baker S tre et W1 commen ced in Q 4 202 1 .This sc heme ex ten ds to 298,00 0 sq f t, a 1 08% uplif t on the pre -existing s pace, t he majorit y of which is of f ice s (2 1 8,0 00 sq f t ). Mos t of the ret ail is subject to a for ward s ale agree ment with T he Por tm an Estate. T he Group ha s entered an a gree ment for Nati ve Lan d to act as our de velopm ent par tne r for the pr ivate resid ential, prov iding funding as well a s develop ment and mar keting advi ce in exchange f or which the y will rece ive a share of th e profi ts. The 19-35 Baker Stre et dem olition c ontrac t was sec ured be low budge t and the main building co ntract , which was f inalised in Q120 22, was in line with b udget. 97% of cap ex on the of f ice eleme nt isnow fi xed ef fe cti vely mitigating our ex posure to f ur ther build co stinfla tion. Capi tal exp enditure is e stimated at £266m andwe will use c apaci ty un der our gre en finan ce fac ilities to fun d eligible exp enditur e. The de velopme nt has be en design ed to be ‘long-lif e, loos e-f it’ wi th 3.2m floor to c eiling heights , integrate d ‘Inte llige nt Building ’ inf ras tru ctur e, doub le heig ht lob by , ro of terrac es and ge nerous p ublic realm. T he building will be ne t zero car bon with a t arget of BREE AM ‘ Outs tanding ’ , N ABERS 4 S tar (ourfirs t NABER S UK cer tif ied sc heme) and WELL ‘Enab led’ cre dentials on th e of fic e element . Comp letion is due in 2025. Nigel G eor ge Execut ive Dir ecto r Paul W illiams Chief E xe cuti ve Completions and capital expenditure 0 500 300 100 400 200 2009 2007 2011 2013 2015 201 7 2019 2021 2023 ‘000 sq ft 250 150 50 200 100 £m Completions (‘000 sq ft) Capital expenditure (£m) Estimated capital expenditure (£m) 85 Financ ial Stat ements Governance Strategic repor t Major dev elopment s pi peline Proper ty Pro po se d area Ca pex to complete £m 1 Commen t H 1 20 22 completions Soh o Plac e W1 285, 000 79 2 209,00 0 sq f t of f ice s, 36,00 0 sq f t re tail and 4 0,000 s q f t the atre - 87% pre -let / pre -sold The Featherstone Building EC1 1 25, 000 10 1 1 0,00 0 sq f t of f ices , 1 3,0 00 s q f t works pace s, 2,00 0 sq f t re tail 4 10 ,000 89 In demolition 1 9-35 Bake r Stre et W1 298 ,000 26 6 3 21 8,0 00 sq f t of f ice s, 28,0 00 sq f t re tail, 4 5,00 0 sq f t pri vate resi dential an d 7 ,0 00 sq f t af f ordable re siden tial. De molit ion com menc ed O ctob er 202 1 298 ,000 355 202 2 schemes Net wor k Building W1 1 37 ,000 c .1 0 0 Dual pl anning con sent: O f fi ces an d groun d floo r retail (1 37 ,00 0 sq f t ) or lab- enable d Lif e Sci ence s and gro und flo or ret ail ( 1 1 2,00 0 sq f t). Up to 96% up lif t on exis ting f loor are a Bush H ouse WC2 1 30, 000 c .1 0 0 Ref urbishme nt and ex ten sion proje ct, tot alling c. 1 30,0 00 s q f t (subject to p lanning ) Poten tial 25% uplif t to exis ting flo or area 267 ,0 00 To t a l 9 75 ,000 1 As a t 31 Dec emb er 2021 2 Inc lude s rema ining si te ac quisi tion c os t and pr ofi t shar e to Cro ssr ail 2 Inc lude s prof it s hare p ayme nts We comple ted our 32,400 s q f t refurb ishment at 6-8 G reenc oat Plac e SW1 in June 202 1 which was ef f ect ively pre -let to Fora . In Q4 202 1 , we pre -let the whole of o ur on-site ref urbishment at Fran cis Hous e SW1 ( 38,200 sq f t) to Edel man. Both t hese tr ansac tions were at premiums to ER V . In 202 1 , t he Group se cure d a dual planning co nsent fo r Netw ork Building W1 : of f ices (1 37 ,000 s q f t) and l ab-en abled Lif e Scien ces ( 1 1 2,0 00 sq f t ) . B oth ben efit f rom groun d floor r etail. On a spe culati ve basis, w e would expe ct to de liver th e of fic e schem e butwe h ave had an early ap proach f rom a life s cience s oper ator . On-si te works are exp ec ted to co mmenc e in H 2 2022 with cap ex forei ther optio n of c.£1 0 0m. At Bush Hous e WC2, a planning app lication w as submit ted in 202 1 for a c .26,000 sq f t e x tension to the c urrent building which would incre ase the ov erall flo or area f rom 1 0 3, 700 sq f t to c . 1 30,000 s q f t. On-si te works are exp ec ted to co mmenc e later this ye ar on either the lar ger sch eme, subjec t to planning , or refur bishment of th e exis ting b uilding. Bey ond the n ear-ter m pipeline, a f ur ther 1 .7 m s q f t, or 31 % of t he por tfolio, has development potential. DE V EL OPMENT & RE FUR BISHMENT CONTINUED 6-8 G ree nc oat P lac e SW1 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 86 Proj ec t summa r y – curr ent pr ojec ts Proper ty Cur ren t net inco me £m p a Pre s ch eme are a ’0 00 s q ft Pro po se d area ’0 00 s q ft 2022 capex £m 2023 capex £m 20 24+ capex £m To t a l c a p e x to compl ete £m Deliver y date Cur ren t of fic e c.E RV psf On-sit e projec ts Soh o Plac e W1 1 – 10 7 28 5 79 – – 79 H1 2 02 2 £92 .50 The Featherstone Build ing E C1 – 69 12 5 10 – – 10 H1 2 02 2 £72 .5 0 Francis House SW 1 – 40 38 8 2 – 10 H1 2 02 2 £ 76. 0 0 1 9-35 Bake r Stre et W1 2 – 14 3 298 50 10 3 113 266 H1 20 25 £ 90.0 0 – 359 74 6 147 10 5 113 365 2022 pr oje c ts Net wor k Building W1 2 .1 70 13 7 12 22 70 10 4 2 025 2 .1 429 883 15 9 12 7 18 3 469 St rathkelv in Retail Par k – – – 10 1 – 11 Pla nning and de sign – – – 12 2 – 14 Other 3 – – – 16 16 14 46 To t a l 2 .1 429 883 19 7 14 6 197 540 Capi talis ed intere st – – – 6 6 11 23 T o tal in cluding inte res t 2 .1 42 9 883 203 15 2 208 563 1 Inc lude s rema ining si te ac quisi tion c os t and pr ofi t shar e to Cro ssr ail 2 Inc lude s prof it s hare p ayme nts 3 Includes EPC upgrades Proj ec t summa r y – futur e proj ect s Proper ty Current net inco me £m p a Pre-scheme are a ’0 00 s q ft Pro po se d area ’0 00 s q ft Earlies t possessio n year Commen t Consente d Holde n House W1 3.9 90 15 0 20 25 3.9 90 15 0 Under appr aisal 1 Bush H ouse WC2 – 10 4 13 0 20 21 Ref urbish ment and p otenti al ex tension Baker S tre et W1 JV 2.5 61 12 0 20 24 Joint ve nture, 5 0% share Blue S tar Ho use SW9 0. 8 54 11 0 2025 Redevelopment Other 4.0 171 17 1 Includ es Oli ver ’ s Y ard EC1 an d 45 Whi tf ield S tree t W1 7. 3 39 0 5 31 Consente d a nd under appraisal 11 . 2 480 6 81 On site a nd 2022 projec ts 2 .1 42 9 883 Previous t able Pipe line 13 . 3 909 1, 5 6 4 1 Ar eas p rop ose d are e stim ated f rom in itial s tud ies Members of The Feathers tone Buildi ng Project team 87 Financ ial Stat ements Governance Strategic repor t FI NAN CE R EV I EW The pa st yea r has see n a re tu rn t ow a rd s more n ormal business conditions pu nctu at ed by per iod s of e l eva t ed u ncer ta in t y wh en l eve ls o f Covid - 1 9 inf e ct io n in cr ea s ed . Introduction With lo ckdowns hav ing ease d and the UK ’ s ver y su cce ssf ul vacc ination prog ramme prov iding some pro tectio n from th e worst impac ts of 202 1 ’s Covid- 1 9 variant s, acti vit y acr oss mo st of our stake holder gro ups has gra dually rec overe d. This is evid ence d by many ec onomic indic ators inc luding GDP grow th, emp loyment an d inves tment. O ur own exp erienc es have b orne this ou t with of f ice rent al collec tions no w almost at p re- Cov id levels an d most of o ur oc cupiers p lanning fur the r ahead on ce more . We have respo nded with a sub stantial inve stme nt programm e in new fu ture projec ts and have re shape d the busin ess mo re than in any year sinc e the LMS me rger in 2007 . Challenge s remain with b usiness es fac ing increas ed co mpliance requirem ents and s taf f shor t ages while als o tackling t he climate change an d biodive rsit y eme rgencie s. We take the se issu es ver y seri ously but al so see t hem as opp or tunitie s to dif ferentiate our pro duct and b usiness w hile beco ming ever mor e custome r foc used. C os t inflatio n is now also b eing widely fe lt, though v iews dif fer on h ow long it will las t. Howev er , the e con omy is exp ecte d to grow and m any of London’s busines ses are ac tive ly recr uiting and expre ssing gre ater conf idenc e in the f uture than fo r some time . Finan cial over vi ew As n oted in las t year ’ s rep or t and with a subt le change in emphasis announc ed during 2021 , we have c ontinue d to rebalan ce the por t fol io. We have made dispo sals whe re we see m ore challeng ing fu ture returns an d repla ced th em with so me new ac quisitions toprov ide fut ure projec ts and ‘super -sites’ fo r the nex t de cade orso. T his reshaping is n ot finishe d and we hop e to sec ure fur the r value-a dd oppo r tunities in the f uture whic h may see b alance s heet gearing r ise a lit tle higher . I have p revious ly noted our shi f t in focus , with f uture value cr eation a highe r current pr iorit y than inc ome grow th; this may prov ide some s hor t-ter m impact on e arnings untilwe are able to repl ace all th e incom e lost fro m rece nt dispo sals. Ho wever , we now antic ipate incom e reversi on incre asingas meaning f ul rental gro wth c ome s through fo r thes tronges t of fic e produ ct. Financial highlights 20 21 2020 T o tal net a sse ts £4,4 4 1 .8m £ 4,3 1 5. 1 m EPR A NTA per share 3,9 59p 3 , 8 12 p Prop er t y po rt fo lio at fair value £5,6 46 .3m £5,355.5m Gro ss prop er t y and ot her inc ome £24 0.2m £268 .6m Net rental income £17 8 . 2 m £1 7 4.3m IFRS pr ofit /(los s) befo re ta x £25 2.5m (£ 83.0 m) EPR A ear nings per sh are (EPS) 10 8 .79 p 9 9 .1 9 p Interim an d final di viden d per sh are 76 .5 0p 74 . 4 5 p LT V r a t i o 20.8% 18 . 4 % N AV ge a r i ng 28.2% 24.3% Net inte rest c over r atio 4 6 4% 44 6% Our as set and pr oper t y mana gers c ontinue to engag e with our oc cupiers to ex ten d lease s, remov e breaks an d mini mise v oids. With re lative ly strong p roper t y re valuations and muc h lower impairme nt provisio ns boo ked in 202 1 than in 2020, this has help ed 202 1 ear nings rise signif icantly wi th IFRS earnings up 294 .33p to 22 4.99p p er share and EP RA e arnings per sh are up 9. 7% to 1 0 8.8p. Icann ot rec all a more ac tive ye ar for our dev elopmen t team eithe r and all this ac tivi ty h elpe d the Gro up produc e a total ret urn of 5.8%. PRE SENT A T ION OF FINANCI AL R ESUL T S The f inancial s tatement s have be en prep ared in acc ordanc e with UK-adopted Inter national Ac coun ting Stan dards. Incomm on with usual and b est p ractic e in our se ctor , alternati ve per fo rmanc e measure s have also b een pr ovide d tosupplem ent IFRS bas ed on th e rec ommendati ons of the Europe an Public Real E state A sso ciation (‘EPR A ’ ) . EPR A Be st Practice Rec ommendati ons (BPR) have be en adopted wi dely throug hout this re por t and are us ed within th e busines s when con sidering our op eration al per for mance as we ll as mat ters such as di viden d polic y and elemen ts of our Direc tors’ remune ration. Full re conciliatio ns bet wee n IFRS and EPR A fig ures are prov idedin n ote 40 and all th e EPR A definitio ns areinclude d onpa ges 27 4 an d 27 5. Damian Wisni ewski Chief Finan cial Of f icer De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 88 Proper t y por tfolio Our pro per t y por t fo lio was ex ternally value d at £5.6bn (excluding the ne w joint venture) as at 31 Dec ember 2021 , alloc ated acr oss theb alance sh eet as f ollows: D ec 2021 £m De c 2020 £m Investment propert y 5,359.9 5 , 0 2 9 .1 Non- curre nt ass ets he ld for sale 10 2 . 8 16 5 . 0 Owner-oc cupied propert y 4 9.3 4 5.6 T r ading pro per t y 32.2 12 . 9 Pro per t y c arr y ing value 5,54 4.2 5, 252. 6 Ac crue d inco me (non- curre nt) 1 59.3 14 6 . 4 Ac crue d inco me (curren t) 2 4 .1 19 . 6 Gro ssing up of he adleas e liabilitie s (7 0.4) (66 .5) Prof it shar e due to TfL (14 . 8 ) – Revaluation of trading proper t y/ other 3.9 3.4 Fair value of proper ty por tf olio 5,6 46 .3 5,355.5 Fair val ue of pr ope r ties h eld in join tvent ure (50 % ) 50.0 – The y ear was marke d by trans actions wi th The P or tman Est ate ( TPE ) and La zari Inve stment s Ltd (Laz ari) which have h elpe d unlock tw o dif ferent an d large- scale de velopme nt oppor t unities in Baker Str eet W1 . Fur th er oppo r tunities fo r future g row th have also c ome from a cquisition s announce d subs equent ly in 20 21 but their impac t will be felt mo re in the me dium term. Firs tly , we acquire d TPE ’ s 45% £5 3.4m non-c ontroll ing interest inPor tman Inve stme nts Baker S tree t Ltd (PIBS) on 30 Septe mber 202 1 . PIBS was a lon gstanding 55%/ 45% joint c ompany holding prop er ties in t wo main block s adjoining Baker Stre et and G eorge Str eet. B ec ause it was majori t y owned an d contro lled by the Der wen t London p lc group, it was co nsolidate d within our acc ounts for many y ears subjec t to a non- contro lling interes t. As p ar t of this overal l transac tion, pro per tie s in Georg e Stre et, Baker S tre et, Robe r t Adam St reet and C astler eagh S tree t W 1 tot alling £4 5.2m were disp ose d of to TPE. Th e last p ar t of the trans action wa s to surren der the ex isting hea dleases to T PE with a new 1 29 y ear headle ase being g ranted by T PE acros s the 1 9-35 Baker S tre et site.T his surrende r and regran t of the headle ases ha s been treate das a £1 00.7 m dispo sal and subs equen t acquisition thoug hno cas h pass ed be twe en the par ti es on this elem ent asthetr ansac tions net te d of f; the ne t cash that p asse d fro m Der wen tto TPE on co mpletion of th e various ste ps outlin ed here was £6.2m. T he result is that t he Group now h as a long lease hold interes t in the newly ge ared de velopme nt site at 1 9 -35 Baker Str eetwhe re work is unde rway to de molish th e old buildings. The o ther major trans actio n was the ac quisition of t wo buildings from L azar i Investm ents in Oc tobe r 202 1 an d the for mation of a50/50 jo int venture. T he buildings acquired we re 250 Euston RoadNW1 for £1 9 0.3m and 1 71 - 1 7 4 T ot tenham C our t Road W1 for £2 4.3m, b oth inclusi ve of cos ts. T he joint venture w as forme d in Oc tober as a L imited Par tn ership; each par tn er has an ef fe cti ve 50% shar e in a deadlocke d stru cture and o ur 50% interes t is there fore held wi thin Investm ents (note 1 8) rather than b eing include d within the P roper t y p or tf olio (note 1 6). T urning to liquidit y, as expe cte d the Group’s rental c ollect ions boun ced b ack well in 2021 but we also exe cute d some ve r y suc ces sful tr easur y trans actio ns, not ably our new £ 350m 1 .875 % 1 0-y ear unse cured gr een bo nd issue in No vembe r . This is f ur ther evid ence of o ur commitm ent acro ss the b usiness to a n et zero car bon f uture. Return to gr owth The p or t folio sho wed a retur n to revaluation gr owt h in 20 21 . Thisc ame from d ownward yield shif t for we ll let of fic es toget her with de velopme nt profi ts from r ecen t schem es and mo des t ERV grow th fo r the be st prop er ties . With IFRS e arnings comfo r tably exce eding divi dends paid , the closing EPR A Ne t T angible A sset s (NT A ) per shar e was 3,959p, up 3.9% from D ece mber 2020. Similarly, I FR S equit y share holders’ f unds incre ased o ver the yearby 4 .2% to £4.4 4bn. 20 21 p 2020 p Op ening EPR A NTA 3 , 8 12 3,957 Revalua tion movement 11 9 (17 6 ) Prof it on disp os als 9 5 EPR A ear nings 10 9 99 Ordin ar y div idend s paid (75) ( 73) Intere st rate swap te rminatio n cos ts (2) (2) Share of j oint ventur e result s (12 ) – Other (1) 2 Closing EPRA NT A 3,959 3 , 8 12 Der wen t London c ontinues to f ocus on p roper t y re turns, re curring earnings , sustaine d divid end grow th and m ode st levera ge as well as our Net Zero C arbo n Pathway and a numb er of other ESG an d stake holder- focus ed me trics . However , we b elieve tha t total return (i.e. div idends pai d plus EPR A Net T angib le Ass ets grow th p er share) is the b est single m easure of our f inancial pe rf ormanc e. Af ter adding b ack the div idends p aid, the Gro up’ s tot al return (seenote 4 1 ) re cover ed to 5.8% in 202 1 af ter th e 1 .8% d ecline se enin 2020 . 2020 3,957 (17 6 ) 5 99 ( 73) – – 3 , 8 12 4,250 4,000 3,750 3,500 1 January Revaluation surplus/(deficit) EPRA earnings Dividends paid Results from joint ventures Profit on disposal Other 31 December EPRA net tangible assets per share 3,812 119 109 (75) (3) (12) 9 p 3,959 89 Financ ial Stat ements Governance Strategic repor t FINAN CE RE VIE W CONTINUED The jo int venture ho lds three leas ehold pro per tie s in Baker Str eet W1 which are curre ntly incom e produc ing but wher e the intention is to work up a major ne w schem e subject to p lanning, site as semb ly and reg earing of the h eadlease . The Gro up’ s s hare of the prop er ties acquire d cos t £64.0 m but was sub seque ntly revalue d at £50.0m as at 3 1 D ece mber 2021 giving a JV r evaluation def icit fo r the year of £1 4 .0m. It is exp ec ted that th e valuation should r ise in due cour se upon a su cce ssf ul planning and h eadleas e gearing ou tcome. In addition to th e transac tions ab ove, oth er prope r t y acquisition s during the y ear include d £23.8m for the lo ng leaseh old interest at Holford Wor ks WC1 and £1 4.5m for th e shor t leas ehold intere st atBush Ho use WC2. Altoge ther , a cquisition s totalled £ 353.6m. Capi tal exp enditure in 202 1 inc rease d to £ 1 66. 1 m p lus £ 1 2.0m of capi talise d interest b ringing total ad ditions to £5 3 1 .7 m in the ye ar . Dispo sals inc luded th e Johnson B uildi ng EC1 , which was disc losed as an ‘asse t held for s ale’ at the star t of 2021 , and A ngel S quare EC1 , which c omplete d in August 2021 . Th e prope r ties within ‘non- current as sets h eld for sale’ at 31 Dec ember 2021 were New River Yard and 2 & 4 Soho P lace W1 , with c arr ying value s of £63.7 m and £ 3 7 .5m, r espe cti vely . New Ri ver Y ard exchang ed in Januar y 2022 with comp letion exp ecte d in Q2 20 22 and c ontrac ts for th e sale of 2 & 4 S oho Plac e have be en exchang ed with c ompletion exp ecte d later in 2022. The t rading prope r ty h eld at 3 1 D ece mber 2021 i nc luded th e last remaining res idential apar tm ent at As ta Hous e W1 . This was subs equently s old po st the ye ar end and br ings to an end our deve lopment of th ese unit s conne cte d with the 80 C harlot te Stre et sch eme. Th e other ite m in trading stoc k was Welby House S W 1 which was wr it ten down by £1 .4m in 202 1 . The ove rall wholly-owne d proper t y por t folio valuation per form ed much b et ter than in 2020 and gave rise to a tot al revaluation surplus f or the year o f £ 1 3 0.8m af ter acc ounting adjustme nts, of which £ 3. 7 m rel ated to our owne r-o ccupie d head of f ice at S avile Row. The lat ter f igure is sho wn in the Group S tateme nt of Co mprehens ive Inco me rather t han the Inc ome St atement . The b alanc e of unamor tise d let ting and legal fe es plus the a ccru ed inco me from th e ‘straight-lining ’ of rent al income un der IFRS 1 6 to spre ad the ef fe ct of inc entive s and fi xed uplif t s over th e lease terms ha s increas ed to £1 83.4m (2020: £ 1 6 6.0m) . T his balanc e rises as inco me is rec ognise d through in centi ve perio ds and fall s gradually o nce the c ash f lows stabilis e. The g rossing up of h eadlease l iabilities incre ase d the car r ying values of th e leaseh old prop er ties by £70.4m (2 020: £66.5m) but there is an e qual and opp osite liabilit y wi thin ‘net debt ’ (note 2 4) and the prof it share p ayable to TfL on th e Soho P lace s cheme o f £ 1 4 .8m makes up the r emaining balanc e. Rent colle ction an d impairment of r eceiva bles One of th e cleares t barom eters of the C ovid - 1 9 per iod for t he real est ate sec tor has b een the imp act on re nt colle ction rate s. This was ver y no ticeab le in the early loc kdown days of H1 20 20, par tic ularly for ret ail and hos pitalit y tenant s or for th ose in the tr avel and enter t ainment busine sse s, but ha d already s tar ted to re cov er signif icantly in H2 2020. It is good to rep or t that ren t colle ction rateshav e continue d to move b ack towards pre -C ovid lev els for our of fic e por t fol io through 2021 and into 202 2. For t he De cemb er 202 1 quar ter day rent s, we have now c ollec ted 98% of of f ice re nts and 97% of overall rent s, including our shar e of the new joint v enture. The r etail and ho spitalit y s ecto rs cont inue to lag bu t are showing much s tronger p ayment p er form ance s than in 2020 and occ upiers are now ge nerally not as king for c once ssions b eyond s ome reques ts for monthly rental payment s. De c 21 quar te r Of fice Ret ail / Hospitalit y To t a l Rent re cei ved to d ate 98% 83% 97 % Due l ater in the qua r ter 1 1% 4% 1% Ou tst anding 1% 13 % 2% Rent-free grante d 0% 0% 0% To t a l 10 0 % 10 0 % 10 0 % £ 40.3m £ 2.3m £ 42.6 m 1 Principally monthly receipts Impairme nt reviews u sing the exp ecte d credi t-loss mo del in acc ordanc e with IFRS 9 have c ontinue d in 202 1 against tr ade rec eivable s as well as amo unts due unde r the sprea ding of lease ince ntives . The se have b een c arried o ut for e ach of our 50 lar gest tenants an d for othe rs where we b eliev e the risk is elev ated, with the rem aining balanc es con sidered a cco rding to their sec tor . Subs tantial impairm ent charge s and write -of fs tot alling £1 4.2m were inc urred agains t rec eivable bal ance s in 20 20. In 202 1 , the se amount s have redu ced c onsider ably to £0.8m, this tot al amount including £2.4m of charg es reve rse d from 2020. This pat tern isdueto an improv ed ass essm ent of the r isks as the f inancial healthof ten ants has impro ved as wel l as lower out standing balan ces . For example, n et trade re cei vables were b ack to norm alyear end le vels at £6.9 m as at 3 1 De cemb er 202 1 , 75%lower than the £27 .5m a year e arlier . 202 1 Ren t coll ect ion De c 20 qua rt er Mar 21 quar ter J un 21 quar ter Se p 21 quar te r Of fice Ret ail/ Hospitalit y Of fice Ret ail/ Hospitalit y Of fice Ret ail/ Hospitalit y Of fice Ret ail / Hospitalit y Rent re cei ved to d ate 99% 73% 98% 6 8% 99% 8 1% 10 0 % 8 8% Ou tst anding 1% 9% 1% 13 % 1% 12 % 0% 11 % Rent-free grante d 0% 18 % 1% 19 % 0% 7% 0% 1% To t a l 10 0 % 10 0 % 10 0 % 10 0 % 10 0 % 10 0 % 10 0 % 10 0 % £ 41 . 4 m £2.9m £ 40.0m £ 3.0m £ 38.8m £2.6 m £38.5m £2.5m De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 90 Proper t y income and earni ngs Net pro per t y and oth er incom e increas ed to £1 87 .5m for t he year ende d 3 1 D ece mber 2021 from £1 83.0m in 2020. Howeve r , ther e are sev eral dif feren t theme s underly ing this overall inc rease, s et out in note 5 and ex plaine d brief ly below. 220 200 210 180 190 170 Pr ior ye ar Majo r developments O ther let tings & ass et management Breaks, exp irie s & v oid s Acquisitions & disp os als Current year 202.9 9.5 0.7 (9.4) (9.5) 194.2 Gross rental income £m Gros s prop er t y and other in come f ell to £2 40.2m for t he year to 3 1D ece mber 2021 from £268.6m in the pri or year , the main rea son for this b eing signif icantly lower s ales of trading pro per tie s at Ast a Hous e. Most of t he apar tme nts were disp ose d of in 20 20, hen ce the redu ction in disp osal pro ce eds fr om £32.3m in 202 0 to £6.7 m in 202 1 . The n ex t apar tmen ts that we will unde r take are thos e at our 1 9 -35 Baker St reet sc heme wh ere the main building co ntract will comm ence s hor tly. These ar e due to complete in 2025 so trading prop er t y dispos al proc ee ds are expe cte d to be ver y low fo r the nex t few ye ars. In addit ion, gros s rental in come f ell back a li tt le in 2 021 to £1 94.2m fro m £20 2.9m in 2020. This was mainly the r esult of prop er t y dispos als where t he incom e yields were r elativ ely higher and ac quisitions whe re they wer e lower . Gro ss ren ts have also b een impac ted by the ‘s of ter’ let ting an d lease ex tensio n transac tions under t aken through 2020 and e arly 202 1 when th e pande mic was af fec ting oc cupier se ntiment. In p art icular , we under to ok a number of trans action s to ex tend lease s at pass ing rental leve ls while of fering in centi ves that to ok the ne t ef fec tive ren ts a lit tle lower than pre viously. Combine d with a smal l increas e in the averag e vac ancy rate, this al so expl ains why EPR A like-for -like gross re ntal inco me has de clined ov er the ye ar . Surre nder pre miums and other prop er t y incom e increas ed to £5.6m in 2021 from £1 .8m in 2020, helping of f set s ome of the lowe r gros s rents. O the r factor s were ser v ice char ge incom e rising to £30.2m in 202 1 against £28. 1 m in 2020 and other inc ome of £ 3.5m, the s ame as in 2020. T ogeth er , the se move ments ac count f or the re duction in g ross pr oper t y and other in come re ferre d to above. Howeve r , as in 2020, it is net pro per t y inc ome that sho ws the full impac t of the Co vid- 1 9 p andemic on o ur busines s. As n oted abo ve, with muc h strong er rent co llecti on and oc cupation le vels amon g mos t of our oc cupiers , impairment c harges and b ad debt s fell to £0.8m in 2021 , a signif icant impro vement f rom the £1 0. 1 m bo oked in 2020. I rr ecov erable ser vic e charges al so fell f rom £6.9m in 2020 to £3.4m in 2021 as we did not repe at the £ 4. 1 m ser v ice ch arge ‘holi day’ that we al lowed tenant s in 20 20. O ther pro per t y co sts were bro adly unchange d at £1 1 . 8m against £1 1 .6m in 2020 . A s a result , net rent al income in crease d to £1 78.2m in 202 1 , a 2.2% incre ase over t he year . Lower pr ofit s from the A st a House apar t ment ‘ trading ’ sales of £0.7 m in 2021 against £5.2m in 2020 were large ly of fset b y higher surren der premiums re cog nised. A s a result, n et prop er t y and other inco me also s aw a rise of 2.5% to £ 1 87 .5m from £1 8 3.0m in 202 0. Administrat ive exp ense s were 1 .9% lowe r than in 2020 at £37 . 1 m, with inc rease d headc ount and s taf f salar ies/ bonus of f set by lowerDire ctors’ re muneration . Cos t pres sure is being se en acro ssthe b usiness an d profes sional s alaries are r ising at a rate abov e general inf lation. T his is impact ing our own staf f c ost b ut also th ose of th e many profe ssional ad viser s, co nsultants an d con tractor s that work wi th us. A s before , we do not c apitalise any of our overhead. Lower imp airment and adminis trative ex pens es have se en our EPR A co st ratio mov e back dow n to a more nor mal level c ompare d to the ‘spike’ in 2020. I nc luding direct vac ancy c ost s, it fe ll to 2 4.3% from 30.5% in 2020. Cost ratios 20 21 % 2020 % EPR A co st ratio , incl. dire ct vac anc y cos ts 24 .3 30.5 EPR A co st ratio , excl. dire ct vac anc y cos ts 2 1 .1 26 .0 Por t fol io cos t ratio, inc l. dire ct vac ancy c ost s 0. 8 1 .1 The inv estme nt por t folio r evaluation surp lus af ter acc ounting adjustmen ts for the s traight-lining of inc entiv es, def erre d legal/ let ting fee s and the g rossing up of he adlease re ntals was £1 30.8m for th e year co mpared wi th a defi cit of £1 96. 1 m in 2020. The prof it on dispo sal, re lating mainly to Ange l Square which c omplete d in Augus t 202 1 , was £1 0.4m (202 0: £1 .7 m). Net f inance c osts w ere £28. 1 m in 202 1 af ter cap italise d interes t of £1 2.0m, a de crea se of £2.0m over th e net char ge of £30. 1 m in 2020. With sl ightly higher intere st rates a cros s the swap cur ve , the fair value of for ward-s tar t swaps m oved in o ur favour by £ 4.8m, or £2.9m af ter net ting of f de rivati ve termination c ost s. When t he new joint ven ture transa ction wit h La zari Invest ments inrelatio n to the Baker S tree t prope r ties was anno unced , we anticipate d a revaluation d efici t for the f irst ac counting p erio d. TheG roup’ s share of th at was £ 1 0.2m and, af ter prof it f rom ope rations of £0.3m , the net re sult for the p erio d attr ibutab le to theGro up was a loss of £ 9.9m. Af ter allowing fo r acquisition c ost s of £4 .0m, the tot al IFRS loss at tr ibutable to o ur share of the joint venture w as £ 1 3.9m. 91 Financ ial Stat ements Governance Strategic repor t FINAN CE RE VIE W CONTINUED The G roup’ s resulting IFR S profi t befor e ta x for the y ear was £25 2.5m af ter the lo ss bef ore ta x of £8 3.0m in 2020 and IFRS earnings p er share were 224.99p against a lo ss of 69.34p in t he prior y ear . A table pr oviding a rec onciliation o f the IFRS re sults to EPR A earnings p er share is includ ed in note 4 0. 250 200 100 150 50 0 Gross rental income Waivers & impairments Premiums and other income Administrative expenses Net finance costs Other property expenditure T ax (charge) / credit EPRA earnings 194.2 (0.8) 9.1 (14.3) (37.1) (28.1) (0.2) (0.8) 122.0 £m Other EPR A ea rnin gs 2020 202. 9 (14 . 2 ) 5.3 ( 14 . 4 ) ( 3 7. 8 ) ( 3 0 .1 ) 0.6 (1. 3 ) 111 . 0 EPR A lik e - for-like rental inc ome EPR A like-fo r-like gros s rental inc ome was dow n by 3.9% over theye ar , due mainly to our de cision to ex ten d leases t hrough the pand emic in 2020 and early 202 1 with in centi ves highe r than usualand slig htly increa sed ave rage vac ancy lev els. Howe ver , EPR A like-fo r-like net rent al incom e was up by 2. 7% over t he year , ben efit ting f rom the lower imp airment ch arges. L ikewise, EPR A net prop er t y incom e, which include s surren der premiums , was up by 5.9% on a like- for-like basis . EPR A like-f or-like ren tal in come 20 21 % 2020 % De crea se bas ed on gr oss re ntal inc ome (3. 9) (0 .9) Increase/ ( decrease) based on net rent alinco me 2.7 (9. 8) Increase/ ( decrease) based on net prop er t yinco me 5.9 (8 .9) Internal controls, as surance and the regulator yenvironment We have rec ently se en a wide spread inc rease in s takeholde r foc uson assur ance and inter nal cont rols, linke d par tly to the BEISrevie w . Intern al audits over t he past t wo ye ars have alre ady had a be nefi cial impact on o ur contro l environme nt and, while no finan cial loss or re putat ional damage h as bee n noted f rom this work , we rec ognise th at the evi dencing and do cumen tation of robus t contr ols are of incre asing interes t to our stakeh olders an d toreg ulator s more wid ely . We provid ed fe edbac k in relation to th e BEIS review an d await thef inal conc lusions and re comm endations of t heir repo r t with interes t. In parallel , we have also b een wor king on a draf t audit andas surance p olicy whic h tackle s our assuran ce appro ach for tho se limited p ar ts of the busin ess whic h are not yet subje ct to ex ternal as suranc e. Our princ ipal third par t y che cks inclu de the annual st atutor y audit , internal audit pr oce dures c arried o ut throug hout th e year , s er vic e charge audit s, a t wice- yearly ex ter nal valuation plus t he assuran ce work c arrie d out on o ur ESG data andpro ce dures, he alth and safe ty r epor ts an d green f inanc e. Werec ognise the imp or tanc e of high qualit y rep or ting that stan dsup to scr utiny , bot h from within th e busines s through robus tinternal c ontrol me chanisms an d also fro m third-par t y verif ic ation. This wor k is ongoing and is ex pec ted to e scal ate. T a xation The c orp oration ta x ch arge for th e year end ed 31 Dece mber 202 1was £0.5m . Most of our p or t folio is within th e REIT regime butthis c harge rel ates to the Po rt man Est ate non-c ontrolling interes t held out side the REI T up until it was acquire d by us at the end of Q 3 as well as inc ome from p roper t y tr ading operati ons. The m oveme nt in deferre d ta x for th e year was a cr edit of £0.8 m (2020: £0.7 m c redi t). A £1 .8m cre dit was taken t hrough the in come s tatemen t mainly dueto the re vers al of the defe rred t ax liabili ty o nce th e Por tman Est ate’ s 45% interes t in the jointly- owned c ompany was a cquired, bringing th e asse t fully within th e REIT regime. In ad dition, £0.7 m was cre dited thro ugh equit y in rel ation to fu ture ta x de duction s fore quit y-set tle d share-b ased p aymen ts, £0.4m was c harged in resp ec t of futur e define d ben efit p ension liabilitie s, and £1 .3m wa s charge d in relatio n to the owner -oc cupied p roper t y at S avile Row. As we ll as other t ax ation paid during t he year , in acc ordanc e with our st atus as a REIT , £8.6m of t ax wa s paid to HMRC relat ing to ta x withhe ld from share holder s on prope r t y income dis tributio ns (P ID s). Der wen t London’s principles of go od gov ernanc e ex tend to a resp onsible appro ach to ta x . Our statem ent of ta x prin ciples is available on our we bsite w ww. der wentlondon.com/investors/ governance/ta x -principles and is approve d by the B oard in line with th e Group’ s long-te rm values, c ulture and stra teg y . We have also pr ovide d more infor mation on our t ax g overnan ce and ris k manag ement on p ages 65 an d 1 6 4, resp ecti vely. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 92 Borr owings, net deb t and ca sh flow In last y ear’s repo r t, I noted t hat our low levera ge meant t hat we would be c omfor t able adding fur th er debt to our c apital s truc ture if the rig ht acquisitio n oppor t unities were id entif ied. In 202 1 , thos e opp or tunities c r ystal lised in th e form of ac quisitions tot alling £25 1 . 8m plus £53.4m ar ising on the ac quisition of Th e Por tman Est ate’ s 45% interes t in PIBS. B ecaus e the lat ter was alr eady con solidate d within the Gro up acco unts and did not re sult in a change of c ontrol , it is require d by IAS 7 to b e shown in ‘ finan cing’ acti vitie s rather th an ‘investing ’ act ivitie s. In additio n, we spent £1 72. 1 m on c apital ex pendit ure including capit alise d interest an d incurre d a fur th er £1 .6m on trading sto ck additio ns. Th e lat ter arise s when we inve st in prop er ties whe re the intention up on comp letion is to sell r ather than h old. Altogeth er , this m eant that £47 8.9m wa s spent on p roper t y ac quisitions an d develop ment exp enditure, c ompare d with £21 9.6m in 2020 . This c ash out f low was of fse t by £29 7 .3m of pr oper t y dispo sal proc ee ds. A s a result, Gro up borrowings in crease d by £21 6.2m to £1 .25bn at 3 1 De cemb er 202 1 . This is th e highes t level the G roup has se en but i t remains rel atively mo des t, equiv alent to a loan-to- value (L T V ) ratio of 20.8% a gainst 1 8 .4 % a y ear earl ier . Mor eover , the leve l of headro om under de bt facilitie s has incre ased af te r the finan cing acti vities n oted b elow; as at 3 1 De cemb er 202 1 , available cas h and undrawn facili ties totalle d £608m c ompare d with £ 4 76m at 3 1 D ece mber 2020. Following c orres ponde nce during Q 4 202 1 with the C orp orate Repo r ting Review T eam of th e Financial Rep or ting C ouncil, we have agre ed to re clas sif y the c ash flow s relating to th e investm ent in, and dispo sal of, trading prope r ties within th e Group Ca sh Flow St atement . Acc ordingly we have re -pres ented th e Statem ent for the ye ar ende d 3 1 De cemb er 2020 to recla ssif y £ 3 1 . 7m of cash rec eipts and £1 .2m of ex pendit ure on trading prop er ties f rom ‘inves ting acti vities’ to ‘op erating ac tivitie s’ . This has th e ef fec t of incre asing the net c ash inflow f rom op erations in 2020 from £ 85.4m to £1 1 5.9 m with a cor resp onding increa se in the net c ash ou tf low in inves ting acti vities f rom £62.0m to £92.5m. T here is no ne t impact upon th e cash f low state ment ove rall and ther e is no impact o n any balan ce she et or inc ome st atement f igures . As re por ted l ast ye ar , net c ash fr om operat ions was adv erse ly impac ted in 2020 from the imm ediate ef fe cts of th e pandemic . Ourre spons e at the time was to ag ree c ash defer rals and oth er form s of tenant supp or t that redu ced c ash rent al rec eipts in 2020. Almo st all of that d eferre d rent has sub sequ ently be en col lecte d in202 1 such t hat the rent s rece ived in 2021 were £25. 1 m hig her than 2020 at £1 87 .0 m. Net ca sh from op erating ac tivi ties fur th er incre ased in 2021 to £ 1 25. 7 m fr om the res tated £1 1 5.9m in 2020. Note that th e cash f low from op eration s may be af fe cted in th e nex t few ye ars by the b uild-up of trading stoc k at our 1 9 -35 Baker Stre et deve lopment wi th both re sidential and s ome ret ail compo nents of the s cheme e armarke d for onward sale. The lowe r levels of imp airment in 202 1 have h elpe d interest c over rec over to 4 64 % fo r the year c ompare d to 44 6% in 202 0 and 4 62% in the pre -C ovid 201 9. O ur debt cov enant remains at 1 45%. Mem ber s of t he Fin anc e tea m 93 Financ ial Stat ements Governance Strategic repor t Debt and financing The G roup had anoth er year of ac tive an d succ ess ful ref inancing in202 1 . B oth of the uns ecure d revo lving credi t facilitie s (RCFs) totalling £ 550m wer e ex tended f or a year to f resh f ive year te rms, evid ence of t he continuing exc ellent rel ationships we h ave with our four longs tanding and value d lending banks . The y have provi ded fur th er suppo rt an d advi ce throug h the year an d remain key stake holders in o ur busines s. We docum ented th e sec ond and f inal one- year ex tensio n to the £4 50m R CF provid ed by HSBC , NatWest an d Barclay s, taking t he maturit y o ut to Oc tober 2026. This fa cilit y incor porates a £ 300 m ‘gree n ’ tran che and de tails of the qualif ying pr ojects , expe nditure incurre d and amo unts drawn are shown b elow. As be fore, the se disclos ures have b een subjec t to a ‘reaso nable’ level of as surance by Deloitte. 2029 2031 2034 2026 2028 2025 2024 Maturity pr ofile of debt facilities as at 31 December 2021 £m 83 30 175 540 240 118 475 127 Drawn Headroom We also do cumente d our firs t one- year ex tensio n for the £1 0 0m RCF p rovide d by Wells Fargo t aking its ter m out to Nove mber 2026. In Q4, b oth the RC Fs and their as sociate d interes t rate swaps were transit ioned f rom a LIBOR to a S ONIA basis . The se t wo for ward- star t s waps totalling £1 1 5m have c ommenc emen t dates in Januar y 2022 and £ 1 .9m was pai d in 20 21 to defer the ir ef fec tive st ar ting dates. R ates have mov ed in our favo ur during the year s uch that th e mark-to-m arket fair value on th ese swap s improve d by £4.8 m. In advan ce of the unwinding of th e 55%/ 45% joint inve stme nt with the Po r tman Est ate, the £28m sec ured loan pr ovide d by HSBC was repaid an d canc elled. A s noted e arlier , the main B aker Stre et islan d site unde r developm ent is now wh olly-own ed and subje ct to a new headle ase. D evelopm ent expe nditure is be ing funde d from ex isting Group re volving deb t facilitie s, including the g reen tr anche of our £ 4 5 0 m R C F. The m ain financing ac tivi ty in 2021 was a debut g reen b ond. This was ver y we ll rec eive d and raise d just under £ 350m at 1 .875% for 1 0 year s to Novembe r 203 1 . The b onds wer e rated ‘ A ’ by Fitc h and will be ut ilised in ac cordanc e with our Gr een Finan ce Framewor k, update d as require d to deal with th e green b onds as we ll as the exist ing green R CF tranch e. As a re sult of this finan cing acti vit y , the G roup’ s weighte d averag e interes t rate fell by 20b p over the y ear to 3. 1 4% on a cash ba sis and 3.27% on an IFRS basis whic h adjusts for th e conver t ible bonds . Inaddition , the weighte d average m aturit y of our bo rrowings incre ased to 7 .2 y ears at 31 Dec ember 2021 compar ed to 6.8 ye ars at 3 1 D ece mber 2020. Dividend We continue to o perate a pro gres sive and su stainable div idend poli cy . Af te r conside ring our pen sion funding ob ligations and others takeho lder requirem ents, th e Board is r ecom mending a 1 .05 p per share o r 2.0% increas e in the final div idend to 5 3.5p. Thiswill b e paid in June 2022 with 35.5p as a PID and th e balanc e of1 8 .0p as a conv entional div idend. We will not b e of fering a s crip dividend al ternative. This t akes the total di viden d for 202 1 to 76.5p, 2.8% higher than2020. Divi dends de clare d in relation to 2021 earnings were 1 .42times c overe d by EPR A earnings and 2.94 t imes co vered byIFRS e arnings. FINAN CE RE VIE W CONTINUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 94 Deb t fac ilitie s and re con ciliat ion to bo rrowi ngs and n et deb t at 31 Dece mber 2021 Drawn £m Undrawn £m To t a l £m Maturity 1 .5% unse cured c onve r tible bon ds 17 5 . 0 – 17 5 . 0 Jun e 2025 6.5% se cured b onds 17 5 . 0 – 17 5 . 0 March 2 026 1 .875% unsec ured gr een b onds 350.0 – 35 0.0 November 203 1 2.68% uns ecure d pri vate plac eme nt notes 55.0 – 55 .0 Januar y 2026 3.46% un sec ured pr ivate pl acem ent note s 30.0 – 30.0 May 2028 4.4 1 % unse cure d priv ate plac ement n otes 25. 0 – 25 .0 Januar y 2029 2.87% unse cure d priv ate plac ement n otes 93.0 – 9 3.0 Januar y 2029 2.97% unsec ured p rivate pl ace ment no tes 50.0 – 5 0.0 Janu ary 20 3 1 3.57% unse cure d priv ate plac emen t notes 75 .0 – 75. 0 May 20 3 1 4.68% uns ecur ed pri vate pla ceme nt note s 75. 0 – 75 .0 Januar y 2034 3.09% uns ecur ed pri vate pla cem ent note s 52 .0 – 52.0 Januar y 2034 3.99% s ecure d loan 83.0 – 8 3.0 October 20 2 4 O ther lo ans 12 . 3 – 12 . 3 n /a Non-bank debt 1, 2 5 0 . 3 – 1, 2 5 0 . 3 Bilate ral revo lving cre dit – unse cure d – 100.0 10 0 . 0 November 2026 Club rev olving c redit – uns ecur ed 1 0.0 4 40.0 45 0.0 Oc tob er 2026 Co mmit ted b ank facilit ies 1 0.0 5 40.0 55 0.0 Debt f acilities 1, 2 6 0 . 3 54 0.0 1,800.3 Ac quired fair v alue of se cured b onds le ss amo rt isatio n 8.0 Unamo r tised dis coun t on unse cure d gree n bonds (1. 8 ) Equit y adjustm ent to co nver tible b onds le ss amo r tisatio n (4 .5 ) Unamor tise d issue an d arrangemen t cost s ( 12 . 6 ) Borrowings 1, 24 9 . 4 Lease hold liabilities 70.6 Cash and cash equivalents (68 .5 ) Net d ebt 1, 2 51.5 Deb t: key st ats 20 21 2020 Hedging profile (% ) Fixe d 99 85 Swaps 0 0 99 85 Perc ent age of de bt that is uns ecure d (%) 79 73 Perc ent age of no n-bank de bt (% ) 99 85 Weighte d avera ge intere st rate – c ash basis (%) 3 .1 4 3.34 Weighte d avera ge intere st rate – IFRS b asis (%) 3.27 3.4 8 Weighte d avera ge maturi t y of facilit ies (yea rs) 6.5 6.2 Weighte d avera ge maturi t y of borr owings (year s) 7. 2 6.8 Undrawn f acilitie s and c ash 608 476 Uncharged prope rtie s 4 ,769 4,329 Impa ct of j oint ven ture s 20 21 2020 Group Gr oup an d sh are o f JVs Group Gro up and sha re of J Vs Fair value of p or t folio (£ m) 5,6 46 .3 5, 696.3 5,355.5 5,355.5 Net pr oper t y an d other in come ( £m) 1 87 .5 1 87 .9 18 3 . 0 18 3 . 0 L T V rat io (% ) 21. 0 20.8 18 . 4 18 . 4 Net inte rest c over r atio (%) 463 464 446 446 95 Financ ial Stat ements Governance Strategic repor t R E P O R T ING UND E R TH E G REE N FI NAN C E F R A ME W OR K Gree n pro ject 80 Ch arlot te S tre et W1 S oho P lac e W1 The Featherstone Build ing EC 1 19-35 B aker S tre et W1 Exp ected completion date Co mplet ed in 2020 202 2 2022 2 025 Categor y for eli gibilit y Green buil ding, criterion 1 of se cti on 3. 1 of t he Fram ewor k (exclu des A st a Hous e and Charlot te Apar tme nts) Green buil ding, criteri on 1 of se cti on 3. 1 of t he Fram ewor k (exclu des Si te B - The atre) Green buil ding, criteri on 1 of se cti on 3. 1 of t he Fram ewor k Green buil ding, criteri on 1 of se cti on 3. 1 of t he Fram ewor k (exclu des re tail an d ref urbis hed residential) Impact repor ting indicator Building c er tif icati on achie ved (sys tem & rat ing ) Building c er tif icati on achie ved (sys tem & rat ing ) Building c er tif icati on achie ved (sys tem & rat ing ) Building c er tif icati on achie ved (sys tem & rat ing ) Green credentials Achieved : BREE A M – Exc elle nt EP C – B Expected: LEED – G old, o n targ et Sit e A Achieved: BREE AM – O utst anding (d esign stage ) Expected: BREE AM – O utst anding (post cons truction) , on target LEED – G old, o n targ et EP C – B, on ta rget Sit e B – Of f ic es Achieved: BREE A M – Exc elle nt (d esign stage ) Expected: BREE A M – Exc elle nt (post cons truction) , on target EP C – B, on ta rget Achieved: BREE AM – O utst anding (d esign stage ) Expected: BREE AM – O utst anding (post cons truction) , on target LEED – P latin um, on t arge t EP C – A, o n targ et Of fices Expected: BREE A M – Exc elle nt (des ign st age), on ta rget LEED – G old, o n targ et EP C – A, o n targ et Private residential Expec ted: Hom e Qual it y Mark – 4 S tar s (desi gn st age), on ta rget Der went London’ s Gre en Finance Fra mework ( the F ramework ) has bee n u pda t ed aga in t hi s year a s a re su l t of t he gr een bon d iss ua nce i n Nov em ber 2 0 2 1 . The Fram ework has b een p repare d in line with the L MA Gre en Loan P rinciples and I CMA Gre en Bon d Principles g uidance doc ument, has b een ex te rnally rev iewed and a s eco nd par t y opinion has b een ob tained. T he late st Framewor k is available on our we bsite at w ww. der wentlondon.com . In acc ordanc e with the rep or ting re quirements s et out in the Framewor k, we are disc losing the Eligible Gre en Proje cts (EGPs) that have b enef ited f rom the gre en f unding element of o ur £4 50m R CF and £35 0m gree n bonds 20 3 1 (togethe r the Gre en Financing T rans action s ( GF T s) ) and th e allocati on of drawn fund s to each proje ct. The pr ojec ts be nef iting fr om the GF T s are a s follows: FINAN CE RE VIE W CONTINUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 96 The 19-35 Baker Stre et projec t include s par t new de velopme nt andpar t re furbishm ent. Th e projec t will be ass ess ed unde r the BREE AM, LEED and H ome Qualit y Mar k stand ards where applic able. Se ctio ns of this projec t do not qualif y a s eligible exp enditure und er the Framewo rk, rel ating mainly to the ret ail andref urbishe d reside ntial element s, and th ese have b een exclude d from th e qualif ying g reen exp enditur e. Qual if ying ‘green ’ expendi ture The qu alif ying exp enditure a s at 3 1 De cemb er 202 1 for e ach projec tis set ou t in the table b elow. This include s an element of ‘look b ack ’ capit al expe nditure on liv e project s which had alre ady be en incurre d as at the or iginal refinan cing date in Octo ber 201 9. Soh o Plac e and The F eather stone B uil ding bo th comm ence d on sitein 201 9 and are due to r each prac tical c ompletio n in H 1 2022. The 19-35 Baker Stre et sch eme c ommenc ed on site in O ctob er 202 1 . Co sts incur red on th e eligible se ctions o f this develop ment prior to O ctob er 202 1 have b een inclu ded in the ‘ look-back ’ spe ndfor this proje ct as th ey occ urred p rior to the pr oject beingf ormally ele cted. Cumul ative s pend on e ach EGP as a t the rep or ting da te EGP Lo ok ba ck spend £m Subsequent spend Cumulative spend £m Q4 19 – F Y 2020 £m 2021 spend £m 80 Char lotte S tree t W 1 18 5 . 6 33. 8 17. 8 2 3 7. 2 Soh o Plac e W 1 66.3 74 . 9 62 .7 20 3.9 Th e Fea ther ston e Building EC1 2 9 .1 30.0 30.3 8 9.4 1 9 -35 Baker Str eet W1 26.5 – 5.8 32 .3 3 0 7. 5 13 8 .7 116 . 6 562.8 The c umulative qu alif ying exp enditure o n EGPs was £562.8m, with£1 1 6.6m of this be ing incurre d in 20 21 ( excluding ex pendit ure incurre d on 1 9-35 Baker S tree t prior to Oc tobe r) . The n et proc ee ds of the Bo nds were initially us ed to rep ay amounts drawn under t he Group’s revolving cre dit facili ties, inc luding the £30 0m gre en tranch e, there by refinan cing the EGPs in line wit h ourGre en Financ e Framework . 400 600 200 800 0 £m Green RCF Green bond Green expenditure Available green headroom Drawn facilities Green bor rowings and qualifying expenditure Green facilities Qualifying expenditure Drawn green borrowings 350 300 563 360 203 £290m total headroom The drawn b orrowings f rom GF T s a s at 3 1 De cemb er 202 1 were £36 0m, which inclu ded £1 0m f rom the g reen tr anche of th e RCF and the £ 350m Gr een Bo nds. T herefor e, there was £29 0m of headr oom within th e £300 m green t ranche of t he Group’ s £ 450 m revo lving cre dit facilit y as at 31 Dec ember 2021 , of which £203m isavailable gre en hea droom. A requirem ent under t he Framework an d the fac ilit y agree ment isforth ere to be an exc ess of qualif ying sp end on EGP s over the amount of drawn b orrowings f rom all GF T s whic h, as shown opp osite, has b een m et. More infor mation c an be foun d in the Resp onsibilit y Rep or t 202 1 . green finance framework http s:/ /rr .derwentlondon.com ww w .derwentlondon.com / greenfinance 97 Financ ial Stat ements Governance Strategic repor t G OING C ONC E R N & VIAB I LI T Y In acc ordanc e with the 201 8 UK C orpo rate Gover nance C ode (theC ode) , the D irecto rs and the s enior mana gement team h ave ass ess ed the p rospe cts of t he Com pany: — in th e shor t-ter m ( ove r the nex t 1 2 mo nths) as required b y the ‘Going c once rn’ provision; and — in th e medium-ter m ( a f ive -year p eriod to 31 Dec embe r 202 6) as req uired by the ‘ Viab ility s tateme nt’ pr ovision. This st atement al so cont ains refere nce s to the longer- term thre ats to the C ompany ’ s re silience. Shor t - term Under p rovision 30 of t he Co de, the B oard is require d to repo rt wheth er the bus iness is a going c onc ern. In co nsidering this requirem ent, th e Directo rs have taken into a cco unt the following: — th e Group’ s late st rolling f orec ast (including s ensitiv it y analysis) for th e nex t tw o years , in par ticular th e cash f lows, bor rowings and undrawn fa cilities; — th e headro om under th e Group’ s f inancial cov enants; and — th e risks includ ed on th e Group’ s risk re gister that c ould impac t on the Gro up ’s liquidit y and solv ency ov er the nex t 1 2month s. Our principal risks The S che dule of Principal Risk s cont ains the risks whic h are curre ntly impacting o n the Group or c ould impac t the Gro up over the nex t 1 2 m onths. T hes e risks are rou tinely subjec t to a comp rehensi ve revie w by the E xecu tive C ommit tee, Risk Co mmit tee and the B oard. C onsider ation is give n to the risk likelihoo d, impact an d veloci t y ( sp eed at w hich the risk c ould impac t on the Gro up ). It was note d that tenant leas e expiries o r break s repres ented 8% of 2022 inco me. Howev er , gi ven the leve l of headr oom, th e Board a gree d that none of t he change s in risk likelihoo d or prob abilit y during the ye ar ( se e page 10 1 ) ha d a signif icant impa ct on the G roup’ s shor t- term viabilit y. Significant financial j udgements, key assumptions ande stim ates Any key ac co unting issue s or judgeme nts are monito red and discus sed wi th the Audit C ommit tee t hrougho ut the ye ar . Th e table on pa ge 1 5 1 prov ides infor mation on th e key issue s discuss ed in 202 1 and th e judgement s adopte d. The key s ource s of estimatio n unce r taint y in the nex t 1 2 mo nths are co nsidere d to be: — Impair ment o f rec eiv ables: a rev iew of the re cei vable balan ces as at 31 De cemb er 202 1 has be en unde r taken (seenote 3 o n page 21 5). It has rev ealed a char ge of £0.8m in 202 1 for imp airment and wr ite-of fs c ompare d with £1 0. 1 m in 2020. Areas of f ocus wer e tenants at highe r risk (par t icularly inthe ret ail or hospi talit y se ctors), tenants in administrat ion orCVA , the top 69 tenant s by size and the remaining b alance s clas sifie d by se ctor . Th e metho dolog y and as sumptions use dhave be en subjec t to review by t he ex ternal Audi tors andAudit C ommit tee (se e page 1 5 1 ). — Proper t y por tfolio valuation : when dete rmining the value of our po r tfo lio, the valuer s consid er a range of as sumptions . More infor mation is pro vide d in note 3 on page 21 5 an d note 1 6 on pa ge 227 . GOING CONCE RN STA T E MEN T Having due re gard to thes e mat ters, and af te r making approp riate enquiries , the Dire ctors hav e a reaso nable exp ect ation that th e Group and C ompany have a dequate res ource s to continue in op erational ex istenc e until at least Febr uar y 2023. Theref ore, the B oard co ntinues to ado pt the going co ncer n basis in prep aring the f inancial st atements . Medium- term The D irector s challenge t he time per iod ove r which to ass ess th e Co mpany ’ s me dium-term viabilit y on an ann ual basis. T he Direc tors deter mined that th e fiv e-ye ar perio d to 3 1 De cemb er 2026 remains an approp riate perio d bas ed on the f ollowing: — f or a major sche me, fi ve year s is a reason able approximatio n of the time t aken from o btaining planning p ermissio n for a t ypic al development to letting the proper ty; — m ost leas es co ntain a fi ve-ye ar rent rev iew pat tern or b reak option s. The refore, f ive -year s allows for the f orec asts to include t he rever sion arising fr om thos e reviews while als o ass essing th e potential imp act of inc ome los t from bre aks exercis ed; and — th e weighted av erage unex pired term of b orrowings was 7 .2 year s as at 3 1 De cemb er 202 1 . As ses smen t of via bilit y The B oard’s medium-te rm ass essm ent include d caref ul con sideration of t he Group’s business m odel , strateg y an d internal con trols. T he ass essm ent highlighte d that the G roup has: — a pr oven busine ss mo del which h as allowed us to rem ain flexib le and resilient during p revio us prope rt y c ycles , perio ds of signif icant unc er taint y and th e rec ent Cov id- 19 pandemic; — a high qual it y custome r base of ten ants, with n one of our oc cupiers b eing resp onsible for m ore than 9.0% of total re ntal inco me and rel atively low ex posure to th e higher risk r etail and res taurant se ctor s; — a k nown level of te nant lease ex piries and br eaks which is being ac tive ly manage d by our As set Mana gement te am ; — re asonab le income v isibilit y for the lif e of our lease s which on avera ge are 7 .8 year s (including rent- free s and pre -lets) with upward only or c ontrac ted rent r eviews; — a high er than usual am ount of new spa ce being d elivere d fro m 2022 to 20 26 as dev elopment s and ref urbishment s complete which c ould cause v oid levels to inc rease; — a s treng the ned f inancial po sition. In 2021 , we raise d £350 m via a senior un secure d gre en bond f or a term of 1 0 ye ars. A s at 3 1 De cemb er 202 1 , the Gro up had £608m of un drawn facilitie s and c ash (20 20: £47 6m); — s trong rel ationships wit h our debt pro vider s. During 2021 , we ex tende d our t wo Revolv ing Credit Facili ties for a f ur ther ye ar to 2026 ; and — a low loan -to-value r atio of 20.8%. In addition , the busine ss mo del and st rateg y were st ress te sted against var ious sc enarios an d other s ensitiv ities . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 98 Sensitivit y analysis of ou r strateg y A det ail e d fiv e-ye ar strategic r eview was c onduc ted which con siders th e Group’ s c ash flows , dividen d cove r , REIT c omplianc e and oth er key finan cial ratios ove r the pe riod. T hese m etric s were subjec ted to sens itivi ty an alysis to ass ess th e Group’ s abilit y to deli ver its s trategic obje ctiv es. Qualifications and assumptions The ke y assumptio ns which under pin our strateg ic plan are: — th e Group’ s busin ess m odel rem ains broadly unch anged and con tinues to fo cus on the c entral Lo ndon of f ice market; — we c ontinue to op erate a progr essi ve divide nd polic y whilst targe ting divide nd cov er in or above t he range of 1 25% to1 5 0%; — o ur por t folio rem ains approximately th e same size, at 5.57 m sq f t (202 0: 5.56m s q f t); and — we will re cyc le capital b y selling buildings when we h ave ma ximise d their poten tial, or the y no longer me et our inves tment cr iteria, an d purchasing b uild ings wher e there isadeve lopment op por tunit y to rep lenish our pipelin e. We have the abilit y to f lex our busine ss mo del to reac t to unfores een circums tanc es or change s in the prop er t y cyc le by either s elling a prop er t y to generate ad ditional c ash flow, or co mmencing or stopping d evelopm ent projec ts to mana ge our capit al expe nditure. Regul ar financ ial forec asting en ables us to ident if y and plan f or addi tiona l fun ding re quirem ents in adva nce . St res s tes ting ou r risk re silien ce The D irector s stre ss tes ted our str ateg y against var ious sc enarios to determin e whethe r they were likely to hav e a signific ant impac t on the Gr oup’ s solve ncy and li quidit y over the f ive -year re view per iod. Th e six sc enarios a sses se d were: — a ‘b ase c ase’ sce nario which was man ageme nt’s bes t est imateof market and bu siness c hanges; — a ‘downside’ s cenari o which showe d a more ne gative outlo okon prop er t y values , longer void an d rent-fr ee per iodsand p oorer r ent colle ction r ates; and — a f ur ther fo ur scenar ios bas ed on dif f erent busine ss cas esinresp ec t to the sale and p urchase of p otential proper ties, hi gher inflation, future d ividend payments andref inancing ac tivit ies. The D irector s’ asse ssme nt consid ered th e uncer t ainty s urrounding the duratio n of the Co vid- 1 9 p andemic an d its me dium- and longer -term impac ts on th e global e conomy, our busine ss and stake holders . As par t of o ur scen arios and f orec asting , the Direc tors c onsidere d the c ost of ren t-fre e conc ess ions of fere d to oc cupiers , its ac counting implic ations an d potential def ault and impairme nt provisio ns, as well a s additional p otential vac ancies . The m odelling in dicated t hat under all sc enario s the Group wo uld still b e able to execu te its strate gic plan ov er the nex t f ive ye ars witho ut breac hing any cove nants or exp erien cing any liquidit y con cern s. As at 31 Dec embe r 202 1, the value of the po r tf olio could fall by 6 3% without b reaching th e gearing c ovenants an d our prop er t y incom e could fall b y 69% befo re breaching th e interest cover covenant. For f ur ther infor mation se e the follow ing disclosure s: Debt and financing pages 94 an d 95 Supp ly cha in risks page 1 07 Business continuity and cyber securit y page s 1 62 and 1 63 Principal risks The D irector s identif ied t hat, of the pr incipal risks d etailed on pag es 1 08 to 1 1 9, the f ollowing are the mo st impo r tant to the ass essm ent of the Gr oup’ s abilit y to cont inue to operate an d me etits f inancial liabilities a s they fall du e in the medium- term: — Inc ome de cline: Bas ed on our fo rec asts, o ur incom e would nee d to dec line by 69% be fore we were at r isk of breaching ourf inancial cov enants. W hen subjec ted to a 1 5% fal l in bothr ental inc ome and pro per t y value s our interest c over remaine d above 30 0% and our lo an-to-value r atio below 4 0%, both o f which are comf or tably wit hin our financial c ovenant s. — Our r esilie nce to c limate c hange: rising glo bal temper atures are a major risk f actor for o ur busines s and the p lanet, incre asing the likeliho od of heat waves , flo oding and prop er t y damage . Althoug h climate change will lead to an in crease in co sts as we t ake action to c ombat it s impact on o ur busines s (bot h in monet ar y terms and man ageme nt time) , it would b e unlikely to af fec t the viabili ty of t he Group within th e fiv e-ye ar revi ew perio d. The G roup is commi tte d to being ne t zero car bon by 2030. The D irector s consi dered t hat none of th e individual pr incipal riskswo uld in isolation c ompromis e the Group’s viabilit y over th e fi ve-y ear per iod to 31 Dece mber 2026. Emerging ris ks The G roup’ s eme rging risks are disc lose d on page s 1 0 4 to 1 05 . Emerg ing risks involve a high d egre e of uncer t ainty an d are there fore fac tored into th e Board ’ s me dium-term viabilit y ass essm ent and the lo ng-term sus tainabilit y of the G roup. Them etho dolog y use d to review an d identif y emer ging risks is onpa ge 1 6 4. The D irector s consi dered t hat none of th e individual em erging riskswo uld in isolation c ompromis e the Group’s viabilit y over thef ive -year p eriod to 31 Dec embe r 202 6. VIABI LITY ST A TEME NT Bas ed on the B oard’s asse ssme nt, the Dire ctor s have a reas onable exp ect ation that th e Comp any will be able to con tinue in operati on and me et its liabilitie s as they f all due overth e fiv e-ye ar perio d to 3 1 De cemb er 2026. Long-term The B oard c onsidere d a number of lon ger-ter m factor s (which could imp act on th e Comp any and its bu siness m odel in th e nex tf ive to 1 0 year s) and how thes e were be ing addres sed (see page 1 50) : — a gile working , the role of the of fic e and the war f or talent (seepa ge 1 5); — th e nature of Lon don’ s of fic e cyc le ( se e page 1 5); — cl imate change risk an d oppor t unities as we c arr y out o ur plans to r each net zer o carb on by 2030 (see p ages 6 8 to 73 ); — ch anges in tec hnolog y and ten ant expe ctat ions; and — inc rease d availabilit y of long-ter m funding: af ter t he ref inancing comp leted in rec ent ye ars, the w eighted avera geunexpire d term of our bo rrowings was 7 .2 ye ars asat31 Dec ember 2021 . Fur ther infor mation on ho w the Bo ard promote s the long-ter m sust ainable succ es s of Der went Lo ndon is on pa ge 1 30. 99 Financ ial Stat ements Governance Strategic repor t OUR PR I N CIP A L R ISKS W e res pon ded t o the Co vid - 1 9 pan dem ic w ith p roa ctiv e ri sk m it ig at io n, a s wel l as early and c ontinua l engagement with our stakehol ders . The risk p rofile of t he Group As a pr edominantly L ondon-b ased G roup, we are par ticul arly sensi tive to fac tors th at impact up on cent ral London’s grow th and deman d for of fi ce spac e. We provid e informatio n on the ce ntral Lond on of fic e market on p ages 1 4 to 1 7 . Any de cline in the d emand for L ondon of f ice sp ace, or a sig nific ant incre ase in supply, could negati vely impac t upon: — th e value of our prop er t y por t folio; — o ccup ancy rates an d, subse quently, our incom e ; and — availab ilit y of proper t ies for ac quisition and t he ease of dispo sal and ref inancing. During th e sec ond half of 202 1 , as the G overnm ent com pleted it s roadmap to e ase loc kdown rest rictio ns, Lond on’ s b usines s conf iden ce and the wi der ec onomy s tar ted to reb ound. Indiv iduals and busin ess es are st ar ting to adapt to ‘liv ing with Co vid- 1 9’ wi th assis tanc e from th e vaccinatio n and bo oster pro gramme s. The e mergen ce of the n ew Omicron v ariant of Cov id- 19 i n ear ly De cemb er , le d to the implemen tation of ‘P lan B’ res tric tions which were late r lif ted f rom 26 Januar y 2022. W ith the les sening of res tricti ons and the su cce ssf ul vaccin ation progr amme, the outlo ok for th e UK econ omy is look ing more po sitive . Ef fe ct o f mitig ation a cti ons on o ur prin cipa l risk s Zero High High Pr ob abi lit y Impact on the Group Gross risk basis Net risk basis (post mitigation) 4c 4b 4a 6 2 3 8a 8b 5c 7 1 5a 5b 6 5c 4b 4c 8b 8a 5b 5a 4a 7 2 3 1 1 Failure to implem ent th e Gro up’ sstr ateg y 2 Risk of tenant s defaulting or tenantfailure 3 Income decli ne 4a Reduced development returns 4b ‘O n-site ’ risk 4c C ontractor /su bc ontractor defau lt 5a C yb er at tack on o ur IT sys tems 5b C ybe r at tac k on o ur buildings 5c Signif icant bus iness inter ruption 6 Reput ational damage 7 Our res ilience to climate c hange 8a Non- complian ce with h ealth and safe tyle gislation 8b Other regula tor y non-compl iance De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 10 0 Aris ing from the up turn in the e conomy, the new c hallenges f acing the Gro up and the wide r eco nomy are, mater ial and labo ur shor t ages an d inflatio n. Ov erall, our ris k profile remains e levated but is ex pec ted to slowly s tabilise to pre -C ovid lev els during 2022. During 2021 , we f urt her stre ng thene d our finan cial posi tion throug h the raising of ad ditional f unds (see infor mation on our ne w ‘Green Bon d’ on page s 1 3, 96 an d 9 7) an d the renewal of o ur Revolv ing Cre dit Facilities (R CFs) for an addition al year . O ur strong f inancial po sition and pr oacti ve stake holder- focus ed appr oach will hel p us to weath er the curr ent uncer t aint y . Dem and for of f ice buildings remains p olaris ed. Well-de signed, ener g y ef ficie nt, amenit y r ich, mo dern buildings with adapt able flo or plans an d good f loor -to-c eiling height s are proving m ore desirab le and easier to lea se than olde r , les s attr activ e buildings which may re quire refurb ishment. W ithou t additional c apital exp enditure to impro ve energ y ef fic iency, our abilit y to lease c er tain prop er ties in our p or tf olio co uld be impac ted. Delivering net z ero carbon buildings page 2 2 Qualif y ing ‘green’ exp enditure page 96 Changes to o ur principal risks The p rincipal risk s and unce r tainties fa cing the Group in 2022 are set o ut on pag es 1 08 to 1 19 t oge ther with t he poten tial impact and the mitigating a ctions an d contro ls in plac e. We define a p rincipal risk as on e that is curre ntly impact ing on the Group or c ould impac t the Gro up over the n ex t 1 2 m onths. During th e year unde r review, there h as be en the following c hanges to our princ ipal risks: — Implications of Brexit: We are now cl assif y ing Brexit a s a gene ral busines s risk rath er than a st andalone prin cipal risk and it ha s been in corp orated into ‘Failure to implem ent the Group’s strateg y ’ as a fac tor which co uld impact on L ondon. — Intr oduc tion o f a new t ax t o repl ac e or comp lemen t busine ss rates: The likelih ood of a n ew ta x being intro duce d to repl ace or co mplement b usiness r ates, which wo uld negativ ely impact on lan dlords, is now de eme d less likely and h as bee n dec lassi fied f rom ‘princip al’ . T his risk is now be ing manage d on the Gro up Risk Register. Risk toleranc e Like any busine ss, we f ace a numb er of risks and un cer taintie s. Th eGroup’ s risk to lerance is s et by the B oard and is th e level of risk we are willing to acc ept to achiev e our strateg ic object ives . Our overall r isk toleranc e is low and is con tained in our Risk A ppe tite St atement (see t he table b elow for an ov er view of this s tatemen t). Thistoleranc e, alongside our culture , informs how o ur staf f re spond to r isk. D ue to our open and c ollabo rative wor king st yle, any p otential pro blem, risk or is sue is iden tifie d quickly so app ropriate ac tion can b e taken. Categor y Risk toler ance Operational Op eratio nal risks in clude he alth and s afet y risk s, con tinuit y of the I T sys tem and re tention of t he senio r manage ment te am. Health a nd safe t y Zero IT c ontinui t y Low St af f retent ion M edium Climate c hange re silienc e Low Othe r operational risks Me dium Financial Ot her than m arket- drive n movem ents th at are bey ond th e Group’s immediate con trol, t he Group wil l not gene rally ac cept r isks whe re it is pro bable that : — As set valu es dec line by mo re than £1 00m f rom th e Group’s annual budget . — EPR A prof it be fore ta x de viates b y more th an £5m fr om the Gro up’ s annualb udget. — Co st ove rruns o ccur o n capit al proje cts of m ore than 5% of th e approv ed cap ex budget. — Th e Group’s interes t cov er ratio will f all to within 20% of t he level s et in the Group’ s borrowing covenants. It is re cog nised t hat inhere nt market r isk may res ult in thes e finan cial toleran ces , in par tic ular the a sset s limit, b eing exce ed ed. Th e Boar d acc epts this mar ket risk bu t see ks to mana ge and mitiga te its impa ct whe re pos sible. REIT s tat us Low Co rpor ate credi t rating Low De crea se in ass et value (>£1 00 m) Me dium Profits (£5m) Medium Co st ove rruns (>5%) Me dium Interest cover ( <20% ) Medium Reputational The G roup has a low to leranc e for ris k in conne cti on with re puta tional ris k. In par tic ular , this lev el of risk to leranc e relate s toany acti on that c ould adv erse ly af fe ct the D er went Lo ndon br and. Brand value Low Regulator y T he Gro up’ s toleran ce for r egul ator y risk ar ising from s tatu te ortheUK Co rpor ate Gove rnanc e Co de and f rom adhe renc e to ‘bes tprac tice’ g uides . St atutor y Zer o Governance Low Ze ro: Zero t olera nce t o risk- tak ing Low: Not w illin g to take a ny sign ifi cant r isks Medium: Will ing to t ake mea sure d ris ks if th ey ar e iden tif ied, a ss ess ed an d co ntro lled Hig h: W illin g to take s igni fic ant r isks 101 Financ ial Stat ements Governance Strategic repor t OUR PRINCIP A L RISKS CO NT IN UED Risk management Our risk m anageme nt proc edures ar e regular ly reviewe d and stre ng thene d to ensure that all f orese eable and e merging r isks are identi fied , unders tood an d manage d. Our risk mana gement fram ework is on p age 1 64 and f ur ther infor mation on em erging risks is on p ages 104 and 1 05. In addition to o ur usual review p roce ss, dur ing 202 1, a detailed revi ew of our Sch edule of Princ ipal Risks, S chedule of Em erging Risks and Gr oup Risk Regis ter was per fo rmed wi th input fr om Slaugh ter and May LLP as we p repare d our pros pec tus for th e launch of o ur new gre en bon d ( se e page s 1 3, 96 an d 9 7). This rev iew resulte d in only minor amendm ents to our ris k register s, which prov ided f ur ther as surance t hat our risk do cument ation is thoro ugh and trans parent. In ad dition, the B oard implem ented an assur ance fr amework f or each p rincipal risk to de termine how e ach con trol is manag ed, ove rsee n and indep endent ly verif ied. Additi onal risk management discl osures: Fraud r isk as ses sme nt page 1 55 Fir e risk ma nage ment page 1 61 Water h ygiene management pag e 1 61 C yber and information security page 1 62 Bus ines s cont inuit y and di sas ter r ecov er y page 1 63 Anti-briber y and corruption page 1 65 Human rights and modern slaver y pag e 1 67 Der went London brand The D er went Lon don brand is we ll-regarded an d respe cte d within our indus tr y and we are re cognis ed for inno vation and de veloping desig n-led buildings. We demo nstrate our br and and value s throug h our ex ternal me mbers hips and ass ociation s. For examp le, we are foun ding suppor ter s of Real Est ate Balanc e, memb ers of the UK Gre en Building Coun cil, Mayor of Lon don’ s Busine ss Climate Lead ers and th e Bet ter Buildings Par tner ship. We are also signe d up to RE 1 0 0 to demon strate our c ommitme nt to 1 0 0% renewab le ener g y in our buildings. Fur ther in 202 1 , we be came f ounding memb ers of th e Acade my of Real A sset s ( se e page 62). In 202 1 , we w ere listed in Man agemen t T oday ’s ‘Britain’s Most Admired C ompanie s’ , a p eer -review s tudy of c orp orate reput ation, and achie ved th e National Equalit y St andard ac credit ation. T he prote ction of o ur brand and rep utatio n is impor tant to th e fut ure suc ces s of the Group an d is consid ered a pr incipal risk . We detail on pa ge 1 1 6 the ac tions we are t aking to prote ct our rep utation . C yber securit y and ransomware The Nat ional C ybe r Sec urit y Ce ntre identi fied r ansomware as th e mos t immediate thre at to UK busines ses . A focus are a for 2022 will be a de tailed rev iew of our ‘incide nt resp onse pl aybo oks’ and the updating of o ur Busines s Continuit y P lan to inco rporate ranso mware as a legitimate s cenario f or disaste r reco ver y. During Q1 20 22, an indep enden t review of o ur contro ls in resp ect to ranso mware will be co nducte d and we will aim to implement any arising re comme ndations during 2022. Our cy ber s ecuri t y proce sse s are regul arly indep enden tly reviewe d, with any re comm endations f or fur the r streng th ening of our proc es ses implem ented. D uring 202 1 , I T Gover nance p er form ed an indep endent c yb er sec urit y health c heck an d vulner abilit y scan (p enetrati on test ) and RSM pe r forme d an IT C ontrols audi t. Our C yb er Esse ntials acc redit ation was rene wed in 202 1 , having p asse d an ex ternal s ecuri ty s can of all inter net-fa cing ser vi ces and an ass essm ent of techni cal and op erational c ontrol s. We also of fe r all our employe es reg ular cy ber se curit y tr aining. During 2021 , we prom oted C yb ers ecurit y Aware ness M onth and stimulate d phishing at tack s ( se e pag e 1 62). Risk documentation and monitoring Schedule of Principal Ris ks C ontain s the risk s which are c lassi fie d as the Gr oup’ s main ris ks which are c urrent ly impac ting on the Gr oup or co uld impac t the Gro up over th e nex t 1 2 mo nths (see p age s 1 0 8 to 1 1 9). The S che dule of Prin cipal Risks in clude s an assur ance f ramewo rk to evi denc e how eac h cont rol is mana ged, o vers een and ind epen dently v erif ied. A s at 31 Dec ember 2021 , t he Sc hedule of P rincipa l Risks co ntains 1 3 risk s. Schedule of Emer gingR isks Co ntains th e internal an d ex ternal e mergin g risks th at could sig nific antly imp act th e Group’s financ ial str eng th, c ompet itive p osi tion or rep utat ion within th e nex t fi ve- year s. Emerg ing risks inv olve a high deg ree of unc er taint y. As at 31 De cemb er 2021 , the S che dule of Emer ging Risks c ontains nin e risks (see p ages 104 and 1 05). Gr oup Risk Re gis ter Pr ovide s a high leve l over v iew of the ke y risks whic h could imp act on t he Group (exclu ding thos e cla ssif ied as ‘p rincipal r isks’). A s at 3 1 De ce mber 2021 , th e Group Ris k Registe r cont ains 34 risk s. Key risk indicators The Ris k Commi tte e has ide ntif ied ris k areas whic h could in dicate an inc rease in t he Group’s risk pr ofile. Th ese indic ators a re revie wed at e ach Risk C ommit tee m eet ing and are c ompare d agains t the Bo ard’s risk to leranc e frame work (se e page 10 1 ). Any dev iance o r signif icant in creas e are subjec t to challe nge by the R isk Com mit tee. T he risk indi cator c ontains 16 risk areas in cluding c ybe r sec urit y , c ost inf latio n, proje ct st atus, da ta prote ctio n, and he alth and s afet y incid ents etc . Functional/departm ental risk regis ters Risk re gister s are maintain ed at a dep ar tmen tal /f unctio nal level to e nsure de tailed m onitoring o f risk s, where n ec ess ar y . T hese r egiste rs are th e resp onsibilit y of e ach dep ar tment a nd are pe riodic ally rev iewed b y the Risk C ommit te e during risk-sp eci fic pre sent ations . E xamples of t hes e registe r are the de velop ment ris k regis ters for e ach building p roject , the ‘ tenan t on watch’ regis ter and th e ‘Home work ing and C ovid-1 9 rel ated I T risks’ re gister . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 102 Climate change Climate chang e is a major global challe nge and will impac t how busine ss op erates in the f uture. Gi ven that th e built environme nt con tributes sig nific antly to the UK ’ s over all carb on foot print, we must f ind the s olutions to f ur ther re duce emis sions and de velop renewab le energ y s ources . Since o ur scienc e-ba sed t argets wer e first v erif ied in 201 9, by the Scie nce -Base d T arget ini tiative (SBTi), we have b een wor king towards achie ving net zero c arbo n. In 2020, we bec ame the f irst UK prop er t y comp any to releas e a det ail e d pathway to net zero c arb on, aligne d to the Bet ter B uild ings Par tne rship (BBP) Net Zero C arbon P athway Framework (se e pag e 1 2). Working towards a chieving ne t zero carb on is aligne d to our reward p rogramme, t hrough the a ddition of climate -relate d targe ts in the Dire ctors’ annual b onus tar gets (see p age 1 8 4) . Our p athway to n et zer o car bon page 1 2 Climate chang e governance pag e 65 Our SEC R discl osur e page 7 4 Climate change risks We identif y and moni tor climate change r isks as par t of our wid er risk mana gement p roce dures whic h are overs een by th e Board an d its pr incipal co mmit tees (see p ages 160 and 1 6 4) . The r isks po sed by c limate change are as ses sed in re spe ct to their impac t in the shor t- term (within the nex t f ive ye ars) , me dium-term (fiv e to 1 0 ye ars) and long-term (1 5+ ye ars) . Climate chan ge risks are also f actore d into the Bo ard’s viabilit y asse ssme nt and strate gic planning pro ce ss which b oth span a f ive -year pe riod (se e page 9 8) . Physic al risks T ran sition risks — H eat st res s — S ubsiden ce — C oa stal f loo ding & s ea lev el ris e — F loodin g — S torms — Infrastr ucture For more on cli mate-r elated risk page 7 2 — P ricin g of GHG em issi ons — Energ y Performance Certificate rating requirements — Emissions off sets — P lanning approval change s — Climate change l itigation — Enhance d em issions repor ting obligations — Change in customer demands — C os t of deb t — In cre ase d cos t of raw m ateri als — Investment risk T o b et ter under stand an d plan for t he risks p ose d by climate change we h ave commis sione d various st udies and re views. In 2020, we under took a m ulti-scenar io climate risk as ses sment (the res ults of which are in our TCFD disc losures on p age 71 ). This as ses sment highlig hted that th e most sig nific ant /finan cially co stly transi tion risk to the G roup was the pr opos ed chang es to ener g y per for mance c er tif icates (EP Cs) from 20 30. In respon se, during 202 1 , we co mmissione d a feasibili ty an d cos t repor t o n our por t fol io to determine th e potential imp act on th e Group and to assis t us in developing o ur strateg y f or achieving an EP C grad e B by 2030. Fur ther inf ormation o n the outc ome of this rep or t is on page 55. Climate change oppor tunities The m ain oppor tunit y f rom climate chan ge will arise fr om our abilit y to adapt and re spon d to the risks ap propriately, so that we do n ot have to dev iate from our b usines s model an d can c ontinue to deli ver sust ainable long-term v alue to our stakeh olders . We believe that pro per t y por t fo lios that are ab le to meet climate -relate d challenge s will remain at trac tive to oc cupier s and investo rs, and in goo d demand. Other oppor tunities i nclude: — S ho r t-te rm: – Energ y ef f icient ‘gre en’ buildings with bet ter EP Cs c ould be let more quic kly , comm and higher re nts and enjoy lower tenant turnover . – Working clo sely with ten ants to manag e building eff icien cy should lea d to closer l andlord/ tenant relati onships. D uring 202 1 , we con ducte d an occ upier net zero c arbon s ur vey so that we c an assist o ur occ upiers with t heir own climate change ambi tions. — M ed iu m-t er m: – Regen erating buildings is at the he ar t of our busines s and prov ides the G roup with signif ican t oppor t unities to lead the se ctor in t aking acti on to mitigate and adapt to clim ate change. – 80 Charlot te S tree t W 1 was our f irst all e lectr ic building and net zero c arbo n develop ment. T o re duce our ex posure to the impa cts of climate c hange, all of our cur rent and f uture deve lopment s are being built to be n et zero car bon, including the F eather stone B uild ing EC1 and 1 9-35 Baker S t r e e t W 1. — L on g-t e rm: – The avail abilit y of buildings which bec ome s trande d be cause of p hysical r isk impact s, co uld provide us wi th acquisi tion oppo r tunities at lower c ost s. – Invest ing in the overall e nerg y ef f icienc y of our buildings also impr oves as set value by re ducing our mainten ance co sts and ex ten ds a building’s life. Fur ther infor mation on th e climate-re lated opp or tunitie s we have identi fied o ver the sh or t-, medium- and long- term is on pa ge 69. We continue to r esear ch and ass ess t he oppo r tunities fo r renewab le energ y ge neration on o ur Scot tis h land. In 201 5, we plante d 1 07 acr es under th e Woodlan d Carb on Co de which, to date, has deli vere d carb on cre dits equiv alent to 1 27 TCO 2 e (see pa ge 1 3). In 202 1 , we s ubmit ted a pl anning applicati on for dev elopment o f an 1 8.4 M egaW at t sol ar park on our S cot tish l and which co uld gene rate c.43% of th e elect ricit y use d acro ss our mana ged por t fol io ( se e page 1 3). Our key ac tio ns durin g 202 1 : Oc cupie r sur vey on t heir c arbo n aspir atio ns page 1 3 Sus ta inabili ty in itiat ives in S cot lan d page 1 3 Net z ero: 202 1 pr ogre ss page 5 2 Our jo urney t o COP 26 pag e 54 Ener g y per f orma nce - lo oking t o the fu ture page 55 Green Finance Framew ork pag es 1 3, 96 an d 97 Audit C ommi tte e tra ining on E SG as sura nce page 1 48 10 3 Financ ial Stat ements Governance Strategic repor t OUR PRINCIP A L RISKS CO NT IN UED Emerging ri sks We defin e an ‘emerging risk ’ as a c ondition, si tuation or tr end that c ould signifi cantly impac t the Gro up’ s f inancial s treng th, c ompeti tive po sition or rep utatio n within the nex t f ive -year s. Emerging r isks involve a high d egree of un cer taint y an d are theref ore fac tored into the Boar d’ s viabilit y as ses sment an d strateg ic planning pro ces s. During t he year unde r review, the Dire ctor s identif ied an ad ditional eme rging risk (‘ The r ising cos t of obtaining pl anning permis sion’) and wid ened ‘ Th e impor tanc e of ESG-re lated c once rns to our key st akeholder s’ to include b oth enviro nmental an d socie tal con cern s. The m etho dolog y use d to review an d identif y emer ging risks is on p age 1 6 4. Strategic: Risk Potential impact Our actions A . The f utur e of of f ice s Th e Cov id- 19 pand emic , and t he as so ciat ed lockdown restrictions, has led to widespread ag ile an d home wor king f or s ome of t he UK ’s of f ice -ba sed w ork fo rc e. As a r esu lt, t he fu tur erol e of of f ice s has b ee n subje c t to considerable discussion among both landlords and occupiers, and more widely inth e med ia. In the e ven t agile an d/or hom ewor king c onti nues a t high lev els, a nd is su stain ed in t he long- term , it c ould lea d to occupiers re qui ring less space, increase d vacant space and d ownwar d pre ssure o n rent al lev els . In addit ion, of f ice sp ace w hich ha s fewe r des ks, mo re co llab orat ion space, mee ting rooms , video conference facilities and oth er ame nitie s is like ly to be m ore de sirab le to oc cupi ers . Buildings t hat are u nable to m eet t hes e obje cti ves m ay suf f er in valu e unles s the y can b e redeveloped or repurpose d. Stra tegic objectives 1. 2. 4. We will c ontin ue to de sign an d deli ver s pac e tha t busin ess es wan t to oc cupy. Co mpani es sti ll nee d to br ing the ir st af f toget her, for the collaboration that social i nteraction brings, t o build c ulture , to at trac t and r etain t alent a nd to have a p hysi cal e mbo dimen t of their b rand . B. Lo ng-term i mplic atio ns of C ovid- 1 9 on o ur por t fo lio Th e ex ten t of th e lon g-ter m impa ct of t he Co vid-1 9 p and emic o n the G rou p will de pen d on ex t ern al fa ct ors w hich a re ou ts ide th e Group’ s control, including, for example, if preventati ve measures bec ome l ess ef fecti ve aga ins t any ne w var iant s of C ov id- 19 whic h may b e ide nti fie d. Th ere is a r isk of ne w varian ts lea ding to th e re- intr oduc tio n of so ciet al res tric tio ns in the U K, whi ch co uld have a s ignif ic ant imp act on t he Gr oup’s busin ess , its occupiers and the economic outlook for London. Stra tegic objectives 2. 3. 4. 5. As p ar t of our p lannin g and de sign o f new dev elop ment s, we ar e foc use d on ‘lo ng-lif e loo se -fi t’ ad apta ble sp ace s and we llne ss fac tor s that c an ena ble pe ople t o mee t toget her in lar ger c ommo n area s, wit h highe r ceil ings and b et ter air q ualit y an d natur al vent ilati on. C. Po litic al ri sk aris ing fr om gove rnme nt re spo nse to i ssue s In th e pas t co uple o f yea rs, t he Go ver nme nt has introduced various restrictions to protect the N HS and r edu ce C ovi d- 19 tra nsmi ssi on. On 21 Feb rua r y 2022, th e Gov ernm ent o utl ine d it s ‘li vin g wit h Cov id’ p lan w hich c ould e nd al l of th e re maini ng leg al re str ic tion s. Th e acti ons t aken by t he Go vern ment h as invo lved a sign ifi cant a mount o f publi c fun ds. G over nmen t bo rrowi ng has in crea sed a nd th e impac t of high er ta xe s co uld have a n adv ers e ef fec t on th e ec ono my for m any years. Stra tegic objectives 2. 5. We will c ontin ue to mo nitor t he sit uatio n to as ses s the li kely imp act on j obs in L ondo n and the refo re the r isk of a c ycli cal a djustm ent to ren ts. We ar e supp or ting t hos e tenan ts mo st in ne ed whil e ex tendin g leas es wh ere thi s can b e ag ree d with a f ocu s on minimis ing voi ds and protecting value. D. The r ising c os t of obt ainin g plan ning pe rmis sion (new e mer ging r isk) The length of time from a pplication to approval, the need for more af fordable ho using o r of f ice s as a co ndi tion o f pl annin g, and t he as so cia ted c os ts , are al l fac to rs. I n addition, tighter regulation is being i ntro duced whi ch is or ien ta ted t owar ds su st aina ble development and is instigating chang es to the planning process and approval criteria which wil l have a m ater ial im pac t on o ur development pipeline and st anding investment por tfolio. Th e rising c os t and ch allen ge of obt aining p lannin g pe rmis sion c ould ha ve an imp act on t he Gr oup’s abilit y to rea lise i ts dev elop ment a mbiti ons an d coul d resul t in inc reas ed c apit al exp endi ture du ring th e earl y sta ges o f development planning, resulting in lower development returns. Stra tegic objectives 1. 2. 4. We liais e with e ach L ondo n auth orit y to und ers tand t heir n ee ds with t he aim of b uilding a par t ner ship and p rovi ding valu e to loc al co mmunit ies –f or exa mple v ia our C ommuni t y Fund , comm unit y init iativ es an d loc al employment opportunities et c. E. Dim inished development pipeline As w e com plet e our d evel opm ent p ipel ine, and i n the ab se nce o f any f ur the r acq uisi tion s or di spo sal s, th e Gro up’s por t f olio b ala nce co uld be co me mo re he avi ly weig hte d tow ard s ‘co re in com e’ and aw ay fr om dev elo pme nt oppor tunities. Thr ough o ur dev elop ment p rojec ts we g ener ate valu e and hi gher r ates of r etur n than f rom ou r ‘cor e inco me’ pro per ti es. I f our de velop men t pipe line st ar ted t o diminis h, our re turn s are like ly to fall w hich c ould imp ac t on ou r abilit y to m aintai n a prog res sive di vid end p olic y for our sha reholders. Stra tegic objectives 1. 2. We co ntinue t o foc us on re cy cling c apit al, selling proper ties with limit ed f uture potential and acquiring propertie s with fu ture regeneration opport un ities in order t o maintain a bal anc ed p or tf olio . Dur ing the y ear un der re view, we h ave inv este d in rep lenish ing our pi pelin e thro ugh s trate gic ac quisit ions (se e pa ges 20 an d 21 ). De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 10 4 Opera tional: Risk Potential impact Our actions F . In cre asing imp or t anc e of ame nitie s Th e pro vis ion of a men itie s and h osp it alit y i n buildings is be coming in creas ingly impor t ant to tenants. Th e Group n ee ds to en sure it i s adeq uately r esp ondin g to the se de mand s, so o ur pro duc t remain s at trac tiv e to tenants, t hereby retaini ng its competitive edge. This risk is dire ct ly rela ted to an oth er eme rging r isk – ‘ Th e fut ure of of fices’. Stra tegic objectives 1. 2. 4. We co ntinue t o rev iew opp or tuni tie s within t he po rt f olio to e nhanc e our am enit y of f ering . In Oc tob er 2021 , we lau nche d DL / 78 at 80 Cha rlot te S tree t W1 . Loc ate d at the h ear t of o ur Fit zro via vi llag e it is a pu rpo se built o cc upier facilit y providing drop-in space and ref res hmen ts, as w ell as t he opp or tuni t y to hire meeting rooms and event space ranging in ca paci ty f rom 8 to 100+ p er sons . We have b ee n enc our age d by the p osi tiv e resp ons e to this init iativ e fro m our oc cupi ers . G. Adoption of technology With technology in the sector advancing at a ra pid p ace t he Gr oup ne ed s to en sure i t is embracing these changes suff iciently whilst making sure that the Group ’s strategy is dri vin g whic h tec hno log y is a dop ted a nd no t be ing dr ive n by the t ech nol og y it sel f . A failu re to ado pt tec hnolo g y cou ld lead to t he Gro up be co ming les s ef fi cien t than it s co mpet itor s, lea ding to a los s of co mpe titi ve ad vanta ge. Buildings ar e increa singly b eco ming ‘intel ligent ’ and tena nts may b egi n to cho ose s uch b uildings ov er th ose wit hou t the sa me tec hno logic al ame nitie s. If t he Gro up fail s to res pon d to tenan t dema nds fo r tec hnolo g y , th e Gro up’s off ic e spac es c ould b ec ome le ss de sirab le, lea ding to po tenti al vac ancie s and lo ss of r enta l inco me. Stra tegic objectives 1. 2. We have a D igit al St rateg y w hich is b eing imple men ted by o ur ded icate d, cr oss -fu nct ion and hi ghly c olla bora tive D igit al, Inn ovat ion & T ec hnolo g y team . We crit ical ly analy se ne w tec hnol og y to ens ure tha t ma ximum va lue ca n be d eriv ed f rom any n ew sy stem o r ser v ice t hat we ch oos e to add in to our ov eral l digit al and tec hnol ogic al fr amewo rk . In par tic ular, analy sing t he cap abili t y of the n ew sy stem or se r vic e to supp or t our Ne t Zero C arb on Pathway. Dur ing 2021 , we lau nche d th e DL / App w hich of fe rs a cur ated c olle cti on of fe ature s and be nef its f or our of f ic e occ upier s incl uding ea sy bo okin gs and ac ce ss to inf orm ation a bou t ro oms, e vent s and ot her b ene fit s at DL / 78. H. Th e impor t anc e of ES G-rel ate d con cer ns to o ur key st akeh older s (p rev iousl y , ‘Env ironm ent al is sues m oving u p the so cial a gend a’) Environmental, social a nd governance concerns (including, climate change and div er sit y an d incl usio n) is imp or t ant t o Derwent London, our stakeholders a nd the general publi c. If we d o not gi ve suf f ici ent pr iori ty t o the se iss ues , and fail to a ct as a r esp onsib le cor por ate ent it y, we will be unpr epar ed fo r the ri sks an d opp or tunit ies ar ising an d it will , in turn , adve rse ly impa ct on o ur busi nes s and reputation. Stra tegic objectives 2. 3. 4. We re cog nise th e impo r tanc e of cle ar communication and proactive engagem ent wit h all of our s take hold ers . Durin g 2021 : — We h ost ed our f irs t St akeho lder D ay (see page 1 34 ). — A chieved accreditation from the National Equal it y St andar d (see p age 5 8) . — At te nde d COP 26 and sub mit te d a plann ing app lica tion to s elf- gene rate re newa ble ene rg y at our l and h oldings in S co tlan d (see page 1 3) . — R ece ive d ex ter nal re cog nitio n thro ugh F TSE4 Goo d, EPR A an d GRESB sus tainabili t y benc hmark ing. I. Impa ct on b usine sse s aris ing fr om the U K’s commi tmen t to be n et zer o car bon b y 2050 As m ore o f the G rou p’s tenan ts c omm it to be co ming ne t zer o ca rbo n, it i s likely t hat tenants will demand evermore environmen tally-friendly build ings. There is a risk that greater carbon taxation ong ree nho use ga s emis sio ns wil l lea d to inc re ase d co st s for t he Gr oup. In a ddit ion , whil e cur ren t env iron men ta l reg ula tio n in the UK on ly pr ohibi ts t he le asin g of sp ace w ith an Energ y Performanc e Certif icate ( ‘EPC’) ra ting o f E or be low, th e gove rnm ent h as prop ose d increa sing the minimum EPC ra ting to B by 2 030. Buildin gs that f ail to re ach th e sta ndard s exp ec ted by oc cupi ers c ould lo se ten ants , suf fe r a disc ount an d fall in valu e. In ord er to impr ove it s olde r buildin gs, th e Group may n eed t o comm it to add ition al cap ital e xpe ndit ure, whic h may no t be re cov erab le thro ugh hig her re nts . The Gro up may als o be un able to le ase th e spa ce dur ing the impr ovem ent ph ase , leading t o redu ce d rent al inc ome and lon ger void periods. An in cre ase in th e minimum EP C rat ing will le ad to increased capital e xpenditure requir ements for the Group. Stra tegic objectives 2. 3. 4. We are c ommit te d to be ing net z ero c arbo n by 2030 a nd hav e publi she d our Net Ze ro Ca rbo n Pat hway. We publis h our pr ogre ss an d achi eve ment s in our ann ual Res pon sibili ty Repor t. In pre para tion f or the p ropo se d chan ges to EP C legi slat ion fr om 2030 , in Q4 2021 , we co mmiss ione d an as ses sme nt of our p or t fol io to identif y the potential capit al exp enditure re quirem ents t o ensur e our co mplia nce b y 2030 (s ee pa ge 55). TCFD page 68 Key Stra tegic objectives 1. T o opt imise r etur ns and c reate v alue fr om a bal anc ed p or tf olio 3. T o at tra ct, r etain a nd de velop talented em ployees 5. T o maintain strong and f lexible f inancin g 2. T o grow recurring earnings and c ash f low 4. T o de sign, d eli ver an d ope rate our buildingsre spo nsibly 10 5 Financ ial Stat ements Governance Strategic repor t OUR PRINCIP A L RISKS CO NT IN UED Financial r isks Der wen t London ha s a low financial r isk profile. F itch reaf f irme d our cre dit rating of A-, with a negati ve outlo ok, in May 202 1 . This was mainly due to the c ontinue d uncer t aint y of Cov id- 1 9, rent col lectio ns and con cern s for health of o ur occ upiers, at th e time ofrating. Our f inancial po sition remains s trong . During 202 1 , Der wen t Lond on was pleas ed to announc e its f irst uns ecure d gree n bond for£ 350m at a term of 10 years. We als o ex tende d our Revolv ing Cre dit Facilities wi th our UK banking p ar tners f or a fur the r year to 2026. Our loan-to -value ratio has r isen to 20.8% at 31 Dece mber 202 1 bas ed on ye ar end pro per t y valuations , and our net a sset value gear ing being 28.2%. Intere st cov er is 464%, alongside c ash and undrawn f acilities of £ 608m. Fraud r isk as ses sme nt page 1 55 Credit Committee The C redit C ommit tee is a supp or ting co mmit tee within the G roup’ s gover nance f ramewor k which t ypic ally mee ts on a wee kly basis to ass ess an d monitor the f inancial s treng th of p otential and exis ting tenants . The Cre dit C ommit tee is chaire d by the CEO and i ts memb ers includ e Damian Wisniewsk i (CFO) and senior me mbers ofthe Finan ce, Le asing, Pro per t y and A sse t Manageme nt teams. Since 2020, due to the dif f iculties b eing fac ed by our c urrent and pros pec tive tenan ts, the C redit C ommit tee has m et on a more fre quent ba sis. The ‘ tenan ts on watch’ registe r was regular ly revi ewed to c arefully mo nitor the f inancial per f ormanc e of exist ingtenants. A s at 3 1 De cem ber 202 1 , the 29 ten ants include d on the ‘ tenant s on watch’ register r epres ented 4% of the Group’s con tracte d net rent al incom e, and mainly con sists of busin ess es ope rating in retail and h ospit alit y sec tors. The Ris k Commit te e and Audit C ommit tee were up dated on th e work of th e Credit C ommit tee dur ing the year un der revie w , to ensure i t was in agree ment with t he acc ounting princ iples being applie d and the man agemen t of risk. T he Risk C ommit tee co nfirms that it is s atisfie d with th e ex tensive du e diligence pro ces s being under t aken by the Cre dit Co mmit tee. Ta x r i s k Our at titu de towards ta x risk is pr imarily gover ned by th e Board’s objec tive s to retain our REIT s tatus and maint ain our ‘low-risk ’ rating fr om HMRC. The B oard was ple ased to h ave rec eive d a ‘low-risk ’ rating f rom HMRC which is valid unt il 20 22. The G roup takes i ts resp onsibilities un der the ‘c orpor ate of fence s of failure to prev ent the fac ilitation of f raudulent ta x eva sion’ legisla tion serio usly and will not toler ate any facilitat ion of ta x evasio n. The Gro up has est ablishe d proc edure s which are desig nedto pre vent its a sso ciated pe rsons f rom delib erately andfr audulently facilit ating ta x evasi on. Ongoing tr aining is prov ided to st af f and a po licy do cument is kept up dated on theC ompany intran et. T a x go vernance page 65 Le ase ex pirie s and vac anc ies T o p rovide f lexibilit y within our p or tf olio for proje ct wor k, a per centa ge of our leas es expire p er annum. Unusually in 2021 , we had a highe r-than-n ormal leas e expir y exp osure, wit h £33.3m of inco me subject to b reaks/expiries (1 7% of our inco me) . In addition , at the b eginning of 202 1 ther e were con cern s that Cov id- 19 and Brexi t could lead to ris ing unemploym ent, which w ould impact up on deman d for of fi ce spac e resulting in highe r vacanc y rates . Leas e expiries an d vacan cies were sub sequ ently identi fie d as a poten tial risk area . The Risk C ommit tee re cei ved upd ates on the work of th e As set Manag ement team to re duce t he Group’s exp osure. T hrough ac tive as set mana gement ac tivi ties, go od relat ionships with o ur occ upiers, an d par tly assis ted by th e ec onomy reb ounding fol lowing the easing of lo ckdown res tric tions, our 202 1 leas e expir y exp osure re duce d signifi cantly, with 77% be ing ret aine d or re -let . 77 % T enant retention/re-lets Protec ting our occupiers Prote cting our o ccupier s and stop ping the spre ad of the C ovid- 1 9 virus in o ur buildi ngs was a p riorit y as our te nants retur ned to th eir of fic e spac es during 2021 . T o e nsure their he alth and safe ty w e imple mente d th e fol lowing me asur es: — S ocial dist ancing, o ne-way traf f ic flow s ystems an d clear signa ge — Re adily available hand sani tiser units — Re stric tions on numb ers using lif ts and WC ac comm odation — Fresh air ventilation — Enhan ced c leaning regime s and upon no tific ation of a conf irme d cas e, an elec trost atic clean was und er taken autom atically — T emp erature che cks on en tr y on agre emen t with oc cupiers — L ateral f low testing pro gramme for D er went Lon don Building Manage ment team an d our contr actors — Ran dom Co vid- 19 testing of our air- condit ioning filters We will continue to of f er the se meas ures until our oc cupiers d eem them n o longer ne ces sar y. During th e year , we also tr acked the c onfir med c ases of C ovid - 1 9 throug hout our man aged p or t folio. T he data of c onfirm ed ca ses clearly s howed th at, where t here were s everal inci dents, t hese were c oncen trated to a tenan t’s area and not m ore widely sp read throug hout th e building. This prov ided o ur occupi ers, and t he Boar d, with co mfor t that our m easures we re proving e f fec tive in minimising the spre ad of the vir us. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 10 6 Supply cha in risks Our supp ly chain is impor tan t to our busines s; the cont ractor s and profe ssional te ams working o n our sites , and the 200 + suppliers that ens ure we provid e agre ed ser v ice leve ls acro ss the p or t folio. T o sup por t our supp ly chain, we have wor ked to redu ce our aver age days fr om 25 days in 20 1 9 to 20 days in 202 1 . In addition, du e to the Co vid- 1 9 p andemic, w e assiste d supplier c ash f low by early par t ial releas e of retention an d contr ibuting to additi onal co sts gen erated by th e delays. Aver age payment term Days 0 5 15 10 20 25 30 2018 2021 2020 2019 20 20 25 28 Responsible payment practices pag e 1 69 Par tly as a pre paration f or any Brexit-r elated d elays, w e have facilit ated pay ment fo r materials and c ompon ents pro perly ves tedand s afely store d of f site, a st rateg y which has al so ser ve d us well thr ough the ch allenges of th e pandemic . The se mea sures help ed mitigate sup ply chain risks , by reduc ing uncer t ainty in relat ion to time and c ost, e nabling them to c once ntrate on deli ver y and qualit y. We are please d to be on e of the fir st deve loper s in the UK whore quire our supply chain p ar tners to fo llow the C ommon As ses sment S tandard w hich was deve loped b y Build UK, with thesupp or t of CECA . T he Comm on As ses sment S tandard c over s 1 2key areas of r isk manage ment (including , health and s afet y, environ mental , equalit y and c orp orate social r espon sibilit y) . Theaim of th e Comm on As ses sment S tandard is to impro ve supplych ain ef ficien cy and re duce sup ply chain risks . We set ou t our principle s and expe ct ations in terms of t he environ mental , social, e thical and g overnan ce issu es which re late to our supply c hains in our Supply Chain Sus tainabilit y S tandard (the St andard). The S tand ard renews o ur commitm ent to ensuring our supply c hain remains as enga ged as we are in se tt ing the highe st stan dards and re ducing the ris k that a supplier a cts in a manner whic h is contr ar y to our values. Human rights and modern slaver y pag e 1 67 Supp ly Chai n Sust aina bilit y S tan dard page 1 69 Developme nt risks Our dev elopmen ts are large, hig h-value projec ts that c an take overf ive ye ars fro m conc ept to co mpletion. T he suc ces s of our deve lopment ac tivi ties is reliant o n taking mana ged and c aref ully con sidered r isk, which aims to d eliver t he of fic e spac e our oc cupiers de sire when it is n eed ed. The Ris k Commit te e rece ives re por ts f rom the Dire ctor of Dev elopmen t on the Group’s major develop ments , which include s a det ail e d asse ssme nt of the risk s and risk mitigation p lans in pla ce. Risk area Comme nt Material shorta ges In 202 1, our on-si te deve lopm ent proje ct s were s afeg uarde d fr om mater ial sho rt age s due to e arly or dering a nd str ong sup ply chainr elati onship s. Mate rial sho r tag es co uldbe com e a more m aterial is sue in t he sho r t-ter m, if dem and c ontinu es to ris e and supply issues contin ue. Labour short ages Un der lying sk ill sho rt age s acro ss th e co nstr uct ion indu str y we re exac erb ated by Bre xit an d Cov id- 1 9. D er went Lo ndon’s str ateg y of s ecur ing Tie r 1 cont rac tors an d subcontractors for project deliver y , provides us with t he be st pr osp ect o f sec uring la bour an d rep eat bu sines s. D uring 2021 , n one of o ur on-si te proje ct s expe rien ce d any insurm ount able is sues in res pe ct to lab our. Inflation Inf lat ion is pu tt ing pre ssure o n con str ucti on co sts . Wher e pos sible, d esig ns are div er ted away fr om mate rials at tr actin g higher p ric e incr ease s. O ur Soh o Plac e and F eathe rsto ne Building d evelo pmen ts had f ixe d pric e con trac ts, res ulting in D er went Lo ndon n ot bein g expo se d to inf latio n. In res pec t to the B aker S tre et dev elopm ent, w hich is c omme ncing in Q 3 2022, 83% of t he co sts ha ve be en fi xed. D er went London’ s strong reputation for being fair , rea sonab le and fo r payin g our supp ly chain pro mptly, makes us w ell pl ace d as pre ferr ed clie nts in th e con stru cti on indus tr y. C o v i d -1 9 O ur deve lopm ent proje ct s cont inue to pr ogre ss as we ad apt to C ovid-1 9 re str icti ons and prot oco ls. We c omply wi th st rict C ov id- 1 9 prot oco ls at all of o ur on-si te dev elopm ents , in ac cord ance wi th Site O per ating Pro ce dure s. Pla nning D e-r isking p lanning is a chiev ed by a s ound unde rst anding of p olic y co upled w ith a co llab orati ve appr oach w ith th e boro ugh and loc al co mmunit y. We are req uired to m eet t he sus tainab ilit y age nda in re spe ct of n et zero carbon and operational energy consumption. Th ere are c onc erns t hat pl anning in Lon don may be com e more c hallen ging again st the b ackdr op of the U K Gove rnme nt’s ‘le vellin g up agen da’ . We will b e monito ring th e outc ome of t he ‘Pl anning for t he Futu re White P aper ’ and ‘C hange s to the cur rent pl anning s ystem’ c onsult atio ns and th e upc oming P lanning B ill. We provid e fur ther c ommen tar y on the s tatus of o ur three deve lopment-r elated p rincipal risk s on page s 1 1 2 and 1 1 5. 10 7 Financ ial Stat ements Governance Strategic repor t Sche dule of Principal Ris ks The p rincipal risk s and unce r tainties fa cing the Group in 2022 are set o ut on pa ges 1 08 to 1 19 . Our p rincipal risk s are not an exhaus tive lis t of all risks f acing the Gro up but are a snap shot of the C ompany ’s main risk prof ile as at 23 Februar y 2022. The ke y contro ls identif ied we re in ope ration during the y ear under re view and up to th e date the 202 1 Rep or t & Acc ounts was ap prove d. STRA TEGI C The G roup’ s busine ss mo del and/or strate g y does n ot create th e anticipated s hareholde r value or fails to me et inves tors’ and oth er stakeh olders’ exp ec tations . Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 1. FAILURE T O IMPLEMENT T HE GROUP’S STR A TEGY Th e Group’s su cc ess d epe nds on im plem enting i ts st rateg y a nd re spon ding app ropr iately to in tern al or ex ter nal f acto rs inc luding re spo nding t o changing work practice s, occupational demand and London’ s global a ppe al. While i t is not y et po ssib le to ful ly evalu ate the im pac t that B rexi t will hav e on the Group’ s operations, the main ris k to the Group pose d by Brexit is that ec ono mic gro wt h in the UK m ay be ne gati vely im pac ted whi ch may in t urn af fe ct Lo ndo n’ s gr ow th and de mand f or of f ice s pac e. In addi tion , the Gr oup mus t res pon d and/or ad apt app ropr iatel y to ec onomi c cy cles a s the Lo ndon o f fic e mark et has g ener ally be en c ycli cal in re ce nt decades , with strong growth followed by sharp economic downtu rns pre cipi tate d by ris ing inter est r ates c oinc iding wi th signi fic ant o vers upply. Sho uld the G roup f ail to re spon d and ad apt to su ch cy cles o r exec ute th e proje ct s that un der pin it s stra teg y, this may ha ve a neg ativ e impac t on th e Group’ s expected grow th and financial per formance. Movement during 2 02 1 : Unchange d Alt houg h the C ovi d- 1 9 pa ndem ic has n ot stop pe d the Gr oup imp leme nting its strategy, the l ockdown restrictions have margina lly extende d the project leng t h for S oho Pl ace a nd Th e Fea ther ston e Buildin g, an d has ca use d sign ifi cant di srup tion to t he ec ono my. Cov id- 19 has only am plif ie d wea kne sse s wit hin the re tail m arket , and we ar e rev iewing o n an ongo ing bas is the r etail e leme nts in o ur building s. Our o cc upier s per cei ve the res taur ant, r etail a nd leis ure asp ec ts wit hin our p or t foli o as ame nitie s; hen ce we f eel i t is imp or tant t hat th ey are r etain ed wi thin our b uilding of fe rings . The im pac t of a pote ntial r ec ess ion on o ur str ateg y, and ot her long er- term c ons eque nce s of th e Cov id-1 9 p ande mic, i s being m onit ored b y the E xe cut ive C ommi tt ee and t he Bo ard. In r esp ec t to Brex it, t he Gro up continued to monit or international trade negotiations. During 202 1 , labour sho r tag es oc cur red du e to the r eloc atio n of Europ ean l abo ur bac k to the EU whic h had an imp ac t on supp ly chain s and th e con str uct ion in dustr y. Executive responsib ility: Paul Williams — T he Gr oup’s deve lopm ent pip elin e has a de gre e of fle xibili ty t hat en ables p lans f or indi vidu al prop er tie s to be c hang ed to re fle ct pr evailin g ec onom ic circ umst anc es. — T he Gr oup se eks g ener ally to ma intain in com e fro m prop er tie s until d evel opme nt co mmen ce s and has a n ongoi ng str ateg y to ex te nd inc ome t hrou gh leas e renew als an d regears. — T he Gr oup aims to d e-r isk th e deve lopm ent pr ogra mme thr ough p re-l ets , ty pic ally during the constr uction period. — T he Gr oup co nduc ts an a nnual s trate gic re view, pr epar es a bu dget an d prov ide s t wo-y ear ro lling f ore cas ts thr ee tim es a ye ar . — T he B oard c onsi ders t he se nsit ivi ty o f the Gr oup KP Is to cha nges in t he assumptions underlying our forecasts in light o f anticipated economic conditions. If considered neces sary, modifications are made. — T he Gr oup main tains s uf fi cient h eadr oom in a ll the G roup’s key rat ios an d fin anci al cov enant s wit h a par tic ular f ocu s on inter est c ove r . — T he Gr oup fo cus es on go od v alue pro per t ies th at are le ss sus ce ptible to re duct ions in te nant d eman d. Th e Group’s ave rage ‘ to ppe d-up’ of f ic e rent is o nly £59 .69 per s q f t. — International trade negoti ations are being monitored and potential outcome s disc uss ed wi th ex ter nal ad vis ers . — T he Gr oup’s dive rse an d high qu alit y ten ant ba se pro vide s re silien ce ag ainst tenant defau lt. — T he Gr oup de velop s pro per ti es in lo cati ons wh ere th ere is go od p oten tial fo r fu ture d eman d, suc h as nea r Cros srail s tat ions . We do not h ave any p rope r ties i n the C it y or Do ckl ands . Stra tegic objectives 1. 2. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal return — T otal proper ty return — T otal shareholder return — T he B oard h eld it s annual s trate g y awayd ay on 1 8 Jun e 2021 to discu ss th e Group’ s five-year strateg y . — E xa mined o ppo r tunit ies fo r acq uisiti ons an d dispo sal s to rec ycle c api tal . — C omp lete d a numbe r of imp or tant a cquis itio ns whic h has he lpe d to re stoc k the G roup’s dev elop ment p ipel ine (se e pag es 20 to 21 and 24 to 25). — M onito red o ur por t fo lio fo r fur th er as set ma nage men t acti vit ies an d managed the vacancy rate. — P rep ared r ollin g fore cas ts th ree ti mes a y ear an d a budge t for 2022 . — O ur cre dit ra ting of A- wa s rene wed b y Fitc h in May 2021 . — T he B oard c onsi dere d the s ensi tiv it y of our K PIs to c hange s in unde rly ing as sumpt ions in cluding i ntere st rat es, t iming of pr ojec ts, le vel of c api tal exp endi ture an d the e xt ent of c apit al re cyc ling. — B egan to p ursu e opp or tuni ties t o self -gen erate r enew able en erg y fr om our lan d holdin gs in Sc otl and an d liaise d wit h our oc cupi ers to al ign our n et zer o ca rbo n journ eys (s ee pa ge 1 3). — In r esp ec t to our de -ris king s trate g y , we h ave pre -let 87% o f Soh o Plac e. — T he Gr oup’s loan- to-v alue ra tio rem aine d low, its n et inte res t cov er rati o was 46 4% and the R EIT rati os we re com for t ably me t. — Tenant s ur vey s were p er for me d to prov ide f ur the r insigh ts to th e Boa rd. — We un der sta nd the i mpor t anc e of amen itie s to our o ccup iers . Dur ing 2021 , we op ene d DL / 78, laun che d the n ew DL / app, a nd fu rt her im prov ed th e fac iliti es avail able in o ur buildin gs (see p age s 30 and 31 ). — Monitored international tra de negotiations and discusse d potenti al ou tcom es, in cludi ng the p oten tial imp act o n our co ntra ctor s/ subcontractorsand supply chain. — R ece ive d po litic al an d eco nomi c updat es fr om ex ter nal ad vise rs throughout the yea r . — M onito red le tt ing pro gre ss and d eman d for o ur buildin gs. — A s at 31 De cemb er 2021 , th e Grou p has ca sh and un drawn f acili ties of £6 08m. — E xamine opportunities for acquisitions and di spo sals t o rec ycle c apit al. — C ont inue to ex te nd inc ome t hroug h ren ewals a nd reg ear s for pr ope rt ies not earmarked for regeneration. — We w ill con tinue w ith our c urre nt controls and mitigating actions, inclu ding ope rating th e busine ss onab asis th at bal ance s risk a nd income generation. OUR PRINCIP A L RISKS CO NT IN UED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 10 8 Sche dule of Principal Ris ks The p rincipal risk s and unce r tainties fa cing the Group in 2022 are set o ut on pa ges 1 08 to 1 19 . Our p rincipal risk s are not an exhaus tive lis t of all risks f acing the Gro up but are a snap shot of the C ompany ’s main risk prof ile as at 23 Februar y 2022. The ke y contro ls identif ied we re in ope ration during the y ear under re view and up to th e date the 202 1 Rep or t & Acc ounts was ap prove d. STRA TEGI C The G roup’ s busine ss mo del and/or strate g y does n ot create th e anticipated s hareholde r value or fails to me et inves tors’ and oth er stakeh olders’ exp ec tations . Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 1. FAILURE T O IMPLEMENT T HE GROUP’S STR A TEGY Th e Group’s su cc ess d epe nds on im plem enting i ts st rateg y a nd re spon ding app ropr iately to in tern al or ex ter nal f acto rs inc luding re spo nding t o changing work practice s, occupational demand and London’ s global a ppe al. While i t is not y et po ssib le to ful ly evalu ate the im pac t that B rexi t will hav e on the Group’ s operations, the main ris k to the Group pose d by Brexit is that ec ono mic gro wt h in the UK m ay be ne gati vely im pac ted whi ch may in t urn af fe ct Lo ndo n’ s gr ow th and de mand f or of f ice s pac e. In addi tion , the Gr oup mus t res pon d and/or ad apt app ropr iatel y to ec onomi c cy cles a s the Lo ndon o f fic e mark et has g ener ally be en c ycli cal in re ce nt decades , with strong growth followed by sharp economic downtu rns pre cipi tate d by ris ing inter est r ates c oinc iding wi th signi fic ant o vers upply. Sho uld the G roup f ail to re spon d and ad apt to su ch cy cles o r exec ute th e proje ct s that un der pin it s stra teg y, this may ha ve a neg ativ e impac t on th e Group’ s expected grow th and financial per formance. Movement during 2 02 1 : Unchange d Alt houg h the C ovi d- 1 9 pa ndem ic has n ot stop pe d the Gr oup imp leme nting its strategy, the l ockdown restrictions have margina lly extende d the project leng t h for S oho Pl ace a nd Th e Fea ther ston e Buildin g, an d has ca use d sign ifi cant di srup tion to t he ec ono my. Cov id- 19 has only am plif ie d wea kne sse s wit hin the re tail m arket , and we ar e rev iewing o n an ongo ing bas is the r etail e leme nts in o ur building s. Our o cc upier s per cei ve the res taur ant, r etail a nd leis ure asp ec ts wit hin our p or t foli o as ame nitie s; hen ce we f eel i t is imp or tant t hat th ey are r etain ed wi thin our b uilding of fe rings . The im pac t of a pote ntial r ec ess ion on o ur str ateg y, and ot her long er- term c ons eque nce s of th e Cov id-1 9 p ande mic, i s being m onit ored b y the E xe cut ive C ommi tt ee and t he Bo ard. In r esp ec t to Brex it, t he Gro up continued to monit or international trade negotiations. During 202 1 , labour sho r tag es oc cur red du e to the r eloc atio n of Europ ean l abo ur bac k to the EU whic h had an imp ac t on supp ly chain s and th e con str uct ion in dustr y. Executive responsib ility: Paul Williams — T he Gr oup’s deve lopm ent pip elin e has a de gre e of fle xibili ty t hat en ables p lans f or indi vidu al prop er tie s to be c hang ed to re fle ct pr evailin g ec onom ic circ umst anc es. — T he Gr oup se eks g ener ally to ma intain in com e fro m prop er tie s until d evel opme nt co mmen ce s and has a n ongoi ng str ateg y to ex te nd inc ome t hrou gh leas e renew als an d regears. — T he Gr oup aims to d e-r isk th e deve lopm ent pr ogra mme thr ough p re-l ets , ty pic ally during the constr uction period. — T he Gr oup co nduc ts an a nnual s trate gic re view, pr epar es a bu dget an d prov ide s t wo-y ear ro lling f ore cas ts thr ee tim es a ye ar . — T he B oard c onsi ders t he se nsit ivi ty o f the Gr oup KP Is to cha nges in t he assumptions underlying our forecasts in light o f anticipated economic conditions. If considered neces sary, modifications are made. — T he Gr oup main tains s uf fi cient h eadr oom in a ll the G roup’s key rat ios an d fin anci al cov enant s wit h a par tic ular f ocu s on inter est c ove r . — T he Gr oup fo cus es on go od v alue pro per t ies th at are le ss sus ce ptible to re duct ions in te nant d eman d. Th e Group’s ave rage ‘ to ppe d-up’ of f ic e rent is o nly £59 .69 per s q f t. — International trade negoti ations are being monitored and potential outcome s disc uss ed wi th ex ter nal ad vis ers . — T he Gr oup’s dive rse an d high qu alit y ten ant ba se pro vide s re silien ce ag ainst tenant defau lt. — T he Gr oup de velop s pro per ti es in lo cati ons wh ere th ere is go od p oten tial fo r fu ture d eman d, suc h as nea r Cros srail s tat ions . We do not h ave any p rope r ties i n the C it y or Do ckl ands . Stra tegic objectives 1. 2. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal return — T otal proper ty return — T otal shareholder return — T he B oard h eld it s annual s trate g y awayd ay on 1 8 Jun e 2021 to discu ss th e Group’ s five-year strateg y . — E xa mined o ppo r tunit ies fo r acq uisiti ons an d dispo sal s to rec ycle c api tal . — C omp lete d a numbe r of imp or tant a cquis itio ns whic h has he lpe d to re stoc k the G roup’s dev elop ment p ipel ine (se e pag es 20 to 21 and 24 to 25). — M onito red o ur por t fo lio fo r fur th er as set ma nage men t acti vit ies an d managed the vacancy rate. — P rep ared r ollin g fore cas ts th ree ti mes a y ear an d a budge t for 2022 . — O ur cre dit ra ting of A- wa s rene wed b y Fitc h in May 2021 . — T he B oard c onsi dere d the s ensi tiv it y of our K PIs to c hange s in unde rly ing as sumpt ions in cluding i ntere st rat es, t iming of pr ojec ts, le vel of c api tal exp endi ture an d the e xt ent of c apit al re cyc ling. — B egan to p ursu e opp or tuni ties t o self -gen erate r enew able en erg y fr om our lan d holdin gs in Sc otl and an d liaise d wit h our oc cupi ers to al ign our n et zer o ca rbo n journ eys (s ee pa ge 1 3). — In r esp ec t to our de -ris king s trate g y , we h ave pre -let 87% o f Soh o Plac e. — T he Gr oup’s loan- to-v alue ra tio rem aine d low, its n et inte res t cov er rati o was 46 4% and the R EIT rati os we re com for t ably me t. — Tenant s ur vey s were p er for me d to prov ide f ur the r insigh ts to th e Boa rd. — We un der sta nd the i mpor t anc e of amen itie s to our o ccup iers . Dur ing 2021 , we op ene d DL / 78, laun che d the n ew DL / app, a nd fu rt her im prov ed th e fac iliti es avail able in o ur buildin gs (see p age s 30 and 31 ). — Monitored international tra de negotiations and discusse d potenti al ou tcom es, in cludi ng the p oten tial imp act o n our co ntra ctor s/ subcontractorsand supply chain. — R ece ive d po litic al an d eco nomi c updat es fr om ex ter nal ad vise rs throughout the yea r . — M onito red le tt ing pro gre ss and d eman d for o ur buildin gs. — A s at 31 De cemb er 2021 , th e Grou p has ca sh and un drawn f acili ties of £6 08m. — E xamine opportunities for acquisitions and di spo sals t o rec ycle c apit al. — C ont inue to ex te nd inc ome t hroug h ren ewals a nd reg ear s for pr ope rt ies not earmarked for regeneration. — We w ill con tinue w ith our c urre nt controls and mitigating actions, inclu ding ope rating th e busine ss onab asis th at bal ance s risk a nd income generation. Key Stra tegic objectives 1. T o opt imise r etur ns and c reate v alue fr om a bal anc ed p or tf olio 3. T o at tra ct, r etain a nd de velop talented em ployees 5. T o maintain strong and f lexible f inancin g 2. T o grow recurring earnings and c ash f low 4. T o de sign, d eli ver an d ope rate our buildingsre spo nsibly 10 9 Financ ial Stat ements Governance Strategic repor t FINAN CIAL Signif icant ste ps have b een taken in re cent y ears to re duce or mi tigate the Group’s financial risk s. The m ain financial risk is t hat the Gro up bec omes unab le to meet it s financ ial obligations, w hich is not curr ently a princip al risk. Financial r isks can aris e from m ovemen ts in the f inancial markets in whic h we oper ate and inef fic ient manag ement of c apital re sourc es. Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 2. RISK OF TEN ANTS DEFAUL T IN G OR TEN ANT F AILURE Th e majori t y of the G roup’s rev enue s are c ompri sed o f rent r ece ive d fro m its tena nts an d any det erio ratio n in their b usin ess es an d/or prof it abilit y c ould in tur n adv ers ely af fe ct th e Gro up’ s re ntal in co me or inc rea se the G roup’s bad d ebt s and/or num ber of l ease t ermin ation s. In th e even t that s ome of our te nant s went int o defa ult, we c ould in cur imp airme nts an d write -of f s of IFRS 16 leas e ince nti ve rec ei vable b alan ces w hich ar ise f rom th e acc ounti ng re quirem ent to sp rea d any ren t-fr ee inc ent ive s giv en to a tena nt ove r the respective lease term. Movement during 2 02 1 : Red uced Du e to the e con omic imp act o f Cov id-1 9, a nd its p oten tial lon g-ter m impl icat ions , oc cupie rs co uld be f acing in cre ase d fin ancial d if fic ult y. Res taur ants a nd ho spit alit y ten ants a cco unt fo r appr oximat ely 6% of t he Gro up’s por t foli o inco me. D esp ite re -op ening r est aurant s, re tail an d leisur e pro per ti es, f oot fa ll is lowe r than pr e Co vid-1 9 le vel s, disp rop or tion ately impa ctin g on the r even ues an d op erati ons of su ch ten ants . Executive responsib ility: Paul Williams — D et ailed re view s of all pr osp ec tive t enant s are p er for med . — A ‘ te nants o n watch’ re gist er is main taine d and r egul arly r evie wed b y the E xec utiv e Com mit tee a nd the B oar d. — R ent de pos its ar e held wh ere c onsi dere d appr opri ate; the b alan ce at 31Dec emb er 2021 was £1 7 .6m. — A cti ve re nt col lec tion wi th re gular r epo r ts to th e Exe cu tive C omm it tee. — We m aintai n clos e and f requ ent c onta ct wi th our te nants . Stra tegic objectives 1. 2. 5. Business mode l — A sset management KPIs — T otal proper ty return — EP R A earn ings pe r share — Interest c over ratio — T enant retention — Void management — We h ave main taine d pro act ive e ngage men t with o ur tenan ts, d ealing w ith the ir con cer ns on a c ase -by -ca se ba sis and s uppo r ting th em as ap prop riate. — En sure d con siste nc y in our app roac h to simil ar tenan ts and p rior itis ed as sist anc e to tho se mo st af fe cte d by C ovi d- 1 9. — D ue to th e dif fi cultie s be ing fac ed b y our cur rent a nd pro spe ct ive te nants , the C redi t Co mmit tee c ont inue d to mee t on a fr equ ent ba sis (se e pag e 1 06). — We h ave co ntinu ed to su ppo rt r est auran ts, r etail an d leisu re ame nitie s in ourbuildin gs. — We w ill con tinue w ith our c urre nt controls and mitigating actions. 3. INCOME DECLINE Changes in macroe conomic factors may adverse ly af fect London’ s off ice mar ket. T he Gro up is ex pos ed to ex te rnal f act ors wh ich are o utsi de the Gro up’s cont rol, s uch as f utu re dem and fo r of fic e spa ce, t he ‘gre y’ m arket in of f ice sp ace ( i.e. ten ant c ontro lled v aca nt spa ce), weak nes se s in reta il and ho spit alit y bu sine sse s, inc rea se in ho mewo rking a nd the d ept h of any fu ture re ce ssi on and s ubse que nt ris e in unemp loy ment an d/or inte rest rates. Such macroeconomic conditions may lead to a general proper ty mar ket co ntra ctio n, a de cline i n rent al value s, de clin e in Gro up inco me and po tentia lly pro per t y val ues . Any re duc tion in p rop er t y inc ome c ould als o have a n adv ers e impac t on th e value of t he Gro up’s prop er tie s and may hinde r any future divi dend payments. Movement during 2 02 1 : Unchange d In ligh t of Co vid-1 9, we hav e be en moni torin g the e con omic o utlo ok, v acan cy rate s, f inanc ial he alth of ou r tenant s and t he co nditi on of th e wider p rop er t y marke t. Executive responsib ility: Paul Williams — T he Cr edit C ommi t tee re cei ve s deta iled re view s of all pr osp ec tive t enant s. — A ‘ te nants o n watch’ re gist er is main taine d and r egul arly r evie wed b y the E xec utiv e Com mit tee a nd the B oar d. — O ngoing dialogue and proactive internal management is maintained with tena ntsto un der stan d the ir con cer ns and r equir emen ts. — T he Gr oup’s low loan -to- value r atio re duc es th e likeli hoo d that f alls in pro per t yval ues ha ve a signi fic ant im pac t on our b usine ss c ontinu it y. Stra tegic objectives 1. 2. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — Interest c over ratio — T otal return — T otal proper ty return — G earin g and availab le resou rces — We m aintai ned p roac tiv e enga geme nt wit h our ten ants , deal ing wit h their co nce rns on a c as e-by -c ase b asis an d supp or ting t hem as ap prop riate . — T he Gr oup pro duc ed a b udge t, str ateg ic rev iew and t hre e rollin g fore ca sts durin g the y ear whic h co ntain d etaile d se nsiti vit y an alys es inc luding t he ef fe ct of c hang es to yi elds . — T hrough active asset management acti vities, good relationships with our oc cupi ers , and par t ly ass iste d by the e co nomy r ebo unding f ollow ing the eas ing of lo ckdow n res tric tion s, our le ase e xpir y ex pos ure re duc ed sign ifi cant ly durin g 2021 ( se e pa ge 1 06). — T he ‘ tena nts on w atch’ reg iste r was reg ular ly rev iewe d to ca ref ully mo nitor the financial performance of existing t enants. — Q uar ter ly man agem ent ac co unts we re pro vide d to th e Boa rd. — We w ill con tinue w ith our c urre nt controls and mitigating actions, inclu ding ope rating th e busine ss onab asis th at bal ance s risk a nd income generation. OUR PRINCIP A L RISKS CO NT IN UED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 1 10 FINAN CIAL Signif icant ste ps have b een taken in re cent y ears to re duce or mi tigate the Group’s financial risk s. The m ain financial risk is t hat the Gro up bec omes unab le to meet it s financ ial obligations, w hich is not curr ently a princip al risk. Financial r isks can aris e from m ovemen ts in the f inancial markets in whic h we oper ate and inef fic ient manag ement of c apital re sourc es. Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 2. RISK OF TEN ANTS DEFAUL T IN G OR TEN ANT F AILURE Th e majori t y of the G roup’s rev enue s are c ompri sed o f rent r ece ive d fro m its tena nts an d any det erio ratio n in their b usin ess es an d/or prof it abilit y c ould in tur n adv ers ely af fe ct th e Gro up’ s re ntal in co me or inc rea se the G roup’s bad d ebt s and/or num ber of l ease t ermin ation s. In th e even t that s ome of our te nant s went int o defa ult, we c ould in cur imp airme nts an d write -of f s of IFRS 16 leas e ince nti ve rec ei vable b alan ces w hich ar ise f rom th e acc ounti ng re quirem ent to sp rea d any ren t-fr ee inc ent ive s giv en to a tena nt ove r the respective lease term. Movement during 2 02 1 : Red uced Du e to the e con omic imp act o f Cov id-1 9, a nd its p oten tial lon g-ter m impl icat ions , oc cupie rs co uld be f acing in cre ase d fin ancial d if fic ult y. Res taur ants a nd ho spit alit y ten ants a cco unt fo r appr oximat ely 6% of t he Gro up’s por t foli o inco me. D esp ite re -op ening r est aurant s, re tail an d leisur e pro per ti es, f oot fa ll is lowe r than pr e Co vid-1 9 le vel s, disp rop or tion ately impa ctin g on the r even ues an d op erati ons of su ch ten ants . Executive responsib ility: Paul Williams — D et ailed re view s of all pr osp ec tive t enant s are p er for med . — A ‘ te nants o n watch’ re gist er is main taine d and r egul arly r evie wed b y the E xec utiv e Com mit tee a nd the B oar d. — R ent de pos its ar e held wh ere c onsi dere d appr opri ate; the b alan ce at 31Dec emb er 2021 was £1 7 .6m. — A cti ve re nt col lec tion wi th re gular r epo r ts to th e Exe cu tive C omm it tee. — We m aintai n clos e and f requ ent c onta ct wi th our te nants . Stra tegic objectives 1. 2. 5. Business mode l — A sset management KPIs — T otal proper ty return — EP R A earn ings pe r share — Interest c over ratio — T enant retention — Void management — We h ave main taine d pro act ive e ngage men t with o ur tenan ts, d ealing w ith the ir con cer ns on a c ase -by -ca se ba sis and s uppo r ting th em as ap prop riate. — En sure d con siste nc y in our app roac h to simil ar tenan ts and p rior itis ed as sist anc e to tho se mo st af fe cte d by C ovi d- 1 9. — D ue to th e dif fi cultie s be ing fac ed b y our cur rent a nd pro spe ct ive te nants , the C redi t Co mmit tee c ont inue d to mee t on a fr equ ent ba sis (se e pag e 1 06). — We h ave co ntinu ed to su ppo rt r est auran ts, re tail an d leisu re ame nitie s in ourbuildin gs. — We w ill con tinue w ith our c urre nt controls and mitigating actions. 3. INCOME DECLINE Changes in macroe conomic factors may adverse ly af fect London’ s off ice mar ket. T he Gro up is ex pos ed to ex te rnal f act ors wh ich are o utsi de the Gro up’s cont rol, s uch as f utu re dem and fo r of fic e spa ce, t he ‘gre y’ m arket in of f ice sp ace ( i.e. ten ant c ontro lled v aca nt spa ce), weak nes se s in reta il and ho spit alit y bu sine sse s, inc rea se in ho mewo rking a nd the d ept h of any fu ture re ce ssi on and s ubse que nt ris e in unemp loy ment an d/or inte rest rates. Such macroeconomic conditions may lead to a general proper ty mar ket co ntra ctio n, a de cline i n rent al value s, de clin e in Gro up inco me and po tentia lly pro per t y val ues . Any re duc tion in p rop er t y inc ome c ould als o have a n adv ers e impac t on th e value of t he Gro up’s prop er tie s and may hinde r any future divi dend payments. Movement during 2 02 1 : Unchange d In ligh t of Co vid-1 9, we hav e be en moni torin g the e con omic o utlo ok, v acan cy rate s, f inanc ial he alth of ou r tenant s and t he co nditi on of th e wider p rop er t y marke t. Executive responsib ility: Paul Williams — T he Cr edit C ommi t tee re cei ve s deta iled re view s of all pr osp ec tive t enant s. — A ‘ te nants o n watch’ re gist er is main taine d and r egul arly r evie wed b y the E xec utiv e Com mit tee a nd the B oar d. — O ngoing dialogue and proactive internal management is maintained with tena ntsto un der stan d the ir con cer ns and r equir emen ts. — T he Gr oup’s low loan -to- value r atio re duc es th e likeli hoo d that f alls in pro per t yval ues ha ve a signi fic ant im pac t on our b usine ss c ontinu it y. Stra tegic objectives 1. 2. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — Interest c over ratio — T otal return — T otal proper ty return — G earin g and availab le resou rces — We m aintai ned p roac tiv e enga geme nt wit h our ten ants , deal ing wit h their co nce rns on a c as e-by -c ase b asis an d supp or ting t hem as ap prop riate . — T he Gr oup pro duc ed a b udge t, str ateg ic rev iew and t hre e rollin g fore ca sts durin g the y ear whic h co ntain d etaile d se nsiti vit y an alys es inc luding t he ef fe ct of c hang es to yi elds . — T hrough active asset management acti vities, good relationships with our oc cupi ers , and par t ly ass iste d by the e co nomy r ebo unding f ollow ing the eas ing of lo ckdow n res tric tion s, our le ase e xpir y ex pos ure re duc ed sign ifi cant ly durin g 2021 ( se e pa ge 1 06). — T he ‘ tena nts on w atch’ reg iste r was reg ular ly rev iewe d to ca ref ully mo nitor the financial performance of existing t enants. — Q uar ter ly man agem ent ac co unts we re pro vide d to th e Boa rd. — We w ill con tinue w ith our c urre nt controls and mitigating actions, inclu ding ope rating th e busine ss onab asis th at bal ance s risk a nd income generation. Key Stra tegic objectives 1. T o opt imise r etur ns and c reate v alue fr om a bal anc ed p or tf olio 3. T o at tra ct, r etain a nd de velop talented em ployees 5. T o maintain strong and f lexible f inancin g 2. T o grow recurring earnings and c ash f low 4. T o de sign, d eli ver an d ope rate our buildingsre spo nsibly 111 Financ ial Stat ements Governance Strategic repor t OPER A TIONA L The G roup suf fe rs eithe r a financial lo ss or ad verse c onse quenc es due to pro ces ses b eing inade quate or not op erating c orrec tly , human f actors o r other ex ter nal event s Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 4A . REDUCED DE VE LOPMENT RE TURNS Ret urns f rom th e Grou p’ s de velo pmen ts may b e adv ers ely imp acte d due to: — d elay s on sit e; — increase d construction costs; — l abour shortage s; — m ateri als and m ateri al shor t age s; and — adver se l et tin g conditions. De spit e stri ct C ovid - 1 9 pr otoc ols o n site, t here is a r isk of l abo ur and res ourc e sho r tag es bo th on si te and in th e supp ly chai n, whic h coul d lead to pro duc tiv it y disr uptio n and pr ojec t del ay . A ny sign ific ant d elay in c omp leting the d eve lopme nt proj ec ts may re sult in f inan cial pe naltie s or a re duc tion in the Group’ s targeted financial returns. Movement during 2 02 1 : Incre ase d Dur ing 2021 , our D eve lopme nt tea m liaise d and a gre ed pr oc ess es to miti gate agai nst de lay s or co st inc reas es wi th our p rincip al co ntra ctor s dueto p oten tial mat erial a nd lab our sh or ta ges . Executive responsib ility: Paul Williams — D et ailed re view s are pe r for med o n con str uct ion proj ect s to ens ure tha t pro gramm e for ec asts p redi cte d by our c ont ract ors ar e align ed wit h our vi ews. — T he pr ocur emen t pro ces s use d by th e Gro up inclu des th e use of h ighly rega rde dfir ms of quan tit y sur v eyor s and is d esig ned t o minimis e unce r taint y regar ding cos ts. — D evelopment costs are benchmarked t o ensure that the Group obtains co mpet iti ve pri cing an d, wher e appr opri ate, f ixed p ric e con trac ts are n egot iated . — P ost -c omple tion re vie ws are c arri ed ou t for al l major de velo pmen ts to en sure tha timprov eme nts to t he Gro up’s proc edur es are i denti fie d, imp lemen ted an d les sons le arne d. — P roc edu res c arri ed ou t bef ore st ar ting w ork on s ite, s uch as si te inve stig ation s, hist oric al re sear ch of th e prop er t y and s ur vey s con duc ted as p ar t of th e plan ning app lica tion, r edu ce th e risk of u niden tif ied is sue s caus ing del ays o nce o n site. — In ves tmen t appr aisal s, whi ch incl ude co nting enci es an d infl ation ar y co st inc reas es, a re pre pare d and s ensi tivi t y analy sis is und er tak en to judg e whet her an ade quat e retur n is mad e in all like ly circu mst anc es. — T he Gr oup’s pre- let ting s trate g y redu ce s or rem ove s the let ti ng risk o f the dev elop ment a s soo n as po ssib le. Stra tegic objectives 1. 2. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal return — T otal proper ty return — T otal shareholder return — We h ave a fl exible d eve lopme nt pip eline a nd, wh ere app ropr iate, w e defe rre d exp endi ture an d de cisio ns on f uture p rojec ts wh ile keep ing ver y c los e to our contractors, professional consultants and the project teams on sit e. — M onito red c ons tru ctio n co st inf lati on in rel atio n to fut ure pr ojec ts. — T he B oard an d Ex ecu tiv e Com mit tee re ce ive d reg ular up date s on our principal developments i ncluding construction costs . — B oth m ajor on si te deve lopm ent s are pro gre ssing w ell. 100% o f the c ost s for Th e Feat her ston e Building a nd So ho Pl ace , have b een a gre ed an d fix ed. — D emand for constr uction activit y i n Central London is i ncreasing and input co sts o f both m ater ials an d labo ur are in crea sing . — S pec ifi c risk a sse ssm ent s on bud get allo wanc es fo r infl atio n are kept u nder rev iew on a q uar ter ly basi s to tes t ade quac y of budg ets . — In r esp ec t to our de -ris king s trate g y , we h ave pre -let 87% o f Soh o Plac e. — C ontinue with ou r current controls and miti gating a ctio ns wit h a major fo cus on proj ec t monitori ng. 4B. ‘ON SIT E’ RISK Risk o f proje ct de lays a nd/or co st ov err uns c ause d by unid enti fie d iss ues . For e xampl e, if th e Group f ails to: (i) a deq uately a pprai se inve stm ent s pri orto st ar ting w ork on s ite, inc luding t hrou gh tak ing into a cco unt co nting encie s and in fla tiona r y cos t incr eas es; (ii) u se a pro cure men t pro ce ss th at is pro per ly des igne d (to minimis e unc er tain ty a roun d cos ts) and t hat inc lude s the us e of high ly regar ded q uanti ty s ur vey ors; (iii ) benchmark development costs; (iv) conduct thorough sit e investigations tore duc e the ri sk of unid entif ie d iss ues su ch as as be stos; (v) im plem ent pre-letting strateg y; or (vi) conduct detailed reviews on constr uction projects to eval uate programme forecasts made by contrac tors, dev elop ment p rojec ts m ay be sig nif ican tly del aye d and we c ould f ace alos sof ren tal in com e and pe nalti es. Movement during 2 02 1 : Unchange d Du e to the re str ict ions in trod uce d to pre vent t he spr ead of C ov id- 19, our on site d eve lopme nts h ave be en subj ec t to minor d elay s. Th e Fea ther sto ne Buildin g and S oho P lac e are aiming t o achie ve pra cti cal c omple tion in H1 2022 and a re stil l exp ect ed to b e comp lete d withi n their o rigin al budg ets . Site s are no w full y ope ratio nal in ac cor danc e with S ite Op erat ing Pro ce dure s Versio n 9. De spite s tric t Co vid-1 9 pro toc ols on s ite, th ere is aris k of lab our and r eso urc e shor t age s bot h on site an d in the s upply cha in,whic h coul d lead to p rodu cti vit y dis rupt ion an d proje ct de lay. Executive responsib ility: Paul Williams — S tri ct C ovid - 1 9 pr otoc ols at a ll of our o n site de velo pmen ts, in a cc ordan ce wi th Site Operating Proc edures (published by the Constr uction Leadership Council). — R egul ar mon itori ng of our c ontr act ors’ c ash f lows. — Frequent meetings with k ey contractors and subcontractors to review their work programme and maintain strong relationships . — O f f- site ins pe ctio n of key c omp onen ts to en sure th ey hav e bee n com plete d to the requisite qualit y. — Pr ior to construc tion beginning on sit e, professional project managers conduct site in ves tigati ons in cluding t he buil ding’s his tor y an d vario us sur ve ys to id enti f y any p otent ial iss ues . — M onthl y revi ews of Br exit -rel ated s upply c hain is sue s for e ach of o ur major proje ct s, inc luding in r esp ec t to pot ential l abo ur sho r tag es. Stra tegic objectives 1. 2. 4. 5. Business mode l — O ur core ac tivities — A dding v alue fo r stakeholders KPIs — T otal return — T otal proper ty return — T otal shareholder return — T he B oard an d Ex ecu tiv e Com mit tee re ce ive d reg ular up date s on our principal developments. — 100% o f the c ost s for T he Fe athe rsto ne Build ing and S oho P lac e, have b ee n ag ree d and f ixe d. — Q uar ter ly co st re por t s prov ide d an upda te on de velop ment p rog res s from a co st, p rof itab ilit y and p rog ramme p ers pe cti ve. — M onito red t he numb er of on s ite wor kers b eing r equir ed to is olat e due to be ing not ifie d by th e NHS app an d the p oten tial imp act o n our proj ect s. — C ontinue with ou r current controls and mitigating action s. OUR PRINCIP A L RISKS CO NT IN UED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 112 OPER A TIONA L The G roup suf fe rs eithe r a financial lo ss or ad verse c onse quenc es due to pro ces ses b eing inade quate or not op erating c orrec tly , human f actors o r other ex ter nal event s Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 4A . REDUCED DE VE LOPMENT RE TURNS Ret urns f rom th e Grou p’ s de velo pmen ts may b e adv ers ely imp acte d due to: — d elay s on sit e; — increase d construction costs; — l abour shortage s; — m ateri als and m ateri al shor t age s; and — adver se l et tin g conditions. De spit e stri ct C ovid - 1 9 pr otoc ols o n site, t here is a r isk of l abo ur and res ourc e sho r tag es bo th on si te and in th e supp ly chai n, whic h coul d lead to pro duc tiv it y disr uptio n and pr ojec t del ay . A ny sign ific ant d elay in c omp leting the d eve lopme nt proj ec ts may re sult in f inan cial pe naltie s or a re duc tion in the Group’ s targeted financial returns. Movement during 2 02 1 : Incre ase d Dur ing 2021 , our D eve lopme nt tea m liaise d and a gre ed pr oc ess es to miti gate agai nst de lay s or co st inc reas es wi th our p rincip al co ntra ctor s dueto p oten tial mat erial a nd lab our sh or ta ges . Executive responsib ility: Paul Williams — D et ailed re view s are pe r for med o n con str uct ion proj ect s to ens ure tha t pro gramm e for ec asts p redi cte d by our c ont ract ors ar e align ed wit h our vi ews. — T he pr ocur emen t pro ces s use d by th e Gro up inclu des th e use of h ighly rega rde dfir ms of quan tit y sur v eyor s and is d esig ned t o minimis e unce r taint y regar ding cos ts. — D evelopment costs are benchmarked t o ensure that the Group obtains co mpet iti ve pri cing an d, wher e appr opri ate, f ixed p ric e con trac ts are n egot iated . — P ost -c omple tion re vie ws are c arri ed ou t for al l major de velo pmen ts to en sure tha timprov eme nts to t he Gro up’s proc edur es are i denti fie d, imp lemen ted an d les sons le arne d. — P roc edu res c arri ed ou t bef ore st ar ting w ork on s ite, s uch as si te inve stig ation s, hist oric al re sear ch of th e prop er t y and s ur vey s con duc ted as p ar t of th e plan ning app lica tion, r edu ce th e risk of u niden tif ied is sue s caus ing del ays o nce o n site. — In ves tmen t appr aisal s, whi ch incl ude co nting enci es an d infl ation ar y co st inc reas es, a re pre pare d and s ensi tivi t y analy sis is und er tak en to judg e whet her an ade quat e retur n is mad e in all like ly circu mst anc es. — T he Gr oup’s pre- let ting s trate g y redu ce s or rem ove s the let ti ng risk o f the dev elop ment a s soo n as po ssib le. Stra tegic objectives 1. 2. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal return — T otal proper ty return — T otal shareholder return — We h ave a fl exible d eve lopme nt pip eline a nd, wh ere app ropr iate, w e defe rre d exp endi ture an d de cisio ns on f uture p rojec ts wh ile keep ing ver y c los e to our contractors, professional consultants and the project teams on sit e. — M onito red c ons tru ctio n co st inf lati on in rel atio n to fut ure pr ojec ts. — T he B oard an d Ex ecu tiv e Com mit tee re ce ive d reg ular up date s on our principal developments i ncluding construction costs . — B oth m ajor on si te deve lopm ent s are pro gre ssing w ell. 100% o f the c ost s for Th e Feat her ston e Building a nd So ho Pl ace , have b een a gre ed an d fix ed. — D emand for constr uction activit y i n Central London is i ncreasing and input co sts o f both m ater ials an d labo ur are in crea sing . — S pec ifi c risk a sse ssm ent s on bud get allo wanc es fo r infl atio n are kept u nder rev iew on a q uar ter ly basi s to tes t ade quac y of budg ets . — In r esp ec t to our de -ris king s trate g y , we h ave pre -let 87% o f Soh o Plac e. — C ontinue with ou r current controls and miti gating a ctio ns wit h a major fo cus on proj ec t monitori ng. 4B. ‘ON SIT E’ RISK Risk o f proje ct de lays a nd/or co st ov err uns c ause d by unid enti fie d iss ues . For e xampl e, if th e Group f ails to: (i) a deq uately a pprai se inve stm ent s pri orto st ar ting w ork on s ite, inc luding t hrou gh tak ing into a cco unt co nting encie s and in fla tiona r y cos t incr eas es; (ii) u se a pro cure men t pro ce ss th at is pro per ly des igne d (to minimis e unc er tain ty a roun d cos ts) and t hat inc lude s the us e of high ly regar ded q uanti ty s ur vey ors; (iii ) benchmark development costs; (iv) conduct thorough sit e investigations tore duc e the ri sk of unid entif ie d iss ues su ch as as be stos; (v) im plem ent pre-letting strateg y; or (vi) conduct detailed reviews on constr uction projects to eval uate programme forecasts made by contrac tors, dev elop ment p rojec ts m ay be sig nif ican tly del aye d and we c ould f ace alos sof ren tal in com e and pe nalti es. Movement during 2 02 1 : Unchange d Du e to the re str ict ions in trod uce d to pre vent t he spr ead of C ov id- 19, our on site d eve lopme nts h ave be en subj ec t to minor d elay s. Th e Fea ther sto ne Buildin g and S oho P lac e are aiming t o achie ve pra cti cal c omple tion in H1 2022 and a re stil l exp ect ed to b e comp lete d withi n their o rigin al budg ets . Site s are no w full y ope ratio nal in ac cor danc e with S ite Op erat ing Pro ce dure s Versio n 9. De spite s tric t Co vid-1 9 pro toc ols on s ite, th ere is aris k of lab our and r eso urc e shor t age s bot h on site an d in the s upply cha in,whic h coul d lead to p rodu cti vit y dis rupt ion an d proje ct de lay. Executive responsib ility: Paul Williams — S tri ct C ovid - 1 9 pr otoc ols at a ll of our o n site de velo pmen ts, in a cc ordan ce wi th Site Operating Proc edures (published by the Constr uction Leadership Council). — R egul ar mon itori ng of our c ontr act ors’ c ash f lows. — Frequent meetings with k ey contractors and subcontractors to review their work programme and maintain strong relationships . — O f f- site ins pe ctio n of key c omp onen ts to en sure th ey hav e bee n com plete d to the requisite qualit y. — Pr ior to construc tion beginning on sit e, professional project managers conduct site in ves tigati ons in cluding t he buil ding’s his tor y an d vario us sur ve ys to id enti f y any p otent ial iss ues . — M onthl y revi ews of Br exit -rel ated s upply c hain is sue s for e ach of o ur major proje ct s, inc luding in r esp ec t to pot ential l abo ur sho r tag es. Stra tegic objectives 1. 2. 4. 5. Business mode l — O ur core ac tivities — A dding v alue fo r stakeholders KPIs — T otal return — T otal proper ty return — T otal shareholder return — T he B oard an d Ex ecu tiv e Com mit tee re ce ive d reg ular up date s on our principal developments. — 100% o f the c ost s for T he Fe athe rsto ne Build ing and S oho P lac e, have b ee n ag ree d and f ixe d. — Q uar ter ly co st re por t s prov ide d an upda te on de velop ment p rog res s from a co st, p rof itab ilit y and p rog ramme p ers pe cti ve. — M onito red t he numb er of on s ite wor kers b eing r equir ed to is olat e due to be ing not ifie d by th e NHS app an d the p oten tial imp act o n our proj ect s. — C ontinue with ou r current controls and mitigating action s. Key Stra tegic objectives 1. T o opt imise r etur ns and c reate v alue fr om a bal anc ed p or tf olio 3. T o at tra ct, r etain a nd de velop talented em ployees 5. T o maintain strong and f lexible f inancin g 2. T o grow recurring earnings and c ash f low 4. T o de sign, d eli ver an d ope rate our buildingsre spo nsibly 113 Financ ial Stat ements Governance Strategic repor t Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 4C. CONTR AC TOR /SUBCONT RAC TOR DEFAUL T Ret urns f rom th e Grou p’ s de velo pmen ts are r edu ced d ue to de lays an d co st increases caused by either a mai n contractor or ma jor subcontractor def aulting d uring th e proje ct . The re have b ee n ongo ing iss ues wi thin th e co nstr uc tion in dust r y in resp ec t of th e leve l of risk an d nar row pro fit margins being accepte d by contractors . Movement during 2 02 1 : Unchange d Th ere is an o ngoin g risk of in solv enc ies in th e con str uct ion ind ustr y. Du e to this r isk , we have b een a cti vely m onit oring t he fin ancia l healt h of our m ain contractors and subcontractors. Executive responsib ility: Paul Williams — R egul ar mon itori ng of our c ontr act ors, i nclud ing the ir proje ct c ash f lows, i s carried out. — Ke y con str uc tion p acka ges ar e acq uired e arly in t he proj ect ’s life t o redu ce th e ris ks ass oci ated wi th la ter def ault. — T he f inanc ial st anding o f our main c ont ract ors is r evie wed p rior to aw arding t he pro ject contr act. — O ur main c ontr acto rs are r esp onsib le, and a ssum e the im medi ate risk , for subcontractor default. — P ayme nts to c ont rac tors ar e in pla ce to inc ent ivis e the a chiev eme nt of proj ec t time sc ales , with d amag es ag ree d in the e vent o f dela y/ co st ov err uns. — R egul ar on si te supe r visi on by a de dic ated P rojec t Mana ger w ho moni tor s contractor per formance and identifies problems at an early sta ge, thereby ena bling re me dial ac tion to b e take n. — We u se kn own co ntra ctor s with w hom we h ave es tab lishe d lon g-ter m workingrelationships. — C ontractors are paid promptly and are encouraged to pay su bc ontractors promptly . Stra tegic objectives 1. 2. 4. Business mode l — O ur core ac tivities — A dding v alue fo r stakeholders KPIs — T otal return — T otal proper ty return — T otal shareholder return — Engaged continuously with our contractors, subc ontractors and supply cha induring t he Co vid-1 9 pan demi c. — O ur supp lier s were p aid on av era ge with in 20 days . — A cc epte d ear ly orde ring of m ateri als ahe ad of th eir ne ed o n site to ac ce lerate ca sh flo w to our sup ply ch ain. — Wo rked a longsi de loc al aut hor itie s to ex tend p er missib le wor king ho urso n site. — T he B oard an d Ex ecu tiv e Com mit tee re ce ive d reg ular up date s on our principal developments. — Q uar ter ly co st re por t s prov ide d an upda te on de velop ment p rog res s from aco st, p rof itab ilit y and p rog ramme p ers pe cti ve. — C ontinue with ou r current controls and mitigating action s. 5A. CY BER A T T ACK ON OUR IT SYS TEMS Th e Group m ay be su bjec t to a cy ber a tt ack th at res ults in i t being u nable to use i ts inf orma tion s yste ms and / or lo sing da ta. S uch an a tt ack c ould se vere ly res tric t the a bilit y of t he Gro up to op erate, l ead to an in cre ase in co sts a nd/or re quire a sig nif ican t dive rsio n of mana gem ent tim e. Movement during 2 02 1 : Incre ase d Thi s risk ha s be en heig hten ed dur ing th e Cov id-1 9 p ande mic, as c yb er- cri minals s eek t o explo it the d isrup tion c ause d by em ploy ees w ork ing fro m hom e. In re spo nse, w e iden tifi ed th e key IT r isks ar ising f rom h omew orkin g and implemented additional controls. Executive responsib ility: Damian Wisniewski — T he Gr oup’s Busin ess C ont inuit y Pl an is re gula rly re view ed and t este d. — Independent internal and external penetration/vulnerabi lit y t ests are regularly co nduc ted t o ass ess t he ef fe ct iven es s of the G roup’s se curi ty. — M ulti-Fac tor Au the ntic atio n exis ts for r emot e acc es s to our sy stem s. — In cide nt re spon se and r eme diatio n pro ces se s are in pl ace , which a re reg ular ly rev iewe d and te ste d. — T he Gr oup’s data is r egul arly b acke d up and r epli cate d of f- site. — O ur IT s yste ms are pr otec te d by anti- vir us sof t ware , sec urit y an omal y dete ctio n and f irew alls th at are f requ ently u pdate d. — Fr eque nt st af f aware nes s and tr aining p rogr amme s. — S ec urit y me asur es are r egul arly r evie wed b y the DI T dep ar tmen t. — T he Gr oup has b ee n awarde d th e ‘C ybe r Ess enti als’ ac cre dita tion wh ich demonstrates our commitment t o cyb er security. Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal shareholder return — M onito red o ur se cure inte rne t gateway a nd clo ud man age d malware protection for malicious activi ty during home/ of fice working. — P rov ide d addit ional e mploy ee awa rene ss tr aining on s oci al med ia and remote working securit y best practic e. — M onito red o ur Dat a Leak P reve ntio n sys tem fo r any indic ati ons of p ers onal data breaches . — R eme diate d any key f inding s from t he la st se curi t y pen etra tion te st and commissioned another independent internal/ ex ternal t est. — C on ducte d a simu late d ‘phishi ng’ ex erci se as pa r t of the on going s ec urit y awareness programme. — C omp lete d a busin ess c ont inuit y te st and f ull dis aste r rec ove r y tes t. — O n 30 July 2021 , o ur Cy be r Ess entia ls ac cre ditat ion was r enew ed, h aving pas se d an ex ter nal se cur it y sc an of all int erne t-f acing s er vic es an d an asses sment o f technical and operational controls. — I T Gov ern ance c ond ucte d a cy be r sec urit y he alth c hec k which c ons iste d of arev iew of o ur infor mati on se curi t y gove rnan ce fr amew ork , an inter nal / ex ter nal v ulner abili ty s can a nd emp loye e ques tion naire (se e pa ge 1 62). — Implement the recommendations aris ing fr om RSM ’s interna l audit of our I T con trol s and th e cyb er s ecur it y he alth ch eck p er for me d by IT Governance. — P er for m a det ailed r evie w of our ‘ransomware securit y incident res pon se pl ayb ook ’ (se e page 162). — Implement further securit y controls to enh ance o ur lay ere d defe nce m ode l. — En hanc ing clo ud se curi ty a nd ano maly detection for remote work ers. — En hanc ing our s ecur it y pat ching an d mobile device management ca pabili ties t o supp or t a hyb rid working model. 5B. CYBE R A T T ACK ON OUR BUILDI NGS Th e Group i s exp ose d to cy ber a tt ack s on its p rop er tie s which m ay res ult in dat a brea che s or sig nifi cant di srup tion to I T -en able d tenan t ser v ice s. A major c yb er at ta ck agai nst th e Grou p or its p rop er tie s coul d negat ive ly impa ct th e Grou p’ s bu sine ss, r epu tatio n and op era ting re sults . Movement during 2 02 1 : Unch ange d but li kely to inc rea se as ou r buildings bec ome more ‘int elligent ’ Executive responsib ility: David Silverman — Eac h bui lding has i ncident managem ent procedures which are regularly reviewed and tes ted. — P hysi cal s egre gatio n bet we en the b uilding ’s core I T infr astr uc ture an d tenan ts’ corporate IT networks. — P hysi cal s egre gatio n of IT inf ras truc tur e bet we en buildin gs acro ss t he po rt f olio. — In clusi on of Buil ding Mana ger s in all cy be r sec urit y awa rene ss tr aining an d phishing simul ations. Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — C ould im pac t on any Gro upKPI s — En gage d wit h a por t fol io IT p ar tner t o prov ide ad ditio nal sup por t f or ICT infrastructure and cyber sec urity assessments. — C on ducte d se curi t y rev iews on n et work d esig ns for a ny new b uildings , or refurbi shments. — Ensured that cyber securit y remains a key consideration in the delivery of intell igent buildin gs and digit al initiat ives . — C ont inue d to col lab orate wi th th e Io T Se curi t y Foun datio n and ot her in dustr y st akeho lder s on the d eve lopm ent of a s et of inte llige nt buildin gs se curi ty guidance documents . — S ent p hishing s imulat ion te sts to B uilding Ma nage rs. — C omp lete d manda tor y se curi t y awaren es s trainin g for al l staf f, inc luding Building Man ager s. — Fu rt her d evel op our IT g ove rnan ce framework, securit y monitoring and securit y incident respons e proce dures. — Implement further securit y controls to enh ance o ur lay ere d defe nce m ode l. — C oll abo rate wit h our p or tf olio I T par t ner on m itigat ing any c ybe r risk s identifie d followi ng cyb er securit y asses sments. OUR PRINCIP A L RISKS CO NT IN UED OPER A TIONA L CONT INUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 1 14 Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 4C. CONTR AC TOR /SUBCONT RAC TOR DEFAUL T Ret urns f rom th e Grou p’ s de velo pmen ts are r edu ced d ue to de lays an d co st increases caused by either a mai n contractor or ma jor subcontractor def aulting d uring th e proje ct . The re have b ee n ongo ing iss ues wi thin th e co nstr uc tion in dust r y in resp ec t of th e leve l of risk an d nar row pro fit margins being accepte d by contractors . Movement during 2 02 1 : Unchange d Th ere is an o ngoin g risk of in solv enc ies in th e con str uct ion ind ustr y. Du e to this r isk , we have b een a cti vely m onit oring t he fin ancia l healt h of our m ain contractors and subcontractors. Executive responsib ility: Paul Williams — R egul ar mon itori ng of our c ontr act ors, i nclud ing the ir proje ct c ash f lows, i s carried out. — Ke y con str uc tion p acka ges ar e acq uired e arly in t he proj ect ’s life t o redu ce th e ris ks ass oci ated wi th la ter def ault. — T he f inanc ial st anding o f our main c ont ract ors is r evie wed p rior to aw arding t he pro ject contr act. — O ur main c ontr acto rs are r esp onsib le, and a ssum e the im medi ate risk , for subcontractor default. — P ayme nts to c ont rac tors ar e in pla ce to inc ent ivis e the a chiev eme nt of proj ec t time sc ales , with d amag es ag ree d in the e vent o f dela y/ co st ov err uns. — R egul ar on si te supe r visi on by a de dic ated P rojec t Mana ger w ho moni tor s contractor per formance and identifies problems at an early sta ge, thereby ena bling re me dial ac tion to b e take n. — We u se kn own co ntra ctor s with w hom we h ave es tab lishe d lon g-ter m workingrelationships. — C ontractors are paid promptly and are encouraged to pay su bc ontractors promptly . Stra tegic objectives 1. 2. 4. Business mode l — O ur core ac tivities — A dding v alue fo r stakeholders KPIs — T otal return — T otal proper ty return — T otal shareholder return — Engaged continuously with our contractors, subc ontractors and supply cha induring t he Co vid-1 9 pan demi c. — O ur supp lier s were p aid on av era ge with in 20 days . — A cc epte d ear ly orde ring of m ateri als ahe ad of th eir ne ed o n site to ac ce lerate ca sh flo w to our sup ply ch ain. — Wo rked a longsi de loc al aut hor itie s to ex tend p er missib le wor king ho urso n site. — T he B oard an d Ex ecu tiv e Com mit tee re ce ive d reg ular up date s on our principal developments. — Q uar ter ly co st re por t s prov ide d an upda te on de velop ment p rog res s from aco st, p rof itab ilit y and p rog ramme p ers pe cti ve. — C ontinue with ou r current controls and mitigating action s. 5A. CY BER A T T ACK ON OUR IT SYS TEMS Th e Group m ay be su bjec t to a cy ber a tt ack th at res ults in i t being u nable to use i ts inf orma tion s yste ms and / or lo sing da ta. S uch an a tt ack c ould se vere ly res tric t the a bilit y of t he Gro up to op erate, l ead to an in cre ase in co sts a nd/or re quire a sig nif ican t dive rsio n of mana gem ent tim e. Movement during 2 02 1 : Incre ase d Thi s risk ha s be en heig hten ed dur ing th e Cov id-1 9 p ande mic, as c yb er- cri minals s eek t o explo it the d isrup tion c ause d by em ploy ees w ork ing fro m hom e. In re spo nse, w e iden tifi ed th e key IT r isks ar ising f rom h omew orkin g and implemented additional controls. Executive responsib ility: Damian Wisniewski — T he Gr oup’s Busin ess C ont inuit y Pl an is re gula rly re view ed and t este d. — Independent internal and external penetration/vulnerabi lit y t ests are regularly co nduc ted t o ass ess t he ef fe ct iven es s of the G roup’s se curi ty. — M ulti-Fac tor Au the ntic atio n exis ts for r emot e acc es s to our sy stem s. — In cide nt re spon se and r eme diatio n pro ces se s are in pl ace , which a re reg ular ly rev iewe d and te ste d. — T he Gr oup’s data is r egul arly b acke d up and r epli cate d of f- site. — O ur IT s yste ms are pr otec te d by anti- vir us sof t ware , sec urit y an omal y dete ctio n and f irew alls th at are f requ ently u pdate d. — Fr eque nt st af f aware nes s and tr aining p rogr amme s. — S ec urit y me asur es are r egul arly r evie wed b y the DI T dep ar tmen t. — T he Gr oup has b ee n awarde d th e ‘C ybe r Ess enti als’ ac cre dita tion wh ich demonstrates our commitment t o cyb er security. Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal shareholder return — M onito red o ur se cure inte rne t gateway a nd clo ud man age d malware protection for malicious activi ty during home/ of fice working. — P rov ide d addit ional e mploy ee awa rene ss tr aining on s oci al med ia and remote working securit y best practic e. — M onito red o ur Dat a Leak P reve ntio n sys tem fo r any indic ati ons of p ers onal data breaches . — R eme diate d any key f inding s from t he la st se curi t y pen etra tion te st and commissioned another independent internal/ ex ternal t est. — C on ducte d a simu late d ‘phishi ng’ ex erci se as pa r t of the on going s ec urit y awareness programme. — C omp lete d a busin ess c ont inuit y te st and f ull dis aste r rec ove r y tes t. — O n 30 July 2021 , o ur Cy be r Ess entia ls ac cre ditat ion was r enew ed, h aving pas se d an ex ter nal se cur it y sc an of all int erne t-f acing s er vic es an d an asses sment o f technical and operational controls. — I T Gov ern ance c ond ucte d a cy be r sec urit y he alth c hec k which c ons iste d of arev iew of o ur infor mati on se curi t y gove rnan ce fr amew ork , an inter nal / ex ter nal v ulner abili ty s can a nd emp loye e ques tion naire (se e pa ge 1 62). — Implement the recommendations aris ing fr om RSM ’s interna l audit of our I T con trol s and th e cyb er s ecur it y he alth ch eck p er for me d by IT Governance. — P er for m a det ailed r evie w of our ‘ransomware securit y incident res pon se pl ayb ook ’ (se e page 162). — Implement further securit y controls to enh ance o ur lay ere d defe nce m ode l. — En hanc ing clo ud se curi ty a nd ano maly detection for remote work ers. — En hanc ing our s ecur it y pat ching an d mobile device management ca pabili ties t o supp or t a hyb rid working model. 5B. CYBE R A T T ACK ON OUR BUILDI NGS Th e Group i s exp ose d to cy ber a tt ack s on its p rop er tie s which m ay res ult in dat a brea che s or sig nifi cant di srup tion to I T -en able d tenan t ser v ice s. A major c yb er at ta ck agai nst th e Grou p or its p rop er tie s coul d negat ive ly impa ct th e Grou p’ s bu sine ss, r epu tatio n and op era ting re sults . Movement during 2 02 1 : Unch ange d but li kely to inc rea se as ou r buildings bec ome more ‘int elligent ’ Executive responsib ility: David Silverman — Eac h bui lding has i ncident managem ent procedures which are regularly reviewed and tes ted. — P hysi cal s egre gatio n bet we en the b uilding ’s core I T infr astr uc ture an d tenan ts’ corporate IT networks. — P hysi cal s egre gatio n of IT inf ras truc tur e bet we en buildin gs acro ss t he po rt f olio. — In clusi on of Buil ding Mana ger s in all cy be r sec urit y awa rene ss tr aining an d phishing simul ations. Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — C ould im pac t on any Gro upKPI s — En gage d wit h a por t fol io IT p ar tner t o prov ide ad ditio nal sup por t f or ICT infrastructure and cyber sec urity assessments. — C on ducte d se curi t y rev iews on n et work d esig ns for a ny new b uildings , or refurbi shments. — Ensured that cyber securit y remains a key consideration in the delivery of intell igent buildin gs and digit al initiat ives . — C ont inue d to col lab orate wi th th e Io T Se curi t y Foun datio n and ot her in dustr y st akeho lder s on the d eve lopm ent of a s et of inte llige nt buildin gs se curi ty guidance documents . — S ent p hishing s imulat ion te sts to B uilding Ma nage rs. — C omp lete d manda tor y se curi t y awaren es s trainin g for al l staf f, inc luding Building Man ager s. — Fu rt her d evel op our IT g ove rnan ce framework, securit y monitoring and securit y incident respons e proce dures. — Implement further securit y controls to enh ance o ur lay ere d defe nce m ode l. — C oll abo rate wit h our p or tf olio I T par t ner on m itigat ing any c ybe r risk s identifie d followi ng cyb er securit y asses sments. Key Stra tegic objectives 1. T o opt imise r etur ns and c reate v alue fr om a bal anc ed p or tf olio 3. T o at tra ct, r etain a nd de velop talented em ployees 5. T o maintain strong and f lexible f inancin g 2. T o grow recurring earnings and c ash f low 4. T o de sign, d eli ver an d ope rate our buildingsre spo nsibly 115 Financ ial Stat ements Governance Strategic repor t Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 5C. SIGNIFICANT BUSINESS INTE RRUPTION (for e xample, pandemi c, terrorism-relat e d event or other busi ness interruption ) Major in cide nts ma y signif ic antly in terr upt th e Grou p’ s bu sine ss, i ts oc cupi ers an d/or supp ly chain . Suc h incid ents c ould b e cau sed b y a wide rang e of eve nts s uch as a p ande mic, te rro rism- rela ted ev ent s, nat ural ca tas trop hes or f ire s. Th is cou ld res ult in iss ues su ch as b eing un able to ac ces s or op erat e the Gr oup’s prop er tie s, ten ant fail ures or r edu ce d rent al inc ome , share p ric e vola tilit y or lo ss of ke y supp lier s. Movement during 2 02 1 : Unchange d Th e ramif ic ation s of the C ovi d- 19 outbr eak hav e be en far -rea ching a cros s all s ect ors an d the p ande mic has c reate d ex tr eme e con omic vo latil it y. The Gro up has su f fere d minim al disru ption d ue to C ovid - 19 and ha s be en ca pable o f oper ating s ucc es sfu lly rem otely d uring lo ckdo wn res tric tio ns. Howe ver, the loc kdow ns have c aus ed a de lay to ou r deve lopm ent ac tiv itie s and r educ tio n in cas h flow d ue to def erm ent or n on-p aym ent of re nt. Executive responsib ility: Al l Execut ive Direct ors — T he Grou p has comprehensive business continuity and incident management pro ce dure s both a t Group l evel a nd for e ach of o ur man age d building s which ar e reg ular ly rev iewe d and te ste d. — G ove rnme nt he alth gui delin es are m ainta ined a t all of our c ons tru cti on site s. — M ost o f our emp loye es are c apa ble of wo rkin g remo tely an d have th e nec es sar y ITre so urce s. — F ire pro tec tion an d acc es s/se curit y p roc edur es are in p lac e at all of o ur managedproper ties. — C omp rehe nsiv e prop er t y dam age an d busin ess i nterr upti on insur anc e which includes t errorism. — At le ast a nnuall y , a f ire ris k ass ess ment a nd he alth and s afe ty in spe cti on are pe rf orm ed fo r eac h prop er t y in our m anage d po r tf olio, in a ddit ion to ann ual Planned Preventive Ma intenance su r veys. — R obus t se curi ty a t our buildi ngs, in cludin g CCT V and a cce ss c ontr ols . Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — C ould im pac t on any Gro upKPI s — En gage d wit h a por t fol io IT p ar tner t o prov ide ad ditio nal sup por t f or ICT infrastructure and cyber sec urity assessments. — C ont inue d to con fig ure se cure V PN co nne cti ons and d eplo y full y encr y pte d lap tops to e nable s ec ure hy brid wo rkin g cap abili ties . — P rov ide d addit ional e mploy ee awa rene ss tr aining on s oci al med ia and remote working securit y best practic e. — R eme diate d any key f inding s from t he la st se curi t y pen etra tion te st andcommissioned another independent internal/external test. — C omp lete d a busin ess c ont inuit y te chnic al tes t and f ull dis aste r re cov er ytes t. — C onducted monthly vulnerabi lit y scans. — Wo rked w ith ou r ex tern al fire c ons ultan ts to be a mong st the f irs t UK pro per t yc ompa nies to im pleme nt a Fir e Safe ty M anag emen t Sy stem in linew ith B S9997 . — C ontinue with ou r current controls and mitigating action s. 6. REPUT A TIO NAL DAMAGE Th e Group h as inve ste d signi fic antl y in deve lopin g a well-re garde d and res pe cte d bran d. Th e Group’s rep ut ation c ould b e dama ged , for ex ample, through una uthorise d or inaccurate media coverage, unethi cal practice s or be havio urs b y the Gr oup’s exec uti ves , or failur e to com ply wit h rele vant legi slat ion. T his co uld lea d to a mater ial ad ver se ef fe ct o n the Gr oup’s operating performanc e and the overall financial position of the Group. Our str ong c ulture, l ow ove rall ri sk toler anc e and es tab lish ed pro ce dure s and po licie s mitig ate again st th e risk of in tern al wron gdoin g. Movement during 2 02 1 : Red uced Fe edb ack on h ow we hav e resp on ded to t he Co vid-1 9 pan demi c, par t icul arly in re spe ct to o ur oc cupie rs, s uppli ers , emplo yee s and C ommun it y Fund, h as generally been positive. Executive responsib ility: Al l Execut ive Direct ors — Close involvement of senior ma nagement in d ay-to-day operations and es tabl ishe d pro ce dure s for app rov ing all ex te rnal an noun cem ent s. — A ll new m emb ers of s taf f b ene fit f rom an in duc tion p rogr amme an d are is sue d wit h our Gro up st af f handb oo k. — T he Gr oup emp loys a H ead of In ves tor and C or pora te Co mmunic atio ns and ret ains s er vic es of a n ex tern al PR ag enc y , b oth of wh om main tain re gula r cont ac t wit h ex tern al me dia sour ce s. — A G roup wh istle blowin g sys tem fo r staf f i s maint aine d to rep or t wron gdoin g anonymousl y. — S oc ial me dia chan nels a re moni tore d. — O ngoin g enga geme nt wit h loc al com muniti es in are as wh ere th e Group o per ates . — S taf f t raining a nd aware nes s pro gramm es . Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal return — T otal proper ty return — T otal shareholder return Co uld indir ec tly imp act on a numb er of o ur othe r KPIs In ord er to sup por t o ur com munit y dur ing Co vid-1 9: — En sure d the m arket a nd our ke y stak ehold ers w ere kep t updat ed on o ur res pon se to C ovid - 1 9. — F ollow ed a pr oac tive a nd pe rso nalis ed re spo nse to o ur tena nts fa cing dif f icult ies due t o Cov id-1 9. — C ommitted £7 25,000 of commun it y and s pons orship donations for 20 21 . — Wo rked w ith re levan t agen cie s to prov ide ac co mmo datio n and c ar par king fr ee of ch arge to NH S staf f in c ent ral Lon don . — C ontinued t o implement a mandator y complia nce training progra mme for allem ploy ees ( inclu ding Dire cto rs). — M onito red in ves tor vie ws and p res s com ment s while main tainin g con tac t with other stakeholders. — C ontinue communication with, and listeni ng to, our stakeholders. — C ont inue to su ppo rt t hos e in ne ed. — C ont inue to su ppo rt o ur st af f ’ s tr aining requirements. — C ontinue with ou r current controls and mitigating action s. 7 . OUR RESILIENCE TO CLIM A TE CH ANGE If th e Group f ails to r esp ond ap prop riate ly , an d suf f icie ntly, to clim ate cha nge ris ks or f ails to be nef it f rom th e pote ntial op por t uniti es. T his co uld lea d to dama ge to our r eput atio n, los s of inc ome an d/or pro per t y val ues an d los s of our li cen ce to o pera te. In add ition , the re is a ris k that th e co st of co nstr uc tion m ateria ls and p rovi ding en erg y, water an d othe r ser v ice s to oc cupi ers wil l rise a s a con seq uenc e of clim ate cha nge. Movement during 2 02 1 : Unchange d O veral l, clim ate ch ange ri sk con tinue s to inc reas e in prom inen ce and imp or tan ce. T he UK Go ver nmen t con tinue s to intro duc e mor e legis lati ve asp ec ts linke d to cl imate ris k e.g . fro m 2022 cer t ain lis ted en titie s will ha ve to dis clos e in line wi th the T CFD and t he la test e ner gy w hite p aper i s set ting ou t highe r sta ndard s for en erg y ef f ici enc y in com merc ial and re sid ential proper ties. Executive responsib ility: Nigel Geo rge — T he B oard an d Ex ecu tiv e Com mit tee re ce ive re gul ar upda tes an d pres ent atio ns on ES G (enviro nmen tal, s oci al and go ver nanc e) mat ters a s well a s prog res s again st our p athw ay to be comi ng net ze ro car bon b y 2030. — T he Su stain abili ty C ommi t tee mo nitor s our p er for manc e and managementcontrols. — S tro ng team le d by an e xpe rien ce d Head o f Sust ainabi lit y. — T he Gr oup mo nitor s its ES G rep or ting a gainst v ario us indu str y b ench mark s. — P rod ucti on of an an nual Re spo nsibili t y Repo r t with ke y data a nd pe rf orm ance po ints whi ch are ex te rnal ly ass ured . — In 2017 we adop ted sc ienc e- base d ca rbo n targ ets wh ich hav e be en independently veri fie d b y the Science-Based T argets initia tive (SBTi) . Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal return — B REEA M rating — Science- based ca rbon target p erf ormanc e — T otal shareholder return A sign ifi cant di ver sion of t ime co uld af fe ct a wi der ran ge ofKP Is — P ublis hed o ur annu al Res pons ibilit y Re por t in A pril 2 02 1. — C ontinued investigations int o of f-site renewable energy generation opp or tuni tie s availa ble to us to re duc e our ma rket- bas ed de pen denc y, whic hinclu ded s ubmit tin g a plan ning app lic ation f or an 1 8.4 MW sol ar par kon Lo chfa ulds Far m (see p age 1 3). — R efre she d our D eve lopme nt Fram ewor k for D eve lopm ents , which s ets newm inimum re quirem ent s for th e dev elopm ent pi pelin e. — We s et buil ding sp ecif ic op era tiona l ener g y targ ets , align ed wi th a 1 .5°C science-based scenario. — L aunc he d our fi rst n et zero c arb on oc cup ier sur v ey fo cuse d sp eci fic ally on be tte r unde rst andin g how we c an sup por t o ur occ upie rs achi eve th eir go als (se e p ag e 13). — En sure d our 2021 Rep or t & Ac co unts c ont ains disc losu res whi ch are consistent with T ask Force on Cli mate-Related Financial Disclosures (TCFD) re comm end ation s (see p age s 68 to 73). — C ommi ssio ned a c omp rehe nsiv e rep or t into th e fea sibili ty a nd co sts o f achi evin g an EPC B g rade a cro ss our p or t foli o by 2030 (s ee pa ge 55). — At te nde d, and p res ente d, at the C onf eren ce of t he Par ti es 26 (CO P26) (seep age 5 4). — R evie w the f inding s arisin g from t he oc cupi er net ze ro ca rbo n sur vey a nd how w e can su ppo rt o ur oc cupie rs achi evin g their g oals . — In ves tigate p lanti ng a fur t her 425ha of tre es ac ros s our S cot tis h land (equi valen t to 794 fo otba ll fi elds). — A gr ee a st rateg y f or the p or t fol io to achi eve an EP C B gr ade by 20 30 fol lowing t he re sults of t he fe asibili t y and c os t repo r t. — C ontinue with ou r current controls and mitigating action s. OPER A TIONA L C ONTINU ED OUR PRINCIP A L RISKS CO NT IN UED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 116 Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 5C. SIGNIFICANT BUSINESS INTE RRUPTION (for e xample, pandemi c, terrorism-relat e d event or other busi ness interruption ) Major in cide nts ma y signif ic antly in terr upt th e Grou p’ s bu sine ss, i ts oc cupi ers an d/or supp ly chain . Suc h incid ents c ould b e cau sed b y a wide rang e of eve nts s uch as a p ande mic, te rro rism- rela ted ev ent s, nat ural ca tas trop hes or f ire s. Th is cou ld res ult in iss ues su ch as b eing un able to ac ces s or op erat e the Gr oup’s prop er tie s, ten ant fail ures or r edu ce d rent al inc ome , share p ric e vola tilit y or lo ss of ke y supp lier s. Movement during 2 02 1 : Unchange d Th e ramif ic ation s of the C ovi d- 19 outbr eak hav e be en far -rea ching a cros s all s ect ors an d the p ande mic has c reate d ex tr eme e con omic vo latil it y. The Gro up has su f fere d minim al disru ption d ue to C ovid - 19 and ha s be en ca pable o f oper ating s ucc es sfu lly rem otely d uring lo ckdo wn res tric tio ns. Howe ver, the loc kdow ns have c aus ed a de lay to ou r deve lopm ent ac tiv itie s and r educ tio n in cas h flow d ue to def erm ent or n on-p aym ent of re nt. Executive responsib ility: Al l Execut ive Direct ors — T he Grou p has comprehensive business continuity and incident management pro ce dure s both a t Group l evel a nd for e ach of o ur man age d building s which ar e reg ular ly rev iewe d and te ste d. — G ove rnme nt he alth gui delin es are m ainta ined a t all of our c ons tru cti on site s. — M ost o f our emp loye es are c apa ble of wo rkin g remo tely an d have th e nec es sar y ITre so urce s. — F ire pro tec tion an d acc es s/se curit y p roc edur es are in p lac e at all of o ur managedproper ties. — C omp rehe nsiv e prop er t y dam age an d busin ess i nterr upti on insur anc e which includes t errorism. — At le ast a nnuall y , a f ire ris k ass ess ment a nd he alth and s afe ty in spe cti on are pe rf orm ed fo r eac h prop er t y in our m anage d po r tf olio, in a ddit ion to ann ual Planned Preventive Ma intenance su r veys. — R obus t se curi ty a t our buildi ngs, in cludin g CCT V and a cce ss c ontr ols . Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — C ould im pac t on any Gro upKPI s — En gage d wit h a por t fol io IT p ar tner t o prov ide ad ditio nal sup por t f or ICT infrastructure and cyber sec urity assessments. — C ont inue d to con fig ure se cure V PN co nne cti ons and d eplo y full y encr y pte d lap tops to e nable s ec ure hy brid wo rkin g cap abili ties . — P rov ide d addit ional e mploy ee awa rene ss tr aining on s oci al med ia and remote working securit y best practic e. — R eme diate d any key f inding s from t he la st se curi t y pen etra tion te st andcommissioned another independent internal/external test. — C omp lete d a busin ess c ont inuit y te chnic al tes t and f ull dis aste r re cov er ytes t. — C onducted monthly vulnerabi lit y scans. — Wo rked w ith ou r ex tern al fire c ons ultan ts to be a mong st the f irs t UK pro per t yc ompa nies to im pleme nt a Fir e Safe ty M anag emen t Sy stem in linew ith B S9997 . — C ontinue with ou r current controls and mitigating action s. 6. REPUT A TIO NAL DAMAGE Th e Group h as inve ste d signi fic antl y in deve lopin g a well-re garde d and res pe cte d bran d. Th e Group’s rep ut ation c ould b e dama ged , for ex ample, through una uthorise d or inaccurate media coverage, unethi cal practice s or be havio urs b y the Gr oup’s exec uti ves , or failur e to com ply wit h rele vant legi slat ion. T his co uld lea d to a mater ial ad ver se ef fe ct o n the Gr oup’s operating performanc e and the overall financial position of the Group. Our str ong c ulture, l ow ove rall ri sk toler anc e and es tab lish ed pro ce dure s and po licie s mitig ate again st th e risk of in tern al wron gdoin g. Movement during 2 02 1 : Red uced Fe edb ack on h ow we hav e resp on ded to t he Co vid-1 9 pan demi c, par t icul arly in re spe ct to o ur oc cupie rs, s uppli ers , emplo yee s and C ommun it y Fund, h as generally been positive. Executive responsib ility: Al l Execut ive Direct ors — Close involvement of senior ma nagement in d ay-to-day operations and es tabl ishe d pro ce dure s for app rov ing all ex te rnal an noun cem ent s. — A ll new m emb ers of s taf f b ene fit f rom an in duc tion p rogr amme an d are is sue d wit h our Gro up st af f handb oo k. — T he Gr oup emp loys a H ead of In ves tor and C or pora te Co mmunic atio ns and ret ains s er vic es of a n ex tern al PR ag enc y , b oth of wh om main tain re gula r cont ac t wit h ex tern al me dia sour ce s. — A G roup wh istle blowin g sys tem fo r staf f i s maint aine d to rep or t wron gdoin g anonymousl y. — S oc ial me dia chan nels a re moni tore d. — O ngoin g enga geme nt wit h loc al com muniti es in are as wh ere th e Group o per ates . — S taf f t raining a nd aware nes s pro gramm es . Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal return — T otal proper ty return — T otal shareholder return Co uld indir ec tly imp act on a numb er of o ur othe r KPIs In ord er to sup por t o ur com munit y dur ing Co vid-1 9: — En sure d the m arket a nd our ke y stak ehold ers w ere kep t updat ed on o ur res pon se to C ovid - 1 9. — F ollow ed a pr oac tive a nd pe rso nalis ed re spo nse to o ur tena nts fa cing dif f icult ies due t o Cov id-1 9. — C ommitted £7 25,000 of commun it y and s pons orship donations for 20 21 . — Wo rked w ith re levan t agen cie s to prov ide ac co mmo datio n and c ar par king fr ee of ch arge to NH S staf f in c ent ral Lon don . — C ontinued t o implement a mandator y complia nce training progra mme for allem ploy ees ( inclu ding Dire cto rs). — M onito red in ves tor vie ws and p res s com ment s while main tainin g con tac t with other stakeholders. — C ontinue communication with, and listeni ng to, our stakeholders. — C ont inue to su ppo rt t hos e in ne ed. — C ont inue to su ppo rt o ur st af f ’ s tr aining requirements. — C ontinue with ou r current controls and mitigating action s. 7 . OUR RESILIENCE TO CLIM A TE CH ANGE If th e Group f ails to r esp ond ap prop riate ly , an d suf f icie ntly, to clim ate cha nge ris ks or f ails to be nef it f rom th e pote ntial op por t uniti es. T his co uld lea d to dama ge to our r eput atio n, los s of inc ome an d/or pro per t y val ues an d los s of our li cen ce to o pera te. In add ition , the re is a ris k that th e co st of co nstr uc tion m ateria ls and p rovi ding en erg y, water an d othe r ser v ice s to oc cupi ers wil l rise a s a con seq uenc e of clim ate cha nge. Movement during 2 02 1 : Unchange d O veral l, clim ate ch ange ri sk con tinue s to inc reas e in prom inen ce and imp or tan ce. T he UK Go ver nmen t con tinue s to intro duc e mor e legis lati ve asp ec ts linke d to cl imate ris k e.g . fro m 2022 cer t ain lis ted en titie s will ha ve to dis clos e in line wi th the T CFD and t he la test e ner gy w hite p aper i s set ting ou t highe r sta ndard s for en erg y ef f ici enc y in com merc ial and re sid ential proper ties. Executive responsib ility: Nigel Geo rge — T he B oard an d Ex ecu tiv e Com mit tee re ce ive re gul ar upda tes an d pres ent atio ns on ES G (enviro nmen tal, s oci al and go ver nanc e) mat ters a s well a s prog res s again st our p athw ay to be comi ng net ze ro car bon b y 2030. — T he Su stain abili ty C ommi t tee mo nitor s our p er for manc e and managementcontrols. — S tro ng team le d by an e xpe rien ce d Head o f Sust ainabi lit y. — T he Gr oup mo nitor s its ES G rep or ting a gainst v ario us indu str y b ench mark s. — P rod ucti on of an an nual Re spo nsibili t y Repo r t with ke y data a nd pe rf orm ance po ints whi ch are ex te rnal ly ass ured . — In 2017 we adop ted sc ienc e- base d ca rbo n targ ets wh ich hav e be en independently veri fie d b y the Science-Based T argets initia tive (SBTi) . Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal return — B REEA M rating — Science- based ca rbon target p erf ormanc e — T otal shareholder return A sign ifi cant di ver sion of t ime co uld af fe ct a wi der ran ge ofKP Is — P ublis hed o ur annu al Res pons ibilit y Re por t in A pril 2 02 1. — C ontinued investigations int o of f-site renewable energy generation opp or tuni tie s availa ble to us to re duc e our ma rket- bas ed de pen denc y, whic hinclu ded s ubmit tin g a plan ning app lic ation f or an 1 8.4 MW sol ar par kon Lo chfa ulds Far m (see p age 1 3). — R efre she d our D eve lopme nt Fram ewor k for D eve lopm ents , which s ets newm inimum re quirem ent s for th e dev elopm ent pi pelin e. — We s et buil ding sp ecif ic op era tiona l ener g y targ ets , align ed wi th a 1 .5°C science-based scenario. — L aunc he d our fi rst n et zero c arb on oc cup ier sur v ey fo cuse d sp eci fic ally on be tte r unde rst andin g how we c an sup por t o ur occ upie rs achi eve th eir go als (se e p ag e 13). — En sure d our 2021 Rep or t & Ac co unts c ont ains disc losu res whi ch are consistent with T ask Force on Cli mate-Related Financial Disclosures (TCFD) re comm end ation s (see p age s 68 to 73). — C ommi ssio ned a c omp rehe nsiv e rep or t into th e fea sibili ty a nd co sts o f achi evin g an EPC B g rade a cro ss our p or t foli o by 2030 (s ee pa ge 55). — At te nde d, and p res ente d, at the C onf eren ce of t he Par ti es 26 (CO P26) (seep age 5 4). — R evie w the f inding s arisin g from t he oc cupi er net ze ro ca rbo n sur vey a nd how w e can su ppo rt o ur oc cupie rs achi evin g their g oals . — In ves tigate p lanti ng a fur t her 425ha of tre es ac ros s our S cot tis h land (equi valen t to 794 fo otba ll fi elds). — A gr ee a st rateg y f or the p or t fol io to achi eve an EP C B gr ade by 20 30 fol lowing t he re sults of t he fe asibili t y and c os t repo r t. — C ontinue with ou r current controls and mitigating action s. Key Stra tegic objectives 1. T o opt imise r etur ns and c reate v alue fr om a bal anc ed p or tf olio 3. T o at tra ct, r etain a nd de velop talented em ployees 5. T o maintain strong and f lexible f inancin g 2. T o grow recurring earnings and c ash f low 4. T o de sign, d eli ver an d ope rate our buildingsre spo nsibly 1 17 Financ ial Stat ements Governance Strategic repor t Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 8A. NON-COMPLIANCE WI TH HE AL T H AND SAF ET Y LE GISLA TION Th e Group’s c ost b ase is in cre ase d, and m anag emen t time is di ver te d thro ugh an in cide nt or br eac h of hea lth, sa fet y and f ire le gisl ation le ading to rep uta tiona l dama ge and / or lo ss of o ur lic enc e to ope rate. F or exa mple, a major h ealt h and sa fet y inc iden t could c aus e signi fic ant bu sine ss interruption for the Group Movement during 2 02 1 : Red uced Dur ing 2021 , the h ealth a nd wel lbei ng of our e mploy ee s, oc cupie rs an d othe r st akeho lder s has b een a to p prio rit y. We have in ves ted ad ditio nal re sour ces into h ealth an d saf et y. Our acc iden t fre quen cy ra te (A FR) f or dev elop ment proje ct s in 2021 was 1 .26 (2020: 2.72) a red uct ion of 5 3.7% ( se e pa ge 66). Executive responsib ility: Paul Williams — A ll our p rope r ties h ave th e relev ant he alth, s afet y an d fir e mana geme nt pro ce dure s in plac e whic h are re view ed ann ually. — T he Gr oup has a q ualif ied H ealth a nd Saf et y tea m whos e per f orma nce i s mon itore d and m anag ed by t he Hea lth and S afet y C ommi tt ee. — H ealth a nd saf et y st atuto r y com plian ce wit hin our m anage d po r tf olio is m anag ed and m onito red u sing Risk Wis e, a sof t war e comp lianc e pl atf orm . This is s uppo r ted by ann ual pro per t y he alth c hec ks. — T he Man age d Por t fo lio Hea lth and S afet y M anage r with t he sup por t of in tern al and e xt erna l stake hold ers s uppo r ts our P or t folio a nd Buildi ng Mana ger s to ensure statutory compliance. — T he C ons truc tio n Healt h and Sa fet y Man ager, with th e supp or t of inte rnal a nd external stakeholders, ensures our Construction (Design and Management) Reg ulat ions (CD M) clie nt dut ies are e xec uted a nd mon itore d and r evie ws he alth, saf et y and we lfare o n eac h con str uct ion site o n a mon thly ba sis. — T he B oard an d Ex ecu tiv e Com mit tee re ce ive f req uent up date s and pr ese ntat ions on key h ealt h and sa fet y mat te rs, in cludin g both p hysi cal an d men tal he alth. Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal shareholder return A sign ifi cant di ver sion of t ime co uld af fe ct a wi der ran ge ofKP Is — O ur Hea d of Hea lth and S afet y wa s par t of th e Co nstr uc tion Le ade rship Co uncil (C LC) Cov id-1 9 Task For ce, wh ich pub lish ed gui danc e for c ontr act ors on-site operating proce dures. He also sits on the Construction Industry Co uncil s (CIC) Buil ding Saf et y Co mmit te e Chair s the He alth an d Safe t y E xec utiv es (HSE ) Man aging R isk Well G roup an d sit s on the n ew Buildin g Saf et y All ianc e Group a nd ou tput o f the p ost -Gre nfe ll Hacke tt r epo r t, whic h is se tt ing the c omp eten cie s for th e new du ties o f the A cco unta ble Pe rso n and Buildin g Safet y Man ager. — P ublis hed a h ealt h and we llbe ing guid e for e mploy ee s work ing fr om hom e. — B ec ame a su ppo rt er of th e Mates in Min d Men tal He alth pr ogram me designed specif ically for the construc tion i ndustr y , developed a working fr om hom e guid e and arr ange d webin ars on t opic s suc h as res ilien ce, m enta l health and nutrition. — P er for me d deta iled he alth an d saf et y risk a sse ssm ent s of 25 Savi le Row and co mmon ar eas wi thin th e mana ged p or t foli o and imp leme nted in itiati ve s aime d at pre ser ving s oci al dist ancin g and pr otec ting o ur empl oye es and occupie rs. — L aunc he d our new b es poke c ompl ianc e sys tem, Ri skWi se, whi ch is embedde d i nto our busi ness operations. — P er for me d a deta iled he alth an d saf et y audit o f all res iden tial pr oper t ies an d a pro per t y he alth c hec k of all c omme rcial p rope r ties in o ur mana ge d po rt f olio, in c onjunc tio n with si x mon thly ris k ass es smen t che cks by e x tern al specialist water consultants. — D eve lope d a he alth an d safe ty k now ledge l ibrar y w here al l our pr oce dure s and s tan dards ar e made a vailab le to bo th inter nal an d ex tern al sta keho lder s. — Wo rked w ith ou r ex tern al fire c ons ultan ts to be a mong st the f irs t UK pro per t yc ompa nies to im pleme nt a Fir e Safe ty M anag emen t Sy stem in linew ith B S9997 . — S et up a pr ope r ty b enc hmar king g roup to sh are b est p ract ice a ccid ent da ta and agree KPIs. — P rep are the b usin ess f or the imple men tatio n of our n ew Fire S afe ty Mana gem ent S yste m align ed wi th the re quirem ents o f the Fi re Saf et y and Building S afet y Ac ts. — C ontinue with ou r current controls and mitigating action s. — In tro duce a n e-p ermi t sys tem, C DM and water hygiene module within our RiskWis e platf orm. — Monitoring Contractor per formance in line w ith th eir KP Is. — C ont inuing th e foc us on h ealth g ivin g it the s ame bi lling as s afet y. — C ontinue to raise Derwent London’ s pro file ac ros s the p rope r ty a nd development sectors. 8B. OT HER REGUL A TORY NON- COMPLI ANCE Sho uld the G roup b reac h any of th e legis lati on that f orm s the re gul ator y fr amewo rk wit hin whic h the Gr oup op erat es, t he Gro up’s cost b ase c ould inc reas e and ma nage ment t ime co uld be d iver te d. T his co uld lead t o dama ge to ou r repu tati on and / or lo ss of o ur lic enc e to op erate . Movement during 2 02 1 : Red uced Dur ing 2020 and 2 021 , we h ave fo llowe d the UK G ove rnme nt’s re gula tion s in res pe ct of s ocia l dista ncing a nd saf e wor king pr act ice s. In ac cor danc e with disc losu re req uireme nts , we ens ured o ur st akeho lder s and th e wide r inve stm ent ma rket we re kept a ppra ised o f Der we nt Lon don’s resp ons e to Co vid-1 9 and i ts imp act on o ur bus ines s. Dur ing 2021 , the C omp eti tion an d Marke ts Au thor it y (the ‘ CMA’) has b ee n investigating uncompetitive behaviour in the construction industry, inc luding pr ice f ix ing, m arket ing shar ing and b id rig ging . Alth oug h the Gr oup se eks as sura nce s fro m pro spe cti ve co ntra ctor s on th e sta tus of any C MA inve stig ation s in which t hey ar e invol ved, t he us e of con trac tor s which ar e fou nd to be e ngag ing in unc omp etit ive b ehav iour c ould le ad to re put ation al damage for the Group. Executive responsib ility: Damian Wisniewski — T he B oard an d Risk C ommi tte e re cei ve reg ular r epo r ts pre pare d by th e Group’s legal advisers identif ying upcoming legislative/regulatory changes . Ex ternal ad vic e is take n on any ne w legis latio n. — S taf f t raining a nd aware nes s pro gramm es . — G roup p olic ies an d proc ed ures d ealing w ith all ke y legi slati on are av ailab le on the Group’ s intranet. — A G roup wh istle blowin g sys tem fo r staf f i s maint aine d to rep or t wron gdoin g anonymousl y. — M anag ing our pr ope r ties to e nsur e they a re com plian t with th e Minimum En erg y Ef fi cien cy St and ards (MEES) f or Ener g y Per fo rman ce C er tif ic ates (EP Cs). Stra tegic objectives 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal return — T otal proper ty return — T otal shareholder return A sign ifi cant di ver sion of t ime co uld af fe ct a wi der ran ge ofKP Is — D esp ite ho mewo rkin g, our e mploy ee s con tinue d to fol low the G roup’s nor mal co mplian ce pr oc edur es, in cludin g in resp ec t of th e signin g of doc umen tati on and delegat ed authorities. — O ur 2020 Rep or t & Ac co unts an d Res pons ibilit y Re por t w as suc ce ssf ully published despite lockdow n restrictions. — O ur AGM ar range men ts wer e amen ded to b e in ac cor danc e with UK Go vern ment g uide lines a nd was h eld on 14 May 2021 . — Q uar ter ly rev iew of o ur anti- brib er y and c orr upti on pro ce dures b y the Ri sk Co mmit tee. — C ont inue d to imple ment a c omp lianc e trainin g prog ramm e, man dator y f or all emp loye es inc luding t he Bo ard. — A s par t of o ur 2021 staf f p er fo rman ce app rais als, a ll empl oye es co nfir me d the y have r evie wed an d unde rst ood G roup p olic ies . — C ontinue with ou r current controls and mitigating action s. OPER A TIONA L C ONTINU ED OUR PRINCIP A L RISKS CO NT IN UED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 118 Risk Our key con trol s Potential impact What w e did in 202 1 Wha t we will be d oing in 2022 8A. NON-COMPLIANCE WI TH HE AL T H AND SAF ET Y LE GISLA TION Th e Group’s c ost b ase is in cre ase d, and m anag emen t time is di ver te d thro ugh an in cide nt or br eac h of hea lth, sa fet y and f ire le gisl ation le ading to rep uta tiona l dama ge and / or lo ss of o ur lic enc e to ope rate. F or exa mple, a major h ealt h and sa fet y inc iden t could c aus e signi fic ant bu sine ss interruption for the Group Movement during 2 02 1 : Red uced Dur ing 2021 , the h ealth a nd wel lbei ng of our e mploy ees , oc cupie rs an d othe r st akeho lder s has b een a to p prio rit y. We have in ves ted ad ditio nal re sour ces into h ealth an d saf et y. Our acc iden t fre quen cy ra te (A FR) f or dev elop ment proje ct s in 2021 was 1 .26 (2020: 2.72) a red uct ion of 5 3.7% ( se e pa ge 66). Executive responsib ility: Paul Williams — A ll our p rope r ties h ave th e relev ant he alth, s afet y an d fir e mana geme nt pro ce dure s in plac e whic h are re view ed ann ually. — T he Gr oup has a q ualif ied H ealth a nd Saf et y tea m whos e per f orma nce i s mon itore d and m anag ed by t he Hea lth and S afet y C ommi tt ee. — H ealth a nd saf et y st atuto r y com plian ce wit hin our m anage d po r tf olio is m anag ed and m onito red u sing Risk Wis e, a sof t war e comp lianc e pl atf orm . This is s uppo r ted by ann ual pro per t y he alth c hec ks. — T he Man age d Por t fo lio Hea lth and S afet y M anage r with t he sup por t of in tern al and e xt erna l stake hold ers s uppo r ts our P or t folio a nd Buildi ng Mana ger s to ensure statutory compliance. — T he C ons truc tio n Healt h and Sa fet y Man ager, with th e supp or t of inte rnal a nd external stakeholders, ensures our Construction (Design and Management) Reg ulat ions (CD M) clie nt dut ies are e xec uted a nd mon itore d and r evie ws he alth, saf et y and we lfare o n eac h con str uct ion site o n a mon thly ba sis. — T he B oard an d Ex ecu tiv e Com mit tee re ce ive f req uent up date s and pr ese ntat ions on key h ealt h and sa fet y mat te rs, in cludin g both p hysi cal an d men tal he alth. Stra tegic objectives 1. 2. 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal shareholder return A sign ifi cant di ver sion of t ime co uld af fe ct a wi der ran ge ofKP Is — O ur Hea d of Hea lth and S afet y wa s par t of th e Co nstr uc tion Le ade rship Co uncil (C LC) Cov id-1 9 Task For ce, wh ich pub lish ed gui danc e for c ontr act ors on-site operating proce dures. He also sits on the Construction Industry Co uncil s (CIC) Buil ding Saf et y Co mmit te e Chair s the He alth an d Safe t y E xec utiv es (HSE ) Man aging R isk Well G roup an d sit s on the n ew Buildin g Saf et y All ianc e Group a nd ou tput o f the p ost -Gre nfe ll Hacke tt r epo r t, whic h is se tt ing the c omp eten cie s for th e new du ties o f the A cco unta ble Pe rso n and Buildin g Safet y Man ager. — P ublis hed a h ealt h and we llbe ing guid e for e mploy ee s work ing fr om hom e. — B ec ame a su ppo rt er of th e Mates in Min d Men tal He alth pr ogram me designed specif ically for the construc tion i ndustr y , developed a working fr om hom e guid e and arr ange d webin ars on t opic s suc h as res ilien ce, m enta l health and nutrition. — P er for me d deta iled he alth an d saf et y risk a sse ssm ent s of 25 Savi le Row and co mmon ar eas wi thin th e mana ged p or t foli o and imp leme nted in itiati ve s aime d at pre ser ving s oci al dist ancin g and pr otec ting o ur empl oye es and occupie rs. — L aunc he d our new b es poke c ompl ianc e sys tem, Ri skWi se, whi ch is embedde d i nto our busi ness operations. — P er for me d a deta iled he alth an d saf et y audit o f all res iden tial pr oper t ies an d a pro per t y he alth c hec k of all c omme rcial p rope r ties in o ur mana ge d po rt f olio, in c onjunc tio n with si x mon thly ris k ass es smen t che cks by e x tern al specialist water consultants. — D eve lope d a he alth an d safe ty k now ledge l ibrar y w here al l our pr oce dure s and s tan dards ar e made a vailab le to bot h inter nal an d ex tern al sta keho lder s. — Wo rked w ith ou r ex tern al fire c ons ultan ts to be a mong st the f irs t UK pro per t yc ompa nies to im pleme nt a Fir e Safe ty M anag emen t Sy stem in linew ith B S9997 . — S et up a pr ope r ty b enc hmar king g roup to sh are b est p ract ice a ccid ent da ta and agree KPIs. — P rep are the b usin ess f or the imple men tatio n of our n ew Fire S afe ty Mana gem ent S yste m align ed wi th the re quirem ents o f the Fi re Saf et y and Building S afet y Ac ts. — C ontinue with ou r current controls and mitigating action s. — In tro duce a n e-p ermi t sys tem, C DM and water hygiene module within our RiskWis e platf orm. — Monitoring Contractor per formance in line w ith th eir KP Is. — C ont inuing th e foc us on h ealth g ivin g it the s ame bi lling as s afet y. — C ontinue to raise Derwent London’ s pro file ac ros s the p rope r ty a nd development sectors. 8B. OT HER REGUL A TORY NON- COMPLI ANCE Sho uld the G roup b reac h any of th e legis lati on that f orm s the re gul ator y fr amewo rk wit hin whic h the Gr oup op erat es, t he Gro up’s cost b ase c ould inc reas e and ma nage ment t ime co uld be d iver te d. T his co uld lead t o dama ge to ou r repu tati on and / or lo ss of o ur lic enc e to op erate . Movement during 2 02 1 : Red uced Dur ing 2020 and 2 021 , we h ave fo llowe d the UK G ove rnme nt’s re gula tion s in res pe ct of s ocia l dista ncing a nd saf e wor king pr act ice s. In ac cor danc e with disc losu re req uireme nts , we ens ured o ur st akeho lder s and th e wide r inve stm ent ma rket we re kept a ppra ised o f Der we nt Lon don’s resp ons e to Co vid-1 9 and i ts imp act on o ur bus ines s. Dur ing 2021 , the C omp eti tion an d Marke ts Au thor it y (the ‘ CMA’) has b ee n investigating uncompetitive behaviour in the construction industry, inc luding pr ice f ix ing, m arket ing shar ing and b id rig ging . Alth oug h the Gr oup se eks as sura nce s fro m pro spe cti ve co ntra ctor s on th e sta tus of any C MA inve stig ation s in which t hey ar e invol ved, t he us e of con trac tor s which ar e fou nd to be e ngag ing in unc omp etit ive b ehav iour c ould le ad to re put ation al damage for the Group. Executive responsib ility: Damian Wisniewski — T he B oard an d Risk C ommi tte e re cei ve reg ular r epo r ts pre pare d by th e Group’s legal advisers identif ying upcoming legislative/regulatory changes . Ex ternal ad vic e is take n on any ne w legis latio n. — S taf f t raining a nd aware nes s pro gramm es . — G roup p olic ies an d proc ed ures d ealing w ith all ke y legi slati on are av ailab le on the Group’ s intranet. — A G roup wh istle blowin g sys tem fo r staf f i s maint aine d to rep or t wron gdoin g anonymousl y. — M anag ing our pr ope r ties to e nsur e they a re com plian t with th e Minimum En erg y Ef fi cien cy St and ards (MEES) f or Ener g y Per fo rman ce C er tif ic ates (EP Cs). Stra tegic objectives 3. 4. 5. Business mode l Co uld po tenti ally imp act on a ll asp ec ts of o ur busin ess m ode l KPIs — T otal return — T otal proper ty return — T otal shareholder return A sign ifi cant di ver sion of t ime co uld af fe ct a wi der ran ge ofKP Is — D esp ite ho mewo rkin g, our e mploy ee s con tinue d to fol low the G roup’s nor mal co mplian ce pr oc edur es, in cludin g in resp ec t of th e signin g of doc umen tati on and delegat ed authorities. — O ur 2020 Rep or t & Ac co unts an d Res pons ibilit y Re por t w as suc ce ssf ully published despite lockdow n restrictions. — O ur AGM ar range men ts wer e amen ded to b e in ac cor danc e with UK Go vern ment g uide lines a nd was h eld on 14 May 2021 . — Q uar ter ly rev iew of o ur anti- brib er y and c orr upti on pro ce dures b y the Ri sk Co mmit tee. — C ont inue d to imple ment a c omp lianc e trainin g prog ramm e, man dator y f or all emp loye es inc luding t he Bo ard. — A s par t of o ur 2021 staf f p er fo rman ce app rais als, a ll empl oye es co nfir me d the y have r evie wed an d unde rst ood G roup p olic ies . — C ontinue with ou r current controls and mitigating action s. Key Stra tegic objectives 1. T o opt imise r etur ns and c reate v alue fr om a bal anc ed p or tf olio 3. T o at tra ct, r etain a nd de velop talented em ployees 5. T o maintain strong and f lexible f inancin g 2. T o grow recurring earnings and c ash f low 4. T o de sign, d eli ver an d ope rate our buildingsre spo nsibly 1 19 Financ ial Stat ements Governance Strategic repor t “ D er went London continues to beexter na ll y recogn ised fo r ou r transparent repor ting an d high gov ernan ce s tand ards. We we re de li gh t ed to h av e ac hi eved t he t op po sition in t he Pro per t y /Reside ntia l &Com mer ci a l RE IT s sector i n Br ita i n ’ s Mo st Ad mi red Com pan ies a wa rd s fo r 2 0 2 1 . W e ha ve n ow w on th e to p pla ce sev en ti mes si nce 2 0 1 2 . Th is i s a re fl ecti on o f eve r yone ’ s ha rd wo rk a nd com m itm ent , an d I am im mens ely proud. ” Paul W illiams C hief E xecu tive De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 120 Governance Introduction f rom the Chairman ........... 122 Governanc e at a glance .......................... 123 The se ction 1 72 ( 1 ) statement ................. 124 Board of Direc tors .................................... 126 Senior management ................................ 128 Cor porate governance st atement ......... 130 Nominations Commit tee repor t ............ 144 Audit Commit tee repor t .......................... 148 Risk Commit tee repor t ........................... 158 Re spo nsible Busin es s Commit tee rep or t .................................... 166 Remuneration Co mmitte e repor t — Annual statement ............................... 172 — Remuneration at a glance ................. 174 — Annual repor t on remuneration ....... 175 Directors’ repor t ....................................... 194 G OV ERNAN CE 121 Financ ial Stat ements Strategic repor t I NT RODUC T ION F ROM T HE C HAI RMA N Dear Shareholder , On be half of the Bo ard, I am please d to introdu ce the Gr oup’ s Co rporate go vernanc e sta tement on p ages 1 30 to 1 4 3. The B oar d’s acti vit ies 202 1 has b een an ac tive and p rogres sive y ear for the G roup. As we ll as over see ing the manage ment of risk s which have aris en from th e Co vid- 1 9 p andemic, t he Boar d and its pr incipal com mitte es have: — app roved a n umber of key ac quisitions and disp osal s ( se e page 2 0) ; — app roved t he issue of a g reen b ond (see p age 1 3); — h eld an Investor D ay and the Gro up’ s f irst S takeho lder Day (see pag e 1 34) which I at tende d alongside th e Exe cutiv e Direc tors and Cilla Sn owball (Chair of the Re spon sible Busines s C om mi t t ee ); — h eld a strateg y re view me eting in June 2021 ; — ac hieved t he National Equalit y S tandard (se e page 5 8 ); and — re viewe d the suppo r t being prov ided to o ur local c ommunities , oc cupiers an d employe es. Fur ther infor mation on our ke y activ ities is pr ovide d on page s 1 42 to 1 4 3 and in the indi vidual co mmit tee repo r ts on pa ges 1 4 4 to 1 9 3. Board changes During 2021 , we were p lease d to welcome Emily Pr ideaux an d Sanjee v Sharma to the B oard on 1 Marc h and 1 Oc tober , resp ec tively. Emily was an internal appo intment and d emonst rated the s treng th of De rwe nt Londo n ’s talent pipe line. Sanjee v brings a wealth of p eople man agemen t exper ience to th e Board (Sanje ev’s full bio graphy is on p age 1 27). Following Simon Frase r stepping down f rom the Bo ard upon re aching his ninth anniver sar y, we appointe d Helen G ordon to the ro le of Senior Inde pend ent Direc tor . Richard D akin will reach his ninth anni vers ar y of appointm ent during 2022. The Bo ard will foc us on appointing a s ucc ess or for the role of Risk C ommit tee Chair and m anaging the t ransition p roce ss. Co mplian ce wit h the UK C orp orat e Gover nanc e Cod e (the Co de) Our c ompliance wi th the C ode during th e year is disclo sed o n page 1 23 in our comp liance s tatement . I am please d to repo r t that from 1Januar y 2022, we are comp lying in full with t he principle s and prov isions of goo d gover nance c ontaine d in the C ode. The A nnua l Gene ral Me eting ( AGM) and r e- elec tion o f Dire cto rs T o e nsure the saf et y of employe es and o ur shareholde rs, we were require d to hold the 2021 AGM as a close d mee ting. De spite the res tricti ons, the 2021 AGM did include a sho rt b usines s update and vir tual Q& A se ssion. T his year , w e are aiming to host our 2022 AGM at DL / 78, which will allow our shareh olders to s ee fir st-hand t his exciting ne w occ upier spac e ( se e pag es 30 and 1 97) . Alon gside my fellow Dire ctor s, I hop e that you will b e able to join us. In acc ordanc e with the C ode, all D irector s will be pu tting them selves f or ward for ele ction at th e AGM. Following an intern al per f ormanc e evaluation, I c an conf irm that e ach Direc tor’s per f ormanc e continue s to be highly ef f ecti ve and dem onstr ates a high level of c ommitm ent to their role s ( se e pag e 1 4 1 ). If you wish to dis cuss any asp ec t of our gover nance ar rangeme nts, pleas e cont act me v ia our Comp any Se cretar y, David L awler (telephon e : +4 4 (0 )20 7 659 30 00 or email: c ompany.sec retar y@ der wentl ondon.com). Mark Breuer Chairman 23 Febr uar y 2022 Mark Breuer Chairman 202 2 FOCUS A RE AS — Re view the G roup’ s strate g y and fi ve-ye ar plan — Mo nitor the pro gres s of our key develo pment proje cts: Soh o Plac e W1 , The F eather stone Building EC1 and 1 9 -35 Baker St reet W1 — Ens ure a smooth h andover of r espo nsibilit y to a new Risk Co mmit tee Chair whe n Richard Dakin s teps down from t he Boar d — Re muneration P olicy re view and c onsultation w ith major shareh olders an d prox y voting ag encies — Enga ge in an ex ternally fac ilitated B oard pe r formanc e evaluation RE VIE W I NG OUR PURPOSE Our p urpo se c ommunic ates th e Group’s stra tegic dire cti on and intentio ns to our employe es, o ccupie rs and wide r stake holders . Due to it s impor tan ce, it is re gularly re viewed by the B oard. At the Bo ard’s strateg y rev iew mee ting in June 202 1 , i t was agre ed th at our purpo se co uld be simplif ied to ens ure greate r clarit y and r eferen ce to the imp or tanc e of our net zero car bon jour ney. The over all sentimen t of our purpo se remains unc hanged an d continue s to highlight our emphas is on deep an d ongoing rel ationships , our focu s on cor porate re sponsibilit y an d wellbeing . Our p urpo se page s 1 and 1 31 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 122 G OV ERNAN CE A T A G L A N C E N ON -EXECUTIVE DI RECTO R CHA NG ES In Oc tober 2021 , we announ ced th e appointm ent of Helen G ordon as the n ewSenior Ind epen dent Direc tor and S anjeev Sharm aas a Non-E xec utive Dire ctor . We are ful ly compliant wi th the Hampton- Alexand er Review an d Parker Rev iew rec ommen dations on Boar ddiversi t y ( se e page 1 47) . EMP LOYEE EN GAGEME NT Employe e engagem ent con tinuously remains a p riorit y, to inspire and enga ge, our talente d and diver se wor kfo rce. In 2021 , we achiev ed the Natio nal Equalit y St andard acc redit ation and rec eive d fee dback f rom our 4th biennial emp loyee sur v ey: 90.5 % 81 % emplo yee s atisfac tion of e mploye es re cog nised Der went London ’s commitment to healt h and well being Our p eopl e page 56 The s ec tion 1 72( 1) stat emen t page 1 2 4 MAJ OR B OARD A CTIVITIES The B oard’s major decisio ns and act ivitie s during 202 1 include d: Key decisions: — Dis pos al of Angel S quare EC1 — A cquisition of B ush House WC 2, Headleas e — A cquisition of 250 Eus ton Road NW1 — A cquisition of 1 71 - 1 7 4 T o tte nham Cour t Ro ad W1 — A gre ed thre e of f-mar ket transac tions wit h Laz ari Invest ments — A cquisition of 230 B lack friar s Road SE 1 — Rais ed £35 0m via a 1 0- year 1 .875 % gre en bo nd — T erms a gree d to acquire T he Moor f ields Est ate EC1 — Dis pos al of New River Yard EC 1 Key activities: — Re viewe d the Group’s talent pipeline an d succ es sion plans — Mo nitored th e Group’ s p er forman ce towards ne t zero carb on — Inve stor Day he ld on 28 Septemb er at DL / 78 — A chieve d the National Equalit y S tandar d accre ditation T ransparenc y and strong c orporate go ver na nce he lps u s t o gen er at e va lu e fo rou r sta ke hol ders a nd u nder pi ns ou rsu ccess. UK CORPOR A TE GO VERN ANCE CODE – 202 1 COMPLIANCE S T A TE MENT The B oard c onfirms t hat for the y ear ende d 3 1 D ece mber 2021 , the pr inciples of go od cor porate go vernanc e cont ained in the 201 8 UK Co rporate G overn ance C ode (the C ode) have b een c onsistently ap plied. How ever , we were unable to c omply in full wi th provisio ns 9, 1 9 and 38 (our explana tion for non -com pliance is pr ovide d below). F rom 1 Jan uar y 202 2, we have b een c ompliant wit h all provisio ns of the C ode. Fur ther infor mation on th e Co de can be f ound on th e Financial Rep or ting Co uncil’ s websi te at: ww w .frc.org.u k Prov ision Expl anation Current status 9: Th e chair sh ould b e inde pen dent o n app ointm ent . A chief e xecu tiv e shou ld not b ec ome c hair of th e sam e com pany. If, exce ptio nally, this is p rop ose d by th e bo ard, maj or shar ehol ders s houl d be co nsulte d ahe ad of app oint ment For t he pe rio d 1 Januar y 2021 to 14 May 2021 , we w ere no n-c omp liant wi th pro visi ons 9 and 19 of the C od e as our C hairma n during t his pe rio d (John Bur ns) was no t indep en dent up on app oint ment , was pr evio usly o ur CEO and had s er ve d for m ore th an nine ye ars . John B urns wa s Chair man fo r two y ear s to fa cilit ate an or derl y suc ces sion a nd pro tec t our cult ure. T he No minatio ns Commit tee’ s decision w as made after careful deliberation and consultation with ma jor shareholders. T o ensure the separation o f leadership between the Chai rman an d CEO we imp leme nted n umero us saf egu ards (se e pa ge 1 16 of the 2 01 9 Re por t & A cc ount s) which op era ted ef f ec tive ly We app ointe d an ind epe nden t Non-Executi ve Cha irman, Mark Bre uer, on 1 4 M ay 2021 . We ar e now f ully c ompl iant wi th pro visio ns 9 and 19 19: Th e chair s hould n ot rem ain in po st be yond n ine ye ars f rom th e date of th eir fir st ap poin tmen t to the b oard 38: The pension contribution rates for exe cut ive dire ct ors, o r pay ment s in lieu , sho uld be al igne d wit h thos e avail able to the workforce Pen sion c ontr ibut ion ra tes fo r newly a ppo inted E xe cut ive Dir ec tors i s alig ned w ith th e work fo rce a t 1 5% o f base s alar y. Sin ce 1 Jan uar y 2020, th e Rem unera tion C ommi tt ee has b ee n implem enti ng its t ransi tion p lan whi ch re duce d pe nsio n cont ribu tion r ates f or the c urre nt Ex ecu tiv e Dire ctor s (be ing, Paul W illiam s, Dami an Wisn iewsk i, Dav id Silve rman a nd Nige l Geo rge) fr om 20% to 15% by 1 Januar y 2 022. Durin g 2021 , t he pe nsion c ont ribu tion r ates for t he cur rent E xe cut ive D irec tors w as 1 7 .5% of s alar y From 1 Ja nuar y 2022, we a re ful ly co mplian t with p rovi sion 38 a s the pension contribution rates for all E xec utiv e Dire cto rs is 1 5% (alig ned with the wider work force) Non-Executive Direc tor appointment pag e 1 46 Key ac tiv ities o f the B oard page 1 4 2 Helen Gordon Senior Independent Director Sanjeev Sharma Non-Executi ve Di rec tor 123 Financ ial Stat ements Strategic repor t Governance TH E S ECTI O N 1 7 2 ( 1 ) S TAT E M E N T Issues, fac tors and stakeholders The B oard has dire ct enga gement pr incipally with o ur employe es and share holder s but is also kep t fully appr ised of th e material issu es of other s takeho lders thro ugh the Res ponsible Bus iness Co mmit tee and E xecu tive Dire ctor s, repo r ts from s enior manag ement and ex te rnal adv isers . On pag es 26 and 27 we outline the ways in whic h we have engage d with key s takeholde rs and the material is sues tha t they have rais ed with us . s17 2 f a c t o r Re levant disclo sures (a) the l ikely consequences of anyd ecis ion in t he long- term Co mpany p urpo se (p age s 1 and 1 31 ) Ce ntral L ondo n of fic e marke t (pa ge 1 4) Res haping th e por t fo lio, re stoc king th e pipe line (p age 20) Pip eline pr ojec ts & sup er-si tes ( page 24) Our b usine ss mo del ( page 28) Our s trate gy ( pa ge 32) (b) the in ter es ts o f the Compa ny’s employe es Our p eop le (pa ge 56) Div ersi t y and inc lusion ( page 5 7) Natio nal Equali t y Sta ndard ( pag e 58) Non- fina ncial re por tin g (pa ge 66) Employee engagement (page 1 35) (c) the ne ed to f os ter t he Company ’ s business relationships with suppliers, customers and others Pro viding e nhanc ed am enitie s (p age 30) Human r ights a nd mo dern s laver y ( pag es65 a n d 16 7 ) St akeho lder Da y (pa ge 1 34) Res pons ible pay ment p ract ice s (pa ge 1 69) Supp ly Chain Su stain abilit y S tand ard (page 1 69 ) (d) the im pac t of th e Company’s operations on th e com munit y a nd the environment Envir onmen tal (p age 52) Our p athway to n et zero c arb on (pa ge 1 2) TCFD dis clos ures , GHG and e nerg y da ta (p ages 6 8 to 75) Co mmunit y Fun d (pa ge 61 ) (e) the de sira bilit y o f the Com pany maint aining a reputation for high st andards of business conduct De rwe nt Lon don br and (p age 102) Pur pos e, value s and c ulture (p age s 1 and 1 31 ) Whis tleblo wing (p age 1 36) Inter nal fin ancial c ontr ols ( page 154) An ti-brib er y and c orr uptio n (pa ge 1 65) Awards a nd re cogn ition (se e insid e backcover) (f ) the n eed t o ac t fair ly bet ween members of the C omp any Shareholder engagement (page 1 37) Ann ual Gen eral Me etin g (AGM ) (pa ge 1 97) Right s at tac hed to s hares ( pag e 1 9 6) Voting rig hts ( page 196) PUBLIC INTE RES T S T A T EMENT – 2021 As a b usiness t hat design s and manage s of fic e spac e, we are aware of our wider o bligations to b e a respo nsible busines s par tne r to our oc cupiers and to t he communi ties in which we ope rate. As our ac tiv ities impac t on multiple st akeholder gr oups (see pa ge 26) , our Bo ard ensures t hat stakeh older mat ters are cen tral to its de cision making alon gside the long-te rm finan cial suc ces s of our busine ss. We ex tend our ob ligations bey ond the s tatuto r y requireme nts to add value an d build long-term mut ually bene ficial rel ationships . Our obligati ons are inco rporate d into our purp ose, whic h stro ngly influen ces o ur values (see pa ge 1 31 ). We have detailed on pa ges 1 2, 1 3, 26, 27 , 30, 31 and 50 to 75 how we have ac ted in the pub lic interest dur ing 202 1. Metho ds used by th e Board The m ain metho ds used b y the Direc tors to p er form th eir dutie sinclude: — th e Board s ets the G roup’ s purp ose, valu es and str ateg y and ensure s they are align ed with o ur culture (see pa ge 1 31 ); — th e Resp onsible Busine ss Co mmit tee monito rs the Gro up’ s cor porate re sponsibilit y, sustainabili ty an d stakeh older engage ment ac tivit ies and rep or ts to the B oard on it s acti vities (see pa ges 1 66 to 1 71 ); — th e Board as ses s the p otential impac t of signific ant capi tal exp enditure de cisions on o ur stakeho lders (see p age 1 36) ; — th e Board’s risk mana gement p roce dures ide ntif y the p otential con seque nces o f decision s in the shor t-, me dium- and long-ter m so that mitigatio n plans c an be put in p lace (se e pag es 1 6 0 and 1 6 4) ; — s trateg y rev iews which as ses s the long-ter m sustainab le suc ces s of the Group an d our impac t on key stakeh olders; — dire ct and indire ct st akeholder e ngagemen t ( se e page s 26 to 27 and 1 3 4 to 1 37) ; — ex ter nal assuran ce is re ceive d from s takeho lder sur vey s, broker s and adv isers; and — sp ecif ic training for o ur Directo rs and se nior manager s. In resp onse to the c ontinuing unc er taint y and dif f iculties fa cing our stake holders du e to the Co vid- 1 9 p andemic , and in addition to th e main meth ods liste d above , the Bo ard also: — h eld two s trateg y me etings in 202 1 to ensure o ur strateg y remains f it for p urpos e ( se e pag e 1 30); — or ganised th e Group’ s f irst St akeholder D ay and an Inves tor Day which we re atte nded by t he Chairman, E xe cutiv e Direc tors and se nior managem ent (see p age 1 3 4 ); — c ontinue d to overs ee mana gement ’ s de cisions an d policie s in res pect t o : – our abilit y to safe ly operate o ur buildi ngs; – suppo r ting the loc al communit y ; and – provi ding clear communic ations an d suppor t to our employees. — in addi tion to the fe edba ck rec eive d at the St akeholder D ay and Inves tor Day, the Board re cei ved mo re regul ar fee dback from o ur stakeho lders thro ugh: – the oc cupier c arbon a spiration que stionnaire (see p age 1 3) ; – the 2021 biennial employee s ur vey and emp loyee p ulse sur vey s ( se e pag e 60) ; and – updates o n engagem ent with o ccupier s and supplier s. The Boa rd of D i rect ors co nfi rm t ha t du ri ng th e yea r u nde r revi ew , it ha s act ed to pr omo t e the l ong -te rm su ccess of t he Com pan y for th e bene fit o f sha reh ol der s, wh il st ha vi ng d ue reg ar d to t he ma t te rs set o ut i n secti on 1 7 2( 1 )( a) t o ( f ) of t he C ompanie s A ct 200 6. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 1 24 Principal de cisions in 202 1 an d how we have met our public inter est obligation s The ke y activ ities an d principal de cisions und er taken by th e Board in 2021 are detailed on p ages 1 42 and 1 4 3. We detail below h ow the Boar d factor ed st akeholder s, and the inf ormation we re cei ved thr ough engag ement, into i ts decis ions in 202 1 . Engagement we received O ur re spo nse Occupiers Dur ing 2021 , th e As set Man agem ent tea m cont acte d mo st of our o cc upiers a nd maint ained t his co ntac t throughout. T wo oc cupie r sur ve ys were c ond ucte d during 2021 to gath er fe edba ck to be tte r unde rst and th e impac t of the pan demic o n our oc cupie rs and t heir key c onc erns . Th e res ults of th ese e ngage ment a cti vitie s were s hare d with the B oard a nd Res pons ible Busin ess C ommi t tee. In addi tion, t he Sus tainabil it y team c ondu cte d an oc cupie r sur vey w hich fo cus ed on th eir ca rbon aspir ations . Fur the r infor mation o n this sur v ey, and our res pons e to the e ngage ment r ece ive d, is on p age 1 3. — To monitor g oo d air qualit y, we ensu red all b uilding ven tilati on sys tems we re co mpliant with C ov id- 1 9 re gulat ions an d intro duce d CO 2 monit oring to as se ss ve ntilati on leve ls and pro vide c omfo r t to our oc cupie rs. — Re que sts f or fin ancial s uppo rt w as tailor ed to bu sines se s indiv idual ne eds r athe r than a bla nket app roac h. Par tic ular at ten tion was g iven t o occ upier s perc eiv ed to b e mos t at risk , inclu ding ret ail and ho spit alit y o ccupi ers . The B oard’s sup por t fo r the se oc cupie rs not o nly ass iste d the bu sines se s thems elve s but al so he lpe d to pre ser ve t he ame nit y for t he buildings’ o ther o cc upiers a nd the lo cal c ommuni t y . — D ue to the p ande mic, m ore oc cupie rs wer e utilisin g the bike r acks at o ur buildings . It was ide ntif ied th at addit ional bike r acks we re re quired f or som e of our buil dings, and t hes e were in stal led. T his was a re lati vely sm all cap ital ex pen diture h owev er , it ref lec ted t he chan ging ne eds o f our oc cupie rs and h elpe d to sup por t th eir well being (se e pa ge 30). — In re spo nse to f ee dback f rom ou r occ upier s, we ins talle d farm t owers a t Oliv er’s Y ard a nd the W hite Chap el buil ding to add m ore biop hilia in our b uildings and to s uppo rt w ellb eing. Employees Th e Boar d and Re spon sible Bus ines s Com mit tee we re mad e aware via o ur emplo yee s ur vey an d fee dbac k re ceiv ed f rom th e D&I Workin g Group th at: — t here wa s a prop or tion of e mploy ees t hat fo und hom ewor king was le ading to lon ger wor king day s. — t here wa s some a nxie ty a nd unc er taint y s urroun ding the m easur es in pl ace f or when e mploy ees s tar te d to ret urn to the o f fic e envir onme nt. — G uidanc e was pro vide d to emp loye es on ho w to supp or t the ir wellb eing and s afeg uard the ir healt h whilst at h ome. At a n umber o f town hall m eet ings, th e CEO rei terate d the impo r tanc e of bal ancing w ork an d per sonal c ommi tmen ts. In re co gnitio n of their h ard wor k, th e Boar d gave all em ploye es ex t ra days of f o n 1 June and 24 De ce mber. — In a dvanc e of ret urning to t he of f ice, an up date d proto col g uide an d a comp ulso r y 30- minute on line indu ctio n were dis tribu ted o n the C ovid-1 9 s afet y m easure s in pla ce. — O ur Oc cupat ional He alth pr ovid er was inv ited to p res ent at town h all me etings o n topic s inclu ding ‘lon g cov id’ , va ccin es, va riants , res pons ible beh avio ur and supp or ting o ther s. — In crea sed o ur ment al he alth cham pions’ n etw ork: 13% of the bu sines s are no w traine d as men tal he alth cha mpions (s ee pa ge 56). Lo cal c omm uniti es an d othe rs Th e fee dbac k we rec eiv ed in 2021 , h ighligh ted th at hom eles sne ss and m ent al healt h remain ed a c once rn with in comm unitie s. We were aw are that c er tain Un iver sit y C ollege H ospi tal st af f were b eing ho use d in hotel s as the y were unab le to st ay with th eir famil ies durin g the he ight of t he pan demic (see p age s 1 3 a nd 1 05 of t he 2020 Rep or t & Ac coun ts). We sou ght enga gem ent fr om the C hickens hed Youth T ask for ce on o ur Comm unit y Fund g uidelin es, to e nsure it re mains ac ces sible an d tru e to its or iginal inte ntion o f supp or ting lo cal c ommuni ties . — We do nate d £4 0,00 0 to group s supp or ting th e home les s and £3 0,00 0 to ment al hea lth char itie s. We don ated ov er £1 30 ,000 to o rganis ation s see king to ad dres s diver sit y and inclu sion wit hin the p rope r ty s ec tor , inclu ding a thre e- year b ursar y s uppo r ting an unde rgra duate st udent a t the Re ading Rea l Est ate Foun dation a nd supp or ting th e es tabli shmen t of the A cad emy of Re al As sets (se e pa ge 62). — T he tot al for c harit able do nation s, sp onso rship an d comm unit y fun ding during 2021 was £7 04,000 . — T he bus ines s ex tend ed us e of 1 6 fur nishe d fl ats at Ch arlot te A par tme nts to NHS s taf f at Univ ersi ty C olle ge Hos pita l fre e of charg e. This w as initial ly agre ed in 2020 f or se ven mon ths, b efor e being e x tende d for a f ur the r six mo nths in 2021 , and ha s a total e quiva lent rental value of c. £598,000. — T he fe edb ack re cei ved f rom th e Chicke nshe d Y ou th T a sk forc e will be u sed to r efre sh our guid eline s, app lica tion and e valuat ion pro ce ss durin g 2022. Suppliers Thr ough c lose c olla bora tion wit h our prin cipal contractors and main subcontractors we were kept appr ise d of their r esp onse to t he pan demic a nd how i t was imp actin g on the ir busine ss , finan ce s and st af f . — T he Fin ance te am wor ked har d to redu ce our av era ge pay ment day s to 20 days , which ass iste d our co ntrac tor s with th eir cas h flow an d liquidi t y . — To suppo rt f urlo ughe d third p ar t y ser v ice st af f, Der went L ondo n con tinue d to ‘to p-up’ wag es by 20% s o that th ere was n o drop in inc ome d uring th e furlo ugh p erio d bet we en Marc h 2020 to 30 Sep temb er 2021 . T he Bo ard were m indf ul that a sig nifi cant n umber o f the se wor kers w ere on re lati vely low w ages a nd a 20% re duc tion und er the C oro navir us Job Re tenti on Sch eme wo uld be si gnif ican t. Af ter t he fur lough p eri od en ded, w e reins tate d all se r vic e staf f b ack to o ur buildings . This he lpe d to ensu re jobs a nd sal arie s rem ained p rotec ted . Ce ntr al and l oc al gove rnm ent Paul W illiams (CEO) is Ch airman of t he Wes tminst er Pro per t y A sso ciatio n (W P A ), a not-f or-p rofi t advo ca cy gro up, which f ocus es on p olic y , re sear ch and m aintainin g exc ellent r elati onship s with C entr al Lond on’s local auth ori ties . In 202 1 , WPA laun che d tw o rese arch p aper s on ne t zero c arbo n and sus tainab ilit y whic h includ ed contribution from Derwent London. T ackl ing climate c hange i s a seri ous cha llenge an d re quires c oordin ated a ctio n. Isling to n Co uncil was w orkin g towards b ec oming a Lon don Li ving Wag e Boro ugh an d was se eking s uppo r t fro m b usine sse s. — T hroug h his WPA role, P aul rec eiv es invalu able fe edb ack fr om loc al auth orit ies and o ther st akehol ders w hich c an be bro ught to o ur Boa rd and inf orm our d ecis ion mak ing. — P aul William s and Jo hn Davie s (Hea d of Sust ainabil it y) at tende d and p rese nted at C OP26 . We also h os ted a tour o f our Sc ot tish l and whe re pla nning pe rmiss ion is b eing so ught fo r ren ewable e nerg y ini tiativ es (se e page 13 ). Damia n Wisniew ski (CF O) spoke at t he Lon don Clima te Act ion Wee k summit in Jun e 2021 on how we c an work t ogeth er to make p rogre ss on clim ate chan ge. De r went Lo ndon’s Net Zero C arb on Pat hway is align ed wi th the t arget for London to be carb on neutral by 2030. — D er went L ondo n bec ame a p ar t of Islin gto n’ s Lo ndon L iving Wa ge Ac tion Gr oup. In ce lebrat ion of Li ving Wag e Week 2021 , Whit e Coll ar Fac tor y ho sted a n even t for Islin g ton Co uncil , which br ought t ogeth er so me of the I sling ton b usine sse s that hav e be com e Liv ing Wage ac cre dite d employ ers o ver th e past 1 2 mo nths. We a lso sig ned- up to par ti cipate in the ‘ Making L ivin g Wage Pl ace s’ initiati ve, r un by the L ivin g Wage Fou ndatio n. De rwe nt Lon don has b ee n Lond on Liv ing Wage F ounda tion ac cre dited s ince 201 7 (se e page 62). Shareholders Th e Cov id- 1 9 pa ndemi c cont inued t o have an imp act o n the s tock m arket . The re was c onsid erable un cer t aint y surr ounding w heth er div iden d paym ents w ould be m ade to shar ehold ers an d the abil it y of busin es ses to we athe r the c ontin uing unc er taint y. — T he Bo ard c onside red t he fin ancial s tren gt h of the b usine ss and a gre ed to c ontinu e to pay the 2020 f inal di vide nd in June 2021 and to p ay an inter im 202 1 div iden d in Oc tobe r . T his de cision p rovi ded s ecur it y to our sh areho lder s who value t he reg ular in com e rec eive d fro m our dividend payments. — We h oste d an Inve stor D ay on 28 Sep temb er , which p rovi ded an o ppor t unit y for o ur inve stor s to mee t with m embe rs of th e Boar d and rais e any que stio ns (see p age 134) . — D esp ite bein g unable to h ost an in p ers on AGM in 2021 , the D irec tors e nsure d ther e were audio f acilit ies so t hat our s hareh older s coul d follow p roc ee dings and as k ques tions . 125 Financ ial Stat ements Strategic repor t Governance 1. 2. 3. 4. 5. 6. 1 . David Silverman, 52 Executi ve Di rec tor Ap poin ted t o the Board: 200 8 Dav id jo ine d the Gr oupin 20 02 and i s responsible for leadi ng Derwent ’ s investment acquisitions and dis pos als . In add iti on, his res ponsibili ties include overseeing the Group’ s proper ty management team. Dav id is a p as t Chairman of Westminster Proper ty Association. Other public appointments: Mem ber o f the B oar d ofDi rec to rs o f New Wes t End C omp any andC hair man o f the Chickenshed Proper t y Company. 2. Em ily Pr ide aux , 42 Executi ve Di rec tor Ap poin ted t o the Board: 20 21 Emil y has o ver all responsi bility for overseeing Leasing and Asset Management transactions, building on our excellent cus to mer s er vi ce an d relations, leading ou r mar ket ing an d digi tal strateg y , whilst con tinuing to ensur e that our future developments provide be st in c la ss workspace for the nex tg ene rat ion o f bus ine sse s. Emi ly is acha r tered surveyor and w as pr evi ous ly Director of Investment Management at CB Richard Elli s Nor th Americ a. Other public appointments: Director of The Paddington Partner ship . 3. He len G ord on, 62 Senior Ind ependent Director Ap poin ted t o the Board: 2 018 Helen is a chartered sur v eyor a nd is CE O of Grainger plc. Previously, she was Glo bal H ead o f Real Estate As set Management of Royal Ba nk of S cot lan d plc and h as he ld se nior proper ty positions at Le gal & Ge ner al Inve stm ent Management, Rai ltrack and J ohn L ain g Developments. Other public commitments: CEO ofGr ain ger pl c, Bo ardm emb er an d Immediate Past Pr esid ent o f the BritishPropert y Federation and Vice Cha ir and B oar d Member of EPRA . Committees: Remuneration, Nominations. 4. Damian Wisniewski, 60 Chief Fi nancial Of ficer Ap poin ted t o the Board: 20 10 A chartere d accountant who held se nior f ina nce r ole s atCh el sf ield p lc, Woo dWha rf L imi ted Par tnership and T rever ia Asse t Management. Dam ianha s ove ral l responsi bility for financial strateg y , treasur y , taxation and financial reporting as wel l as s tra teg ic and operational res ponsibili ties. Other public appointments: T ru ste ean d memb er of the g ove rnin g bod y at the R oyal A ca demy o f Music and Non - Executi ve Di rec tor atth e ABR SM. 5. Mark Breuer , 59 Non-Executive Chairm an Ap poin ted t o the Board: 20 21 Mar k wor ked in investm ent banki ng for 30 ye ar s and, in 2017 , re tir ed fr om a 20 -yea r ca re er at JP M orga n in London, where he held the p os iti on of V ice Chairman Global M&A and w as a me mbe r of the Global Strategic Advisor y Council. Mar kis a Fe llow o f the Institute of Chartered Accountant s of England and Wales, having qu alifie d in 1987 , a nd ha s a BA fr omVas sar C oll ege inth e US. Other public appointment: Cha irma n of DC C plc . Committees: Nominations ( Chair ). 6. D ame Ci lla Sn owba ll,6 3 Non-Executive Director Ap poin ted t o the Board: 2 015 Cill a is t he fo rme r Gr oup Ch airm an and Gr oup CEO a t AMV BBD O, one o f the t op adver tising agencies inth e UK. Other public appointments: Go ver nor o f the Well com e T ru st an d Director of Genome Resea rch Limited. Committees: Responsible Bus ine ss(Cha ir), Nominations, R isk. BO A R D OF DIR E C T ORS De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 126 11. 7. 8. 9. 10. 12. 7 . R icha rd D akin , 58 Non-Executive Director Ap poin ted t o the Board: 2 013 Ric har d is the Man agi ng Dir ec tor o f Capit al Advisor s, part of CB RE, sin ce 2014. Pr evi ousl y , h e had b een employed at Lloyds Ba nk sin ce 1982 whe re he ga ine d an ex te nsi ve kn owle dge o f pro per t y fi nanc e and t he r eal es ta te se ct or. He is a Fel low of t he Ro yal Institution of Charter ed Sur veyors. Committees: Ris k (Chair), Au dit , Nominations. 8. P aul Wil liam s, 61 Chi ef E xec uti ve Ap poin ted t o the Board : 19 9 8 Pau l is a cha r ter ed surveyo r who joined the G ro up in 1 987 . Hewa s app oint ed Chi efE xec uti ve in 201 9.He h as ov era ll res ponsibili ty f or Group strateg y , business development, sus tainabil it y , health and s af et y and day- to-day operations. Other public appointments: Director of S adle r’s Well s Foundation and Cha irma n of th e Westminster Proper tyAssociation. Committee: Responsible Business. 9. Cl audi a Arn ey, 5 1 Non-Executive Director Ap poin ted t o the Board: 2 015 Cl audi a was Gr oup Man agi ng Dir ec tor o f Ema p until 2 01 0. Pr ior to t hat sh e hel d seni or ro les a t HM T r ea sur y, Go ldma n Sac hs and the Fi nancial Times. Other public appointments: Chair ofD eli ver oo pl c and Non-Executive Director of Kingfisher plc. Member of the T akeover Panel (Hearings Co mmitt ee) and L ea d Non- Executive Boa rd Mem ber f or th e Depar tment for Digital, Cul ture , Medi a & Spo r t. Committees: Remuneration ( Chair) , Audit, Responsible Business, Nominations. 1 0. Sanjeev Sharma , 58 Non-Executive Director Ap poin ted t o the Board: 20 21 Sa njee v is a me mbe r of the Real Est ate Balan ce board, and is an independent me mber o f the E st at es Strateg y Commit tee ofK ing ’s Coll ege Universit y London. Other public appointments: C hief Proper ty Por tfolio Of f ic er at M& G Real Es ta te – a le ading financial solutions pr ovi der f or gl obal r eal est ate investor s, w hich is p ar t of M&G p lc’s £67 .2 billion Private & Alternative Asset s division. Committees: Audit, Risk, Nominations. 1 1. Nige l Geo rge, 5 8 Executi ve Di rec tor Ap poin ted t o the Board: 19 9 8 Nige l is a ch ar ter ed surveyo r who joined the G ro up in 1 98 8. Hisr esp ons ibili tie s include overseeing thedevelopment dep ar tm ent , as we ll as acquisitions, disposals and i nves tm ent analysis. Other public appointment: Di rec tor of th e Cha nce r y La ne Association Limited. 1 2. L uci nda B ell , 57 Non-Executive Director Ap poin ted t o the Board: 2 019 Lu cind a is a cha r ter ed ac cou nta nt an d fr om 201 1 t o 201 8 was C FO of T he Br iti sh L and Company plc ( ‘British Land’). Prior to that, she h eld a r ang e of fi nanc e and t a x ro les atBr it ish L and. Other public appointments: Non-Executive Director of Crest Nicholson Hol dings p lc, a nd Non-Executive Director at Ma n Gro up Plc . Committees : Aud it (Cha ir), Risk , Remuneration, Nominations. 127 Financ ial Stat ements Strategic repor t Governance S E NI O R M ANAG E M ENT 1. 2. 3. 4. 5. 6. 7. EXECUTIVE C OM MITTEE 1. Jennifer Whybrow Head of F inancial Planning & A nalysis 2. John Davies * Head of S ustainabilit y 3. David L awler Co mpany Se cretar y 4. Vasiliki Ar vani ti * Head of A sse t Managem ent 5. Ric hard B aldwin Director of Development 6. Jay Joshi T reasurer 7. Victoria Steventon * Head of P roper t y Mana gement SENIOR MAN AGEMENT 8. Tim Hyman Gro up Arch itect 9. Kat y Le vine Head of Human R esourc es 10 . Robert Duncan Head of Inve stor Rel ations & S trategic Pl anning 11 . Heethen Patel Financial Controller 12 . Matt Cook Head of D igital Innovat ion & T e chnolog y 13 . Lesley Buf ton Head of P roper t y Mar keting 14 . Giles Sheehan He ad of Invest ment 15 . Clive Johnson Head of He alth & Safet y 16 . P hilippa Davie s Head of Leasing 1 7. David Westgate Gr oup Head of T a x 18 . J onathan Theobald Head of Inve stme nt Analy tic s 19 . Umar Loane He ad of Prop er t y Acc ounts * ef fe ct ive f rom 1 Ja nuar y 2022 1. 2. 3. 4. 5. 6. 7. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 1 28 9. 8. 14 9. 15. 10. 16. 11. 1 7. 12. 13. 19. 8. 9. 10. 11. 12. 18. 13. 129 Financ ial Stat ements Strategic repor t Governance COR POR A T E G OV ERNAN CE S TAT E M E N T Struc ture of the Governance section The G overn ance se ctio n has be en organise d to follow the s truc ture and prin ciples ( A to R) of the 201 8 UK C orpor ate Gover nance C ode (the C ode) and illustrate s how we have app lied the C ode p rinciples and c omplied wi th the prov isions. Fur th er informati on on the C ode and our c omplianc e is on page 1 23. 1 . Board leadership and Company purpose P a g e 13 0 topag e 1 37 A Ef fe cti ve Boa rd (pa ge 1 30) B Pur pos e, value s and c ulture (p age 13 1 ) C Gov erna nce f rame work an d Boar d res ourc es (p age s 1 32 and 133) D Stakeholder eng agement (page 1 34) Res pons ible Busin es s Comm it tee (p age s 1 6 6 to 1 71 ) E Work fo rce p olicie s and p ract ice s (pa ge 1 36) 2. Division of responsibilities P a g e 13 8 topag e 1 43 F Bo ard role s (pa ge 1 38) G Independence (page 1 39) H E x ternal a ppoin tmen ts and c onf lict s of intere st (p age 139 ) I Key ac tiv itie s of the B oard in 2021 (p age 1 42) 3. Composition, succession and evaluation P a g e 14 0 topag e 1 4 7 J Ap point ment s to the B oard ( page s 1 40 an d 1 4 6) K Bo ard skil ls, ex per ienc e and kn owle dge (p age 1 4 0) L Ann ual Bo ard eval uation ( pag e 1 4 1 ) 4. Au dit , risk an d inter nal co ntr ol P a g e 14 8 topag e 1 7 1 M Finan cial re por tin g (pa ge 1 4 9) E x ternal A uditor & In terna l audit (p age s 1 5 5 to 1 5 7) N Rev iew of th e 202 1 Re por t & A cco unts ( page 150) O Inter nal fin ancial c ontr ols ( page 154) Risk management (page 1 59) 5. Remuneratio n P a g e 17 2 topag e 1 93 P Link ing remun erat ion with p urp ose an d stra teg y ( pa g es 17 4 an d 1 75 ) Q Remun erat ion Pol icyre view ( p ag e 1 73) R Pe rf orma nce o utco mesin 2021 ( pa g es 183 to 185 ) Strat egic targ ets (pag es 1 79 and 1 84) BOA RD LE A DERSHIP AND COMP AN Y PURPOSE Ef fec tive Bo ard Our Bo ard is comp ose d of highly skille d profes sionals wh o bring arange of sk ills, pe rspe ctiv es and c orpor ate exper ience to o ur bo ardroom (see p ages 1 26, 1 27 and 1 40). T o ens ure suf fi cient time for disc ussion, t he Boar d utilises i ts fi ve principal c ommit tee s to ef fe ctiv ely manage i ts time (see p age 1 33). At each Bo ard mee ting, the ag enda ensur es suf f icient time f or the co mmit tee chairs to rep or t on the c ontents of disc ussions , any rec ommendat ions to theB oard which re quire approval an d the acti ons taken. The B oard c onduc ts a detaile d annual review of o ur strateg y (in cluding our purp ose an d strategi c objecti ves). Some of the ke y aspe cts discus sed b y the Bo ard during its st rateg y discus sions includ ed: — o ur aspirations, c ulture and purp ose (se e page 1 3 1 ); — th e role and fu ture of the of f ice (se e page 1 5), tenant sec tors towatch and, c hanges in oc cupier de mand; — ch anges to the L ondon of f ice mar ket and inves tment mar ket; — su cce ssion p lanning (see pa ge 1 46); — f eedb ack rec eive d from o ur employe es and oth er key stakeholders ; — o ur developm ent pipelin e in respe ct to it s replenishmen t andf uture pote ntial (see pag es 20 and 21 ); and — cl imate change risk an d oppor t unities. Promoting the long -term success of Derwent London In acc ordanc e with the C ode, th e role of the B oard is to prom ote thelong- term sust ainable succ es s of the Co mpany , gen erate valuefor sh areholder s and co ntribute to wide r socie ty. The approp riatenes s of our busine ss mo del is reg ularly rev iewed by theB oard at its s trateg y rev iew me etings to ensure it re mains cap able of generat ing long-term sus tainable value fo r our shareh olders an d other key st akeholde rs. In order f or the busine sstoco ntinue to gener ate long-term sus tainable value, theB oard’s actions during 2021 , inclu ded: — We co mpleted a numb er of impor t ant acquisiti ons which hashe lped to re stoc k the Group’s developm ent pipelin e (see pa ge 20) . A well-sto cked pipe line of potent ial deve lopment op por tunitie s is a sourc e of fut ure returns forth eGroup and akey f actor in our abilit y to c ontinue to deliver above average returns to ou r stakeholders. — D uring the ye ar , we be gan to pursue op por tunitie s to self- gene rate renewable en erg y fro m our land ho ldings i n S cotl and and liaise d with our o ccupier s to align our net zero c arb on jou rneys ( see page 1 3) . — We unde rstan d the impor t ance of am enities to o ur occupie rs. During 2021 , we op ened DL / 7 8, l aunched t he new DL / A pp, andf urt her improve d the f acilities availab le in our buildings ( see page 30 ). — We incre ase d the availabilit y of long- term funding . An additio nal £350m of f inanc e was raised v ia a gree n bond andwe ex ten ded our Re volving Cre dit Facilitie s. As at 31 De cemb er 202 1 , our weighte d average te rm of bor rowings incr eased to 7 .2 yea rs. Fur ther infor mation on ho w we create long-te rm value is available on the f ollowing page s: Rea sons t o inves t page 6 Our s tra teg y pa ge 3 2 The s ec tion 1 72( 1) stat emen t page 12 4 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 130 PURPOSE Why we do what we do VA L U E S The qualities weemb ody CUL TUR E How we wor k together Our pur pose , values and culture ar e disclose d on pa ges 1 and 1 22. Purpo se and values Our pur pose c ommunic ates the Gro up’ s s trategic dire ction an d intentions to o ur employe es, o ccupier s and wider s takeholde rs. Due to it s impor tan ce, it is re gularly re viewe d by the Bo ard. At the Boar d’ s str ateg y revie w meeting in Jun e 202 1 , it wa s agree d that our purp ose c ould be simpli fie d to ensure grea ter clarit y an d refer ence to th e impor tan ce of our net ze ro carb on journe y ( se e pag e 1 ). Our progre ss towards ac hieving our pur pos e during 202 1 can b e review ed on the f ollowing pag es: — How w e have help ed to improv e and upgrade t he stoc k of of fic e spac e in centr al London ( page s 20 to 2 5). — T he abov e average long- term retur ns to our shareh olders (pa ges 46 an d 1 87). — T he soc ial, environm ental and e con omic ben efit s brought to allour st akeholder s (pag es 50 to 75). Our value s ar ticulate the qu alities we emb ody an d our under lying appro ach to doing busine ss. O ur values are emb edd ed in our ope rational prac tice s through t he polic ies approv ed by the B oard and the dire ct ove rsight and inv olvemen t of the E xecut ive Dire ctors . The E xe cutiv e Direc tors have b een dele gated resp onsibilit y for ensuring t hat policie s and be haviours s et at Bo ard level are ef fe ctiv ely communic ated and imp lemented a cros s the busine ss. Ifthe B oard is co ncer ned or dis satisf ied wit h any behavi ours orac tions, it will s eek as surance t hat cor rect ive act ion is being taken. No s uch ac tion was require d during 202 1 . Cultu re Our culture ha s develop ed f rom our values an d is a key streng t h ofour busine ss. T he be nefi ts of a stron g culture is see n in our employe es’ enga gement s core s, retentio n rate year- on-ye ar and level s of produc tivi t y . As th e cultural tone of a bu siness c omes fromt he boar droom, s afeguarding our c ulture is a key fac tor in thede velopme nt of the Bo ard’ s su cce ssion pl ans. Asses sment and monitori ng The B oard mo nitors and as ses ses th e culture of the Gr oup via: — Re gularly m eeting wit h managem ent and invit ing employe es topres ent at Bo ard and commi tte e mee tings. — Gle aning fee dback via t he employe e repre sentat ives th at sit on our Re sponsible B usiness C ommit tee . — A ss es sing cult ural in dicato rs su ch as: – manage ment ’ s at titud e to risk; – health and s afet y data; – comp liance with t he Group’s policies an d proc edures; and – key per f ormanc e indicator s, including st af f retention . — Fe edb ack from o ur wider st akeholder s, including at our St akeholder D ay and from o ccupie r pulse sur ve ys. — Me ssa ges re ceiv ed via th e Group’ s whist leblowing sys tem. — P romptne ss of pay ments to sup pliers . — Ind epend ent assur ance is so ught via th e outs ource d internal audit f unction an d other ad viser s. The bi ennial employe e sur veys p rovide valuab le insights into what is valued an d see n as corp orate nor ms. Th e Board was p lease d to note that wh en our employ ees de scrib ed the c ore char acteris tics ofour culture in th e 202 1 e mployee s ur vey , th e top resp onses were‘pas sionate’ , ‘profe ssional’ , ‘har dworking ’ and ‘repu table’ . Inaddition , ‘ dive rse’ and ‘inclusi ve’ were at tribu tes of our culture which were u sed sub stantially m ore than in our la st employe e sur vey in 201 9, highlig hting the ef fe cti venes s of our initiativ es and progr ess in the se area s ( se e page 5 9 ). With as sist ance fr om advis ers, t he Board w ill seek ind epen dent assur ance that t he Group’s culture is clearly unde rstoo d by our employe es and ke y stakeho lders during 2022 (see pa ge 1 4 1 ). Emb edding o ur cultur e The B oard reinfo rces o ur culture and value s through it s decisio ns, strate g y and con duct. Culture and value ‘ f it ’ is a key consid eration during our r ecrui tment proc es s, which is reinfo rced d uring our induct ion program me, monthly to wn halls run by th e CEO, and is monitore d throug h per f ormanc e appraisal s. As p ar t of the six-mon thly per for mance revi ew cycle, o ur employe es ref lect on wh ether t hey demo nstrate the c ore ‘comp etencie s’ outline d in the revi ew . T hese c ompete ncies include t he abilit y to build strong inte rnal and ex tern al relat ionships, c ommunicate c learly, buil d tr ust, and d emons trate creat ivit y, initiative and te amwork. T hes e discuss ions reinforc e the beh aviours we wish to f oster wi thin our work forc e and link our culture to our rewar d mech anisms. Our se nior manage ment team und er take training to ensure th ey are suppo r ting their teams an d enco uraging the b ehavio urs which align with our c ulture. During 2021 , manag ement training c overe d rec ognising and sup por ting me ntal health c onc erns, di versit y an d inclusion, and uncons cious bias. Main tainin g our cult ure durin g unce r tain ty a nd per iods o f chan ge The C ovid - 1 9 pand emic caus ed disruptio n and require d adjustment to the way we wor k, lead o ur teams, c ollabo rate and comm unicate. Early em phasis was pl aced o n suppor ting o ur key stakeho lder group s, including our emp loyee s, oc cupiers an d local c ommunities . For our e mployee s, we prov ided c lear communic ation, re assuran ce and implem ented f ur ther initiativ es to supp or t their ment al health and well being (see p age 56). It was cr itical th at any new joiner s during this per iod, who wer e unable to physi cally me et their team s or expe rience t he of fic e environ ment, gaine d a clear sen se of our cultural id entit y. This was princip ally facilit ated throug h frequ ent team vid eo/ c onferen ce call s, our employ ee news letter s, vas t information o n our intranet site and mo nthly town halls . As par t of Nati onal Inclusion Wee k, ‘cof fe e catch ups’ were organise d for ran domly sele cted s taf f to getto kn ow some one the y perh aps had not h ad a chanc e to meet yet. T his initiative wa s par ticular ly helpf ul for new s tar ters wh o hadjoine d through out the y ear and had limite d interac tion with other departments. In addition , we hoste d two in-p ers on induct ion ses sions in July andS eptember w hich include d a discus sion with Dav ina Stewar t (an employee m ember of t he Resp onsible Busine ss C ommit tee) onthe top ic of diversi t y and inclusion and o ur culture. At our Prop er t y & Building Manageme nt Awayday , the HR team h oste d aninterac tive se ssion on D er went Lon don’ s culture and v alues. 131 Financ ial Stat ements Strategic repor t Governance CO RPOR A TE GOVERNANC E S T A TE ME NT CONTINUED Governance arrangements and Boar d resources Co rporate go vernanc e is es sential to ens uring our busine ss is runinthe r ight way for the b enef it of all of our s takeholde rs. Ourgov ernanc e arrangem ents supp or t the de velopme nt and deli ver y ofstr ateg y by: — en suring acc ountabilit y an d respo nsibilit y; — f acilitating th e sharing of infor mation to inform d ecisions; — e stablis hing engageme nt program mes with key s takeho lders (see pa ges 26 and 27); — maint aining a sound sy stem of risk o versight , managem ent and an ef fe cti ve suite of internal c ontrol s ( se e pag es 1 5 4, 1 59, 1 6 0 and 1 6 4) ; — pr oviding indep enden t insight and kn owledge f rom the Non-E xec utive Dire ctor s; and — f acilitating th e develop ment and m onitoring of key per f ormanc e indicator s ( se e page s 44 to 4 9) . If any Direc tor has c once rns abou t the running of th e Group or a prop ose d cours e of actio n, they are en coura ged to exp ress t hose con cern s which are then minu ted. No suc h conc erns wer e raised d u r i n g 2 0 2 1. The B oard maint ains a formal s chedule of mat ter s which are res er ved s olely for it s approval . Thes e mat ters includ e decisio ns relat ing to the Group’s strateg y, capital s truc ture, finan cing, any major prop er t y acquisitio n or dispos al, the r isk appeti te of the Group and t he autho risation of c apital ex pendi ture above t he delega ted authority limits. On 6 Aug ust 202 1 , a det ail e d review of t he Board ’ s delegate d autho rit y limits was c onduc ted, and ame ndment s were made in resp ec t to the limits fo r major prope r ty ac quisitions / dispo sals andmajor c apital exp enditure p roject s. The r evise d author it y limitsare de tailed be low: Bo ard ap pro val is re quir ed f or: Level of approva l: Major proper t y acq uisition ordis pos al Valued ab ove £4 0m (pr eviou sly£20m) Maj or c ap it al expenditure pro ject Proje cte d cos ts abo ve £20m (previo usly £ 1 0m) Material o cc upier lease or contract Rent al inco me grea ter than 7 .5% of the Gr oup’ s tot al rent al incom e Altho ugh the Bo ard is form ally required to au thoris e capit al exp enditure ab ove this limit, th e open nat ure of our organisati on mean s that the Bo ard is aware of all act ive projec ts within ourpo r tfo lio. The D irector s utilise an ele ctro nic Board p aper sy stem which prov ides imme diate and sec ure acc ess to p apers . The Chair man ofthe B oard and th e chairs of the c ommit tee s set the a gendas f or upc oming mee tings with suppo r t from th e Comp any Sec retar y. We aim to ensure that th e information s hared wit h our Board is of suf f icient dep th to facilit ate debate and to f ully unders tand th e con tent withou t bec oming unwieldy an d unproduc tive . Papers ar e require d to be clear an d conc ise with any ba ckgr ound material include d as an appe ndix. We of ten inv ite the prep arer of the re por t to at tend me etings so the B oard c an gain a bet ter under stan ding and que stion mana gement dire ctly. All Dire ctor s have acc ess to th e ser vi ces of th e Comp any Sec retar y and any Dire ctor may ins tigate an agree d pro cedure wh ereby indep endent p rofes sional adv ice may b e sought at t he Comp any’s exp ense. No su ch adv ice was so ught by any Dire ctor during th e y e a r. Boar d member s and at tendanc e in 20 2 1 At ten danc e at B oard mee tings (i) Chair man Mark Br euer (fr om 1 Febr uar y 2021 ) 10 0 % John B urns (until 1 4 May 2021 ) 10 0 % E xecut ive Dire ct ors Paul William s, CEO 10 0 % Damian W isniewsk i, CFO 10 0 % Nigel George 10 0 % Emily Prid eaux (fr om 1 March 2021 ) 10 0 % Simon Silv er (until 26 Febru ar y 202 1 ) 10 0 % Davi d Silverma n ( until 1 4 A pril 2022) 10 0 % Independent Non-Executive Direc tors Claudia A rne y 10 0 % Luc inda Be ll 10 0 % Richard Dak in 10 0 % Simon Fra ser (until 31 Octob er 2021 ) 10 0 % Helen Gordon 10 0 % Cilla Snowball 10 0 % Sanje ev Sharm a (from 1 O ctob er 202 1 ) 10 0 % Not es: (i) Per cen tag es b ase d on th e mee tings e ntit led to a tt end f or the 12 month s end ed 31De cemb er 2021 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 132 GOV ERNANCE FR A ME WORK We pride our selve s on con ducting our b usiness in an op en and tr ansparent m anner . O ur well-es tablishe d culture ens ures that our gover nancef ramewor k remains f lexible, allowing for fa st decis ion making and ef f ect ive ove rsight (fur th er informatio n on page 1 32). The Board Th e Board is p rimarily re spon sible for s et ting the Gr oup’ s st rateg y fo r deliv ering long- term value to o ur shareh older s and othe r stake holder s, pro viding ef fe cti ve chal lenge to mana geme nt conc erning t he exec ution of t he str ateg y and en suring the Group m aintains an ef f ec tive ris k manage ment an d internal c ontro l sys tem. The Bo ard delegate s cer tain mat ter s to its fi ve principal com mitte es Risk Committee Rev iews and m onitors the Gr oup’ s pr incipal and em erging r isks and the effec tiveness of the Group’s risk man agem ent system s. Audit Committee O vers ees t he Group’s financial repor ting, maintain s an approp riate rel ationship wi th the ex tern al Auditor an d moni tors the G roup’s internal financia l controls . Remuneration Committee Est ablishes the Gr oup’ s Remuneration Policy and en sures th ere is a clear l ink bet wee n per fo rmance an d remuneration. Responsible Business Committee Monitors the Group’s cor porate responsibility, sustainabilit y and s takeho lder engagement acti vities. Nominations Committee Ensure s the B oard (andits c ommit te es) have th e cor rec t bal ance of sk ills, knowledge and exp erien ce and t hat adequate succession plan s are inplac e. Rep or t page 1 58 R epo r t page 1 48 R epo rt page 1 72 Re por t page 1 66 Rep or t pag e 1 44 Th e terms of re feren ce of eac h Boar d commi tte e are availab le on the Gr oup’ s web site at: w ww. der wentlondon.com Executive Directors Th e Board d elegates t he exec ution of t he Co mpany ’ s s trateg y an d the day- to-day m anagem ent of th e busine ss to the E xe cuti veDirec tors , assis ted by ot her me mber s of the E xec utive C ommi tte e. Chief Executive’s statement page 1 0 Measuring ou r perf ormance pag e 44 Property review page 7 6 Members pa ge 1 28 Suppor ting committees Th e execu tive s oper ate a number of s uppor t ing commi tte es th at provi de over sight on ke y busine ss ac tivi ties and r isks. Credit Committee page 1 06 Health and Safet y Committee page 64 Sus tainabilit y Committee page 6 5 Sponsorship and Donations Committee page 64 Our share holder s and other key s takehold ers play an imp or tant ro le in monitoring and s afeguarding th e gover nance of our G roup. Fur ther infor mation on ho w we engage wit h our shareho lders (see p age 1 37), employe es (see p age 1 35) an d other key s takehold ers are onpa ges 26 to 27 . Shareholders and other stakeholders Our s tr ate gy page 3 2 Our principal risks page 1 00 T h e s e c t i o n 172 (1) statement page 1 2 4 Key ac ti vit ies o f the Bo ard d urin g 2021 page 1 4 2 133 Financ ial Stat ements Strategic repor t Governance CO RPOR A TE GOVERNANC E S T A TE ME NT CONTINUED St ak eholder engagement We rec ognise the imp or tanc e of clear c ommunicatio n and proac tivee ngageme nt with all of our s takeholde rs. Our s takeholde r engage ment pro grammes ar e kept under rou tine rev iew by theB oard. St akeholder e ngageme nt has be en par ticul arly impor t ant in the pas t two ye ars, due to t he uncer t aint y and ec onomic dif f iculties caus ed by C ovid- 1 9. Som e of our engagem ent met hods re quired adjustmen t in respon se to the re stric tion impo sed by t he gover nment to slow th e spread of t he virus , including the use o f conf erenc e call fac ilities to hold o ur 202 0 and 2021 Annual Ge neral Mee ting ( se e pag e 1 97) and the p ostp onem ent of our 2020 St akeholder D ay which took pl ace in 2021 . During th e year unde r review, we utilise d variou s engagem ent channe ls to rec eive invaluable fe edb ack from o ur key stakeh olders (see pa ges 26 to 27) which was fa ctore d into our principal d ecisions and ac tivit ies (see pa ges 1 24 and 1 25). For f ur ther infor mation se e the follow ing disclosure s: Our s tra teg y pa ge 3 2 Our p eopl e page 56 National Equalit y Stan dard page 58 The s ec tion 1 72( 1) stat emen t page 1 2 4 ST A KEHOL DER DA Y T o e nhance our un derst anding of our st akeholder s’ views and c oncer ns, we held o ur firs t Stakeh older Day on 29Sep tember 2021 at DL /78. At tende es includ ed the E xecut ive Dire ctors , Mark Breue r (Chairman) and Cilla Snowb all (Non-E xecu tive Dire ctor) as well as o ccupie rs, loc al charitie s, co ntractor s, suppli ers, ad viser sand memb ers of th e local aut horitie s. At the eve nt our st akeholders w ere inform ed of our purp ose, value s, our 2030 Ne t Zero Carb on Pathway, and fu ture p rojec ts in cluding our ‘Inte llige nt Buildin g’ ini tiati ves . The e vent was wel l rece ived b y atten dee s and fur the r emphas ised that s trong s takeholde r relation ships are cen tral to our col laborat ive appro ach. ST A KEHOL DER CHA RI T Y AUCT ION Following c onsultatio n with our employ ees , Der went Lond on nominated t wo char ities to supp or t during 202 1 . In order to rais e funds f or the cho sen char ities we h eld a vir tual auc tion fr om 1 5 to 1 9 Novem ber . The o nline auctio n site was ope n to all of our occ upiers via the DL / A pp and s aw a high level of interac tion fro m supplie rs and fr iends of De rwe nt Londo n through gen erous donatio ns and bids. Gi f ts donate d by our st akeholder s include d a signe d Cristian o Ronaldo foo tball bo ot and a ‘Spa f or tw o’ at Mandarin Orient al. We were del ighted with the leve l of engagem ent and supp or t we rec eive d. £13,857 was rais ed and di vide d equal ly bet wee n our cho sen char ities , MIND and The T ee nage C ance r T r ust I NVESTOR DA Y On 28 Se ptember 2021 , we he ld an Investor Day whi ch include d pres entatio ns from th e Exe cuti ve Direc tors on th e Lond on of fic e market, th e sust ainabilit y of our por t folio (our Net Zero Car bon Pathway), our fu ture develo pments and inve stment a ctiv it y . The day in cluded a p roper t y tour of si x proper t ies in our por t fol io (including the re cent ac quisitions f rom L azari inves tments) and a drinks r ece ption with th e Chairman, E xecut ive Dire ctors an d membe rs of senior m anageme nt. “ It w as t re mend ou s to s ee ho wmu ch Derwen t va lu e the opi nion and engagement of theirstakeholders ” . Andr ew Ridley-Barker , Multiplex Con stru ction Europ e Ltd. Stakeholder Day at tendee Stakeholder Day 202 1 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 134 How do we engage with our e mployees? We have an exp erienc ed, div erse and d edicate d work for ce which is re cognis ed as a key as set of our b usiness . The B oard and it s commi tte es rou tinely invite m ember s of the manag ement team to jo in meetings to pr esent o n the mat ters b eing discus sed. In ord er toreach al l employe es, th e Board ut ilises a co mbination of for mal and infor mal engagem ent meth ods which are d etailed b elow. How th e Boa rd fac tor ed em ployee e ngage ment in to it s deci sions in 2021 page 12 5 T own hall mee tings The C EO hosts m onthly vir tual tow n hall me etings to ensure all emp loyee s are kept infor med of bu siness ac tiv it y , reas sured an d engage d. Employee s were en coura ged to put qu estio ns for ward in adv ance (anony mously if th ey wishe d) , which w ere then ans wered during the s essio ns. In 202 1 , our Oc cupation al Health prov ider was invite d to prese nt at town hall me etings on topic s including ‘long c ovid’, vaccine s, variants , resp onsible beh aviour and suppor ting others. Responsible Business Commit tee Th e Res pon sible Bu sines s C ommit te e has app ointed four e mployee s as members. Having em ployee members on a Bo ard-level c ommit tee, en ables the div erse vo ice of our emp loyee s to be broug ht directly into o ur Boardro om, pro viding invaluab le insigh t. Th e Commit tee also streng thens the Boar d’ s ove rsight of env ironment al and so cial issue s and, monitor s the Gro up ’s co rpo rate re sp onsibili t y , su stain abilit y and stakehol der engagement activities (see pa ges 1 66 to 1 71 ). HOW DO WE EN GAGE WI TH OUR EMP LOYEES? Soc ial Media channel s A variet y of S ocial Me dia channels ar e utilise d to enhanc e engagem ent and theexch ange of informat ion on the Co mpany ’ s acti vitie s to all stakeh olders . The se chann els include , Faceb ook, T wit ter , Inst agram, th e DL / App an d ourIntrane t. In par ticul ar our intranet is use d as a popul ar plat for m for employe es to ac ces s our poli cies and to rec eive info rmation on we llbeing , health and saf et y , and training. Awayd ays Awaydays pro vide an opp or tunit y for ourCEO to share th e vision and s trateg y for th e future , enco urage co llabor ation acro ss the b usiness an d, most impor t antly , have f un. Our nex t employe eawayday is prov isionally sch eduled f or Septem ber 2022. During2021 , we organise d an awayday for our p roper t y and b uildi ng man agers which fo cuse d on risk mana gement , con tractor m anageme nt and exce llence in custom er care . Employee sur veys We gather fe edba ck regul arly from o ur employe es to as ses s their level s of engage ment. We c onduc t a formal biennial employ ee sur ve y , desig ned and deve loped in c onjunction wi th an indep endent p rovide r ( se e page 6 0) . A work ing group is es tablishe d af ter eac h form al employe e sur vey with t he aim of making re comm endations to t he E xecu tive C ommit tee . Dedic ated Non-E xecutive Director Dame Cill a Snowball is t he dedic ated Non-E xec utive Dire ctor f or gathering t he views of t he work forc e. As C hair of the Res pon sible Bu sine ss C ommi tte e, Cil la over saw and re ceiv ed update s on our employee eng agement methods. During 202 1 , Cilla at tende d the S takeholde r Day and vario us employe e event s. Fur ther inform ation on Cilla’ s role is on p age 1 38. Whistleblow ing Our whist leblowing sys tem of fers an anony mous rep or ting line for e mployee s to raise any c once rns direc tly with the Boar d. The whis tleblowing sys tem allows co ncer ns to be raise d eithe r via telephone or on line web-repor ting. Fur ther infor mation on p age 1 36. D ue to the ‘op en door ’ nature of our b usines s, con cern s are of ten raise d directly wi th manag ement, t he CEO or HR team, and appropriat ely in vestigated. Working Groups The G roup curren tly operate s a number of work ing groups c overing are as such asdiver sit y and inclusio n, innovation , and so cial event s. Fe edbac k rece ived from t hese wo rkings gro ups are give n to the Re sponsible B usiness C ommit tee o r the E xec utive Dire ctor s, and ultimately the B oard. The Diversit y and I nclusion Working Group page 16 9 135 Financ ial Stat ements Strategic repor t Governance Workforc e polici es and practice s The E xe cutiv e Direc tors, with a ssist ance f rom memb ers of the E xecut ive C ommit tee, rev iew and appr ove all key pol icies and prac tice s which could imp act on our wo rk force o r influenc e their beh aviours to en sure they supp or t the Gr oup’ s purp ose and re flec t our values (se e page 1 31 ). Polici es are publish ed on th e intranet and wh ere relevan t included in the emp loyee handb ook . Our employ ees are r equired to c onfirm their und erst anding of thes e policie s upon re cruitm ent and on an annual basis . T o e nsure polic ies are emb edde d in our busine ss prac tice s, we hold pres entatio ns to staf f whic h highlight the key m ess ages an d notif y them of any c hanges . We operate a mand ator y training program me which aims to reinfo rce key c ompliance m ess ages in are as such as anti-brib er y , mo dern sl aver y , c onflic ts of intere st, etc . Compliance train ing page 1 61 All emp loyee s (including the B oard) are re quired to notif y the Co mpany as so on as they b ec ome aware of a situat ion that co uld give r ise to a conf lict o r potential c onflic t of interes t. The r egister ofpoten tial conf licts of inter est is re gularly re viewed to e nsure it remains up to date. T he Boar d is satisf ied that p otential c onflic ts have be en ef fe cti vely manag ed throug hout th e year (see p age 1 39) . The B oard appr ove the Rem uneration P olicy fo r the E xecut ive Direc tors and, v ia the Remun eration C ommit tee, has o versigh t of the wider work force remuneration prac tices (fur ther information on pag e 1 76 ). Our remuner ation poli cies and pr actic es are aligne d with our pay pr inciples, d escrib ed on p age 1 75. As a b usiness , we see k to condu ct ours elves wi th hone st y and integri ty an d belie ve that it is our du ty to t ake appropr iate meas ures to ident if y and rem edy any malp ractic e within or af fec ting the C ompany. Our employe es emb race our high s tandards of con duct an d are enco uraged to s peak ou t if they wit nes s any wrongd oing which falls sh or t of thos e stan dards. Our whist leblowing proc edure s are include d within our employ ee handb ook, o n our Group intran et and st af f notice boards . In addition to an indep endent te lephone line an d online po r tal for ano nymous rep or ting of conc erns , the Se nior Indepe ndent Dire ctor ac ts as an indep endent p oint of con tact f or whistleblowing c onc erns. Following re ceipt of a whis tleblowing me ssa ge we have pro cedure s in plac e to ensure an inde pende nt and prop or tionate inve stigation. Any sig nific ant issue re lating to pote ntial fraud is e scal ated to the Chair of the Au dit Commi tte e immediately. In addition, Dam e Cilla Snowb all (Chair of the Resp onsible Busine ss C ommit tee and desig nated Dire ctor for gat hering the v iews of the wo rk force) will bead vise d of any signifi cant c oncer ns raise d by our employe es. During 2021 , the Gr oup migrated to a n ew whistleblowing s ystem prov ider . T he new ar rangemen ts were rolle d out to all emp loyee s, including the b uildi ng man agemen t teams. In the 2021 employe e sur vey, 84 % of emp loyee s conf irmed t hey would fe el able to sp eak up if they wi tnes sed o r exper ience d behav iour which was no t con sistent with o ur culture/policies . Altho ugh this is an enc ouraging f igure, we asp ire for this to be 1 00% . We have therefo re set ‘w rongdoing and t he repo rt ing of con cern s’ as the topic for Q1 2022 under our c ompulso r y comp liance training pr ogramme. The B oard re ceiv es update s from th e Compan y Sec retar y on th e ope ration of the whis tleblowing sy stem. Dur ing the year und er revi ew , we did no t rece ive any me ssa ges via our whis tleblowing sys tem (20 20: no me ssa ges) . D ue to the ‘open d oor ’ nature of our busine ss, c once rns are of ten rais ed direc tly with mana gement , theCEO or HR team , and approp riately invest igated. St ak eholder impact analysis The B oard’s proc edures r equire a stake holder impac t analysis tobec ompleted f or all material de cisions re quiring its appr oval thatc ould impact o n one or more of o ur stakeh older group s. Th e stake holder impac t analysis as sists th e Direc tors in per f orming their dut ies under s1 72 of the C ompanies A ct 200 6 and prov ides theB oard with as suranc e that the p otential impac ts on our stake holders ar e being car efully co nsidere d by manage ment whende veloping pl ans for Bo ard approv al. The s takehold er impact an alysis identi fies: — p otential be nefi ts and areas of c onc ern for e ach stake holdergro up ; — th e proc edures an d plans b eing implemente d to mitigate against any are as of con cern; and — wh o is respo nsible for ens uring the mitigation p lans are be ingef f ec tiv ely imple men ted. Boar d decisio ns which are likely to have th e greates t impact o n ourst akeholder s are thos e relating to our de velopm ent projec ts par tic ularly in resp ec t to demolit ions and reb uilds. The se projec ts can c ause: — tr af fic disrupti on; — n oise and dust; — v ibrations; and — imp act on the s urrounding are a, comm unities and bu siness es. T o mi tigate these is sues , we enrol our de velopme nt projec ts in the Considerate Constr uctors Scheme, con duct detail e d tra f fic manag ement risk a sse ssment s, nois e and dust mo nitoring, an d work in ac cordan ce with t he relevant lo cal auth orities’ C onst ruct ion Manage ment Pl an. The c onstr uctio n metho ds to be use d are mod elled in sof twar e in order to calc ulate noise lev els and if th e mod el exce eds trig ger le vels, adjust ments are ma de until the require d noise lev els are met . At all times , work on our de velopm ent sites is c arrie d out in a safe and c onsiderate mann er with due re gard to the public , adjoining prop er ties, b usines ses, an d road us ers. We maintain re gular con tact wi th local c ommunitie s via various c hannels inc luding, co mmunit y enga gem ent for ums, n ewslet te rs, let te rs, p ublic exhibitio ns and con sultations . We disclose d on page s 1 1 7 and 1 07 of the 2020 and 201 9 Rep or t & Ac counts , the ou tcome of stake holder impac t analys es per fo rme d for the 1 9-35 Baker S tre et W1 and Soh o Plac e W 1 proje cts , respe cti vely. CO RPOR A TE GOVERNANC E S T A TE ME NT CONTINUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 136 How do we engage with our s hareholde rs? Shareh olders pl ay a valuable role in safe guarding the Gro up’ s g overnan ce throug h, for examp le, the annual re -elec tion of Dire ctors , monitor ing and rewarding the ir per form ance and e ngageme nt and con struc tive dialog ue with the B oard. The G roup aims to be as tr ansparent as p os sible with the infor mation it pr ovide s to investor s and welco mes fac e-to -fac e interactio n. OurChairm an aims to routinely m eet wit h institu tional inves tors and re por t the ir views to the B oard. Upon his ap pointme nt to Chairman, Mark Bre uer wrote to all major share holder s inviting the m to meet wi th him to discuss any are as of con cerns o r provid e fee dback . For our pri vate investor s, ther e is an oppor tuni ty to m eet th e entire Bo ard (including the No n-Exe cuti ve Direc tors) at our Annual G eneral Me eting ( AGM) . Our S enior Indep enden t Direc tor , Helen G ordon, is al so available to discu ss any shareh older co ncer ns. We desc ribe our main enga gement m etho ds in the table b elow. Shareholder consultation We will always s eek to e ngage wi th shareh older s when c onside ring mater ial change s to eithe r our Bo ard, str ateg y or remun eratio n polic ies. D uring 2022, the Rem uneratio n Comm it tee will c onsult with share holder s on prop ose d chan ges to our Re munerat ion Poli cy (see p age 1 73) . Investor meetings Durin g 202 1 , the Gr oup held 267 inve stor me etings wi th 21 4 exis ting and po tential inve stor s. Of t hes e, 69were s hareho lders at t he year e nd and th eir owner ship repr esen ted c.60 % of the sha res in iss ue. Dueto t he pand emic the m ajorit y of the se wer e vir tual me etings . The se me etings are pr edomin antly at tende d by our CEO, CF O and at leas t one ot her seni or exec utiv e. The m eetings f ocus ed on t he Group’spor t fo lio, strate g y , the f utur e of of fic es, t he impac t of Co vid- 1 9 and wo rking f rom hom e. Whe resignif icant v iews wer e expre sse d, eith er during or f ollowing th e mee tings, th ese wer e rec orde d and circ ulate d to all Direc tors . Investor presentations and p rop er t y tour s Durin g 202 1 , we hos ted v irt ual year e nd and inte rim result s pres entati ons and thr ee pro per t y tour s. Prop er t y tour s and road show ac tivi t y were se verely re str icte d by the pan demic . On 28 Sep tembe r 202 1 , we held a n Investo r Day which in clude d a prope r t y tour of six pr oper tie s in our po r tf olio (inc luding the recent ac quisitions from L azari investments). Proper t y conferences D ue to the C ovid-1 9 pa ndemic , the majori t y of conf erenc es mo ved to a v ir tual for mat. Dur ing 202 1 , we attended 1 1 virtual proper t y conferences. AGM Th e AGM provi des an op por tuni ty f or pri vate share holder s, in par ti cular , to que stion t he Direc tors an d the c hairs of eac h of the B oard C ommit tee s. It was n ec ess ar y to hold th e 2020 and 202 1 AGMs v ir tually due to th e UK Gove rnment ’s lockdow n rest ricti ons. How ever , pro ce edings inc luded a Q& A se ssio n for any share holder o r interes ted st akehold er to ask que stio ns of the B oard. Infor mation on t he 2022 AGM is on pa ge 1 97 , in cluding how w e would enga ge with sh arehold ers in the eve nt of a signif ican t vote agains t an AGM res olutio n. We ensure th at the Noti ce of AGM is is sue d at least 20 work ing days in ad vanc e of the AGM date . Ar ticles of As sociation At the 2021 AGM we sou ght, and r ece ive d, shareh older app roval fo r a number o f amendm ents to our Ar ti cles of A sso ciation (th e Ar tic les) which prim arily ref lecte d update s to legisl ation, t he UK Co rpor ate Gov ernan ce C ode 201 8 an d to prov ide for p roce dural me chanic s gov erning how t he Co mpany may h old gene ral me etings, in cluding annual ge neral m eetings , throu gh a comb ination of a phy sica l meet ing and the us e by share holder s of an ele ctroni c facilit y. An ex planati on for th e change s was co ntaine d in the 202 1 No tice of AGM (on p ages 1 5 and 16 ) whic h is available on o ur websi te. At the 2022 AGM, we will b e se eking sha reholde r approv al to raise th e ag gregate m ax imum fee s payable to our Non -Exe cut ive Dire ctor s under t he Ar tic les by £1 00,0 00 to £8 00,00 0 a year (se e pag e 1 97). Ann ual Rep or t & Ac coun ts Our annua l Repor t & A cc ounts is avail able to all shar eholde rs. T hrough o ur elec tronic c ommunic ation initiati ves , we aim to make our annual R epor t & A cco unts as ac ce ssible as p oss ible. Share holder s can o pt to rec eive a h ard cop y in the po st, o r PDF cop ies via e mail or fro m our webs ite. Addi tionally, if a share holder h olds the ir Der went L ondon s hares v ia a nomine e acc ount and e ncoun ters dif f icult y rec eiv ing our annual Re por t & A cco unts via t heir nomin ee pro vider , th ey are welc ome to c ontac t the Co mpany S ecre tar y to re ques t a copy. Corpor ate w ebsite Our we bsite, w ww.derwentlondon.com , has a de dicate d inves tor se ction w hich includ es our annu al Rep or t & Acc ount s, res ults pres entat ions (which are m ade to analy sts and inv esto rs at the tim e of the interim an d full ye ar res ults) and our f inancial c alendar fo r the upc oming ye ar . Development websites We also cre ate webs ites fo r spe cific d evelop ment s which are us ed to exp lain the G roup’s current pr oject s in grea ter det ail. For exa mple, you c an fin d fur th er inform ation on S oho Pl ace W1 and T he Fe ather stone Building EC1 h ere: ww w . 1 oxf ordstreet .london ww w .thefeatherstonebuilding. london Senior I ndependent Director If sh arehold ers hav e any con cern s, which t he norm al channe ls of co mmunicat ion to the CEO, CF O or Chairm an have faile d to reso lve, or f or which c ontac t is inappr opriate, t hen our S enior Ind epen dent Dire ctor , Hele n Gordo n, is availab le to addres s them . Helen Go rdon c an be c ontac ted v ia the C ompany Se cret ar y whos e con tact d etails ar e on pag e 27 8. Other con tact s Cont act d etails f or our Inve stor rel ations te am, C ompany S ecre tar y and R egist rars are avail able on pag e27 8. How th e Boa rd fac tor ed sh are holde r engage ment i nto it s deci sions in 2021 page 12 5 Inves tor Day page 1 34 Annual Gener al Meeting page 1 97 137 Financ ial Stat ements Strategic repor t Governance DIV ISION OF RESPONSIBILIT IES Board ro les The re is clear div ision bet wee n execut ive and no n-exec utive r espon sibilities which e nsure acc ountabilit y an d oversig ht. The r oles of Chairman an d Chief E xecuti ve are sep arately held an d their resp onsibilitie s are well def ined, s et out in wri ting and regul arly revi ewed bytheB oard. Chie f Exe cut ive, Pa ul Willia ms — T o prov ide clear an d visible leader ship — E xec ute the Gro up’ s s trateg y and c ommerc ial objecti ves togeth er with implem enting the de cisions of th e Board an d its co mmit tee s — T o keep t he Chairman an d Board app raised of imp or tant and strate gic issue s facing th e Group — T o ensure t hat the Gro up ’s busines s is con ducted wi th the highe st stan dards of integri ty, in keeping with o ur culture — Mana ge the Gro up’ s r isk prof ile and ensure act ions are comp liant with the B oard’s risk appe tite — Inve stor rel ation act ivitie s, including ef f ecti ve and ongo ing comm unication wit h sharehold ers Chief Financial Of ficer , Damian Wisn iewski — Sup por t the CEO in de veloping and imple menting str ateg y — P rovide f inancial lead ership to the Gro up and align the Gr oup’ s busine ss and f inancial str ateg y — Re sponsib le for finan cial planning and analy sis, treas ur y and ta x f unct ions — Re sponsib le for pres enting and rep or ting ac curate and timely historic al finan cial informatio n — Mana ge the c apital st ruc ture of the Gro up — Inves tor relation activitie s, includi ng co mmun ic ations with inves tors, alongsid e the CEO Other Executi ve Direc tors — Sup por t the CEO in de veloping and imple menting str ateg y — O ver see th e day-to- day acti vities of t he Group — Mana ge, moti vate and deve lop staf f — D evelop b usiness p lans in co llaborat ion with the B oard — Ens ure that the p olicies an d practic es se t by the Bo ard are adopte d at all levels o f the Group — Inves tor relation activitie s, includi ng co mmun ic ations with inves tors, alongsid e the CEO Co mpany S ecr et ar y , Dav id L awler — S ecre tar y to the B oard and it s commit te es — D evelop B oard and c ommit tee ag endas and c ollate and distrib ute pape rs — Ens ure complian ce with B oard pro cedure s — A dvise o n regulato r y complian ce and c orpo rate govern ance — Facili tate induc tion progr ammes fo r Directo rs and as sist with their training and d evelopm ent, as re quired — Re sponsib le for communic ations wit h retail share holders an d the organis ation of the A nnual Gen eral Mee ting — Availab le to suppor t all Dire ctor s (i) Alt houg h Cill a Snow ball i s the de sig nate d Dire cto r for ga ther ing th e vie ws of our work force, the Cha irman ensures that all Directors continue to remain eng age dwith o ur emp loye es an d cha lleng e and c ontr ibu te to dis cus sions o n workf orce engagement. Chairman, Mark Breuer — Re sponsib le for the ef fe cti ve running of the B oard and ensuring i t is appropr iately balanc ed to deli ver the G roup’ s strategic obj ec tives — P romote a bo ardroom c ulture that is roote d in the princ iples ofgoo d gover nance and e nables tran sparenc y , deb ate andchalle nge — Ens ure that the B oard as a whole p lays a full an d cons truc tive par t in the d evelopm ent of strate g y and that the re is suf fi cient time for b oardro om discus sion — Ef fe cti ve engagem ent bet we en the Bo ard, its shar eholder s and oth er key stakeh olders Senior Independent Direc tor , Helen Gordon — P rovide a ‘so unding board ’ for the Ch airman in mat ters of gover nance o r the per f ormanc e of the Bo ard — Availab le to shareholde rs if the y have conc erns whic h have not be en res olved thr ough the no rmal chann els of com munication — T o at leas t annually lead a me eting of the No n-Exe cuti ve Direc tors wit hout th e Chairman pre sent to appr aise the per f ormanc e of the Chairman — T o ac t as an interme diar y for Non-E xec utive D irector s when nec es sar y and ac t as Chairman, i f the Chairman is c onflic ted — T o ac t as an indepe ndent p oint of cont act in the G roup’ s whistleblowi ng proc edures Des ignat ed NED fo r gathe ring th e views o f our wor kf orc e (i) , Dame Cill a Snowball Cilla Sno wball has b een de signated th e NED respon sible for gather ing the views of o ur work forc e. This is achie ved by : — At tendan ce at key emplo yee and b usiness e vents , including prop er t y launche s and the S ummer Par t y — Re view me ssa ges rec eive d throug h the whistleb lowing system from t he Group’s employee s — Monitor the effec tiveness of engagement programmes est ablishe d for emp loyees — P rovide re gular upd ates to the Bo ard — Mo nitor the ou tcome of e mployee s ur veys and p rovide inpu t on the ir des ign Non-Executive Direc tors (N EDs) — P rovide c onstr ucti ve challenge to o ur execut ives , help to deve lop propo sals on s trateg y and m onitor per f ormanc e agains t our KP Is — Ens ure that no indiv idual or group do minates the B oard’s dec ision making — P romote the high est s tandards of inte grit y and gov ernanc e throug hout th e Comp any , par ticul arly at Bo ard level — D etermine app ropriate leve ls of remuner ation for th e seniore xecuti ves — Re view the integ rit y of finan cial repo r ting and that f inancial con trols and s ystems of r isk manage ment are rob ust CO RPOR A TE GOVERNANC E S T A TE ME NT CONTINUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 138 Independence The B oard has id entif ied on pa ge 1 32 which Dire ctors ar e con sideredto b e indep endent . The B oard has re conf irme d that ourNon-E xec utive D irecto rs remain indep ende nt from exe cuti ve manag ement and f ree f rom any busine ss or oth er relatio nships which c ould materially inter fer e with the exer cise of their judge ment. Independence of the Board (excluding the Chairman) Independent 6 Executive 5 Status The N on-E xecuti ve Direc tors pl ay an impor tant r ole in ensuring thatno indi vidual or gr oup dominates th e Board’s decisi on making. It is the refore of par amount impo rt ance t hat their indep ende nce ismaintaine d. T o s afeguard t heir indep enden ce, Non-E xe cutiv e Directo rs are not per mit ted to ser v e more than thr ee thre e-ye ar terms unles s in excep tional circums tanc es (see pa ge 1 4 5) . T enure o f the Non-Executive Directors (including the Chairman) Under 3 3 3-6 1 6-9 3 9+ 0 Y ears The C hairman held a numb er of me etings with the N on-Exe cuti ve Direc tors wit hout exe cutiv e managem ent being p resent . The se me etings are usef ul to safeg uard the inde pende nce of our Non-E xec utive Dire ctor s by prov iding them with tim e to discuss their v iews in a more pri vate environm ent. John Bur ns, co -found er of Der went L ondon plc an d the CEO for ov er 30 year s, was app ointed Non-E xec utive C hairman for a t wo-y ear term until th e conclus ion of the 202 1 AGM. A s our Chairman was notinde pend ent upon app ointment , we were unable to c omply withpro visions 9 an d 1 9 of the C ode un til Mark Breue r succ eed ed John as ind epend ent Non-E xec utive Ch airman on 1 4 May 2021 (seepa ge 1 23). Other ex ternal appoi ntments The B oard take s into acc ount a Direc tor’s other ex ter nal commi tments w hen con sidering th em for app ointment to s atisf y its elf that the indiv idual can dis charge suf f icient tim e to the Der wen t Lond on Board an d asse ss any po tential conf lict s of interest . Our Dire ctors ar e required to n otif y the C hairman of any alterations to their ex ter nal commit ments tha t arise during the y ear with an indicat ion of the time c ommitme nt involved . During the ye ar under revi ew , Simon Fra ser be came a N on-Exe cuti ve Direc tor of Se gro plc with ef f ect f rom 1 May 202 1 . Simon not ifie d the Chairman in advan ce of his app ointment, an d the Bo ard conf irme d that it doe snot be lieve that this ad ditional direc torship af fe cte d Simon’ s commi tment to, or invo lvement wi th, the D er went Lond on Board, nor did it g ive rise to a p otential co nflic t of interest . E xecut ive Dire ctors may ac cep t a non-exe cuti ve role at anoth er comp any with the ap proval of the B oard. Cur rently, none of our E xecut ive Dire ctors are dire ctor s of other liste d comp anies. Howeve r ,se veral of our E xec utive Dire ctor s are T rus tees of chari tableorganisat ions or memb ers of indu str y-re lated b odies. When as ses sing addition al director ships, th e Board c onsider s thenumb er of public dire ctorship s held by the in dividual alre ady andthe ir expe cted tim e commitm ent for th ose role s ( se e biograp hieson pa ges 1 26 and 1 27). The Bo ard takes into ac count guidanc e publishe d by insti tutional inv estor s and prox y ad viser s asto the ma ximum numb er of public ap pointme nts which c an be managed ef f iciently . All Dire ctor s have conf irme d ( as th ey are require d to do annually) that the y have be en able to alloc ate suf fi cient time to disch arge their re sponsibilit ies ef fe ctiv ely (see tab le on page 1 32 for Boar d me eting at tendanc e ). Co nflic ts o f inte res t As a No n-Exe cuti ve Direc tor’s indep endenc e could b e impacte d where a D irector h as a conf lict of intere st, th e Board o perates a poli cy that re stric ts a Direc tor fro m voting on any mat ter in which they mig ht have a per sonal intere st, unles s the B oard unanimously decides other wise. Prior to al l major Board de cisions , the Chairman re quires the Direc tors to c onfirm th at they do n ot have a poten tial pers onal conf lict wi th the mat ter b eing discuss ed. If a c onflic t doe s arise, theDire ctor is exclu ded fr om discus sions. An ex ample of this polic y in ef fec t is in relatio n to Richard Dakin , who is the M anaging Dire ctor of C apital Ad visor s Limited (a wholly -owne d subsidiar y of CBRE ), who are the Group’s ex ternal valuers . T o mitigate a gainst a potent ial conf lict of intere st, Richar d doe s not take par t in any dis cussion s on the valuation of t he Group’s proper t y p or tf olio at eith er Board o r commit te e level. Inaddition , he has no involv ement in any de cisions regar ding theapp ointment of C BRE or the fe es paid to t hem. During th e annual per fo rmanc e evaluation of the B oard, it s commi tte es and indi vidual Dire ctors , the impac t of this role onRichard ’ s indep enden ce has b een c onsidere d. The B oard con tinue to conc lude that Richar d remains indep enden t both in charac ter and judge ment. 4.2 YEAR S Th e averag e tenure of our Non-Exe cutive Director s (inc luding th eChairm an) 5 4.5 % of our B oard (excluding th e Chairman ) are independent Non-Exe cutive Director s 139 Financ ial Stat ements Strategic repor t Governance COMPOSIT ION, SUCCESSION AND EV A LUA TION Appointments to the Board At Der went L ondon, we e nsure that app ointment s to our Board aremade s olely on mer it with the o verriding obje ctiv e of ensuring that the B oard maint ains the cor rec t balanc e of skills , leng th of ser v ice and k nowledg e of the Group to su cce ssf ully determine theGro up’ s s trateg y. App ointmen ts are made b ased on t he rec ommen dation of the Nomination s Commit te e with due co nsideratio n given to th e ben efit s of divers it y in its wides t sens e, including gend er , so cialandethnic ba ckgr ounds and p erson al streng th s. The Nomination s Commit te e repor t on p ages 1 4 4 to 1 4 7 pro vides fur ther informati on on: — B oard co mposi tion and Non-E xe cutiv e Directo r tenure; — B oard app ointments an d induct ion ; — su cce ssion p lanning; and — Board div ersity. Boar d skills , experienc e and knowle dge An ef f ect ive Bo ard requires t he right mix of s kills and exp erien ce. Our Bo ard is a diver se and ef fe cti ve team fo cuse d on promot ing the long-ter m succ ess of t he Group for t he ben efit of all s takehold ers. The D irector s’ biographie s are available on pa ges 1 26 and 1 27 . Th e char t b elow provi des an over view of th e skills and ex perie nce of our Direc tors as at 31 Dec embe r 202 1. T r aining With th e ever -changing e nvironmen t in which Der went L ondon ope rates, it is imp or tant fo r our Exe cuti ve and Non-E xe cutiv e Direc tors to rem ain aware of rece nt, and upc oming, de velopme nts. We require all Dire ctors to ke ep their k nowledge an d skills up to date and includ e training discuss ions with th e Chairman in their annual pe rf ormanc e revie ws. As re quired, we invi te profes sional ad viser s to provide in- depth update s. Update s and training are not so lely rese r ved fo r legislati ve deve lopment s but aim to cov er a range of iss ues including , but not limited to, mar ket trends , the ec onomic an d politic al enviro nment, environ mental , technolo gical and s ocial c onsideratio ns. Our C ompany Se cret ar y provi des reg ular updates to t he Boar d and its c ommit tee s on regulato r y and cor porate go vernanc e mat ters. In additio n, we invite our Dire ctor s to atten d cours es ho sted by t he Deloi tte A cade my and P wC. Our Dire ctors r ecei ve training on the ir duties unde r sec tion 1 72( 1 ) of the C ompanies A ct 200 6 as par t of the ir induction p roce ss f rom the Group’s corp orate law yers , Slaughte r & May LLP . T he training is uploade d to the B oard’s paper p or tal for e asy refe rence . In addition, at each m eeting , the Bo ard’s pack of doc uments inc ludes the co dific ation of its du ties alongside t he mee ting agend a, to ensure it is at the fo refront of dis cussio ns. D u r i n g 2 0 2 1: — A ll Direc tors par tic ipated in online c omplianc e training cours es on a range of top ics including s ocial me dia awarenes s, data pri vacy and unc onsc ious bias (see p age 1 61 ). — T he Boar d rece ived r egular mar ket and leasing up dates. — E x ternal independent advisers frequently presented to the Boar d on the po litical an d eco nomic env ironment. — T he Resp onsible Busine ss C ommit tee re ceiv ed a pre sentati on from E Y o n the National Equalit y S tandar d. — T he Audit C ommit tee re ceiv ed training fr om Deloit te on ES G/ sust ainabilit y assuran ce. — T he Risk Co mmit tee rec eive d a legal update f rom Slaughte r & May LLP in Nov ember . — A ll Direc tors at tende d regul ar ex ternal brief ing se ssions f rom the major ac count ancy f irms. Sk ills an d exp eri enc e E xecu tiv e and st rat egicl eade rship Se nior exec utiv e and dire ctor ship exp erie nce 7 5 Corpor ate responsibi lit y and communityrelations E xpe rienc e in cor porate or s ocial responsibility, charitable bodies orhumanr esour ces 4 4 Financial acumen Se nior exec utiv e expe rienc e in finan cial acco unti ng, rep or ting or cor porate finance 4 2 Hea lth and s afe t y , ris k mana geme nt E xpe rienc e in health an d safet y, risk mana gemen t or internal c ontr ols 4 2 Climate change Relev ant skills , exp erien ce or kn owledg e of climate c hange and i ts ass ociate d risk s and opp or tunitie s 2 3 Investor relations and engagement E xpe rienc e in inves tor relat ions (p rivate o r institutional) and engagement 7 5 Pro per t y a nd re al es tat e Ex perience in proper t y development, con str uctio n or real e state management 4 5 Capit al projec ts E xpe rienc e work ing in an indust r y with proje cts inv olving la rge-s cale c apital o utlay s and long- term inve stm ent hor izons 6 5 Govern ance and complianc e Prio r expe rienc e as a Bo ard memb er ,indus tr y or mem bers hip ofgove rnanc e bo dies 7 3 Remuneration Prio r Remune ration C ommit te e membe rship and/or exp erien ce in rel ationto re munerat ion inclu ding inc enti ve prog ramme s 3 0 Numb er of N on-E xe cut ive D irec tor s (inc luding t he Ch airma n) Numb er of E xe cut ive D irec tor s CO RPOR A TE GOVERNANC E S T A TE ME NT CONTINUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 14 0 Annual B oard evaluatio n On an annual b asis, an evaluatio n proc ess is und er taken whichc onsider s the ef fe ctiv enes s of the Bo ard, its pr incipal commi tte es and indi vidual Dire ctors . This rev iew identif ies are as for impro vement , informs tr aini ng pl ans for our D irector s and identi fies are as of know ledge, exp er tise or di versit y whic h should be c onsidere d in our suc ces sion plan s. The B oard fo llows a formal t hree- year cy cle that was dev elope d toenable re views to be le d from a f resh p erspe cti ve, each y ear . Then ex t ex ternally fa cilitated e valuation is due to b e conduc ted forth e year ending 31 Dec embe r 202 2. Y ear 3 Internal evalu ation facilitated by the Chair man Y ear 2 Internal evalu ation facilitated by the Senior Independent Director Y ear 1 Ex ternally facilitated independent review The e valuat ion fo r the yea r ende d 3 1 De cemb er 2020 Las t year ’ s evaluat ion was des cribe d in the 2020 Repor t & Ac counts o n page 1 21 and was internally f acilitate d by Simon Fraser (our pre vious S enior Indep endent D irector). The e valuation identi fied a n umber of fo cus areas w hich the Bo ard and its co mmit tee s addre sse d during 202 1 : Focus area A ct ion s duri ng 2021 Th e induct ion of Mark Br euer as Chairm an Des ignate, and handover o f responsibilit y from John B urns — Mark j oined D er went Lo ndon as a Dire ctor on 1 F ebru ar y 202 1 to be gin his induc tion pr oce ss whic h was com pleted w ell in adva nce of th e 202 1 AGM Ensurin g the Gro up’ s str ateg y remains appro priate in th e curr ent ec onomic environment — T wo str ateg y me etings wer e held in May and Jun e 202 1 , the implementation of the actions arising were m onitore d by the B oard Board diversity which will b e factore d i nto the Board’s recruitment processes — Sa njeev Shar ma was app ointed a Non-Execu tive Di rec tor on 1 Octobe r 202 1 an d is from a n on-white e thnic minority background The e valuat ion fo r the yea r ende d 3 1 De cemb er 202 1 The 2021 per for mance e valuation was internal ly facilitate d by MarkBre uer (Chairman) and was infor med b y the rec ommen dations arising f rom the 2020 evaluation . The p roce ss c overe d the following are as: — th e Group’ s st rateg y and it s ef fec tiven ess; — th e managem ent of the b usiness , and st akeholder engage ment, dur ing the Cov id- 19 pandemic; — th e signific ant challen ges that D er went Lond on is likely to fac eover the n ex t 1 2 m onths; — th e comp osition of t he Boar d and its pr incipal commi tte es; — e ach Direc tor’s cont ribution to t he Board ’ s discus sions; and — wh ether th ere are any issu es con cerning t he Board ’ s proc edure s and pro ces ses, in cluding informatio n provid ed to the me mbers , and the re sourc es made avail able to the Bo ard. The r espon ses were c ollate d and prov ided o n an anonymo us basis to the ch airs of each c ommit tee. As a re sult of this evaluation , the Bo ard is satisf ied tha t its str ucture , balanc e of skills and o peratio n continue s to be satis factor y an d appropr iate for the Gro up. Althoug h the fee dback rec eive d was ex trem ely posi tive fr om all Board m ember s, the Boar d identif ied a numb er of areas whic h it wishes to f ocus up on dur ing 2022: Focus area Ac tions for 2022 Co mpany cult ure — Wit h assis tanc e of adv isers , ensure t he Group’s culture is c learly und ers tood by our emp loyee s and key s takeho lders Employ ee development and career management — Nomin ations C ommit tee to c ontinu e its focus on employee devel opment a nd car eer man agem ent during 2022 Boar d papers — C ontinue to s tream line Boa rd pape rs, with s uppor ting p aper s includ ed as appendices — End eavour to dis tribu te commit te e pap ers to c ommit tee m embe rs a wee k prio r to each m eeting In resp ect to t he evaluation of th e Chairman, He len Gordo n ( S enior Indep endent D irector) m et with the No n-Exe cuti ve Direc tors in pri vate ses sions to con sider Mark Bre uer ’ s indivi dual per for mance as Non-E xec utive C hairman. Th e Non-E xecu tive Dire ctors w ere unanimous in ag reeing that M ark has shown c ommitm ent to the role, obje ctive ju dgement an d has create d a culture in the Boar droom which f acilitate s openne ss and d ebate. The e valuat ion fo r the yea r ending 31 Dec emb er 2022 In acc ordanc e with our thre e-ye ar cycle, t he per fo rmanc e evaluation f or the ye ar ending 3 1 D ece mber 2022 will be ex tern ally facilit ated by an ind epend ent prov ider . T he Chairm an and Senior Indep endent D irector m et with p otential rev iewers and m ade a rec ommen dation to the B oard on 22 Febr uar y 2022. The evaluatio n proc es s will comme nce in Q4 2022, and the o utcom e of the evaluation will b e repo r ted in the 2022 Repor t & A cco unts. 14 1 Financ ial Stat ements Strategic repor t Governance CO RPOR A TE GOVERNANC E S T A TE ME NT CONTINUED KE Y ACT IVI TIES OF THE BOA RD DURIN G 2021 Proper ty por tfolio — Approve d the acquisitions o f: – B ush Hous e WC2 Hea dlease for£1 3.5m bef ore co sts – 250 Eus ton Roa d NW1 , £1 89.9min clusiv e of cos ts – 1 71 - 1 7 4 T ot tenham C our t Ro ad W1 , £2 4.7 m inclu sive of c ost s – A gre ed jo int ventur e with La zari Investments to develop th ree leas ehold pr oper ti es in Baker St reet , initial co nsider ation of £6 4.0m inclus ive of c osts – 23 0 Black f riars Ro ad SE 1 for£ 55.0m b efore c ost s – T er ms agre ed to a cquire Th eMoor f ields Es tate EC1 — Approve d the disposal of: – A ngel S quare EC1 fo r £86 .5mbefo re co sts – N ew River Yard EC1 for £67 .5mb efor e cos ts — Re cei ved re gular up dates on ke y construc tion pro ject s from asset andpr oper t y man agem ent, and inves tmen t acti vitie s from t he senio r mana gemen t team Strateg y and financing — Rev iewe d the sho r t- and long- term implic ations o f Cov id- 19 on the Gro up, our de velopm ents an d occ upiers — Ong oing update s fro m the E xecu tive Directors on the impl ementation of str ateg y throu ghou t the ye ar — Re ceiv ed re gular up dates on le ase expir ies and p otential v acanc ies — Reg ularly r eview ed the G roup’s fin ancial st ruc ture and p ositio n: – Rai sed £ 350m v ia a 1 0 -ye ar 1 .875%green b ond – E x ten ded th e Group’s two RollingC redit F orec ast s – R ece ived a n update on o ur Gre enfina nce initia tive s — Rev iewe d the Gro up’ s fi ve-y ear for ec ast inc luding a re view of thepip eline f or nex t f ive ye ars — Rev iewe d the quar ter ly projec t co strep or t Risk management and internal control — Rev iewe d the Gro up’ s princ ipal risk s and c onside red em erging r isks which co uld impact o n the f ive -year p lan — Re ceiv ed re gular re por ts o n health ands afet y mat ters , including t hose rel ated to the C ov id- 19 pandemi c — Reviewed C ovid Risk M anagement inclu ding mana ging th e por t fo lio, development, tena nts and proper tymanagement — Ong oing rev iew of the de velop ment risk s at Soho P lac e and the Featherstone Bu ild ing — Re ceiv ed an up date on C yb er & ITS ecur it y — Verba l updates f rom th e Risk andAu ditCom mit tee chair s on thekeya reas disc uss ed — Up dates on th e assur ance audit sper for med b y RSM and theac tions a rising — Rev iewe d the co mplianc e training com pletion r ates and ap prove d the 202 1/ 2022 training pr ogramm e O ver view The B oard me t nine times during th e year (inclu ding the Annual G eneral Me eting ). Addition al meetings are ar ranged , if nec ess ar y , for th e Boar d to prope rly discharge i ts dutie s. Lin k to st rat egi c obje ct ives : 1. 2. 4. Lin k to st rat egi c obje ct ives : 1. 2. 4. 5 . Lin k to st rat egi c obje ct ives : 2. 3. 4 . January F ebruar y March April May June Jul y Au g ust September October November December Boar d and commit tee meetings — M ain Boa rd — Nominations Co mmit tee — E xec utive C ommit tee — M ain Boa rd — Audit Commit tee — M ain Boa rd — Nominations Co mmit tee — Remune ration Co mmit tee — Valuers C ommit tee — E xec utive C ommit tee — Nominations Co mmit tee — Ris k Commit tee — Audit Commit tee — E xec utive Co mmit tee — M ain Boa rd — Nominations Co mmit tee — R espo nsible Busin ess Co mmit tee — AGM — M ain Boa rd strateg y awayday — E xec utive Co mmit tee — Nominations Co mmit tee — Audit Commit tee — M ain Boa rd — Nominations Committee — Ris k Commit tee — Valuers C ommit tee — E xec utive Co mmit tee — E xec utive Co mmit tee — Audit Commit tee — E xec utive Co mmit tee — M ain Boa rd — Nominations Co mmit tee — Remune ration Co mmit tee — Ris k Commit tee — M ain Boa rd — R espo nsible Busin ess Co mmit tee Key announcements — D ecember 20 20 rent coll ectio n — A ppointment of Mark Breuer as Chai rman De signate — Fu ll yea r resu lts announcement date — R esult s for y ear en ded 31 Dec emb er 2021 — M arch 2021 ren t coll ectio n — A nnua l Repo r t 2020 & Not ice of AG M — Q1 Bus ine s s update — LMS Bondholders meeting — Publish ed resu lts of th e 2021 AGM — J une 2021 rent coll ectio n — D ispo sal o f Ange l Sq uare EC1 — F ora let s 6-8 Gree ncoat Pl aceSW1 — A cqui sitio n of Bus h Hous e WC2 He adle ase f or£1 3. 5m before costs — A ppointment of Sanjeev Sharma and the retirement ofSim on Fras er — In terim res ults — A cqui sitio n of 250 Eus ton R o a d N W 1, 17 1-17 4 T ot ten ham Co ur t Roa d and Baker Street W1 joint venture with Lazari I nvestments — In ves tor and Analy st Present ation hel d on 28 September 20 21 — Re signation of David Silver man — R aise d £35 0m 10 - y e a r 1. 87 5 % gre en b ond — A cqui sitio n of 230 Blackfriars Road SE1 for £5 5.0m before costs — Terms a gre ed to acq uire The Moor f ields Es tate EC1 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 14 2 Corporate repor ting and per formancemonitor ing — Rev iewe d the roll ing fore cas ts and approved the 20 22 budget — Re cei ved re gular up dates on t he Group’s Net Zero C arb on Pathway to2030 — Approve d the year end and interimre sults — A pprove d the Q1 and Q 3 busin essup dates — Re cei ved as suranc e rep or ts fro m De loit te in resp ec t to our Gre en finan ce fram ework a nd disclo sures un der the T a sk Forc e on Climate -Relate d Finan cial Disc losure s (TC FD) — Publishe d rent collection statistic s asat Marc h, June, S eptemb er and Dec ember 2 02 1 — Rev iewe d the 2021 Repor t & Ac count sto ensure i t is fair , bal ance dand unde rst andable — Pub lishe d our annual Respon sibi lit yRepor t — Reviewed and approved the half- yearly v aluations of t he Group’sprop er t y por t fol io Stakeholder engagement — V irt ually ho sted th e Annua l Gene ral Mee ting ( AGM) on 1 4 M ay 202 1 — Ho sted o ur Investo r Day on 28 Se ptembe r ( s ee pa ge 1 3 4) — Ho sted o ur firs t St akeholde r Day on 29Se ptembe r 202 1 (see p age 1 34) — Re ceiv ed up dates fr om the Resp onsib le Busines s Co mmit tee on the Gr oup’ s sus tainabili t y and st akehol der init iative s inclu ding: – O ur diver sit y tar gets and f ocus area s from th e Dive rsit y & Inclu sion Workin g Group (se e page s 1 69 t o 17 1) – T he re sults of emp loyee an d oc cupier p ulse sur v eys — Re ceiv ed up dates on o ur investo r engagement program mes and regular investor relations repor ts Governance — A ppointe d Mark Br euer as Independent Chairman — A ppointe d Helen G ordon a s SeniorIndependent Director — A ppointe d Sanje ev Sharm a as a Non-Exe cutive Director — Routinely considered the Board ’s con flic t of intere sts — Pe rf orme d a rev iew of the B oard, i ts Co mmit tee s and all Dire ctor s led by the C hairma n, inclu ding the re view ofthe C ommit te es’ mem bers hip (seep age 1 4 1 and 1 4 5) — Re ceiv ed up dates fr om the chair softhe Remun eratio n and AuditC ommit te es on th e key area sdiscus sed — Rev iewe d the ou tcome of t he ass ess ment p er form ed by E Y f or theNational Equalit y S tandard acc redit ation (se e page 5 8) — Recei ved regular governance update sfro m the Co mpany S ecre tar y 202 1 has b een an ac tive and p rogres sive y ear for the G roup. As we ll as managing t he risks whic h have arisen f rom the C ovid- 1 9 pand emic, the G roup has made a numb er of key ac quisitions, is sued a g reen b ond, and ha s held its f irst S takeho lder Day . A n over v iew of our Bo ard’s k ey ac tivi ties is pro vided b elow. January F ebruar y March April May June Jul y Au g ust September October November December Boar d and commit tee meetings — M ain Boa rd — Nominations Co mmit tee — E xec utive C ommit tee — M ain Boa rd — Audit Commit tee — M ain Boa rd — Nominations Co mmit tee — Remune ration Co mmit tee — Valuers C ommit tee — E xec utive C ommit tee — Nominations Co mmit tee — Ris k Commit tee — Audit Commit tee — E xec utive Co mmit tee — M ain Boa rd — Nominations Co mmit tee — R espo nsible Busin ess Co mmit tee — AGM — M ain Boa rd strateg y awayday — E xec utive Co mmit tee — Nominations Co mmit tee — Audit Commit tee — M ain Boa rd — Nominations Committee — Ris k Commit tee — Valuers C ommit tee — E xec utive Co mmit tee — E xec utive Co mmit tee — Audit Commit tee — E xec utive Co mmit tee — M ain Boa rd — Nominations Co mmit tee — Remune ration Co mmit tee — Ris k Commit tee — M ain Boa rd — R espo nsible Busin ess Co mmit tee Key announcements — D ecember 20 20 rent coll ectio n — A ppointment of Mark Breuer as Chai rman De signate — Fu ll yea r resu lts announcement date — R esult s for y ear en ded 31 Dec emb er 2021 — M arch 2021 ren t coll ectio n — A nnua l Repo r t 2020 & Not ice of AG M — Q1 Bus ine s s update — LMS Bondholders meeting — Publish ed resu lts of th e 2021 AGM — J une 2021 rent coll ectio n — D ispo sal o f Ange l Sq uare EC1 — F ora let s 6-8 Gree ncoat Pl aceSW1 — A cqui sitio n of Bus h Hous e WC2 He adle ase fo r£1 3. 5m before costs — A ppointment of Sanjeev Sharma and the retirement ofSim on Fras er — In terim res ults — A cqui sitio n of 250 Eus ton R o a d N W 1, 17 1-17 4 T ot ten ham Co ur t Roa d and Baker Street W1 joint venture with Lazari I nvestments — In ves tor and Analy st Present ation hel d on 28 September 20 21 — Re signation of David Silver man — R aise d £35 0m 10 - y e a r 1. 87 5 % gre en b ond — A cqui sitio n of 230 Blackfriars Road SE1 for £5 5.0m before costs — Terms a gre ed to acq uire The Moor f ields Es tate EC1 Key Stra tegic objectives 1. T o opt imise r etur ns and c reate v alue fr om a bal anc ed p or tf olio 3. T o at tra ct, r etain a nd de velop talented em ployees 5. T o maintain strong and f lexible f inancin g 2. T o grow recurring earnings and c ash f low 4. T o de sign, d eli ver an d ope rate our buildingsre spo nsibly Lin k to st rat egi c obje ct ives : 1. 2. 5. Lin k to st rat egi c obje ct ives : 3. 4. Lin k to st rat egi c obje ct ives : 1. 3. 14 3 Financ ial Stat ements Strategic repor t Governance 202 2 FOCUS A RE AS — Co ntinue to monitor t he Group’s talent and deve lopment pip eline (see p ages 60 an d 1 46) — Revie w the wider re comm endation s arising from th e FCA’ s c onsultat ion on diver sit y and inclusio n (page 1 47 and 1 7 1 ) an d continue to m onitor diver sit y initiative s — Ensure a smo oth hand over of res ponsibilit y to a new Risk Co mmit tee Chair whe n Richard Dakin s teps down from t he Boar d NO M IN A T I ONS COMMI T T E E R E PORT Dear Shareholder , This is my f irst rep or t to you as C hair of the Nomination s Commit te e and I am plea sed to pre sent an ov er view of th e Commi tte e’ s work during 202 1 . It has b een a p ar ticularly b usy year f or the C ommit tee which inclu ded re cruiting a ne w Non-E xecu tive Dire ctor , monitor ingthe Group’s diversi ty init iatives , talent dev elopmen t andsuc ce ssion pl ans. Non-Executive Director changes In Oc tober 2021 , we welc omed S anjeev Shar ma as an indep endent Non-E xec utive Dire ctor , Simon Fras er stepp ed down af te r ser ving nine year s on the B oard, and Hele n Gordon was ap pointed S enior Indep endent D irector. All of thes e changes we re manage d ef fi ciently and th e inductio n programm e was thoro ugh (an over v iewis prov ided on p age 1 4 6) . As Ric hard Dakin (Non-E xe cutiv e Direc tor) approach es his ninth anniver sar y on th e Board, i t is anticipate d that he will step do wn as a Direc tor by the e nd of 2022. The Co mmit tee have c onsidere d the comp ositi on of the Bo ard, its ef f ecti vene ss and div ersit y, and has con cluded t hat no fur th er appoint ments to th e Board will b e made dur ing 2022. Executive Director chang es David Silve rman (E xecu tive Dire ctor) will be leav ing the Group o n 1 4 A pril 2022 af ter 1 3 ye ars as a Bo ard Direc tor . D avid Silverman’s curre nt resp onsibilities will b e allocate d amongst t he other E xecut ive Dire ctors an d the Bo ard will not se ek to appoint a replac ement Exe cutive Direc tor . Since 201 8, an d through nat ural succ ess ion change s, the numb er of E xecut ive Dire ctors o n the Boar d has redu ced f rom six to fo ur , which is mo re aligned wi th other F T SE 250 companie s. Diversit y and i nclusion O ver the p ast few ye ars, th e busines s has intro duce d various initiative s to addres s gende r diversi ty an d we are pleas ed with th e great s tride s that have be en made . In total, 52% of employe es are female and w e are seeing p rogres sive impro vement in th e number of wome n at execut ive level an d as direct r epor ts to t he Exe cuti ve Co mmit tee (see pa ges 1 4 7 , 1 69 and 1 7 1 ). The B oard is f ully compliant wi th the gen der diver sit y rec ommen dations of the Hamp ton-Alexande r Review an d thepro pos ed Bo ard diver sit y target s cont ained in the F CA ’ s con sultation on ‘D iversi t y and inclusion on c ompany b oards and exec utive c ommit tee s’ ( se e page 1 4 7). In resp ect to e thnic diver sit y , the B oard’s compo sition is in acc ordanc e with the P arker Revie w reco mmendatio n that at least one Dire ctor is f rom an ethnic minor it y back ground b y 3 1 De cemb er 202 4. Altho ugh ther e has be en improvem ent in the ethnic di versit y of the B oard, and wit hin the Group’s senior manag ement team s, we are mindf ul that this remains a f ocus are a so that we c an fur the r harne ss the b enef its of div ersit y. We i nten d to continue to sup por t the div ersit y and de velopm ent of the Gro up’ s t alent pipelin e. Further engagement If you wish to dis cuss any asp ec t of the C ommit tee’s activi ties, Iwillbe at tending th e for thc oming AGM on 1 3 May 2022 and would welco me your que stions . I am also available v ia our Comp any Se cretar y , Dav id Lawler (teleph one: +44 (0) 20 7659 3000 o r email: company .sec retary @derwentlondon.com) . Mark Breuer Chair of the No minations C ommit tee 23 Febr uar y 2022 Mark Breuer Chair of the No minations C ommit tee De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 14 4 Non- Exe cuti ve Dire ct ors’ te nure The C ommit tee m onitors a s chedule of th e Non-E xecu tive Dire ctor s’ tenure and revie ws potential de par ture dates a ssuming the re levant Direc tors are n ot permi tte d to ser ve m ore than thre e three -year ter ms (nine years) fro m their appo intment date, unles s in excepti onal circums tanc es (see the c har t below). 2 013 2 0 14 2 0 15 2 0 16 2 0 17 2 0 18 2 0 19 2020 2021 2022 2023 20 24 2 025 2026 2027 2028 202 9 2030 Richard Dak in Claudia A rne y Cilla Snowball Helen Gordon Luc inda Be ll Mark Breuer Sanjeev S harma Bas ed on Rich ard Dakin’ s tenure, it is an ticipated t hat he will step dow n as a Direc tor by the en d of 202 2. Fur ther inf ormation o n succ essio n planning is on p age 1 46. Board and commit tee composition On an annual b asis, the No minations Co mmit tee co nsiders thec ompos ition of the B oard and i ts commit te es in terms of i ts balan ce of skill s, expe rienc e, leng th of ser v ice, k nowledge o f the Group and wi der diver sit y cons iderations . The C ommit tee did no t identi f y any material skill gap s on the B oard or its c ommit tee s. An ov er view of th e Board ’ s skills , exper ience an d knowle dge is on pa ge 1 4 0. The C ommit tee’s review al so aims to ensure e ach commi tte e is approp riately comp ose d to be ef fe cti ve and is co nducte d alongside discus sions on B oard suc ces sion and Non -Exe cuti ve Direc tor (NED) tenure. The t able below p rovide s an over v iew of the co mposi tion of the Boar d’ s f ive princ ipal commit te es as at 1 Januar y 2022. Fur ther inform ation on the B oard’s diversi ty is o n page s 1 4 7 and 1 7 1 . Audit Comm itte e Risk Comm itte e Remuneration Comm itte e Nominations Comm itte e Resp onsible Business Comm itte e Mark Breuer Chair Richard Dak in ✓ Chair ✓ Claudia A rne y ✓ C hair ✓ ✓ Cilla Snowball ✓ ✓ Chair Helen Gordon ✓ ✓ Luc inda Be ll C hair ✓ ✓ ✓ Sanjeev Sharma ✓ ✓ ✓ Numbe r of independent NE Ds 4 4 3 7 2 Numbe r of Execut ive D ir ectors – – – – 1 Numbe r of emplo yee represent atives – – – – 4 T ot al mem ber shi p 4 4 3 7 7 Following th e Commit te e’ s revie w , it was c onfir med th at the memb ership of the f ive p rincipal c ommit tees c ontinues to b e approp riate, ef fe ctive an d in acc ordance wi th the 201 8 UK Corporate Governance Co de. Commit tee composition and perf ormance Our C ommit tee c onsists of s even inde pend ent Non-E xec utive Direc tors (bio graphies are avail able on page s 1 26 an d 1 27). At the requ est of th e Commit te e, Exe cuti ve Direc tors, m ember s of the senior m anageme nt team and ex ter nal advis ers may b e invited toat tend all or par t of any m eeting , as and whe n appropriate . During th e year unde r review, the C ommit tee was p ar ticular ly busy and he ld eight form al meetings (2020: seven m eetings), t o ov erse e the se arch for a n ew Non-E xecu tive Dire ctor (Sanjee v Sharma). Independent Number of mee tings Atten dance (i) Mark Br euer , Chair (ii) Ye s 6 10 0 % Claudia A rne y Ye s 8 10 0 % Luc inda Be ll Ye s 8 10 0 % Richard Dak in Ye s 8 10 0 % Helen Gordon Ye s 8 10 0 % Sanjeev S harma (ii) Ye s 1 10 0 % Cilla Snowball Ye s 8 10 0 % Simon F raser (iii) Ye s 7 10 0 % Not es: (i) Per cen tag es ar e bas ed on t he me etin gs ent itle d to at ten d for t he 1 2 m ont hs en ded 3 1 Decem ber 20 2 1 . (ii) M ark Br eue r and Sa njee v Shar ma join ed t he Co mmit te e fol lowin g their a ppo intm ent to th e Boa rd on 1 Fe bru ar y 2021 and 1 O cto ber 20 21 , r esp ec tiv ely. (iii) Sim on Fra ser jo ine d all me etin gs of th e Com mit te e until hi s retir eme nt fr om the Bo ard on 31 O ctob er 2021. Simon Fr ase r step pe d down a s Com mit tee C hair, and wass ucc ee de d by Mar k Breu er , f ollow ing th e con clusi on of th e 2021 AGM. The C ommit tee’s role and res ponsibilitie s are set ou t in the terms ofrefer ence, whic h were las t updated in May 2021 and are on the Co mpany ’ s websi te at: ww w .derwentlondon.com/investor s/ governanc e/boar d-commit tees The 2021 evaluation of th e Board, it s commit te es and indiv idual Direc tors, wa s internally fac ilitated by Mar k Breuer , the C hairman of the B oard, in acc ordanc e with our thre e-y ear cyc le of evaluations (see pa ge 1 4 1 ). The rev iew conf irme d that the C ommit tee c ontinues to ope rate ef fec tively, with no signif ic ant mat ters raise d. 14 5 Financ ial Stat ements Strategic repor t Governance NOMI NA T IONS COMMI T T EE RE PORT CONTINUED Non-Executive Direc tor appointment During th e year unde r review, the Nominat ions Co mmit tee led these lecti on and appo intment pro ces s for a ne w Non-E xecut ive Direc tor , as Sim on Fraser app roache d his ninth year on t he Boar d. Spen cer S tuar t, an exe cutiv e search c onsultan cy, provide d assis tanc e to the Co mmit tee and was ma de aware of the Bo ard’ s diver sit y polic y (see pa ge 1 47) . Spe ncer S tuar t has no o ther conn ect ion to the C ompany or indiv idual Direc tors . It was a key c ompon ent of our spe cif ication t hat a new memb er ofthe B oard has an und erst anding of the prop er t y se ctor , an entre preneur ial mindset, a p assion f or culture and dive rsit y, andex tensi ve pe ople manage ment exp erien ce. Sp encer S tuar t prov ided a long lis t of potential c andidates , and fir st st age inter view s were con ducte d by the Chair of th e Commit te e andCillaSn owball, No n-Exe cuti ve Direc tor . A s hor tlist of t wo can didates was sele cte d for final s tage inter views wi th the Co mmit tee memb ers, C EO and CFO. Following s atisfac tor y con clusion of a tho rough due diligenc e and refer encing pro ces s, the C ommit tee unanimo usly rec ommend ed Sanjee v Sharma’ s app ointment to th e Board. We wer e delighte d that S an je ev joine d our Board o n 1 Octob er 202 1 . Sanjee v’s biograp hy is available on pa ge 1 27 . Induction The C ompany p rovide s new Dire ctors wi th a compre hensiv e and tailore d inductio n proc ess whic h includes v isiting a numbe r of the Group’s proper tie s, me etings with th e Group’ s audit p ar tner and cor porate l awye r , toget her with m eetings wit h the E xecut ive Direc tors, E xe cutiv e Commit te e and senior m anageme nt. Induc tion progr ammes are de velope d by the Gr oup’ s Com pany Se cretar ial team and appro ved by th e Chair of the C ommit tee. Ifcon sidere d appropriate, n ew Direc tors are als o provid ed with ex ternal tr aining that addres ses th eir role and dutie s as a Direc tor of a quote d public co mpany . We aim to limit the amount of inf ormation pr ovide d as reading material during an in duction p roce ss. A ll new Dire ctors are prov ided wit h acce ss to our ele ctro nic Board p aper sy stem and theGro up intranet whic h provide s easy an d immediate ac ces s tothe fo llowing key docum ents: — O ur latest b udget and f ive -year pl an. — Re cent b roker repo r ts and fe edbac k from our s takehold er engagement progra mmes. — Info rmation on o ur sustainabilit y initiat ives , including our NetZero C arbon P athway . — T he Group’s Risk Register , Sc hedule of Prin cipal Risks and Sch edule of Emer ging Risks. — Re cent B oard evaluat ion repor t s, including th e repor t f rom thela test ex tern ally facilitate d revie w . — Re cent r epor ts f rom the ex ter nal Auditor , P wC. — O rganisation and le gal char ts, ov er view of th e commit te es’ memb ership and No n-Exe cuti ve Direc tor tenure. — Mat ter s reser v ed for t he Board an d the co mmit tees’ term s ofrefer ence. During th e year unde r review, the C ompany c onduc ted t wo induc tion proc es ses fo r Mark Breue r and more re cently Sanjee vSharma . Appoin tment re view As Cl audia Arn ey , Cilla Sn owball and Lu cinda Bel l approac hed the end of th eir current ter m of of fic e, the C ommit tee p er forme d a rigoro us review of t heir appointm ents during 2021 . Non e of the Non-E xec utive Dire ctor s were pre sent whe n their term of appoint ment was c onsidere d by the C ommit tee. As p ar t of this review, the C ommit tee c onside red the f ollowing factors: contribution to boardroom discussion, independence, indust r y knowle dge, leng th of tenure on t he Board , outcom e of their lates t individual ann ual ef fec tiven ess re view, Board c ompo sition (including div ersit y co nsideratio ns) , and time c ommitme nt to the appointment (includi ng other external appoint ments) . The C ommit tee is p lease d to repor t th at it is satisf ied wi th the ongoing p er forman ce and c ommitme nt of Claudia, Cill a and Lucinda an d rec ommend ed that th eir appointm ents be ex te nded for ano ther thre e-ye ar term. Succes sion planni ng As Dire ctor s we have a dut y to ens ure the long-ter m succ ess of t he Co mpany , which inc ludes ens uring that we have a s teady supp ly of talent f or execu tive po sitions an d est ablishe d succ essio n plans fo r Boar d changes . The C ommit tee c onsider s the Group’s succ essio n planning on a r egular b asis to ensure that c hanges to th e Board are proac tive ly planne d and co -ordinate d. O ver the p ast co uple of years , the Co mmit tee has led t he suc ces sion plan s for the re cent B oard chang es including th e appoint ment of Paul Williams a s CEO, Mark Breuer a s Non- E xecut ive Chairman an d Helen Go rdon as Se nior Indep endent Direc tor . D avid Silverm an will be leaving th e Group on 1 4 Apr il 20 22 and the B oard has a gree d that Dav id’ s res ponsibilitie s will be alloc ated amongs t the oth er Exe cuti ve Direc tors and t herefor e a repl aceme nt Exe cuti ve Direc tor will not b e appointe d. In Novemb er 202 1 , the C ommit tee re viewed t he Group’s l ong- term talent pip eline and su cce ssion pl ans, with p ar ticular at tentio n being gi ven to indiv iduals showing p otential to be ‘ leaders of t he fu ture’ , c urrent and f uture sk ill gaps (including training ne eds) andarea s of risk within the b usines s (including impen ding retirem ents). As par t of its r eview, the C ommit tee re queste d an update on sp ecif ic dev elopment p lans for key t alent and sug ges ted that the R emuneratio n Commit te e review th e Group’ s long-te rm ince ntive sc heme s for employ ees , as par t of its Re muneration Polic y revie w in 20 22, to ensure th ey remain appr opriate and ef fec tive for talent retention. The C ommit tee’s succ essi on planning ac tivit ies during 2022 will there fore primar ily focus on N on-E xecuti ve Direc tors , the E xecut ive Co mmit tee and the wi der talent pip eline. The E xe cutiv e Direc tors are resp onsible for t he Group’s succe ssion plans b elow the B oard. T he Commi tte e rec eives p erio dic updates on the se suc ces sion plan s, and moni tors the de velopme nt of the exec utive te am below the B oard, to ens ure that there is a di vers e supply of s enior exec utive s and poten tial future B oard me mbers with app ropriate skill s and expe rienc e. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 14 6 HA MPT ON - A LE X ANDER RE V IEW: OUR PROGRE SS Women on the Boar d (inc luding th e Chairm an) 1 Januar y 2021 : 33% Female Non-E xecut ive Director s (excluding t he Chair man) 1 Januar y 2021 : 66% Women in senior Board positions (i) (inc luding th e Chairm an) 1 Januar y 2021 : 0% 42 % Number : 5 ( + 1 f rom 2020) 66 % Number : 4 ( no change) 25 % Numb er: 1 ( + 1 f rom 2020) Women on the Executive Commit tee (ii) 1 Januar y 2021 : 22% Female dire ct rep or ts to the E xecutive Commit tee (iii) 1 Januar y 2021 : 36% Women in senior management (iv) 1 Januar y 2021 : 33% 33 % Number : 4 ( + 2 fr om 2020) 49 % Number : 25 (+ 1 3 fr om 2020) 32 % Number : 6 ( + 1 f rom 2020) Not es: (i) Se nior p osi tion s on the B oar d incl ude th e CEO, CF O, Chai rman a nd Se nior In dep end ent Di rec tor. (ii) T he c ombin ed di ver sit y ba lanc e of th e Ex ecu tiv e Co mmit te e and it s dire ct re por t s (exclu ding adm inist rati ve an d supp or t st af f ) is 53. 4 % wo men . (iii) Di rec t rep or ts to t he E xec uti ve C ommit te e, exc ludin g admini stra tiv e and su ppo rt s taf f, is 4 9.0% wo men . Dire ct re por t s to the E xe cut ive C omm it tee, i nclu ding admi nistr ati ve and s upp or t st af f, is 57 .4% wom en. (iv) Se nior m anag eme nt are on p age s 1 28 and 1 29. D urin g 2021 , the re was a n et ch ange in t he co mpo sit ion of t he se nior ma nag emen t team o f two n ew me mbe rs, o f whic hone w as fem ale and o ne wa s male. T he num ber o f wome n in se nior ma nag emen t incr eas ed f rom f ive t o six . The B oard’s diversi t y polic y requires th at, where p ossib le, each time a Dire ctor is re cruite d at least on e of the shor tlis t candida tes is female, an d wherev er pos sible, at least o ne of the c andidates is non-w hite. Whilst we have i dentif ied area s where we c ould fur the r improve o ur diversi ty b alanc e, principally o ur ethnic diver sit y , we do not p ositiv ely discriminate during th e recr uitment p roce ss and are con scious th at altering the dive rsit y of the B oard c an only be don e in conjunct ion with the un derlying B oard ref reshme nt program me. The C ommit tee is aware of t he FCA’ s c onsultati on on ‘Div ersit y andinclusio n on comp any boards an d execu tive c ommit tees’ andwelc omes all r ecom mendation s which se ek to improve transp arency. The C ommit tee c an conf irm that as at 1 Janu ar y 2022, the Board c omplie s with the pr opos ed chang es to the List ingRules in resp ect to B oard dive rsit y targ ets: — At lea st 4 0% of the b oar d are wom en (incl uding indi vidual s self-identi f ying a s women): 4 2% of our B oard are wome n (improv ing fur ther to 4 6% af ter Davi d Silverman step s down from t he Boar d on 1 4 A pril 2022) . — At lea st on e of the s enior b oard p osit ions (Chair , CEO, SID orCFO) is he ld by a woman ( includin g indiv iduals s elf - iden tif y ing as wom en) : He len Gordon is o ur Senior Independent Director . — At lea st on e memb er of the b oar d is fro m a non-whi te ethni c minor it y bac kgr ound: Sanjee v Sharma (Non-E xe cutiv e Direc tor) is from a n on-white ethnic mino rit y back groun d. During 2022, the C ommit tee will rev iew the wide r propo sals con tained in th e FCA c onsultation an d will monitor th e release ofthe f inal rec ommenda tions. The di versit y of o ur Board is in ac cordan ce with th e Hampton- Alexand er Review an d Parker Rev iew rec ommen dations. A n over v iew of our re cent pro gres s against the Hamp ton-Alexande r rec ommen dations is prov ided b elow. As at 1 Januar y 2022, the Exe cuti ve Com mit tee con sists of f ive E xecut ive Dire ctors , the Co mpany Se cret ar y and six se nior manag ers. V ictoria S teven ton (Head of Pro per t y Manage ment), Vasiliki Ar vaniti (He ad of As set Mana gement ) and John Dav ies (Head of Su stainabilit y) were ap pointed m ember s of the E xecu tive Co mmit tee from 1 Jan uar y 202 2. T he diver sit y balanc e of the E xecut ive C ommit tee is now 33% fe male and 8% from an e thnic minorit y b ackg round. Fur the r information o n the gend er diver sit y of the E xec utive C ommit tee, an d its direc t repo r ts, is prov ided in th e char t b elow. The memb ership of the E xe cutiv e Commit te e will be con sidered f ur ther dur ing 20 22. The G roup’ s talent pip eline has b een s treng then ed thro ugh a number of e x ternal appo intments an d internal prom otions ( seepage 60 ). Non-Executive Direc tor succession Richard D akin is nearing t he ninth anniver sar y of his app ointment (see pa ge 1 4 5) and it is anticip ated that he will s tep down as a Direc tor by the e nd of 2022. The Co mmit tee doe s not intend to rec ruit a Non-E xec utive D irecto r following Richard ’ s retirem ent from t he Boar d. In prepar ation for Cl audia Arne y reaching he r ninth anniver sar y on the B oard in the f irst half of 202 4, S anjeev Sharma w ill join the Remune ration Co mmit tee during 2022 to ensure he has t he know ledge to suc cee d Claudia A rney as C hair , in acc ordanc e with the UK C orpo rate Gover nance C ode ( provisio n 3 2). Board diversit y A diver sifie d Boar d brings cons truc tive c hallenge and f resh per spe ctiv es to discus sions. We c onsider div ersit y, in its wides t sens e (and not limited to ge nder), during our Board c ompo sition revi ews and the de velopme nt of recr uitment s peci fic ations. 14 7 Financ ial Stat ements Strategic repor t Governance 202 2 FOCUS A RE AS — Implemen t our new Valuer App ointment P olicy which set s out our pro ce dures in resp ec t to valuer rotati on and tenure (se e page 1 52) — Co ntinue to foc us on climate change m atte rs in finan cial statem ents, inc luding assuran ce from Deloi tte o n ESG disclosure s (see pa ge 1 53) — Revie w the final r ecom mendation s arising from t he BEIS cons ultation on ‘Re storing tr ust in audit and cor porate gov ernanc e’ and agre e a timetab le for their implemen tation (see p age 1 53) — Prog ress pr eparation of an A udit & As surance P olicy — Review t he ef fectiveness of our outsourced intern al audi t fun ctio n A UDI T COMMI T T E E R E PORT Dear Shareholder , I am pleas ed to prov ide you wi th an over v iew of the C ommit tee’ s main acti vitie s and areas of f ocus during th e year . The C ovid - 1 9 pand emic continu ed to require adjust ment to the way we wo rk and provide oversight. H owever , our procedures operated eff icientl y and pro vided s uf ficie nt flexibilit y, such that disr uption during th e year was minimal . Por tf olio valuation The C ommit tee c onside rs the valuatio n of the Group’s proper t y por t fol io to be the pr incipal area of jud gement in dete rmining the acc uracy of the f inancial s tatement s (see pa ge 1 5 1 ). In order to obtain as suranc e that the p or tf olio valuation is f airly valued in acc ordanc e with the RI CS Valuation Global S tandar ds and the UK national s upplement (th e Red Bo ok), a ben chmarking exe rcise was con ducte d ( se e pag e 1 52) . Th e Commit te e was satisf ied wit h the outc ome of the exe rcise and re cei ved f ur ther as surance t hat the meth odolog y us ed by CBR E is robust . Following the b enchmar king exercis e, and the re lease of the ‘ Indepe ndent Rev iew of Real Es tate Inves tment Valuations’ commis sione d by RIC S, the C ommit tee revis ed it s V aluer A ppointm ent Polic y (see pa ge 1 52) . Climate change As th e Group is co mmit ted to being n et zero car bon by 2030, it is impor t ant that our f inancial rep or ting refle cts an d suppor t s this goal . The C ommit tee re ceiv ed training on the a ssuranc e rec eive d from D eloit te, including in re spe ct to its de pth and bre adth in comp arison to o ur industr y p eers . The C ommit tee als o sought inform ation from t he ex ternal value rs on how climate c hange was being f actore d in the por t fo lio valuation and c onsidere d how climate chang e impacte d other ite ms in the finan cial statem ents. During th e year , the C ommit tee re ceiv ed update s on the Gro up’ s ‘gree n financ e’ initiatives , including the ne w £350m g reen b ond, the gre en funding elem ent of our £ 450m R CF and th e revision s made to the Gro up’ s G reen F inance Framew ork (see pa ges 1 3, 96 and 97). BEIS c onsu ltati on on ‘ Audi t and f inanc ial rep or ting governance’ reform The C ompany r espon ded to th e BEIS consultat ion on 1 July 202 1 , inresp ect to t he rec ommend ations of mo st signif icanc e to Der wentLondon. I n response to the consultation, the Commit tee: — re viewe d the assur ance re ceiv ed on the G roup’ s f inancial disclos ures, to ide ntif y area s where fur t her ass urance c ould be gaine d ( se e pag e 1 53); — ex pande d its viabili ty/resilienc e disclosure s ( se e pag e 1 50); — c ommenc ed pr eparation of an A udit and As suranc e Polic y; and — disc usse d with mana gement i ts plans to f ur ther en hance th e internal c ontrol f ramewor k. Dur ing 202 2, we will co mmission a revi ew of our internal c ontrols in or der to identi f y focu s areas. During 2022, the C ommit tee will moni tor the ou tcome of th e con sultation and t he implement ation of any re quired change s to the Gro up’ s p ractic es or re por ting. Financial Reporting Council ( FRC) eng agement Following c orres ponde nce in late 2021 and early 2022 with the Co rporate Re por ting Rev iew T e am of the FRC , we have agre ed to clas sif y the c ash f lows relating to th e additions to, an d dispos al of , trading pro per ties wi thin the Group C ash Flow S tateme nt within ‘net op erating ac tivitie s’ rather th an ‘investing a ctiv ities’ . We have re-p resente d the st atement f or the ye ar ende d 3 1 De cemb er 2020 to rec lassif y £31 .7 m o f cash re ceipts an d £ 1 .2m of expe nditure on Lucinda Bell Chair of the Au dit Commi tte e De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 14 8 The 2021 evaluation of th e Board, it s commit te es and indiv idual Direc tors, wa s internally fac ilitated by Mar k Breuer , the C hairman of the B oard, in acc ordanc e with our thre e-y ear cyc le of evaluations (see pa ge 1 4 1 ). The rev iew conf irme d that the C ommit tee c ontinues to ope rate ef fec tively, with no signif ic ant mat ters raise d. Financial repor ting One of th e Commi tte e’ s princip al resp onsibilities is to re view and rep or t to the Bo ard on the cl arit y and ac curacy of t he Group’s finan cial statem ents, inc luding the annual Rep or t & Acc ounts andinterim s tatement . When c onduc ting its re views, th e Commi tte e consid ers the o verall requirem ent that th e financial s tatemen ts pres ent a ‘ true an d fair view ’ and the fo llowing: — th e acc ounting polic ies and pra ctic es applie d ( se e note 4 3 on pag es 263 to 267) including in resp ec t to any signific ant trans action s during the year , for ex ample the unwinding of the prev ious inves tment an d, surrende r and rege ar of leases wi th The P or tman Est ate and the thr ee of f-m arket West End trans action s with La zari Inves tment s ( se e page s 89, 90, 92, 93, 250 an d 25 4); — th e ef fec tive ness an d applic ation of internal f inancial co ntrols ( see page 1 54) ; — mate rial acc ounting ass umptions and e stimates ma de by manag ement (see n ote 3 on page s 2 1 5 and 21 6); — sig nific ant judgemen ts or key audit mat ter s identif ied by theex ter nal Auditor (see p ages 202 to 204); and — c omplianc e with relevan t acco unting stan dards and oth er reg ulato r y f inanci al rep or ting r equir emen ts inc luding th e UK Cor porate G overnan ce C ode and Europ ean Single Elec tro nic Fo rmat (ES EF) requir emen ts. In order to as ses s the f inancial state ments , the Co mmit tee regul arly rev iews repo rt s from th e CFO, memb ers of the F inance team and th e ex ternal Audito r who are invite d to at tend the Co mmit tee’ s me etings. T hrough fac e-to -fac e discussi ons and det ail e d writ ten rep or ts, th e Commit te e membe rs are able to under stand t he busine ss rationale f or transa ctions an d how they are being r ecor ded and dis close d in the finan cial statem ents. In acc ordanc e with DTR4. 1 . 1 4 R, Der went L ondon is re quired to publish i ts annual Rep or t & Acc ounts in eXtensible Hy per T ex t Mar k- up Lang uage ( XHT ML) and key e lements of i ts financ ial statem ents nee d to be ‘ ta gge d’ using eXtensible Busine ss Rep or ting Lan guage ( XBRL) in ac cor dance with s ingle elec tronic for mat ta xonomy. The 202 1 Rep or t & Acc ounts will b e format te d and ‘ tag ged ’ in acc ordanc e with the se require ments . The C ommit tee r ecei ved up dates on how m anageme nt were prep aring for the n ew requirem ents, whic h include d : — th e appointm ent of an ex ternal sp ecialis t ( T opp an Merrill ) to assis t with ta gging ; — a tr ial run was com pleted to tes t our proc es ses using th e 202 0 Repo r t & Acc ounts; — a de tailed rev iew proc es s for the ch eck ing of all tags was est ablishe d; and — a tim etable was pre pared to e nsure both t he PDF and XH TML form ats of the 2021 Repor t & Ac count s would be availab le at the s ame time and pub lished on t he Com pany’s websi te. trading proper ties from ‘inves ting ac tivities’ to ‘operating activitie s’ . This pre sent ation has als o bee n adopted f or the ye ar ende d 3 1 D ece mber 2021 and will be applie d consis tently in fu ture ( see page 1 50) . Ex ternal Auditor The C ommit tee is p lease d with the p er forman ce and lev el of challenge r ecei ved f rom the P wC au dit team led by S andra Dow ling. In 202 1 , t he Commi tte e piloted the u se of audit qualit y indic ators ( AQIs) to assist with i ts ass essm ents of P wC ’ s qualit y an d per f ormanc e ( se e pag e 1 56). Further engagement I welco me ques tions fro m sharehold ers on the C ommit te e’ s acti vitie s. If you wis h to discuss any as pec t of this repo r t, pleas econt act me v ia our Comp any Se cretar y, David L awler (telephon e : +4 4 (0 )20 7 659 30 00 or email: c ompany.sec retar y@ der wentl ondon.com). Lucinda Bell Chair of the Au dit Commi tte e 23 Febr uar y 2022 Commit tee composition and perf ormance During th e year unde r review, the C ommit tee was c ompo sed of indep endent N on-E xecut ive Direc tors wit h a wide range of exp erienc e, including real e state an d financ e (biographie s are available on p ages 1 26 and 1 27). The Ch air , Lucinda B ell, is a Char tere d Acc ountant an d has an approp riate level of re cent andrelev ant financ ial exper ience to disc harge her du ties as Chair ofthe C ommit tee. In addition to th e Commi tte e membe rs, me etings are at tende d by the B oard Chairman , internal and ex ter nal Auditors , and memb ers of the Gro up’ s senior man ageme nt team, at the re ques t of the Co mmit tee Chair . T o f ur ther fac ilitate ope n dialogue and as surance , the C ommit tee ho lds private s essio ns with the Au ditors with out members of management being present. During th e year unde r review, the C ommit tee me t four time s, in March, May, August an d Novemb er (20 20: thre e meetings). T wo additio nal sub-c ommit tee m eetings are he ld each ye ar with the Group’s exte rnal prop er t y valuers to c onsider th e valuation of our proper t y port folio. Independent Number of meetin gs Attendance (i) Lucin da Bell , Chair Ye s 4 10 0 % Claudia A rne y Ye s 4 10 0 % Richard Dak in Ye s 4 10 0 % Simon F raser (ii) Ye s 3 10 0 % Sanjeev S harma (iii) Ye s 1 10 0 % Not es: (i) Per cen tag es ar e bas ed on t he me etin gs ent itle d to at ten d for t he 1 2 m ont hs en ded 3 1 Decem ber 20 2 1 . (ii) S imon Fr aser j oine d all m eet ings of t he Co mmit te e until h is ret irem ent fr om th e Bo ard on 31 O ctob er 2021. (iii) S anjee v Shar ma joi ned t he C ommi tte e fo llowin g his app oint men t to the B oar d on 1 Oc tob er 2021 . The C ommit tee’s role and res ponsibilitie s are set ou t in the terms of refer ence, whic h were las t updated in F ebruar y 2022 and are available on th e Comp any’s website at: w ww.derwentlondon.com/ inv estors/ governance /board-comm it tees 14 9 Financ ial Stat ements Strategic repor t Governance Review of th e 20 2 1 Repor t & Ac counts At the re quest of t he Board , the Co mmit tee was aske d to review theGro up’ s R epor t & Ac coun ts and to con sider whe ther , t aken as awhole, it w as fair , bal ance d and under stan dable. In carr y ing out its re view, the Co mmit tee had re gard to the following: Fairness and balanc e — Is th e repor t o pen and h onest , are we rep or ting on our weak ness es, dif f iculties an d challenge s alongside our suc ces ses and o ppor tuni ties? — D o we provi de clear exp lanations of o ur KPIs and is th ere stro ng linkage b etwe en our KP Is and our str ateg y ? — D o we show our pr ogres s over time an d is there c onsistenc y in our met rics and measu rements ? Understandable — D o we expl ain our busines s mode l, strateg y and ac counting poli cies simply, using precis e and clear lang uage? — D o we break up leng thy n arrative wi th quotes , tables , case studie s and graphic s? — D o we have a co nsistent tone a cros s the Repo r t & Acc ounts? — A re we clearly ‘sig npos ting’ to whe re additional info rmation can b e found? Spe cif ic con sider atio ns for t he 202 1 Rep or t & Acc ount s: — Wh ether we c learly expl ain the climate chan ge-rel ated risks and opp or tunitie s facing the Gr oup and our pro gress a gainst our Net Zero C arbo n Pathway (see pa ges 1 2, 1 3 an d 68 to 73 ). — Wh ether we p rovide su f ficie nt disclosure s on the as surance of inform ation repo r ted within the ann ual Repor t & A cco unts ( see page 1 53) . — Wh ether o ur 20 21 Repor t & A cco unts con tains disclos ures which are c onsistent wi th T ask F orce on Clim ate-Relate d Financial D isclosure s rec ommenda tions in acc ordanc e with List ing Rule 9.8.6( 8)(b) ( se e page s 68 to 73) . — Enhan ced dis closures in re spe ct of: – Reas ons to invest in D er went Lon don (pa ges 6 and 7). – Reshaping t he por t folio, r esto cking the pip eline (p ages 20 and 21 ). – Our projec t pipelin e & ‘super-si tes’ (pa ges 24 and 2 5). – Prov iding enhance d amenit y ( page s 30 and 3 1 ). – How the B oard moni tors and as ses ses th e Group’ s culture (page 1 31 ). – Dive rsit y and inclusi on (pa ges 57 to 59). – Risk doc umentatio n, monitor ing and manage ment str ucture ( page s 1 02 and 1 60). – Our eme rging risks ( page s 1 04 an d 1 05 ) . The C ommit tee p aid par ticul ar atte ntion to the se change s to ensure th ey did not impac t on the b alanc e and clari ty of t he Repo r t & Ac counts . Following it s review, the C ommit tee c onfirm ed to the B oard that th e 202 1 R epor t & Ac coun ts is fair , b alance d and prov ides suf f icient c larit y fo r shareholde rs to under stand o ur busine ss mo del, st rateg y , po sition an d per for mance. AUDI T COMMI T T E E RE PORT CONTINUED Financial Reporting Council: Presentation of cash flow st atement Following c orres ponde nce in late 2021 and early 2022 with the Co rporate Re por ting Rev iew T e am of the Financial Re por ting Co uncil (FRC), we have agre ed to cl assif y t he cash f lows rela ting tothe addi tions to, and disp osal of, trading prop er ties within th e Group C ash Flow S tatemen t within ‘net ope rating acti vitie s’ rather than ‘investing activ ities’ . We have re-p resen ted the s tatement f or the ye ar ende d 3 1 De cemb er 2020 to reclas sif y £ 3 1 . 7 m of c ash rec eipts and £1 .2m ofexp enditure on t rading prope r ties fro m ‘investing ac tiv ities’ to ‘opera ting activ ities’. This has the ef f ect of inc reasing th e net cas hfrom op erations in 2020 from £ 85.4m to £1 1 5.9m with a cor resp onding increa se in the net c ash use d in invest ing activ ities from £ 62.0m to £92.5m. This pre sentati on has also b een ad opted for th e year end ed 31 Dec ember 2021 and will be applie d con sistently in fu ture. Th ere is no net imp act up on the ca sh flow sta tement ove rall and ther e is no impac t on any balanc e she et or inc ome st ateme nt fi gures . The r eview c onduc ted by the F RC was bas ed so lely on the Group’spublishe d 202 0 Rep or t & Ac counts an d does n ot prov ide any ass urance that t he Repo rt & A cc ounts are c orrec t in all ma ter ia l res pects. Going Concern and Viability In order to impro ve and exp and our disclo sures, we hav e combine d our Going C onc ern and V iabilit y St atements . Our disclo sures now include t he following as ses sments: Shor t -term asses sment: c onsider s the pros pec ts of the C ompany over th e nex t 1 2 mont hs and wheth er the bus iness is a ‘going con cern’ , which inc ludes a de tailed rev iew of the fo llowing: — th e Group’ s late st rolling f orec ast (including s ensitiv it y analysis) for th e nex t tw o years , in par ticular th e cash f lows, bor rowings and undrawn fa cilities; — th e headro om under th e Group’ s f inancial cov enants; and — th e risks includ ed on th e Group’ s risk re gister that c ould impac t on the Gro up ’s liquidit y and solv ency ov er the nex t 1 2 months . Medium - te rm as ses sment: c onside rs wheth er the C ompany would remain ab le to continue in op eration and m eet it s liabilities as the y fall due over a f ive -year p erio d. This ass essm ent involve s det ail e d scen arios, s tres s testing , sensit ivit y analy sis and revie w ofass umptions and e stimates . Long- term assessment: conside rs the fac tors whic h could impac t on the C ompany an d its busine ss mo del in the n ex t five to 10 years, including the G roup’ s princ ipal and emer ging risks, alo ngside fac tors suc h as techno logical, s ocial and e nvironmen tal change s. The C ommit tee r eviewe d the pro ces s and ass umptions be hind thesh or t-, medium- and long-te rm ass essm ents co nducte d by manag ement b efore re comme nding thes e disclosure s to the Boar dfor final ap proval. Goin g Con cern & V iabil it y page 98 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 150 Signific ant finan cial judgement s, key assumpt ions and es timates Any key ac co unting issue s or judgeme nts made by m anageme nt are monitore d and disc usse d with the C ommit tee thr oughou t the year . Thet able below p rovide s informatio n on the key is sues disc usse d with the C ommit tee in 2021 and the judgem ents adop ted. Issue Assumptions or estimates Judgement Va luation of the Group ’ s proper t y port folio Due t o it s size, nat ure an d the dir ec t impa ct up on the G roup’s net a ss et valu e, the C ommi tt ee co nsid ers t his to b e the pr imar y ar ea of ju dgem ent inde term ining the a ccur acy o f the financial statements. Th e valuation c onside rs a range o f ass umptions in cluding f uture re ntal inc ome, inves tmen t yields , anticip ated ou tgoings an d mainten ance c ost s, fu ture exp endit ure and appro priate re turns. T he ex ter nal valuer s also m ake refere nce to m arket ev idenc e of trans act ion pric es fo r similar prop er tie s ( se e note 1 6 on p ages 226 to 229). Th e valuation is p er for med t wice y early b y a com bination of CB RE Limite d and Sav ills (UK ) Limite d (the ‘ex ter nal valuer s’) and, du e to its signif ica nce, is al so rev iewed b y the ex ter nal Audito r . T he Co mmit tee re viewe d the und erlying ass umptions u sed in th e valuation an d the ex tern al valuers’ o bject ivit y an d meth odolog y. In additi on, during th e year un der rev iew, a ben chmar king exerc ise was c onduc ted to prov idef urt her as suranc e to the C ommit tee (see p age 1 52) . T hese p roc edure s enable d the Co mmit tee to b e satisf ied w ith the a ssumpt ions and e stimate s used in t he valuatio n of the Gro up’ s proper t y port folio. Impairment r eview Co vid- 19, the re sultin g lockd owns an d other restr ictions have i mpac ted the businesses of man y of our occupiers, par t icul arly t hos e in the re ta il and hos pit alit y s ec tor s. Th e impac t was mor e signi fic ant in 2020, b ut ce r tai n se cto rs ha ve con tinue d to f ace low er tha n norm al volum es and m arg ins in 2021 . T houg h it has r ec over ed sign ifi can tly in re cen t quar t ers , ren t coll ection co ntin ued to be i mpacted in 2021 and we have p rov ide d some fin anci al supp or t, wh ere n eed ed. T ra de receiva ble b alances have been r educed sign ifi can tly sinc e 31 Dec embe r 2020. Impairm ent tes ting of trad e rec eivab les and acc rue d incom e rec ognis ed in adv ance of rec eipt has b een c arr ied ou t in acc ordanc e with IFR S 9, using the ex pe cted c redit lo ss mo del. T his has re quired judg ement s to be ma de in relat ion to rec ove rabilit y and es timated p robabili ty o f default ac ross o ur whole por t folio. In som e case s, th e probab ilit y of default has b een e stimate d as signif ican tly lower com pare d with 31 Dec embe r 2020 and rent arre ars were al so co nsider ably lower at 31 Dec ember 2021 than a ye ar earl ier . Th e probab ilit y of default wa s consi dere d using a risk-ba sed ap proac h. In par tic ular , our top 5 0 tenant s, tho se in adminis tration o r CVA or in high risk s ecto rs, su ch as ret ail and ho spital it y , were looke d at in det ail with the r emaining bal ance s cla ssif ied by s ec tor . T he rev iew was c arrie d out by the F inance te am in conjunc tion wit h the Cre dit Co mmit tee and a d etaile d pape r was revi ewed by the A udit C ommit tee on 16 Febru ar y 2022 and was subje ct to signi fic ant discu ssion . Climate change The subj ec t of climate change , the re spon sibili t y of of f ice own er s and the ne eds of o ur oc cupie rs in thi s area , have all gr own sig nif ican tly in imp or t anc e thr ough 2021 . We have a pr ogr amme to upgrade the energ y eff iciency of our old er buildin gs and ha ve con sider ed h ow the c os ts of s uch r etr o-fit tin g shoul d be reflec ted in our financial st atements, includin g our proper ty valuations. Durin g 202 1 , a fea sibilit y and c ost re por t was c ommissio ned to e stimate t he co sts of upgr ading our olde r buildings to achie ve an EPC r ating of B or ab ove by 203 0. This infor mation ha s bee n share d with our valuer s and is b eing fac tored into o ur capi tal exp endit ure progr ammes f or 2022 onwards. Whe re any imme diate actio n or expe nditure i s ne ede d, the re levant amo unts would b e prov ided for b ut, th ese c ost s are exp ecte d to aris e over sev eral ye ars as f uture ref urbis hment pl ans are prep ared, w hich sho uld add value to th e buildings and are n ot curre nt capi tal co mmitme nts. T a xation and R EIT compliance Sho uld the G roup n ot co mply wi th UK REIT r egul atio ns, i t coul d incur t a x pe naltie s or ulti mate ly be ex pell ed fr om the REI T reg ime, whi ch would h ave a sign ifi can t ef fe ct on t he fin anci al state ments. As a REI T , th e Group b enef its f rom ta x adv antag es. Inc ome an d charge able gains on the qua lif ying p roper t y re ntal bu sines s are exempt from corporation tax . I ncome that doe s not quali f y as prop er t y inc ome within the REI T rules is s ubject to c orp oration t a x in the n ormal way. The re are a numbe r of test s that are a pplie d annually, and in relat ion to fore cas ts, to e nsure th e Group rem ains well within th e limits allo wed wit hin thos e tests . Th e Group emp loys a qualif ie d and exp erien ced Head o f T a x whom t he Co mmit tee me ets at leas tannually. Th e Commi tte e note d the fr equen cy wit h which com plianc e with the te sts an d regul ations was rep or ted to t he Bo ard and c onsider ed the subs tantial m argin by whic h the Gro up comp lied. Bas ed on thi s and the lev el of he adroom s hown in the l atest G roup fore ca sts, t he Co mmit tee ag ree d that , once a gain, no f ur ther ac tion was re quire d. Borrowings and derivatives Th e calc ulat ion of f air valu es fo r the Group’ s financial instruments, such as the U SPP not es, 2025 c onver t ible bo nds and in ter est r ate s waps, i s a tec hnica l and c omple x are a and the a moun ts invo lved ar e sign ific ant . Th e fair values of t he Group’s bor rowings and inter est ra te swaps are pr ovide d by an independent third part y based on information prov ide d to them by t he Group. T his includ es the ter ms of eac h of the f inancial ins trum ents and dat a available in th e finan cial marke ts (see n ote 2 4 on p ages 235 to 244). Th e Commi tte e note d that the v aluations we re car ried o ut by an ind epen dent third p ar t y which had valu ed the in strum ents in pr eviou s years and th at the ex ter nal Audito r used i ts own trea sur y spe cialis ts to re-p er for m the valuat ion and to as ses s the re asona blene ss the reof. The ex tern al Auditor s ubse quently c onf irme d that no is sues ha d arisen r elating to t he valuatio ns. Th e Commi tte e was sat isfie d with t he level o f ass urance gain ed f rom the se pro ce dures. 151 Financ ial Stat ements Strategic repor t Governance AUDI T COMMI T T E E RE PORT CONTINUED Por t folio valuation Our pro per t y por t fo lio is valued by th e ex ternal valuer s for ourinterim and y ear end re sults. A s at 3 1 De cemb er 202 1 , it was valued at £ 5.697 bn (2020: £5.356bn) and pr incipally con sists of 77prop er ties . The v aluation of the p or tf olio is a major comp onent of n et ass et value. Mov ements in th at valuation are a signif icant p ar t of how we meas ure our progre ss and a key d eterminant of th e Group’ s total return (a KP I and a per fo rmanc e measure fo r our E xecuti ve Direc tors’ variab le remuneration – s ee pa ges 45 an d 1 83). Due to its signif icanc e, the C ommit tee mo nitors the o bjecti vit y and indep enden ce of the ex ter nal valuers’ wo rk and hos ts the valuati on me etings. Th e valuation me etings t ypic ally occ ur in Februar y an d July , prio r to Audit Co mmit tee me etings. Due to his p osition a s Managing Dire ctor of C apital Ad visor s Limited (a wholly-o wned sub sidiar y of CBRE Limite d) , Rich ard Dakin do es not t ake par t in discussio ns regarding the valuati on of the Group’s prop er t y por t folio (se e page 1 39) . Key mat ters dis cusse d during the m eetings inc lude: — Lo ndon of f ice dem and, inves tment volum es and vac ancy rat es; — th e assumpti ons under lying the valuation an d the qualit y of dat a; — valuati on metho dolog y and wh ether i t was adver sely impac ted b y C o v i d -19 ; — any valuati on which require d a greater le vel of judgem ent than normal, for exampl e development proper ties; — h ow climate change was f actore d into the valuation; and — any valuati on movem ents that we re not bro adly in line with that of th e MSCI be nchmark . The a ssumption s underly ing the valuation are dis cusse d with th e ex ternal Au ditor and an update o n the mat ters disc usse d at the me etings is provi ded to the B oard. A well p lac ed por t fo lio page s 1 8 to 1 9 V aluation benchmarking The C ommit tee c ommissio ned a b enchmar king exercis e in relation to the pro per t y valuation, w hich was per f orme d during Q2 202 1. The purp ose of th e exercise was to as sure the C ommit tee th at the valuation of our p or t folio was fair an d aligned wi th the RIC S Val uatio n Global S tandards an d the Red B ook . The b enchm arking exercis e entailed: — T hree valuer s, including CBRE , valued a samp le of our por t folio (compris ed of f ive ass ets) which repr esent a c ross -sec tion of proper ties from on-site development to long -dated income. — T he sample tot alled approx imately £7 0 0m of ass ets (c. 1 3% of our po r tfo lio value) . — T he valuation date was 31 March 202 1 . — E ach valuer use d a similar meth odolog y an d the res ulting valuation s were bro adly aligne d. The C ommit tee wa s satisf ied with t he ben chmarking re sults which prov ided f ur ther as surance t hat the met hodolo g y used by C BRE was robust. Eff ectiveness of the Group ’s va luers A revi ew into the ef fe ctiv enes s of the ex tern al valuers is pe r forme d af ter the y ear end and inte rim valuations, wi th assist ance f rom Nigel George, Executive Director . The e f fec tiven ess re view for 2021 was condu cted in Fe bruar y and Augus t and con sidere d the following: — ex perie nce, qualif icat ion and objec tivi ty o f the valuation team; — quali ty of p resen tation and d ata; and — ro bustne ss of th e valuation. At both m eetings it wa s conclu ded that th e ex ternal valuer s per f orme d to a high stand ard and, whilst it w as not ideal h aving the proc es s per for med re motely , it was c onduc ted wel l and the timet able for deli ver y was achie ved. Ov er view o f our Valuer A ppoin tmen t Polic y When re viewing it s V aluer A ppointm ent Polic y , the C ommit tee to ok into cons ideration th e outc ome of the RIC S ‘Inde pende nt Review o f Real Es tate Inves tment Valuations’ per f orme d by Peter Pe reira Gray (the RIC S rev iew) and publishe d in Januar y 2022. The C ommit tee’s revis ed Valuer App ointment Po licy st ates that th e Group’s exte rnal valuer sho uld be rot ated at least e ver y f ive year s, subjec t to annual asse ssme nt of their ef fe cti venes s and objec tiv it y . The R ICS re view rec ommen ds that the ma ximum ter m of appoint ment for a v aluation firm is nine y ears . The re are no co ntract ual obligations whic h could res tric t the Group’s choice of value r or a minimum appointm ent peri od. As o ur current value r (CBRE) has exc eed ed the m aximum te nure under th e revis ed po licy, Knight Frank have be en app ointed to value at least 5 0% of the Lon don-ba sed p or tf olio for th e June 2022 valuation. CB RE will value the bal ance of th e London-b ase d por t fol io with Knight Frank ‘sh adowing’. Subject to K night Frank’s overal l per for mance, K night Frank will be app ointed on 100% of the London-based por t folio for the December 202 2 valuati on. Savill s will be engag ed to value our S cot tish lan d which acc ounts for c . 1 % of t he Group’s por tf olio. Th e Commit te e will conside r its poli cy in resp ec t to the valuation of th e Scot tish l and in 2023. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 152 Restoring trust in audit and corporate gov ernance The C ommit tee we lcome s all develo pments w hich aim to improve transp arency in go vernan ce and tr ust in our disclo sures. T he Co mpany resp onde d to the BEIS con sultation on 1 July 2021 , in resp ect to t he rec ommend ations of mo st signif icanc e to Der went London. The r esults of the c onsultat ion, and the f inal agre ed ref orms, areanticip ated to be pub lished dur ing 20 22. Th e Commit te e will monitor t he outc ome of the c onsultati on and the implem entatio n ofany require d change s to the Group’s practic es or rep or ting. The t able below p rovide s an over v iew of some of th e propo sed refor ms include d in the co nsultation, an d how we anticipa te resp onding, i f these b ec ome applic able to De rwe nt London: Proposed reforms Directors’ accountability for internal controls, d ividends and capital maintenance Internal controls and detec ting fr aud An in depe ndent re view will b e com mission ed durin g 2022 to provide clear f ocus ar eas on h ow we can fur th er str eng then o ur internal c ontr ol fr amewor k, in cluding in r esp ec t to frau d detection / prevention. Legality and af fo rdab ilit y of dividends In our 2022 Rep or t & Acc ounts , we intend to widen o ur disclo sures in re spe ct to di stribu table reserves. New corporate reporting Resilience statement On pa ges 98 an d 99, we have st ar ted to trans ition to a ‘Re silienc e st atement ’ by exp anding our dis closure s on the sh or t-, me dium- and long- term thre ats to th e Co mpany ’s resilienc e. If re quired, we wil l prep are a ‘Re silienc e state ment ’ for th e 2022 Repo rt & A cc ounts . Audi t & As suran ce Policy Durin g 2022, we will continu e to progr ess the de velop ment of an Au dit & As suranc e P o li c y. Company direc tors E xecu tiv e pay and streng thening clawback and m alus pr ovis ions As p ar t of the Re munerati on Polic y rev iew being c ondu cted d uring 2022, the Remun eration C ommit te e will con sider the inclusi on of additiona l conditions to its m alus and cl awback p rovisio ns. Th e condi tions whic h curren tly apply to our malus an d clawb ack pro vision s are disclo sed in n ote 1 on pa ge 1 78. The BEIS c onsultatio n propo sed v arious refo rms in resp ec t of the purp ose and s cop e of audits, au ditor repor t ing and audit market super vision an d comp etition . If applicab le, we intend to impleme nt any refor ms as par t of our n ex t comp etitiv e ex ternal audit ten der . The C ommit tee’s current inten tion is to con duct this ten der for th e 202 4 year e nd audit (see pa ge 1 56). If the f inal rec ommend ed refo rms req uire the Audit C ommit tee to under t ake additional re sponsibili ties, th ese will be a dded to th e Co mmit tee’ s term s of referen ce. Assurance Der wen t London’s approach to as suranc e is influenc ed by o ur lowtoleranc e to risk tak ing ( se e page 10 1 ) an d our cons er vativ e manag ement st y le. If suf f icient as surance c annot b e gained, wese ek indep endent as suranc e from our o utso urced inte rnal auditors , ex ternal audito rs, inde pende nt advis ers and spe cialistc onsultants . The m ain area of repo r ting risk rela tes to the valuation of o ur por t fol io. The valuatio n of our por t folio is a m a jor c ompo nent of netas set value an d is a key determinant f or our inves tors when ass essing o ur per for mance. In ad dition, mov ements in th e valuation are a sig nific ant par t of how we m easure our pro gres s and a key de terminant of the Gr oup’ s total ret urn. Due to i ts signif icanc e, the biannual valuati on is subject to a d etailed inter nal revi ew by our inves tment and v aluation team, which c onsist s of exp erienc ed and quali fie d profes sionals, an d is overs een by t he Val ue rs Commi tte e and Audit C ommit tee . The ex tern al valuers are subjec t to annual evaluations whic h focu ses on th eir objecti vit y (see pa ge 1 52). Key asp ect s of the ESG dat a that we disclo se in our annual Rep or t & Ac counts is s ubject to ‘reas onable as surance’ ver ific ation by Deloi tte L LP , inc luding in respe ct of: — Env ironment al, energ y an d carb on repo r ting (all Scop e 1 , 2 and3 GHG emis sions data , intensit y ratio an d energ y dat a); — He alth and safe ty s tatist ics (all minor acc idents , RIDDORs, fatali ties and impr ovement n otice s data); and — O ur Green F inance Framew ork, whic h rec eived in depen dent assur ance fr om Deloit te tha t it is aligne d with the Lo an Market As sociat ion’ s Ex te nded G reen Lo an Principle s. The a ssuranc e statem ents are pub lished in our ann ual Resp onsibilit y Rep or ts which are availab le on our websi te. During 2021 , we st ar ted to rev iew the as surance we re cei ve in resp ec t to corp orate rep or ting, th e handling of risks an d internal con trols. T o date, th e exercise has hig hlighted th e following key actions: — A s detaile d above, o ur key ESG data is subjec t to annual assur ance by D eloit te, howev er , histo rically th e Commit te e was not pr esente d with the o utcom e of thes e reviews . In Novemb er 202 1 , the C ommit tee re cei ved training on t he assur ance pro vide d by Deloit te and, in Fe bruar y 2022, the Co mmit tee revi ewed the o utcom e of the late st assur ance revi ews. Going f or ward, Deloit te will pro vide reg ular update s tothe C ommit tee on th eir assuran ce work . — We iden tifie d that our EPR A disclo sures pub lished in th e annual Rep or t & Acc ounts are n ot current ly subject to ex ter nal verif ic ation. A pe er analysis c onfirm ed that t his was normal prac tice wit hin our industr y. We wi ll c onsider h ow we could gain indepe ndent as suranc e on thes e disclosure s during 2022. — T he Group has b een v oluntarily disclo sing under the T ask Fo rce on Climate -Related F inancial Disc losures ( TCFD) for t he past thre e years . As the se disclo sures are now m andator y for th e 202 1 Rep or t & Acc ounts an d all future r epor ts , the C ommit tee agre ed th at Deloit te would p er form a re view of our disc losures and share t heir comm ents with t he Commi tte e. The Co mmit tee will con sider whet her fur th er assuran ce is re quired over o ur TCFD disclosure s during 2022. 153 Financ ial Stat ements Strategic repor t Governance AUDI T COMMI T T E E RE PORT CONTINUED Internal financial controls On an ongo ing basis, th e Audit Co mmit tee rev iews the ade quacy and ef fe cti venes s of the Gro up’ s sys tem of internal f inancial con trols which are d escr ibed br iefly in the t able below. While Der went L ondon is a lar ge busines s in terms of th e size of its balan ce she et and mar ket capit alisation, we ar e relativ ely small when c onsider ing the numbe r of peop le working dire ctly in the busine ss. O ur Group str ucture is o rganised to b e simple and transp arent (i.e. rel atively f ew subsidiarie s) and our internal co ntrol proc edure s and poli cies are well e stab lished, re viewe d annually and subjec t to ex ternal ve rific ation by o ur internal auditors , RSM(see p age 1 55). The C ommit tee r ecei ves de tailed rep or ts on the o peratio n and ef fe ctiv enes s of the internal f inancial c ontrols f rom memb ers of the se nior manage ment team an d the internal audi tors. In additi on, the ou tcome of t he ex ternal audit at y ear end an d the half-y ear revi ew are consid ered in re spe ct to internal c ontrol s. As tr aining and staf f awaren ess fo rms par t of th e Group’ s intern al con trol fram ework , the Audit an d Risk Commit te e rec eives up dates on the p olicies an d proc edures in p lace an d how the se are being comm unicated to, an d complie d with, by o ur staf f. We utilise IT s ystems an d automate d work flows to man age our finan cial proc ess es, inc luding the proc ess ing and author isation of paym ents and dat a input (see t he table b elow) . All B ACS p ayment files ar e encr y pted on gen eration and a cce ss is moni tored by o ur security system s. In 202 1 , t he Digit al Innovation & T echn olog y (DIT ) team implemen ted an ITIL -aligne d ser v ice des k plat form an d new proc es ses/contro ls were de signed f or our finan cial sys tems in resp ec t to user mana gement . Thes e work flow s promote automatio n, ensure th e corre ct app rovals have b een gaine d, and prov ide full audit abilit y of any work c arrie d out. T he DIT te am regul arly ensure s that all busine ss- critic al IT sy stems, su ch as finan cial packa ges, ar e secure ly acce ssible rem otely . The C ommit tee h ave agre ed that a re view will be c ommissio ned during 2022, to provide c lear foc us areas on ho w we can fur t her stre ng then our inter nal contr ol frame work, in cluding in respe ct tofraud d etec tion/preven tion. In addition , during 2022, we wi ll ro ll out s of tware to au tomate the cre ation and app roval of exp ense s. The C ommit tee r emains satisf ied t hat the rev iew of internal finan cial contr ols did not rev eal any signif icant we aknes ses o r failures and t hey co ntinue to oper ate ef fec tively. Fur ther infor mation on ris k managem ent and non -financ ial internalc ontrol s is available in the Risk C ommit tee rep or t. Risk management page 1 59 Over view of i nternal financial controls Governance framewo rk Our go vernan ce fr amewor k (see pa ge 1 33) suppor t s ef fe ctiv e internal c ontro l throug h an approv ed sc hedule of m at ters res er ve d for de cision by t he Bo ard and the E xe cuti ve Dire ctor s, supp or ted by d efine d res ponsibili ties , levels of au thor it y and sup por ting c ommit te es. Financial rev iews and internal procedu res Co mprehe nsive s yste ms of finan cial rep or ting and f orec astin g which are c onduc ted f reque ntly and inc lude bo th sen sitiv it y and vari ance analy sis. A n annual bu dgeting exe rcise is c arrie d out wi th thre e rolling f orec ast s prepar ed. A f ive - year s trateg ic revi ew is prep ared annu ally . Bre akeven an d sens itiv it y analys es are inclu ded in b oth the f ive -ye ar strate gic rev iew and th e rolling fo rec asts . T r ea sur y and t a x procedu res T re asur y is c ontro lled by th e Chief Finan cial O f fic er and T reas urer . All tr ansac tions are c hec ked and m onitore d. All com plex or lar ge trans actio ns are disc usse d in adva nce wit h the Bo ard and E xec utiv e Direc tors an d are ex tern ally rev iewed b y our adv iser s. T a xat ion is a com plex area an d is subjec t to fre quent ex te rnal rev iew. Cor porate t a x return s are prep ared b y the T a x A ssis tant and r eview ed by th e Group He ad of T a x and, o n a sample b asis, by R SM. O ther hig her risk area s like P A Y E and CIS (the C ons truc tion Indu str y S cheme w hich re quires us to de duct t a x at sourc e from t he lab our elem ent of a sub contr actor ’s invoice unle ss th ey are prop erly au thor ised by HMR C) is subjec t to thoro ugh examinat ion and tes ting. We maint ain an open r elatio nship with HMRC a nd have a ‘low r isk ’ ta x stat us. Fur the r inform ation on t ax r isk and ta x gov ernanc e is on pa ges 65 a nd 1 06. Risk identificatio n and monitoring Th e Risk Com mit tee reg ularly r eviews t he Group’s risk re gister s, the s che dule of key co ntrols an d key risk in dicator s. Th e sche dule of key co ntrol s provi des ev idenc e of how th e cont rols are b eing op erated a nd their ef f ec tiven ess . Our ris k mana gemen t proc edure s are robu st and inc lude initiat ives s uch as a ‘ tenan ts on watch’ reg ister and a b ack-up IT f acilit y. Th e Risk Com mit tee’s repor t is o n page s 1 58 t o 1 65 . IT controls A ll finan cial trans acti ons are re cord ed and, w here re quired, ap prove d utilisin g financ e sys tems or au tomate d work flow s. Role ba sed a cce ss is in pl ace fo r all finan cial solu tions , manage d by the D IT ser vic e desk . Dat a transf ers b etwe en prog rams are ei ther au tomated o r impor te d with minimal man ual inter ve ntion to maint ain the integ rit y of the d ata. T r aining a nd st af f aware nes s St af f are aware of th e delegate d autho rit y limit s set by th e Boar d and con firm th eir under sta nding of our inter nal po licies which ar e cont ained on o ur Group int ranet an d in our employ ee han dboo k. S taf f have si x-monthly p er for manc e revie ws with any t raining requir ement s identi fie d and agr eed w ithin six mo nths. T he Gro up oper ates a whis tleblowing p olic y which includ es ac ces s to an indep ende nt help line for an onym ous rep or ting of c once rns (see p age 1 36). Ex ternal verific ation During t he year , no s ignifi cant de ficie ncies h ad be en raise d by P wC as a re sult of the ir contr ol test ing under t aken as par t of the ann ual audit. T he ou tsour ced in ternal audi tors, R SM, pe rf orm var ious as suranc e revie ws as par t of th e annual Intern al Audit Pl an. Th e impleme ntation o f rec ommen dations ar ising fro m the RSM r eviews a re monito red by th e Audit Co mmit tee. T he Gro up’ s VA T pro ce dures are s ubject to o ngoing p erio dic revie w by ex ternal a dvis ers. C ompr ehens ive rev iews of the G roup’s financial c ontr ols have al so be en unde r taken wit h assis tanc e from ex te rnal ad vise rs. Re gular annual cr edit rat ings, inclu ding risk as ses sment s, are c onduc ted. E ach yea r , at ren ewal, a c ompreh ensiv e revie w of the Group’s insuran ce co ver is pre pare d by its ind epen dent insur ance a dvis er . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 154 Fraud risk assessment On an annual b asis, the C ommit tee re views the G roup’ s frau d risk ass essm ent prep ared by man agemen t which detail s the polic ies and pro ces ses whic h safeg uard the C ompany ’ s as sets , prevent anddete ct f raud and err ors. The l arges t cos ts incurre d by the C ompany re late to capit al exp enditure or p roper t y tran sacti ons which are subjec t to approv alin accor dance wit h the Bo ard’ s dele gated autho rit y limits,b efore c ost s are incurre d (by the C ost C ommit tee f or cos ts up to £5m, th e CEO and the E xec utive Dire ctor s for co sts up to £20m and by th e Board f or any capit al expe nditure ove r £20m) . App roval is doc umented in minu tes which are re quired to be s een bef ore the bu dgets are as signed . The appr oved bu dgets are th en subjec t to internal monito ring to ensure th ey remain within the approved lim its. The B oar d’s delega ted au thori ty l imits page 1 32 The r isks identi fie d by the frau d risk ass essm ent, in res pec t to finan cial fraud and e rror , are mitigated t hrough the f ollowing key c ont rol s: — A t wo-s tage ap proval pro ces s is require d for invoic es and trans action s, eithe r through th e use of sof t ware or fo rms. The re is a fur the r two -sta ge approval p roce ss for t he releas e of final p ayment s. — Su f ficie nt suppor t /eviden ce is require d by the Finan ce team which is subjec t to validation b efore p ayment s are made. — Pay roll is pre pared by an ex perie nce d team and rev iewed by the He ad of HR and the T r easurer . Paym ent varianc e repo r ts are prep ared to exp lain movem ents. — T raining is provi ded to st af f to ensure the y are aware of thela test met hods us ed by tho se at tempting to def raud theC ompany. — Us e of third par ties to p roduc e or review inf ormation, includingin res pec t to projec t monitoring a gencie s, internal and ex tern al Auditors e tc. — P reparation o f a detailed b udget and thre e rolling fo rec asts against whic h actual s are compar ed. — T he proc es s of produc ing the quar terly mana gemen t acco unts involve s detailed v ariance analy sis to prior p eriods an d fore cas ts, as wel l as a number of re conc iliations of bot h balan ce she et and inc ome st atement ite ms. Further information on cyber security page 1 62 Internal audit RSM wer e appointed a s the Group’s outso urce d internal audit func tion in De cemb er 201 8 following a c ompe titive ten der pro ces s and are c onsidere d by the C ommit tee to b e indepe ndent. In additio n to per for ming an internal audit f unction , another te am from R SM also re view our ye ar end ta x ret urns. The Inter nal Audit Pl an for 202 1 was app rove d jointly by the Risk and Audit C ommit tee s and includ ed a com bination of risk-bas ed audits an d project s ( se e the t able below). The outc ome of the au dits were pre sente d to the Risk and Au dit Commit te es and rep or ted to the B oard. Th e Commit te es were ple ased wi th the leve l of assur ance re ceiv ed fro m the audits . The C ommit tee r ecei ves a rep or t on intern al audit acti vit y at eac h me eting and moni tors the s tatus of intern al audit rec ommen dations and man agemen t’s respo nsiven ess to th eir implemen tation. T he other B oard c ommit tees ar e kept updated o n the ou tcome of any r eviews whic h fall within their are as of res pon sibilit y. Audits per formed during 2021 Aud its to b e pe rf orm ed un der th e Inter nal Au dit P lan 2022 — Procurement a nd contrac t management — Lease man agement — Mana gement o f HR data — T a x govern ance and repor ting — C ore f inancial cont rols — IT general controls — He alth and safe ty — C yber securit y — S trategic planning — Joint venture governance — Financial controls A form al review of th e ef fec tive ness of t he internal audito r and the internal audi t proc ess was c onduc ted in Febr uar y 2022 and considere d the following: — th e qualific ation and ex per tis e of RSM’s internal audit team; — th e relatio nship est ablished an d the ex tent to whic h RSM have built an under standing of our b usines s and sys tems; — de pth and bre adth of intern al audits; — quali ty of r epor ting , including in resp ec t to the regul ar Internal Audit Pr ogres s Repor t s provid ed to the Au dit and Risk Co mmit tees; and — quali ty of p lanning and abilit y to me et dea dlines. The C ommit tee c onclud ed that th e internal audit pr oce ss had b een cond uct ed effectiv ely . Mem ber s of t he Co mpa ny Secr etarial team 155 Financ ial Stat ements Strategic repor t Governance AUDI T COMMI T T E E RE PORT CONTINUED Ex ternal Auditor The C ommit tee h as primar y re sponsibilit y fo r managing th e rel ation ship wi th the ex tern al Audi tor , includin g ass es sing th eir per f ormanc e, ef fe ctive nes s and indep endenc e annually and rec ommen ding to the Boar d their reapp ointment o r removal . Followi ng a comprehensive t ender in 20 1 4, Pric ewaterho useC oop ers LL P (Pw C) were appo inted as the G roup’ s Auditor . Th e Commit te e’ s curren t intention is to co nduct i ts nex t comp etiti ve tender f or the 202 4 ye ar end audit, in ac cor dance with curre nt regulat ion that re quires a tender e ver y 1 0 year s. The Co mpany has cho sen this tim etable due to th e rece nt change in audit par tn er in 2020, who will ser ve fo r four year s prior to th e tende r in order to prov ide cont inuit y over the n ex t two ye ar end audits . This timet able is subject to annu al asse ssmen t of the Auditor’ s ef fectiveness and independence. The re are no co ntract ual obligations whic h restr ict the C ommit tee’s choic e of Auditor or a minimum app ointment p erio d. The C ompany h as complie d with th e provisio ns of the C ompeti tion and Market s Autho rit y’s Order f or the f inancial year un der rev iew in resp ec t to audit tender ing and the pro vision of non -audit ser v ices . Annual r eview of the ex tern al Auditor Following th e year end au dit, the C ommit tee as ses sed t he ef fe ctiv enes s of the ex ternal A uditor . T his ef fec tive nes s review is per f orme d on an annual basis an d aims to ensure a robus t audit is per f orme d, auditor per f ormanc e is optimise d and enc ourage s can did fee dback and c ommunicat ion bet wee n the Auditor an d the Commit tee. The assessment considere d : — th e qualific ation and ex per tis e of the Lead A udit Par tner an d the wide r audit team; — th e availabilit y of res ource s to per for m a compre hensiv e and time ly audi t; — adh erenc e to the Non-Audit S er vic es Po licy; — leng t h of tenure and abilit y to pe rf orm an indep ende nt audit; — quali ty of t he audit pl an, overall audi t and outc ome rep or t; — quali ty of p lanning and abilit y to me et dea dlines; and — quali ty of au dit in respe ct of key ju dgement s and estima tes. Independence An imp or tant asp ec t of managing th e ex ternal Audito r relation ship is ensuring t here are ade quate safeg uards to prote ct Audito r objec tivi ty an d indepe ndenc e. In asse ssing this mat ter , the Commit tee con sidered the following: — th e Auditor ’ s indep ende nce let ter which annu ally conf irms their inde pend ence an d complian ce with th e Financial Repo r ting Coun cil’ s (FR C) Ethical S tandard; — h ow the Auditor d emonst rated prof essio nal scep ticism and challenge d manag ement ’ s as sumptions wh ere nec es sar y; — th e tenure of the ex ter nal Auditor and t he lead audit par t ner; — th e outco me of the FR C’s inspec tion of P wC ’ s audit quali t y; — th e operat ion, and c ompliance wi th, the Gr oup’ s polic y on non-au dit work be ing per for med by th e Auditor; and — h ow the Auditor id entif ied risks to au dit qualit y and how th ese were addre sse d, including the n et work level c ontrol s the Auditor r elied upon. In asse ssing how t he Auditor de monst rated prof ession al sc epticism and c hallenge d managem ent’s assump tions, th e Co mmit tee con sidere d the depth of dis cussio ns held with th e Auditor , par tic ularly in res pec t to challenging th e Group’ s appr oach to its signi fic ant judgement s and es timates (see p ages 1 5 1 an d 202 to 204) . S andra Dowling h as bee n lead audit par t ner since t he 2020 half-ye ar review. Th e Commit te e has be en pleas ed with th e challenge r aised by S andra and he r team during the y ear . Audit qual it y Audit quali ty c an be ch allenging to def ine and mea sure. In resp onse to the FR C thematic r eview on A udit Qualit y Indic ators ( AQIs) releas ed in May 2020, the Co mmit tee agre ed th e six AQIs which would be u sed to as ses s Pw C in the f inancial year en ded 3 1 Dece mber 2 0 21 . The C ommit tee f ound that th e use of AQIs was an ef f ect ive additi on to its re view pro ces ses an d they will co ntinue to be us ed for th e year e nding 3 1 De cemb er 2022. Outcome Af ter t aking all of thes e mat ters into ac count, t he Commi tte e con cluded t hat P wC had p er forme d their audit e f fec tively, ef fi ciently, and to a high qualit y . Ac cordingly, the C ommit tee has rec ommen ded to the B oard that P w C be reap pointed as A uditor to the Gro up for the ye ar ending 31 Dec ember 2022, subjec t to reapp ointment at t he 2022 AGM. Any f eedb ack arising fr om the annual as ses sment will b e discus sed wi th the ex tern al Auditor for imple mentati on into the audit pl an for the nex t y ear end audi t. The ‘Independent Audit or’s report to the members of Derwent Lond on plc’ is available on p ages 201 to 208, and it s audit opinion is con sistent with t he repo rt r ecei ved by t he Audit C ommit tee. Independent auditor’s repor t page 2 01 Non-audit ser v ices in 202 1 During 2021 , in additio n to the interim res ults review, P wC were asked to as sist wit h the prep aration and is sue of comf or t let ters as par t of th e new gre en bond is suanc e ( se e page 1 3). The total fe e for this projec t was £9 0,000. This se r vice wa s approve d in acc ordance wi th the Gro up ’s Non-Audit S er vic e Polic y and rec eive d Commi tte e approval p rior to commencement. The C ommit tee n oted that t his ty pe of se r vice is p ermis sible underth e UK FRC Ethic al Stan dard 201 9. The C ommit tee was in agre ement w ith the ratio nale that P wC were b est p lace d to per for m this ser v ice due to th eir knowle dge and unde rstan ding of the Group. The n on-audit se r vice s provi ded by P wC dur ing the year un der revi ew totalled £1 5 0,000 (see t able on pa ge 1 57). The C ommit tee conf irme d that it do es not b elieveth at the level o r nature of the non-au dit ser vic es pro vide d during 202 1 have impac ted on P wC ’s actual or perceived independence as Audit ors. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 156 Over view of our Non- Audit Ser vices Policy The o bjecti ve of maintaining the No n-Audit Ser vic es Polic y istoensure th e indepe ndenc e of the ex tern al Auditor is not comp romise d and that the p rovision of su ch ser v ices d o not impairthe ex ter nal Auditor ’ s objec tiv it y . Under t he polic y , all ser vic es prov ided by t he ex ternal Audi tor (otherthan th e audit its elf ) are regarde d as non-audit s er vic es. Ourpo licy draws a distin ction b etwe en pe rmissible se r vice s (whichcould b e provid ed subjec t to condi tions set b y the Co mmit tee) and prohibite d ser vic es (which may not b e prov ided bythe ex ter nal Auditor exc ept in excep tional circums tanc es when the Audi tor has be en prov ided wit h approval by th e Financial Co nduct Au thori ty). The t y pe of non -audit ser v ices d eeme d to be per missible includ es revie w of the half-y ear results an d assuran ce work on n on-f inancial data . In acc ordanc e with audit legisl ation, the to tal fee s for non -audit ser v ices p rovide d by the ex ter nal Auditor to th e Group shall b e limited to no m ore than 70% of the ave rage of the s tatuto r y audit fee f or the C ompany pai d to the Auditor in th e last thre e consecutive financi al yea rs. The C ommit tee h as provid ed pre -approval limit s which allow manag ement to app oint the ex tern al Auditor to co nduct per missible non- audit ser v ices if t hey fall b elow an amount it dee ms as triv ial. The ap proval limits f or non-audit s er vic es are pro vide d below and are subjec t to annual revie w: Value Approval requi red prior to engagement Up to £25,0 00 Chief F inancial O f fic er £2 5, 000 to £ 1 00,000 At least t wo memb ers of t he Audit C ommit te e (inc luding th e Comm it tee Ch air) £1 0 0,001 and a bove Bo ard of Dire ctor s When re viewing re quest s for pe rmit ted non -audit ser v ices , the Audit C ommit tee will as ses s: — wh ether th e provisio n of such se r vice s impairs the Au ditor’s indep enden ce or objec tiv it y and any safe guards in pla ce to eliminate or re duce suc h threats; — th e nature of the n on-audit ser vic es; — wh ether th e skills and ex perie nce make th e Auditor the m ost suitab le supplier of th e non-audit se r vice; — th e fee to b e incurre d for non-au dit ser vi ces , both for indivi dual non-audit s er vic es and in ag gregate, r elativ e to the Group audit f ee; and — th e criteria w hich gover n the comp ensat ion of the indiv iduals pe r for ming the audit . In acc ordanc e with the FR C Ethical S tandard, t he Audit C ommit tee would als o asse ss whet her it is pro bable that an obje ctive , reas onable and infor med third p ar t y would con clude indep enden ce is not c ompromise d. Non- audit se r vic es in the p as t thre e con secu tive f inan cial yea rs Our Non-Au dit Ser v ices P olicy re quires that th e total fe es for no n-audit ser vic es are limited to n o more than 70% of the ave rage st atutor y audit fe e in the las t three c onse cutiv e financial y ears. Gi ven the low v alue of non-audit s er vic es historic ally prov ided, th e level of no n-audit ser v ices r emains well b elow the 70% fee c ap. 20 21 2020 2 019 £’000 % £’000 % £’000 % Audit of D er went L ondon p lc and subs idiaries (i) (ii) 471 76 494 92 4 04 91 Rev iew of interim re sults 60 10 44 8 42 9 Other non-audit serv ices 90 14 – – – – T otal fees 621 10 0 5 38 10 0 446 10 0 Not es: (i) Th e audit f ee in r elat ion to t he ye ar end ed 31 De ce mbe r 2020 inc lude s a co st ove rr un of £79,0 00. T his was l arge ly due t o the in ef fic ien cies o f rem ote wor king a nd th e ex tend ed tim etab le tha t res ulted f rom t he loc kdow n in pla ce th roug hou t the au dit p erio d. (ii) T he au dit fe e in rel atio n to the y ear e nde d 31 Dec emb er 2019 inclu des a c ost o ver run of £17 ,2 75. 157 Financ ial Stat ements Strategic repor t Governance 202 2 FOCUS A RE AS — Ongoing m onitoring of th e Group’ s princ ipal and emer ging risks — Monitor th e risks arising f rom material sh or tage s, lab our shor ta ges and inf lation (se e page 1 07) — Ensure he alth and safet y r isks are being ef fec tive ly manag ed acro ss the Gr oup (see pa ge 1 61 ) — Revie w results of th e energ y p er forman ce ce r tific ate (EPC) fe asibilit y and co sts rep or t (see pa ge 55) — Revie w the outc ome, and p otential impac t, of th e Planning Bill re forms R ISK COMMI T T E E R E PORT Dear Shareholder , I am pleas ed to pre sent our Risk C ommit tee re por t for 2021 whichde scrib es our ac tivitie s and area s of focus dur ing the year . Risk p rof ile of th e Gro up 202 1 co ntinued to b e a challenging ye ar for the G roup, our oc cupiers an d the wider e cono my . Th e risks arising f rom Cov id- 19 and the imp lication s of the lockdo wn restr ictions , continu ed to have an impac t throug h the fir st half of 202 1 and re quired care ful manag ement. F ollowing the c ompletion of th e UK Gover nment ’ s roadmap to e ase res tric tions, we s aw a stronge r sec ond half with the e cono my showing signs of re cov er y . De spite the e asing of res tricti ons, unc er taint y and risk re mained. The e mergen ce of the n ew Omicron v ariant of Cov id- 19 i n ear ly De cemb er , le d to the implemen tation of ‘P lan B’ res tric tions which were late r lif ted f rom 26 Januar y 2022. W ith the les sening of res tricti ons, the s ucce ssf ul vacc ination progr amme, and as guidanc e is shif ting towards ‘ living with c oronav irus’ , the ou tlook forth e UK econ omy is look ing more po sitive . Aris ing from the up turn in the e conomy, the new c hallenges f acing the Gro up and the wide r eco nomy are, mater ial and labo ur shor t ages an d inflatio n ( se e page s 1 01 and 1 07). Independent assurance An imp or tant par t of o ur overall ris k governan ce is to rev iew the result s of indepen dent ex tern al reviews o n a variet y of risks . During2021 , we re ceive d the fo llowing indep endent as suranc e : — annual in depen dent faç ade/f ire risk as ses sments; — annual P lanne d Preven tive Maintenan ce sur vey s, which are con ducte d acros s the mana ged po r tf olio; — si x monthly risk a sses sment c heck s by ex ternal sp ecialis t water co nsultants; — an ind epend ent risk analy sis of the Group’s key climate change -relate d risks; — I T Gover nance p er form ed an indep ende nt cyb er se curit y health c heck an d vulner abilit y scan ( pene tration tes t); and — R SM per for med f unctio n spe cific audi ts during 202 1 , which include d audits on o ur IT cont rols, lea se manage ment and procureme nt/contract managem ent ( se e page 1 55). Key ac tiv ities o f the C ommit te e during 2021 A signif icant pro por tion of t he Commi tte e’ s time this ye ar was spe nt on over seeing th e managem ent of risks ar ising from th e Co vid- 1 9 p andemic and t he identif icat ion of emerg ing risks within the c ontex t of the Gro up’ s c hanging risk pr ofile. We have again foc used o ur atte ntion on a varie ty of r isks within four ke y categ ories: our bus iness an d clients , eco nomic and p olitical , environmental and technology. I am gratef ul to the exec utive te am and manage ment for t heir proac tive ap proach to t he changing env ironment t hroughou t the year . Par tic ular foc us was give n to : — He alth and safe ty m atte rs, including pr otect ing our occ upiers and emp loyees , and st atutor y c omplianc e — O ur occ upiers, inc luding their finan cial wellbe ing, cov enant stre ng th and abilit y to use th eir of fic e space s (see pa ge 1 0 6) — Env ironment al risks and op por tunitie s, including EP C regul ator y comp liance (see p age 1 61 ) — C y ber risk m anageme nt (see pa ge 1 62) — A sse t managem ent risks , including lease ex piries and va canc y rate exp osure (see p age 1 06) — D evelopm ent and supp ly chain risks (see p age 1 07) Richard Dakin Chair of the Risk C ommit tee De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 158 per iodically r ecei ves pre sent ations fr om senior mana gers an d external advisers. A robus t asse ssme nt of the prin cipal risks f acing the Gro up is regul arly per f orme d by the Dire ctors , taking into ac count th e risks that c ould threaten o ur busines s mode l, fut ure per for mance, solve ncy or liq uidity, as well as th e Group’ s st rategic objec tive s over the c oming 1 2 m onths. Our prin cipal risks are d ocumen ted in a sche dule which includ es a comp rehensi ve over v iew of the key c ontrol s in place to mit igate the risk and t he potential imp act on o ur strategic obje cti ves, K PIs and busine ss mo del. T he Sch edule of Princ ipal Risks also in cludes an assur ance fr amework to e viden ce how ea ch cont rol is manage d, overseen and independently verified. Due to it s impor tan ce, chan ges to the S che dule of Principal Risks can only b e made wit h approval f rom the Risk C ommit tee or B oard (changes ma de to our princip al risks during 202 1 are on p age 1 01 ). Risks not d eeme d to be pr incipal to the Gro up are docum ented within the G roup’ s Risk Regis ter which is maintain ed by the E xecut ive Dire ctors , with assis tanc e from th e Exe cuti ve Co mmit tee. Th e Board re views and ap proves t he Group’s Risk Regis ter on an annual basis an d it is revie wed by th e Risk Co mmit tee at each of i ts me etings. In additio n, risks de emed to b e key indica tors of change s in the Group’s risk prof ile, or deviatio n from t he Boar d’ s risk toler ance, are sing led out an d repor te d upon at each Ris k Commit te e meeting . Risk documentation and monitoring page 1 02 During th e annual strateg ic review an d approval of th e fiv e-ye ar plan, t he Boar d condu cts a rob ust ass ess ment of the G roup’ s emer ging risks, b eing tho se that co uld impact on t he busine ss in the me dium- to long-term . Emerging risk s are identif ied th rough round table discus sions and h orizon sc anning. Emerging r isks are discus sed b y the Co mmit tee at each m eeting . Emer ging r isks page 1 04 The A udit Commi tte e revie ws the ade quacy and e f fec tivene ss of the Gro up’ s s ystem of inte rnal finan cial contro ls which are des cribe d brief ly in the table on p age 1 54. T he Audit C ommit tee remains s atisfie d that the r eview of inter nal financial c ontrol s did not rev eal any signif icant we aknes ses o r failures and the y continu e to op erate ef fe cti vely. Inte rnal f inanc ial co ntro ls page 1 5 4 During 2021 , we co mmenc ed a rev iew into the as surance whic h can be ev idenc ed in res pec t to cor porate rep or ting and, th e handling of risks an d internal co ntrols (b oth, f inancial and non -financ ial). Fur ther infor mation on th e initial outc omes of this re view is det ailed in the Audit C ommit tee r epor t. Assurance pag e 1 53 Following th e Audit C ommit tee’ s and Ris k Commit te e’ s r eviews , the chairs of e ach com mitte e conf irme d to the Bo ard that it is sa tisfie d that the G roup’ s internal c ontrol f ramewo rk (financial and n on- finan cial) and risk m anageme nt proc edure s: — op erated e f fec tively thr oughou t the pe riod; and — are in ac cordan ce with t he guidanc e cont ained within th e FRC ’ s Guidan ce on Risk Mana gement , Internal C ontrol and Relate d Financial an d Busines s Repor ting . The Ris k Commit te e remains satis fied t hat the Gro up’ s non-f inancial inter nal contr ols and risk m anageme nt proc ess es con tinue to operate e f fec tively, and that its r eviews did no t reveal any signif icant we aknes ses o r failures. Further engagement The f or thc oming AGM is on 1 3 May 2022 and I will be avail able to answer any que stion s on the C ommit tee’ s ac tivi ties that yo u may have. If y ou wish to cont act me , I am available via our C ompany Se cretar y , Dav id Lawler (teleph one: +44 (0) 20 7659 3000 o r email: company .sec retary @derwentlondon.com) . Richard Dakin Chair of the Risk C ommit tee 23 Febr uar y 2022 Commit tee composition and perf ormance The C ommit tee’s membe rship for th e year under r eview is de tailed in t he tab le b elo w. Helen G ordon will join the C ommit tee a s a memb er from 1 Mar ch 2022. In addition to th e Commi tte e membe rs, th e Board Ch airman, othe r Direc tors, s enior mana gement an d the internal or e x ternal Auditor s, may be inv ited to at tend all or p ar t of any mee ting as and when app ropriate or ne ce ssar y. During th e year unde r review, the Risk C ommit tee m et three tim es (202 0: four m eetings). The me eting in Augus t included a jo int ses sion with t he Audit C ommit tee to rev iew the ou tcome of t he internal audi tor’s reviews (se e page 1 55). Independent Number of meetin gs Attendance (i) Richar d Dakin, C hair Ye s 3 10 0 % Luc inda Be ll Ye s 3 10 0 % Sanjeev S harma (i) Ye s 1 10 0 % Cilla Snowball Ye s 3 10 0 % No te: (i) Per cen tag es ar e bas ed on t he me etin gs ent itle d to at ten d for t he 1 2 m ont hs en ded 31 De cemb er 2021. Sanje ev Sh arma j oine d the C ommi t tee f ollow ing his app oint men t to the B oar d on 1Oc tob er 2021 . The C ommit tee’s role and res ponsibilitie s are set ou t in the terms of refer ence, whic h were las t updated in No vember 2020, and are available on th e Comp any’s website at: w ww.derwentlondon.com/ inv estors/ governance /board-comm it tees The 2021 evaluation of th e Board, it s commit te es and indiv idual Direc tors, wa s internally fac ilitated by Mar k Breuer , the N on- E xecut ive Chairman , in acco rdance wi th our three -year c ycle of evaluation s ( se e page 1 4 1 ). The rev iew conf irmed t hat the Co mmit tee con tinues to op erate ef fec tive ly , with no sig nific ant mat ters rais ed. Risk management At Der went L ondon, th e manage ment of risk is tr eated as a cr itical and c ore aspe ct of our b usiness a ctiv ities . Although t he Boar d has ultimate resp onsibilit y for th e Group’ s rob ust risk ide ntific ation and manag ement pro ce dures, c er tain risk mana gemen t activ ities are delegate d to the level t hat is mos t capable of o verse eing and manag ing the risks . Our ri sk man agem ent s truc ture page 1 60 In order to gain a co mprehen sive unde rstan ding of the risks f acing the bu siness an d the manag ement th ereof, the Risk C ommit tee 159 Financ ial Stat ements Strategic repor t Governance RISK COMMIT T EE RE PORT CONTINUED Our ri sk man agem ent s truc ture — O ve rall resp onsibili t y for risk m anagem ent and inte rnal c ontrol s, and fo r the rev iew of th eir ef fec tiv enes s — S ets s trategi c objec tive s and risk ap peti te — S ets d elegation o f author it y limits f or senio r manage ment — En sures th at a healthy p urpo sef ul culture ha s bee n embe dde d through out th e organis ation (with inpu t from t he E xecu tive Dire cto rs) — A gre es th e Group’s strateg y t o managing c limate chan ge resilie nce, ap prov ing and moni toring pro gres s agains t the pat hway to net zer o carb on (with inpu t from t he Resp onsible B usines s Com mit tee) The Board — Monitor s and rev iews the B oard’s risk re gister s — Wor ks alongsid e the Bo ard to se t the risk to leranc e levels for th e Group — R ece ives up dates o n key risks an d monito rs the Gr oup’ s ris k indic ator s — D eter mines th e nature and ex te nt of the pr incipal an d emer ging risk s facing th e Group — A gre es ho w the prin cipal ris ks should b e mana ged or mi tigated to red uce th e likelihoo d of their in ciden ce or th eir impac t — M onitors a nd rev iews the r isk manag ement an d non- financ ial intern al cont rol sys tems , and mana gemen t’s proc ess es, an d satis fie s itse lf that the y are fun ctionin g ef fec tive ly and that corre ctive action is being taken where nece ssar y Risk Committe e — En sures th e desig n and implem entati on of appro priate ris k mana gemen t and intern al cont rol sys tems th at identi f y the ris ks facin g the co mpany and e nable the B oard to m ake a robus t ass ess ment of th e princ ipal risks — En sures s ound inter nal and ex ter nal infor mation an d com municati on pro ces ses , and take s resp onsibilit y f or ex ternal com municati on on risk m anagem ent and inte rnal c ontrol s — Main tains the G roup’s Risk Regis ters and re views t he ope ration and ef f ect iven ess of ke y cont rols — P rovid es guid ance an d advic e to st af f on risk id entif icati on and mit igation pl ans Executive Directors, with assi stance from the Executiv e Commi ttee — En gages wi th the E xec utiv e Direc tors an d senior m anagem ent to iden tif y risk s — A lloc ates ‘risk m anager s’ and ove rse es the ir resp onse — Ri sk manag ement is d evolve d to the ap propr iate level m ost cap able of ide ntif yin g and mana ging the ri sk Heads of Departments — R eviews t he ass urance receive d for the i nformation publi shed in o ur financ ial st atement s and key announcements — Ma nage s the ex tern al and intern al audit pro ce ss and rev iews the A uditor ’ s rep or ts — M onitors t he intern al finan cial control arrangement s, and satis fie s itse lf that the y are fun ctionin g ef fec tive ly and that correc tive action is being tak en whe re necessa r y — En sures th at remune ration and reward arr angements prom ote long-te rm sust ainable p er form ance an d reten tion of key t alent — M onitors t he inc entiv e fram ework t o ensure it d oes not en cour age E xecu tive Dire ctor s to oper ate outsi de the B oard’s risk tole rance — O ve rse es the G roup’ s pol icies in re spe ct of : mode rn slav er y , th e protec tion of human rig hts, a chievin g our Net Zero C arb on Pathway an d employe e satisf action and wellbeing, etc. — M onitors t he Group’s corp orate respo nsi bilit y , sust ainabilit y an d stakeh older engagement acti vities — M onitors t he Group’s diver sit y and in clusio n initiati ves — En sures th e Boar d ( an d its com mit tees) have t he co rrec t bal ance of sk ills, k nowle dge and expe rience — En sures th at adeq uate succe ssion plans are in pl ace fo r the Bo ard, E xecu tive Dir ecto rs and th e wide r talen t pipel ine Audit Committee Remuneration Committee Responsible Business Committee Nominations Committee In additi on to the Risk C ommit te e, the B oard’s othe r princip al commi tte es man age ris ks relevan t to their are as of res ponsibili t y De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 160 Health and s afet y At each C ommit tee m eeting , a detailed up date is prov ided on health an d safet y mat ter s on both th e manage d por t folio an d the development pipeli ne. Healt h and s afe ty page 63 Fire risk management Our buildings are subjec t to annual fire ris k asse ssme nts, reg ular fire al arm testing , six-mon thly fire do or sur vey s, smoke ex tra ct and ventil ation testing , and spr inkler testing (where ap plicable). Fire strate g y docume nts are rou tinely rev iewed, and w here ne ces sar y update d by our Fire Engine ers , OFR Con sulting. Our faç ade f ire risk ass essm ents have c onfir med th at our manag edpor t fo lio does n ot cont ain any ACMs (alu minium comp osite mate rial) or HPL s (high pres sure laminates). T o mana ge our f ire risks, up on acquisitio n of a new building, a f ull faça de fire sur vey is un der taken to maint ain complianc e and iden tif y any issues promptly . We continue to m onitor f ire safet y be st prac tice an d regulat ion andhave de termine d the actio ns require d to ensure our comp liance wit h the new Fire S afet y and Building Saf et y Act s. Water h ygiene management Legio nella b acteria is c ommonly fo und in water . A lthough it is impos sible to comp letely eradic ate the risk of legio nella , Der went Lond on have robus t risk mana gement pr oce dures in pla ce to ensure th at the legion ella risk is ap propriately m anaged to e nsure that incid ence s are low, and if an incident d oes o ccur , it can b e quickly identified and re ctifie d. The p rimar y meth ods use d to manage an d mitigate the risk f rom legion ella are: — weekly water t emperature control che cks ; — m onthly water samp les; — leg ionella aware nes s training; and — as suranc e from six m onthly risk as ses sment c hecks b y ex ternal sp ecialis t water cons ultants. Our inde pende nt water con sultants als o review o ur proce dures and proc es ses to ens ure they rem ain suf ficie nt to ef fec tive ly manage legion ella risk . Whilst we hav e proac tively de alt with a numbe r of inst ances in o ur por t folio, to date, th ere have be en no no tific ations of legionella illne ss. Energ y p er formanc e cer tific ates (EPC s ) An ind epen dent risk analy sis of the Group’s key climate change - relate d risks was c onduc ted (see p age 49 of t he 2020 Repor t & Ac counts), which identif ied c omplianc e with EP C legislatio n as anemer ging transitio n risk which c ould have a material imp act on the Grou p. From 1 Ap ril 2023, a m inimum EPC r ating of E will apply to all ope rable lease s but excluding lea ses ove r 99 years o r less than six mon ths (the 2023 regul ations) . The C ommit tee r eviewe d regular up dates on th e work pe r forme d by the Su stainabilit y, Develop ment and A sse t Managem ent teams and was ple ased to n ote that our po r tfo lio was fully c ompliant withth e 2023 regulation s ( excluding th e proper t ies acquire d during the ye ar) . In prepar ation for th e propo sed 2030 r egulatio ns, we commis sione d an indepe ndent re view during 2021 to asses s the suitabili ty of o ur buildings to achieve EP C B ratings and the re quired capi tal exp enditure. In Q1 2022, the Commi tte e will review t he result s of these s ur veys and , alongside senior m anageme nt, agr ee nex t ste ps (see pa ge 55). Compliance traini ng The G roup oper ates a comp liance tr aini ng pr ogramme whic h is mandator y f or all employ ees and m ember s of the Bo ard. The Ris k Co mmit tee over see th e programm e, agre e the topic s to be c overe d and re ceiv e an update on co mpletion rate s. The p rogramme c over s a range of ris k and comp liance topic s (including anti-br iber y and cor ruption, un cons cious bias, d ata prote ction and m oder n slaver y). At the launc h of each tr aini ng topi c, an introdu ctor y email is s ent to par ticip ants adv ising them of why th e training is impor tan t and links to fur th er informat ion (including C ompany po licies and guidanc e notes). The to pics c overe d during 202 1 include d: — s ocial me dia awarenes s; — dat a priva cy; and — unc onsc ious bias/resp ect in th e workp lace. The C ommit tee wa s please d with the lev el of engage ment fr om employe es wit h, on avera ge, 97 % of all p ar ticipants (inc lusive of the Bo ard) c omp leting e ach t raining m odule. Mem ber s of t he He alth an d Saf et y an d SohoPlace Bu ilding Management teams 161 Financ ial Stat ements Strategic repor t Governance C yber secur it y Our cy ber s ecuri t y contro ls have be en stre ng thene d consi derably in rec ent year s in respo nse to the inc reasing thre at this pos es to busine sse s, and it re mains an area that we ke ep under c ontinuous revi ew . We adop t a layere d approac h to cyb er se curit y which provide s mul tiple oppor tunities for threats to be identi fied bef ore they c an caus e harm. Our laye red se curit y app roach c onsists o f the following: Data securit y Applic ation securit y Host security Intern al sec urit y Physical security Perimeter securit y Poli cies, p rocedures, and awarene ss We rec ognise that r ansomware has b een id entif ied by the Nat ional C yb er Sec urit y Ce ntre as the m ost imme diate threat to UK busine sse s. In addition to o ur layere d secur it y approac h, we maintain a ‘rans omware sec urit y inciden t respo nse play boo k’. During 2022, we will per fo rm a detaile d review of o ur ransomware play boo k and will update our Busin ess C ontinuit y Pl an to inco rporate ran somware as a p otential sc enario for dis aster rec over y. Addition ally , during Q1 202 2, an indep ende nt review of o ur con trols in res pec t to ransomware will b e con ducte d. Our Digi tal Innovation & T e chnolog y (DI T) te am teste d the ef fe ctiv enes s of our ongoing se curit y awaren ess p rogramme in 202 1 by se nding fake phishing emails to s taf f in Novemb er and monitor ed their re spons e. Any s taf f memb er who clic ked on the links co ntained in th e test em ails, or entere d their cre dentials , wasprov ided wi th fur the r training on the dange rs and tips on howto ide ntif y phishing emails . Each ye ar , all st af f par ticipate inmandator y info rmation s ecuri ty t raining and, through out the month of O ctob er , th e DIT team pr omoted C y bers ecuri t y Awarene ss Month b y sharing cy ber s ecurit y t heme d tips andguidan ce. RISK COMMIT T EE RE PORT CONTINUED Our cy ber s ecuri t y proce dures are s ubject to reg ular indep endent revi ews and test s. In De cemb er 202 1 , I T Gove rnance c onduc ted a cy ber se curit y he alth che ck consis ting of a revi ew of our inform ation sec urit y gove rnance f ramewor k, an intern al/ex ternal vuln erabilit y sc an and an employ ee ques tionnaire to gauge cy ber awarene ss level s. The C ommit tee r ecei ves up dates on the o utcom e of the se test s/ ass ess ments and m onitors t he implement ation of any arising re comme ndations . The C ommit tee r eviews a das hboard of key r isk indicator s at each me eting which includ es inform ation sec urit y and c yber r isk-related KPIs . During 202 1 , ther e were 1 31 ,31 9 (2020: 1 09,73 5) at tempte d at tacks o n our sys tems, non e of which were su cce ssf ul and 99.97% (202 0: 99.96%) of the at tempts w ere stopp ed b efore the y reache d the inten ded tar gets, wi th the remaining at tempt s immediately being re por ted to o ur DIT team – this highlig hts the rob ustne ss of our cy ber s ecuri ty p ost ure and awarene ss camp aigns. Cyber Essenti als accred itation As p ar t of our ongoing c ommitmen t to cyb er sec urit y , on 30 July 202 1 our C yb er Ess entials ac credi tation was ren ewed, hav ing pas sed an ex ter nal sec urit y sc an of all internet -facing se r vice s andan as ses sment of te chnical and o peratio nal contro ls. C yb er Esse ntials is a gove rnment-b acked, indu str y-sup por ted sch eme which he lps guard a gainst the m ost c ommon cy ber threat sand demo nstrates to s takeho lders our c ommitmen t to cyber se curity . Information security We have robus t proc edure s in place to s afeguard t he sec urit y and pri vacy of infor mation entr usted to u s. This ens ures that we: — maint ain the conf ident ialit y , integrit y an d availabilit y of data and saf eguard th e privac y of our cus tomers an d employe es, to ensure th at the busine ss ret ains their tru st and co nfiden ce; — pr otect t he Group’s i ntelle ctual p roper t y rig hts, f inancial interes ts and c ompeti tive ed ge ; — maint ain our reput ation and br and value; and — c omply with ap plicable legal an d regulato r y requireme nts. We operate a dat a prote ction s teering c ommit tee, which is comp rise d of Data Pro tectio n Champions f rom each d epar tme nt and me ets on a m onthly basis . In August 2021 , the C ommit tee was prov ided wit h an update on the wo rk per f orme d by the data prote ction s teering c ommit tee, whic h included m andator y refr esher tr aining to all employee s on prote cting pe rsonal dat a. Compliance train ing page 1 61 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 162 Busin ess c ontin uit y and dis as ter r ecove r y Der wen t London ha s formal pr oce dures for us e in the eve nt of an emerge ncy that disr upts our no rmal busine ss op erations whic h con sistof: Busin ess C ont inuit y Pl a n (B CP) Th e BCP ser ves a s the centralised repositor y for the information, tasks and pro ced ures that w ould be ne ces sar y to fa cilitate Der went London ’s decision making p roc ess an d its timely r esp onse toany disruption or prolonged interr uption to o ur norm al act ivit ies. T he aim of the BCP is to e nable the recover y of prioritised business operations as so on as prac tic able. Crisis Management Te a m ( C M T ) Th e CMT is co mpos ed of key personnel deemed ne ces sar y to as sist wi th the re cov er y of the busin ess . The B CP emp owers th e CMT to make st rategic an d effective deci si ons to suppor t the rec overy oftheb usines s until weareable to r eturn to normalworking. Of f- site disa ster rec over y suit e An of f -site dis aster rec over y suite is availab lein the eve nt of anemergency , to provide ITand d ata fac ilities toourst af f who ei ther work o n site at the suiteorv iaour ‘agile’ working capabilities. Te s t i n g and rev iew Th e streng t h of our busin es s cont inuit y and disaster r ec over y plans arereg ularly te ste d to ensur e they are c ontinual ly ref ined an d to redu ce thep otential f or failure. Ano ver vie w of the disas terrec ove r y test s dueto ta ke plac e during 2022 are prov ided in t he table bel ow. The p andemic ha s provide d an opp or tunit y to stre ss tes t our infrast ruct ure and demo nstrate our abili ty to p rovide re liable, remote conn ect ivit y to th e entire work for ce over a p rolonged p erio d. On 23 A pril 202 1 , t he DIT team c omplete d a technic al test to ens ure the resilie nce of our I T infrastr uct ure in the event of a c omplete ou tage at 25 Savile Row. The tes t was suc ces sful; an d we were able to conf irm that all f ailover me chanisms for c ritic al IT ser v ices f uncti oned as exp ecte d and all ser vic es con tinued to op erate from b ackup infr astru cture at our dis aster re cover y site. On Friday 25 June to Sat urday 26 June, a full disa ster rec over y te st was suc ces sf ully complete d. This includ ed a failover of al l critic al IT infras truc ture/ser vic es to our disas ter rec over y suite an d all busines s applic ations were te sted by a g roup of stakeh olders f rom acro ss thebu siness . The ent ire proc ess, f rom the f ailover to our disas ter rec over y suite, to re storing s er vic es at 25 Savile Row, took six h ours and25 minutes (a 20 minute improvem ent on our pr evious f ull test c omplete d in Octob er 201 8) . During 2022, we will be chan ging the loc ation of our of f -site disas ter rec over y suite. O nce th e change has b een f inalise d, a full IT dis aster rec over y te st will be p er forme d to ensure th at all IT fun ctions an d busines s-relate d acti vitie s can be a dequately p er form ed. Te s t Purp ose Date Business C ontinuit y Plan review T he CMT te am mee t regul arly to rev iew and up date the b usines s con tinuit y plan a nd cas cad e list, re view c urrent thr eat leve ls and agr ee on any ac tion p oints. Ongo ing during 2022 IT Component test A tec hnical te st of the in dividu al comp onent s require d to car r y out a failove r of IT se r vice s to our disa ster re cov er y suite. Q1 20 22 Full IT di sas ter r ec over y t est A ful l IT sys tems failo ver fr om our of f ices to o ur disas ter rec over y s uite and te sting that a ll IT fun ctio ns and busin ess -relate d act ivit ies ca n be ade quately p er form ed. Q2 2022 Desk top rev iew A de sk top exerc ise fo cusing on ra nsomware t o rehear se sc enari os to ensur e we are ade quately pre pare d. Q2 /3 2022 163 Financ ial Stat ements Strategic repor t Governance RISK M ANAGE MENT FR A MEW ORK Identif y T op down Board considers fu turesc enario s and ide ntif ies pr incipa l andem erging r isks Bottom up Risks identified through workshop debates Assess De tailed as ses smen t by theE xec utiv e Comm it tee Emer ging risks ar e keptund errev iew and reas se sse dannually Monitor Risk own er assig ned an d E xecu tive C ommit te e and Risk C ommit tee c ondu ct moni toring exer cises Respo nd Introduce contro ls and pro ced ures to re duce r isk exp osure an d under stan d how ri sks rel ate and impac tupon e ach oth er How do we i dent if y risk s ? — T op do wn appr oach t o ident if y the p rincip al risk s that co uld thre aten t he deli ver y o f our str ateg y: at the B oard’s strateg y revi ews, sc enarios f or the f uture are c onsidere d which as sist with th e identif icatio n of principal an d emerging r isks and howth ey could impa ct on our s trateg y. The cont inuous revi ewof strateg y an d our environm ent ensure s that we do notb eco me comp lacen t and that we res pond in a time ly manner to any c hanges . — B ot tom up ap pro ach at a de par tm ent al and f unct ional lev el: risks are id entif ied throu gh worksh op debate s bet ween t he E xecut ive C ommit tee and me mbers o f senior mana gement , analysis , indepen dent rev iews and us e of historic al data and exp erienc e. Risk regis ters are maint ained at a dep ar tment al/ func tional lev el to ensure det ailed monito ring of risks . Since 2020, the DIT dep ar tment ha s maintained an a dditional risk regis ter with res pec t to homew orking and C ovid-1 9 relate d IT risks . Risks cont ained on t he depar tm ental re gisters are f ed into the main Gro up Risk Register d epen ding on the indivi dual risk pro babilit y and p otential impac t. — Independent assurance: th e Group’ s out sourc ed internal au dit func tion p er form re views of the G roup’ s dep art ments an d key acti vitie s which prov ide assur ance to the B oard and Co mmit tee that risk s are being ide ntifie d and ef fe cti vely manag ed. In addition , thes e reviews high light any recommendations for fur ther action. How do we a ss ess ri sk? Following th e identif icatio n of a potential r isk, the E xe cutiv e Co mmit tee under t akes a det ail e d asse ssme nt proc ess to: — gain suf f icient un derst anding of the ris k to allow an ef fec tive and ef f icient mitigati on strateg y to b e determine d; — allow th e root c ause of the r isk to be ident ifie d ; — e stimate the pr obabilit y of the r isk occ urring and th e poten tialquantitati ve and qualit ative impa cts; and — und erst and the Gro up’ s current e xpos ure to the risk and the‘ targ et risk prof ile’ (in accor dance wit h the Boar d’ s risk appe tite) which will be achie ved fo llowing the comp letion ofmitigation p lans. Where n ece ss ar y , ex ternal as sistan ce is sou ght to ass ess p otential risks an d advis e on mitigation st rategies . Emerging ris ks are kept under re view at eac h Risk Commi tte e mee ting and are reas ses sed during the annual s trateg y re views. How do w e monitor risks ? Onc e a risk has b een ide ntifie d and as sess ed, a ris k owner is assig ned who is c onside red to be in th e bes t posi tion to influen ce and moni tor the ou tcome of th e risk. A s par t of our r isk manag ement pro ce dures, th e Exe cuti ve Commi tte e and Risk Co mmit tee rout inely con duct mo nitoring exercis es to ensure thatrisk m anageme nt acti vitie s are being co nsistently ap plied acro ss the Gr oup, that they re main suf fic iently robus t and identi f yany weakn ess es or enhan cemen ts which co uld be madetoth e proc edures . Monito ring activities i nclude : — th e regular r eview and up dating of the S che dule of Princ ipalRisks, S chedule of Em erging Risks and t he Group’sRisk Register; — ind epend ent third par t y rev iews of the r isk managem ent proc es s to provide f ur ther as suranc e of its ef fe cti venes s; — aler ting t he Board to n ew emerg ing risks and ch anges to exist ing risks; — m onitoring how t he risk prof ile is changing for t he Group; and — pr oviding ass urance tha t risks are be ing manage d ef fec tively and whe re any assuran ce gaps exis t, ident ifiable ac tion plan s are b eing imp leme nted . How do we r esp ond to r isk ? We implement c ontrol s and proc edure s in respon se to identi fied risks wi th the aim of redu cing our risk exp osure, s o that it is aligne d or be low our risk app etite. Th e succ ess ful mana gement of r isk cann ot be don e in isolation wi thout un derst anding how ris ks relatean d impact up on each ot her . At D er went Lond on, we con sider the interc onne ctiv it y bet wee n risks which allows us to p rioritis e areas th at require incre ased o versigh t and reme dial action. Themi tigation plans in p lace f or our princip al risks are de scribe d ingreater d etail on pa ges 1 08 to 1 1 9. RISK COMMIT T EE RE PORT CONTINUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 164 Anti-briber y and corruption We are commit te d to the highe st st andards of ethic al con duct and inte grit y in our busine ss pra ctice s and adop t a zero-toler ance appr oach to bribe r y and cor ruption . An over view of o ur policie s and proc edure s in this area is con tained in th e table be low . All e mploye es will rec eive refr esher tr aining on anti-briber y an d corr uption during 2022 as par t of th e mandator y c omplianc e training programm e. Corpor ate hospitality Hosp italit y mu st be re ason able in value, app ropria te to the oc casi on and pro vide d ope nly and trans parent ly . It mus t not c ompromis e, nor ap pear to c ompro mise, th e Group no r the busin ess judgem ent of our s taf f. Business gif ts G eneral ly , gif t s should no t be ac cepte d unles s valued le ss than £ 50, are no t cash o r a cash e quivalen t (e.g. gi f t cer ti fic ate) , are app ropriate to t he circum stan ces an d are not gi ven wit h the intent ion of com promising o r influen cing the p ar t y to whom it is b eing gi ven. Hos pit alit y an d Gif t Returns All s taf f are re quired to c omplete qu ar terly Ho spital it y and Gif t Re turns whic h doc ument all ins tanc es of third p ar ty h ospi talit y or gi f ts ( give n or rec eive d) ove r that thre e-m onth pe riod i f the value is in exc es s of £5 0 for ho spital it y and £1 0 f or gif ts . The H ospit alit y and Gif t Retur ns are subje ct to rev iew by th e Risk C ommit tee . During th e past t wo ye ars, du e to the C ovid-1 9 pan demic , there ha s bee n a signif icant red uctio n in hospi talit y. Political donations The C ompany s tric tly prohib its any p olitic al donat ions be ing made on i ts beh alf . Charitable donations C harit able dona tions are ha ndled by t he Spon sors hips and D onation s Commi tte e. ‘K now your c lient ’ pro ced ures are app lied to c harit able organis ations to e nsure we are de aling with a v alid bo dy ac ting in goo d faith a nd with c harit able objec tive s. Contrac tors and suppl iers Our zero -toler ance ap proac h is communi cate d to all suppli ers, c ontra ctor s and busin ess p ar tner s. Due dilig ence p roc edure s determin e if a third par t y ha s prev ious co nvic tions und er the Br iber y A ct. All c ontra cts wi th supplie rs or c ontrac tors p rohibit th e paym ent of brib es or en gaging in any c orrup t prac tice . The C ompan y has the rig ht to termina te agre ement s in the ev ent a brib e is paid or o ther c orrup t practice undert ak en. Supply C hain Sust ainab ilit y St andard Co ntains th e minimum stan dards we ex pec t fro m our major supp liers (f ur ther info rmatio n on pag e 1 69). Payments All p aymen ts made m ust be war rante d, transp arent an d prope r . A ll paym ents mu st be ac curate ly rec orde d throu gh the no rmal ac count ing and f inancial pr oce dures wi thou t any dec eptio n or disguis e as to the re cipien t’s identi t y or the pur pos e of the pay ment in q uesti on. No on e approv es their o wn expe nse claim . All exp ense c laims mus t be app rove d by a Direc tor or s enior mana ger . Facili tat ion pay ment s Facili tation p ayme nts are br ibes an d are str ictly p rohibite d. Co nfli ct s of int ere st A ll conf lict s of intere st or po tential c onflic ts of inte rest m ust be n otif ied to the C omp any Se cret ar y and a regis ter of suc h notif ica tions is maint ained . The C orp orate gov ernanc e st atement o n page 139 explains our pro ce ss for m anaging p otential c onf lict s. T r aining We prov ide our emp loyee s with g uidanc e notes an d regul ar training on ant i-bribe r y , co rrupt ion, ethi cal st andards an d the pre ventio n of the fa cilitati on of ta x eva sion. Whistleblowing proc edures A c onf idential r epor tin g helplin e is available f or staf f to r aise co ncer ns anony mous ly (see pa ge 1 36). Compliance train ing page 1 61 Insurance We use insuranc e to transf er risks which w e cannot f ully mitigate. Our c omprehe nsive insuran ce prog ramme co vers all of our a sset s and insurable risk s. We are adv ised by o ur insurance br okers, Mar sh, who rep or t to the Risk C ommit tee on an ann ual basis. We have a long- stan ding relation ship with our prop er t y insurers , who pe rf orm reg ular revie ws of our prop er ties that aim to id entif y risk imp rovemen t areas. Due to our p roact ive risk man agemen t proc ess es, D erw ent Londo n has a low claims re cord whic h makes us at trac tive to insure rs. During 2021 , as we were o perating wi thin a Long T er m Ag reeme nt for our key pr oper t y-re lated insuran ces , our oc cupiers wer e not impac ted by the har dening insuranc e market. F ollowing the trans actio n with La zari inve stment s, which le d to the creat ion of the ‘B aker Stre et joint venture’ (se e page 21 ), we acquired p rofes sional indemni ty ins urance to of f set any risk s arising from th e oper ation of the joint ve nture. O ver the p ast t wo years , the insuranc e market has h ardene d with insurer s reducing t he amount of c apacit y th ey are willing to alloc ate to any one ris k. This re sulted in an over all capac it y contr action, c onse r vative und er writing and a sig nific ant rise in premiums . It is pre dicted that pre miums will continue to ris e above inf lation in 2022. 165 Financ ial Stat ements Strategic repor t Governance 202 2 FOCUS A RE AS — Revie w the rec ommen dations arising f rom the Employe e Sur vey Work ing Group and o ccupier puls esur veys — O verse e the wor k of the Div ersit y and Inc lusion Working Group and p rovide s uppor t for i ts initiativ es — Ensure adhe rence to th e Group’ s Net Zer o Carb on Pathway and re cei ve regul ar updates on p rogres s — Co ntinue to monitor t he Group’s communit y , char itable and sp onso rship initiat ives R E SPON SIBL E BUSI N E SS COMMI T T E E R E PORT Dear Shareholder , As th e Chair of the Re sponsible Bu siness C ommit tee , I am please d to pres ent our rep or t of the wor k of the C ommit tee for 2021 . I would sug gest t hat this repo r t is read alongside t he Resp onsibilit y se ction on pa ges 50 to 75. Suppor ting our stakeholders We continue to p rioritis e stakeh older enga gement as a key dr iver of the bu siness . This has b een es pecially c ritic al during the pan demic when th e Commi tte e has rec eive d detaile d updates on th e input from , and suppo r t to, our employe es, o ccupier s, co mmunities and the supp ly chain. We were par tic ularly plea sed to s ee the many proactive ef for ts that Derwent London has made to suppor t comm unities ove r such a dif f icult year . We were pleas ed to rev iew the re sults of the 2021 Employee Sur v ey showing c ontinuing high level s of pride and jo b satisf action at Der wen t London, in sp ite of the challen ges of Co vid. Pul se sur vey s among o ur occupie rs were als o condu cted t hrough the v arious sta ges of loc kdown, hyb rid work ing and return to th e of fic e. The Co mmit tee was pleas ed to par ti cipate in the S takeholde r Day at DL / 78 in Septembe r ( se e pag e 1 34). Diversit y and i nclusion The C ommit tee r ecei ved re gular upd ates from t he Diver sit y and Inclusion Wor king Group on it s acti vities an d discus sions (see pa ge 1 6 9 ). The C ommit tee als o review ed the Gr oup’ s progre ss towards achiev ing the National Equali ty S tan dard accre ditatio n and was delighte d to se e Der went Lon don achiev e full c ompliance a cros s all35 of the c ompeten cies at the e nd of 202 1 . A remark able achiev ement and te stam ent to the hard wo rk of Kat y Lev ine (Headof HR) an d the Div ersit y and Inc lusion Working Gro up. Net zero carbon The C ommit tee r ecei ved up dates on the G roup’ s prog ress towardsbe ing net zero c arbon by 20 30. Of par ti cular interes t was stake holder enga gement wi th our oc cupiers on o ur net zero pl ans and how D er went Lon don can p ar tner with t heir own sust ainabilit y ef for t s ( se e page 1 3). This was an impor tan t discussio n at the St akeholder D ay , held at DL / 78 in the 80 Char lotte S tree t building, De r went L ondo n’ s f irst a ll-ele ctr ic buildin g, de mon stra ting th e Group’s sustainabilit y pr inciples in ac tion. We were also p lease d to se e Der went Lo ndon ac tively par t icipate at COP 26. Employee m ember s The b enef its of hav ing employe es on the C ommit tee h ave bee n evid ent in 202 1 , p ar ticular ly when, during p eriods o f remote wor king due to the p andemic, t he Boar d were able to be clo sely infor med of staf f w elfare and enga gement . I would like to thank Ally C lements , Jonathan T heob ald and Davina Stewar t f or their insight s and con tribution s to the Co mmit tee and their tirele ss ef fo r ts over th e past ye ar . Al ly and Jonathan b oth retire d from th e Commit te e at the end of th eir term in De cemb er 202 1 and we are g rateful to the m for set ting su ch a high bar as th e fir st employe e repre sent atives o n the Co mmit tee. We welco me Mat t Masse y , Luc y T aylor an d Kirst y William s, who join Dav ina as employe e repre sent atives in 2022 (see pa ge 1 6 8) . If you wish to dis cuss any asp ec t of the C ommit tee’s activi ties, Iwillbe availab le at the 2022 AGM and would welco me your ques tions. Iam al so available via o ur Company S ecr etar y, DavidL awler (telephon e: + 4 4 (0 )20 7 659 30 00 or em ail: company .sec retary @derwentlondon.com) . Dam e Cilla Sn owball Chair of the Re spons ible Busines s Commit te e 23 Febr uar y 2022 Britain’s Most Admire d Companie s – se ctor win ner and 38 th ove rall Dam e Cilla Sn owball Chair of the Re spons ible Busines s Commit te e De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 166 E x ternally, we are active in e nsuring our ESG s tandards are c learly comm unicated to o ur supply chains, p rincipally via o ur Supply Chain Sust ainabilit y St andard. In additio n, we are clear on o ur zero- tolerance p ositio n with regards to sl aver y and human traf f icking as se t out in our Mo dern Sl aver y St atement , which can be fo und at: ww w .der wentlondon. com/ investors/ governance/ modern-slavery-act During 2021 , we co ntinued to ide ntif y and imple ment ways to stre ng then our p olicies an d proc edures in re spe ct of the p rotect ion of human right s and prev ention of mo dern sl aver y. The Co mmit tee rec eive annual up dates on pro gres s from our de signate d ‘champion’ , who is a s enior manag er resp onsible for en suring the Boar d’ s po licies on m odern s laver y are implem ented. In addi tion, the C ommit tee re viewed in de tail the answe rs prov ided by s uppliers in resp ect to m oder n slaver y f ollowing the supp lier audit pe rf orme d in 201 9 on the Sup ply Chain Sust ainabilit y Stan dard (see pa ge 1 69). Key activ ities of the C ommit tee during 202 1 The C ommit tee c ontinue d to focu s on how the Gr oup has be en suppo r ting its key st akeholder s during the C ovid- 1 9 pand emic and the c ontinuing uncer t aint y . Climate chang e is a major global challenge an d at each of i ts mee tings, the C ommit tee re viewed t he Group’s progres s against our N et Zero Carb on Pathway (see p ages 1 2 and 1 3) . During 2021 , the C ommit tee’s keys act ivitie s were: — S takeholder engagement: – Rec eive d an update on our c ommunit y initiativ es and engage ment (see p ages 26 to 27 and 62 to 63) – Review ed the re sults of the C ovid- 1 9 employ ee and oc cupier pulse sur vey s – Ag ree d the con tent of the 202 1 emp loyee sur v ey and revi ewed it s results (see p age 60) – Rec eive d a prese ntation on o ccupie r engagem ent and an update on th e work of th e Ass et Manage ment team – Rec eive d regular up dates on ho w we are engaging wit h, anddev eloping, o ur employe es (see pa ge 60) — Di versit y and inclusion : – Rec eive d a prese ntation f rom E Y on the Nati onal Equalit y St andard and re cei ved up dates on the Gr oup’ sprogr ess to being ac cre dited (see p age 58) – Rec eive d regular up dates on th e Diver sit y and Inclusion Working Gr oup and its ac tivi ties and dis cussion s ( se e pag e1 69) — Ne t zero c arb on: – Monitore d our prog ress to ne t zero carb on by 2030 (seepa ge 52) – Rec eive d an update on st akeholder e ngageme nt in respe ct to comm unicating our Net Zero C arb on Pathway and assis ting our st akeholders in ac hieving th eir own goals (seepa ge 1 3) — Resp onsible business: – Review ed the re vise d Supply Chain Sus tainabilit y St andard and re ceiv ed an update on e ngageme nt with key supp liers during 202 1 (see p age 1 69) – Rec eive d an update on the G roup’ s mo dern slav er y initiatives and rec ommendations Commit tee composition and perf ormance During 2021 , our C ommit tee c onsiste d of two ind epend ent Non-E xec utive Dire ctor s, the Chie f Exe cutiv e and thre e employe e memb ers. At th e reque st of the C ommit tee, E xe cutiv e Directo rs, memb ers of se nior manage ment, ot her Bo ard membe rs and ex ternal ad vise rs may be invi ted to at tend all or p ar t of any meet ing, as and whe n appropr iate. During th e year unde r review, the C ommit tee he ld two f ormal me etings (in May and De cemb er) (2 020: two m eetings). In addition to the fo rmal me etings, the C ommit tee h olds ad hoc inf ormal me etings. Th e Chair of the C ommit tee is also t he Group’s desig nated NED for gathe ring the vie ws of our work forc e (see pag e1 38). Independent Number of meetin gs Attendance Cilla Snowball, Chair Ye s 2 10 0 % Claudia A rne y Ye s 2 10 0 % Ally Cl ements (i) Employ ee 2 10 0 % Davin a Stewar t Emplo yee 2 10 0 % Jonathan Theobald (i) Emp loye e 2 10 0 % Paul William s No 2 10 0 % No te: (i) Jon atha n The oba ld and A lly Cle men ts ten ure on th e Co mmit te e end ed on 3 De ce mbe r 2021 and th ey hav e now s tepp ed do wn as m embe rs . Mat t Mas sey, Luc y T ay lor an d Kirs t y Willi ams we re app ointe d as em ploy ee m embe rs of t he Co mmit te e fro m 1 Janu ar y 2022 and w ere inv ite d to at ten d the 3 D ec emb er 2021 meeting as obser vers. The C ommit tee’s role and res ponsibilitie s are set ou t in the terms of refer ence, whic h were las t updated in May 2021 and are available on the C ompany ’s website at: w ww. der wentlondon.com/ inv estors/ governance /board-comm it tees The 2021 evaluation of th e Board, it s commit te es and indiv idual Direc tors, wa s internally fac ilitated by Mar k Breuer , the C hairman of the B oard, in acc ordanc e with our thre e-y ear cyc le of evaluations (see pa ge 1 4 1 ). The rev iew conf irme d that the C ommit tee c ontinues to ope rate ef fec tively, with no signif ic ant mat ters raise d. Repor ting framework s The G roup repo r ts under s everal f ramework s to provid e a complete pict ure of our resp onsibilit y prog ress an d activ ities an d to allow comp arison wi th our pe ers and ot her comp anies. Our rep or ting aims to show no t only a prop er t y sec tor spe cific per spe ctiv e (EPRA B est P ractic e Repo r ting measure s) but also a broa der internatio nal pers pec tive (the G lobal Rep or ting Index and the Unite d Nations Sus tainable De velopme nt Goals). For fur th er det ails on our EPR A meas ures, ple ase se e page s 269 to 27 1 , and for our G lobal Repo r ting Index disclo sures and Unite d Nations Sust ainable Dev elopment G oals alignm ent, se e our annual Respo nsibil it y Rep ort . Human right s and mode rn slaver y The p rotec tion of human right s and fun damental f ree doms is one of our key ESG pr ioritie s which we manag e from an inter nal ( wit hin our busine ss) and ex ternal p ersp ec tive (within our supply c hain and our relationships with contrac tors) . Internally, the Bo ard monitor s our culture to ensure we m aintain our values an d high stan dards of transp arency an d integrit y. Our Human Res ource s team ensure s that we have the r ight sys tems and pro ces ses in pl ace to st reng then an d sustain o ur culture. TheB oard’s role in managing th e Group’ s culture c an be fo und on page 1 31 . 1 67 Financ ial Stat ements Strategic repor t Governance COMMIT T EE EMPL OYE E MEMBERS RE SPON SIBLE BUSINESS COMMI T T EE RE PORT CONTINUED Lucy T aylor Investment Man ager Joine d Der we nt Lond on in March 201 9 Appointed to the Committe e : Januar y 2022 E xpe ct ed te rm exp ir y: Dec ember 20 2 4 Mat t Mass ey Se nior Proje ct Mana ger Joine d Der we nt Lond on in March 201 4 Appointed to the Committe e : Januar y 2022 E xpe ct ed te rm exp ir y: Dec ember 20 2 4 Kir st y Wil liams Busin ess L iaison Mana ger Joined Derwent London in February 2007 Appointed to the Committe e : Januar y 2022 E xpe ct ed te rm exp ir y: Dec ember 20 2 4 Dav ina S tew ar t Prop er t y Ac count s Manage r Joine d Der we nt Lond on in June 201 5 Appointed to the Committe e : Oc tobe r2020 E xpe ct ed te rm exp ir y: Dec ember 20 23 Employees on the Responsible Business Committee The e mployee m ember s of the C ommit tee are f ully involved in all asp ect s of the Co mmit tee’ s ac tivit ies, inclu ding atten dance at me etings and co ntributio n to discussio ns and de cisions. Thee mployee m ember s also ex ten d the Co mmit tee’ s influe nce within the b usines s, by being ac tive ly involved in em ployee engagement d iversit y and i nclusion i nitiatives. Ally Clem ents and Jo nathan Th eobald c omplete d their tenure on the C ommit tee in D ece mber 2021 . The C ommit tee is thank ful f or the level of c ommitm ent both h ave shown in the role and th eir involveme nt in the Co mmit tee’ s ac tivit ies. Having employe e memb ers on a B oard-leve l commit te e, enables th e diver se voic e of our employe es to be b rought dire ctly into our Bo ardro om, p rovi ding invalu able insi ght. Due to th e number and hig h qualit y of applic ants, in D ecem ber , thre e new employe es wer e appointed to t he Commi tte e. Th e Co mmit tee agre ed th at the thre e new memb ers would s er ve on the C ommit tee fo r three ye ars. “ Bei ng pa r t of th e Res pon si bl e Bus i ness Com mi t t ee wa s suc h a fa nta sti c ex peri en ce. R epr esen ti ng th evo ice o f em pl oy ees at Bo ar d l eve l wh i lst a lso co ntributing towards impor tant ESG t op ics th at a f fect how w e ope ra te a ndar e re ga rded a s a bus iness , wa s area l privi leg e. ” Ally C lements Senio r Prope r ty M arketing Co -ordinator Memb er of the C ommit tee fr om Januar y 201 9 toDe cemb er202 1 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 168 Supply Chain Sus tainability St andard All supp liers with w hom we spe nd more th an £20 ,00 0 per ann um are require d to comp ly with, and pro vide ev idenc e of how, they areimpleme nting our Supply Chain Su stainabilit y S tandard (th e St andard). The S tandar d sets ou t our principle s and exp ect ations in terms of t he environm ental, s ocial, et hical and go vernanc e issue s which rel ate to our supply chains an d renews o ur commitm ent to ensuring o ur supply chain rem ains as engage d as we are in set ting the high est st andards . In Augus t 202 1 , we p ublished a r evise d St andard which is availab le to download o n our websi te. The S tandard n ow includes o ur exp ect ations in res pec t of diver sit y and inclusion , environme ntal issu es and pre venting mo dern sl aver y . In res pec t to diver sit y and inclusion , our Stan dard ex tends b eyond b asic com pliance an d require s our supplier s to advis e how diver sit y and inclusio n is embe dde d in their work ing practic es. During 2021 , we re queste d evide nce that o ur major supplier s were comp liant with the S tand ard. This involve d comp letion of a ques tionnaire and pro viding cop ies of key po licies and pr oce dures. O verall, we re cei ved an exc ellent res ponse r ate, with all 49 supp lier s res pon ding. — A ll supplier s conf irmed t hey have an e qualit y , dive rsit y and inclusion p olicy t hat aligns with th e Equalit y Act 201 0, and 48 supplie rs conf irme d this is communic ated to th eir staf f. — A ll supplier s conf irmed t hey have a p olicy/ pro ce dure in plac e to ensure th at bullying , harassm ent, and disc rimination (bas edon all pr otecte d charac teristic s) is not tolerate d. — A ll supplier s conf irmed t hey have a mo dern sl aver y po licy thataddre sse s items raise d in the Mo dern Sl aver y Ac t 20 1 5, and 4 4 supplier s conf irmed t hey prov ide st aff t raining on thesubje ct. — T hree supp liers ad vise d that they us e limited zero ho ur con tract s. Af ter enga gement , thes e suppliers c larif ied that zero hour c ontrac ts are not us ed at any D erw ent Londo n sites. As th e use of zero ho ur contrac ts is not alig ned wit h our princip les, we will se ek to engage wi th thes e supplier s fur ther dur ing 2022. All supp liers who h ave not co nfirme d comp liance with o ur Stan dard will be c ontac ted to under stan d the reas on and to ag ree a time pl an for compliance. Responsible pa yment prac tices Der wen t London is a sig nator y to the Char te red Insti tute of Cre dit Manage ment (CICM) Pro mpt Payme nt Co de, which c onfirms o ur commi tment to b est pra ctic e paymen t practi ces and t he fair and equal t reatmen t of suppliers . We are clear abo ut our pay ment prac tice s. Unless ot her wise st ated, we aim to pay our sup pliers within 30 days or o ther wise will do s o in accor dance wit h spec ifie d con tract c ondition s. We expe ct our sup pliers to ado pt similar prac tice s througho ut their supp ly chains to ensure f air and prompt treat ment of all cre ditors . In 20 21 , our ave rage pay ment days was 20 days (see p age 1 07) . On 1 9 Januar y 2021 , the Pr ompt Paym ent Refor ms were announ ced which re quire 95% of invoices f rom small b usiness es (define d as tho se with fewe r than 50 emp loyee s ) to be p aid within 30 days . Ther eforms b ec ome applic able from 1 J uly 20 21 . Dur ing 202 1, weliaise d with our suppl iers to ident if y thos e which fall wit hin thene w requireme nts. Alth ough we curr ently pay all invoic es on avera ge within 30 days of re ceipt, d etermining our small b usiness supplie rs and re cording the ir speci fic pay ment days will re main a priority for 202 2. Diversit y and inclusion Having a dive rse, highly t alented and s killed gro up of peop le at all level s at Der went Lon don is fun damental to o ur busines s succ es s. Dive rsit y and inc lusion bring new i deas and f resh p erspe cti ves which f uel innovatio n and creat ivit y. Furth er informat ion on how diver sit y and inclusio n factor s into our strateg y is o n page 4 1 . We are founding supp or ters of Re al Estate B alanc e and we are memb ers of th e Cit y Women Net work (CWN) whi ch provid es memb ership to all our s enior female emp loyee s. During 2021 , in order to a sses s the Gro up’ s s treng ths an d key areas for impro vement in re spe ct to equali t y , diver sit y and inclusion , Der went London wa s independently asses sed under the Na tional Equalit y St andard. T he Commi tte e revie wed the re sults of the ass essm ent and was de lighted th at the Group was award ed the acc reditat ion (fur ther inf ormation on p age 58). The Diversity and Inclusion W orking Group The D ivers it y and Inclusion Work ing Group (the D&I Work ing Group) con sists of 1 3 memb ers and m eets m onthly to fur th er advan ce the Group’s diversit y an d inclusion visio n and strate g y . Each m onth, an E xecu tive Dire ctor and H ead of De par tment ar e invite d to join the D&I Working Gro up’ s mee tings. This pro vides t he Direc tors and s enior mana gement wi th insights into the di versi ty and inclusio n initiative s being dev elope d, unders tand what t he work ing group is tr y ing to achieve, and h ow they c an suppo rt andprom ote the initiati ves. T he Co mmit tee rec eive d updates onthe wo rk of the D&I Working G roup at each m eeting , which durin g 202 1 in clude d: — Emplo yee induc tion pro gramme: Diver sit y and inclusio n is now inco rporate d into our induc tion progr amme and pre sents an opp or tunit y for new e mploye es to under stand o ur vision and strate g y and share ide as or initiativ es. — Re design of t he cor porate web site: The D&I Working Gr oup share d with the B oard that th ere was a lac k of perc eive d diver sit y on our web site. The w ebsite was sub sequ ently red esigne d to bet ter rep resent t he pe ople and culture of Der went London. — 2021 Employee Sur v ey: At the re ques t of the D&I Working Group, the 2021 employe e sur vey aske d for res ponde nts’ gend er , ethnic it y , sex ual orient ation and disabilit y. This additio n to the sur vey will allow th e Direc tors to es tablish if there ar e variance s/inc onsiste ncy in exp erienc es. — P romoting th e work of the D&I Work ing Group: At a town hall me eting, th e D&I W or king Group intro duce d its me mbers , role and the C ompany ’s diversit y an d inclusion str ateg y . In additio n, a diver sit y and inclusio n ‘mailbox’ ha s bee n created f or sharing ideas , and a de dicated p age has b een cre ated on th e intranet . — Natio nal Inclusion Wee k cof fe e ‘catch up’ . In 2022 , th e D&I W or king Group will c ontinue to raise awaren ess of all asp ect s of diversi t y , in clusion and e qualit y , f urt her emb ed our 202 1 initiativ es, pro mote the re levant training and welc ome inspiring gu est sp eakers to town hal l meetings . For f ur ther infor mation, se e the fo llowing disclosure s: More on diversity and inclusion page 57 National Equalit y Stan dard page 58 Bo ard’s div ersi ty p olic y page 1 4 7 169 Financ ial Stat ements Strategic repor t Governance RE SPON SIBLE BUSINESS COMMI T T EE RE PORT CONTINUED Diversit y focus areas The B oard has e stab lished c lear focu s areas which aim to prom ote the impo r tance of di versit y at all s tage s from at tra cting dive rse and talente d employe es thro ugh to retention an d promoti on. The key f ocus are as have be en widen ed to ensure s uf ficie nt at tention is be ing give n to ethnic diver sit y in addition to ot her diver sit y con sideration s. Focus Acti ons t aken du ring 20 21 Fur t her a cti ons re quir ed in 2022 At tra ctin g dive rse , highly s kille d and t alen ted e mploy ees — T ackle any un cons cious bia s — All c andida te shor tlis ts to have ge nder b alanc e — Re cruit f rom a wide p ool o f tale nt (inclu ding wom en retur ning to work ) — Work ing clos ely with all r ecr uitmen t cons ultants to e nsure dive rsit y sho r tlist s are rec eive d for ev er y vac ancy — L aunche d new re crui tment g uideline s to ensure c onsis tenc y of approach — L aunche d a rec ruitm ent log to ens ure that th e data and dem ographic s are analy se d within a re cruitm ent pro ce ss includin g candida te poo l, inter vi ew poo l and hires — Up dated and r elaunc hed o ur Diver sit y & Inclus ion pag e on the inte rnet to p ublicis e our employ ee value p ropo sition — Incr ease d foc us on ac tively p romot ing ours elves as a n employer tha t embraces Diversit y & I nclusivit y — Rel aunche d our unc ons cious bias t raining alongsid e Chicke nshe d for all emp loyee s — T wo gue st sp eaker s from an e thnic bac kgro und, wit hin the prop er t y indus tr y , pre sente d to the E xe cuti ve Com mit tee and emplo yee s via a town hall m eet ing to share th eir expe rienc es, chall enges and jou rneys — Dur ing the ye ar under r eview: – 6 0% of new re cr uits have b een f emale – 37% of ne w recr uits wer e non-whi te – 72% of new f emale re cruit s were fo r ‘profes sional’ ro les (i.e. exc ludes adminis trati ve, train ee and sup por t ro les) – 91 % of n ew ethnic min orit y re crui ts were fo r ‘profe ssio nal’roles — Co ntinue with current initia tive s inclu ding our social responsibility mess aging, communicating our cult ure and inclus ive value s to the mar ket — C ontinue wi th our unconsc ious bias trainingpr ogramm e — C ontinue to wo rk clos ely with all r ecr uitmen t consultants Ret ainin g the be st t alen t — Fo cus on wo men ret urning towork — Pro mote the im por tan ce of work /life balance — Equal op por tuni ties fo r all — Cre ated an d set up a new D iver sit y & Inclusi on Working GroupWor ked towar ds achiev ing the Nati onal Equalit y St andard acc reditatio n — Rol led out In clusiv e Leade rship & Be haviour t raining to the E xecu tive C ommit te e and othe r Senio r Manage rs — C ontinue d with p arental t ransiti on coa ching for t hose retur ning from a p erio d of ex tend ed leav e — S trong fo cus on s uppor tin g work / life bal ance a nd health andwellbeing — L aunche d our new a gile work ing poli cy — Enhan ced a nd rela unche d our Family Frien dly polic ies — A f ur ther 26 emp loyee s par ticip ated in th e ‘Fit f or the Future’p rogramm e — C ore Skill s ses sions an d technic al work shop s co ntinue dvir tu ally — Rol led out o ur four th f ull emplo yee sur v ey run by a n independent provider — Fo cus on m ental he alth and wellbeing — A nalyse an d digest t he fe edbac k from t he emplo yee sur v ey and explore recomme ndations and actions through fo cusgroup s — Ho st an emplo yee away day — C ontinue to of f er Co re Skills se ssions a nd training opp or tunitie s Promoting diversit y — Ge nder b alanc e within our intern ships and wo rk experience placements — Aim to e nco urage mo re fem ales to be inte reste d in the construc tion a nd proper t y indus tr y and ch allenge harmf ul gen der ster eot yp ing — He ads of Dep ar tmen t dem onstr ate that we are an inclusive employer — Inter nship prog ramme s and work e xper ienc e plac emen ts for mat was t weake d in line with C ovid - 1 9 re stric tions — Our m onthly tow n hall me etings, h oste d by our CEO fo cuse d on div ersit y an d inclusion o n a regul ar basis — We incre ase d the numb er of emp loyee re pres entat ives o n ourRe spons ible Busine ss C ommit tee to f our — Our int ranet an d scre ens avers f ocus ed on div ersi ty an d inclusi on e.g . rec ognising and c elebr ating Bla ck Histor y Mont h, Eid, Jewis h Holiday s etc. — Work ing with Pat hways to Pro per t y — Par ti cipate in ca reer s andvo lunteer ing event s during 2022 — C ontinue to hav e gende r and et hnic balan ce wit hin our inter nships an d work placem ents — Ho st thre e interns un der the #1 00 00BlackInterns programme — C ontinue wi th training on divers it y and i nclus ivit y e.g .allyship — C ontinue to us e the town halls to c ommunic ate divers it y and i nclus ivit y initiati ves an d gues t speak ers De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 17 0 The Group’ s composition and diversit y We have an exp erienc ed, div erse and d edicate d work for ce. Th e informatio n below pro vides a b reakdown of our div ersit y as at 1 Januar y 2022. Fu r th er informati on on the Bo ard’s compo sition as at 1 Januar y 2022 is shown o n page s 1 39 and 1 4 7 . We will monito r the outc ome of the FC A ’s cons ultation on ‘diver sit y and inclusion o n company b oards and exe cuti ve commi tte es’ and will addre ss th e reco mmendatio ns onc e they are f inalised . The varian ce bet we en gende rs in resp onses to e mployee s ur veys is t aken into acco unt by the Rem uneration Co mmit tee when de termining the annual b onus payo ut for E xecu tive Dire ctor s in relation to th e staf f s atisfac tion metr ic (see pag e 1 84). Length of service Under 3 69 3-5 13 5-10 34 10-15 24 15-20 10 20+ 13 Y ears Employ ees by ag e 19 or below 0 20-29 21 30-39 53 40-49 41 50-59 30 60+ 18 Y ears B oard of Dir ec to rs 1 2 Le as ing & P rop e rty Mar ke ti ng 9 Ass et Mana ge me nt 1 1 P rop e rt y Mana ge me nt 5 5 Fi nanc e & Co Se c 2 4 Op e rat i ona l S upp o rt 1 2 De ve lopm e nt 1 6 5 S us ta i nab il it y 7 HQ Build ing S e rvi ces 4 IR & Corp Communi ca t ion s 8 In ve stm ent Headcount by department Number Numb er of to tal employees (i) % of to tal employees Numb er in the ex ecutive comm ittee and i ts dir ec t repor ts (ii) % of ex ecu tiv e comm ittee and i ts dir ec t repor ts (ii) Numb er of B oard members (iii) % of Board (iii) Numb er of se nior po sit ions o n the Board (iv) Gender Men 79 48 .5% 34 54.0% 7 58.3% 3 Wom en 84 51. 5 % 29 46.0% 5 41 . 7 % 1 Not sp ecif ie d/prefer n ot to say – – – – – – – Ethnicit y White Br itish or W hite Ot her 12 3 75.5% 54 85. 6% 11 9 1. 7 % 4 Mixe d/Multiple Eth nic Group s 6 3 .7% 2 3.2% – – – Asian / A sian British 16 9.8% 2 3.2% 1 8.3% – Blac k/Afric an/Caribb ean/ Black Bri tish 13 7. 9 % 2 3.2% – – – O ther Ethnic G roup 5 3 .1% 3 4 .8% – – – Not sp ecif ie d/prefer n ot to say – – – – – – – To t a l 16 3 – 63 – 12 – 4 Not es: (i) T ot al emp loye es in clud e the B oar d of Dire cto rs. (ii) In clud es th e Ex ecu tiv e Co mmit te e and it s dire ct re por t s (exclu ding adm inist rati ve an d supp or t st af f ). (iii) The Board includes the Cha irman, Executive Directors and Non-Executive Directors. (iv) Se nior p osi tion s on the B oar d incl ude th e CEO, CF O, Chai rman a nd Se nior In dep end ent Di rec tor. 17 1 Financ ial Stat ements Strategic repor t Governance R E M UNE R A T I ON COMMI T T E E R E PORT A N N U A L S TAT E M E N T Dear Shareholder , As c hair of the Remuner ation Co mmit tee and on b ehalf of theB oard, I am pleas ed to pre sent our re por t on Dire ctor s’ remune ration for 2021 . Th e Annual rep or t on remun eration, des cribing how th e Remuneratio n Polic y has be en applie d for the year e nded 31 Dec embe r 202 1 an d how we intend to implem ent poli cy for 2022, is provi ded on p ages 1 75 to 1 93. Our Remun eration Po licy was appr oved by s hareholde rs at the 2020 AGM and rec eive d 95.5% of votes c ast in favour . Rath er than repro duce th e polic y in full, we hav e provide d a summar y on p ages 1 77 to 1 80. A c opy of the c omplete Remun eration Po licy c an be found o n our websi te at: www.derwentlondon.com/investor s/ governanc e/boar d-commit tees Link ing E xecu tive Di rec tor s’ rem unera tion wi th our pur pos e andstrategy Our Remun eration Po licy is de signed to b e simple and transp arent and to prom ote ef fec tive s tewardship that is vi tal to the de liver y of the Gro up’ s p urpo se (see pa ge 1 ). Suc ces s against our s trategic obje ctiv es is meas ured using our KPIs , which are large ly embe dded wi thin the exec utive remune ration fram ework as illus trated by th e char t on pa ge 1 7 4. Der wen t London value s openn ess an d transpare ncy. T o this en d the C ommit tee s trive s to provide c larit y on h ow pay and per f ormanc e is repor te d at Der went L ondon and h ow decisi ons made by t he Commi tte e suppo rt o ur purpo se and th e strategic direc tion of the Gro up. Per formance outcomes in 202 1 Bas ed on p er forman ce against t he financ ial and strateg ic target s, the inc entive o utcom es for 2021 were as follows: — A n annual bonu s vesting of 30.9% of t he ma ximum opp or tunit y (equivalent to 4 6.4 % of bas e salar y) ( see page 1 83) . — A P SP award ves ting of 1 8. 1 % of ma ximum opp or tunit y ( see page 1 85). The C ommit tee c onside red the f ormulaic ve sting ou tcome s against broader perspec tives incl uding: underlying busi ness per formance and af for dabilit y; the ex perien ce of share holders; and t he experience of employees and other stakeholders. The G roup’ s 202 1 TP R per for mance was 6 .3% compare d to the MSCI IPD Q uar terly C entral Lon don Of f ice s T ot al Return Index of 5.9%. T he Group’s TSR per for mance f or the year s 20 1 9 to 202 1 was 2 4. 1 % c ompare d to the me dian of the F TSE 350 S upers ecto r Real Est ate Index of 1 2%. The G roup has co mpleted a numb er of key acquisi tions during 202 1 .The ac quisitions a dd to our ex tensiv e pipeline and of fer con siderable opp or tunitie s for ass et manag ement and m edium- tolonger -term dev elopmen t; and are there fore a me asure of the exec utive lea dership team’s strong lead in dicator pe r formanc e. As dis close d via RNS on 1 0 Augus t 202 1 , w hilst the L azari Inves tments t ransac tion prov ides a key long- term deve lopment opp or tunit y , the G roup’ s por t fo lio valuation was ad verse ly af fec ted by the tr ansac tion and this has imp acted t he Group’s T otal Ret urn and TP R per for mance f or 202 1 . 202 2 FOCUS A RE AS — Remune ration Polic y revie w and cons ultation with major shareh olders an d prox y voting ag encies — Revie w the Group’s share-ba sed inc entiv e schem es for the wide r work forc e to ensure the y remain approp riate and ef fe cti ve for tale nt retention — Ope ration of the 2022 annual b onus and grant of 2022 Per fo rmance S hare Plan (P SP) awards — Co ntinue to keep und er review t he ef fe ctive nes s and relevan ce of pe rf ormanc e con ditions and c omparator group s for variable re muneration Claudia Arney Chair of the Re muneration C ommit tee De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 172 ourcar bon intensi t y and energ y inte nsit y targe ts will be as ses sed onarolling th ree- year re duction , and our targe t range for v oid manag ement has b een ex pande d to 1 0% to 2% ( previ ously , 8% to2%) ( se e page 1 79 ). The C ommit tee r eviewe d the Group’s share pric e per for mance priorto d etermining award level s for the 2022 PSP g rant. As t he share pr ice on 22 Febr uar y 2022 was broadly similar to th e share pric e at the time th e 202 1 P SP awards were g ranted (£ 33. 1 6), theC ommit tee c onsidere d it appro priate to award a ma ximum opp or tunit y of 200% of s alar y to E xecu tive Dire ctors (in line wi th the ma ximum op por tunit y unde r the Remune ration Pol icy). TheC ommit tee will t ake into acco unt any potential win dfall gains when de termining the ve sting outc ome. The B oard rev iewed t he Non-E xecu tive Dire ctor fe es during th e year (witho ut the Non -Exe cuti ve Direc tors be ing prese nt) and dec ided to incr ease th e base fe e by £5,0 00 to £52,500, th e commi tte e chair fe e by £2,500 to £1 0,00 0, and the c ommit tee memb ership fe e by £1 ,00 0 to £5,00 0. The Bo ard con siders this lev el of fe es approp riate for a co mpany of our size and co mplexit y. The las t increas e to Non-E xecut ive Dire ctor bas e fee s was with ef fe ct from 1 Jan uar y 20 1 9 and th e last inc rease to th e commit tee c hair and mem bership f ees wer e with ef fe ct fr om 1 Januar y 201 5 . Remuner ation Poli cy review The current Remu neration Policy w as approved by shar eholders atthe 2020 AGM and is now ap proaching th e end of it s three -year term. D uring the c oming year , the C ommit tee will co nduct a comp rehensi ve revie w of its remun eration arran gement s to ensure it remains c losely align ed with t he Comp any’s strateg ic aims, purp ose, at tit ude to risk and c ulture, and will se ek cons ultation with our major sh areholder s on any prop ose d change s. On pro motion to Chief E xec utive in May 201 9, Paul W illiams’ salar y was po sitione d towards the lowe r end of market f or a comp any of our size and be low that of his pred ece sso r’s salar y. This refle cted that Paul was s tepping up into the role of C hief Exe cuti ve. As det ail e d on page 1 21 of the 201 9 Re por t & Ac count s, the C ommit tee commi tte d to keep Paul’s salar y leve l under rev iew as he dev elops and gains exp erienc e in the role; and may award an incr ease ab ove the wide r work forc e average to m ove his sal ar y level clos er to the market rate . Theref ore, as par t of t he Remunerat ion Polic y review, the C ommit tee will als o review P aul ’s salar y to ens ure that it is approp riately po sitione d against th e market, t aking into acc ount his exp erienc e and per f ormanc e in the role sinc e appointm ent. Ongoing an d transpare nt dialogue with o ur sharehold ers is impor t ant to us and inform s the Co mmit tee’ s thinking o n remune ration mat ters . I theref ore enc ourage all of our shareh olders to en gage with us during th e review p roce ss. Further engagement I look fo rwar d to rece iving your s uppor t at our 2022 AGM, where Iwill be availab le to respon d to any quest ions shareh olders may have on this re por t or in rel ation to any of the C ommit tee ac tiv ities. In the me antime, if you w ould like to discuss any as pec t of our Remune ration Polic y , plea se fee l free to c ontac t me thro ugh the Co mpany Se cretar y , Dav id Lawler (teleph one: +44 (0) 20 7659 3000 or email : company .se cretar [email protected]) . The D irector s’ remunerat ion repor t h as bee n approve d by the B oard of Direc tors and s igned on i ts beh alf by: Claudia Arney Chair of the Re muneration C ommit tee 23 Febr uar y 2022 The C ommit tee al so note d the following: — T he Group rais ed the 2021 interim divide nd by 4.6% to 23.00p ence p er share and t he propo se d 20 21 final div idend has be en incre ase d by 2.0% to 53.5 pen ce pe r share. — No e mployee s were f urloughe d or made re dundant during 2020 or 2021 . — T he Co mpany has not re cei ved go vernmen t suppor t or lo ans. — T he avera ge salar y inc rease f or eligible employ ees was 5 .5% in202 1 and at leas t 3.2% from 1 Januar y 2022. — A ll eligible employ ees re cei ved a b onus for 2021 . — We co ntinued to sup por t our tenan ts, prov iding relief on rentwhere required. The G roup has co ntinued to p er form s trongly in dif f icult circums tanc es and has ma de strateg ic decisio ns during the yearwhic h will provid e longer-te rm grow th opp or tunitie s, which istest ament to th e qualit y and com mitment of o ur executi ve leader ship team. Nev er theles s, circ a 90% of the E xe cutiv e Direc tors’ inc entive o ppor tunit y is b ased o n relativ e per for mance against Re al Estate p eer s and the C ommit tee de termined thatitwas n ot appropr iate to apply discre tion to adjust the formulaicoutcome. David Sil verman’s depar ture from the Board and treatment of outst anding incentives As ann ounce d on 1 4 O ctob er 202 1 , D avid Silverm an will step down asan E xecu tive Dire ctor and le ave the Group o n 1 4 Ap ril 202 2. Th ere will be no p ayment f or loss of of fic e in resp ect of D avid’s depar ture. David will c ontinue to re ceiv e his salar y, benef its and p ension until his leaving date. D avid was eligible f or a bonus in re spe ct of the ye ar ende d 3 1 D ece mber 2021 and will be treate d as a goo d leaver in resp ec t of his outs tanding P SP awards ( which will b e cap able of ves ting at the nor mal time subjec t to per for mance an d pro-rat ing for time se r ved, and any am ounts that v est will b e subject to a t wo-y ear holding pe riod). David will al so be re quired to hold sh ares following his depar t ure in acco rdance wit h the Group’s post -employ ment shareh olding guideline s. Fur ther info rmation is se t out on p age 1 78. Imple ment atio n in 2022 The C ommit tee r eviewe d the pe rf ormanc e and dev elopment of ourE xecu tive Dire ctors dur ing the year an d, with the exc eption ofDavid Silve rman and Emily Pri deaux , decide d to incre ase E xecut ive Dire ctors’ s alaries by 3% f rom 1 Januar y 2022. All eligi ble employe es re ceiv ed at leas t a 3.2% salar y inc rease f rom 1 Januar y 2022. David Silverm an ’s salar y will rem ain unchanged f or the p eriod 1Januar y 2022 to his leaving date. Emily Pride aux was appo inted an E xecut ive Dire ctor on 1 Marc h 202 1 . Emily’s salar y was p ositio ned b elow the oth er E xecuti ve Direc tors on ap pointmen t to refle ct that sh e was stepping up into therole of an E xe cutiv e Directo r . A s detailed on p age 1 5 1 of th e 2020 Repo r t & Acc ounts, Emily ’ s s alar y has be en incre ase d by 9.8% to £4 50,00 0 with ef fe ct fr om 1 Januar y 2022. The Co mmit tee intends tofur th er align Emily’s salar y wi th the othe r Exe cuti ve Direc tors by 1 Januar y 2023, subject to g ood Gro up and per sonal p er forman ce. Pensio n contr ibution fo r Paul Williams, Damian W isniewski, Nigel Ge orge and Dav id Silverman we re reduc ed to 1 5% of salar y f rom 1Januar y 2022, to be aligne d with the wi der work forc e. Pen sion con tribution f or Emily Pride aux was set at 1 5% of salar y on her appointment as E xecutiv e Director . The ann ual bonus and P SP opp or tunities an d financ ial per f ormanc e measure s remain larg ely unchange d for 2022. Minor change s have be en made to s trategic t argets whic h make up 25% of the bonus . We will use the Group’s accide nt fre quency r ate in resp ect to d evelopm ent projec ts as our ac cident rate m etric, 17 3 Financ ial Stat ements Strategic repor t Governance R E M UNE R A T I ON A T A G L A N C E W e a re tr a nsp ar en t abo ut ou r pa y prac tices which aim to inc entiv ise ou r em pl oyees t o ac hi ev e ou r st rateg y and gen erate s ust ainable va lu e for ou r stak ehol ders. Ou r Re mu nera tio n Pol i cy wa s su ppo r ted by 95.5 % of our shareholders. REW A RD LI NKED TO PERFO RMANCE Ann ual bo nus ear ned by E xec uti ve Dire cto rs Measure T hresho ld Max imum A ctual Bo nus earne d (% ma x) Relat ive TR 3 7. 5 % 7. 7 % 22.9% 5.8% 0.0 Relative TPR 3 7. 5 % 5.9% 7. 9 % 6.3% 14 . 5 Strategic 25. 0% 16 . 4 To t a l 30.9 PSP ea rned b y Exe cuti ve Dire ct ors Measure T hresho ld Max imum A ctual PS P earne d (% ma x) Relative TSR 5 0% 12 . 0 % 7 1. 2 % 2 4 .1% 1 8 .1 Relative TPR 50% 4.9% 7. 9 % 4.6 % 0.0 To t a l 1 8 .1 The C ommit tee c onside rs that the se outc ome s are fair inthe con text o f our underly ing per for mance an d the exp erienc e of our shareholders a nd stakeholders. WIDE R ST AK EHOLDE R CONSI DE RA TIONS The C ommit tee c onside rs pay po licies and p ractic es fore mployee s, as well as f eedb ack fro m key stakeh olders,w hen making remune ration de cisions forE xec utive D irecto rs. — 1 0 0% of employe es be low the Bo ard rec eive d full sal aries and ben efit s during 202 1 . N one were f urloughe d — A ll eligible employ ees re cei ved at leas t a 3.2% salar y inc rease from 1 Jan uar y 202 2 — 2.8% inc rease to t he divide nd in 202 1 — T otal c haritab le donations an d funds of £704,00 0 — He ld our firs t Stake holder Day on 29 S eptemb er (see pa ge 1 34) SUMMA RY OF OUR RE MUN ER A TION POLICY AND RE MUNE R A T ION S T RUC T UR E Component Key fea tures Base salary andb ene fit s At trac t and ret ain high calib re execu tive s Pension From 1 Januar y 2022, 1 5% of salar y (in line with the wider work force) Annual bonus — 37 .5% Relative TR — 37 .5% Relative TPR — 25% Strategic Ma ximum opp or tunit y of 1 50 % ofsalar y Linke d to key finan cial and s trategi cKPIs Any b onus e arne d in exces s of 1 00% o fsalar y is def erre d into share s over thr ee yea rs LT I P — 5 0% Rel ati ve TSR — 50% Relat ive TPR Ma ximum opp or tunit y of 20 0% ofsal ar y Linke d to key finan cial KPI s Thre e-y ear pe r forma nce p erio d plustw o- year h olding pe riod Shareholding guide lines 200% o f salar y f or all exec utiv es Guide line is met b y all exec utive s (i) Post-employment gu idelines a pply During th e coming ye ar , the C ommit tee will c onduc t a comp rehensi ve revie w of its remun eration arran gement s toensure it remains c losely align ed with t he Comp any’s strateg ic aims, purp ose, at tit ude to risk and c ulture, and will se ek cons ultation with our major sh areholder s on any prop ose d change s. Not es: (i) E xcludi ng Emily P rid eaux w ho was a ppo inte d an Ex ecu tiv e Dire cto r on 1Mar ch 2021 . Emily i s work ing to wards a chie ving t he sha reh olding g uide line (s ee pa ge 19 1) HOW OUR K PI S A RE EMBE DDED W ITHIN T HE E XECU TI VE RE MUN E RA T IO N F RA ME WORK Financial K PIs Per formance measures Non-fi nancial KPIs Operational measures Annual bonus Operational measures T otal return Rela tive total return (37.5%) Rev ersionary percentage T otal property return Relative t otal property return (37.5%) Development potential T otal shareholder return Strategic (25%) T enant retention EPRA earnings per share Void management Gearing measures PSP Resp onsibili ty me asures Gearing and available resour ces R elative total property return (50%) BREEAM Interest cover r atio Relative T SR (50%) EPC Carbon & Energy intensity Performance against all KPIs is tak en into account when assessing underlying business performance Staff satisfaction Accident frequency r ate TR TPR TSR TSR TR TPR S S S S S S S TPR De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 1 74 ANNU A L R EPO RT ON RE MUNE R A T ION (unaudite d unle ss ot her wis e indic ate d) This par t of t he Direc tors’ remun eration rep or t expl ains how we have implem ented our Re muneration P olicy during 2021 . Th e Remunerat ion Polic y in plac e for the ye ar was approv ed by share holder s at the 2020 AGM on 1 5 May. W e have p rovide d a summar y of our Re muneration Polic y on pag es 1 77 to 1 80. O ur full Remune ration Poli cy can b e found on o ur website at: w ww.derwentlondon.com/investor s/ governance/ board-commit tees This A nnual repo rt o n remunerat ion will be subjec t to an advis or y vote at our 2022 AGM on 1 3 May 2022. Role of the Rem uneration C ommitte e The r ole of the Co mmit tee is to deter mine and rec ommen d to the Bo ard the Remune ration Poli cy for E xec utive D irector s, and se t the remune ration for th e Chairman, E xec utive D irector s and senio r managem ent (including the C ompany S ecr etar y). In doing so, the C ommit tee ensure s that the Rem uneration P olicy is align ed with th e Comp any’s key remuner ation princip les, as well a s taking into ac count th e principles of clar it y , simplicit y, risk, pr edict abilit y , prop or tionalit y an d alignment to culture s et out in th e 20 1 8 UK Cor porate G overnan ce C ode. At tra ct , ret ain an d motivate Supp or t an ef fe cti ve pay fo r per for manc e culture whic h enable s the C ompany to at tra ct, re tain and m otivate E xecu tive Dir ecto rs who hav e the sk ills and exp erie nce n ece ssa r y to deliv er the Gr oup’ s pur pos e (see pa ge 1 ). E x ternal marke t pract ice is c onside red wh en deter mining the Dire ctor s’ Remune ration P olicy. Clarit y and simplicit y Ensure t hat remune ration ar rangem ents are s imple and tran sparen t to key sta keholde rs and t ake acc ount of pay p olicie s for the wi der wor kf orce . Det ails of the ma ximum p otentia l values th at may be e arne d through t he remun eration a rrangem ents ar e set ou t in the summar y of our Rem unerati on Polic y on pa ges 1 77 to 1 80. Alignment to strateg y and cul ture Alig n remuner ation wit h the Gro up’ s objec tive s and long- term s trateg y and r efle ct our c ulture thro ugh a bala nce d mix of shor t- and lon g-term p er form ance -rel ated pay an d ensure t hat per f ormanc e met rics r emain ef fe cti vely align ed wit h s t ra te g y. Risk ma nagement Promote lo ng-term s ustain able per f ormanc e thro ugh suf f icient ly stret ching per f orman ce tar gets, w hilst ens uring that th e ince ntive f ramewo rk doe s not en cour age E xecu tive D irec tors to op erate ou tside th e Group’s risk app etite (se e pag e 1 01 ). Malus and cl awback p rovisio ns apply to ann ual bonu s and PSP awa rds, and t he Co mmit tee has t he mea ns to apply dis creti on and judge ment to v esting o utco mes . St ewardship P romote lo ng-term s hareho ldings by E xecu tive Dir ecto rs that s uppor t alig nment wi th long-te rm share holder intere sts . Exe cuti ve Dire ctor s are subjec t to within- employ ment an d pos t-em ploym ent share holding gui deline s. Onc e PSP aw ards have ve ste d there is a t wo- year h olding per iod during w hich E xecu tive D irecto rs are no t able to sell t heir share s to supp or t sust ainable de cision mak ing. Propor tionalit y and fairness T o tal remun eratio n should f airly ref lect t he per f orman ce deli vere d by the E xe cuti ve Direc tors an d the Gro up. The Co mmit tee t akes into ac count un derly ing busine ss p er form ance an d the exp erien ce of sh arehold ers and o ther st akeholde rs when d etermining v estin g outc omes , ensuring t hat po or per f orman ce is not r ewarde d. The C ommit te e con sider s the appr oach to wid er work fo rce p ay and pol icies wh en deter mining the Rem unerati on Polic y to ensure t hat it is app ropriate in t his contex t . Commit tee composition and perf ormance None of th e membe rs who have s er ve d on the C ommit tee during the ye ar had any per sonal intere st in the mat ter s decid ed by the Co mmit tee and are all c onsidere d to be inde pend ent. Th e Comp any Se cretar y acte d as Se cretar y to the C ommit tee. Claudia A rney will re ach her ninth anni vers ar y on the B oard in 202 4. Sanjee v Sharma will join the C ommit te e from 1 March 2022 to ensure he has th e knowle dge to succ ee d Claudia A rney as Ch air , in acc ordanc e with the UK C orp orate Gove rnanc e Cod e. Independent Num ber o f meetin gs At tendance (i) Clau dia Arn ey , Chair Ye s 2 10 0 % Simon F raser (ii) Ye s 1 10 0 % Helen Gordon Ye s 2 10 0 % Luc inda Be ll Ye s 2 10 0 % Not es: (i) Per cen tag es ar e bas ed on t he me etin gs ent itle d to at ten d for t he 1 2 m ont hs en ded 3 1 Decem ber 20 2 1 . (ii) Simo n Fras er st epp ed do wn fro m the B oar d on 31 Oc tobe r 2021 . Simo n at tend ed 100% of th e Com mit te e mee tings h e was en tit led to at te nd pr ior to hi s retir eme nt date . The C ommit tee’s role and res ponsibilitie s are set ou t in the terms of refer ence, whic h were las t updated in Fe bruar y 2022 and are available on th e Comp any’s website at: w ww.derwentlondon.com/ inv estors/ governance /board-comm it tees The 2021 evaluation of th e Board, it s commit te es and indiv idual Direc tors, wa s internally fac ilitated by Mar k Breuer , the C hairman of the B oard, in acc ordanc e with our thre e-y ear cyc le of evaluations (see pa ge 1 4 1 ). The rev iew conf irme d that the C ommit tee c ontinues to ope rate ef fec tively, with no signif ic ant mat ters raise d. Advis ers to the C ommit tee The C ommit tee h as author it y to obtain the ad vic e of ex ternal indep endent r emuneratio n consult ants. D eloit te LLP have b een retain ed as the C ommit tee’s principal c onsultant s since July 201 8, following a c ompet itive ten der pro ces s. Deloi tte is o ne of the founding m ember s of the Remune ration C onsulting Group. T he Co mmit tee has be en f ully briefe d on Deloi tte’s complianc e with the voluntar y co de of con duct in res pec t of the pro vision of remuneration consulting ser vic es. During th e year unde r review, Deloi tte p rovide d indep endent assis tanc e to the Co mmit tee in resp ec t of , among ot her things, th e following mat ters: — P er forman ce ass essm ent against ann ual bonus and P SP targe ts. — Mar ket practi ce and c orpor ate governan ce update s. — B enchmar king of Non-E xec utive D irector f ees . — Remunerat ion arrangem ents fo r a depar ting E xec utive Dire ctor . The f ees p aid to Deloit te fo r their ser v ices to t he Commi tte e during the ye ar , bas ed on tim e and expe nses , amounted to £ 4 1 , 700. 17 5 Financ ial Stat ements Strategic repor t Governance R E MUNE R A T ION COMMI T T EE RE PORT CONTINUED A sep arate team at Deloi tte L LP also p rovide d sust ainabilit y and health an d safet y audit as suranc e consult ancy, corp orate ta x con sultancy an d employm ent ta x co nsultanc y ser vi ces to th e Group. T he Co mmit tee took this w ork into acc ount and, due to t he nature and ex te nt of the work p er for med, c onclude d that it did no t impair De loit te’ s abili ty to a dvise t he Commi tte e objec tively and fre e from inf luenc e. It is the vie w of the Co mmit tee that th e Deloit te engage ment team th at provid e remuneratio n advic e to the Co mmit tee do not hav e conne ction s with Der wen t London o r its Direc tors that m ay impair their indep enden ce. T he Commi tte e there fore de em Deloit te c apable of prov iding appropr iate, object ive and inde pende nt advi ce. Shareholder voting and engagement The C ommit tee’s resolu tions at the C ompany ’s rece nt AGMs in resp ec t of the Remune ration Poli cy and the A nnual rep or t on remunerat ion, receive d the following votes from sharehol ders: An nual r ep or t on remuneration (202 1 AGM) Remuneration Policy (2020 AGM) Votes ca st in favo ur 88.9m 95.0% 85.6m 95.5% Votes ca st agains t 4. 7m 5.0% 4.0m 4.5% Votes with held 0.0 m 0.0% 0.0m 0.0% T o tal vote s cas t 93.6 m – 89.6 m – The C ommit tee wa s ex tremely p lease d with the leve l of shareho lder suppo r t at the 202 1 AGM (c.84 . 7% of our issu ed share c apital vo ted ). The C ommit tee e ncoura ges ong oing, op en and con stru ctive dialogue wit h shareholde rs and th eir repres entati ve bodie s. Th e Co mmit tee con sulted with major shar eholder s prior to th e 20 20 AGM on chang es to the Remun eration Po licy and f eedb ack was taken into acc ount (see p age 1 5 4 of the 2020 Repor t & A cc ounts for de tails) . The current Remu neration Policy w as approved by shar eholders atthe 2020 AGM and is now ap proaching th e end of it s three -year term. D uring 2022, the Commit te e will condu ct a co mprehens ive revi ew of its remun eration arran gement s to ensure it rem ains clos ely aligne d with the C ompany ’ s s trategic aims, p urpos e, at titude to r isk and culture, an d will seek c onsultatio n with our major shareh olders on any p ropo sed ch anges. Wider work force c onsiderations When m aking remuner ation dec isions for E xec utive D irector s, theC ommit tee c onsider s pay polic ies and pra ctice s acros s the wider workforce. We value and appre ciate our employ ees an d aim to provide m arket comp etiti ve remuner ation and be nefi t packa ges in orde r to continue to be s een as an emp loyer of choi ce. Th e remunerat ion stru cture fo r our wider wo rkf orce is similar to t hat of our E xecuti ve Direc tors and c ontains both f ixe d and per fo rmanc e-bas ed elem ents. B ase sal aries are revi ewed annually and an y increas es be come e f fec tive fr om 1 Januar y . The C ommit tee is kep t informe d of salar y in crease s for th e wider work for ce, as well a s any signific ant change s in pract ice or p olicy. As p ar t of the Remune ration Poli cy rev iew being c onducte d during 2022, the Commi tte e will consid er the Gro up’ s s hare-ba sed ince ntive sc heme s for the wide r work forc e to ensure the y remain approp riate and ef fe ctiv e for talent re tention. De spite the C ovid- 1 9 pand emic, all of our emp loyee s below th e Boar d continue d to rec eive th eir full sal aries and b enef its and n one were f urloughe d. Fur ther infor mation on ho w we suppor te d the health an d wellbeing of o ur employe es is on pa ge 56. We enrol all of our e mployee s into an annual discret ionar y bonu s sch eme. Our app roach is to rewar d our employe es, b ased o n their indivi dual per for mance an d their con tributio n to the per f ormanc e of the Gro up. In 202 1, 1 00% of o ur work forc e below B oard level (not subjec t to probatio n) recei ved an annual b onus (2020 : 1 00 % ). All emp loyee s are eligible to par ticip ate in our non-c ontribu tor y oc cupation al pension s cheme o perate d as a Master T rus t with Fide lit y . Fide lit y of fer all emp loyee s who are memb ers of th e pension sch eme ongoing s uppor t and tr aining oppor tuniti es in resp ect of their p ension and inve stme nts. Al l employe es are eligible to re cei ve an employe r pensio n contr ibution e qual to 1 5% of sal ar y per annum. In addition , all employe es rec eive p rivate me dical insuranc e, dent al care an d are invite d into a non-c ontrac tual health care c ash plan whic h of fer s an af fordable way to hel p with ever y day healthc are co sts. In order to align t he interes ts of our employ ees an d those of o ur shareh olders , we operate an Emp loyee Share O ption Pl an (ESOP). Employe es, exc luding the Direc tors, are e ligible to join the ESOP subjec t to per for mance. T he ESOP g rants optio ns which are exercis able af ter three y ears at a pr e-agre ed op tion pric e. In 202 1 , we grante d 1 98, 800 opti ons to 78% of our employe es be low the Boar d and E xecut ive Co mmit tee (2020 : 1 7 4 ,300 opti ons to 79% of our employ ees). Furt her inform ation is on pa ge 22 1 . In addition , to encour age Group -wide share own ership, the Co mpany ope rates a HMRC ta x ef f icient Share save P lan which was approv ed by share holder s at the 201 8 AGM. Th e third grant unde r the Shar esave P lan was made on 1 5 A pril 202 1 , with emplo yees saving o n average £1 77 p er mont h. The C ommit tee ha s been pleas ed with t he level of t ake-up, espe cially within th e contex t of ongoing unc er taint y c aused by B rexit and th e Cov id- 1 9 pan demic. As at 1 Januar y 2022, 1 1 8 e mployee s are saving into o ur Sharesav e Plan ( 7 2.4% of our employe es) . Fur ther info rmation on t he Shares ave Plan is o n page 1 91 . We have an ope n, coll aborati ve and inclusi ve manage ment str ucture an d engage re gularly wit h our employe es on a rang e of issu es including the G roup’ s appro ach to remune ration. We do this throug h an appraisal pr oce ss, s truc tured c areer c onvers ations , employe e sur vey s, our intran et site, C ompany pre sentat ions, awaydays and o ur wellbeing p rogramme (se e page s 28, 29, 1 25 and 1 35). Employe e engagem ent is fre quently m easure d and we have a desig nated Non-E xe cutiv e Directo r , Dame Cill a Snowball , who chair s th e Resp ons ible Bus ines s C ommit te e. The C ommit tee c onside rs that the re are suf f icient chann els for employe es to disc uss a range of m atter s, including exe cuti ve remune ration, with t he Boar d. The C ommit tee c onsider s pay and con ditions acr oss th e Group, as well as any emp loyee f eedb ack when mak ing decisio ns on exec utive re muneration . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 176 Summar y o f Remuneration P olicy We have prov ided a summ ar y of the key elem ents of the Re muneration P olicy f or Exe cuti ve Direc tors and No n-Exe cuti ve Direc tors approv ed by share holder s at the 2020 AGM on page s 1 77 to 1 80. Th ere has b een no de viation in th e implementat ion of the Remun eration Polic y during 202 1 . In addition, w e have set ou t how the Re muneration P olicy will b e implemente d in 20 22. Our f ull Remunerat ion Polic y can be fo und on our web site at: ww w .der wentlondon. com/ investors/ governance/boar d-comm it tees Element H ow op era ted Ma ximum oppor tuni ty Impl eme ntat ion f or 2022 Base sala ry Normally reviewed annually. Factors taken into account in clu de: — the rol e, experience and per formance of the indi vidu al and th e Co mpany ; — economic conditions; — pay and conditions throughout the bus ines s;and — pra ctic e in co mpani es wit hsimilar b usin ess charac teristic s. No ma xim um, bu t incr eas es will normall y be consistent wit h the p olic y appl ied to the workforce generally (in pe rce nta ge of sal ar y ter ms). Wit h ef fe ct f rom 1 Janu ar y 2022, E xec uti ve Dire cto rs sa larie s (exclu ding Emily Pri deau x and D avid Sil verm an) were in cre ase d by 3%. A ll elig ible em ploye es re cei ved a t leas t a 3.2% sal ar y inc reas e fro m 1 Januar y 2022 . Executi ve Di rector 2022 s al ar y £’000 2021 sa la r y £’000 Paul W illiams , CEO 630.4 6 12 . 0 Damian Wisniewski, CF O 504.3 4 89.6 Emily Pride aux (i) 45 0.0 410 . 0 Nigel George 504 .3 489.6 Dav id Silver man (ii) 48 9.6 48 9.6 Notes: (i) Emily P rid eaux w as app ointe d an E xe cuti ve Di rec tor on 1 M arch 20 21 . Em ily ’ s s alar y was p osi tion ed b elow t he oth er E xec uti ve Dir ec tors o n app oint ment . As d etai led on pa ge 1 51 of the 2020 R epo r t & Acc oun ts, Em ily ’ s s alar y h as be en inc rea se d by 9.8% to £ 450, 00 0 with e ff ec t fro m 1 Janu ar y 2022. Th e Co mmit te e inten ds to f ur the r align Emily ’s sal ar y wit h the o ther E xe cut ive D irec tor s by 1 Jan uar y 2023, s ubje ct to go od Group and pers onal per formance. (ii) D avid S ilver man di d not re ce ive a s alar y i ncre ase e f fec tiv e fro m 1 Janu ar y 2022. He will c ont inue to r ec eive a b ase s ala r y of £4 89,6 00 unt il he st eps d own fr om th e Bo ard on 14 Apr il 2022 (fu r ther i nfor mati on on p age 179 ). Bene fits Inc lude, b ut are n ot limit ed to, pri vate m edic al insu ranc e, ca r and fu el allo wanc e and lif e ass uranc e. Execut ive D irect ors m ay par t icipa te in the Sh ares ave Pl an and any o the r all-em ploye e pl ans on th e sam e basi s as oth er emp loye es, u p to HMRC ap prov ed limit s. Se t at a leve l which t he Commit tee considers to be ap prop riate t akin g into ac coun t the ov eral l cos t to the C omp any in se cur ing the b ene fit s, in divi dual circu mstances, benefits pro vide d to th e wider workforc e and market practice. Be nef its wil l con tinue to in clud e a full y expe nse d car o r car a llowan ce, p riva te me dica l insura nce an d life a ssur anc e. Pension Executive D irectors participat e in the C omp any ’s defin ed contribution pension scheme or may re ce ive c ash p ayme nts in lie u of con trib utio ns (e.g. w here contributions would e xcee d eit herth e life time o r annual contribution limits ). Max imum Company contribution or cash supp leme nt (or a mix o f both) for E xe cut ive D irec tors f rom 1Janu ar y 2022 is alig ned w ith the contribution avai lable to the wider workforc e ( currently 1 5% of s alar y). Co mpan y cont ribu tion an d/or ca sh supp leme nt eq ual to 1 5% of s alar y f or all Executive Di rectors. Annual bonus Bo nuse s up to 1 0 0% of sa lar y are pai d as ca sh. Am ount s in exc ess o f 1 0 0% are de fer red in to share s for thre e ye ars subj ec t to con tinue d employment. Div ide nd eq uivale nts ma y acc rue on de fer red sh ares . Suc h amoun ts will n orma lly be p aid in sha res . Malus a nd cl awbac k prov isio ns app ly (see n ote 1 on p age 1 78). Th e Com mit tee h as disc reti on to adjus t the p ayme nt ou tcom e if it i s not de eme d to ref lec t the underlying financial or non-financial performanc e of the bus iness, the performance of th e indiv idual o r the experience of sha reholders or other stakehol ders over the per formance period. Ma ximum o ppo r tunit y of up to 1 5 0% of sal ar y may be aw arde d in res pec t of a financ ial year . Ma ximum o ppo r tunit y : 1 5 0% of s alar y fo r all E xec uti ve Dire cto rs. Per f orma nce m etr ics an d weig htings (as a p erc ent age of m ax imum op por tu nit y): — T ot al retu rn ver sus a c ompa rator g roup of r eal e stat e comp anie s (3 7 .5%) — T ot al prop er t y ret urn ve rsus t he MS CI IPD C entr al Lon don O f fic es (CLO) I n d e x ( 3 7. 5 % ) — Strategic objectives (2 5% ) Th e total r etur n and tot al pro per t y re turn t arge ts are s et ou t belo w. T ot al re turn v s re al es tate c omp arat or gro up Ves ting (% o f tota l retur n award) Be low me dian 0% Me dian 22.5% Upp er quar tile 10 0 % St raight -line ve sting o cc urs be twe en th ese p oints Th e comp arat or gro up com pris es of Big Yello w Group p lc, T he Bri tish L and Co mpan y plc, C apit al & Co untie s Pro per ti es plc , CLS Ho ldings p lc, Gre at Por t land E sta tes plc , Hamm ers on plc , Heli cal pl c, La ndse c plc , Lon donMe tric Pro per t y pl c, Se gro pl c, Shaf t esb ur y plc, UK C omm erci al Pro per t y, Unite Gr oup plc an d Work spac e Gro up plc. T he C ommi tte e rev iewe d the c omp arato r group durin g the y ear and c onf irm ed th at it rem aine d appr opria te. TP R vs th e MSCI I PD CLO In dex Ves ting (% o f tota l retur n award) Be low Inde x 0% Inde x 22.5% Inde x + 2% 10 0 % St raight -line ve sting o cc urs be twe en th ese p oints Th e stra tegic t arge ts, r ange s and we ightin gs for t he 2022 annu al bon us are disc los ed in no te 2 on pa ge 1 79. 17 7 Financ ial Stat ements Strategic repor t Governance R E MUNE R A T ION COMMI T T EE RE PORT CONTINUED Element H ow op era ted Ma ximum oppor tuni ty Impl eme ntat ion f or 2022 Long-term ince ntive s Award o f per f orma nce sh ares whic h ves t af ter th ree y ears , subje ct to p er fo rman ce me asure s se t by the C ommi tt ee an d continued employme nt. Award s will be s ubjec t to a t wo- year post-vesting hol ding period. Div ide nd eq uivale nts ma y acc rue on perf ormance shares. Such amo unts wil l nor mally b e paid in shares . Malus a nd cl awbac k prov isio ns app ly (see n ote 1 be low). Th e Com mit tee h as disc reti on to adjus t the v est ing out com e if it i s not de eme d to ref lec t approp riately the und erlying financial or non-f ina ncial per forma nce of the business, the pe rf orm ance o f the in divi dual, o r the experience of shareholders or other stakeholders over the per formance period. Ma ximum o ppo r tunit y of up to 20 0% of sa lar y may be aw arde d in res pec t of a financ ial year . Ma ximum o ppo r tunit y : 200% of s ala r y for all E xe cut ive Di rec tors . Per f orma nce m etr ics an d weig htings (as a p erc ent age of m ax imum op por tu nit y): — T otal shareholder r eturn versus the constituents of the F TSE 350 Super Se cto r Real E sta te Index (5 0%) — T ot al prop er t y ret urn ve rsus t he MS CI IPD UK Al l Prop er t y Ind ex (50%) Th e total s hare holde r ret urn and t otal p rope r t y retur n targ ets ar e set o ut be low. TSR v s F TSE 35 0 Sup er Se ct or Re al Est ate In dex Ves ting (% o f TSR award) Be low me dian 0% Me dian 22.5% Upp er quar tile 10 0 % St raight -line ve sting o cc urs be twe en th ese p oints An nuali se d TPR v s the MS CI IP D UK All P rop er t y Inde x Ves ting (% o f tota l retur n award) Be low Inde x 0% Inde x 22.5% Inde x + 2% 10 0 % St raight -line ve sting o cc urs be twe en th ese p oints Share owner ship guidel ines Within-e mployme nt: E xecuti ve Dire cto rs are e xpe cte d to buil d up and r etain a s hare holdin g eq ual to 200 % of sal ar y. Until th e share holding g uidelin e is met, 50% o f any def erre d bo nus awar ds or P SP award s ves ting (ne t of ta x) nor mally m ust b e ret aine d. Post -employment: E xecut ive Dire cto rs wh o step d own fr om the B oar d are re quire d to ret ain a holdin g in ‘guidelin e share s’ e qua l to: — 200 % of sal ar y (or the ir ac tual sh areh olding at t he po int of dep ar ture i f lower) for the first 1 2 months following stepping down as an Executiv e Di recto r . — 1 0 0% of sal ar y (or th eir ac tual sh areh olding at t he po int of dep ar ture i f lower) for t he sub se quent 1 2 months. ‘Gui delin e share s’ do no t inclu de shares that the E xecutive Director has p urch ase d or whic h have b een acquired pursuant to deferred shar e awards o r PSP a wards wh ich ve sted b efo re 1 Janu ar y 2020. n /a A s at 23 F ebru ar y 2022, all of o ur E xecu tiv e Dire ctor s have a chie ved t he wit hin- emp loym ent g uidel ine (see p age 191 ) exc ept E mily Pri deau x, wh o was app ointe d an E xec uti ve Dire cto r on 1 Marc h 2021 . E mily will wo rk towa rds ac hievi ng the share holding g uidelin e. On 14 April 2022 , Davi d Silver man wil l cea se to be a D irec tor an d empl oye e of the Gro up. It is an ticip ated t hat Da vid Silv erm an will b e dee med to h old in exc es s of 200 % of sal ar y in ‘guid elin e share s’ on lea ving D er went L ondo n and wil l ther efor e be r equire d to re tain a sh areh olding in ac co rdan ce wit h the p ost -emp loym ent share o wner ship guide lines . Th e Com mit tee wi ll moni tor Dav id’s co mplia nce wi th th e pos t-e mploy men t share owne rship gui deline s. Not e 1 : Ma lus and c lawb ack Malus and cl awback pro visions app ly to annual bonus , deferre d bonu s and per fo rmanc e shares ove r the following t ime perio ds: Malus Clawb ack Annual bonus T o suc h time as pay ment is m ade. Up to two ye ars fo llowing pay ment . Deferred bonus T o su ch time as t he award ve sts . No cl awback p rovisi ons apply (as malus p rovisi ons apply f or thre e year s from t he date of award ) . Per formance shares T o s uch time as t he award ve sts . Up to t wo year s followin g vest ing. Malus and cl awback may app ly in the following circ umstanc es: 1 . Mate rial misst atement of f inancial res ults. 2. A n error in as ses sing per for mance c ondition s which has led to an o verpay ment. 3. Dismis sal due to gro ss misc onduc t. 4. S erious re putatio nal damage. 5. Corp orat e failu re. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 178 Not e 2: Stra tegic t ar gets f or the 2022 a nnual b onus The s trategic t argets f or the 2022 annual bonus will b e broadly th e same as th ose us ed for th e 202 1 annual bon us ( se e page 1 8 4 ). For the 2022 annual bonus, w e will use the Gro up’ s a cciden t frequ ency rate a s our accide nt rate metr ic, our c arbon intens it y and energ y intensit y targe ts will be as ses sed on a r olling three -year r educ tion, and our t arget range f or void mana gement h as bee n expand ed to 1 0% to 2% (pre viously, 8% to 2% ). Performance m easure (i) T arget range (ii) Maximum award Vo id management This is m easure d by the G roup’s average EP RA v acanc y rate ov er the ye ar . 1 0% to 2% 5.0 % T enant retention This is m easure d by the p erc enta ge of tenant s that rem ain in their sp ace whe n their lea se expire s. 50% to 75% 5.0% St aff satisf action St af f sur vey s are use d to ass ess t his meas ure. In ass essin g this targ et the C ommit tee w ill con sider any v arianc e in staf f s atisfac tion s core s bet we en gend ers. 80% to >95% of s taf f to be satis fie d or be tte r 2.5% Accident rate (iii) For 2022, this will b e our Ac ciden t Frequen cy Rate, w hich is calc ulate d base d on the n umber of dev elopme nt RIDDOR injurie s during th e year multip lied by 1, 0 00,00 0 and div ided b y ‘wor k hours’. 65% to 75% of the late st industr y b enchmar k 2.5% Por tfolio development potential This is m easure d by the p erc enta ge of the Gr oup’ s p or tf olio by are a, whe re a pote ntial development scheme has been identified. 35% to 50% 2.5% Net Zero C arb on Pathway t arget s: Thes e meas ures have b een s et to be c onsis tent with o ur ambiti on to be ne t zero car bon by 20 30. Carbon intensit y (iv) This is m easure d by emis sions inte nsit y pe r m 2 of lan dlord-c ontro lled f loor are a acro ss our mana ged like -for- like por t foli o, against th e rolling t hree -year av erage . -5% to - 1 0% 5.0 % Energ y i ntensit y (iv) This is m easure d by ene rg y con sumptio n (kWh) pe r m 2 of landlord-controlled f loor area across our man aged l ike-for -like por t fo lio, agains t the roll ing three -ye ar averag e. - 2% to -4% 2.5% 25% Not es: (i) Th e link b et wee n the p er for manc e me asur es and o ur st rate gic obje ct ive s is sh own in th e tab le on pa ge 184. (ii) Pay out a ccr ues o n a str aigh t-lin e basi s, be tw een t hres hol d and ma xim um pe rf orm anc e. (iii) In 2021 , we u sed A cc iden t Inci dent R ate (se e pag e 1 84). Our A cc iden t Freq uen cy Rate ( A FR) fo r 2021 was 1.26 (2020: 2.72) a red uct ion of 5 3.7%. AF R is subje ct t o inde pen dent assurance from Deloitte. (iv ) For t he 2022 b onus , the t hre e-y ear av era ge to 31 De cem ber 202 2 will be c omp are d again st th e thre e- yea r aver age to 31 De ce mbe r 2021 . Outside appointments f or Executive Director s E xecut ive Dire ctors may ac cep t a non-exe cuti ve role at anoth er comp any with the app roval of the B oard. T he Exe cuti ve Direc tor is entit led to retain any fe es p aid for the se ser v ices . During 2021 , our E xecu tive Dire ctors did n ot rec eive fe es for t heir ex ternal app ointment s. Fur ther inform ation on our E xecu tive Dire ctor s’ exte rnal appo intments is p rovide d on pag es 1 26 and 1 27 . Paymen ts to pa st Direc tor s and for los s of of fic e ( audited) Simon Silver re tired as an E xec utive Dire ctor o n 26 Februar y 2021 . Th e impact of Simo n Silver’s retireme nt on his remuner ation was disclos ed on p age 1 5 1 of th e 202 0 Rep or t & Ac counts . Simon Silver rem ained eligible to e arn a pro rat a bonus fo r the 202 1 f inancial year . HisPSP awards g ranted on 1 2 Marc h 20 1 9 and 1 3 March 2020 remain c apable of ves ting in acc ordance wi th their nor mal ves ting timetab le, subjec t to the achiev ement of th e relevant p er forman ce con ditions and a p ro rata re ductio n for the p eriod 26 Fe bruar y 2021 to the end of the p er forman ce pe riod. D etails of Simon Silve r’s 20 21 bonus e arned an d 20 1 9 P SP award expe cted v esting o utcom e are disclose d on pag es 1 8 4 and 1 85 r espe cti vely . David Silve rman will step d own from th e Board on 1 4 A pril 2022 and the table b elow disclos es how this will imp act on his rem uneration. The re will be no p ayment f or loss of of f ice in re spec t of David ’ s dep art ure. David will c ontinue to re ceiv e his salar y, benef its and p ension until his leaving date. T he table b elow prov ides infor mation on th e treatme nt of his annual bonus an d PSP arr angement s. Element Agreed trea tment Annual bonus — A nnual bon us for th e year en ded 31 Dec emb er 202 1 will b e paid in Marc h 2022 base d on per f ormanc e agains t targ ets and is d etaile d on pag e 1 8 4. — Dav id Silver man will not b e eligible to re cei ve a bo nus in resp ec t of the p eriod 1 J anuar y to 1 4A pril 2022. PSP award s David S ilverman w ill not be e ligible to re ceiv e a PSP g rant in 2022. In resp ec t of his out stan ding PSP awar ds, the y will: — Vest in ac cor dance to t heir nor mal ves ting time table, subje ct to th e achiev ement o f the rele vant per f orman ce conditions; — Be s ubject to t he nor mal tw o-ye ar holding p erio d ; and — Will b e subjec t to a pro rat a redu ction f or the p erio d 1 4 A pril 2022 to the en d of the p er form ance p erio d Sharesave options A ll outs tanding S hares ave opti ons will lap se on his leav ing date (see p age 1 91 ). Post -employment shareholding guidelines It is anti cipate d that Davi d Silverm an will be de eme d to hold in exc ess of 20 0% of sal ar y in ‘guidel ine share s’ on leavin g Der went L ondon an d will ther efore b e require d to ret ain a shareho lding in acc ordanc e with th e pos t- emplo ymen t shareh olding guide lines (se e page s 1 78 and 19 1 ). 17 9 Financ ial Stat ements Strategic repor t Governance R E MUNE R A T ION COMMI T T EE RE PORT CONTINUED Ser vice contrac ts and letters of appointment Executive Directors E xecut ive Dire ctors’ se r vice c ontrac ts do no t have a fixe d expir y date, h owever , they ar e terminable eith er by the C ompany pro viding 1 2 month s’ notice or b y the exec utive p roviding six m onths’ notic e. Da te of s er vi ce c ont rac t Notice period Ser v ic e con tr ac t exp ir y dat e Paul William s, CEO 2 2 November 20 1 8 1 2 mon ths’ noti ce to the Execut ive D ir ector and sixmo nths’ not ice fr om theE xec utiv e Direc tor . Rolling s er vic e co ntrac t with nof ixed c ontra ct end d ate. Damian W isniewsk i, CFO 10 July 20 1 9 Nigel George 1 0 July 201 9 Emily Prid eaux 26 F ebr uar y 2021 Davi d Silverma n (i) 1 4 A ugust 201 9 No te: (i) Dav id Silv erm an will s tep do wn fro m the B oar d on 1 4 A pril 2022 (f ur th er info rma tion o n pag e 1 79). Non-Executive Direc tors Non-E xec utive Dire ctor s are appointe d for initial thre e-y ear terms whic h thereaf te r may be ex tend ed, subjec t to re-e lecti on at each AGM. Ap poi ntm ent d ate t o th e Boa rd Curr en t ten ure a s at 1 Ja nuar y 2 022 Date of latest appointment letter A ppointment let ter expi r y date Mark Breuer 1 F ebru ar y 202 1 1 1 months 25 Januar y 202 1 1 Feb ruar y 2024 Richard Dak in (i) 6 Augu st 201 3 8 year s, 5 mo nths 5 A ugust 201 9 6 A ugust 2022 Claudia A rne y 1 8 May 201 5 6 year s, 7 mo nths 5 M ay 202 1 1 8 M ay 202 4 Dame Cilla Snowball 1 S eptemb er 201 5 6 year s, 4 mont hs 9 Aug ust 2021 3 1 A ugust 2024 Helen Gordon 1 Januar y 201 8 4 years 4 November 20 20 3 1 D ece mber 2023 Luc inda Be ll 1 Januar y 201 9 3 years 1 1 November 202 1 1 Januar y 2025 Sanjeev S harma 1 O ctob er 202 1 3 months 6 Aug ust 2021 1 Oc tobe r 202 4 No te: (i) Ric hard D akin wil l rea ch his nin th anni ver sar y o n the D er wen t Lond on Bo ard du ring 2022 . It is ant icip ated t hat h e will st ep dow n as a Dire ct or by th e end o f 2022. Furtherinformation on Non-Executive Director succes sion is on page 1 46. Summar y table for the Chairman and Non-Executive Director s Operat ion Im plem ent atio n for 20 22 Chair man T he remun eration of t he Chairm an is set by t he Bo ard (excluding t he Chair man). Th e Chairman re cei ves an ann ual fee . Th e Chairman may b e eligib le to rec eive b enef its inc luding, b ut not limi ted to, the u se of a dri ver , s ecr etarial p rovis ion, of f ice co sts an d travel c ost s. Th e Chairman do es no t rec eive p ension c ontr ibution s or par ticipate i n incentiv e arrangements. Mark Br euer ’s i nc lusive C hairman fe e is £250,00 0 per annum a nd remain s unchang ed fro m 202 1 . Mark d oes n ot rec eive th e ben efit s of a driv er or c ontribu tions to his of f ice c os ts. Non- E xecut ive Director s Th e remuner ation fo r Non-E xec utive D irec tors is se t by the Executive Di rectors. Non-E xe cuti ve Dire ctors r ece ive a ba se fe e, plus addi tional fe es for c ommit tee c hairman ship, commit te e memb ership an d for the Senior Independent Director . Non-E xe cuti ve Dire ctors m ay be elig ible to rec eive b enef its includin g, but n ot limite d to, sec retar ial prov ision and tr avel costs. Non-Execu tive Di rec tors do not rec eive pension contributions or par ticipate i n incentiv e arrangements. With e f fec t from 1 J anuar y 2022, the Bo ard have ap prove d the f ollowing inc rease s to Non-E xe cuti ve Direc tor fe es (see p age 1 73) : Non- Executiv e Di rector fees 2022 f ee £’000 2021 fe e £’000 Bas e fee 52.5 4 7. 5 Co mmit tee ch air 10 . 0 7. 5 Senior Independent Director 10 .0 1 0.0 Co mmit tee me mber ship fee 5.0 4.0 In additi on to their c hairmanship f ee, a C ommit te e Chair also rec eiv es the c ommit tee m embe rship fe e. Th e Non-Exe cutive Director b ase fe e and Se nior Indep end ent Dire ctor fe e were l ast inc rease d with e f fec t from 1 Jan uar y 201 9. Th e commit te e chair and m embe rship fe es were l ast inc reas ed with ef f ec t from 1Jan uar y 201 5. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 180 T ot al remunera tion in 20 2 1 (audited) The t able below s ets ou t the remune ration paid to e ach Direc tor for th e financial y ears end ed 31 Dec ember 2021 and 3 1 De cemb er 2020 as a single fig ure. A full b reakdown of f ixed p ay and pay for p er forman ce in 202 1 c an be foun d on page s 1 82 to 1 85 . Executive Directors £’000 Fi xed p ay P ay fo r per f orm anc e (variab le pay) Other items in th e nat ure o f remuneration (vi) To t a l remuneration Salar y (i) Ta x a b l e benefi ts Pension an d lif e assurance (ii) Subtotal Bonus Perf ormance LT IP s (iii)(iv)(v) Subtotal Cash Deferred 2 021 Paul William s, CEO 612 23 121 75 6 28 4 – 222 506 – 1, 2 6 2 Damian W isniewsk i, CFO 490 23 95 608 227 – 17 8 4 05 1 1, 014 Emily Prid eaux (vii) 342 15 57 41 4 15 9 – 48 207 3 624 Nigel George 490 22 97 609 227 – 17 8 405 – 1, 014 Davi d Silverma n 49 0 21 96 6 07 227 – 17 8 405 – 1 , 012 Former Executi ve Di rec tor Simon Silver (viii) 97 11 22 13 0 43 – 15 3 19 6 – 326 2020 Paul William s, CEO 600 23 13 5 75 8 597 – 856 1, 4 5 3 3 2 , 2 14 Damian W isniewsk i, CFO 480 23 10 7 610 478 – 856 1, 3 3 4 1 1, 9 4 5 Simon Silver 5 81 51 14 6 7 78 578 – 1 ,12 5 1,7 0 3 – 2, 4 81 Nigel George 480 22 10 7 609 478 – 856 1, 3 3 4 3 1, 9 4 6 Davi d Silverma n 4 80 21 10 6 6 07 47 8 – 856 1, 3 3 4 3 1, 9 4 4 Former Executi ve Di rec tor John B urns – – – – – – 52 3 523 – 523 Non-Executive Direc tors £’000 20 21 2020 Fees Ta x a b l e benefi ts To t a l Fees Ta x a b l e benefit s To t a l Mark Breuer (ix) 17 3 – 17 3 – – – Richard Dak in 67 – 67 67 – 67 Claudia A rne y 71 – 71 71 – 71 Cilla Snowball 67 – 67 67 – 67 Helen Gordon 57 – 57 56 – 56 Luc inda Be ll 71 – 71 71 – 71 Sanjeev S harma (x) 15 – 15 – – – Former Non-Executive Director s John B urns (xi) 93 – 93 25 0 – 25 0 Simon F raser (xii ) 61 – 61 77 – 77 Not es: (i) In res pon se to t he Co vid - 1 9 p ande mic, D irec tor s’ bas e sal arie s and f ee s were s ubje ct to a vo lunt ar y 20% wai ver f or th e thre e- mont h per iod b et wee n 1 Ap ril 2020 an d 30 Jun e 2020. T he wai ve d remun era tion wa s use d for c hari tab le don atio ns and s pon sor ships . Th e sal arie s and f ees d iscl ose d for 2 020 are b efor e the v olunt ar y 20% wa ive r . (ii) 2020 p ensi on co ntri buti ons we re c alcul ated b ase d on s alar ies b efo re the v olun tar y 20% w aive r . (iii) Pe rf orm anc e L TIP s for 20 21 relat e to the 2019 PSP aw ards w hich wil l ves t on 14 March 2022 a nd 1 5 Au gus t 2022 and f or whi ch the p er fo rman ce c ondi tio ns rel ate d to the y ear en ded 31 De ce mbe r 2021 . Th e value i s bas ed on a n est imate of e xpe ct ed ve stin g of 1 8. 1% and the a vera ge sh are pr ice o ver th e las t thre e- mont hs of th e fin anc ial ye ar end ed 31 De ce mbe r 2021 of £33 .90. T his am ount in clud es th e value o f addi tion al shar es awa rde d in res pe ct of di vid end e quiv alent s. Fo r det ails o f the am ount a tt ribu tab le to sha re pri ce app rec iatio n se e pag e 1 85. (iv) In the 2 020 Rep or t & Ac co unts , the p oten tial va lue of 2018 PSP awa rds ve sti ng for w hich t he pe rf orm anc e con diti ons re late d to th e yea r ende d 31 De cem ber 202 0 was ca lcul ated u sing th e aver age s hare p ric e for th e thre e- mont hs en ded 31 D ec embe r 2020, b eing £29 .80. T he 2020 P er for man ce LTIP fig ure s in the t able a bov e have b ee n res tate d to re fle ct th e act ual num ber o f 201 8 PS P award s which v es ted on 16 Marc h 2021 using t he sha re pr ice on t he day o f ves ting ( bein g, £ 33.03). T he re sta ted va lue pro vid es a dif fe ren ce of £ 3.23 p er ve ste d shar e in co mpar ison t o the e stim ates c ont aine d in th e 2020 Rep or t & Ac co unts o n pag e 1 59. Fur t her de tail s of ve stin g is pro vide d on p age 193. (v) T he 2018 PSP aw ards wh ich ve ste d on 16 March 2021 we re gr ante d on 6 Mar ch 201 8 wh en th e share p ric e was £29 .48. B et we en gra nt and t he ve stin g date, t he sh are pr ice h ad inc reas ed t o £33. 03 whic h equ ated t o an inc reas e in valu e of ea ch ve sting s hare e qui valen t to £3. 55. T he pro por t ion of t he valu e disc los ed in th e sing le fig ure at tr ibut able t o sha re pri ce gr ow th is th ere fore 10.7%. Th e Rem uner ation C om mit tee di d not ex erci se dis cre tion in r esp ec t of the s hare p ric e appr eci atio n. (vi) Inc lude d in the c olum n for ‘o ther i tems i n the na ture of r emun erat ion’ is t he gra nt und er th e Der we nt Lon don Sh are save P lan m ade on 15 Apr il 2021 . T hes e have b ee n calc ulat ed ba sed o n the mi ddle ma rket s hare p ric e on the d ate of g rant b eing £ 33.5 7 minus t he valu e of the a wards a t the op tion p ric e whic h was £25. 93. Fur th er inf orm ation o n the De rw ent Lo ndo n Shar esa ve Pl an is on p age 186. (vii ) Emil y Prid eau x was ap poin ted an E xe cut ive D irec tor o n 1 Marc h 2021 . Th e remun era tion f or 2021 , is t he ac tual re mune rati on pai d to Emily P rid eaux s inc e her ap poin tme nt. (viii) Simo n Silve r ret ired a s an E xec uti ve Dire ct or on 26 Fe bru ar y 2021 . Th ere wa s no pa yme nt fo r loss o f of fi ce on Si mon c easi ng to be a D ire ctor. Simo n con tinue d to re cei ve his sal ar y, ben efi ts an d pen sion un til his r etir emen t date. S imon w as elig ible to e arn a b onu s for th e per iod t o 26 Feb ruar y 2021 o n a pro ra ta dail y basi s (see p age 184). Simo n’ s 2019 PS P award s will ve st in a cco rdan ce wi th th e nor mal tim eta ble on 14 March 20 22, subje ct to p er fo rman ce, a nd a pr o rata r edu cti on for t he p erio d 26 Feb rua r y 2021 to the en d of the p er fo rman ce p eri od (se e pag e 1 85). (ix) F or th e per iod 1 F ebr uar y 2021 to 14 May 2021 , Mar k Breu er as C hairm an De sign ate re cei ve d a bas e fee o f £47 ,50 0 pe r annum a nd a co mmit te e memb er ship fe e of £ 4,0 00 pe r annu m. From 14 May 2021 , Ma rk Bre uer to ok ov er th e role o f Non-E xe cu tive C hair man. Hi s inclu siv e Chair man fe e fr om this d ate was £25 0,00 0 pe r annum . (x) Sanj eev S harm a was ap poin ted a N on-E xe cut ive Di rec tor on 1 O ct obe r 2021 . Th e fee s for 20 21 , a re the a ctu al fe es pai d to Sa njeev S harm a sinc e his ap poin tme nt. (xi) Fo r the p eri od 1 Jan uar y 2021 to 14 May 2021 , Joh n Burn s’ fe es as No n-E xec uti ve Ch airm an was £250 ,00 0 per a nnum su bjec t to a pro r ata re duc tio n. In or der to un der t ake his dut ies , John B urns w as als o pro vide d wit h a dri ver an d se cret ar y, toge ther w ith a c ont ribu tion t o his of fi ce r unning c os ts. (xii) Sim on Fras er s tepp ed do wn fr om the B oar d on 31 Oc tob er 2021 . Th e fe es fo r 2021 show n in the t able ab ove a re the a ctu al fe es pa id to Sim on Fras er unt il his re tire ment d ate. 181 Financ ial Stat ements Strategic repor t Governance R E MUNE R A T ION COMMI T T EE RE PORT CONTINUED Executive Directors ’ remun eration in 2 02 1 Remune ration for E xec utive D irector s compr ises th e following elem ents: T ot al remuneration V ariable pay Performance-based Annual bonus | L ong- term incentive Fixed pay Base sal ary | Benefits | Pension Fixed p ay in 2 02 1 ( audited) Ba se sa lari es and f ees Sal aries for t he Exe cuti ve Direc tors were in creas ed by 2.0% with e f fec t from 1 Januar y 2021 , which wa s in line with the c ost of li ving incre ase awarde d to the wider wor kf orce (se e page 1 89) . Emily Prid eaux was app ointed an E xec utive Dire ctor o n 1 March 202 1 ; fro m herapp ointment , Emily’s base s alar y was £ 4 1 0,00 0 per annum. During 2020, in resp onse to the C ovid - 1 9 pand emic, Dire ctors’ b ase sal aries and f ees wer e subject to a vo luntar y 20% waive r for the thre e-mont h perio d bet wee n 1 April and 30 Jun e 2020 . T he comp arison b ase sal ar y for 2020 detailed in th e table be low is the Direc tors’ bas e salarie s befor e the 20% waive r . Th e actual b ase sal aries paid to D irector s during 2020 is detailed on p age 1 60 of th e 202 0 Rep or t &Ac counts . 20 21 base salary/ fee 2020 ba se s al ar y/f ee E xecut ive Dire ct ors Paul William s, CEO £6 1 2 ,000 £600, 000 Damian W isniewsk i, CFO £ 48 9,60 0 £480, 000 Emily Prid eaux (i) £ 3 41, 6 6 7 – Nigel George £ 48 9,60 0 £480, 000 Davi d Silverma n £ 48 9,60 0 £480, 000 Former Executi ve Di rec tors Simon Silver (ii) £96,833 £58 1 ,000 Non-Executive Director s Mark Breuer (i) £17 2 , 6 0 5 – Richard Dak in £67 ,00 0 £67 ,000 Claudia A rne y £7 1 , 000 £7 1 ,000 Cilla Snowball £67 ,0 00 £67 ,000 Helen Gordon £ 5 7,1 6 7 £ 55,50 0 Luc inda Be ll £7 1 , 000 £7 1 ,000 Sanjeev S harma (i) £14 , 8 7 5 – Former Non-Executive Director s John B urns (iii) £ 9 2 , 74 2 £ 25 0,000 Simon F raser (iv) £6 0,679 £77 ,000 Not es: (i) Mar k Breu er , Emi ly Pri deau x and S anje ev Sha rma we re app oint ed to th e Bo ard on 1 F ebr uar y, 1 Marc h and 1 O ctob er 2021, resp ec tiv ely. Th e bas e sal arie s show n in the t able ab ove ar e the ac tua l fee s/sal ar y pai d to the m for t he pe rio ds the y were D ire ctor s. (ii) S imon Si lver ’s sal ar y rema ine d unch ange d at £5 81 , 00 0 per an num fo r the p erio d 1 Jan uar y 2021 until h is ret irem ent da te on 26 Fe brua r y 2021 . (iii) Jo hn Bur ns’ fe e rem aine d unc hange d at £250 ,00 0 per a nnum fo r the p eri od 1 Jan uar y 2021 unt il his ret irem ent da te on 1 4 Ma y 2021 . (iv) From M ay 2021 , Sim on Fras er ’s fee re duc ed f rom £7 7 , 00 0 to £69,5 00 p er ann um as Mar k Bre uer su cc ee ded h im as Cha ir of the N omin ation s Co mmit te e. Simo n Fras er ste ppe ddow n fro m the B oard o n 31 Oct obe r 2021 . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 1 82 Benefits E xecut ive Dire ctors are e ntitled to a c ar and fu el allowance , private me dical insur ance and lif e assuran ce. Fur ther d etails of the t a xable ben efit s paid in 202 1 can b e found in th e table be low . Car and fuel allowance Private medi cal insurance Tot al 2021 t ax abl e ben ef it s E xecut ive Dire ct ors Paul William s, CEO £ 1 6,000 £ 7, 4 8 7 £23, 487 Damian W isniewsk i, CFO £ 1 6,000 £ 6,7 91 £ 22, 791 Emily Prid eaux (i) £ 13 , 3 3 4 £2 ,267 £ 15 ,6 0 1 Nigel George £ 1 6,000 £ 6 ,1 6 1 £ 2 2 ,1 6 1 Davi d Silverma n £ 1 6,000 £ 4,943 £20,9 43 Former Executi ve Di rec tors Simon Silver (ii) £ 9,0 81 £1, 9 8 3 £ 11 , 0 6 4 Not es: (i) Emily P rid eaux w as app ointe d an E xe cuti ve Di rec tor on 1 M arch 20 21 , t here for e her b enef it s sho wn in the t able a bov e are fo r the p eri od 1 Mar ch to 31 De cem ber 2 021 . (ii) T he b enef it s whic h Simon S ilver r ec eiv ed re maine d unc hang ed fo r the p eri od 1 Jan uar y 2021 unt il his re tirem ent da te on 26 Fe bru ar y 2021 . Pension and life assurance Paul Williams, D amian Wisniewski, Nige l Geor ge and Simon Silver e ach rec eive d a cash s upplement of 1 7 .5% of sal ar y . Davi d Silverman and Emily Pride aux rec eive d £4,0 00 and £ 3,333, resp ec tively, into the Group’s Fidelit y Mas ter T rus t pensio n schem e with the re mainder of the ir entit lement paid as a c ash supp lement. No o ther Dire ctors ar e accr uing benef its unde r a money p urchase p ension s cheme . From 1 Januar y 2022, the E xecu tive Dire ctor p ension prov ision has b een align ed with th e contr ibution availab le to the wider wor kf orce at 1 5% of sal ar y . The re was no chang e in the life as surance b enef its re ceiv ed by the E xe cutiv e Direc tors in 202 1 . The c hange in the annual c ost is due to incre ases in life a ssuranc e premiums. Pay for perf ormance ( audited) Determination of 20 2 1 annual bonus outcome The p er form ance me asures s et for the y ear under re view were a c ombination of f inancial-bas ed metr ics (wor th 75% of the bo nus potential ) and st rategic targ ets (wor th 25% of the bonus p otential). The m ax imum bonus p otential for E xec utive D irector s is 1 50 % of salar y. Base d on act ual 202 1 p er for mance, th e annual bonus p ayout f or Exe cuti ve Direc tors is 30.9% of th e max imum potential (2020: 96.3%; 2 01 9: 97% ; 201 8: 68.5% ). The C ommit tee exerc ised it s discreti on to reduc e the 2020 annual bonus p ayout by 30.0% (f rom 96.3% to 66.3%). The C ommit tee c onside red the f ormulaic p er form ance ou tcome alongsi de broade r pers pec tive s including: under lying busine ss per f ormanc e and af fordabili ty ; the exp erienc e of shareh olders; and th e exper ience of e mployee s and othe r stakeho lders. P oints spe cifi cally co nsidere d are set ou t in the Chair ’ s Annual s tateme nt on page s 1 72 and 1 73. Th e Commit te e determine d that it was no t approp riate to apply discre tion to adjust the fo rmulaic ou tcome . 202 1 annu al bonus o utc ome Bon us payable f or finan cial-base d pe rf orman ce 14 . 5% Bon us payable f or stra tegic tar get pe r forman ce 16 . 4% T ot al bon us paya ble fo r 202 1 (% of th e ma ximum) 30.9% Finan cial-bas ed me tric s Performance m easure Weighting % of b onu s Basis of calculation Threshol d (ii) % Ma ximum (iii) % Actual % Payable % T o tal ret urn 3 7. 5 T ot al retur n versu s other m ajor real e state c ompa nies (i) 7. 7 22.9 5.8 0.0 T otal proper t y retu rn ( TPR) 3 7. 5 Versus t he MSCI IP D Quar ter ly Central London Of fic es T o tal Ret urn Index 5.9 7. 9 6.3 14 . 5 T ot al bon us paya ble fo r fina ncial-ba se d metr ics 14 . 5 Not es: (i) Th e major r eal es tat e com panie s co ntai ned in t he c ompa rator g roup f or th e 2021 annua l bonu s are: Big Yello w Gro up plc, T he B riti sh La nd Co mpan y plc , Capi tal & C oun ties Pro per t ies p lc, CL S Holdin gs plc , Gre at Por t land E st ates p lc, Ham mer son p lc, He lic al plc , Lan dse c plc , Lon donM etri c Pro per t y plc , Se gro pl c, Sh af tesb ur y plc , UK Co mmer cial Pro per t y, Unit e Grou p plc an d Works pac e Gro up plc . (ii) F or ac hiev ing th e thre sho ld per f orma nce t arg et, i. e. at th e MSCI I PD Ind ex or me dian to tal re tur n again st our s ec tor p eer s, 22.5 % of the m ax imum b onus o ppo r tunit y wi ll be com e payab le. (iii) T ot al ret urn p ayou t acc rue s on a s traig ht-l ine ba sis b etw een t he th resh old le vel f or me dian p er for manc e and m ax imum p aym ent fo r upp er quar t ile pe rf orm anc e or be tt er . ForT PR , the p ayou t acc rue s on a st raig ht-li ne ba sis be tw een t he thr esh old le vel fo r Inde x per f orma nce a nd ma xim um pay men t for In dex + 2% . 183 Financ ial Stat ements Strategic repor t Governance R E MUNE R A T ION COMMI T T EE RE PORT CONTINUED Str ategic targe ts Performance m easure Li nk to strategic objectives (i) T arget range (ii) Ma xi mum award 20 21 achievement Propor tion awa rde d f or 2 021 Vo id management: This is me asured b y the Gro up’ s avera ge EPR A vac ancy rate ove r the ye ar . 1. 2. 8% to 2% 5.0 % 1. 6 % 5.0% T enant retention: This is meas ured by t he per cent age of ten ants that remain in th eir spac e when t heir leas e expire s. 1. 2. 50% to 75% 5.0 % 77% 5 .0% St aff satisf action (iii) : Staf f sur v eys are us ed to as ses s this me asure. In ass ess ing this targ et, th e Commi tte e will co nsider any v arianc e in staf f satisfaction s cores bet ween genders . 3. 80% to >95% of st af f to be satis fie d or be tte r 2.5% 9 0.5% 1. 8 % Accident incident rate (iv) : This is calc ulated b ase d on the num ber of dev elopme nt RIDDOR injurie s during th e year , multipli ed by 1 0 0,000 an d divi ded by t he numbe r of site wor kers (indu ctio ns) . 4. >0% to 5% reduction 2.5% 72.2% reduction 2.5% Por tfolio development potential : This is mea sured b y the pe rcent age of the Gr oup’ s p or tf olio by are a, whe re a pote ntial dev elopme nt sch eme has bee n identified. 1. 35% to 50% 2.5% 4 7. 6 % 2 .1% Net Zero C arb on Pathway t arget s : Thes e meas ures have b een s et to be con sistent w ith our ambi tion to be n et zero c arbo n by 2030. Carbon intensit y (v) : This is meas ured by e missio ns intensit y p er m 2 of lan dlord-c ontro lled f loor are a acros s our man aged l ike-for -like por t fo lio. 4. -5% to - 1 0% 5.0 % -1% 0.0% Energ y i ntensit y (v) : This is meas ured by e nerg y c onsump tion (kW h) per m 2 of lan dlord-c ontro lled f loor are a acro ss our man aged l ike-for -like por t fo lio. 4. - 2% to -4% 2.5% +2 % 0.0% 25% 16 . 4% Not es: (i) Suc ce ss a gains t our st rate gic obj ec tive s is me asur ed us ing our K PIs (s ee pa ges 4 4 to 4 9) and re warde d thr ough o ur inc ent ive s che mes a nd annu al bo nus. T he re fere nc es ab ovesh ow th e link be tw een o ur st rateg ic obje ct ive s and o ur annua l bon us tar get s (fur th er inf orm ation o n our f ive s tra tegic o bjec ti ves c an be f oun d on pa ges 32 to 4 3). (ii) P ayou t acc ru es on a s traig ht-l ine ba sis, b et we en thr esh old an d ma ximum p er fo rman ce. (iii) Th e vari ance b et we en gen der s in res pon se s to the e mploy ee s ur vey wa s take n into ac co unt by t he Co mmit te e whe n dete rmini ng the p ayo ut for s taf f s atis fac tion . Th e resu lts ofth e empl oye e sur ve y show ed a 0.7% va rian ce be tw een g end ers , with f emal e sati sfac tio n bein g at 95.6 % and ma le sat isfa cti on at 94 .9%. (iv) Our a cci dent i ncid ent ra te in 2021 was 34 .23 (2020: 1 23. 3) a red uct ion of 72.2% . For t he 2022 ann ual b onus , the t arge t will c hange t o acc iden t fre que ncy r ate (se e note 2 o n pa ge 1 79). Our a cci dent f re quen cy ra te for 2021 wa s 1 .26 (2020: 2.72) a re duc tio n of 53.7% (se e pa ge 66). (v) Ac hiev emen t of th e car bon an d ene rg y inte nsit y t arge ts ha ve be en af fe ct ed pr imari ly by th e Cov id-1 9 pan demi c. A s buildi ng oc cup ation r ose t hrou gho ut 2021 fo llowin g the rel eas e of loc kdown r est ric tio ns, th ere wa s a sub seq uent i ncre ase in e ner g y con sump tion c omp are d to the si gnif ic ant re duc tion i n 2020 (se e pag e 7 4). (vi) Th e str ategi c tar gets f or th e 2022 annu al bo nus are a vaila ble in no te 2 on pa ge 179. The to tal bonus f or each exe cuti ve is there fore: Bonus payable Cash bonus payabl e £’000 Deferred bo nus % of ma ximum % of salar y £’000 % of salar y E xecut ive Dire ct ors Paul William s, CEO 30.9 4 6.4 28 4 – – Damian W isniewsk i, CFO 30.9 4 6.4 227 – – Emily Prid eaux (i) 30.9 4 6.4 15 9 – – Nigel George 30.9 4 6.4 227 – – Davi d Silverma n 30. 9 46.4 227 – – Former Executi ve Di rec tors Simon Silver (ii) 30.9 4 6.4 44 – – Not es: (i) Emily P rid eaux e arn ed a b onus e qual t o £1 5 9,40 0 in res pe ct of h er rol e as an E xec uti ve Dir ec tor (1 March t o 31 Dec emb er 2021 ) and t his am ount is d iscl ose d in th e tabl e abov e. Emily P rid eaux a lso e arn ed a b onus e qual to £ 4 0,600 i n resp ec t of he r role p rior t o bein g app ointe d as an E xe cuti ve Di rec tor (1 Janua r y to 28 Feb rua ry 2 021 ). He r tota l bon us ear ne d in res pe ct of 2021 wa s ther efo re £200 ,00 0. (ii) Simo n Silve r ret ired a s an E xec uti ve Dire ct or on 26 Fe bru ar y 2021 and hi s bon us pay out wa s calc ula ted on a p ro rat a daily b asis f or th e per iod 26 F ebr uar y 2021 to th e end o f the performa nce per iod. In acc ordanc e with our Remune ration Pol icy , b onuses of up to 100% of base s alar y are pai d as cash. A mount s in exces s of 1 0 0% are defer red into shar es and rele ased af ter t hree ye ars, subjec t to cont inued emplo yment . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 184 Per formance Share Plan (PSP ) vesting of aw ards The G roup grante d share-b ased award s under the P SP on 1 2 March 201 9 an d 1 4 Aug ust 201 9. The g rant made in Aug ust 201 9 was only to Paul Williams to ref lec t his increas e in salar y (from £ 4 4 2,000 to £ 600,0 00) , fol lowing his promotion to C hief Exe cuti ve on 1 7 May 201 9. T he March and A ugust 201 9 gr ants were subje ct to the s ame per f ormanc e condit ions over a th ree- year pe rf ormanc e peri od which en ded on 3 1 Dece mber 2 0 21 . As sh own in the tab le below, the PS P awards granted in 201 9 will ve st on 1 4 March 2022 and 1 5 A ugust 2022 at 1 8. 1 % of ma ximum opp or tunit y . Performance m easure Weighting % of aw ard B asis of calcula tion Threshol d (ii) % Ma ximum (iii) % Actual % % vesting/ estimated vesting T otal proper t y retu rn ( TPR) 50 MSCI IPD Q uar terly UK A ll Prop er t y T otal Re turn Inde x 4.9 7. 9 4.6 0.0 T o tal shar eholde r return ( TS R) 50 F TS E 350 Supe r Sec tor Real E state Ind ex (i) 12 . 0 7 1. 2 2 4 .1 1 8 .1 Not es: (i) T he c onst itu ents o f the F TS E 350 Su per S ec tor Re al Es tate In dex a s at the s tar t of t he Pe rf orm anc e Per iod (i .e. 1 Jan uar y 2019 ). (ii) F or achi evi ng the t hres hold p er fo rman ce t arge t, i.e . at the M SCI IP D Inde x or me dian TS R again st our s ec tor p eer s, 22. 5% of the m ax imum awa rd will v es t. (iii) For T SR (whic h is ca lcul ated b ase d on a th ree -mo nth we ekda y aver age Re tur n Index e xclud ing UK pu blic h olid ays en ded o n: ( 1 ) th e day b efor e the p er for man ce p erio d st ar t date; an d (2) th e per f orma nce p eri od en d date) v est ing ac cru es on a s trai ght- line b asis b et wee n the th res hold le vel f or me dian p er for man ce an d ma ximum le vel f or upp er qu ar tile pe rf orm anc e or be tt er . Fo r TPR , ves ting a ccr ue s on a st raigh t-lin e bas is be twe en th e thre sho ld lev el fo r Index p er fo rman ce an d ma ximu m leve l for In dex +3%. The C ommit tee d etermine d that it was not ap propriate to app ly discretio n to adj us t the form ulaic outc ome. T herefor e, the ves ting for ea ch exec utive will b e: Number of awards granted Num ber o f sha res ve sti ng ba se d on perf ormance ( 18. 1% ) Divide nd equivalents (i) (num ber o f sha re s) Tota l numb er of s har es ve st ing Tota l est ima ted v alu e of aw ard o n ves tin g Valu e on ve st ing at tr ibu ta ble t o shar e price growth E xecut ive Dire ct ors Paul Willia ms, CEO (March) 2 7,1 7 4 4 , 9 18 335 5 ,253 £17 8 , 0 7 7 £ 7,1 9 7 (August) 6 , 713 1, 2 14 84 1, 2 9 8 £4 4,0 03 £ 5 , 8 15 ( To t a l ) 3 3,887 6 ,1 3 2 419 6 , 5 51 £ 222,080 £ 13 , 0 12 Damian W isniewsk i, CFO 2 7, 17 4 4 , 9 18 335 5 ,25 3 £17 8 , 0 7 7 £ 7,1 9 7 Emily Prid eaux (ii) 7, 3 7 7 1, 3 3 4 91 1, 4 25 £ 48,30 8 £1 , 952 Nigel George 2 7, 17 4 4 , 9 18 335 5 ,25 3 £17 8 , 0 7 7 £ 7,1 9 7 Davi d Silverma n 2 7, 17 4 4 , 9 18 335 5 ,25 3 £17 8 , 0 7 7 £ 7,1 9 7 Former Executi ve Di rec tor Simon Silver (iii) 35,7 20 4,229 288 4 , 517 £ 1 5 3 ,12 7 £6, 1 88 Not es: (i) In ac cor danc e wit h the P SP ru les, t he Re mune ratio n Co mmit te e has dis cre tion t o allow P SP pa r ticip ants t o rec eiv e the b ene fi t of any di vide nds p aid on v est ing sh ares b et wee n the g rant d ate an d the ve sti ng date in t he fo rm of ad diti onal v est ing sha res . The d ivi den d equi valen ts fo r Paul W illiam s’ Aug ust aw ard is an e stim ate an d the ac tua l numb er of sha res wil l not b e kno wn unt il the 2021 F inal Di vid end is p aid on 1 J une 2022. (iii) Emily P rid eaux ’s PS P award wa s gran ted in r esp ec t of he r role pr ior to b eing a ppo inte d an E xecu tiv e Dire cto r . (iii) Simo n Silve r’s awa rd was s ubjec t to a pr o rata r edu cti on for t he pe rio d 26 Feb rua ry 2 021 to the en d of th e per f orma nce p eri od an d is subje ct t o the no rma l holdi ng per iod o f two years. The v alue of the ves ting awards is bas ed on the av erage shar e price o ver the la st thre e months of th e financial y ear ende d 3 1 D ecem ber 202 1 , being £ 33.90. Th e estimate d value of the ve sting awards has b een inc luded wi thin the ‘single fig ure’ total remuner ation table on p age 1 81 . The C ompany ’s share pric e was £32.53 and £29.4 2 at th e point of grant , resp ecti vely, (March and Augus t 20 1 9) . Based on the average share pric e over the l ast thre e month s of the finan cial year en ded 31 Dec ember 2021 , b eing £ 33.9 0, t he C o mpan y ’ s shar e p ric e h as r ise n b y £1 . 37 and £ 4.48, sinc e the March an d August g rant dates, r espe cti vely . T he propo r tion of the value dis close d in the single f igure at tribut able to share pr ice grow th is th erefore 5 .9% for Paul Williams an d 4.0% for the ot her E xecu tive Dire ctors (th e actual value at tr ibutable to sh are pric e grow th is co ntained in th e table abo ve) . The R emuneratio n Commit te e did not cons ider that it was n ece ss ar y to exercise disc retion inresp ect o f share pric e fluc tuations sinc e grant. O verall, th e Commit te e consid ers that th e Remunerati on Polic y has oper ated as it inten ded during 2021 and that the p ay outcom es are aligne d with the ex perie nce of shar eholder s and other s takehold ers. Holding period In acc ordanc e with the P SP rules , veste d awards are subjec t to a two -year ho lding perio d whereby at le ast the af ter -ta x numbe r of veste d share s must be re tained b y the exec utive f or a minimum of two ye ars from t he point of ve sting. Grant Grant date Perfor mance period V esting date Holding period Holdi ng period ceases 2 0 17 G r a n t 20 Mar ch 201 7 1 Janu ar y 201 7 to 31 Dec ember 201 9 20 Mar ch 2020 T wo years 20 Marc h 2022 2 0 18 G r a n t 6 Marc h 201 8 1 Janua r y 20 1 8 to 31 Dec embe r 2020 8 March 2021 T wo years 8 March 2023 2 0 19 G r a n t s 1 2 March 201 9 1 4 A ugust 201 9 1 Januar y 201 9 to 31 Dec embe r 202 1 1 2 March 2022 1 4 A ugust 2022 T wo yea rs 1 2 Marc h 202 4 1 4 A ugust 2024 2020 Grant 1 3 Mar ch 2020 1 Jan uar y 2020 to 3 1 De ce mber 2022 1 3 Marc h 2023 T wo yea rs 1 3 March 2025 20 21 G ra n t 1 2 March 2021 1 J anuar y 2021 to 3 1 D ec embe r 2023 1 2 Mar ch 202 4 T wo yea rs 1 2 Ma rch 2026 185 Financ ial Stat ements Strategic repor t Governance R E MUNE R A T ION COMMI T T EE RE PORT CONTINUED Gran t of PSP awar ds On 1 2 March 2021 , the C ommit te e made an award under t he Group’s 2 01 4 P SP to Exe cuti ve Direc tors on th e following bas is: Num ber o f shares awarded Fac e val ue of aw ard Paul William s, CEO 3 6 , 9 11 £ 1, 22 3 , 9 6 9 Damian W isniewsk i, CFO 29,5 29 £ 9 7 9 ,1 8 2 Emily Prid eaux 24 ,728 £ 8 19 , 9 8 0 Nigel George 29,5 29 £ 9 7 9 ,1 8 2 Davi d Silverma n 29,5 29 £ 9 7 9 ,1 8 2 Awards were gr anted as nil-co st optio ns and equi valent to 200% of ba se salar y, with 22.5% of the award ve sting at thres hold per f ormanc e. The s hare pric e used to de termine the lev el of the awards was t he closing share p rice on t he day immediately pr ece ding the grant date of £33. 1 6 (note: a share pric e of £33. 1 4 was use d to determine th e level of P SP awards grante d in March 2020 ). The p er forman ce pe riod will r un over th ree f inancial year s and, depe ndent up on the achie vement of t he per fo rmanc e conditi ons, the awards w ill vest on 1 2 Marc h 202 4 an d will be subje ct to a t wo-ye ar holding peri od as out lined in the t able on pag e 1 85. 50% of th e award vest s acc ording to the Group’s relativ e TSR per fo rmanc e versus t he cons tituen ts of the F TSE 35 0 Super S ecto r Real Est ate Index with th e following ves ting prof ile : TSR p er fo rman ce o f the C omp any re lati ve to t he TSR o f the c ons tit uen ts of th e F TSE 35 0 Sup er S ec tor Re al Es tate In dex te ste d ov er thr ee -ye ar pe rf orm anc e per iod e ndin g 31 Dec emb er 2023 Ves ting (% o f TSR p ar t of awa rd) Be low Medi an 0% Me dian 22.5% Upper quar tile and ab ove 10 0 % St raight-lin e ves ting oc curs b etwe en th ese p oints 50% of th e award vest s acc ording to the Group’s TPR ver sus the MSC I IPD Quar terly UK Al l Prope r ty T ot al Return Index wi th the fol lowing ve sting p rof ile: An nuali se d TPR v ers us the M SCI IP D Qua rt erly U K All P rop er t y Ind ex tes ted o ver t hre e yea rs Ves ting (% o f TSR p ar t of awa rd) Be low Ind ex 0% At Ind ex 22.5% Index + 2% 10 0 % St raight-lin e ves ting oc curs b etwe en th ese p oints The C ommit tee h as discretio n to reduc e the ex tent of ve sting in the e vent that it c onside rs that pe r formanc e against ei ther me asure is inco nsistent wit h underly ing financial p er forman ce and / o r the exp erienc e of key stake holders . At least th e af ter-ta x numb er of ves ted share s must be re tained f or a minimum holding peri od of t wo years . T o the e x tent that awards ve st, the C ommit tee h as discretio n to allow the E xec utive Dire ctor s to rec eive the b enef it of any divi dends paid o ver the ve sting p eriod in th e form of addit ional ves ting shares . Grant of Shares av e Plan options On 1 5 Apr il 20 21 , th e Compan y granted op tions under t he Der went L ondon Shar esave P lan. Th e three -year c ontrac t for the O ptions st ar ted on 1 June 2021 . The se Opt ions are exercis able at a pric e of £2 5.93 p er share f rom 1 June 202 4 and are n ot subject to any p er form ance conditions. Executi ve Di rector s Monthly saving amo unt Number of s har es under option Option price Mar ket p ric e at g ran t Fac e val ue of aw ard (i) Valu e of award (ii) Damian W isniewsk i, CFO £ 12 5 17 3 £25 .93 £ 33.57 £5,808 £1, 3 2 2 Emily Prid eaux £25 0 3 47 £25. 93 £ 33.57 £ 11 , 6 4 9 £ 2 , 6 51 Not es: (i) Th e fac e value o f the aw ard is b ase d on th e middle m arke t shar e pric e on th e gran t date m ultipl ied b y the nu mber o f shar es und er op tion . (ii) T he va lue of th e award i s bas ed on t he mid dle mar ket sh are pr ice o n the g rant da te minus t he op tion p ric e. Fur th er inf orma tion o n the D er wen t Lond on Sh ares ave P lan is onp age191 . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 186 Managing shareholder dil ution The t able below s ets ou t the available dilution c apacit y f or the C ompany ’ s emplo yee share p lans bas ed on th e limits set o ut in the rule s of tho se plans t hat relate to iss uing new shares . 20 21 T o tal iss ued sh are capi tal as at 31 De cemb er 202 1 1 12.2 m Inve stm ent A sso ciat ion sha re limi ts (i n any con sec uti ve ten- year p erio d): Curre nt dilution f or all share p lans 2.3% Headr oom re lativ e to 1 0 % limit 7. 7 % 5% for exe cuti ve pla ns – curre nt dilution f or discre tionar y (exec utiv e) plans 1. 2 % Headr oom re lativ e to 5% limit 3.8% Pay for perf ormance comparison The g raph below s hows the value o n 3 1 De cemb er 202 1 of £1 0 0 investe d in Der went Lon don on 31 Dec ember 201 1 , c ompare d to that of £1 00 inv este d in the F TSE 350 Sup er Se ctor Real E state Index . The o ther point s plot ted are th e values at inter vening f inancial ye ar ends. This index h as bee n chos en by the C ommit tee as i t is consid ered th e most ap propriate b enchmar k against which to as ses s the rel ative per f ormanc e of the C ompany for this p urpo se. T ot al shareholder return (TSR) 100.0 100.0 130.9 139.0 161.8 158.0 191.3 202.1 251.6 214.1 212.3 213.8 215.8 192.9 270.5 266.4 245.3 209.4 294.2 243.8 185.0 187.7 0 50 100 150 200 250 300 350 400 £ Source: Datastream (Thomson Reuters) 31 Dec 2011 31 Dec 2012 31 Dec 2013 31 Dec 2014 31 Dec 2015 31 Dec 2016 31 Dec 2017 31 Dec 2018 31 Dec 2019 31 Dec 2021 31 Dec 2020 Derwent London F TSE United Kingdom 350 Super Sector Real Estate Index Not e: The TS R char t d ata is b ase d on th e 30- day av era ge ove r the p eri od 2 De ce mbe r to 31 Dec emb er fo r eac h yea r . Remu nera tion of t he Chie f Exe cut ive Finan cial year endin g 3 1 /12 / 2 0 12 3 1 / 12 / 2 0 13 3 1/ 12 / 2 0 14 3 1 /12 / 2 0 1 5 3 1 / 12 / 2 0 16 3 1/ 12 / 2 0 17 3 1/ 12 / 2 0 1 8 31 / 12 / 2 0 1 9 (i)(ii) 31 /1 2 /2020 (iii) 31 /12 / 2 0 21 Chief E xec utiv e John Burns John Burns John Burns John Burns John Burns John Burns John Burns John Burns Paul William s Paul William s Pau l Williams T ot al remu neration (single fig ure) (£’0 00) 2,72 1 2 , 478 2,6 4 8 2 ,52 9 1, 4 0 3 1, 6 8 1 2 , 2 19 1, 3 9 9 2 ,1 0 0 2 , 2 14 1, 26 2 Annual bonus (% of ma ximum) 85.4 95.0 92.6 74 . 2 23.3 5 3.6 68 .5 9 7. 0 9 7. 0 66.3 30.9 Long- term var iable pay (% of ma ximum) 83.8 55.2 50.0 6 5 .7 24 .9 26 .5 46 .0 6 5 .75 6 5.7 5 81. 6 1 8 .1 Not es: (i) Paul W illia ms’ 201 9 to tal re mune rati on is in re sp ect o f his ten ure as C hief E xec uti ve f rom 17 May 201 9. His s alar y, bo nus an d PSP h as be en su bjec t to a pro r ata ti me re duc tion . (ii) T he ann ual b onus (% of m a ximum) a nd long -ter m vari able p ay (% of ma xim um) for J ohn Bu rns in 2019 is bas ed o n remun era tion in t he ro le of Chie f Ex ecu tiv e. (iii) Total re mune rati on fo r 2020 has b ee n res tate d to ref le ct th e act ual num ber o f 201 8 PS P award s which v es ted on 16 Marc h 2021 using t he sha re pri ce on t he day o f ves ting (b ein g, £3 3.03). Th e res tate d valu e pro vide s a dif fe ren ce of £ 3.23 p er ve ste d shar e in co mpar ison t o the e stim ates c ont aine d in th e 2020 Rep or t & Ac co unts w hich we re ba sed o n the ave rag e thre e-m onth s hare p ric e for t he ye ar end ed 31 De ce mbe r 2020, whic h was £2 9.80. Fu rt her d eta ils of to tal re mune rati on is pr ovid ed o n pag e 1 81 . 1 87 Financ ial Stat ements Strategic repor t Governance R E MUNE R A T ION COMMI T T EE RE PORT CONTINUED Chief E xecuti ve pay ratio As D er went Lon don has les s than 250 employe es, we ar e not require d to disclose t he CEO pay ratio. Ho wever , give n our commit ment to high stan dards of transp arenc y and cor porate gov ernanc e, the C ommit tee c onsider s it appropr iate to disclose t he CEO pay ratio vo luntarily . Fo r the ye ars ende d 31 Dece mber 201 8 to 31 Dec ember 2021 , the C hief Exe cuti ve’ s total re muneration a s a ratio against th e full-time equi valent remuner ation of UK employe es is det ailed in the tab le below: Base salary Total remuneration C EO pay r ati o Y ear e nde d 3 1 De cem ber 2021 25th pe rce ntile £4 8,50 0 £67 ,908 19 :1 50 th p erc entile £ 6 3,75 0 £ 90,28 9 14 :1 75th pe rce ntile £ 9 1,7 5 0 £ 14 3 ,1 6 8 9 :1 Y ear en ded 31 De cemb er 2020 25th pe rce ntile £4 7 ,000 £ 62,4 99 3 5:1 50 th p erc entile £64,000 £86,4 63 2 6:1 75th pe rce ntile £ 95,26 6 £137 , 4 52 16 :1 Y ear en ded 31 De cemb er 201 9 25th pe rce ntile £ 40,9 93 £ 6 3 , 2 11 4 0:1 50 th p erc entile £6 8,4 62 £ 8 9 , 2 74 2 8:1 75th pe rce ntile £ 6 7, 5 0 0 £ 15 3 , 8 2 8 17: 1 Y ear en ded 31 De cemb er 201 8 25th pe rce ntile £ 45,057 £ 5 8,2 37 3 8:1 50 th p erc entile £ 59 ,250 £ 76 ,8 42 29 :1 75th pe rce ntile £7 5,000 £ 14 8 , 8 6 7 15 :1 Not es: (i) Total r emun erat ion inc lude s on e-o ff e mplo yee g ains re ce ive d thro ugh t he exe rcis e of opt ions g rante d und er th e Emplo yee S hare O ptio n Pla n (see p age s 1 76 and 221) . (ii) C hief E xe cuti ve re mune rati on for t he ye ar en ded 31 De ce mbe r 2021 is Paul W illia ms’ 2021 ‘sing le fi gure’ (s ee pa ge 18 1) . (iii) Chie f Exe cu tiv e remun erat ion f or the y ear e nde d 31 Dec emb er 2020 i s Paul Wil liam s’ 2020 ‘sin gle fi gure’ (s ee p age 18 1) , b efor e the v olunt ar y 20% s alar y w aive r . Pau l’ s to tal rem uner atio n has b een r est ate d to ref lec t the a ctu al numb er of 2018 PSP aw ards w hich ve ste d on 16 March 2 021 , u sing th e shar e pri ce on t he day of v est ing (se e pa ge 1 93). Th e imp act of t he re st ateme nt on t he CEO p ay rati o for t he ye ar end ed 31 De ce mbe r 2020 was th at it in cre ase d fro m 34:1 for th e 25th pe rce ntile, f rom 25:1 fo r the 50 th p erc ent ile, and f rom 15: 1 fo r the 75t h per cen tile. T he re sta ted C EO pay ra tio, b ase d on th e act ual tot al re mune ratio n rec ei ved b y Paul Wi lliam s in 2020, is in clud ed wi thin th e abo ve ta ble. (iv) Chie f Ex ecu tiv e remu nera tion f or th e year e nde d 31 De cemb er 2019 is bas ed o n the ag gr egat ed tot al re mune ratio n ear ned b y John B urn s and Pau l Willi ams in re sp ect o f the ir ten ures a s Chief E xe cut ive d uring 2019. (v) Th e wor kf orc e com pari son is b ase d on th e pay rol l data f or th e per iod 1 Ja nuar y to 31 D ece mbe r for al l emp loye es (in clud ing the C hief E xe cut ive b ut exc ludin g the No n-E xec uti ve Dire ct ors) an d incl ude s emplo yer p ens ion c ontr ibut ions , lif e ass uranc e and t he he alth car e cas h plan . (vi) Th e CEO pay r atio h as be en ro unde d to th e nea res t whol e numb er . For ea ch year , the C ompany has c alculate d the ratio in line wi th the rep or ting regul ations using ‘Me thod A ’ (determine tot al full-time equi valent remuner ation for all UK emp loyee s for the rele vant finan cial year; rank th e data and ide ntif y emplo yees w hose re muneration plac es the m at the 25th, 50 th and 75th perc entile) . This me thod was us ed due i t being the m ost ac curate way of calcul ating the ratio. The B oard have c onfir med th at the ratio is c onsistent wi th the C ompany ’ s wider p olicie s on employe e pay , reward an d progre ssion . Relati ve impor tan ce of the sp end on pay In order to gi ve shareh olders an und erst anding of how total ex pendi ture on remune ration (for all emplo yees) co mpares to c er tain co re finan cial dispers als of the C ompany, the table b elow demo nstrate s the relat ive impor t ance of th e Comp any’s spen d on employe e pay for the p eriod 2020 to 202 1 . £m 20 21 2020 % change St af f cos ts (i) 2 7. 7 29.2 (5 .4) Distributions to shareholders 84 .6 82 .2 2.8 Net as set valu e at tribut able to eq uit y shareh olders (ii) 4,442 4,26 3 4.0 Not es: (i) St af f co sts i nclu des s alar ies , emp loye r pen sion c ont ribu tion s, so cial s ec urit y c ost s and s hare -ba sed p aym ent ex pe nse s rel ating to e qui ty -se tt led s che mes . (ii) Net a ss et valu e at trib uta ble to e quit y sh areh olde rs was c hos en as i t is a key d eter minate o f the G roup’s tot al re turn an d is us ed by m anag eme nt to me asur e our pr ogre ss . We ba se our to tal r etur n calc ulat ion o n EPR A net t angi ble as set s (NTA). Fur t her inf orm atio n, inc luding h ow thi s fig ure is c alcu late d, is on p age 8 9. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 188 Percent age i ncreas e i n remuneration The t able below s hows the p ercen tage ch ange in the sal ar y or fee s, be nefi ts and annual bo nus, for e ach of the Dire ctor s comp ared to that for an ave rage employ ee, fo r the per iods 201 9 to 2020 and 2020 to 202 1 . % change 2020 to 2021 201 9 to 2020 Sa la r y/F ee s Be nefits Bonus Salary/Fees Benef its Bonus Average employee (i) +0.3 (3 .7) +2 2 . 5 + 4.7 (6. 2) ( 2 1. 0 ) E xecut ive Dire ct ors (ii)(iii) Paul William s, CEO (iv) +2 . 0 (0.2) ( 52.5) + 1 0.5 + 0 .1 ( 24. 4) Damian W isniewsk i, CFO +2 . 0 (0. 2) (52.5) +3 .7 (1. 4 ) (2 9.0) Simon Silv er (until 26 Febru ar y 202 1 ) (v) n /a n /a n /a – (1. 7 ) ( 3 1.6 ) Nigel George +2 . 0 0.0 (52 .5) +3 .7 (3.9) (2 9.0) Davi d Silverma n +2 . 0 (0 .2) (52.5) +3 .7 ( 1.7 ) (29. 0) Emily Prid eaux (fr om 1 March 2021 ) (vi) n /a n /a n /a n /a n /a n /a Non-Executive Director s John B urns (until 1 4 May 2021 ) (vii) n /a – – (4 0) (10 0 ) ( 10 0 ) Mark Breuer (from 1 F ebrua r y 202 1 ) (viii) n /a – – – – – Simon Fra ser (until 31 Octob er 2021 ) (iv) n /a – – 0.0 – – Richard Dak in 0.0 – – 0.0 – – Claudia A rne y 0.0 – – 0.0 – – Cilla Snowball 0.0 – – 0.0 – – Helen Gordon +3.0 – – 0.0 – – Luc inda Be ll (x) 0.0 – – +6.0 – – Sanje ev Sharm a (from 1 O ctob er 202 1 ) (xi) n /a – – – – – Not es: (i) T he ann ual pe rce nta ge ch ange i s calc ulate d ba sed o n the m ean e mploy ee p ay for e mplo yee s of De rw ent L ondo n plc , the p arent c omp any of t he Gr oup, an d not th ose e mplo yed by ot her s ubsi diar y co mpan ies , on a fu ll-tim e equi vale nt bas is. (ii) T he Dir ec tors ’ remun era tion us ed to c alc ulate t he p erc enta ge ch ange i s take n from t he ‘sin gle f igur e’ tab le on pa ge 1 81. (iii) Ben ef its in clud e all ta xa ble be nef it s (inc luding c ar all owanc e, pr iva te me dica l and de ntal e tc.). (iv) From 2 01 9 t o 2020, th e aver age e mploy ee s alar y in cre ase d by 4.7% in c omp aris on to 3.7% fo r mos t of th e Exe cu tive D ire ctor s, ex cep t Paul W illiam s. Pau l Willi ams’ s alar y wa s inc reas ed f rom £ 442,0 00 to £ 60 0,00 0 ef fe cti ve f rom his a ppo intm ent as C EO on 1 7 May 2 01 9. (v) Simo n Silve r ret ired a s an E xec uti ve Dire ct or on 26 Fe bru ar y 2021 and t here fore t he p erc enta ge ch ange in r emun erat ion f or 2020 to 2021 is n ot app lic able. (vi) Emily P rid eaux w as app oint ed an E xe cut ive Di rec tor on 1 M arch 2 021 and the ref ore th e per cen tag e cha nge in re mune rati on is no t appl icab le. (vii) John B urns s tep ped d own as C hief E xe cut ive o n 1 7 May 2019, follo wing wh ich he s er ve d as No n-E xec uti ve Ch airma n until hi s reti reme nt on 14 May 2021 . Th e per cen tag e cha nge in fe es in 2019 ther efo re inc orp ora tes b oth his s ala ry r ec eiv ed as C hief E xe cuti ve an d fee s re cei ve d as Non -Ex ecu tiv e Chair man . The p erc ent age c hang e in rem uner ation f or 2020 to 2021 is n ot app lic able . (viii) Mar k Bre uer wa s app ointe d to th e Boa rd as Ch airma n De signa te on 1 Fe bru ar y 2021 and th en to ok ov er the r ole of C hairm an fr om 1 4 May 2021. The refo re th e per cen tag e chan ge in re muner atio n is not a ppli cab le. (ix ) Simo n Fras er st epp ed do wn as a No n-E xec uti ve Dir ec tor on 31 Oc tob er 2021 and t her efor e the p erc ent age c hang e in remu ner ation f or 2020 to 2 021 is not ap plic able . (x) Lu cind a Bel l be cam e Audi t Com mit tee C hair f rom 17 May 201 9. (xi ) Sa njeev S harm a was ap poin ted a N on-E xe cut ive D irec tor o n 1 Oct obe r 2021 and th eref ore t he pe rce nta ge ch ange in r emun erat ion is n ot app lic able. Salary/fees — T he avera ge employe e salar y inc rease inc ludes emp loyee s who were not e ligible for a sal ar y increa se (i.e. new join ers and leave rs, dep ending on the date of joining or le aving the Gro up ). The ave rage 202 1 s alar y incre ase for elig ible employe es (excluding promotio ns) was 5.5%. — T here was no c hange in the unde rlying fe es payab le to Non-E xecut ive Dire ctors during 2021 . T he change fo r Helen Gor don relate s to herapp ointment a s Senior Ind epend ent Direc tor ef fe ctiv e from 31 Octob er 202 1 . Th e last incr ease to Non -Exe cutiv e Direc tor base fee swas with ef f ect f rom 1 Januar y 201 9 an d the las t increas e to the commi tte e chair and me mbers hip fees we re with ef fe ct fr om 1Januar y 201 5. T he Board h as approve d an incre ase to Non-E xec utive Dire ctor f ees ef f ect ive fro m 1 Januar y 2022 ( se e page 1 80). Benefits The re was no chang e in the ben efit s rece ived b y the avera ge employe e or the E xec utive Dire ctor s in 202 1 o r 202 0. Th e change in the ann ual co st is due to the c ost of p urchasing pri vate medic al and life ins urance. Bonus — T he 202 1 bo nus for the E xec utive D irecto rs redu ced f ur ther f rom 2020, by 5 2.5%. In comp arison, t he averag e employe e bonus incre ased by 22.5%. — T he 2020 bonus fo r the avera ge employe e and E xecut ive Dire ctors was low er than 201 9 due to the imp act of th e Cov id- 1 9 pan demic on the bu siness an d the wider e cono my . De spite achiev ing the pre -set p er forman ce me asures at 96. 3%, the Co mmit tee exercis ed its discre tion to reduc e the 2020 annual bon us for E xecu tive Dire ctors to 6 6.3%, a 30.0% redu ction. T he avera ge employe e bonus f rom 201 9 to 2020, reduc ed by 21 .0%. 189 Financ ial Stat ements Strategic repor t Governance R E MUNE R A T ION COMMI T T EE RE PORT CONTINUED Director s’ i nteres ts ( audited) Dir ect ors’ in tere st s in shar es Det ails of the Dire ctors’ inter ests in sh ares are prov ided in th e table be low . Num ber a t 31 Dec emb er 20 21 Numb er at 31 D ec emb er 2020 Benef icially held Deferred shares Conditional shares (vii) Share options (viii) To t a l Bene ficially held De fer red shares Conditional shares Share options To t a l E xecut ive Dire ct ors Paul William s, CEO (i) 86,383 3 ,737 1 0 7, 0 0 8 6 74 1 9 7, 8 0 2 72 ,5 76 7, 6 5 5 99 ,201 6 74 18 0 ,1 0 6 Damian Wisniewsk i, CFO (ii) 6 5,6 61 3 ,1 8 2 8 5 ,6 71 684 15 5 ,1 9 8 51, 9 5 2 6,54 5 8 5, 24 6 5 11 14 4 , 2 5 4 Nigel George (iii) 90,948 3 ,1 8 2 8 5, 671 6 74 18 0 , 47 5 7 5 , 41 6 6 ,545 8 5 ,24 6 6 74 1 6 7, 8 8 1 Davi d Silverma n (iii) 6 4 ,1 9 6 3 ,1 8 2 85 , 671 6 74 15 3 ,7 2 3 48 ,66 4 6 ,545 8 5 ,24 6 6 74 141 ,12 9 Emily Prid eaux (iv) 5,322 – 41 ,1 5 7 3,267 4 9 , 74 6 – – – – – To t a l 3 12 , 51 0 13 , 2 8 3 4 0 5 ,1 7 8 5 ,973 73 6,94 4 24 8 ,6 0 8 2 7, 2 9 0 354,939 2,533 6 3 3, 370 Non -Exe cu tiv e Director s Mark Breuer (v) 7 ,000 – – – 7 ,000 – – – – – Richard Dak in – – – – – – – – – – Claudia A rne y 2,50 0 – – – 2, 50 0 2,5 00 – – – 2,50 0 Cilla Snowball – – – – – – – – – – Helen Gordon (vi) 938 – – – 938 918 – – – 918 Luc inda Be ll 1 ,000 – – – 1 ,000 1 ,000 – – – 1 ,000 Sanjeev S harma – – – – – – – – – – To t a l 11 , 4 3 8 – – – 11 , 4 3 8 4 , 41 8 – – – 4 , 41 8 The re have be en no oth er change s to the abov e interest s bet ween 31 De cembe r 202 1 and 23 Feb ruar y 2022. Not es: (i) Paul W illia ms ac quire d 25,91 3 sh ares f rom t he PS P 201 8 gra nt whic h ve ste d on 1 6 Mar ch 2021. The ve stin g shar es inc lude d div ide nd eq uiva lent s in the f orm of 2 , 164 addi tion al sha res . T o sat isf y t he ta x lia bilit y ar ising , Paul W illia ms so ld 1 2, 204 sh ares i mme diatel y upon v es ting at an a vera ge sh are pr ice o f £33. 03 pe r shar e. Paul W illia ms ac quire d and imm ediat ely so ld 3,8 30 sha res un der th e Co mpan y’s de ferr ed b onus s che me wh en th ey wer e rele ase d fro m the 202 0 defe rral o n 1 6 Mar ch 2021 . T hes e shar es we re so ld at an ave rag e pric e of £3 3.03 p er sh are. O n 23 Marc h 2021 , Pau l Willi ams ac quire d 1 88 s hare s unde r the C omp any ’s defe rre d bo nus sc hem e when t hey w ere re leas ed f rom t he 201 9 def err al. To satis f y the t a x liabil it y aris ing, P aul Wil liams s old 9 0 shar es imm edia tely up on th eir re leas e at an ave rag e shar e pric e of £ 32.02 pe r share . (ii) D amian W isnie wsk i acqu ired 25 ,91 3 s hare s fro m the P SP 2018 grant w hich v est ed on 16 Marc h 2021 . Th e ves ting sh are s inclu ded d ivi dend e qui valen ts in th e for m of 2, 1 6 4 add itio nal sh ares . T o sa tisf y t he ta x lia bilit y ar isin g, Da mian Wis niew ski s old 1 2,20 4 shar es imm edia tely up on ve stin g at an ave rag e shar e pric e of £ 33.03 p er sh are. D amian Wis niews ki ac quire d and im me diatel y sold 3 ,261 share s und er th e Com pany ’s def erre d bo nus sc hem e whe n the y were r elea sed f rom t he 2020 d efer ral on 16 Marc h 2021 . Th ese sha res we re so ld at an av era ge pri ce of £ 33.0 3 per s hare . Damia n Wisni ewsk i acq uire d and imm edia tely s old 188 shar es un der th e Co mpany ’s def err ed b onus s che me whe n the y wer e rele ase d fro m the 2019 def erra l on 23 Mar ch 2021 . T hes e shar es we re so ld at an ave rag e pric e of £ 32.02 pe r share . On 15 Apri l 2021 , D amian W isni ewsk i was gr ante d 1 73 share options under the Derwent London Sharesave Plan, fur ther information on page 1 86. (iii) Nig el Ge org e and D avid Si lver man ea ch ac quire d 25,918 share s fro m the P SP 201 8 gr ant wh ich ve ste d on 16 March 2021. The v est ing sh ares in clud ed di vid end e quiv alent s in th e for m of 2, 1 6 4 addi tion al shar es . T o s ati sf y th e ta x liabil it y ari sing , they e ach s old 1 2,20 4 sha res imm edi ately up on v est ing at an av era ge sha re pri ce of £ 33.0 3 per s hare . On 16 Mar ch 2021 , Nige l Ge org e and Da vid Sil ver man ea ch ac quire d 3,261 sha res un der t he Co mpan y’s de fer red b onus s che me wh en th ey wer e rele ase d fro m the 202 0 defe rra l. T o sat isf y t he ta x lia bilit y ar ising , th ey eac h sol d 1 ,53 6 share s imme diat ely up on the ir rele ase a t an ave rage s hare p ric e of £3 3.03 p er sh are. O n 23 Marc h 2021 , Nige l Ge orge a nd Dav id Silv erm an eac h acq uire d 1 88 sh are s unde r the C omp any ’s defer re d bon us sch eme w hen t hey we re rel eas ed f rom th e 201 9 def err al. To sati sf y th e ta x liabi lit y ari sing , they ea ch so ld 90 sh ares im me diatel y upon t heir r elea se at an a vera ge sh are pr ice of £ 32.02 p er sha re. (iv) Emily P rid eaux w as app ointe d an E xe cuti ve Di rec tor on 1 M arch 20 21 , Em ily ’ s aw ards in clud e tho se th at were g rant ed pr ior to h er app oint men t. Emily P rid eau x acqu ired 6 ,037 sha res f rom th e PS P 201 8 gra nt whic h ves ted o n 1 6 Mar ch 2021 . T he ve stin g share s inc lude d div iden d eq uival ents in t he fo rm of 5 01 addit iona l shar es. To sati sf y th e ta x liabi lit y ari sing , Emily Pr ide aux s old 2,8 44 s hare s imme diate ly upo n ves ting a t an ave rage s hare p ric e of £3 3.03 p er sha re. O n 1 5 A pr il 2021 , Emily P rid eaux w as gr ante d 347 share o ptio ns under the Derwent London Sharesave Plan, fur ther in formation on page 1 86. (v) On 1 1 Mar ch 2021 , Mar k Bre uer p urch ase d 4,00 0 sha res at a n aver age s hare p ric e of £33 . 1 2. Mar k Bre uer p urch ase d a fur t her 3,0 00 s hare s on 1 8 Ma y 2021 at an ave rage s hare pri ce of £ 33.78. (vi) Dur ing 2021, Helen G ordo n rein ves ted h er div ide nd to pu rcha se an ad diti onal 20 s hare s. (vii ) Co ndit iona l shar es are t hos e whic h are sub jec t to pe rf orm anc e con diti ons. F or f ur the r infor mati on on t he Per f orm anc e Share P lan s ee p age s 1 85, 186 and 193. (viii) Sha re opt ions p rinc ipal ly rel ate to th e Shar esa ve Pl an (see p age s 1 86 a nd 1 91 ) an d are unv es ted. F or Emily P rid eau x only, she h as ou tst andin g Emplo ye e Share O pti on Pl an (ES OP) awar ds whic h wer e gran ted in r esp ec t of her r ole pr ior to b eing a ppo inted a n Ex ecu tiv e Dire cto r De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 19 0 Directors’ shareholding guidel ine E xecut ive Dire ctors are s ubject to within- employ ment and p ost- employm ent shareh olding guideline s ( se e pag e 1 78) . The wi thin- employ ment share holding guidelin e for the ye ar ende d 3 1 De cemb er 202 1 exp ec ts all E xecut ive Dire ctors to wo rk towards holding shar es inDer went L ondon plc e quivalent to 200 % of base s alar y. As at 3 1 De cemb er 202 1 , all E xecu tive Dire ctors h ave excee ded t he within- employ ment share holding guidelin e, except Emily Pr ideaux wh o was appointe d an Exe cuti ve Direc tor from 1 Mar ch 202 1 . Emily Prideau x iswork ing towards achiev ing the within- employm ent shareh olding guideline. Executive Direct ors Benef icially held shares 20 21 s al a r y (i) Within-employment shareholding guideli ne T arget Achieved Valu e of benef icially held shares (ii) (% of b as e sal ar y) Paul William s, CEO 86,383 £61 2, 000 20 0% 4 82% £2,949,980 Damian W isniewsk i, CFO 65,66 1 £ 4 89,6 00 20 0% 458% £2,2 42,323 Nigel George 90,94 8 £ 4 89,6 00 20 0% 6 3 4% £3, 1 05,87 4 Davi d Silverma n 6 4 ,1 9 6 £ 48 9,60 0 200% 448% £2, 1 92,293 Emily Prid eaux 5, 322 £4 1 0, 000 20 0% 4 4% £ 1 8 1, 74 6 Not es: (i) Th e bas e sal arie s show n in the t able a bov e are as at 31 D ec embe r 2021 . Fur th er inf orm ation o n fi xed p ay durin g 2021 is pro vid ed on p age 182. (ii) Th e value o f the E xe cut ive Di rec tor s’ ben ef icial ly hel d share s has b ee n calc ulat ed usi ng the a vera ge clo sing s hare p ric e durin g the y ear en de d 3 1 D ec emb er 2021 of £3 4. 15. All oth er employe es gran ted PSP awar ds are expe cte d to work towards ho lding shares in De rwe nt London p lc equivalent to 5 0% of base salar y . Th ere is no share holding guidelin e for Non-E xec utive D irector s. Th e share owner ship guideline s for all P SP recipien ts (including E xecut ive Dire ctors) require s them to ret ain at least half of any def erred b onus share s or per f ormanc e shares whic h vest (net o f ta x) untilthe g uideline is met . Only wholly -owne d shares will c ount towards the g uideline. Due to th e relati vely large s hareholdings of our E xec utive Dire ctor s, a small ch ange in our share pri ce would have a ma terial impact o n theirwe alth. For example, a 5% drop in o ur share pric e would result in a los s of value for our Chie f Exe cuti ve, Paul Williams, e quivalent to approxim ately 2 4 % of his ba se salar y. Sharesave Plan (a udited) T o e ncoura ge Group- wide share own ership, the C ompany op erates a HMRC t ax ef f icient S haresave P lan which was ap prove d by shareh olders at th e 20 1 8 AGM (fur the r information o n page 1 91 ). The out stan ding Sharesav e options he ld by Direc tors are se t out in the table b elow: At Gr ant Dur ing t he ye ar Dat e of Gra nt Option price £ 1 January 20 21 (num ber ) Gr ant ed (num ber ) Exercised (num ber ) Laps ed (num ber ) 31 De cem ber 20 21 (num ber ) Mar ket p ric e at d ate o f exercise £ Valu e at exercise £’000 Maturi ty date E xecut ive Dire ct ors Paul William s, CEO 3 0 / 0 4 / 2 0 19 25.80 34 8 – – – 348 01/ 0 6 / 2 0 2 2 09/04 /2020 2 7. 5 3 326 – – – 326 01 /06/2023 6 74 – – – 6 74 Damian W isniewsk i, CFO 3 0 / 0 4 / 2 0 19 25.80 348 – – – 34 8 0 1/ 0 6 / 2 02 2 09/04 /2020 2 7. 5 3 16 3 – – – 16 3 01 /06/2023 15 / 0 4 / 2 0 2 1 25. 93 – 17 3 – – 17 3 0 1/0 6 / 2 02 4 5 11 17 3 – – 68 4 Nigel George 3 0 / 0 4 / 2 0 19 25.80 348 – – – 348 01/ 0 6 / 2 0 22 09/04 /2020 2 7. 5 3 326 – – – 326 01 /06/2023 6 74 – – – 6 74 Davi d Silverma n 3 0/ 0 4 / 2 0 19 25.80 348 – – – 348 01/ 0 6 / 2 0 2 2 09/04 /2020 2 7. 5 3 326 – – – 326 01 /06/2023 6 74 – – – 6 74 Emily Prid eaux 15 / 0 4 / 2 0 2 1 25 .9 3 – 3 47 – – 3 47 0 1/ 0 6 /2 0 24 – 3 47 – – 3 47 Other employees Other employee s 3 0 / 0 4 / 2 019 2 5.80 18 , 0 7 0 – – ( 1 ,080) 16 , 9 9 0 01/ 0 6 / 20 2 2 09/04 /2020 2 7. 5 3 21, 2 6 3 – – (978) 20,28 5 01 /06/2023 15 / 0 4 / 2 0 2 1 25. 93 – 1 3,394 – (10 4 ) 13 , 2 9 0 01/ 0 6 / 2 0 24 39,333 13 , 3 9 4 – ( 2 ,1 6 2 ) 5 0,565 To t a l 41, 8 6 6 13 , 914 – ( 2 ,1 6 2 ) 5 3 , 618 No te: (i) On 15 Apri l 2021 , the C omp any gr ante d opt ions o ver 13,91 4 shar es un der th e De rwe nt Lo ndon S hare sav e Pla n. Th e thre e- year c ont rac t for t he Op tion s sta rt ed on 1 J une 2021 . Th ese O pti ons are e xerc isab le at a pr ice o f £25.93 p er sha re fr om 1 Jun e 2024 and are n ot subje ct t o any pe r for manc e con diti ons . 19 1 Financ ial Stat ements Strategic repor t Governance R E MUNE R A T ION COMMI T T EE RE PORT CONTINUED Long-term incentive plans (aud ited) Deferred Bonus Plan Det ails of the def erre d bonus share s held by th e Direc tors are se t out in the t able below: At Gr ant Dur ing t he ye ar Earlies t rel eas e dates Date of award Mar ket pr ice at da te of gr ant £ Original Gr ant (num ber ) 1 January 20 21 (num ber ) Deferred (num ber ) Rel ea sed (num ber ) 31 De cem ber 20 21 (num ber ) Mar ket p ric e at date of r ele ase £ Valu e at release £’000 E xecut ive Dire ct ors Paul William s, CEO 20/0 3/20 1 9 32 .5 0 36 3 18 2 – (18 2 ) – 32. 02 6 20/03/2020 & 2 2 /0 3/ 2021 1 3/03/2020 33.03 7, 4 7 4 7, 4 7 4 – (3,7 37 ) 3 ,737 33.03 12 3 15 / 0 3 / 2 0 2 1 & 14 / 0 3 / 2 0 2 2 7, 8 3 7 7, 6 5 6 – ( 3 , 919 ) 3 ,737 Damian W isniewsk i, CFO 20/03/201 9 32. 50 36 3 18 2 – (18 2 ) – 32. 02 6 20/03/2020 & 2 2 /0 3/ 2021 1 3/03/2020 33.03 6,36 4 6,36 4 – ( 3 ,1 8 2 ) 3 ,1 8 2 33.03 10 5 15 / 0 3 / 2 0 2 1 & 14 / 0 3 / 2 0 2 2 6,7 27 6,5 46 – (3, 36 4) 3 ,1 8 2 Nigel George 20/03/201 9 32. 50 36 3 18 2 – (18 2 ) – 32. 02 6 20/03/2020 & 2 2 /0 3/ 2021 1 3/03/2020 33.03 6,36 4 6,36 4 – ( 3 ,1 8 2 ) 3 ,1 8 2 33.03 10 5 15 / 0 3 / 2 0 2 1 & 14 / 0 3 / 2 0 2 2 6,7 27 6,5 46 – (3, 36 4) 3 ,1 8 2 Davi d Silverma n 20/03/201 9 32.5 0 363 18 2 – ( 182 ) – 32 .02 6 20/03/2020 & 2 2 /0 3/ 2021 1 3/03/2020 33.03 6,36 4 6,36 4 – ( 3 ,1 8 2 ) 3 ,1 8 2 33.03 10 5 15 / 0 3 / 2 0 2 1 & 14 / 0 3 / 2 0 2 2 6,7 27 6,5 46 – (3, 36 4) 3 ,1 8 2 Former Executi ve Di rec tors John B urns 20/03/201 9 32 .5 0 556 278 – (278) – 32 .02 9 20/03/2020 & 2 2 /0 3/ 2021 1 3/03/2020 33.03 3 ,5 72 3 ,5 72 – (1,7 8 6 ) 1,7 8 6 33.03 59 15 / 0 3 / 2 0 2 1 & 14 / 0 3 / 2 0 2 2 4 ,1 2 8 3,85 0 – (2,0 6 4) 1, 7 8 6 Simon Silver 20/03/201 9 32 .5 0 476 238 – (23 8) – 32 .02 8 20/03/2020 & 2 2 /0 3/ 2021 1 3/03/2020 33.03 7, 9 9 6 7, 9 9 6 – (3,9 98) 3,99 8 33.03 132 15 / 0 3 / 2 0 2 1 & 14 / 0 3 / 2 0 2 2 8 , 472 8,23 4 – (4 ,2 36) 3,9 98 Other employees Other employee s 1 3/0 3/2020 33.0 3 1, 8 3 4 1, 8 3 4 – (9 17 ) 9 17 33.03 30 15 / 0 3 / 2 0 2 1 & 14 / 0 3 / 2 0 2 2 1, 8 3 4 1, 8 3 4 – ( 917 ) 917 To t a l 42,4 52 41 , 2 12 – ( 21, 2 2 8) 19 ,9 8 4 70 0 Not es: (i) Th e 201 9 annu al bo nus in exc es s of 100% of s alar y w as def err ed int o share s on 13 March 20 20 and wil l be re leas ed in t wo t ranc hes , 50% o n or af ter 15 Marc h 2021 and th e rem aining 5 0% on o r af ter 14 March 2022 . On 16 March 2021, the Dir ec tors c hos e to se ll all , or a pro por t ion, o f thei r rele ase d shar es (whic h inc lude d a numb er to dis cha rge th e rel evan t ta x obli gatio ns), in all c ase s at an ave rag e pric e of £ 33.0 3 per s hare. F ur the r infor mati on is in th e not es to th e Dire cto rs’ in tere sts in s hare s tab le on pa ge 190. (ii) T he 2018 annual b onu s in exce ss of 100 % of sal ar y was d efer re d into sh ares o n 20 Marc h 201 9 an d was re leas ed in t wo tr anch es , 50% o n 20 Marc h 2020 and t he rem aining 5 0% on 23 M arch 2021. On 23 Mar ch 2021 , th e Dire ct ors ch os e to sel l all, o r a prop or ti on, of t heir re lea sed s hare s (whic h inclu ded a n umbe r to dis char ge the r elev ant t ax o bliga tion s) , in all c ase s at an av era ge pri ce of £ 32.02 pe r shar e. Fur th er inf orm ation i s in the n otes t o the D irec tor s’ inter es ts in sha res t able o n pag e 1 90. (iii) In ac cor danc e wit h the A nnua l Bonu s Pla n rule s, th e Remu nera tion C omm it tee ha s disc ret ion to al low par t icip ants to r ec eiv e divi den d equi vale nts up on th e rele ase of t heir def err ed b onus s hare s, whi ch is e quiv alent to t he val ue of any di vi dend s paid o n tho se sh ares b et we en the d efe rral d ate and t he re leas e date. T he di vid end e quiv alent s are in t he for m of ad ditio nal sh ares . Th e div iden d equi vale nt sha res ad de d to the r elea sed s hare s on 16 March 2021 an d 23 Mar ch 2021 are ex clud ed fr om th e abo ve tab le. Fo r the s hare s rel eas ed on 16 Marc h 2021 , t he ad diti onal di vid end e quiv alent s hare s equ ate d to 1 1 sh ares f or Jo hn Bur ns, 8 s hare s for Sim on Sil ver an d 6 shar es ea ch fo r the ot her E xe cut ive Dire ct ors . For t he sha res re leas ed o n 1 6 Mar ch 2021 , th e addi tion al div iden d equ ivale nt sh ares e quat ed to 4 5 shar es fo r John B urns , 93 fo r Paul W illiam s, 100 sha res f or Simo n Silv er and 79 s hare s eac h for t he oth er E xec uti ve Dir ec tors . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 192 Per formance Share Plan (PSP ) The o utst anding PSP award s held by Dire ctors are s et out in th e table be low: At Gr ant Du rin g the y ear Earlies t ve stin g date Dat e of award Mar ket pr ice at da te of gr ant £ 1 January 20 21 (num ber ) Gr ant ed (num ber ) Ves te d (num ber ) L aps ed (num ber ) 31 De cem ber 20 21 (num ber ) Mar ket p ric e at date of v est ing £ Valu e ves te d (inclusive of di vi den d equivalen ts) £’000 E xecut ive Dire ct ors Paul William s, CEO 0 6 / 0 3 / 2 0 18 29.4 8 2 9 ,1 0 4 – ( 2 5 , 9 13 ) ( 3 ,1 9 1 ) – 33.0 3 856 0 6/ 03 /20 21 12 / 0 3 / 2 0 1 9 32. 53 2 7,1 7 4 – – – 2 7, 1 74 12 / 0 3 / 2 0 2 2 1 4/08/2 01 9 2 9. 42 6 ,7 13 – – – 6 , 713 1 4/08/ 202 2 1 3/03/2020 3 3 .1 4 3 6 , 210 – – – 36 , 2 10 1 3/03/2023 12 / 0 3 / 2 0 2 1 3 3 .1 6 – 3 6 , 9 11 – – 3 6 , 9 11 12 / 0 3 / 2 0 2 4 99 ,201 3 6 , 9 11 ( 25 , 9 13 ) ( 3 ,1 9 1 ) 1 0 7, 0 0 8 Damian Wisniewsk i, CFO 0 6 / 0 3 / 2 0 18 2 9.48 2 9 ,1 0 4 – ( 2 5 , 9 13 ) ( 3 ,1 9 1) – 3 3.03 856 0 6/ 0 3/2 021 12 / 0 3 / 2 0 1 9 32. 53 2 7,1 7 4 – – – 2 7, 1 74 12 / 0 3 / 2 0 2 2 1 3/03/2020 3 3 .1 4 28,96 8 – – – 28,96 8 1 3/03/2023 12 / 0 3 / 2 0 2 1 3 3 .1 6 – 29,5 29 – – 29,529 12 / 0 3 / 2 0 2 4 85,246 29,529 (2 5 , 9 13) ( 3 ,1 9 1 ) 85 ,6 71 Nigel George 0 6 / 0 3 / 2 0 18 29.4 8 2 9 ,1 0 4 – ( 2 5 , 9 13 ) ( 3 ,1 9 1 ) – 33.0 3 856 0 6/ 03 /2 021 12 / 0 3 / 2 0 1 9 32. 53 2 7,1 7 4 – – – 2 7, 1 74 12 / 0 3 / 2 0 2 2 1 3/03/2020 3 3 .1 4 28,96 8 – – – 28,96 8 1 3/03/2023 12 / 0 3 / 2 0 2 1 3 3 .1 6 – 29,5 29 – – 29,529 12 / 0 3 / 2 0 2 4 85,246 29,529 (2 5 , 9 13) ( 3 ,1 9 1 ) 85 ,6 71 Davi d Silverma n 0 6 / 0 3 / 2 0 18 29.4 8 2 9 ,1 0 4 – ( 2 5 , 9 13) ( 3 ,1 9 1 ) – 33.0 3 856 0 6/ 03 /2 021 12 / 0 3 / 2 0 1 9 32. 53 2 7,1 7 4 – – – 2 7, 1 74 12 / 0 3 / 2 0 2 2 1 3/03/2020 3 3 .1 4 28,96 8 – – – 28,96 8 1 3/03/2023 12 / 0 3 / 2 0 2 1 3 3 .1 6 – 29,5 29 – – 29,529 12 / 0 3 / 2 0 2 4 85,246 29,529 (2 5 , 9 13) ( 3 ,1 9 1 ) 85 ,6 71 Emily Prid eaux 0 6 / 0 3 / 2 0 18 29.4 8 6 ,78 4 – (6 ,0 37) ( 74 7 ) – 3 3.03 19 9 0 6/ 0 3/2 021 12 / 0 3 / 2 0 1 9 32. 53 7, 3 7 7 – – – 7, 3 7 7 12 / 0 3 / 2 0 2 2 1 3/03/2020 3 3 .1 4 9,0 52 – – – 9,0 52 1 3/0 3/2023 12 / 0 3 / 2 0 2 1 3 3 .1 6 – 24 ,728 – – 24,7 28 12 / 0 3 / 2 0 2 4 2 3 , 213 24 ,728 (6,0 37 ) ( 747 ) 4 1,1 5 7 Former Executi ve Di rec tors John B urns 0 6 / 0 3 / 2 0 18 2 9.48 4 4,586 – (15 , 8 2 8 ) ( 28 ,75 8) – 3 3.03 523 0 6/ 03 /2 021 4 4,586 – (15 , 8 28 ) ( 28 ,75 8) – Simon Silver 0 6 / 0 3 / 2 0 18 29.4 8 38 ,263 – (3 4,0 6 8) ( 4 ,1 9 5 ) – 33.0 3 1,1 2 5 0 6 /0 3/2 021 12 / 0 3 / 2 0 1 9 32. 53 35,720 – – – 35, 720 12 / 0 3 / 2 0 2 2 1 3/03/2020 3 3 .1 4 35,063 – – – 35,063 13/03/2023 10 9 ,0 4 6 – (3 4,0 6 8) ( 4 ,1 9 5 ) 7 0,78 3 Other employees Other employee s 0 6 / 0 3 / 2 0 18 29.4 8 3 5,70 0 – (28 ,0 53) ( 7, 6 4 7 ) – 33.03 927 0 6/ 03 /2 021 12 / 0 3 / 2 0 1 9 32. 53 33,03 0 – – – 33,030 12 / 0 3 / 2 0 2 2 1 3/03/2020 3 3 .1 4 34,84 3 – – – 34,843 1 3/0 3/2023 12 / 0 3 / 2 0 2 1 3 3 .1 6 – 31, 6 5 4 – – 31, 6 5 4 12 / 0 3 / 2 0 2 4 10 3 ,5 7 3 3 1,6 5 4 (2 8,0 5 3) ( 7, 6 4 7 ) 9 9,527 To t a l 635,357 181, 8 8 0 (18 7 , 6 3 8 ) ( 5 4 ,111 ) 575 ,4 88 6 ,1 9 8 Not es: (i) Th e PSP aw ard gr ante d on 6 Mar ch 201 8 ve ste d on 16 March 2 021 at a ves ting le vel of 81.6%. T he valu e of the v es ting awa rds wa s bas ed on t he sha re pri ce on t he ve stin g date and i s inclu siv e of div iden d equ ivale nts in t he fo rm of ad diti onal v est ing sha res (s ee no te ii for f ur th er det ails). (ii) In a cc orda nce w ith th e PSP r ule s, th e Remun erat ion C ommi tt ee ha s disc reti on to all ow PS P par tic ipan ts to re ce ive di vid end e quiv alent s upo n the v est ing of th eir awa rds, w hich is e quiva lent to t he val ue of any di vid end s paid o n tho se sh ares b et wee n the g rant d ate and t he ve stin g date . For th e 201 8 P SP gran t, di vide nd e quiv alent s were in t he fo rm of add itio nal ve stin g shar es an d equa ted to di vi dend s paid b et wee n Marc h 201 8 an d March 2 021 . T he di vid end e quiv alent s hare s have b ee n incl ude d in the t able ab ov e, wit hin the numb er of v est ing awa rds, a nd eq uate to 1,322 shar es fo r John B urn s, 2,8 45 sh ares f or Sim on Silv er and 2 , 164 sha res e ach f or the o the r Exe cu tiv e Dire cto rs. (iii) Th e PSP a wards g rante d on 1 2 Mar ch 2021 will v es t on 1 2 M arch 2 02 4. T he p er for man ce ta rget s at tac he d to the se awa rds are d eta iled o n pag e 1 86. 31 /12 / 2 0 21 31 /1 2 /2020 31 / 12 / 2 0 19 Weighte d avera ge exercis e pric e of PSP awar ds – – – Weighte d avera ge remaining c ontra cted l ife of P SP awards 1. 2 0 y e a r s 1 . 1 9 years 1 .20 year s At each ye ar end, no ne of the ou tstan ding awards were exercis able. The w eighted ave rage exercis e pric e of awards that eith er ves ted or laps ed in 202 1 was £’nil (20 20: £’nil) . T he weighte d average mar ket pric e of awards vest ing in 20 21 was £33.03 (2020: £2 7 .65). 19 3 Financ ial Stat ements Strategic repor t Governance DIR E C T ORS’ R E PORT The D irector s pres ent their annual re por t and audi ted finan cial sta tements f or the year e nded 31 De cemb er 202 1 . This A nnual Repor t c ontains c er tain for ward-lo oking st atement s. By t heir nature, any s tatement s abou t the fu ture outlo ok involve risk and un cer taint y b ecau se they re late to event s and dep end on circums tanc es that may or may n ot occ ur in the fu ture. Ac tual result s, per fo rmanc e or outc omes may dif f er materially fr om any result s, per fo rmanc e or outc omes ex press ed or implie d by suc h for ward-lo oking st atements . Each for ward-lo oking st atement spe aks only as of the date of t hat par ticul ar statem ent. No repre sent ation or warran ty is g iven in rel ation to any for ward- look ing stateme nts made b y Der went Lon don, including as to t heir comp letenes s or acc uracy. Nothing in this repor t an d acc ounts should b e cons true d as a prof it fore cast . Both t he Str ategic rep or t and the Dire ctor s’ repor t have b een drawnup and pre sente d in accor dance wit h and in relianc e upon applic able English c ompany law, and th e liabilities of the D irecto rs in conn ecti on with that re por t shall b e subject to th e limitation s and re stric tions prov ided b y such law. Corpor ate g overnance arrangements During th e year end ed 31 Dec ember 2021 , we have app lied th e princip les of goo d govern ance c ontaine d in the UK Cor porate Gov ernanc e Co de 20 1 8 (the ‘C ode’). We were unable to c omply with prov isions 9 and 1 9 of the C ode unt il the conc lusion of the 2021 AGM and we were o nly par tially com pliant with pro vision 38 until 1Januar y 2022, when we be cam e fully co mpliant. Our ex planatio n for th e depar ture s from th e Cod e is cont ained within our Co mpliance S tateme nt for 2021 on page 1 23. Fur ther d etails on how we have ap plied th e Co de can be f ound in the G overnan ce se ction on p ages 1 20 to 1 97 . The C ode c an be fo und in the Co rporate G overn ance se ction o f the Financial Re por ting C ouncil’ s we b si te: ww w .frc.org.u k Company st atus and branche s Der wen t London p lc is a Real Est ate Investm ent T ru st (REIT ) and the ho lding company of th e Der went Lo ndon gro up of companie s which inclu des no bran ches . Der went Lo ndon is a pub lic listed comp any on the Lo ndon S tock E xchange main mar ket with a premium list ing, and is reg istere d and domiciled in Eng land and Wales (company numb er 01 81 9699). Results an d dividends The f inancial s tatement s set ou t the result s of the Group f or the finan cial year en ded 31 Dec ember 2021 and are shown on p ages 209 to 267 . The Dire ctor s rec ommend a f inal divid end of 53.5 p ence per o rdinar y share for th e year en ded 31 Dec ember 2021 . Whe n taken toge ther with t he interim divi dend of 23.00 p enc e per ordinar y share p aid in Octo ber 202 1 , this re sults in a total divi dend for th e year of 76.50 pen ce (2020 : 7 4.45 p enc e ) p er ordinar y share. Subjec t to approval by sh areholder s of the re comme nded f inal divid end, the di vidend to s hareholde rs for 2021 wi ll tot al £60.0m. If approv ed, the C ompany will p ay the final di viden d on 1 June 2022 to shareh olders on t he registe r of membe rs at 29 Ap ril 202 2. PID and non-PI D dividends As a REI T , Der we nt London mu st distribu te at least 9 0% of the Group’s income pr ofits f rom its t a x-exempt pro per t y rent al busine ss by way of a div idend, whic h is known as a P roper t y Inc ome Distr ibution (PID). Thes e distribut ions can b e subject to wi thholding ta x at 20%. Di viden ds from pro fits of t he Group’s tax able residual busine ss are non -PID and will be ta xe d as an ordinar y divid end. The D irector s’ repor t f or the f inancial year e nded 31 De cemb er 202 1 is set o ut on pa ges 1 94 to 1 97 . A dditional inform ation, which is inc orpo rated into this Dire ctors’ re por t by re fere nce , inclu ding info rmat ion re quire d in ac cor danc e with th e Comp anies Act 20 06 and L isting Rule 9.8.4R of the Financial C onduc t Auth orit y ’ s Lis ting Rules, c an be loc ated by pa ge referen ce in the b ody of t his Directo rs’ repor t an d on the f ollowing page s: Future busi ness developments pag es 1 to 1 20 St ak eholder engagement pages 26 & 1 34 Diversit y and i nclusion pag es 57 , 1 4 7 & 1 69 to 1 71 Charitable donations page 6 1 Goin g Con cern & V iabil it y page 98 The s ec tion 1 72( 1) stat emen t page 1 2 4 Asses sing and monitoring cultu re page 1 3 1 Rev iew of th e 202 1 Repo r t & Acco unts page 1 50 Inte rnal f inanc ial co ntro l page 1 54 Risk management and internal controls page 1 59 T o tal r emune rati on in 202 1 page 1 8 1 Long-term incentive plans page s 1 91 to 1 93 Inte res t cap itali sed page 2 1 9 Financial instruments pa ges 235 to 2 4 4 Financial risk management pag e 2 43 Cre dit , marke t and liq uidit y ris ks page s 2 43 & 244 Rel ated p ar t y discl osur es pag es 254 & 255 Dav id L awl er Co mpany Se cretar y De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 19 4 Key sta k ehol ders The lon g-term suc ce ss of the Gr oup is depen dent on it s relatio nships with it s key stakeh olders . On pag es 28 and 29 we out line the ways in which we have e ngaged wi th key stake holders , the mater ial issues t hat they have r aised wit h us, and how t hese is sues hav e bee n taken into acc ount in the B oard’s decision m aking proc ess es. Subst antial shareholde rs The t able below s hows the ho ldings in the Comp any’s issue d share cap ital which ha d bee n notif ied to the C ompany pur suant to the Financial C onduc t Auth orit y ’ s Disc losure Guidanc e and T r ansparenc y Rules. T he inform ation below w as corre ct at th e date of notif ication . Itsho uld be note d that thes e holdings may have ch anged sinc e the C ompany was not ifie d. However , noti fic ation of any change is n ot require d until the nex t n otifiable thr eshold is c ross ed. 31 De cem ber 2 021 23 F ebr uar y 2022 Dire ct /indire ct Num ber o f sha res (m) % D irect /in direct Numb er of s hare s (m) % T . R owe Pric e As soc iates, Inc Indir ec t 14 . 6 13 . 0 In direc t 14 . 6 13 . 0 Norge s Bank Dire ct 1 0 .1 9.0 Di rect 1 0 .1 9.0 Bla ckRo ck Inves tment M anagem ent (UK ) Ltd Ind irec t 6.0 5.4 Indire ct 6.0 5 .4 Am eripr ise Fin ancial In c (Columb iaThrea dnee dle) Indir ec t 4.9 4.8 Indirec t 4 .9 4.8 La dy Jane Ray ne Dire ct 3.6 3.6 D irect 3.6 3.6 Employe es The B oard re cognis es the imp or tanc e of att racting , develo ping and retaining th e right pe ople. In ac cordanc e with b est pra ctice , we have emp loyment p olicie s in place whic h provid e equal opp or tunities f or all employe es, irr espe cti ve of sex, r ace, c olour , disabilit y, sexual orie ntation, r eligious b eliefs o r marital s tatus. Dame Cill a Snowball is t he design ated Direc tor resp onsible for gather ing the views of t he work forc e. Fur ther info rmation on th e Boar d’ s met hods fo r engaging wit h the work for ce is on pa ges 26, 27 and 1 2 4. Director s The D irector s of the C ompany are se t out on p ages 1 26 and 1 27 ; all of which were in of f ice dur ing the year und er revie w except fo r the following B oard chang es: — Mar k Breuer , Emily Pride aux and S an je ev Sharma we re appointe d Direc tors of th e Comp any on 1 Febr uar y , 1 March and 1 Oc tobe r 202 1, respe ctiv ely . — Simo n Silver and Simon Fras er retired f rom the B oard on 26 Febr uar y and 31 Octob er 202 1 , resp ec tively. David Silve rman will step d own as a Direc tor on 1 4 A pril 2022. David ’ s curre nt resp onsibilities will b e allocate d amongst t he other E xecut ive Dire ctors an d therefo re it is not th e Board’s current intention to appoint a replacement. The B oard is re quired to co nsist of no fe wer than t wo Direc tors and not mo re than 1 5. S hareholde rs may var y the minimum and / or ma ximum numbe r of Directo rs by pas sing an ordinar y res olution. Co pies of the E xec utive D irector s’ ser vi ce con tract s are available to shareh olders fo r inspe ction at th e Comp any’s register ed of f ice and at the A nnual Gene ral Meet ing (AGM). Det ails of the Dire ctors’ remune ration and se r vice c ontrac ts and th eir interest s in the share s of the Co mpany are set o ut on pa ges 1 72 to 1 93. Appointment and replacement of Directors Direc tors may b e appointe d by ordinar y res olution of th e shareh olders , or by the B oard. Ap pointme nt of a Direc tor from out side the Gro up is on the re comme ndation of the N ominations Co mmit tee, whilst inter nal promo tion is a mat ter dec ided by th e Boar d unless it is c onsider ed appro priate for a re comme ndation to be requested from the Nominations C ommittee. At ever y AGM of t he Comp any , any of the D irector s who have b een appointe d by the B oard sinc e the las t AGM shall se ek elec tion by the me mbers . Sanjeev S harma will the refore b e seek ing elec tion as a Direc tor following his app ointmen t to the Boar d on 1 Oc tober 202 1 . Not withst anding prov isions in the C ompany ’ s A r ticles of As sociat ion, the B oard has ag ree d, in acco rdance wit h the Co de and in line with p reviou s years , that all of the Dire ctor s wishing to con tinue will retire and, b eing eligible, of fe r themse lves fo r re- elec tion by the sh areholder s at the 2021 A GM. A ll Direc tors who held of f ice during th e financ ial year under re view, will be pu tting them selves f or ward for ele ction at th e AGM on 1 3 May 2022, except Simon Silver an d Simon Fraser wh o retired on 26 Fe bruar y and 31 Oc tober 2021 , res pec tively, and David Silv erman who will s tep down as a Dire ctor on 1 4 Apr il 20 22. Director s’ indemnit y The C ompany m aintains approp riate Direc tors’ and O f fic ers’ liabilit y insuranc e cove r in respe ct of any p otential legal ac tion broug ht against it s Directo rs. T he Comp any has also in demnifie d each D irecto r to the ex tent pe rmit ted by l aw against any liabilit y incurre d in relatio n to acts or o missions ar ising in the ordinar y cour se of their du ties. T he indemnit y ar rangemen ts were in forc e throug hout th e year (and at the date of app roval of the f inancial sta tements) and are qualif ying ind emnit y provis ions under th e Co mpanies Ac t 2006 . Our indemnit y arr angement s were subjec t to a be st prac tice rev iew with our l awy ers during 2021 . Powe rs of t he Dir ect ors Subjec t to the Co mpany ’ s Ar tic les of As soc iation, the C ompanie s Ac t and any direct ions give n by spe cial reso lution, th e busines s of the C ompany is mana ged by t he Board , who may exercis e all the powe rs of the C ompany, whether re lating to the m anageme nt of the busine ss of the C ompany o r not. In par tic ular , th e Board may exercis e all the powe rs of the C ompany to b orrow mo ney , to guarante e, to indemnif y , to mor t gage or ch arge any of its under t akings, pro per t y , as sets ( prese nt and fu ture) and uncalle d capi tal and to iss ue debe ntures and o ther se curitie s and to give se curit y for any de bt, liabilit y or ob ligation of the C ompany or of any third par t y. Directors’ training and development Det ails of the training that h as bee n provid ed to the E xec utive an d Non-E xec utive Dire ctor s during the ye ar can be f ound on pa ge 1 4 0. 19 5 Financ ial Stat ements Strategic repor t Governance Capital s tructure As at 23 F ebruar y 2022, the C ompany ’ s is sued sh are capit al comp rise d a single clas s of 5p ordinar y share s and equalle d an amount of £ 5,6 1 0,4 25 divide d into 1 1 2,208,5 1 0 ordinar y share s. The m arket pric e of the 5p ordinar y sh ares at 31 Dece mber 2021 was £3 4. 1 5 (2020 : £ 30.96) . During th e year , they tr aded in a range bet we en £30. 1 6 and £38 .50 (20 20: £23.34 and £ 43.62). Det ails of the ordinar y sh are capit al and share s issue d during the year c an be fo und in note 28 to the f inancial state ments . Righ ts an d res tric tion s at tac hing to sh are s Subjec t to the Ar tic les of As sociat ion, the C ompanie s Act and o ther shareh olders’ righ ts, share s in the Co mpany may be is sued wi th such r ights and re stric tions as th e sharehold ers may by ordinar y res olution de cide, or if t here is no su ch reso lution, as th e Board may dec ide provi ded it do es not c onfl ict with any re soluti on pass ed by the sharehol ders. The se right s and res trict ions will apply to the r elevant share s as if they we re set ou t in the Ar tic les of As sociat ion. Subjec t to the Ar tic les of As sociat ion, the C ompanies A ct and ot her shareh olders’ right s, unissue d shares ar e at the dispo sal of the B oard. V ariation of rights The r ights at tac hed to any cl ass of share s can b e amende d if approv ed, eit her by 75% of shareholde rs holding the is sue d shares in that cl ass by amo unt, or by sp ecial res olution p asse d at a sep arate meet ing of the holde rs of the re levant clas s of shares . Ever y m ember and e ver y duly app ointed prox y pr esent at a g eneral me eting or clas s mee ting has, up on a show of hand s, one vote an d ever y m ember p resen t in pers on or by prox y ha s, upon a p oll, one vote for e ver y share h eld by him or her . No pe rson h olds sec urities in the C ompany c arr ying sp ecial righ ts with regard to c ontrol o f the C o m p an y. Derwent London shares held by the Group As at 31 Dec embe r 202 1 , th e Group holds 19 ,984 D er went Lon don share s in order to deli ver the de ferre d bonus sh ares to the Dire ctor s and oth er senior exe cuti ves whe n the defer ral per iods expire (se e pag e 1 85). Movem ents on th e holding of thes e shares are d etailed at the b ot tom of the pa ge. Res tric tio ns on tr ans fer of s ecur ities i n the Co mpany The re are no spe cif ic restr iction s on the trans fer of se curitie s in the Co mpany , which is go verne d by its A r ticles of A sso ciation and prevailing leg islation. T he Co mpany is not aware of any a greem ents bet we en shareho lders that m ay result in rest rictio ns on the transf er of se curitie s. Year en de d 31 Dec emb er 2021 Y ear e nde d 31 De cem ber 2 020 As a t 1 January 20 21 A cquired Dispo sal As a t 31 De cem ber 20 21 As a t 1 January 2020 Ac quired Disp osal As a t 31 De cem ber 2020 Numbe r of 5p ordinar y sh ares 4 1,1 8 5 568 2 1,7 6 9 19 , 9 8 4 2,4 84 39, 968 1 ,267 41 ,1 8 5 Price 33.0 4 33 .03 Perc ent age of is sued s hare cap ital 0% 0% DIRE CT ORS’ RE PORT CONTINUED Powe rs in r elat ion to th e Comp any is suing or b uyi ng bac k it sownsha res At the 2021 AGM, shareholder s author ised th e Comp any to allot relevant securitie s: — up to a no minal amount of £1 ,865, 837 ; and — up to a no minal amount of £3,73 2,234, af ter de duct ing from such limit any r elevant se curitie s allot ted under (i ) , in conn ect ion with an of fe r by way of a rights is sue. This aut horit y is ren ewable annually. An ordinar y res olution will b e prop ose d at the 2022 AGM to grant a similar auth orit y to allot: — up to a no minal amount of £1 ,869,955 (b eing one -third of the issu ed share c apital of th e Comp any) ; and — up to a no minal amount of £3,7 4 0,4 7 1 , af ter de ducting f rom such limit any r elevant se curitie s allot ted under (i ) , in conn ect ion with an of fe r by way of a rights is sue (being tw o-thirds of th e issue d share c apital). At the 2022 AGM, similar to prev ious year s, autho rit y will be so ught via a sp ecial re solution to e nable the Dire ctors to allot s ecuri ties and/ or s ell any tre asur y shares f or cash o n a non-pre -empti ve basis up to a no minal amount of £280,52 1 (rep resent ing 5% of the issu ed share c apital ) . In additio n, author it y will be sou ght via a spe cial res olution to enab le the Direc tors to allot se curitie s and/or sell t reasur y share s for c ash on a non-p re-e mptive b asis for the purp ose s of financing (or ref inancing , if the auth orit y is to be us ed within six m onths af ter th e original trans action) an ac quisition or other c apit al investm ent. Th e allotment of e quit y sec urities o r sale of trea sur y shares und er such aut horit y will als o be limited to a nominal amo unt of £280,5 21 ( repr esenting a f ur ther 5% of the issu ed share c apital ) . A fur th er spe cial reso lution will be p ropos ed to ren ew the Dire ctors’ autho rit y to repurc hase the C ompany ’s ordinar y shares in the market . The auth orit y will be limi ted to a ma ximum of 1 1 ,220,85 1 ordinar y share s and the re solutio n sets th e minimum and ma ximum pric es which may b e paid. Th e Direc tors will only purcha se the C ompany ’ s shar es in the marke t if they b elieve it is in the b est intere sts of shar eholder s generally. Vo t in g Shareh olders will b e entitle d to vote at a gener al meeting wh ether on a show of h ands or a po ll, as prov ided in th e Companie s Act . Where a p rox y is give n discretion a s to how to vote on a sho w of hands this will be tr eated as an ins truc tion by the re levant shareh older to vote in the way in which t he prox y de cides to exer cise that disc retion. This is subjec t to any spe cial right s or restr iction s as to voting which are giv en to any shares or up on which any shar es may be he ld at the relevant t ime and to the A r ticles of A sso ciation. If more t han one joint hold er votes (inc luding voting by prox y), the only vote which w ill count is the v ote of the pe rson wh ose name is liste d firs t on the regis ter for th e share. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 19 6 Restrictions on voting Unless t he Direc tors de cide othe rwis e, a shareh older cann ot at tend or vote sh ares at any gen eral mee ting of the C ompany or upon a p oll or exercis e any other r ight conf erre d by membe rship in relat ion to general m eetings or p olls if th ey have not p aid all amount s relating to th ose share s which are due at th e time of the me eting, or if t hey have b een se r ved wit h a restr iction n otice (as def ined in the A r ticles of A sso ciation) af ter failure to pro vide the Co mpany with infor mation c oncer ning interest s in those s hares require d to be prov ided un der the C ompanie s Act. T he C ompany is not aware of any a greem ents be twe en shareh olders th at may result in re stric tions on vot ing rights . Signific ant agree ments The re are no agr eemen ts bet wee n the Co mpany and it s Direc tors or employ ees p roviding for c ompe nsation fo r loss of of f ice or employ ment that o ccur s bec ause of a t akeover bid, e xcept that , under th e rules of th e Group’ s share -base d remune ration sch emes som e awards may vest f ollowing a change of c ontro l. Som e of the Group’s banking and f inancial arran gement s are terminable up on a change of c ontrol of th e Comp any . As a REI T , a ta x charg e may be levie d on the C ompany if i t makes a distrib ution to anoth er Com pany which is be nefic ially entitle d to 1 0% or more o f the shares o r dividen ds in the C ompany or c ontrols 1 0% or more o f the voting rig hts in the C ompany (a subst antial shareh older), u nles s the C ompany has t aken reaso nable steps to avoid suc h a distribu tion being ma de. The C ompany ’s Ar ticles of As sociat ion give th e Direc tors pow er to take such s teps, inc luding the p ower to: — identif y a substantial shareholder; — wit hhold the p ayment of di viden ds to a subst antial shareh older; and — re quire the dispo sal of share s forming p ar t of a subst antial shar ehol ding. The re is no per son with w hom the Gro up has a cont ractual o r other arrange ment that is e ssen tial to the busine ss of the C ompany. Amen dment of Ar ticle s of Ass ociation Unless ex pres sly spe cifie d to the c ontrar y in the C ompany ’s Ar tic les of As sociat ion (the Ar tic les) , the A r ticles may b e amende d by a spe cial res olution of th e Comp any’s shareho lders. In acc ordanc e with the C ompany ’ s A r ticles, t he ma ximum ag gregate fe es pay able to Non-E xecu tive Dire ctors are £700,00 0 a year . Th e amount of he adroom availab le under this fe e limit is pres ently low. Acc ordingly, al tho ugh there ar e currently n o plans to make any material ch anges to Dire ctors’ f ees ot her than the change s disclos ed on pa ge 1 73, the B oard be lieves i t is desirable to incre ase the fe e limit to prov ide flexibili ty f or any fut ure increas e in Direc tors’ fe es or any f ur ther incre ase in the numb er of Direc tors , and will the refore se ek share holder appr oval at the 2022 AGM to raise th e ag gregate ma ximum fe es payable to it s Non-E xecu tive Direc tors by £1 00,00 0 to £80 0,000 a ye ar . Fixed assets The G roup’ s por t fo lio was profe ssionally re valued at 31 Dec ember 202 1 , resulting in a surp lus of £ 1 4 2.9m, b efore ac count ing adjustmen ts of £23. 7 m and sh are of joint venture of £1 3.9 m. The por t fol io is include d in the Group bal ance sh eet at a c arr ying value of £5,5 44m. Fur th er details are g iven in note 1 6 of th e financial statements. Pos t -bala nce shee t events Det ails of pos t-balan ce she et eve nts are give n in note 37 of the finan cial statem ents. Political donations The re were no p olitic al donations dur ing 20 21 (20 20: nil). Auditors Pric ewaterho useC oop ers LL P , which wa s appointe d in 20 1 4 following a c ompet itive ten der pro ces s, has exp ress ed its willingne ss to con tinue in of fic e as the Gro up ’s Auditor and, acc ordingly, resolutio ns to reapp oint it and to auth orise th e Audit Co mmit tee, for an d on behalf of th e Directo rs, to dete rmine its remune ration will be pr opos ed at the AGM. T hes e are reso lutions 1 5 an d 1 6 se t out in the Not ice of Me eting. The D irector s who held of f ice at t he date of approval of t his Direc tors’ rep or t conf irm that , so far as th ey are each aware, t here is no relev ant audit inform ation of which the C ompany ’s Auditor is unaware and that e ach Dire ctor has t aken all the step s that the y ought to hav e taken as a Dire ctor to make the mselve s aware of any relevant au dit informatio n and ensure th at the Auditor is aware of such information. Gree nhouse gas emis sions In line with our c ommitme nt to transpar ent and be st prac tice rep or ting, we have in cluded o ur streamline d ener g y and car bon rep or ting (SECR) disclosure s on page 7 4 of t he Resp onsibilit y se ction, whic h includes o ur annual GHG ( greenh ouse gas) emissio ns foot print, glob al energ y us e figure an d an intensit y ratio approp riate for our bus iness , which fulf il the requirem ents of the Co mpanies Ac t 2006 (S trategic and D irector s’ Repor t ) Regulat ions 201 3. For f ur ther analysis an d detail on o ur GHG emissions , please se e our annual Resp onsibilit y Rep or t, which c an be foun d at: www . derwentlondon.com/responsibility Annual G eneral Mee ting (AGM) In resp onse to C ovid- 1 9, and in line with th e relate d public health guidanc e and legisl ation issu ed by the UK G overnm ent, th e 202 1 AGM was held as a c lose d meeting . Shareho lders were ab le to par ticip ate in the AGM, and ask que stions of t he Boar d remotely, via call f acilities . We were delighte d to rec eive in exce ss of 87% votes in favour of all r esolut ions. In total , 84.7% of our shareholde rs (voting capi tal) vote d at the 2021 AGM ( which c ompares f avourably to th e F TSE 250 avera ge of 69.65% ). The 38 th AGM of De rwe nt Londo n plc will be held in DL / 78 at 80 Charlot te S treet , Londo n W 1A 1 AQ on 1 3 May 2022 at 1 0.30 am. The Notic e of Meeting to gether wi th explan ator y notes is c ontaine d in the circ ular to shareho lders that a ccom panies the ann ual Repor t & Accou nts. In the eve nt we rec eive 20% or m ore votes a gainst a rec ommen ded res olution at a gen eral me eting, we wo uld announce t he actio ns we intend to take to en gage with our sh areholde rs to under stand th e result in ac cordan ce with th e Co de. We would follow this announc ement w ith a fur th er update within six m onths of th e me eting, wit h an over vie w of our shareho lders’ views o n the res olutions an d the reme dial action s we have taken. T o date, th e Boar d has not b een re quired to follow th ese pr oce dures due to th e high level of s uppor t re ceiv ed fr om shareho lders. The S trategi c repor t an d Directo rs’ repor t h ave be en approve d by the B oard of Dire ctors an d signed b y order of the B oard by : Dav id L awl er Co mpany Se cretar y 23 Febr uar y 2022 197 Financ ial Stat ements Strategic repor t Governance “ W e fin a nce ou r bu si ness us i ng equ it ya nd a mode ra t e l evel o f de btfr om a w id e va ri et y o f sou rces . W ea re r ela ti on sh i p dr ive n an d va lu econs i ste ncy a nd r eli ab il it y wi th ou r l end ers , but w e al so l ook t o be progressive and innova tive. 20 2 1 w asa n act ive ye ar o f re fi na nci ng which has f ur ther streng then ed o u r ba la nce sh eet an d fin an ci a l posi ti on . ” Damian Wisni ewski C hief Financial O f fic er De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 19 8 FI NAN CIA L S TAT E M E N T S St atement of Directors’ resp onsibilities .......................................... 200 Independent Audit or’s report ................. 201 Gro up inc ome s tatem ent ........................ 209 Gro up st ateme nt of comprehensive income .......................... 210 Balance sh eets ......................................... 211 St at ement s of changes in equit y ........... 212 Cash f low statements .............................. 213 Notes to the financial statements ......... 214 Other information T en-year summary ................................... 268 EPRA summar y ......................................... 269 Pr incip al pro pe r tie s .................................. 272 List of def in itions ...................................... 274 Communication with our shareholder s .. 278 Awards & recognition ................................ IBC 19 9 Governance Strategic repor t Financial St atements S T A T E MEN T OF DIR EC T ORS’ R E SPO NSIBILI T IE S IN RESPECT OF THE F I NANCIA L ST A TEMENT S The D irector s are resp onsible for p reparing th e Annual Rep or t andthe f inancial s tatement s in acco rdance wi th applic able law andreg ulation. Co mpany law re quires the Dire ctors to p repare f inancial sta tements f or each f inancial ye ar . Under t hat law the Dire ctor s have pre pared th e Group and th e Comp any financial s tateme nts in acc ordanc e with UK -ad opted intern ational ac counting s tandards . Under C ompany l aw , Dire ctors m ust not app rove the f inancial sta tements unle ss they ar e satisf ied that t hey give a t rue and f air view of th e state of af fair s of the Group an d Comp any and of the prof it or los s of the Group f or that per iod. In prep aring the f inancial sta tements , the Direc tors are re quired to: — sele ct suit able acc ounting poli cies and th en apply the m co nsiste ntly; — sta te whether ap plicable UK-adopte d international a cco unting stan dards have b een fo llowed, subjec t to any material depar t ures disclo sed and e xplaine d in the finan cial statements; — make judgem ents and ac counting e stimates t hat are reas onable and pr udent; an d — prep are the fin ancial state ments on t he going con cern b asis unless i t is inappropr iate to presume th at the Group and Co mpany will cont inue in busines s. The D irector s are resp onsible for s afeguar ding the asse ts of the Group and C ompany an d henc e for tak ing reason able steps f or thepre vention an d detec tion of fr aud and other ir regular ities . The D irector s are also re spons ible for keeping ad equate acc ountingre cords th at are suf fi cient to show an d explain the Group’s and Comp any’s transac tions an d disclose wi th reaso nable acc uracy at any time th e financ ial positi on of the Group an d Co mpany and enab le them to ensure t hat the fin ancial state ments and the D irecto rs’ Remunerat ion Repor t c omply wit h the Co mpanies Ac t 2006 . The D irector s are resp onsible for t he maintenanc e and integri ty of the C ompany ’ s web site. Leg islation in the Uni ted Kingdo m gover ning the prep aration and dis semination of f inancial sta tements may dif f er from leg islation in oth er jurisdic tions. Director s’ confirmations The D irector s consi der that the A nnual Rep or t and Ac count s, taken as a whole, is f air , balan ced an d unders tandab le and provid es the inform ation nec es sar y for shar eholder s to asse ss the G roup’ s and Co mpany ’ s po sition and p er forman ce, bus iness m odel and strateg y . Each of t he Direc tors, wh ose nam es and f unctions ar e listed on pag es 1 26 and 1 27 conf irm that, to th e bes t of their kn owledge: — the Gro up and Com pany finan cial statem ents, whic h have be en prep ared in acc ordanc e with UK-adopted inter national acc ounting st andards, g ive a tru e and fair view of t he asse ts, liabilities an d financ ial positi on of the Group an d Comp any , and of the p rofit of t he Group; and — the S trategic re por t includ es a fair rev iew of the dev elopmen t and pe r formanc e of the bu siness an d the po sition of the G roup and C ompany, together wit h a desc ription of the p rincipal risk s and unc er tainties t hat it fac es. On be half of the Bo ard Paul M. W illiams Chief E xecu tive Dami an M. A. W isniewsk i Chief Finan cial Of f icer 23 Febr uar y 2022 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 200 I NDEPE N DEN T A UDI T OR ’S R EPOR T TO T HE MEMBE RS OF DERW ENT LONDO N PL C Repor t on th e audit of the fina ncial st atement s Opinion In our opinion, D er went Lond on plc’s Group financ ial stateme nts and C ompany f inancial sta tements (the “ f inancial st atements” ): — give a t rue and f air view of the st ate of the Group’s and of the Co mpany ’ s af fairs as at 31 D ec ember 202 1 and of t he Gr oup’ s prof it and the Group’s and Co mpany ’ s cas h flows fo r the year then ended; — have be en prop erly p repare d in accord ance wi th UK-adopted internatio nal acc ounting st andards; an d — have be en prep ared in ac cord ance with the re quirements of the C ompanies Ac t 2006. We have audited t he financial st atements , include d w ith i n th e Repo r t & Ac coun ts 20 21 (the “ Annual Re por t ”), which com prise: th e Balan ce she ets as at 31 Dec embe r 202 1 ; the Gro up income sta tement and Gr oup statem ent of com prehensi ve inco me, the Cas h flow st atements , and the S tateme nts of change s in equit y for the ye ar then en ded; and the no tes to the f inancial statem ents, which inclu de a descr iption of the signif ican t account ing policies . Our opinion is c onsiste nt with our re por ting to the A udit C ommit tee. Basis for opinion We condu cted o ur audit in acc ordance wi th Internation al Stan dards on Auditing ( UK) (“ ISAs (UK )”) an d applic able law. Our respo nsibilities under IS As (UK ) are fur th er des cribe d in the Auditor s’ respo nsibilities for th e audit of the f inancial st atements s ect ion of our rep or t. We beli eve that th e audit evide nce we hav e obtaine d is suf fic ient and approp riate to provid e a basis for o ur opinion. Independence We remaine d indepe ndent of th e Group in acc ordanc e with the ethic al requireme nts that are re levant to our audit of th e financial sta tements in th e UK, which inc ludes th e FRC’s Ethical S tandar d, as applic able to liste d public interes t entitie s, and we have f ulfilled o ur other e thical re sponsibili ties in acc ordanc e with the se requirem ents. T o th e bes t of our know ledge and b elief, we declare t hat non-audit ser v ices p rohibited by t he FRC ’ s Ethic al Stan dard were not p rovide d. O ther than th ose disc losed in n ote 1 0 to th e financial s tateme nts, we have pro vide d no non-audit s er vic es to the C ompany or its con trolled und er takings in t he peri od under au dit. Our audit approach Ove rv iew Audit s cop e — We tailore d the sc ope of our audit to ensure t hat we pe rf orme d enoug h wor k to be able to gi ve an opinion on the f inancial sta tements as a whole, t aking into ac count the ge ographic str ucture of the G roup, the acc ounting proc es ses and c ontrol s, and the industr y in which the G roup operate s. — The G roup’ s prop er ties are sp read acr oss 6 3 statu tor y entitie s with th e Group finan cial statem ents b eing a cons olidation of the se entitie s, the C ompany an d the Group’s joint venture s. All wor k was carr ied ou t by the Group au dit team with additio nal proc edures p er form ed on th e cons olidation to ensure su f ficie nt cove rage for o ur opinion on the Gro up finan cial statem ents as a who le. — In planning our audit, we m ade enquiries wit h managem ent to under stan d the ex tent of the poten tial impact of c limate change r isk on the f inancial st atements . Managem ent con cluded t hat there was n o material impac t on the f inancial sta tements . Our evaluation of t his conclusi on include d challeng ing key judgement s and es timates in areas wh ere we con sidered t hat there was g reates t potential f or climate change imp act. We par t icularly c onsidere d how climate change risk s would impac t the ass umptions made in th e valuation of inve stmen t prope rt ies as exp lained in our key audit mat ter below. We also c onsider ed the c onsisten cy of thedisc losures in rel ation to climate ch ange made within theA nnual Repor t , the finan cial statem ents and th e know ledge obt ained fr om our audit. We as ses sed th e con sideration of t hecos t of deli vering the G roup’ s climate change an d sust ainabilit y strateg y within the going conc ern and v iabilit y fore cast s. Key aud it mat te rs — Val uatio n of inves tment pr oper tie s (Group) — Revenue re cognition (Group) — Val uatio n of borro wings and deriv atives (Group) — Ac counting fo r the exp ec ted cre dit loss prov ision (Group) — Co mpliance with REIT g uidelines (Group) — Val uatio n of investm ents in and loan s to subsidiaries (C omp any ) Materialit y — O verall G roup materialit y: £ 58.9 millio n (202 0: £55 .3 million) bas ed on 1 % of T otal As sets . — Spe cifi c materialit y of £5. 8 million (20 20: £7 . 1 millio n) for cer t ain income s tateme nt line items whic h is calculate d base d on 5% of Prof it Bef ore T a x af ter rem oving revaluatio n of inves tment pro per tie s ( whe ther held dire ctly or th rough joint venture s) , prof it on dispo sal and fair v alue move ments onderiv atives. — O verall C ompany m aterialit y: £ 37 .4 million (20 20: £ 33.7 million) bas ed on 1 % of T ot al As sets . — Per fo rmance materialit y: £ 44 . 1 million (20 20: £4 1 .4 million) (Group) and £28.0 mi llion (2 020: £2 5.3 million) (Comp any) . The s cop e of our audit As p ar t of designing our au dit, we deter mined mater ialit y andas ses sed th e risks of material mis state ment in the finan cialstatem ents. 201 Financial St atements Governance Strategic repor t IN DE PENDENT A UDIT OR’S RE PORT CONTIN UE D Key audit mat ters Key audit mat ter s are thos e mat ters that, in th e auditors’ profe ssional jud gement , were of mos t signifi canc e in the audit of the f inancial st atements of t he curren t perio d and include t he mos t signif icant as ses sed r isks of material mis statem ent (whether or not due to f raud) iden tifie d by the auditor s, including th ose which had the g reates t ef fec t on: the overall au dit strateg y ; the alloc ation of res ource s in the audit; and dire cting the ef f or ts of the engage ment team . Thes e mat ters, an d any commen ts we make on the re sults of our pro cedure s there on, were a ddress ed in the con text o f our audit of the f inancial st atements a s a whole, and in forming o ur opinion there on, and we d o not prov ide a separ ate opinion on these mat ters. This is not a c omplete lis t of all risks ide ntifie d by our audit. Val uatio n of borro wings and deriv atives (Group) and valuatio n of inves tments in an d loans to subsidiarie s (Company) are n ew key audit mat ters t his year . C ovi d- 1 9, which was a key audit m atte r last year , is no longe r include d bec ause of the low er level of unc er taint y from C ovi d- 1 9 in comp arison to th e prior ye ar . O ther wise, t he key audit mat ters b elow are co nsistent wit h last ye ar . Key a udit matter How o ur au dit a ddre ss ed t he key a udi t mat te r V aluation of i nvestment proper ties Group Refe r to the Audi t Commi tte e rep or t (Signifi cant f inancial ju dgemen ts, key as sumption s and es timates), note 3 (Signif icant ju dgeme nts, key ass umptions a nd est imates) and no te 1 6 (Pr oper t y p or t folio) to the fin ancial st atemen ts. Th e Group has inv estm ent pro per tie s totallin g £5,359.9 milli on (2020: £ 5,029 . 1 milli on). Th e Group’s prope rt y p or t folio p rincipal ly consis ts of of f ice s and com mercial s pace wi thin cen tral Lon don. T he remain der of the p or t folio repr esen ts a ret ail park , cot ta ges and s trateg ic land in S cotl and. Valuations are c arrie d out b y third par t y value rs (the ‘ Valuers’ ) in acc ordan ce with t he Royal Ins titu te of Char tere d Sur ve yors Valuation – Prof essi onal St andard s, Intern ational A cco unting St andard 4 0 (Inves tmen t Prop er t y) and Intern ational F inancial Re por ting S tand ard 1 3 (F air V alue Me asurem ent). Th ere are signi fic ant judgem ents an d estim ates to be m ade in rel ation to the va luation of th e Group’s invest ment pro per tie s. Wh ere availab le, the valu ations t ake into acc ount ev idenc e of marke t transa ction s for prop er tie s and loc ations c ompar able to tho se of the G roup. Th e centr al Londo n inves tment p roper t y p or t folio mainly f eature s of fi ce ac comm odation a nd includ es: Standing investment s : The se are existing prop ertie s that a re currently let. T hey are v alued using t he inc ome cap italis ation me tho d. Development proj ec ts: The se ar e proper ties currentl y under development or ide ntif ied for f utur e develo pment . The y have a dif fer entrisk an d inves tmen t prof ile to the st anding inves tmen ts. T hese ar e valued using th e residua l apprais al metho d (i.e. by e stimat ing the fair va lue of the c omplete d proje ct using t he inco me capi talis ation me thod le ss es timated c ost s to comp letion an d a risk pre mium) . Th e most s ignifi cant e stimate s af fec ting the va luation inclu ded yie lds and es timated r ental valu e (“ERV ” ) grow th (as de scrib ed in note 1 6 of th e finan cial st atement s) . For d evelop ment pr oject s, othe r assump tions inc luding co sts to c ompleti on and ris k premium ass umptions a re also f actore d into the v aluation. Th e existen ce of signi fic ant es timation un cer t aint y , co upled wit h the fac t that only a s mall pe rcent age dif f erenc e in indiv idual prop er t y valuatio ns when a gg regated c ould re sult in material m isst atemen t, iswhy we hav e given s pec ific au dit foc us and at tenti on to this are a. Th e valuers us ed by t he Group ar e CBRE for t he cen tral Lon don por t fo lio and S avills fo r the major it y of the rem aining inves tment p rope rt y p or t folio in Sc otlan d. The y are well-kn own fir ms, with s uf fic ient exp erie nce of th e Group’s market . We asse sse d the c ompe tenc e and cap abilitie s of the Valuers and v erif ied th eir qualif icat ions by disc ussing t he sc ope of th eir work a nd revi ewing the te rms of the ir engage ments f or unusual te rms or fe e arrange ments . Bas ed on this w ork , we are satis fie d that th e V aluer s remain o bjecti ve and c ompe tent and th at the sc ope o f their wor k was appropriat e. We teste d the dat a input s under pinning the inve stm ent prop er t y valuatio n for a sam ple of prop er ties , including r ental inc ome, a cquisit ions and c apital e xpen diture, b y agre eing the m to the unde rlying p roper t y rec ords h eld by the G roup to as ses s the relia bilit y , c ompleten ess an d acc uracy of t he unde rlying dat a use d by the Valuer s. The un derly ing prop er t y rec ords we re ass ess ed fo r reliabilit y by o btaining sig ned an d appro ved le ase co ntrac ts or s ale/ pur chase c ontr acts an d by insp ect ing appro ved t hird par t y invoic es and t racing ba ck to bank s tatem ents. F or the pr oper t ies curr ently und er deve lopmen t, we ag ree d the co sts to da te includ ed wit hin develo pment ap praisal s to quantit y sur vey or repo r ts. We met wi th the Valuers in depe ndent ly of manag ement an d obtain ed th e valuatio n repo r ts to discus s and ch allenge th e valuation m etho dolog y and as sumptio ns. We als o challeng ed the ex te rnal value rs as to th e ex tent to whi ch rec ent mar ket trans actio ns and ex pec ted re ntal value s which t hey mad e use of in der iving th eir valuatio ns took into a cco unt the impac t of climate c hange. Give n the inhe rent subje cti vit y involv ed in the v aluation of th e prop er t y por t fo lio, and th erefo re the ne ed fo r deep m arket kn owledg e when deter mining the mo st app ropriate a ssumpt ions and t he tech nicalit ies of valuatio n meth odolog y, we enga ged our in ternal valua tion exp er ts (qualif ied char ter ed sur v eyors) to as sist us in o ur audit of this are a. We involv ed our intern al valuation ex per t s to comp are the valua tions of e ach prop er t y with o ur indep enden tly form ed mar ket exp ec tation s and challe nged any dif fe renc es out side of our ex pe cte d range. In doin g this we use d evi denc e of comp arable mar ket trans acti ons and fo cus ed in par ti cular on prop er tie s where th e grow th in c apital va lues was high er or lowe r than our exp ec tation s base d on inde pend ent publ icly availab le market indic es . We ident ifie d the fo llowing ca tegorie s of ass ets fo r fur the r testin g: st anding inve stmen ts wher e the valuati on fell o utsid e the exp ec ted range; ong oing and pl anned d evelop ment pr oject s; high value as sets o ver over all materia lit y; and ac quisitio ns. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 202 Key a udit matter How o ur au dit a ddre ss ed t he key a udi t mat te r V aluation o f investment p roper ties c ontinued In rela tion to the se as sets , we foun d that yie ld rates an d ERVs were predominantly consistent with comparable i nformation for central Lon don of fi ces an d assump tions ap propria tely ref lecte d com parable marke t informa tion. Wh ere ass umptions di d not fall wi thin our exp ec ted range , we asse ss ed whe ther ad ditional e viden ce pre sente d in arri ving at the f inal valuati ons was app ropriate . V arian ces w ere larg ely due to prop er t y spe cif ic fac tors su ch as mov ement s in ERV or y ield to ref lect marke t transa ction s in close p roximit y, expo sure to ret ail or the de -risk ing of development projects nearing completi on. We verified the movements to supp or ting do cument ation in cluding ev idenc e of comp arable mar ket transactions where appropr iat e. We challen ged th e direc tors on th e move ments in t he valuation s and foun d that the y were able to p rovid e expla nations an d refer to ap propr iate suppor ting evidenc e. We have no m atte rs to rep or t in resp ec t of this wor k. Revenue rec ognition Group Refe r to the S trategic r epor t – “ Our prin cipal risk s” and note 5 (Prop er t y and ot her inc ome) to the f inancial s tatem ents . Reve nue for t he Group c onsis ts prima rily of rent al incom e. Rent al inco me is bas ed on te nancy a gre ement s where t here is a s tandar d pro ces s in plac e for re cor ding reven ue. Th ere are ce r tain trans act ions within r evenu e that warra nt additio nal audit f ocus b ec ause of an inc rease d inher ent risk of e rror due to t heir non-s tandard nature . Th ese inc lude spre ading of tenan t incen tive s, guara ntee d rent incre ase s and rent al con ces sions gi ven to ten ants. Th ese ba lanc es req uire adjustme nts made to r ental in come to ensur e revenu e is rec orde d on a str aight-line b asis ove r the c ourse of the le ase. We per fo rme d sample te sting ov er the le ase data r eco rded in t he tw o tenan cy mana gemen t sys tems to supp or ting lea se agre eme nts, to gain com for t ove r the ac curac y of the dat a. We also p er for med a re calc ulation of a s ample of re ntal inc ome ba sed on the inf ormat ion in the ten ancy ma nagem ent sy stem (that g enerate s rent al deman ds) to gain comfo r t over th e comple tenes s of rev enue rec ognis ed. We tes ted on a s ample ba sis the auto matic c alculatio n of rental demands. For re ntal inc ome b alanc es, we te sted a s ample of b alanc es to invoic es and tr ace d rec eipts to ban k statem ents an d ensure d that re ntal inc ome had b een app ropria tely rec orde d. We teste d a samp le of lease in centi ve debto r balan ces b ack to sup por ting doc ument ation ag reeing t he input s to the lea se ince ntive c alcul ations and as ses se d the appr opriaten ess o f the calc ulatio ns in line with Intern ational F inancial Rep or ting S tand ard 1 6 (L ease s) (“IFRS 1 6” ). We rec alculate d a samp le of lease in centi ve adjustm ents p oste d to reve nue in the y ear to ens ure that leas e ince ntive d ebtors ar e being rec ognis ed pro per ly as accr ued in com e and subs eque ntly amor t ised in line wit h IFRS 1 6. We use d subst antiv e testin g proc edure s to ensure t hat a samp le of rental con ces sions o f fere d to tenants a s a result of C ovid - 1 9 had b ee n corr ect ly acc ounte d for wit hin the re quirement s of IFRS 1 6. We have no m atte rs to rep or t in resp ec t of this wor k. V aluation o f borrowings an d derivative s Group Refe r to the Audi t Commi tte e rep or t (Signifi cant f inancial ju dgemen ts, key as sumption s and es timates), note 3 (Signif icant ju dgeme nts, key as sumption s and es timates) and n ote 2 4 (Net d ebt and d erivat ive fin ancial inst rumen ts) to the f inancial s tateme nts. Th e Group has s ecur ed and uns ecur ed deb t totalling £1 ,249.4 million (2020: £ 1 ,033.2 millio n) . Th ere were t wo ex tens ions for t he exis ting £4 50.0 million r evolv ing cre dit facili t y and £1 0 0.0 million re volving c redit f acilit y durin g the year. In addition, a s a direct c ons equen ce of th e Inter-B ank Of f ered Rate ref orm, am endmen ts to the se fac ilities h ad be en made on t he flo ating intere st rate s of the Lon don Inter -Bank O f fere d Rate with the re plac emen t of the S terling O ver night Indexe d Avera ge plus a Cre dit Adjustm ent Spr ead. Th ese ex te nsions an d amendm ents were de termine d by mana geme nt to be mo difi cation s of the exi sting facilitie s rather than an ex ting uishment. A £35 0.0 million 1 .875% gree n bond w as issu ed during t he year whi ch is re deem able in 2031 . Th ere have b een a numb er of f inancing ac tiv ities d uring the ye ar . T hes e warran ted addi tional audi t foc us due to the m agnitu de of the ac tiv ities and th e poten tial for c omplex c ontrac tual ter ms that intr oduc e judgem ent into ho w they we re acc ounte d for . We obtain ed and r eviewe d eac h loan co ntrac t to under stan d the term s and c onditio ns. Wh ere debt c ove nants wer e identi fie d, we re-p er for med mana gemen t’s calcul ations to v erif y c omplian ce wit h the co ntrac ts. Th e carr y ing value of all d ebt was ag ree d to third par t y c onfir mations . We obtain ed and r eviewe d the lo an amendm ent c ontrac ts to unde rst and the ter ms and c onditi ons of the te rm ex tensio ns. We co nsider ed if the am endme nts co nstit uted a m odif icati on or ex tinguis hment an d con firm ed that t he amen dments w ere a mo dific ation in ac cor dance wi th Intern ational F inancial Rep or ting S tand ard 9 - Financ ial Instr ument s (“ IF R S 9” ). We revi ewed th e agre emen t per t aining to the gre en bo nd issu ed during the y ear and as ses se d the ac countin g treatm ent app lied again st IFRS 9. For de rivat ives , we agr eed t he car r ying value to v aluations o btaine d direc tly fro m the third p ar t y valuers , Chath am Financial . We ass ess ed the com peten ce and c apabili ties of th e ex ternal v aluers by c onsid ering th eir qualif icat ions and m arket exp erie nce. We inv olved o ur internal e xper t s who p er form ed ind epen dent valuat ions to re calcul ate the valu e using independent market data. From our wo rk on th e terms of th e debt ar rangem ents in pl ace as at 31 Dec ember 2021 , we con sider th e bor rowings and de rivat ives to b e acc ounte d for app ropriate ly , value d cor rec tly in the c ontex t of mate rialit y, and disclo sed appro priately. We have no m atte rs to rep or t in resp ec t of this wor k. 203 Financial St atements Governance Strategic repor t IN DE PENDENT A UDIT OR’S RE PORT CONTIN UE D Key a udit matter How o ur au dit a ddre ss ed t he key a udi t mat te r Acco unting for the exp ecte d credit lo ss prov ision Group Refe r to the Audi t Commi tte e rep or t (Signifi cant f inancial ju dgemen ts, key as sumption s and es timates), note 3 (Signif icant ju dgeme nts, key ass umptions a nd est imates) and no te 20 (T rad e and othe r rec eivab les) to the f inancial s tatem ents . IFRS 9 re quires th at cre dit loss es on f inancial a sset s are me asured an d rec ognis ed using t he “exp ecte d cre dit los s” (ECL) app roach . Th e Group has ap plied t he simplif ie d approa ch to trad e rece ivable s and lease i ncentive debto rs. Co vid- 1 9 and t he result ing eco nomic an d social dis ruptio n brough t unfor ese en challen ges to Lo ndon and t he wider g lobal e con omy; impac ting the G roup and in ge neral th e overa ll risk prof ile. Whils t con dition s improve d in 202 1 as a re sult of the va ccine p rogramm e, the re remains a ri sk of tenant s defaulting o r tenant failure , par ticul arly in resp ec t to the leis ure, retail an d hosp itali ty s ec tors. T he co ntinue d impac t of Co vid- 1 9 has t heref ore giv en rise to hig her es timated prob abilitie s of default f or spe cif ic tenant s than pre th e pand emic. Durin g the yea r an ECL prov ision of £9.5 mill ion (2020: £9.3 million) has be en rec orde d as a pro vision f or bad de bts. In ar riv ing at the Gro up’ s es timate, mana geme nt has co nsider ed the p robabili t y of default fo r tenant s at higher r isk, p ar ticul arly in the re tail or ho spit alit y sec tors , tho se in administ ration or C omp any volunt ar y arrange ment s (CV A ) and th e top 50 tena nts by size. Mana geme nt has als o consi dere d the remaining b alanc es cl assif ie d by sec tor ris k. Due to t he subjec tiv it y of the as sumptio ns use d there in, we have con sidere d this an are a of audit fo cus. We veri fie d the math ematic al acc uracy of t he mo del and pr ovisio n calc ulation o f the ECL . We evaluate d the b asis for de termining th e categ orisat ion of tenant s by risk a nd the as soc iated pr obabilit y of d efault pe rcen tage s applie d to eac h catego r y . We teste d a samp le of tenant re nt conc es sions gr anted in re spon se to Co vid- 1 9 to unde rlying a gre ement s or com municati on with th e tenants . We teste d the tr eatme nt of con ces sions to e nsure tha t they hav e bee n cor rec tly acc ounte d for as le ase mo dific ation s in line with Inte rnation al Finan cial Rep or ting St andard 16 (Lease s) . We also e nsured t hes e have be en appr opriately in clude d within th e ECL calcul ation. We revi ewed th e risk c ommit tee m eeting min utes and c ompa red th ese agains t the ECL mo del to en sure that t he tenant sp eci fic dis cussi ons were re flec ted in th e prov ision c alculatio n. We obtain ed an ag eing rep or t of trade r ece ivable s and tes ted th e acc uracy b y chec king th e ageing of s elec ted invoi ces o n a sample b asis. We per fo rme d indep ende nt rese arch ov er a samp le of tenants in o rder to ass ess a ny cont radicto r y evide nce an d how this ha d bee n incor pora ted into the f or ward- loo king prob abilit y of def ault assig ned to t he tenant . We revi ewed th e disclo sures ma de in relat ion to the ECL p rovisio n and the sen sitiv it y of the pr ovisio n to the unde rlying p robabili t y of default app lied. We have no m atte rs to rep or t in resp ec t of this wor k. Complianc e with REIT guideli nes Group Refe r to the Audi t Commi tte e rep or t (Signifi cant f inancial ju dgemen ts, key as sumption s and es timates) and n ote 3 (Signifi cant judg ement s, key as sumption s and es timates). Th e UK REIT regim e grants c ompa nies ta x exem pt stat us prov ided t hey me et the r ules within th e regim e. The r ules are c omplex and t he ta x exempt s tatu s has a signif ican t impac t on the f inancial s tatem ents. Th e complex it y of the r ules cre ates a ris k of an inadve r tent bre ach and th e Group’s profi t bec oming subje ct to t ax . Th e obligatio ns of the REI T regime inc lude re quiremen ts to com ply with bal ance of b usines s, div idend an d inco me cov er tes ts. Th e Group’s st atus as a REIT un derpin s its bus iness m ode l and share holder retur ns. Fo r this reas on, it war rants sp ec ial audit fo cus. We conf irme d our und erst anding of man agem ent’s appr oach to en suring com plianc e with the R EIT regim e rules . We obtain ed man ageme nt’s calc ulation s and supp or ting do cumen tation , che cking t heir acc uracy b y verif ying th e input s and calc ulation s. We involv ed our inte rnal ta xat ion spe cialis ts to veri f y the ac curac y of the appli catio n of the rule s and to re -per fo rm the REI T comp liance te sts . We found t hat the as se ssme nt prep ared was f ree f rom mater ial erro r and con sistent w ith the UK REI T guide lines. V aluation o f investment s in and loans t o subsidiaries Co mpany Refe r to notes 1 8 (Inve stm ents) and 20 ( T rade an d other re cei vable s ) to the f inancial s tatem ents . Th e Comp any has inve stme nts in sub sidiaries of £1 ,7 4 9.8 million (2020: £1 ,61 5.9 mill ion) and loan s to subsidiar ies of £1 ,8 60.7 million (2020: £1 ,659.4 millio n) as at 3 1 D ece mber 2021 . T his is follo wing the re cog nition of a £1 9.9 milli on (2020 : £ 4 7 .3 mil lion) prov ision for im pairme nt on inves tmen ts in subsi diaries an d an expe cte d cre dit loss imp airmen t of £nil (2020: £nil) rec ognis ed on lo ans to subsi diaries in th e year . Th e Comp any’s acc ounting p olic y for inve stme nts and lo ans is to hold t hem at co st les s any impair ment. Imp airmen t of the loan s is calc ulated in a cco rdanc e with Inter national F inancial Re por ting St andard 9 (F inancial Ins trum ents), where exp ec ted cr edit los se s are co nsider ed to be t he exce ss of th e Comp any ’ s intere st in a subsi diar y over th e subsidiar y ’ s fair valu e. Inves tment s in subsidiar ies are as ses sed f or impairm ent in line wi th Internat ional Ac co unting St andard 36 (Imp airment o f Ass ets). Give n the inhe rent judge ment an d comp lexit y in ass ess ing both t he car r ying value o f a subsidiar y c ompan y and the ex pec ted c redit lo ss of interc ompany r ece ivable s, this was i dentif ied as a ke y audit mat ter . We obtain ed th e directo rs’ impairm ent as ses sment f or the re cov erabilit y of inve stme nts in and loa ns to subsidiar ies as at 31 De cemb er 2021 . We ass ess ed th e acc ounting p olicy f or inves tment s and loan s to subsidiar ies to ensur e they we re comp liant with UK-adop ted Inter national A cc ounting St andards . We verif ied t hat the m etho dolog y us ed by th e direc tors in arri ving at th e carr y ing value of e ach sub sidiar y , and t he exp ec ted cre dit los s ‘simplif ied app roach’ pro vision f or interc ompany r ece ivable s, was com pliant wit h UK -ado pted Inter nation al Acc ounting S tan dards. We ident ifie d the key jud gemen t within the r equirem ent for imp airment of bot h the inve stme nts and lo ans to subs idiaries to b e the und erlyin g valuatio n of inves tment p rope rt y h eld by the s ubsidiari es. Fo r detail s of our pro ce dures ov er inves tmen t prope r t y valuations p lease r efer to th e Group ke y audit mat ter ab ove. We have no m atte rs to rep or t in resp ec t of this wor k. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 204 How we t ailor ed th e audit sc ope We tailored t he sco pe of our audit to en sure that we pe r forme d enoug h work to be ab le to give an opinion on t he financ ial stateme nts as a whole, t aking into acc ount the s truc ture of the Gro up and the C ompany, the acc ounting pro ces ses and c ontrol s, and th e industr y in which the y oper ate. The G roup’ s prop er ties are sp read acr oss 6 3 statu tor y entitie s with the Gr oup financ ial stateme nts being a c onso lidation of the se enti ties, the C ompany and t he Group’s joint ventures . All work wa s carrie d out by t he Group audit te am with additio nal proc edures p er form ed on th e con solidation to e nsure suf f icient c overag e and approp riate audit evid ence f or our opinion on th e Group finan cial statem ents as a wh ole. Materiality The s cop e of our audit was inf luence d by our applic ation of mate rialit y . We set c er tain quantit ative thr esholds f or materialit y. Thes e, togeth er with qualit ative c onsider ations, he lpe d us to determine th e scop e of our audit and t he nature, timing and ex te nt of our audit pro cedure s on the indivi dual financial s tateme nt line items and dis closures an d in evaluating the ef f ect of mis state ments , both indiv idually and in ag gre gate on the f inancial st atements a s a whole. Bas ed on our pr ofess ional judgeme nt, we deter mined mater ialit y for the f inancial st atement s as a whole as fo llows: Financial statements – Grou p Financial statement s – Company Overall materiality £58 .9 million (2020: £55.3 mill ion). £ 37 .4 million (2020: £33.7 million). How we de term ined it 1 % of Total As sets 1 % of T ot al Ass ets Rationale for benchmark applied Th e key drive r of the bu sines s and deter minant of the Gr oup’ s value i s direct p rope r ty inv est ments . Due to t his, the ke y area of fo cus in the a udit is the valuatio n of inves tment p rope rt ies. O n this basi s, we set a n overall G roup mater ialit y leve l base d on total a sse ts. Th e key drive r of the bu sines s and deter minant of the C ompan y’s value is inve stme nts in and lo ans to subsi diaries . Due to this , the key are a of foc us in the audit is t he valuation o f invest ment s in and loans to in subsi diaries . On this ba sis, we se t an overa ll Co mpany mate rialit y leve l base d on tot al asse ts. For ea ch comp onent in th e scop e of our Group audi t, we alloc ated a materiali ty t hat is less th an our overall G roup materialit y. The range of materialit y allo cate d acros s comp onents was £ 57 .0 to £47 .5 million. C er tain comp onent s were audite d to a local st atutor y au dit materialit y that was als o less th an our overall Gr oup materialit y. We use pe rf ormanc e materialit y to re duce to an app ropriately low lev el the prob abilit y that the a gg regate of unco rrec ted and und etec ted miss tatement s excee ds over all materialit y. Speci fic ally , we use p er forman ce materiali ty in de termining the sc ope of o ur audit and the nature and ex te nt of our testing of a cco unt balanc es, c lass es of trans action s and disclosur es, for ex ample in determining sam ple sizes. Our per f ormanc e materialit y was 75% (20 20: 75% ) of overall m aterialit y , amo unting to £4 4. 1 millio n (2 020: £4 1 .4 million) for th e Group f inancial sta tements an d £28.0 mi llion (2020: £2 5.3 million) fo r the Co mpany finan cial statem ents. In addition , we set a spe cif ic materialit y leve l of £5.8 million (2020: £7 . 1 million) for c er tain inc ome st atement line i tems which is c alculated bas ed on 5% of Prof it Bef ore T a x af ter rem oving revaluat ion of invest ment prop er ties (whet her held dire ctly or thro ugh joint vent ures) , prof it on dispo sal and fair value m oveme nts on der ivative s. In determining th e per for mance mate rialit y , we co nsidere d a number of f actors - t he histor y of mis statem ents, r isk asse ssme nt and ag gregatio n risk and the e f fec tiven ess of c ontrols - an d conc luded th at an amount at the upp er end of o ur normal rang e was appropr iate. We agre ed with t he Audit C ommit tee that we w ould repor t to th em miss tatement s identif ied during o ur audit above £2.9 million (fo r items audited u sing overall mater ialit y) and £0.5 million (for ite ms audited using sp ecif ic materiali t y) ( 2020: £2. 7 milli on and £0.7 million) ( Group audit) an d £ 1 .8 million (2020: £ 1 .7 million) (Company au dit) as well as mis state ments b elow thos e amounts t hat, in our view, warran ted repor ting for qualitative reas ons. 205 Financial St atements Governance Strategic repor t IN DE PENDENT A UDIT OR’S RE PORT CONTIN UE D Conclusions relating to going concern Our evaluati on of the direc tors’ ass ess ment of the G roup’ s and th e Co mpany ’ s abilit y to con tinue to adopt th e going con cern b asis of acc ounting include d : — A gree d the under lying ca sh flow proje ctions to B oard appr oved fore cas t and ass ess ho w this forec ast is c ompiled; — Co nsidere d managem ent ’ s fore cas ting accura cy by co mparing how th e forec ast mad e at the half year c ompare to th e actuals per f ormanc e in the se cond half of th e year; — T e sted th e integrit y of th e underly ing formula s and calcul ations within th e going con cern an d cash f low mode ls; — Under stoo d and ass ess ed the ap propriaten ess of th e key assump tions under b oth in the b ase ca se and in the s evere bu t plausible d ownside sc enario s, including as ses sing whethe r we con sidered t he downsid e sensiti vitie s to be approp riately severe; — Per fo rmed s ample testing o ver the dat a and inform ation of thepro per tie s used in th e forec ast ma de by the C ougar fore cas ting syste m to the suppo r ting docum ents to gain comf or t over th e accura cy of the dat a and inform ation in the Co ugar forec asting s ystem; — As ses sed t he consi deration of th e cos t of delive ring the Group’s climate change and s ustainabilit y s trateg y within the under lying going co ncer n and viabilit y for eca sts; — Evaluated wh ether th e director s’ conc lusion, that suf f icient liquidit y and c ovenant he adroom ex isted to c ontinue trading ope rationally thro ughout t he per iod to 3 1 D ece mber 2023 under th e base an d severe b ut plaus ible scenar ios, is approp riate; and — Revie wed the dis closures p rovide d relat ing to the going con cern b asis of prep aration and fo und that the se prov ided an expl anation of the dire ctor s’ asses sment t hat was cons istent with th e eviden ce we obt ained. Bas ed on the w ork we have p er form ed, we have no t identif ied any material unc er taintie s relating to ev ents or c ondition s that, indivi dually or colle ctiv ely , may c ast signif icant do ubt on the Group’s and the Co mpany ’ s abilit y to co ntinue as a going c oncer n for a p eriod of at le ast t welve mont hs from wh en the f inancial sta tements are au thoris ed for is sue. In auditing the f inancial st atement s, we have c onclude d that the direc tors’ use of th e going conc ern b asis of acc ounting in the prep aration of the f inancial st atement s is appropr iate. Howeve r , be caus e not all fu ture even ts or con ditions c an be pre dicted, this c onclusio n is not a guarante e as to the Gro up’ s an d the C ompany ’ s abilit y to c ontinue as a going c once rn. In relatio n to the direc tors’ repo r ting on how the y have applie d the UK Cor porate G overnan ce C ode, we have n othing material to add o r draw at tention to in rel ation to the direc tors’ st atement in th e finan cial statem ents abo ut whet her the dire ctors c onsider ed it approp riate to adopt th e going conc ern b asis of acc ounting. Our re sponsibilitie s and the re spon sibilities of the dire ctor s with resp ec t to going conc ern are de scrib ed in the re levant se ction s of this rep or t. Repor ting on other i nformation The o ther infor mation co mprises al l of the inform ation in the A nnual Repo r t other than t he finan cial statem ents and our au ditors’ rep or t there on. T he directo rs are resp onsible for t he other info rmation, which inclu des rep or ting base d on the T ask Fo rce on Climate - relate d Financial Dis closure s ( TCFD) recomm endation s. Our opinion on th e financial s tateme nts doe s not co ver the oth er inform ation and, ac cordingly, we do not exp ress an audit o pinion or , excep t to the ex tent oth er wise explic itly state d in this repo r t, any form of a ssuranc e there on. In conn ectio n with our audit of th e financ ial stateme nts, our resp onsibilit y is to read t he other inf ormation an d, in doing so, con sider whet her the ot her inform ation is materially inc onsisten t with th e financial s tatemen ts or our kn owledge obt ained in th e audit, or o ther wise app ears to b e materially miss tated. If w e identi f y an apparen t material inco nsistenc y or material miss tatement , we are require d to per for m proc edures to c onclud e wheth er there is a m aterial misst atement of t he financ ial sta tements or a m aterial misst atement of t he other inf ormation. I f , bas ed on the w ork we have p er forme d, we co nclude that t here is a material mis statem ent of this othe r information , we are require d to rep or t that fac t. We have nothing to re por t bas ed on th ese res pon sibilit ies . With re spe ct to the S trategic r epor t and D irecto rs’ repor t , we also con sidered w hether t he disclos ures require d by the UK C ompanies Ac t 2006 have b een inc luded. Bas ed on our wo rk under t aken in the cour se of the audit , the Co mpanies Ac t 2006 re quires us als o to repor t c er tain opinions an d mat ters as de scrib ed b elow. St rate gic re por t an d Dire cto rs’ re por t In our opinion, b ased o n the work und er taken in the c ourse of t he audit, th e informatio n given in th e Strateg ic repor t an d Direc tors’ rep or t for the ye ar ende d 3 1 De cemb er 202 1 is c onsistent wi th the finan cial statem ents and ha s bee n prepare d in acc ordance wi th app lica ble legal r equir emen ts. In light of the k nowledg e and under standing of th e Group and Co mpany and the ir environmen t obtaine d in the cour se of the audi t, we did not ide ntif y any mater ial misstate ments in th e Strateg ic rep or t and Direc tors’ rep or t. Director s’ Remuneration In our opinion, th e par t of the Rem uneration C ommit tee re por t to be audited h as bee n prope rly prepar ed in acc ordanc e with the Co mpanies Ac t 2006 . Corpor ate g overnance st atement The L isting Rules re quire us to revie w the direc tors’ state ments in relat ion to going con cern , longer-te rm viabilit y and th at par t of the cor porate gov ernanc e state ment rel ating to the Co mpany ’ s comp liance wit h the prov isions of the UK C orp orate Gove rnanc e Co de spe cif ied for o ur review. Our additi onal resp onsibilities wi th resp ec t to the cor porate go vernanc e state ment as oth er inform ation are des cribe d in the Rep or ting on othe r information se ction of this re por t. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 206 Bas ed on the w ork under t aken as par t of our audi t, we have con cluded t hat each of th e following elem ents of the c orp orate gover nance s tateme nt is materially co nsistent wit h the finan cial sta tements an d our knowle dge obtaine d during the au dit, and we have not hing material to add or draw at tentio n to in relation to: — The dire ctor s’ confir mation that th ey have c arried o ut a robus t ass essm ent of the em erging and pr incipal risk s; — The dis closure s in the Annual Re por t that de scrib e thos e princip al risks, wh at proc edures are in pl ace to ide ntif y emer ging risks and an ex planatio n of how the se are being manag ed or mitigate d ; — The dire ctor s’ stateme nt in the finan cial statem ents abo ut wheth er they c onsider ed it app ropriate to adop t the going con cern b asis of acc ounting in prep aring them , and their identi fic ation of any material unc er taintie s to the Group’s and C ompany ’ s abilit y to c ontinue to do so o ver a per iod of at least t welve m onths f rom the date of appr oval of the finan cial statem ents; — The dire ctor s’ explanatio n as to their ass ess ment of the Group’s and Comp any’s prosp ec ts, the p erio d this asse ssme nt cov ers and why th e perio d is approp riate; and — The dire ctor s’ stateme nt as to whethe r they have a r easonab le exp ect ation that th e Comp any will be able to co ntinue in ope ration and me et its liab ilities as the y fall due ove r the pe riod of its as ses sment , including any relate d disclos ures drawing at tention to any ne ces sar y qualif icat ions or as sumptions. Our rev iew of the dire ctors’ st atement re garding the longer -term viabilit y of th e Group was subs tantially les s in sco pe than an audit and only c onsiste d of making inquiries an d consid ering the direc tors’ proc es s suppor ting th eir statem ent; che cking that t he sta tement is in alignme nt with the re levant prov isions of the UK Co rporate G overn ance C ode; and co nsidering wh ether th e sta tement is co nsistent wit h the finan cial statem ents and o ur know ledge and und erst anding of the Gro up and Comp any and their environ ment obt ained in the c ourse of t he audit. In addition , base d on the wor k under taken as p ar t of our audit, we have c onclude d that eac h of the following e lements of th e cor porate gov ernanc e state ment is materially c onsiste nt with the finan cial statem ents and o ur knowled ge obtaine d during the audit: — The dire ctor s’ stateme nt that they c onside r the Annual Re por t, taken as a wh ole, is fair , b alance d and unde rstan dable, and prov ides the inf ormation n ece ssar y f or the me mbers to a sses s the Gro up’ s an d Comp any’s posi tion, pe r formanc e, busine ss mod el and str ateg y; — The s ec tion of the A nnual Repor t t hat desc ribes t he revie w of ef fe ctiv enes s of risk manag ement and inte rnal con trol sys tems; and — The s ec tion of the A nnual Repor t d escr ibing the work of t he Audit Committee. We have nothing to re por t in resp ec t of our resp onsibilit y to rep or t when th e director s’ statem ent relat ing to the Comp any’s comp liance wit h the Co de doe s not prop erly disc lose a dep ar ture from a r elevant prov ision of the C ode s peci fied un der the L isting Rules fo r review by t he auditors . Respo nsibilities for the f inancial s tatemen ts and theaudit Res pons ibilitie s of th e direc tor s for t he fin anci al st atem ents As ex plaine d more ful ly in the St atement of Dire ctors’ resp onsibilitie s in respe ct of th e financial s tatemen ts, the dire ctors are resp onsible for t he prep aration of the f inancial st atement s in acc ordanc e with the ap plicable f ramewor k and for b eing satisf ied that the y give a tr ue and fair vi ew . T he directo rs are also re spon sible for su ch internal c ontrol as th ey deter mine is nec ess ar y to enable the pre paration of f inancial st atement s that are fre e from m aterial miss tatement , whethe r due to fraud o r error . In prepar ing the finan cial statem ents, t he directo rs are resp onsible for as ses sing the Group’s and the C ompany ’ s abilit y to c ontinue as a going co ncer n, disclosing , as applic able, mat ters re lated to going con cern an d using the going c once rn basis of ac counting unle ss the direc tors eith er intend to liquidate the G roup or the C ompany or to ce ase ope rations, o r have no realis tic alternati ve but to do s o. Auditors’ responsibilities for the audit of the financial st atements Our objec tive s are to obtain re asonable as suranc e about wh ether the f inancial st atements a s a whole are fre e from m aterial miss tatement , whethe r due to fraud o r error , and to iss ue an auditors’ re por t that inc ludes our op inion. Reaso nable assuran ce is a high level of a ssuranc e, but is n ot a guarante e that an audit con ducte d in acco rdance wi th ISAs ( UK) will always dete ct a material mis statem ent when it ex ists . Misstatem ents c an arise from f raud or er ror and are c onsidere d material if, individually o r in the ag gre gate, they c ould reas onably be ex pec ted to inf luence th e ec onomic de cisions of us ers taken o n the basis of t hese f inancial statements. Irreg ularitie s, including fr aud, are instan ces of n on-c omplianc e with laws an d regul ations. We des ign proc edures in lin e with our resp onsibilitie s, outlin ed abov e, to detec t material mis statem ents in resp ect o f irregular ities , including fraud. T he ex tent to which o ur proc edure s are capab le of detec ting irregul arities , including frau d, is det ail e d below. Bas ed on our und erst anding of the Gro up and industr y, we identi fied t hat the prin cipal risks of n on-c ompliance wi th laws and regul ations rel ated to bre aches of t he Real Es tate Invest ment T r ust (REIT ) st atus sec tion 1 1 5 8 of the Co rpor ation T a x Ac t 20 1 0 and non- complian ce with t he UK regulato r y principle s, such as t hose gover ned by t he Listings R ules, and we c onsidere d the ex tent to which no n-co mpliance migh t have a material ef f ect on t he finan cial sta tements . We also con sidered t hose l aws and regul ations that have a direc t impac t on the f inancial state ments su ch as the Co mpanies Ac t 2006 . We evaluated manag ement ’ s inc entive s and opp or tunities f or fraudulent m anipulation of th e financial sta tements (inc luding the risk of ov erride of c ontrol s) , an d deter mined that th e principal r isks were rel ated to po sting inapprop riate journal ent ries to incr ease rev enue or re duce exp enditure, an d managem ent bias in acc ounting es timates and judgeme ntal area s of the finan cial statem ents suc h as the valuation of inve stmen t prope rt ies. Audi t proc edures p er form ed by the enga gement te am include d : — Disc ussions wi th managem ent, inc luding the Comp any Se cretar y , as wel l as thos e charge d with gover nance , over their con sideration of k nown or sus pec ted inst ance s of non- comp liance wit h laws and reg ulation and f raud; — Under standing an d evaluating mana gement ’ s c ontrols desig ned to pre vent and de tect irr egulari ties; — Revie wing the rep or ts made by inte rnal audit; 207 Financial St atements Governance Strategic repor t IN DE PENDENT A UDIT OR’S RE PORT CONTIN UE D — As ses sment of mat ter s repor te d on the Gro up’ s whistleb lowing helpline an d the result s of managem ent’s inves tigation of such m atter s where re levant; — Revie w of ta x compl iance with t he involvem ent of our ta x spe cialists in th e audit; — Pro cedure s relating to th e valuation of inves tment p roper tie s des cribe d in the rela ted key audit mat ter ab ove; — Revie wing relevant me eting minute s, including tho se of the B oard of Direc tors , Risk Commit te e and the Audi t Commit te e ; and — Identi f ying and te sting journal e ntries , in par ticular any jo urnal entrie s pos ted with unu sual acc ount combin ations or po sted by senio r managem ent. The re are inherent limit ations in the au dit proc edures d escr ibed abov e. We are less likely to be com e aware of instan ces of no n- comp liance wit h laws and reg ulations th at are not clos ely relate d to even ts and trans action s refle cted in th e financial s tateme nts. Al so, the ris k of not dete cting a material mis statem ent due to fr aud is higher th an the risk of no t detec ting one re sulting from er ror , as fraud m ay involve delib erate con cealm ent by , fo r example, forg er y or intentional misrepresentations, or through c ollusion. Our audit te sting might inclu de testing c omplete po pulations of cer t ain transac tions and b alanc es, p ossibly using dat a auditing techniqu es. Howe ver , i t t ypical ly involves se lecting a l imited number of i tems for te sting, rat her than tes ting comp lete pop ulations . We will ofte n seek to t arget par ti cular items f or testing bas ed on the ir siz e or ris k charac teristic s. In other c ase s, we will use audit s ampling to enable us to draw a c onclusion ab out th e pop ulation f rom which the s ample is sele cted. A fur th er des cription of our re spon sibilities for t he audit of the finan cial statem ents is loc ated on th e FRC ’ s web site at: ww w.frc. org.uk/aud itorsresponsibilities. This descr ipt ion forms par t of ou r auditors ’ repor t. Use o f this r epor t This rep or t, inclu ding the opinions, h as bee n prepare d for and o nly for th e Comp any’s membe rs as a bo dy in acc ordanc e with Chapte r 3 of Par t 1 6 of the C ompanies A ct 200 6 and for n o other pur pose . We do not, in gi ving the se opinions , acce pt or assum e resp onsibilit y for any oth er purp ose or to any ot her per son to who m this repor t is shown or into wh ose han ds it may com e save whe re expre ssly agre ed by o ur prior co nsent in wri ting. Other required repor ting Co mpani es Ac t 2006 exc epti on rep or ting Under t he Comp anies Ac t 2006 we are re quired to rep or t to you if, in our opinion : — we have not o btaine d all the inform ation and exp lanations we require fo r our audit; or — ade quate acco unting rec ords have no t bee n kept by the Co mpany , or re turns ade quate for our audit hav e not be en rec eive d from br anche s not visite d by us; or — cer t ain disclosure s of director s’ remunerat ion spe cifie d by law are not ma de; or — the C ompany f inancial st atements an d the par t of th e Remune ration Co mmit tee rep or t to be audite d are not in agre ement w ith the ac counting re cor ds and return s. We have no exc eptions to rep or t arising f rom this resp onsibilit y. Appointment Following th e rec ommendat ion of the Audit C ommit tee , we were appointe d by the dire ctors o n 1 4 May 201 4 to audit the f inancial sta tements f or the year e nded 31 De cemb er 20 1 4 and subs eque nt finan cial perio ds. T he peri od of total uninterr upted en gagemen t is eight ye ars, c overing th e years e nded 31 Dec embe r 20 1 4 to 3 1 Decembe r 20 21 . Other mat ter As re quired by th e Financial C onduc t Autho rit y Disclo sure Guidanc e and T r ansparen cy Rule 4. 1 . 1 4R, th ese f inancial st atements f orm par t of the ESEF-pre pared annu al financial re por t f iled on the Natio nal Stor age Mec hanism of the Finan cial Con duct Au thorit y in acc ordanc e with the ESEF Reg ulator y T echnic al St andard (“ESEF RTS ”). This auditor s’ repor t pro vides n o assuranc e over wh ether th e annual fin ancial repo r t has be en prepar ed using the sing le elect ronic form at spe cifie d in the ESEF RTS. Sandra Dowling ( Senior Statutor y Auditor ) for and o n behalf of Pri cewaterh ouse Coo pers L LP Char tere d Acc ountant s and St atutor y Au ditors London 23 Febr uar y 2022 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 208 Note 2021 £m 2020 £m Gro ss prop er t y and ot her inc ome 5 240.2 268.6 Net pr oper t y an d other in come 1 5 187.5 183.0 Adminis trativ e expe nses (37.1) (37.8) Revaluation surplus/( defici t) 16 130.8 (196.1) Prof it on disp os al 6 10.4 1.7 Profit /(loss) from operations 291.6 (49.2) Finan ce in com e 7 – 0.2 Fina nce costs 7 (28.1) (30.3) Loan ar rangem ent c osts w rit ten of f 7 – (0.1) Move ment in fair v alue of deri vativ e finan cial instr ument s 4.8 (1.9) Finan cial deri vativ e terminati on cos ts 8 (1.9) (1.7) Share of r esults of jo int ventur es 9 (13.9) – Profit /(loss) before ta x 10 252.5 (83.0) Ta x c r e d i t 15 1.3 1.6 Prof it /(los s ) fo r the ye ar 253.8 (81.4) At trib utab le to: Equit y sh areho lder s 31 252.3 (77.6) Non-c ontrolling i nterest 1.5 (3.8) 253.8 (81.4) Basi c earnings /(loss) per s hare 40 224.99 p (69.34 p) Dilute d earnings /(loss) pe r share 40 224.44 p (69.34 p) 1 Net p rop er t y and o ther i nco me in 2021 inc lude s wri te- of f/imp airm ent of r ec eiva bles o f £0.8 m (2020: £10.1 m pl us a ser v ice c har ge waiv er of £ 4.1m). Se e not e 3 for ad diti onal information. The n otes on pa ges 21 4 to 267 form par t of t hese f inancial st atement s. GROUP IN COME S T A T E MENT FOR T HE YE A R ENDED 31 DE CEMBER 2 021 209 Governance Strategic repor t Financial St atements Note 2021 £m 2020 £m Prof it /(los s ) fo r the ye ar 253.8 (81.4) Ac tuarial gains /(loss es) on def ined b enef it pe nsion sc heme 14 2.7 (4.1) Def erre d ta x (charge)/ cre dit on p ension 27 (0.4) 0.4 Revalua tion surp lus of owne r-o ccupie d prop er t y 16 3.7 0.4 Def erre d ta x char ge on revalua tion 27 (1.3) (0.2) O ther c ompreh ensiv e incom e/( ex pens e) that will not b e recl assi fie d to prof it or los s 4.7 (3.5) T o tal co mpreh ensive in com e/( exp ense) re lating to th e year 258.5 (84.9) At trib utab le to: Equi t y share holde rs 257.0 (81.1) Non- controlling interest 1.5 (3.8) 258.5 (84.9) The n otes on pa ges 21 4 to 267 form par t of t hese f inancial st atement s. GROUP S T A T E MENT OF COMPRE HENSI V E I NCOME FOR T HE YE A R ENDED 31 DE CEMBER 2 021 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 210 Note Group 2021 £m 2020 £m Company 2021 £m 2020 £m Non-current ass ets Investment propert y 16 5,359.9 5,029.1 – – Prop er t y, plant and e quipmen t 17 54.0 50.2 22.6 23.7 Investments 18 51.1 0.9 1,749.8 1,615.9 Deferre d tax 27 0.3 – 3.6 3.1 Pen sion sch eme sur plus 14 1.8 – 1.8 – Oth er receivables 19 159.3 146.4 – – 5,626.4 5,226.6 1,777.8 1,642.7 Curre nt ass ets T r ading pro per t y 16 32.2 12.9 – – T r ading sto ck 30 0.4 – – – T r ade and ot her re ceiv ables 20 61.7 76.2 1,898.9 1,682.3 Corp oration ta x asset – – – 0.4 Cash and cash equivalents 33 68.5 50.7 68.2 50.1 162.8 139.8 1,967.1 1,732.8 Non- curre nt ass ets he ld for sale 21 102.8 165.0 – – To t a l a s s e t s 5,892.0 5,531.4 3,744.9 3,375.5 Current liabilitie s Borrowings 24 12.3 – – – Lease hold liabilities 24 51.2 – 1.2 1.2 T r ade and ot her payab les 22 128.3 106.7 1,281.7 1,072.9 Corp oration ta x liab ilit y 0.5 0.5 0.7 – Derivative f inancia l instruments 24 0.4 – 0.4 – Prov isions 23 0.3 0.6 0.3 0.6 193.0 107.8 1,284.3 1,074.7 Non-current liabilities Borrowings 24 1,237.1 1,033.2 1,054.7 821.7 Derivative f inancia l instruments 24 0.4 5.6 0.4 5.6 Lease hold liabilities 24 19.4 66.6 22.9 24.1 Prov isions 23 0.3 0.4 0.3 0.4 Pen sion sch eme def icit 14 – 2.2 – 2.2 Deferre d tax 27 – 0.5 – – 1,257.2 1,108.5 1,078.3 854.0 T ot al liabilities 1,450.2 1,216.3 2,362.6 1,928.7 T o tal net a sse ts 4,441.8 4,315.1 1,382.3 1,446.8 Equit y Share cap ital 28 5.6 5.6 5.6 5.6 Share p remium 29 195.4 193.7 195.4 193.7 Other reser ves 29 941.1 939.4 925.6 926.3 Ret ained e arnings 1 29 3,299.7 3,124.5 255.7 321.2 Equit y share holde rs’ fun ds 4,441.8 4,263.2 1,382.3 1,446.8 Non-cont rolling interest 30 – 51.9 – – To t a l e q u i t y 4,441.8 4,315.1 1,382.3 1,446.8 1 Ret aine d ear nings f or th e Com pany in clu de pro fit f or th e year o f £11.6 m (2020: £1.8 m). The f inancial s tatement s were appro ved by th e Board of D irector s and auth orise d for issu e on 23 Febr uar y 202 2. Paul W illiams D amian W isniewsk i Chief E xecu tive Chief F inancial O f fice r The n otes on pa ges 21 4 to 267 form par t of t hese f inancial st atement s. B A L A NCE SHE E T S AS A T 31 DE CEMBER 2 021 REGIS TE RED NO. 18 19699 211 Governance Strategic repor t Financial St atements Share capit al £m Share premium £m Other reserves 1 £m Retain ed earnings £m Equit y shareholders’ funds £m Non- controlling interest £m To t a l equit y £m Group At 1 Januar y 2021 5.6 193.7 939.4 3,124.5 4,263.2 51.9 4,315.1 Prof it fo r the yea r – – – 252.3 252.3 1.5 253.8 Other comprehensive income – – 2.4 2.3 4.7 – 4.7 Share -bas ed pay ment s – 1.7 (0.7) 5.2 6.2 – 6.2 Dividen ds paid – – – (84.6) (84.6) – (84.6) Acquisition of non-controlling interest – – – – – (53.4) (53.4) At 31 Dec embe r 202 1 5.6 195.4 941.1 3,299.7 4,441.8 – 4,441.8 At 1 Januar y 2020 5.6 193.0 936.2 3,286.4 4,421.2 55.7 4,476.9 Los s for th e year – – – (77.6) (77.6) (3.8) (81.4) Other comprehensive income/( expense) – – 0.2 (3.7) (3.5) – (3.5) Share -bas ed pay ment s – 0.7 3.0 1.6 5.3 – 5.3 Dividen ds paid – – – (82.2) (82.2) – (82.2) At 3 1 D ece mber 2020 5.6 193.7 939.4 3,124.5 4,263.2 51.9 4,315.1 Company At 1 Januar y 2021 5.6 193.7 926.3 321.2 1,446.8 – 1,446.8 Prof it fo r the yea r – – – 11.6 11.6 – 11.6 Other comprehensive income – – – 2.3 2.3 – 2.3 Share -bas ed pay ment s – 1.7 (0.7) 5.2 6.2 – 6.2 Dividen ds paid – – – (84.6) (84.6) – (84.6) At 31 Dec embe r 202 1 5.6 195.4 925.6 255.7 1,382.3 – 1,382.3 At 1 Januar y 2020 5.6 193.0 923.3 403.7 1,525.6 – 1,525.6 Prof it fo r the yea r – – – 1.8 1.8 – 1.8 Other comprehensive expense – – – (3.7) (3.7) – (3.7) Share -bas ed pay ment s – 0.7 3.0 1.6 5.3 – 5.3 Dividen ds paid – – – (82.2) (82.2) – (82.2) At 3 1 D ece mber 2020 5.6 193.7 926.3 321.2 1,446.8 – 1,446.8 ¹ S ee n ote 29. The n otes on pa ges 21 4 to 267 form par t of t hese f inancial st atement s. ST A T EM ENTS O F C HAN GES I N EQU IT Y FOR T HE YE A R ENDED 31 DE CEMBER 2 021 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 212 Note Group 2021 £m 2020 Restat ed £m Company 2021 £m 2020 £m Operating activ ities Rents recei ved 187.0 161.9 – – Surre nder p remiums and o ther pro per t y inc ome 5.7 2.7 – – Proper t y e xpens es (14.3) (19.1) – – Cas h paid to and o n behalf of e mploye es (26.9) (27.5 ) (26.6) (27.3) O ther adminis trati ve exp ense s (7.8) (8.0) (8.5) (7.6) Interest recei ved 7 – 0.2 – 0.2 Intere st paid 7 (21.9) (25.4) (19.4) (20.5) O ther f inanc e cos ts 7 (3.1) (2.9) (2.2) (2.0) Other income 4.1 3.5 3.8 3.1 Disp osal of t rading pro per tie s 1 5.0 31.7 – – E xpe nditure on t rading pro per tie s 1 (1.6) (1.2) – – T a x pai d in resp ect o f opera ting acti viti es (0.5) – – – Net cash from / (used in) op erating acti vities 1 125.7 115.9 (52.9) (54.1) Investing activitie s Acquisition of proper ties (251.8) (43.8) – – Capi tal exp endi ture on the p rope r ty p or t folio 7 (172.1) (173.4) – – Disposal of i nvestment proper ties 297.3 125.6 – – Investment in joint ventu res (64.1) – – – Se ttle ment of sh arehold er loan 2.0 – – – Receipts fro m joi nt ventures – 0.4 – – Pro ce eds fr om sale of inve stm ents – – 82.0 – Purc hase of p roper t y, plant an d equipm ent (1.6) (0.4) (1.2) (0.4) Disp osal of p rope r ty, plan t and equipm ent 0.2 – 0.1 – V A T receiv ed/(pai d) 7.5 (0.9) – – Net cash (used in) /from investing acti vities (182.6) (92.5) 80.9 (0.4) Financing activities Net pr oce eds of g reen b ond is sue 346.0 – 346.0 – Net m oveme nt in interc ompany lo ans – – (153.7) 77.7 Rep ayment o f revolv ing bank lo an 26 – (6.5) – (6.5) Drawd own of new re volv ing bank loan 26 – 24.2 – 24.2 Net m oveme nt in revol ving bank lo ans 26 (117.8) 38.0 (117.8) 38.0 Pro ce eds fr om othe r loan 12.3 – – – Rep ayment o f sec ured ba nk loan (28.0) – – – Finan cial deri vativ e terminati on cos ts 8 (1.9) (1.7) (1.9) (1.6) Acquisition of non-controlling interest 30 (53.4) – – – Net pr oce eds of s hare iss ues 28 1.8 0.6 1.8 0.6 Dividen ds paid 32 (84.3) (81.8) (84.3) (81.8) Net cash from / (used in) f inancing acti vities 74.7 (27.2 ) (9.9) 50.6 Incre ase/(dec rease) in c ash and c ash equi valents in t he year 17.8 (3.8) 18.1 (3.9) Cas h and ca sh equi valents at t he beg inning of the ye ar 50.7 54.5 50.1 54.0 Cas h and ca sh equi valents at t he end of th e year 33 68.5 50.7 68.2 50.1 The n otes on pa ges 21 4 to 267 form par t of t hese f inancial st atement s. CAS H FLOW ST A TEM EN TS FOR T HE YE A R ENDED 31 DE CEMBER 2 021 213 Governance Strategic repor t Financial St atements 1 Bas is of prepa ration On 31 Dec ember 2020, IFRS as ad opted by th e European Union atthat date was br ought into UK law and b ec ame UK -adop ted Internatio nal Acc ounting S tandards , with fu ture change s being subjec t to endor sement b y the UK Endor semen t Board. T he Group transit ioned to UK-adopte d International A cco unting St andards in its c onsoli dated finan cial statem ents on 1 Januar y 202 1 . This change c onsti tutes a ch ange in acc ounting fram ework how ever , there is n o impact o n reco gnition, m easurem ent or disclo sure. The f inancial s tatement s have be en prep ared in acc ordanc e with UK -ado pted Internat ional Ac counting S tandards , (the ‘applic able fram ework ’), and have b een pre pared in ac cordan ce with t he prov isions of the C ompanie s Act 20 06 (the ‘applic able legal requirem ents’ ) . Th e financial s tateme nts have be en prep ared under th e historic al cos t conve ntion as mo difie d by the rev aluation of inves tment pro per tie s, the rev aluation of prop er t y , plant an d equipm ent, ass ets he ld for sale, p ension sc heme, an d financial ass ets and liabilit ies held at fair value . Going concern The B oard c ontinues to ad opt the going c once rn basis in pre paring the se cons olidated f inancial s tatement s. In con sidering this requirem ent, th e Directo rs have taken into a cco unt the following: — The G roup’ s lates t rolling for eca st for th e nex t two y ears , in par tic ular the c ash flows , borro wings and undrawn facilit ies. — The h eadroo m under the G roup’ s finan cial cove nants. — The r isks include d on the Gr oup’ s risk reg ister that c ould impac t on the Gro up ’s liquidit y and solve ncy ov er the nex t 1 2month s. — The r isks on the G roup’ s risk reg ister that c ould be a thre at to the Gro up’ s b usines s mode l and capit al adequ acy. The D irector s have co nsidere d the rel atively long- term and pre dictable nat ure of the inc ome rec eivable und er the tenant lease s, the Gr oup’ s year -end loan -to-value r atio for 202 1 of 21 .0%, the intere st co ver ratio of 4 63%, the £6 08m total of undr awn facilit ies and c ash and the f act that th e average m aturit y of bor rowings was 7 .2 year s at 3 1 De cemb er 202 1 . The imp act of th e Co vid- 1 9 p andemic on th e busines s and its o ccupie rs has b een con sidered . The impac t in 202 1 was co nsiderably le ss than in 2020 as evi dence d by lower impair ment char ges and st ronger ren t col lectio n rates. Ren t collec tion has impr oved quar ter b y quar ter and, for o ur of fic e occ upiers, is n ow close to th at seen p re- pand emic. O f fic e occ upation rates ar e also gradu ally reco vering. The likely imp act of climate c hange has be en inc orpor ated in our fore cas ts and an exercis e has be en car ried ou t to bet ter under stand t he co st of upgrading th ose pro per tie s in our por t folio with lower EP C ratings. T here is a risk t hat, with out capi tal inves tment, s ome of the b uildi ngs wit h lower EPC rat ings could in fu ture suf fer f rom highe r vacanc y rates and in come/ valuation dec line. Bas ed on our f orec asts , rental inc ome would ne ed to dec line by 69% and pr oper t y value s would nee d to fall by 6 3% bef ore breac hing our financ ial covenan ts. Whe n subjecte d to a 1 5% fall in bo th rental inc ome and p roper t y value s our interes t cove r remaine d above 30 0% and our lo an-to-value r atio below 4 0%, bo th of which are c omfor t ably within our fin ancial cov enants. Fur ther infor mation is pro vide d in the Group’s viabilit y statem ent onpa ge 98. The f inancial p osition of t he Group, its c ash f lows, liquidit y po sition and bo rrowing facili ties are de scrib ed in the f inancial rev iew. I n additio n, the Group’s risks and risk m anagem ent proc ess es c an befo und within the r isk managem ent and intern al contro ls. Having due re gard to thes e mat ters and af ter mak ing appropr iate enquirie s, the Dire ctor s have reas onable exp ect ation that th e Group has a dequate re sourc es to cont inue in operatio nal existen ce for a p eriod of at le ast 1 2 mont hs from th e date of signing of thes e con solidate d financial s tatemen ts and, the refore, th e Board con tinues to adop t the going co ncer n basis in their pre paration . Pre sen tati on of c ash f low st atem ent Following c orres ponde nce in late 2021 and early 2022 with the Co rporate Re por ting Rev iew T e am of the Financial Re por ting Co uncil (‘FRC ’), we have ag ree d to class if y the c ash flows re lating tothe addi tions to, and disp osal of, trading prop er ties within th e Group C ash Flow S tatemen t within ‘net ope rating acti vitie s’ rather than ‘inve sting act ivitie s’ . We have r e-pre sented t he state ment for the ye ar ende d 3 1 De cemb er 2020 to recla ssif y £ 3 1 . 7m of cash rec eipts and £1 .2m of ex pendit ure on trading prop er ties f rom ‘inves ting acti vities’ to ‘op erating ac tivitie s’ . This has th e ef fec t of incre asing the net c ash fr om operat ions in 2020 from £8 5.4m to £1 1 5.9 m with a cor resp onding increa se in the net c ash use d in inves ting acti vities f rom £62.0m to £92.5m. T his prese ntation has also b een ad opted fo r the year e nded 31 Dec embe r 202 1 an d will be applie d consis tently in fu ture. The re is no net imp act upon t he cas h flow s tatemen t overall and t here is no impa ct on any bal ance sh eet or inc ome st atement f igures. T he rev iew con ducte d by the FR C was bas ed sole ly on the Group’s publishe d 2020 annual repor t and acc ounts and d oes no t provid e any assuranc e that the r epor t and acc ounts are c orre ct in all material re spe cts . 2 Changes in ac counting policie s The p rincipal ac counting p olicies ar e desc ribed in no te 43 and are con sistent with t hose app lied in the G roup’ s finan cial statem ents for th e year to 31 Dec ember 2020, as amen ded to ref lect t he adopti on of new st andards, am endment s and interpre tations which b ecam e ef fec tive in th e year as sho wn below. New standards adopted during the year The f ollowing stan dards, ame ndment s and interpret ations wer e ef fe ctiv e for the f irst time f or the Gro up’ s c urrent ac counting p eriod and had n o material impac t on the f inancial st atements . IFRS 1 6 (amende d) – Cov id- 19-relate d Rent Co nces sions; IFRS 9, IA S 39, I FR S 7 , IFRS 4 and IFR S 1 6 (amende d) – Interes t Rate Ben chmark Ref orm – Phas e 2. St and ard s in issu e but no t yet e ff ec tive The f ollowing stan dards, ame ndment s and interpret ations wer e inissue at t he date of approval of t hese f inancial s tatement s butwe re not yet ef f ect ive for t he current a cco unting perio d and have not b een ad opted e arly . Ba sed on th e Group’ s cur rent circums tanc es, the D irecto rs do not antic ipate that their ad option in fut ure perio ds will have a mater ial impact on th e financial sta tements of th e Group. N OT ES TO TH E FI NAN CIAL ST A TEME NTS FOR T HE YE A R ENDED 31 DE CEMBER 2 021 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 2 14 IFRS 1 7 – Insuranc e Contr acts; IA S 1 ( amen ded) – C lassif icat ion of liabilities as c urrent or n on-cur rent; IA S 1 and IFRS Prac tice S tatem ent 2 (amende d) – Disclo sure of Acc ounting Pol icy; IA S 8 ( amen ded) – D efiniti on of Acc ounting Es timate ; IFRS 1 0 and I AS 28 (amende d) – Sale or C ontribut ion of As sets b etw een an inve stor and it s Ass ociate or Joint Venture; IFRS 3 (amende d) – Busine ss C ombinations; IA S 1 6 (amende d) – Prop er t y , pl ant and equipme nt; IA S 3 7 (amende d) – Prov ision, c ontingent liabiliti es and co ntingent as sets; IFRS 1 , IFRS 9, IA S 4 1 an d IFRS 1 6 annu al improveme nts; IA S 1 2 (amend ed) – def erred t a x relate d to asset s and liabilities ar ising from a sing le transac tion; Annual imp roveme nts to IFRS S tandards 201 8-20 20. 3 Signific ant judgement s, key ass umptions andes timates The p reparatio n of financial s tatemen ts in acc ordanc e with the app licable f ramework r equires th e use of cer t ain signific ant acc ounting est imates and judgem ents . It also re quires manage ment to exerc ise judgeme nt in the pro ces s of applying th e Group’ s ac counting p olicies . The G roup’ s signif icant ac count ing policie s are state d in note 43. No t all of thes e acco unting polici es require man agemen t to make dif fic ult,subject ive or c omplex judgeme nts or es timates. E stimates and ju dgement s are continually e valuated and are b ased o n historic al exp erienc e and othe r factor s, including exp ec tations of f uture e vents that ar e believ ed to be re asonab le under the circ umstan ces . Altho ughthes e estimate s are base d on mana gement ’s best k nowledge of t he amount , event or ac tions, a ctual re sults may dif fer f rom tho se estim ates. Th e following is intend ed to prov ide an under standing of t he polici es that mana gement c onsider c ritic al bec ause of th e level of c omplexit y, judgement o r estimati on involve d in their applic ation and th eir impact on th e cons olidated f inancial st atement s. Key sour ce s of es timat ion unc er tain t y Proper t y por tfolio valuation The G roup uses t he valuation c arried o ut by ex tern al valuers as th e fair value of its pro per t y po r tfo lio. The valuat ion consid ers a range ofass umptions including f uture ren tal incom e, inves tment yie lds, anticipa ted out goings and maintenan ce co sts, f uture de velopme nt exp enditure and ap propriate disc ount rates . The ex ter nal valuers al so make refere nce to mar ket evide nce of tran sacti on price s for similarprop er ties an d take into acc ount the impac t of climate chan ge and relate d Environme ntal, S ocial and G overnan ce co nsideratio ns. More infor mation is pro vide d in note 1 6. Impair ment t est ing of tr ade re cei vable s and oth er fin anciala sse ts T rad e rece ivables an d accr ued ren tal incom e rec ognise d in advanc e of rec eipt are subject to imp airment te sting. T his accr ued rent al inco me arise s due to the spre ading of rent fre e and re duce d rent per iods, c apital c ontrib utions and c ontrac ted ren t uplif ts in acc ordanc e with IFRS 16 Leases . Impairme nt calculat ions have be en c arried o ut using the f orwar d-looking , simplif ied appro ach to the ex pec ted cre dit los s model wi thin IFRS 9. Th e impact of th e Cov id- 1 9 pan demic on the G roup’ s busine ss and i ts occ upiers has b een c onsider ed and in 2021 the sever it y of the impac t has redu ced an d the charge to t he incom e statem ent was lower than in 2020. Rent c ollec tion rates hav e improved an d are close to pre -Co vid level s. Howev er , th ere remains an elev ated risk of c er tain tenants d efaulting or failing , par ticular ly in respe ct to th e retail and hosp italit y se ctor s. This has r esulted in an addit ional prov ision totalling £ 0.2m for 202 1 . Af ter adding re ceivab le balanc es writ ten of f of £0.6m, th e total charge f or prov isions and wri te-of f s in 202 1 wa s £0.8m, lower t han the £1 0. 1 m re cog nised in 2020. In arriv ing at the est imates, the G roup con sidered t he tenants at hig her risk , par ticular ly in the ret ail or hospit alit y sec tors , those in adminis tration or C V A , the top 69 te nants by size and has als o consi dered t he remaining balan ces c lassif ied b y sec tor . T he impairmen t provisio ns are include d within ‘O ther re cei vables (non- current )’ ( se e note 1 9) and ‘T rade and o ther re ceivab les’ (see note 20) as shown b elow: Other receivables (non-cu rrent) £m T r ade a nd ot her receivables £m To t a l £m Lease incenti ve receivables before impairment 151. 9 22.0 17 3 . 9 Impairm ent of lea se ince ntive r ece ivable s (4. 7) ( 0.7 ) ( 5.4) Writ e-of f (0.2) ( 0 .1 ) (0. 3) Net le ase inc entiv e include d within ac cru ed inc ome 1 4 7. 0 2 1. 2 16 8 . 2 T rade rec eivables before impairment – 11 . 3 11 . 3 Impairm ent of tra de rec eivab les – (3. 8) (3.8 ) Ser vice charge provision – (0 .3) (0. 3) Writ e-of f – ( 0. 3) ( 0.3) Net trade recei vables – 6 .9 6.9 Impa irme nt (4. 7) (4.5 ) (9.2) Ser vice charge provision – (0 .3) (0. 3) (4. 7) (4 .8) (9.5 ) 215 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 3 Signific ant judgement s, key ass umptions andes timates (continued) The a sses sment c onside red the r isk of tenant failures o r defaults using infor mation on tenan ts’ payme nt histor y, deposi ts held, th e latest know n financial p ositio n together wi th fore cast inf ormation wh ere available, on going dialogue with ten ants as well as o ther infor mation such as t he se ctor in which th ey oper ate. Following this, te nants were cl assif ied as e ither low, medium or high r isk and the t able below prov ides f urt her infor mation. Th e cumulati ve impairment a gainst lease in centi ve rec eivable b alance s was £5.4m and a gainst trade rec eivable b alance s was £4 . 1 m. Lease i ncentive receivables (non-cu rrent) £m Lease i ncentive receivables (cu rrent) £m Tr a d e receivables (cu rrent) £m Bal ance b efore imp airmen t Low ris k 13 8 . 0 1 7. 4 3 .7 Medium r isk 6.3 3.2 2.3 High risk 7. 4 1. 3 5.0 151. 7 21. 9 11 . 0 Impa irme nt Low ris k ( 0.2) – – Medium r isk (0. 4) ( 0 .1 ) ( 0 .1 ) High risk ( 4 .1 ) (0.6) (4 .0 ) (4. 7) ( 0.7 ) ( 4 .1 ) Net le ase inc entiv e include d within ac cru ed inc ome 1 4 7. 0 2 1. 2 6.9 All amo unts include d within trad e rece ivables are c urrent. Borrowings and derivatives The f air values of the Gr oup’ s bor rowings and interes t rate swaps are pr ovide d by an indep endent t hird par t y base d on inform ation prov ided to them by t he Group. T his includes t he terms of e ach of the f inancial instr uments an d data available in the f inancial mar kets. Mor e inform ation is prov ided in note 24. Significant judgements Co mplianc e wit h the re al es tate in ves tmen t trus t (REIT ) ta xa tion r egime As a REI T , the Gr oup bene fits f rom ta x ad vantage s. Inc ome and char geable gains on the qu alif ying pro per t y rent al busines s are exempt from c orp oration t ax . Incom e that doe s not qualif y as p roper t y inc ome within th e REIT rules is subje ct to co rporat ion ta x in the nor mal way . The re are a number of te sts that ar e applied annu ally , and in relat ion to fore cast s, to ensure th e Group remains we ll within the limit s allowed wi thin those te sts . The G roup met all th e criteria in 2021 with a subst antial margin in ea ch cas e, thereb y ensuring it s REIT stat us is maintained . The Dire ctors intend that t he Group sho uld continue a s a REIT for the f orese eable f uture. The G roup has maintaine d its low r isk rating with HMRC fo llowing continu ed reg ular dialogue and a f ocus on tr ansparen cy and f ull disclosure. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 216 4 Segme ntal info rmation IFRS 8 Op erating S egment s requires o perating s egment s to be ident ifie d on the bas is of internal finan cial repo r ts abou t comp onents of t he Group th at are regular ly reviewe d by the c hief operat ing decision m akers (which in the Group’s case are t he fi ve execu tive Dire ctor s assiste d by the ot her sev en memb ers of the E xe cutiv e Commit te e ) in orde r to allocate re sourc es to the s egment s and to ass ess th eir per for mance . The inte rnal finan cial repor t s rec eived b y the Group’s Exe cutiv e Commit te e cont ain financial infor mation at a Gro up level as a who le and there ar e no rec onciling items b et ween th e results c ontaine d in thes e repor t s and the amo unts repo r ted in the f inancial st atements . The se internal f inancial rep or ts includ e IFRS fig ures but al so repo r t non-IFRS f igures f or the EPR A ear nings and net as set value. Re conc iliations of each of t hese f igure s to their stat utor y equi valents are de tailed in note 4 0. Additional ly , inf ormation is p rovide d to the E xecu tive Co mmit tee showing gr oss pro per t y inc ome and pro per t y valuation by in dividual pro per t y. Therefo re, for the p urpo ses of IFRS 8 , each indivi dual prope r ty is c onside red to be a s eparate rep or table s egment in t hat its pe r formanc e is monitor ed indiv idually . The G roup’ s prop er t y por t folio in cludes inve stme nt prope r ty, owner- oc cupied pro per t y and tr ading proper t y an d compris ed 97% of fic e building s 1 by value at 31 Dec ember 2021 (2 020: 98% ). The Dire ctor s consid er that the se indiv idual prope r ties have similar e con omic charac teristi cs and th erefore h ave bee n ag gregated into a sing le repor t able segm ent. Th e remaining 3% (20 20: 2% ) rep resen ted a mix ture of retail , resident ial and light indus trial prop er ties, a s well as land, e ach of which is de minimis in its o wn right and b elow the quanti tativ e thres hold in ag gregate. T herefo re, in the view of t he Direc tors, t here is one re por tab le segme nt under the p rovision s of IFRS 8. All of th e Group’ s prop er ties ar e base d in the UK. N o geograp hical gro uping is cont ained in any of the inter nal financ ial repor t s provide d to the Gro up’ s E xe cutiv e Commit te e and, there fore, no ge ographi cal seg mental an alysis is require d by IFRS 8. Howe ver , ge ographic al analysis is include d in the tab les below to pr ovide us ers with ad ditional infor mation regarding th e areas co ntaine d in the Strate gic Repo r t. The majorit y of th e Group’ s prop er ties are lo cate d in London ( West En d central , West End b orders / other an d Cit y bord ers) , with t he remainde r in Scotl and (Provincial) . ¹ S om e of fic e buil dings ha ve an anc illa r y elem ent su ch as r etai l or res iden tial . Gro ss pr ope rt y inc ome 20 21 2020 Of fice buildings £m Other £m To t a l £m Of f ic e buildings £m Other £m To t a l £m West En d cent ral 10 8 . 4 0.3 10 8. 7 1 04.3 0 .1 10 4 . 4 West End borders/ other 18. 5 – 18. 5 20.4 – 20.4 Cit y borders 6 7. 6 0.5 6 8 .1 74 . 9 0.5 75.4 Pro vinci al – 4 .5 4.5 – 4 .5 4 .5 19 4 . 5 5.3 19 9. 8 19 9 . 6 5 .1 20 4 .7 A rec onciliation of g ross p roper t y inc ome to gro ss prop er t y and oth er incom e is given in no te 5. E xcluded f rom the t able above is £ 0.4m of the Gro up ’s share of gro ss prop er t y incom e in relation to joint v entures lo cated wi thin West End cen tral. Se e note 9. Proper ty por tf olio 20 21 2020 Of fice buildings £m Other £m To t a l £m Of fice buildings £m Other £m To t a l £m Carr ying val ue West En d cent ral 3 , 313 . 6 82.2 3,395.8 2,93 6.7 4 5.9 2,982. 6 West End borders/ other 4 0 8 .1 – 4 0 8 .1 4 4 7. 9 – 4 4 7. 9 Cit y borders 1,6 4 9 .7 8.4 1 , 6 5 8 .1 1, 73 8 . 2 8 .0 1 , 74 6 . 2 Pro vinci al – 82. 2 82.2 – 75 .9 75. 9 5 , 3 71. 4 17 2 . 8 5,5 44 .2 5 ,1 2 2 . 8 12 9 . 8 5, 252.6 Fair value West En d cent ral 3,34 8.9 8 4.2 3 , 4 3 3 .1 2,966 .2 4 7. 4 3 , 0 13 . 6 West End borders/ other 4 31. 4 – 4 3 1. 4 475 .4 – 47 5 .4 Cit y borders 1, 6 9 0 . 4 8.4 1, 6 9 8 . 8 1,781.7 8 .1 1, 7 8 9 . 8 Pro vinci al – 83 .0 8 3.0 – 76 .7 76.7 5 , 470 .7 17 5 . 6 5 ,64 6.3 5,223. 3 13 2 . 2 5,355.5 A rec onciliation b et ween th e fair value and c arr ying value of th e por t folio is s et out in note 1 6. E xcluded f rom the t able above is p roper t y in rel ation to the Gr oup’ s share of joint ve ntures loc ated wi thin West End ce ntral, wit h a carr y ing value of £5 0.2m and a fair value of £50.0m . See n otes 1 6 an d 1 8. 2 17 Financial St atements Governance Strategic repor t N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 5 Proper ty and other income 20 21 £m 2020 £m Gross rental inco me 19 4 . 2 202 .9 Surre nder p remiums re cei ved 3.6 0.9 Other proper t y income 2.0 0.9 Gross proper t y income 19 9. 8 20 4 .7 T r ading prop er t y sales p roc eed s ¹ 6 .7 32. 3 Service ch arg e i ncome ¹ 30.2 2 8 .1 Other income¹ 3.5 3.5 Gro ss prop er t y and ot her inc ome 240.2 268.6 Gross rental inco me 19 4 . 2 202 .9 Write– of f/impair ment of re cei vables (0.8) ( 1 0 .1) Se r vice c harge wai ver – ( 4 .1 ) Service ch arg e i ncome 1 30.2 2 8 .1 Ser vice charge expens es (33 .6) (3 0.9) (3. 4) (2.8) Prop er t y co sts ( 11. 8 ) (11 . 6 ) Net rental income 17 8 . 2 1 7 4.3 T ra ding prop er t y sales p roc eed s ¹ 6 .7 32. 3 T ra ding prop er t y cos t of sale s (6.0 ) ( 2 7. 1 ) Prof it on tr ading prop er t y dispo sals 0.7 5.2 Other proper t y income 2.0 0.9 Other income¹ 3.5 3.5 Surre nder p remiums re cei ved 3.6 0.9 Dilapidation receipts 0.9 – Write– down of t rading prop er t y (1. 4 ) (1. 8 ) Net pr oper t y an d other in come 1 87 .5 18 3 . 0 1 In line w ith IFR S 1 5 Re venu e fro m Co ntra cts w ith Cu sto mer s, th e Group r ec ogni sed a t otal o f £4 0.4m (2020: £ 63. 9m) of ot her in com e, tra ding pr ope r ty s ale s pro cee ds an d ser v ice cha rge in com e, whi ch rel ate s to exp endi ture t hat is dir ec tly re co vera ble fr om ten ants , wit hin gro ss p rope r t y and ot her in com e. Gros s rental in come inc ludes £20.2m (20 20: £2 4.0m) rel ating to rents re cognis ed in adv ance of c ash rec eipts. O ther inc ome relate s to fee s and commis sions ear ned f rom tenants in re lation to th e managem ent of the Gro up’ s p roper tie s and was rec ognise d in the Group inc ome s tatement in ac cor dance wit h the deliv er y of ser v ice s. The imp airment re view has b een c arried o ut using the ex pec ted cr edit los s mode l within IFRS 9 Financ ial Instrume nts (see note s 3 and 1 5 for ad ditional inform ation) . Inclu ded in this prov ision is a char ge of £0.6m against tr ade rec eivable s relating to ren tal incom e for the 25 De cemb er 202 1 quar ter day. Most of this inc ome is def erred an d has not ye t bee n reco gnised in th e incom e statem ent. A 1 0% incre ase/ dec rease to th e absolu te probabilit y rate s of tenant def ault i n th e year would re sult in a £ 1 .8m incre ase and £1 .9m d ecre ase resp ec tively, in the Gro up’ s p rofit f or the p eriod. T his sensit ivit y has b een p er form ed on th e medium to high risk ten ants as the sig nific ant estimat ion unce r taint y is wholly rel ated to the se. In the ye ar to 3 1 De cemb er 2020, a 2 5% waiver of t wo quar ter s’ ser vic e charge was gi ven to supp or t oc cupiers ac ross th e whole por t fo lio in resp onse to C ovid- 1 9 at a co st of £ 4. 1 m to the Gro up. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 218 6 Prof it on dispos al 20 21 £m 2020 £m Investment propert y Gro ss dispo sal pr oce eds 402. 4 12 0 . 9 Co sts of dis pos al (3 .7) (0.6) Net disp osa l proc ee ds 39 8 .7 12 0 . 3 Car r ying v alue (387 .5) ( 11 8 . 6 ) Adjust ment fo r lease c ost s and rent s rec ognise d in adv ance (0 .7) – Prof it on disp os al of inves tment p roper t y 10 .5 1. 7 Ar twork Car r ying v alue ( 0 .1 ) – Los s on disp osal of ar t wor k ( 0 .1 ) – Prof it on disp os al 10 .4 1.7 Include d within gro ss dispo sal pro cee ds for 2021 is £ 1 67 .6m rel ating to the disp osal of th e Group’ s fre ehold inter est in Johns on Building EC1 in Januar y 202 1 , which was cl assif ied as a n on-cur rent ass et held f or sale at 3 1 D ece mber 2020 and £86 .5m relating to th e dispos al of the Group’s freeh old interes t in Angel S quare EC1 in August 2021 . Als o include d within gros s dispos al proc ee ds for 202 1 is £1 0 0. 7 m rel ating to the surre nder of he adlease s at 1 9-35 B aker Stre et W1 . A new headle ase was subs eque ntly regrante d and is include d in ‘additions’ in Note 1 6. In additio n, the Gro up dispose d of its lea sehold intere sts in 1 7 -39 Ge orge St reet , 1 6-20 Baker Stre et, 27 -33 Rober t A dam Str eet and 26-2 7 C astlere agh S treet W1 for g ross pr oce eds of £ 45.2m (see n ote 30 ). 7 Financ e income and to tal fina nce cos ts 20 21 £m 2020 £m Finance i ncome Bank interest recei vable – 0.2 Finan ce in com e – 0.2 Finance costs Bank loans 0.9 2.3 Non-utilisation fees 2 .1 1. 7 Unse cure d conv er tible bo nds 3.9 3.9 Unse cure d gree n bond s 0.8 – Se cure d bond s 11 . 4 11 . 4 Unse cure d priv ate plac ement n otes 15 . 6 15 . 6 Se cure d loan 3.3 3.3 Amo r tisation of issu e and arrangem ent cos ts 2.5 2.2 Am or tisati on of the f air value of the s ecure d bon ds (1. 3) (1. 3) Obli gations und er hea dlease s 0.7 0.9 Other 0.2 0.2 Gro ss intere st co sts 4 0 .1 40.2 Les s: interes t capi talise d ( 12 . 0 ) (9.9) Fina nce costs 2 8 .1 30.3 Loan ar rangem ent c osts w rit ten of f – 0 .1 T o tal f inance c ost s 2 8 .1 30.4 Financ e cos ts of £1 2.0m (2020: £9.9m) have be en capit alised o n develop ment proje cts, in ac cord ance with I AS 23 Bo rrowing C osts , using the Gro up’ s av erage c ost of b orrowings during e ach quar ter . T ot al financ e cos ts paid to 31 Dec embe r 202 1 we re £37 .0m (2020 : £ 38.2m) of which £1 2.0m (2020: £9.9m) was include d in capit al expen diture on the p roper t y p or t folio in the Gro up cash f low statem ent under inv esting activ ities. 8 Financial d erivative ter mination cos ts The G roup incurre d co sts of £1 .9m in th e year to 31 Dece mber 2021 ( 2020: £ 1 . 7 m) defe rring intere st rate swaps . 2 19 Financial St atements Governance Strategic repor t N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 9 Shar e of results o f joint ventures 20 21 £m 2020 £m Inc ome 0.4 – Adminis trativ e expe nses ( 0 .1 ) – Revaluation deficit (10 . 2 ) – (9.9) – Joint ve nture ac quisitio n cos ts incur red (4. 0) – (13 . 9 ) – The s hare of results of jo int ventures f or the ye ar ende d 3 1 De cemb er 202 1 include s the Gro up’ s 5 0% share in the D er went L azari B aker Str eet Limite d Par tne rship since it s format ion in Octo ber 202 1 . Se e note 1 8 for f ur ther det ails of the Gro up’ s jo int ventures . 1 0 Prof it / (loss) befo re ta x 20 21 £m 2020 £m This is ar rive d at af ter ch arging: Depre ciation 0.9 0.7 Co ntingent r ent payab le under h eadleas es 1. 4 1 .1 Auditor’s remuneration A udit – Group 0.4 0.4 A udit – subs idiaries 0 .1 0 .1 In 202 1 , au dit fee s for the Gr oup were £376, 7 1 8 (202 0: £395,252) and for the s ubsidiaries £ 94, 1 8 0 ( 2020: £98,588). The pr ior year comp arative s include ad ditional fe es billed fo r scop e change s and co st over runs. Fe es fo r non-audit s er vic es, rel ating to the half year revi ew , wer e £60,00 0 (2 020: £4 3, 705) and othe r non-audit s er vic es were £ 90,000 (2020: £nil). Det ails of the Audi tor’s indepe ndenc e are include d on page 1 56. 1 1 Director s’ emoluments 20 21 £m 2020 £m Remunerati on for management serv ices 4.0 5 .2 Share -bas ed pay ment s 3.6 3.3 Post-employment benefit s 0.5 0.6 8 .1 9 .1 National insurance contributions 1 .1 1. 3 9.2 10 . 4 An am ount of £1 . 7m ( 2020: £4.2m) relating to th e Direc tors is include d within Share -base d paym ents exp ense of £ 4.3m (2020 : £5 .8m) relat ing to equit y-se tt led sch emes in no te 1 2. This is in ac cordan ce with IFR S 2 Share-b ased P ayment . Det ails of the Dire ctors’ re muneration award s under the lon g-term inc entive p lan and optio ns held by th e Directo rs under th e Group share option s chem es are giv en in the rep or t of the Remun eration C ommit tee on p ages 1 72 to 1 93. The o nly key managem ent pe rsonne l are the Directors. 1 2 Employees Group 20 21 £m 2020 £m Company 20 21 £m 2020 £m St af f cos ts, in cluding tho se of Dire ctor s: Wa ges an d sala ries 18 . 5 18 . 5 18 .5 18 . 5 So cial se curit y c ost s 2.5 2 .7 2.3 2.6 O ther p ension c ost s 2.4 2.2 2.2 2 .1 Share -bas ed pay ment s expe nse rel ating to e quit y-se tt led sch eme s 4.3 5.8 4.4 5.7 2 7. 7 29.2 2 7. 4 28 .9 The m onthly avera ge number of e mployee s in the Group dur ing the year , excluding Dire ctors , was 1 4 0 (20 20: 1 32). The mont hly average numb er of employ ees in the C ompany dur ing the year , excluding Dire ctor s, was 1 20 (202 0: 1 1 4). All were employ ed in administrati ve or supp or t roles. Oft he Group’s employee s, ther e were 39 (20 20: 34) whos e cos ts were re charge d or par tially re charge d to tenants via s er vic e charges . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 220 1 3 Sh are-ba sed paym ents Det ails of the opt ions held by Dire ctor s under the P er form ance Share P lan (PSP) ar e given in th e repor t of th e Remunerati on Commi tte e on page 1 85. Gro up and C ompa ny – equit y-s et tled o ption s che me The Emp loyee Shar e Option Pl an (ESOP) is de signed to inc entiv ise and ret ain eligible employ ees . The ESOP is s eparate to th e PSP disclo sed in the rep or t of the Re muneration C ommit tee . The Dire ctors ar e not entitle d to any awards under th e ESOP . Year of g ra nt Exercise price £ Adjusted exercise price 1 £ Out stan ding at 1 January Movement in options Ou tst anding at 31 December Granted E xercised Lap sed For t he yea r to 31 Dece mber 2021 2 0 13 21. 9 9 21. 0 9 4 ,1 5 8 – – – 4 ,1 5 8 2 0 14 2 7. 3 9 26. 27 18 , 6 5 0 – (1, 6 0 0 ) – 1 7, 0 5 0 2 0 15 34.65 33.23 4 3 , 4 74 – (5,807) (2,6 05) 35 ,062 2 0 16 31. 2 0 29.9 3 3 8, 397 – ( 76 2) – 3 7, 6 3 5 2 0 17 28.93 2 7. 7 5 9 9,44 6 – (28,893 ) – 70,55 3 2 0 18 30.29 29. 57 114 , 2 3 4 – ( 22,399) – 91, 8 3 5 2 0 19 32.4 3 32. 43 12 9 , 5 7 5 – – (5, 550) 12 4 , 0 2 5 2020 30.02 30.02 17 2 , 4 7 5 – – (6 ,5 00 ) 16 5 , 9 7 5 20 21 33.28 33.28 – 20 4,079 – (3,25 0) 200, 829 620,4 09 204,079 ( 5 9 , 4 6 1) ( 1 7, 9 0 5 ) 7 4 7,1 2 2 For th e year to 31 De cemb er 2020 2 0 13 21. 9 9 21. 0 9 4 ,1 5 8 – – – 4 ,1 5 8 2 0 14 2 7. 3 9 26. 27 20,23 4 – ( 1, 5 8 4 ) – 18 , 6 5 0 2 0 15 34.65 33.23 4 4 , 2 14 – ( 74 0 ) – 4 3 , 4 74 2 0 16 31. 2 0 29.9 3 4 7,1 5 4 – (8 ,757) – 3 8, 397 2 0 17 28.93 2 7. 7 5 113 , 9 8 6 – ( 11 , 6 8 0 ) (2,8 60) 9 9,44 6 2 0 18 30.29 29. 57 11 8 ,1 7 6 – – (3 ,9 42 ) 114 , 2 3 4 2 0 19 32.4 3 32. 43 13 5 , 8 5 0 – – (6 ,275) 12 9 , 5 7 5 2020 30.02 30.02 – 1 7 4,300 – ( 1, 8 25 ) 17 2 , 4 7 5 4 8 3,7 72 1 7 4,300 ( 2 2 , 7 6 1) (14 , 9 0 2 ) 620,409 31 December 20 21 31 December 2020 1 January 2020 Numbe r of share s: E xercisable 256,293 2 0 4 ,1 2 5 115 , 7 6 0 Non-exercisable 4 90,829 416 , 2 8 4 3 6 8 , 0 12 Weighte d avera ge exercis e pric e of share op tions: E xercisable £ 29.37 £29. 23 £30. 39 Non-exercisable £ 31. 9 6 £30.6 6 £ 3 0 .1 4 Weighte d avera ge remaining c ontra cted l ife of share o ptions: E xercisable 4.92 ye ars 5.29 y ears 5.4 1 years Non-exercisable 7 .30 year s 8.36 years 8.30 years Weighte d avera ge exercis e pric e of share op tions th at laps ed: E xercisable £33 .23 £ 2 7. 8 1 £ 32. 54 Non-exercisable £ 31. 5 6 £ 3 1 .1 4 £29.7 4 ¹ I n 201 8 , fol lowing t he pa yme nt of th e spe cial d ivi dend o f 75 pen ce p er sha re, th e Remu nera tion C omm it tee ex erci se d their d iscr etio n and adj uste d the n umbe r of ou tst andin g unap pro ved ‘ B’ op tion s and th eir op tion p ric e, to en sure p ar ticip ant s were n ot dis adv anta ge d by the p aym ent to s hare hold ers o f the sp ec ial div ide nd. The we ighted aver age share pr ice at which o ptions were exe rcise d during 202 1 was £35. 8 2 (2020: £34.82). The we ighted aver age fair value of op tions grante d during 202 1 was £ 8.23 (2 020: £6.27). 221 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 1 3 Sh are-ba sed paym ents (continued) The f ollowing inform ation is relevant in th e determinatio n of the fair value of th e options gr anted during 2021 and 20 20 unde r the equit y -set tled employe e share pl an opera ted by the Gr oup. 20 21 2020 Opti on pricin g mode l use d Binomial la tti ce Bin omial lat tice Risk f ree intere st rate 0. 3% 0.2% Vola tility 30.0% 26.0% Div idend y ield 2.2% 2 . 4% For b oth the 2021 and 202 0 gran ts, addit ional assump tions have b een mad e that there is n o employe e turnov er and 50% of em ployee s exercis e early whe n the share opt ions are 20% in the mo ney and 50 % of employe es exercis e early whe n the share op tions are 1 00% in th e money . The v olatilit y as sumption, m easure d as the st andard dev iation of exp ecte d share pri ce return s, is bas ed on a st atistic al analysis of daily pric es over th e last f our years . Group and Company – Save As Y ou Earn scheme The S ave As You Earn (SA YE ) is desig ned to allow emp loyee s (including Direc tors) to purcha se shares in th e Comp any in a ta x ef ficie nt manner . The S A YE pl an is an HMRC approve d sch eme. Employ ees c an par ticipate o n an annual basis and s ave up to £2 50 p er mont h per grant . Fur ther det ails are given in th e repor t of t he Remunerat ion Commi tte e on pag e 1 86. 1 4 P ension cos ts The G roup and C ompany op erate both a d efine d contr ibution s cheme an d a define d ben efit s cheme . The lat ter was a cquired as p ar t of the acquisi tion of Londo n Merchant S ecur ities plc in 20 0 7 and is c lose d to new memb ers. A ll new employ ees are e ntitled to join t he defin ed con tribution s chem e. The as sets of t he pens ion sche mes are he ld separate ly from tho se of Group c ompanie s. Defined contribution plan The to tal expe nse rel ating to this plan in the c urrent ye ar was £2.0m (20 20: £2.0m) . Defined benefit plan The C ompany s ponso rs the S cheme whi ch is a funde d def ined b enef it arrangem ent. T his is a separate tr ustee -administere d fund ho lding the pen sion sche me ass ets to me et long-term p ension liabili ties for p ast employ ees . The S cheme c lose d to future b enef it acc rual on 31 July 20 1 9. The le vel of retirem ent ben efit is p rincipally b ased on b asic sal ar y at the las t schem e anniver sar y of employ ment pr ior to leaving ac tive s er vic e and incre ases at 5% p a in deferm ent. The t ruste es of the S cheme ar e required to ac t in the be st intere st of the S cheme’s bene ficiarie s. Th e appointme nt of the tr ustee s is deter mined by th e Schem e’ s trus t docum entation . It is polic y that one t hird of all truste es sho uld be nominate d by the mem bers . A full ac tuarial valuatio n was carr ied out a s at 3 1 Oc tober 201 9 in ac cord ance with t he Sch eme fun ding requiremen ts of the Pe nsions Ac t 2004 and the f unding of the S chem e is agree d bet we en the C ompany and th e truste es in line with t hose re quirement s. Th ese in par tic ular require the sur plus/ def icit to b e calculate d using pru dent, as op pos ed to be st es timate, actuar ial assumptio ns. This ac tuarial valuation sh owed a de ficit of £7 .3m . The C ompany ag reed w ith the tr ustee s that it will aim to eliminate the de ficit o ver a per iod of 5 year s and 2 month s from 31 Octob er 201 9 by the p aymen t of a contr ibution of £ 0.9m by 3 1 De cemb er 201 9, followe d by annual c ontribut ions of £1 .4m payab le by each 31 Dec ember f rom 31 Dece mber 2020 to 3 1 D ece mber 202 4 inclusi ve. In addition , the Co mpany has ag ree d with the trus tees t hat the Co mpany will me et expe nses of r unning the Sc heme and lev ies to the P ension Pro tectio n Fund separ ately . Th e estimate d amount of tot al employe r contrib utions ex pec ted to be p aid to the Sc heme during t he year to 31 Dec ember 2022 is £1 .4m (3 1 De cemb er 202 1 act ual: £ 1 .4m). For th e purpo ses of I AS 1 9 t he actu arial valuation as at 31 Octob er 201 9, which was c arrie d out by a qualif ied ind epend ent act uar y , has b een update d on an approximate b asis to 3 1 De cemb er 202 1 . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 222 Am ount s includ ed in th e bala nce s hee t 20 21 £m 2020 £m 2 019 £m Fair value of pl an ass ets 62 .7 66.6 5 3.9 Pre sent valu e of def ined b enef it obligat ion (6 0. 9) (6 8. 8) (53 .4) Net asset/(liab ility) 1. 8 (2. 2) 0.5 The p resen t value of the Sc heme liabiliti es is meas ured by disc ounting the b est e stimate of f uture ca sh flows to b e paid out by t he Sch eme. The v alue calculate d in this way is refle cted in th e net as set /(liabilit y) in the balan ce she et as shown ab ove. All ac tuarial gains and los ses are r eco gnised in th e year in which th ey oc cur in the Group S tateme nt of Comp rehensi ve incom e. Rec oncil iatio n of the im pac t of the a sse t ceil ing We have con sidere d the applic ation of IFRIC 1 4 and de eme d it to have no mater ial ef fec t on the IA S 1 9 f igures . Rec oncil iatio n of the o pening a nd clo sing pr ese nt value o f the de fine d ben efit o bligat ion 20 21 £m 2020 £m At 1 Januar y 68.8 53 .4 Curre nt ser v ice c ost – – Intere st co st 0.8 1.1 Ac tuarial lo sse s due to sch eme ex perie nce 0.7 6.4 Ac tuarial ( gains)/los ses du e to change s in demo graphic as sumpti ons ( 0 .1 ) 1. 6 Ac tuarial ( gains)/los ses du e to change s in finan cial ass umptions (6. 9) 8.9 Ben efi ts paid, d eath in se r vice p remiums an d expe nses (2. 4) (2.6) At 3 1 D ece mber 60.9 68.8 The re have be en no sc heme ame ndments , cur tailme nts or set tlem ents in the y ear . Rec oncil iatio n of ope ning and c losin g value s of the f air value o f pla n ass et s 20 21 £m 2020 £m At 1 Januar y 6 6.6 53.9 Intere st inc ome 0.8 1.1 Retur n on plan a sse ts (excluding amo unts inclu ded in inter est inc ome) (3.6 ) 12 . 8 Contributions by the Group 1. 4 1. 4 Ben efi ts paid, d eath in se r vice p remiums an d expe nses (2. 4) (2.6) Other ( 0 .1 ) – At 3 1 D ece mber 62 .7 66.6 The a ctual ret urn on the pl an asse ts including intere st inco me over th e year was a los s of £2.8m (20 20: gain of £ 1 3.9m). Amounts recognised in other comprehensive i ncome 20 21 £m 2020 £m (Los s)/ gain on p lan as sets (exclu ding amount s rec ognise d in net inter est c ost ) (3. 6) 12 . 8 E xpe rienc e loss es arisin g on the def ine d bene fit o bligation (0 .7) (6.4) Gain/(lo ss) from c hanges in t he dem ographic a ssumpt ions und erlying t he pre sent valu e of the d efine d ben efi t obligatio n 0 .1 (1. 6 ) Gain/(lo ss) from c hanges in t he fina ncial as sumption s under lying the p rese nt value of the d efine d ben efi t obligatio n 6.9 (8 .9) T o tal gain/(lo ss) rec ognise d in othe r compr ehens ive inc ome 2 .7 ( 4 .1) Fair valu e of pl an as set s 20 21 £m 2020 £m 2 019 £m UK equi ties 0.6 0.5 0.5 Overs eas equiti es 0 .6 0.5 0.5 LDI 6.2 – – Buy a nd maintain c redit 4 .1 – – Government bonds – 4.8 3.0 Cash 1. 4 0.2 0.5 Other 9.3 1 5 .1 14 . 0 Insure d ass ets 4 0.5 45.5 35.4 To t a l a s s e t s 62 .7 66.6 5 3.9 223 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 1 4 P ension cos ts (continued) The £ 9.3m (20 20: £1 5 . 1 m) in th e ‘other ’ asse t clas s is made up of holdings of £5 .5m ( 2020: £9.6m) in equit y-linked b onds, £2.4m (2020: £5.5m) in global f unds and £1 .4m (2020: £nil) in sterling liquidi ty f unds. The S chem e’ s ass ets are held exc lusively wit hin instrume nts with quote d market pr ices in an ac tive mar ket with the exc eption of t he holdings in insuranc e policie s and the tr ustee’s bank acc ount. T he insured a sset s have be en set e qual to the value of th e insured liabilitie s but b efore allowanc e has be en made for t he impac t of equalising be nefi ts for th e dif ferent ef f ect s of GMP for males an d females. The S chem e does n ot invest dire ctly in pro per t y oc cupied b y the Group or in f inancial se curitie s issue d by the Gr oup. It is the p olicy of t he trus tees and t he Group to rev iew the inve stmen t strateg y at th e time of each f unding valuation. T he tru stee s’ investme nt objec tive s and the pro ces ses un der taken to me asure and mana ge the risk s inherent in the p lan inves tment s trateg y are illustr ated by the ass et alloc ation at 3 1 D ece mber 2021 . The re are no ass et-liabilit y matching s trategie s currently b eing use d by the pl an. Signific ant actuarial as sumptions 20 21 % 2020 % 2 019 % Disc ount rate 1. 9 1. 2 2 .1 Infl ation (RPI) n /a n/a n /a Salar y i ncreases n /a n/a n /a Allowa nce fo r commu tatio n of pensi on for c ash at ret irement 7 5% of P ost A Day Pension 75% of Post A Day Pe nsion 75% of Post A Day Pe nsion The m or talit y as sumptions ad opted at 31 Dec embe r 202 1 ar e 85% of the stan dard tables S 3NX A _ L, ye ar of bir th, no age r ating for males an d female s, projec ted using CMI 2020 conv erging to 1 .25% p.a . Thes e imply the fo llowing life exp ect ancies: Lif e expe ct anc y at age 6 5 Ye a r s Male re tiring in 2021 24 .8 Fem ale retir ing in 2021 26.5 Male re tiring in 20 4 1 2 6 .1 Fem ale retir ing in 204 1 2 7. 8 An alysis o f the se nsit ivi ty to t he prin cipal a ssu mptio ns of th e pre sent v alue of th e def ined b enef it obl igatio n Change i n assumption Ch ange in liabilities Disc ount rate De cre ase of 0.25% p.a. Inc rease b y 4.0% Rate of mo r talit y Incre ase in lif e expe ct ancy of o ne year Inc rease b y 6.0% The s ensiti vities s hown abov e are approximate. E ach sen sitivi ty c onside rs one ch ange in isolati on. The ave rage duratio n of the def ined ben efit o bligation at the y ear ende d 3 1 De cemb er 202 1 is 1 5 year s for the S chem e as a whole or 26 year s when only c onsidering n on- insur ed member s. The S chem e t ypical ly expos es the G roup to actuar ial risks suc h as investm ent risk , interest r ate risk, s alar y grow th ris k, mor t alit y risk and longev it y risk . A decre ase in cor porate b ond yie lds, a rise in inf lation or an inc rease in lif e expe ctan cy would re sult in an increase to t he Sch eme’s liabi lit ies. This w ould detrime ntally impac t the bal ance sh eet p osition an d may give ris e to increas ed char ges in the inc ome sta tement. T his ef fec t would be p ar tially of fse t by an increa se in the value of th e Sche me’ s bon d holdings. The b est e stimate of c ontribut ions to be pai d by the Group to th e plan fo r the year c ommenc ing 1 Januar y 2022 is £ 1 .4m . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 2 24 1 5 T a x credit 20 21 £m 2020 £m Corporation ta x UK cor por ation ta x and in com e ta x in resp ect o f results f or the y ear 0.9 0.8 O ther adjust ment s in resp ect of p rior ye ars’ ta x (0 .4) (0.6) Corp oration ta x charge 0.5 0.2 Deferred ta x Orig ination an d rever sal of temp orar y dif f erenc es ( 1 .1) (2.0) Adjust ment fo r change s in estim ates (0 .7) 0.2 Deferre d tax cre dit (1. 8 ) ( 1. 8 ) Ta x c r e d i t (1. 3) (1. 6 ) In addition to th e ta x credi t of £ 1 .3m (2020 : £1 .6m) that pas se d through th e Group inco me state ment, a def erre d ta x charge of £1 .3m (202 0:£0.2m) relating to t he revaluation of t he owner -oc cupied pr oper t y at 25 Savile Row W1 and a ch arge of £0.4m (2020 : cre dit of £0.4m) relat ing to the fu ture defin ed be nefi t pension liabili ties were re cog nised in the G roup state ment of co mprehen sive inc ome. The e f fec tive rate of t ax f or 202 1 is lower (2020 : lower) than t he stan dard rate of cor poratio n ta x in the UK. T he dif fer ence s are expl ainedb elow: 20 21 £m 2020 £m Profit /(loss) before ta x 252.5 (8 3. 0) E xpe cte d ta x charg e/( cre dit) b ase d on the st andard r ate of cor porat ion ta x in the UK of 19.00% (2020: 1 9.00 % ) 1 48 .0 (1 5.8) Dif fe renc e bet wee n ta x and ac count ing prof it on disp osal s (0 .7) 1. 2 REIT exe mpt inco me (14 . 9) ( 1 4.7) Revalua tion (surplus)/ de fici t att ribut able to REIT pr oper ti es (32.2) 36 .6 E xpe nses an d fair value adjus tment s not allowab le for ta x pur pos es 4.6 (1. 3 ) Capit al allowance s (4. 3) (5. 3) Other dif ferences (1. 4 ) (1. 7 ) T a x cr edit in re spe ct of prof it /(los s) for the ye ar (0.9) (1. 0 ) Adjust ments in re spe ct of p rior ye ars’ ta x (0. 4) (0.6) T a x cr edit in re spe ct of prof it /(los s) for the ye ar (1. 3 ) (1. 6 ) 1 Cha nge s to the UK c orp ora tion t a x rate s were s ubs tant ive ly ena cte d as par t o f the F inanc e Bill 20 21 ( on 24 May 20 21 ) an d incl ude in crea sing t he main r ate to 25% ef f ec tive o n or af ter 1 A pr il 2023. D efer red t a xes at t he ba lanc e sh eet d ate hav e bee n mea sure d usin g the ex pe cte d ena cte d ta x rate a nd thi s is ref lec ted i n the se f inanc ial st atem ent s. 225 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 1 6 Prop ert y por tf oli o Freehold £m Leasehold £m To t a l inves tment proper ty £m O w n er- occupi ed proper ty £m Assets he ld fo r sale £m T rading proper ty £m To t a l proper ty por tfolio £m Group Carr ying val ue At 1 Januar y 2021 3,893.5 1 ,13 5 . 6 5 , 0 2 9 .1 4 5.6 16 5 . 0 12 . 9 5, 252. 6 Acquisi tions 214 . 6 1 39.0 353 .6 – – – 35 3.6 Capi tal exp endi ture 76. 6 88.4 16 5 . 0 – – 1 .1 16 6 .1 Interest c apitalis ation 2.4 9.6 12 . 0 – – – 12 . 0 Addi tions 293 .6 2 3 7. 0 53 0.6 – – 1 .1 5 3 1.7 Disp osals ( 7 5.8) ( 1 46.7) (222.5 ) – (16 5 . 0 ) ( 5.9) (39 3.4) T ransfers (6 3 .7) (6 3. 0) ( 1 26. 7) – 10 1. 2 25 .5 – Revaluation 91. 5 39.3 13 0 . 8 3 .7 – – 13 4 . 5 Write- down of t rading prop er t y – – – – – ( 1. 4) (1. 4 ) T r ansfer f rom pre paym ents an d accr ued in come – – – – 1. 6 – 1.6 Move ment in gr ossing up o f headle ase liabili ties – 3.8 3.8 – – – 3. 8 Move ment in gr ossing up o f other liab ilities – 14 . 8 14 . 8 – – – 14 . 8 At 3 1 De ce mber 2021 4 ,1 3 9 .1 1,220.8 5,359.9 49.3 10 2 . 8 32.2 5,5 4 4.2 At 1 Januar y 2020 4 ,12 1 . 2 1 , 0 5 3 .1 5, 1 7 4.3 45.3 11 8 . 6 40 .7 5,378.9 Acquisi tions 43.5 – 4 3.5 – – – 43.5 Capi tal exp endi ture 6 4 .1 8 7. 8 151. 9 ( 0 .1 ) – 0 .1 15 1. 9 Interest c apitalis ation 4 .6 5 .1 9 .7 – – 0.2 9.9 Addi tions 112 . 2 92 .9 2 0 5 .1 ( 0 .1) – 0.3 205.3 Disp osals – – – – ( 11 8 . 6 ) (2 6.3) (14 4 . 9 ) T ransfers (16 1. 2 ) – ( 161. 2 ) – 16 1. 2 – – Revaluation ( 1 78. 7) ( 1 7. 4 ) ( 1 9 6 .1 ) 0.4 – – (19 5 . 7 ) Write- down of t rading prop er t y – – – – – (1. 8 ) (1. 8 ) T r ansfer f rom pre paym ents an d accr ued in come – – – – 3. 8 – 3.8 Move ment in gr ossing up o f headle ase liabili ties – 7. 0 7. 0 – – – 7. 0 At 3 1 D ece mber 2020 3,893.5 1 ,13 5 . 6 5 , 0 2 9 .1 4 5.6 16 5 . 0 12 . 9 5, 252. 6 Adjus tm ent s fro m fair va lue to c arr y ing valu e At 3 1 D ece mber 2021 Fair value 4,296.2 1,161. 9 5,45 8. 1 4 9.3 10 4 . 8 3 4 .1 5 ,64 6.3 Se lling co sts re lating to as sets h eld for s ale – – – – (2.0) – (2.0) Rev aluation o f trading p rope r t y – – – – – ( 1. 9) (1. 9 ) Lea se ince ntive s and c osts in clude d in rec eivable s ( 1 5 7. 1 ) (26.3 ) (18 3 . 4 ) – – – ( 18 3 . 4 ) Gro ssing up of he adleas e liabilitie s – 70 .4 70. 4 – – – 70.4 Gro ssing up of ot her liabilit ies – 14 . 8 14 . 8 – – – 14 . 8 Carr ying val ue 4 , 13 9 .1 1 ,220.8 5,359.9 49. 3 10 2 . 8 32.2 5,5 4 4.2 At 3 1 D ece mber 2020 Fair value 4 , 0 3 7. 0 1, 0 9 1. 6 5 ,12 8 . 6 4 5.6 1 6 7. 0 1 4.3 5,355.5 Se lling co sts re lating to as sets h eld for s ale – – – – (2.0) – (2.0) Rev aluation o f trading p rope r t y – – – – – ( 1. 4) (1. 4 ) Lea se ince ntive s and c osts in clude d in rec eivable s (14 3 . 5 ) (22.5 ) (16 6 . 0 ) – – – ( 16 6 . 0 ) Gro ssing up of he adleas e liabilitie s – 6 6.5 6 6.5 – – – 66.5 Car r ying v alue 3,893.5 1 ,13 5 . 6 5 , 0 2 9 .1 4 5.6 16 5 . 0 12 . 9 5, 252. 6 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 226 Rec oncil iatio n of fair v alue 20 21 £m 2020 £m Por t fol io including th e Group's share o f joint vent ures and t rading sto ck 5,696. 7 5,355.5 Less: trading stoc k (0.4) – Por t fol io including th e Group's share o f joint vent ures 5,696.3 5,355. 5 Les s: joint vent ures (5 0.0) – IFRS proper ty por t folio 5,6 46. 3 5,355.5 T he prop er t y por t folio is subje ct to semi-annu al ex ternal valuations an d was revalue d at 3 1 De cemb er 202 1 by ex ter nal valuers on t he basisof f air value in accor dance wit h The RIC S Valuation – Profe ssional S tandards , which take s acco unt of the prop er ties’ high est and b est use. Wh en con sidering the hig hest an d bes t use of a prop er t y , the ex ter nal valuers will c onsider i ts exist ing and potent ial uses which are physic ally , legally and f inancially v iable. Where th e highes t and bes t use dif fe rs from t he existing us e, the ex tern al valuers will c onsider thec osts an d the likeliho od of achiev ing and implemen ting this change in arr iving at the p roper t y valuati on. The re were no suc h instanc es in the ye ar . CBRE L imited value d proper t ies at £5,61 0.8m (2020: £5,32 4.5m) and othe r valuers at £ 35.5m (20 20: £31 .0m), giving a c ombined value of £5,6 46.3m (2020 : £5, 355.5m) . O f the prop er ties re valued by CB RE, £4 9.3m ( 2020: £45 .6m) relating to owner -oc cupied p roper t y was include d within prop er t y , plan t and equipme nt and £3 4. 1 m (202 0: £1 4.3m) was in relati on to trading prop er t y . Th e total fe es, inclu ding the fee f or this assig nment, e arne d by CBRE (or other c ompanies f orming par t of th e same gro up of companie s within the UK ) from t he Group is less t han 5.0% of their tot al UK revenue s. At 3 1 De cemb er 202 1 , the gr ossing up of oth er liabilities of £1 4 .8m relate d to the disc ounted prof it share to Tf L for the de velopm ent at Soh o P l a c e W 1. Following exc hange of cont racts in D ec ember 2021 for the s ale of its fre ehold intere st in New Rive r Y ard EC1 , the Gr oup transf erred £ 63.7 m from inv estm ent prop er t y to asset s held for s ale. This subs eque ntly comple ted in Januar y 2022. A revaluation def icit of £1 .2m rel ating to the as set he ld for sale is includ ed within th e revaluation surp lus of £ 1 30.8m. Co ntract s exchange d in July 20 20 for t he sale of its le asehold inte rest in 2 & 4 S oho Pla ce W1 , with c ompletio n expe cted in 2022. As a re sult the Gro up transfe rred £ 37 .5m f rom inves tment pro per t y to ass ets he ld for sale. A re valuation def icit of £0.8m r elating to the as set h eld for sale is includ ed within th e revaluation surp lus of £ 1 30.8m. Net z ero c arbo n and EP C com plian ce The G roup publish ed its p athway to net zero c arbon in July 2020 and has s et 2030 as its t arget date to achie ve this. £1 1 6.6m (year to 31 De cemb er 2020 : £1 0 3.2m ) of eligib le ‘ gre en’ expe nditure was incur red in the y ear to 3 1 D ece mber 2021 on ma jor d evelopm ents at 80 Charlot te S treet W1 , Soh o Plac e W1 , The F eather stone B uil ding EC1 and 1 9-35 Baker S tre et W1 . As th ese hav e met the cr iteria to be e ligible qualif y ing project s under the G reen F inance Framew ork, th e Group has ut ilised th e green t ranche of th e £4 50m revo lving cre dit facilit y and the £ 350m gre en bon ds (more inform ation can b e found on p ages 9 6 to 9 7). In 202 1 , t he Group c ommission ed a third par t y rep or t to deter mine the co sts of ac hieving EP C complian ce acro ss the p or t folio by 2030. Results o f the stud y indicate an e stimated c ost of c .£97 m to upgra de the Group’s prope rt ies to EPC ‘ B’ or abov e. An exerc ise is under way to est imate the amount of c apital ex pendi ture that is rec over able through s er vic e charges o r not alread y include d within fu ture planne d ref urbishment p rojects . Any c ommit ted c apital exp enditure h as bee n include d in note 34. Reconciliation of revaluati on surplus/( def icit) 20 21 £m 2020 £m T ot al reval uation surplus/( deficit ) 14 2. 9 (17 8 . 5 ) Le ss: Sh are of joint ve ntures 13 . 9 – L ease inc enti ves an d cos ts (19. 7 ) ( 1 6.7) A ss ets he ld for sale s elling c osts (2. 0) (2 .0) T ra ding prop er t y re valuatio n surplu s (2.0) (0. 3) IFRS reval uation surplus/ (deficit) 1 3 3 .1 ( 1 9 7. 5 ) Rep or ted in th e: Revaluation surplus/( def icit) 13 0 . 8 ( 1 9 6 .1 ) Write -down of t rading pro per t y (1.4 ) ( 1. 8 ) Group in com e statem ent 12 9 . 4 ( 1 9 7. 9 ) Group s tatem ent of co mpreh ensiv e incom e 3 .7 0.4 1 3 3 .1 ( 1 9 7. 5 ) V aluation process The v aluation repo r ts produ ced b y the ex ternal value rs are bas ed on info rmation pro vide d by the Group s uch as curre nt rents , terms and con ditions of leas e agre ement s, ser v ice char ges and c apital exp endit ure. This inform ation is deri ved f rom the Gro up’ s f inancial and prop er t y manage ment sy stems and is subje ct to the Gr oup’ s overall c ontro l environme nt. 227 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 1 6 P roper t y por t folio (continued) In addition , the valuation rep or ts are b ased o n assumptio ns and valuation mo dels us ed by th e ex ternal valuer s. The a ssumptio ns are t ypic ally market-re lated, su ch as yields an d discount r ates, and are b ase d on their profe ssion al judgement an d market ob ser vation an d take into ac count th e impact of clima te change and rel ated Enviro nmental , Social an d Gover nance c onsider ations. E ach prop er t y is con sidered a s eparate as set cl ass ba sed on t he unique nature, ch aracter istics an d risks of th e proper t y. Memb ers of the G roup’ s inves tment team , who repo r t to the exec utive Dire ctor re spon sible for the valuatio n proc ess , verif y all m ajor inputsto t he ex ternal valuatio n repor t s, ass ess th e individual p roper t y valuatio n changes f rom the pr ior year valuati on repor t an d hold discus sions with t he ex ternal value rs. Whe n this proc ess is c omplete, th e valuation rep or t is rec ommend ed to the Au dit Commi tte e, which con siders it a s par t of its ov erall resp onsibilitie s. Val uation te chniques The f air value of the prop er t y por t foli o has be en determine d using an inco me capi talisatio n technique, wh ereby c ontrac ted and mar ket rent al values are c apitalise d with a mar ket capit alisation rate. T he res ulting valuations are cro ss-c hec ked against th e equivalen t yields and the fair mar ket values p er square fo ot deri ved f rom comp arable rec ent market t ransac tions on arm’s leng th terms . For prop er ties und er con struc tion, th e fair value is calcul ated by e stimating the f air value of the co mpleted pro per t y using the in come c apitalis ation tec hnique less e stimate d cos ts to comp letion and a risk p remium. The se tec hniques are c onsistent wi th the princ iples in IFRS 1 3 Fair V alue Meas urement and us e signifi cant unob ser vab le inputs suc h that the fair value m easurem ent of each p roper t y wit hin the por t folio h as bee n clas sifie d as Lev el 3 in the fair value hierar chy . Th ere were no t ransfer s bet ween L evels 1 an d 2 or bet wee n Levels 2 an d 3 in the fair value hierarchy dur ing either 2021 or 2020. Gains and los ses r eco rded in prof it or los s for re curring fair value m easurem ents c ategorise d within Lev el 3 of the fair value hier archy amount to a gain of £1 30.8m (2020: defici t of £ 1 96. 1 m) and ar e prese nted in the Gro up income s tateme nt in the line item ‘re valuation surplus / (defi cit)’ . Th e revaluation sur plus for the o wner- occ upied prop er t y of £3.7 m (2020: defic it of £0.4m) was include d within the G roup statement of compr ehensive income. All gains and lo sse s reco rded in prof it or los s in 202 1 and 2020 for re curring fair value m easurem ents c ategorise d within Leve l 3 of the fair value hierarc hy are at tribut able to changes in unre alised gains or lo sse s relating to inve stmen t proper t y h eld at 3 1 De cemb er 202 1 and 3 1D ece mber 2020, resp ecti vely. Qua ntit ati ve info rmat ion abo ut fa ir value me asur emen t using u nobs er vabl e input s (Leve l 3 ) Wes t End centr al Wes t End borders/other Cit y borders Provinc ial commer cial Provinc ial land To t a l Valuation tec hnique Inc ome capi talisation Inc ome capi talisation Inc ome capi talisation Inc ome capi talisation Inc ome capi talisation Fair value (£ m) 1 3,4 83.6 4 3 1. 4 1, 6 9 8 . 7 4 6.9 3 6 .1 5 ,6 96 .7 Are a (’0 00 s q f t) 3 ,1 0 2 42 9 1, 715 32 8 – 5 , 5 74 Range of un obse r vable inpu ts 2 : Gro ss ERV ( per s q f t pa) Minimum £28 £ 24 £ 39 – n /a 3 Ma ximum £10 1 £58 £63 £ 13 n /a 3 Weighte d avera ge £60 £ 52 £ 51 £ 13 n /a 3 Net init ial yield Minimum 2.5% 2.5% 2 .6% 7. 8 % 0.0% Ma ximum 6 .7% 5.0% 5.3% 8 .1% 1 0.0% Weighte d avera ge 2 . 4% 4 .6% 3.5% 8 .1% 1. 3 % Reve rsion ar y yield Minimum 2.5% 3. 8% 3.8% 7. 8 % 0.0% Ma ximum 6.5% 5.0% 5.6% 8.5% 9. 4% Weighte d avera ge 4 . 4% 4.8% 4. 8% 8.5% 1. 3 % T r ue equi valent y ield (EPR A basis) Minimum 2 . 4% 3.5% 2.7 % 8 .1% 9.7 % Ma ximum 5.9% 5. 3% 5.0% 9. 0% 10 . 4% Weighte d avera ge 4.3 % 4.9% 4 .7% 8 .1 % 10 . 4% 1 Inc lude s the G roup’s sh are of jo int ven ture s. 2 Co st s to com plet e are no t dee med a s ignif ic ant un obs er vab le inpu t by vi rt ue of th e high p erc ent age t hat is a lrea dy f ixe d. 3 Th ere is n o calc ula tion of g ros s ERV p er s q f t pa. T he l and tot als 5 ,50 0 acre s. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 2 28 Sensitivit y of measurement to variat ions in the significant unobservable inputs The sig nific ant unobs er vable input s used in th e fair value mea surement c ategoris ed within Le vel 3 of the f air value hierarchy of th e Group’ s prop er t y por t folio, to gether wi th the impac t of signif icant mov ement s in these inp uts on the f air value measure ment, are s hown below: Unobser vable input Imp ac t on fa ir val ue me as urem en t of s igni fi can t inc re ase i n inpu t Imp ac t on fa ir val ue me as urem en t of s igni fi can t de cre as e in inp ut Gro ss ER V Increase De crease Net init ial yield Dec rease Increase Reve rsion ar y yield Dec rease Increase T r ue equi valent y ield Decre ase Increase The re are inter-rel ationships b et ween th ese inpu ts as they are p ar tially determin ed by marke t conditi ons. A n increas e in the rever sionar y yield m ay accom pany an increa se in gros s ERV and wo uld mitigate its impac t on the fair value m easurem ent. A sensi tivi ty an alysis has be en pe rf orme d to asce r tain the impac t of a 25 basis point shif t in true e quivalent y ield and a £2.50 pe r sq f t shif t in ERV on th e prope rt y valuat ions. Th e Group be lieves t his capture s the range of var iations in the se key valuation as sumptions . The re sults are shown in th e tables b elow: Wes t End centr al Wes t End borders/other Cit y borders Provinc ial commer cial Provinc ial land To t a l T r ue equi valent y ield +2 5 b p (5 .5%) (4 .9 %) ( 5 .1% ) (3 .0 %) (2 .3 %) (5 .3 %) -25 b p 6.2% 5 . 4% 5.6 % 3.2% 2.5% 5.9% ERV +£2.50 p sf 4 .2% 4.8% 4.9% 19 . 3 % – 4 .7 % -£2.50 p sf (4. 2%) (4 .8 %) (4 .9 %) (19 . 3 % ) – (4 .7 %) Historical cost 20 21 £m 2020 £m Investment propert y 3,292.6 3, 149.2 Owner-oc cupied propert y 19. 6 19 . 6 As set s held for s ale 38.5 6 5 .7 T r ading pro per t y 4 4.0 22.6 T o tal pro per t y po r tf olio 3, 39 4 .7 3 , 2 5 7. 1 229 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 1 7 Pr oper t y , pl ant and e quipment O w n er- occupi ed proper ty £m Right -of -use asset £m Ar twork £m Other £m To t a l £m Group At 1 Januar y 2021 45 .6 – 1. 0 3.6 50.2 Addi tions – – – 1. 3 1. 3 Disp osals – – ( 0 .1 ) ( 0 .1 ) (0.2) Depre ciation – – – (0 .9) (0 .9) Revaluation 3 .7 – ( 0 .1 ) – 3 .6 At 3 1 De ce mber 2021 49.3 – 0.8 3 .9 5 4.0 At 1 Januar y 2020 45.3 – 1. 0 3.9 5 0.2 Addi tions ( 0 .1 ) – – 0.4 0.3 Depre ciation – – – (0 .7) (0 .7) Revaluation 0.4 – – – 0.4 At 3 1 D ece mber 2020 45 .6 – 1. 0 3.6 5 0.2 Net b ook valu e Co st or valua tion 4 9.3 – 0.8 8.0 5 8 .1 Ac cumulate d depr eciatio n – – – ( 4 .1 ) ( 4 .1 ) At 3 1 De ce mber 2021 49.3 – 0.8 3 .9 5 4.0 Net b ook valu e Co st or valua tion 4 5.6 – 1. 0 7. 3 5 3.9 Ac cumulate d depr eciatio n – – – (3 .7 ) (3 .7 ) At 3 1 D ece mber 2020 45 .6 – 1. 0 3.6 5 0.2 Company At 1 Januar y 2021 – 19 . 2 1. 0 3.5 2 3.7 Addi tions – – – 1. 3 1. 3 Disp osals – – ( 0 .1 ) ( 0 .1 ) (0.2) Depre ciation – (1. 2 ) – (0.9) ( 2 .1 ) Revaluation – – ( 0 .1) – ( 0 .1) At 3 1 De ce mber 2021 – 18. 0 0.8 3.8 22.6 At 1 Januar y 2020 – 20.4 1. 0 3.8 25. 2 Addi tions – – – 0.4 0.4 Depre ciation – (1. 2 ) – (0.7 ) (1. 9) At 3 1 D ece mber 2020 – 19 . 2 1. 0 3.5 2 3 .7 Net b ook valu e Co st or valua tion – 2 1. 6 0.8 8 .0 30.4 Ac cumulate d depr eciatio n – (3.6) – (4 .2 ) ( 7. 8 ) At 3 1 De ce mber 2021 – 18. 0 0.8 3.8 22.6 Net b ook valu e Co st or valua tion – 2 1. 6 1. 0 7. 3 29.9 Ac cumulate d depr eciatio n – (2.4) – (3. 8) (6 .2) At 3 1 D ece mber 2020 – 19 . 2 1. 0 3.5 2 3.7 The ar t wor k is perio dically value d by Bonham s on the basis o f fair value using their ex tensi ve market k nowledge . The late st valuation was car ried ou t in Dec ember 2021 . In ac cordanc e with IFRS 1 3 Fair Value Measurem ent, the ar t work is d eeme d to be cl assif ied as Le vel 3. Thehis torical c ost of t he ar tw ork in the Gro up at 3 1 De cemb er 202 1 was £0.9m (2020: £ 1 .0m) and £0.9m (2020: £ 1 .0m) in the C ompany. Se enote 1 6 f or the histo rical c ost of own er-o ccupie d prop er t y and IFRS 1 3 Fair V alue Mea surement dis closures . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 230 1 8 Investments Group The G roup has a 50% inter est in fo ur joint venture vehi cles, D er went La zari Baker S tre et Limited P ar tnership, D orring ton De rw ent Holdings Limite d, Primister L imited and Pr esc ot Stre et Limite d Par tner ship. 20 21 £m 2020 £m At 1 Januar y 0.9 1. 3 Addi tions 6 4 .1 – Joint venture acquisition costs (4. 0) – Revaluation deficit (10 . 2 ) – Other profi t from operations 0.3 – Distributions rec eived – (0. 4) At 3 1 D ece mber 51 .1 0.9 In Oc tober 2021 , the Gro up entered into a 5 0: 50 joint v enture with L azar i Investm ents Limite d to est ablish the D er went L azari B aker Stre et Limite d Par tner ship. The Gro up ’s 50% share was ac quired fo r £64. 1 m, including £ 4.0m of acquisi tion co sts and f ees an d £0. 1 m of work ing capi tal con tribution s. The j oint venture ho lds three pro per tie s, 38-52 Baker Str eet W1 , 5 4-60 B aker Stre et W1 and 66- 70 Baker S tree t W1 , isfund ed by loan s from it s par tner s and has no third p ar t y borrowings . The G roup’ s share of it s invest ments in joint ve ntures is rep resen ted by the f ollowing amount s in the under lying joint venture e ntities . 20 21 2020 Joint ventures £m Group share £m Joint ventures £m Group share £m Non-current ass ets 10 0 .5 50.2 – – Curre nt ass ets 3 .7 1. 9 1. 2 0 .6 Current liabilitie s (2 .7 ) (1. 3 ) (0 .7) (0. 3) Non-current liabilities (1 20.8) (6 0.4) – – Net assets (19 . 3) (9.6) 0.5 0. 3 Loans provided to j oint ventur es 6 0.7 0.6 T o tal inve stme nt in joint ven tures 5 1 .1 0.9 Inc ome 0.7 0.4 – – Adminis trativ e expe nses ( 0 .1 ) ( 0 .1 ) – – Revaluation deficit (20.4) (10 . 2 ) – – Los s for th e year (19 . 8) (9.9) – – Co mpany Subsidiaries £m At 1 Januar y 2020 1,550.2 Addi tions 11 3 . 0 Impa irme nt ( 4 7. 3 ) At 3 1 D ece mber 2020 1, 6 15 . 9 Addi tions 268 .0 Disp osals (8 0 .7) Rep ayment o f capit al (33 .5) Impa irme nt (19 . 9 ) At 3 1 De ce mber 2021 1,74 9 . 8 At 3 1 De cemb er 202 1 , the c arr ying value s of the inve stment in wh olly-ow ned sub sidiaries were re viewe d in acco rdance wit h IAS 36 Impairme nt of Ass ets on b oth a ‘ value in use’ and ‘ fair value les s cos ts to sell’ basis . The C ompany ’s account ing polic y is to carr y inves tments in sub sidiar y under t akings at the lower of c ost an d reco verable amo unt and rec ognise any imp airment, or r evers al there of , inthe inc ome st atement. A s a result , the Co mpany rec ognise d an impairmen t charge of £1 9.9m (2020: £4 7 .3m). This was due to pro per t y revaluatio n defici ts charge d to the inc ome st atement in a numb er of the pro per t y inves tment sub sidiaries he ld directly or in directly by t he Co mpany . Inve stment p roper tie s are held by t he prop er t y investm ent subsidiarie s with any surp luses or de ficit s resulting fr om a change in their fair value s being rep or ted in th e income s tateme nt of thos e subsidiarie s, there by af fec ting their fair value s. 231 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 1 9 O ther receivables (non-current) Group 20 21 £m 2020 £m Company 20 21 £m 2020 £m Prep ayme nts and a ccr ued inc ome 1 59.3 14 6 . 4 – – Prep ayment s and acc rued in come inc lude £1 47 .0m (2020 : £1 32.3m) afte r impairment s ( se e note 3) relating to rent s rec ognise d in advanc e as a res ult of spreading tenant le ase ince ntives o ver the ex pec ted ter ms of their res pec tive lea ses. T his include s rent fre e and redu ced r ent per iods, c apital c ontribu tions in lieu of re nt fre e perio ds and co ntracte d rent uplif t s. In addition , £ 1 2.3m (2020 : £1 4. 1 m) re lates to the spre ading ef fec t of the initial direc t cos ts of let ting over t he same ter m. T o gether wi th £2 4. 1 m (2020: £ 1 9.6m), which was include d as acc rued in come wi thin trade and oth er rec eivable s ( se e note 20) , th ese amo unts totalle d £ 1 83.4m at 31 Dec ember 2021 ( 2020: £ 1 66.0m). The to tal move ment in tenant leas e incent ives is sh own below: 20 21 £m 2020 £m At 1 Januar y 14 9 .7 13 5 . 9 Am ounts t aken to inco me st atement 19 .9 23.0 Capi tal inc enti ves gra nted 0 .7 0.5 Lea se inc enti ve impair men t 0.3 (5 .7 ) Adjust ment fo r non- curren t asse t held for s ale (1.6 ) (3 .2) Disposal of i nvestment proper ties (0.5) – Write of f to b ad debt (0. 3) (0.8) 16 8 . 2 14 9 . 7 Am ounts inc luded in t rade and o ther re cei vables (se e note 20) ( 21. 2 ) ( 1 7. 4 ) At 3 1 D ece mber 1 4 7. 0 13 2 . 3 20 T rade a nd other receivabl es Group 20 21 £m 2020 £m Company 20 21 £m 2020 £m T rade rec eivables 6.9 2 7. 5 – – Am ounts owe d by sub sidiarie s – – 1, 8 6 0 .7 1, 6 5 9 . 4 Oth er receivables 3.7 4 .1 15 . 2 0.8 Prepayme nts 24 .7 22.6 23.0 22.0 Accrue d income 26 .4 22.0 – 0 .1 61. 7 76 .2 1, 8 9 8 . 9 1, 6 8 2 . 3 20 21 £m 2020 £m Group t rade re cei vables are s plit as f ollows: less than three months d ue 6.8 1 7. 4 bet we en thre e and six m onths due 0 .1 3.5 bet we en six an d twel ve month s due – 6.6 6.9 2 7. 5 Group tr ade rec eivable s as at 3 1 De cemb er 202 1 are st ated ne t of impairment . The bal ance s have redu ced o ver the ye ar as amounts d eferre d or unc ollec ted in 2020 were rec eive d. As a res ult, the exp ec ted cre dit loss as ses sment un der IFRS 9 (see n ote 3 ) was lower t han in 202 0. Am ounts owe d by subsidiarie s are unsec ured, have n o fixe d date of repay ment and are re payable on dem and. The se bal ance s have be en con sidered a s par t of the f ull expe cte d credit lo ss ass ess ment under IFR S 9 and no impairm ents were d etermine d to be req uired (202 0: £nil). O ther re ceivab les in the C ompany as at 31 Dec ember 2020 includ es a £1 2.3m (2020 : £nil) inter est-f ree loan wi th no fi xed rep ayment date prov ided to a sub sidiar y for the de velopm ent of the re sidential elem ent at 1 9 -35 Baker Str eet W1 . T he loan will be r epaid fro m the sale proc ee ds of thes e reside ntial apar tmen ts af ter the c ompletion of t he sche me. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 232 The G roup has £9.5m of pr ovision fo r bad debt s as shown b elow. £4. 1 m is inc luded in trad e rec eivables , £0.7 m in ac crue d income an d £4 . 7 min prep ayment s and accr ued inc ome wit hin other re ceivab les (non-c urrent) (note 1 9). 20 21 £m 2020 £m Provision for bad debts At 1 Januar y 9.3 0.4 Lease incentive provision (0.2) 5 .7 T rade rec eivables provision 0.8 3.2 Ser vice charge provision 0 .1 0.3 Rele ase d (0.5) (0 .3) At 3 1 D ece mber 9.5 9. 3 Th e provis ion for b ad debt s are split a s follows: less than three months d ue 4.3 3.2 bet we en thre e and six m onths due 0.2 0.5 bet we en six an d twel ve month s due 0. 3 1. 0 gre ater than t welve m onths du e 4 .7 4.6 9.5 9. 3 2 1 Non-c urrent as set s held for sale 20 21 £m 2020 £m T r ansfer red f rom inve stme nt prop er ties (se e note 1 6) 10 1. 2 16 1. 2 T r ansfer red f rom pre paym ents and a ccr ued inc ome 1. 6 3.8 10 2. 8 16 5 . 0 In De cembe r 202 1 , th e Group exchan ged co ntract s for the s ale of its fre ehold inter est in New Ri ver Y ard EC1 . T he prop er t y was valued at £66.5m as at 31 De cemb er 202 1 . In ac cord ance with IFR S 5 Non-c urrent A sset s Held for S ale, this prope r ty w as rec ognise d as a non- curre nt asse t held for s ale and, af ter dedu cting se lling cos ts of £1 .2m, the c arr ying value wa s £65.3m (see n ote 1 6). In July 2020, the Group exchang ed co ntract s on the sale of it s leaseh old interes t in 2 & 4 Soho Pl ace W1 . T he prop er t y was valued at £ 38.3m as at 31 Dec ember 2021 . Th e dispos al is expe cted to c omplete in 2022 and there fore, in acc ordanc e with IFRS 5 No n-curr ent As sets He ld for S ale, this prope r ty wa s reco gnised a s a non-c urrent as set held f or sale. Af ter d educ ting selling c osts of £ 0.8m, the c arr ying v alue at 3 1 De cemb er 202 1 was £ 3 7 .5m (see n ote 1 6). 22 T r ade and oth er payables Group 20 21 £m 2020 £m Company 20 21 £m 2020 £m T rade payables 3.2 2.5 0 .1 0.2 Am ounts owe d to subs idiaries – – 1 ,262.9 1 ,055.3 O ther pay ables 38.0 21. 2 1. 2 0.3 Other taxes 8.0 4.0 1.7 0.8 Ac cruals 3 7. 2 32. 0 1 5 .1 16 . 2 Deferre d income 41. 9 4 7. 0 0 .7 0 .1 12 8 . 3 10 6 . 7 1, 2 81.7 1, 0 7 2 . 9 Def erred in come p rimarily relate s to rents re ceiv ed in advan ce. At 3 1 De cemb er 202 1 , othe r payables inc luded £1 4.8m dis counte d profi t share for th e develop ment at So ho Plac e W1 ( se e note 1 6). 233 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 23 P rov isi ons Group £m Company £m At 1 Januar y 2021 1. 0 1. 0 Prov ide d in the inc ome st atemen t 0.6 0.6 Utilis ed in ye ar (1. 0 ) (1. 0 ) At 3 1 De ce mber 2021 0.6 0 .6 Due wi thin one ye ar 0.3 0.3 Due af te r one ye ar 0.3 0. 3 0.6 0.6 At 1 Januar y 2020 2.4 2.4 Prov ide d in the inc ome st atemen t 0.2 0.2 Utilis ed in ye ar (1. 6 ) (1. 6 ) At 3 1 D ece mber 2020 1. 0 1. 0 Due wi thin one ye ar 0.6 0.6 Due af te r one ye ar 0.4 0.4 1. 0 1. 0 The p rovision s in both the Gr oup and the C ompany re late to national insur ance that is p ayable on gains made by e mployee s on the exerc ise of share opt ions grante d to them. T he even tual liabilit y to national insuran ce is dep enden t on : — the mar ket price of t he Com pany’s shares at t he date of exercis e ; — the numb er of equit y shar e options th at are exercise d; and — the pre vailing rate of national insuran ce at the da te of exercise. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 234 24 Net deb t and derivati ve financial ins trument s Group 20 21 £m 2020 £m Company 20 21 £m 2020 £m Current liabilitie s O ther lo ans 12 . 3 – – – 12 . 3 – – – Non-current liabilities 1 .5% unse cured c onve r tible bon ds 2025 16 8 .3 16 6 . 4 – – 6.5% se cured b onds 2026 18 2 . 4 18 3 . 6 – – 1 .875% unsec ured gr een b onds 2031 34 6.0 – 3 46.0 – 2.68% uns ecure d pri vate plac eme nt notes 2026 54.8 54.8 5 4.8 54.8 3.46% un sec ured pr ivate pl acem ent note s 2028 29.9 2 9.9 29. 9 29.9 4.4 1 % unse cure d priv ate plac ement n otes 2029 24.9 24 . 9 24.9 24 . 9 2.87% unse cure d priv ate plac ement n otes 2029 92.6 92.6 92.6 92.6 2.97% unsec ured p rivate pl ace ment no tes 2031 4 9.8 49. 8 49.8 49.8 3.57% unse cure d priv ate plac emen t notes 20 3 1 74 . 7 74 . 6 74 . 7 74 . 6 3.09% uns ecur ed pri vate pla ceme nt note s 2034 51. 8 51. 8 51. 8 51. 8 4.68% uns ecur ed pri vate pla ceme nt note s 2034 74 . 5 74 . 5 74 . 5 74 . 5 3.99% s ecure d loan 2024 82.5 82.3 82.5 82.3 Unse cure d bank loan s 4 .9 1 2 0 .1 4.9 12 0 .1 Se cure d bank loan – 2 7. 9 – – Intercom pany loan – – 16 8 . 3 16 6 . 4 1 , 2 3 7.1 1, 0 3 3 . 2 1, 0 5 4 . 7 8 2 1.7 Borrowings 1, 2 4 9 . 4 1, 0 3 3 . 2 1, 0 5 4 . 7 8 2 1.7 Lea sehold l iabilitie s – curren t 51. 2 – 1. 2 1. 2 Lea sehold l iabilitie s – non- curren t 19 . 4 66.6 22. 9 2 4 .1 Der ivati ve fin ancial inst rume nts – curr ent 0.4 – 0.4 – Der ivati ve fin ancial inst rume nts – non- curr ent 0.4 5.6 0.4 5.6 Gross debt 1 ,320.8 1 ,10 5 . 4 1,079. 6 8 52.6 Rec onc iliati on to ne t deb t: Gross debt 1 ,320.8 1 ,10 5 . 4 1,079. 6 8 52.6 Derivative f inancia l instruments (0.8) (5.6) (0.8) (5 .6) Cash and cash equivalents (68 .5 ) ( 5 0.7 ) (68 .2) ( 5 0 .1 ) Net debt 1, 2 51.5 1 , 0 4 9 .1 1, 0 10 . 6 796. 9 1 .5% uns ecur ed co nver tibl e bond s 2025 In June 201 9 the Gr oup issue d £1 75m of c onver tible bo nds. T he unse cured inst rument s pay a coup on of 1 .5% until June 2025 or the conv ersion date, i f earlier . Th e initial conve rsion pri ce was set at £ 4 4.96 per s hare. In acc ordanc e with IA S 3 2, the e quit y and debt comp onent s of the bo nds are acc ounted f or separ ately and the f air value of the debt c ompon ent has b een dete rmined using th e market interes t rate for an e quivalent non- conve r tible bond, d eeme d to be 2.3%. A s a result, £1 67 . 3m was reco gnised a s a liabilit y in the balan ce she et on issu e and the rem ainder of the pr oce eds, £7 .7 m, which re prese nts the e quit y comp onent, w as credite d to rese r ves. T he dif fere nce bet we en the fair value of th e liabilit y and the pr incipal value is be ing amor tise d through t he incom e statem ent from t he date of issue . Issue co sts of £ 4.0m were allo cated b et ween e quit y and debt an d the eleme nt relating to th e debt co mponen t is being amor tis ed ove r the life of the b onds. T he issu e cos ts appor ti oned to e quit y of £0.2m have not b een am or tised. T he fair value was de termine d by the ask-pric e of £1 02.00 p er £ 1 00 a s at 3 1 De cemb er 202 1 (2020 : £1 02.90 p er £1 00). The c arr ying value at 31 De cemb er 202 1 was £1 68. 3m ( 2020: £ 1 66.4m). Rec onciliation of n ominal value to car r ying value: £m Nomin al value 17 5 . 0 Fair value adjust ment on i ssue allo cate d to equit y ( 7. 7 ) Debt component on issue 1 6 7. 3 Unamor tise d issue c osts (2. 2) Am or tisati on of fair value a djustmen t 3.2 Car r ying amo unt includ ed in bo rrowings 16 8 . 3 235 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 24 Net deb t and derivati ve financial ins trument s ( continued) 6.5% se cure d bon ds 2026 As a re sult of the ac quisition of Lon don Merch ant Sec urities p lc in 2007 , th e sec ured bo nds 2026 were include d at fair value less unamor tis ed iss ue cos ts. T his dif ferenc e bet wee n fair value at acquisit ion and princ ipal value is being am or tised t hrough the in come sta tement. T he fair value at 31 Dec ember 2021 was determine d by the as k -pr ice of £1 1 7 .60 per £1 00 (2020: £ 1 25.90 per £1 00). The c arr ying value at 31 Dec ember 2021 was £ 1 82.4m ( 2020: £ 1 83.6m). 1 .875% uns ecur ed gr een b onds 2031 In Novemb er 202 1 , the Gro up issue d £350m o f green b onds on a 1 0 -year ter m maturing in 2031 . Th e unsecure d instr ument pay s a coup on of 1 . 87 5% and the ef fec tive inter est rate is 1 .934%. This rep resent s an issue dis count of £1 .8m . The uns ecure d green b onds 2031 are acc ounted f or at amor tise d co st. Th e fair value at 31 Dece mber 2021 was determine d by the ask-pric e of £98.4 5 per £1 0 0. The c arr ying value at 31 Dec ember 2021 was £34 6.0m. Th e £350m g reen b onds will be us ed to f und qualif ying ‘gre en’ expe nditure in acc ordanc e with the Gro up’ s G reen F inance Framew ork. 2.68% un sec ured p riva te pla cem ent no tes 2026, 2.8 7% unse cure d pri vate pl ace ment n otes 2029, 2 .97% unse cure d pri vate pl ace ment not es 2031 and 3.09% u nsec ure d priva te pl acem ent no tes 203 4 In Oc tober 201 8, th e Group arrang ed unse cured p rivate pl aceme nt notes , comprising £ 55m for 7 ye ars, £ 93m for 1 0 year s, £50 m for 1 2 year s and £52m for 1 5 ye ars. T he fund s were drawn on 31 Januar y 20 1 9. The f air values were dete rmined by c ompar ing the disco unted fu ture cash f lows using the c ontrac ted yi elds with tho se of refe rence g ilts plus implied mar gins. Th e referen ces we re a 2% 202 5 gilt, 1 .62 5% 2028 gilt, 4. 75% 2030 gilt and a 4.25% 2 032 gilt all with an implie d margin which is un change d since the da te of fixing . The c arr ying value s at 3 1 D ece mber 2021 were £54.8 m ( 2020: £54. 8m) , £92.6m (20 20: £92.6m) , £4 9.8m (2020 : £ 49.8m) and £5 1 .8m (2020 : £5 1 .8m), respe ctiv ely . 3.4 6% unse cure d pri vate pl ace ment n otes 2028 a nd 3.57% un secu red pr ivat e plac eme nt not es 2031 In Febr uar y 20 1 6, the G roup arrange d unse cured pr ivate plac ement n otes, c omprising £ 30m for 1 2 y ears and £75m for 1 5 year s. Th e funds were drawn on 4 May 201 6. T he fair value s were deter mined by c omparing th e discounte d fut ure cash f lows using the c ontrac ted yie lds with tho se of refere nce gilts p lus implied marg ins. The re ferenc es were a 6 % 20 28 gilt and a 4.75 % 2030 gilt b oth with an implie d margin which is unchang ed since t he date of fi xing. Th e carr y ing values at 31 Dec ember 2021 were £29.9m (202 0: £29.9m) and £7 4 . 7 m (2020 : £7 4.6m) , respe ctively. 4.41 % uns ecur ed pri vate p lac emen t note s 2029 and 4.6 8% unse cure d pri vate pl ace ment n otes 20 34 In Novemb er 201 3, the Gro up arrange d unsec ured pri vate plac ement no tes, co mprising £25m for 1 5 y ears and £75m for 20 ye ars. T he fund s were drawn on 8 Janu ar y 20 1 4 . The fair value s were deter mined by c omparing th e discoun ted fu ture cash f lows using the c ontrac ted yi elds with th ose of ref erenc e gilts plus implied m argins. T he refere nces w ere a 6% 2028 gilt and a 4.2 5% 2032 gilt both wit h an implied marg in which is unch anged sinc e the date of f ixing. T he car r ying values at 31 De cemb er 202 1 were £24.9m (2 020: £2 4.9m) and £7 4.5m (2020 : £7 4.5m) , resp ectiv ely . 3.99% s ecur ed lo an 2024 In July 20 1 2, the G roup arrange d a 1 2¼ -year s ecure d fixe d rate loan. T he loan was drawn on 1 Aug ust 201 2. T he fair value was dete rmined by comp aring the disc ounted f uture c ash flow s using the co ntracte d yield wit h those o f the refere nce gilt plus an implie d margin. T he refer ence was a 5% 2025 gilt with an implied m argin which is unchan ged sinc e the date of f ixing. T he carr ying value at 31 Dec embe r 202 1 was £82.5m (2020 : £ 82.3m ). De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 236 Bank borrowings In 202 1 , t he Group exerc ised th e one-y ear ex tension o ption on b oth the £1 0 0m revo lving cre dit facilit y (“R CF” ) and th e £45 0m RCF , th ereby ex tending the m aturitie s of both fac ilities ou t to 202 6. The m ain corp orate £4 50m R CF includes a £ 300 m ‘green tran che’ to fund qu alif ying ‘gre en’ expen diture in acc ordance wi th the Gro up’ s Gre en Financ e Framework . As all m ain corp orate facilitie s were ref inance d or amen ded re cently, the fair values of t he Group’s bank loans are de emed to b e approxim ately the sam e as their car r ying amount , af ter adjusting for t he unamor tise d arrange ment fe es. During th e year , in preparat ion for the c es sation of LIB OR, the b enchmar k rate of the exis ting bank loans we re transition ed onto a S ONIA basis . Undrawn committed bank facilities – maturit y profile < 1 year £m 1 to 2 years £m 2 to 3 years £m 3 to 4 years £m 4 to 5 years £m > 5 years £m To t a l £m Group At 3 1 De ce mber 2021 – – – – 5 40.0 – 5 4 0.0 At 3 1 D ece mber 2020 – – – – 425 .0 – 425 .0 Company At 3 1 De ce mber 2021 – – – – 5 40.0 – 5 4 0.0 At 3 1 D ece mber 2020 – – – – 425 .0 – 425 .0 Other loans O ther loans c onsist of a £1 2.3m interes t-fre e loan with no f ixe d repaym ent date from a t hird par t y provi ding developm ent cons ultancy ser v ices o n the resid ential eleme nt of the 1 9-35 Baker S tree t W 1 de velopme nt. The lo an will be rep aid from the s ale proc ee ds of thes e resid ential apar tme nts af ter c ompletion of th e schem e. The a gree ment prov ides fo r a profi t share on co mpletion of th e sales which, un der IFRS 9 Finan cial Instrum ents, ha s bee n deeme d to have a c arr ying value of £nil at 31 Dec embe r 20 21 (20 20: £nil). The c arr ying value of th e loan at 31 Dec ember 2021 was £ 1 2.3m (2020 : £nil). Intercompany loans The te rms of the interc ompany lo an in the Comp any mirror tho se of the uns ecure d conv er tible bond s 202 5. A s with the c onver tible bo nds, debt an d equit y co mponen ts of the interc ompany loan h ave bee n acco unted for s eparately, and the fair value of t he debt c ompon ents is identi cal to that of th e bonds . The c arr ying value of t his loan at 3 1 De cemb er 202 1 was £1 6 8.3m (20 20: £1 66.4m). Derivative financial i nstrument s The d erivati ve finan cial instrum ents co nsist of intere st rate swaps , the fair value s of which repre sent th e net pres ent value of th e dif ferenc e bet we en the co ntracte d fixe d rates an d the fi xed rates p ayable if the swap s were to be re place d on 31 Dec ember 2021 for the p eriod to th e co ntrac ted ex pir y date s. During th e year , all interes t rate swaps were t ransitione d from L IBOR basis sw aps to SONIA . The G roup has a £ 40m fo rwar d star ting intere st rate swap ef fe cti ve from 1 7 Januar y 2022, and a £75m for ward star t ing interest rate swap ef fe ctiv e from 4 Januar y 2022. The se swaps ar e not include d in the 31 Dec ember 2021 figure s in the table b elow. The f air values of the Gr oup’ s out standing intere st rate swap s have be en estimate d using the mid-p oint of the y ield cur ves p revailing on the rep or ting date and repre sent th e net pre sent value of th e dif ferenc es b etwe en the c ontrac ted rate and t he valuation rate whe n applied to the proje cted b alanc es for th e perio d from t he repor t ing date to the cont racte d expir y dates . 237 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 24 Net deb t and derivati ve financial ins trument s ( continued) Secured and un secured d ebt Group 20 21 £m 2020 £m Company 20 21 £m 2020 £m Se cure d 6.5% se cured b onds 2026 18 2 . 4 18 3 . 6 – – 3.99% s ecure d loan 2024 82.5 82.3 82.5 82.3 Se cure d bank loan – 2 7. 9 – – 26 4.9 293.8 82.5 82.3 Unse cure d 1 .5% unse cured c onve r tible bon ds 2025 16 8 .3 16 6 . 4 – – 1 .875% unsec ured gr een b onds 2031 34 6.0 – 3 46.0 – Unse cure d priv ate plac ement n otes 2026 – 2034 45 3.0 4 52. 9 45 3.0 4 52. 9 Unse cure d bank loan s 4 .9 1 2 0 .1 4.9 12 0 .1 O ther lo ans 12 . 3 – – – Intercom pany loan – – 16 8 . 3 16 6 . 4 98 4.5 739.4 972. 2 739.4 Borrowings 1, 2 4 9 . 4 1, 0 3 3 . 2 1, 0 5 4 . 7 8 2 1.7 As at 31 Dec embe r 202 1 , th e Group’ s se cure d bonds 2026 were se cure d by a floating c harge over a n umber of the G roup’ s subsidiar y comp anies which c ontaine d £571 .8m (2020 : £61 6 .5m) of the Group’s proper tie s. The G roup’ s se cured b ank loan was set tle d during the ye ar in advan ce of the ac quisition of th e non-c ontroll ing interest f rom The P or tman Est ate, se e note 30. The lo an was previo usly sec ured by a fi xed charg e over £1 05.2m of pr oper t y as at 31 Dec ember 2020. At 3 1 De cemb er 202 1 , the C ompany ’s 3.99% secure d loan 202 4 was se cured b y a fixe d charge ov er £305 .2m ( 2020: £304.5m) of the G roup’ s proper ties. Fixe d inte res t rate a nd he dged de bt At 3 1 De cemb er 202 1 , the Gr oup’ s fixe d rate and he dged d ebt include d the unse cure d conver t ible bonds , the unse cured g reen b onds, th e se cured b onds, a s ecure d loan, the uns ecure d private p lace ment note s and other lo ans. At 31 Dece mber 2020, the Gro up ’s fixe d rate and he dged deb t included t he unse cured c onver tible b onds, th e secur ed bon ds, se cured lo an and the unse cure d private pl acem ent notes . At 3 1 De cemb er 202 1 , the C ompany ’s fixed r ate and hedg ed debt inc luded th e unsec ured gre en bon ds, a se cured lo an, the unse cured pri vate place ment note s and the interc ompany lo ans. At 3 1 D ece mber 2020, the C ompany ’ s f ixed rate and h edge d debt includ ed a se cured loan, th e unsec ured pri vate plac ement no tes and the inter company lo ans. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 238 Inte res t rate e xpo sure Af ter t aking into acc ount the vari ous interes t rate hedging ins trume nts entere d into by the Gro up and the C ompany, the interest r ate exp osure of the G roup’ s and C ompany ’ s b orrowings were: Floa ting rate £m Hedged £m Fixed rate £m Borrowi ngs £m Weig hte d avera ge interest rate 1 % Weig hte d avera ge life Ye a r s Group At 3 1 De ce mber 2021 1 .5% unse cured c onve r tible bon ds 2025 – – 1 68.3 1 68.3 2.30 3.4 6.5% se cured b onds 2026 – – 18 2 . 4 18 2 . 4 6.5 0 4.2 1 .875% unsec ured gr een b onds 2031 – – 3 46.0 346 .0 1. 9 3 9. 9 Unse cure d priv ate plac ement n otes 2026 – 2034 – – 45 3.0 45 3.0 3. 42 8 .7 3.99% s ecure d loan 2024 – – 82. 5 82 .5 3.99 2.8 Unse cure d bank loan s 4.9 – – 4.9 1. 2 5 4.8 O ther lo ans 2 – – 12 . 3 12 . 3 – – 4.9 – 1, 2 4 4 . 5 1, 2 4 9 . 4 3 .27 7. 2 At 3 1 D ece mber 2020 1 .5% unse cured c onve r tible bon ds 2025 – – 16 6 . 4 16 6 . 4 2.30 4 .5 6.5% se cured b onds 2026 – – 18 3 . 6 18 3 . 6 6.5 0 5.2 Unse cure d priv ate plac ement n otes 2026 – 2034 – – 4 52. 9 4 52. 9 3 .42 9 .7 3.99% s ecure d loan 2024 – – 82. 3 82. 3 3.99 3.8 Unse cure d bank loan s 12 0 .1 – – 12 0 .1 1 .11 4.8 Se cure d bank loan 2 7. 9 – – 2 7. 9 1. 8 4 1. 6 14 8 . 0 – 885 .2 1, 0 3 3 . 2 3.4 8 6.8 Company At 3 1 De ce mber 2021 1 .875% unsec ured gr een b onds 2031 – – 3 46.0 346 .0 1. 9 3 9. 9 Unse cure d priv ate plac ement n otes 2026 – 2034 – – 45 3.0 45 3.0 3. 42 8 .7 3.99% s ecure d loan 2024 – – 82. 5 82 .5 3.99 2.8 Unse cure d bank loan s 4.9 – – 4.9 1. 2 5 4.8 Intercom pany loan – – 1 68.3 1 68.3 2.30 3.4 4.9 – 1, 0 4 9 . 8 1, 0 5 4 . 7 2.7 8 7. 7 At 3 1 D ece mber 2020 Unse cure d priv ate plac ement n otes 2026 – 2034 – – 4 52. 9 4 52. 9 3 .42 9 .7 3.99% s ecure d loan 2024 – – 82. 3 82. 3 3.99 3.8 Unse cure d bank loan s 12 0 .1 – – 12 0 .1 1 .11 4.8 Intercom pany loan – – 16 6 . 4 16 6 . 4 2.30 4.4 12 0 .1 – 7 0 1. 6 8 2 1.7 2.9 0 7. 3 1 Th e weig hted a vera ge int eres t rate s are b ase d on th e nomi nal amo unt s of the d ebt f acili ties . 2 O ther l oans s hown a bov e are int eres t fr ee an d have n o fix ed re pay ment d ate. F or fur t her d etai l, se e oth er loa ns se cti on abo ve. 239 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 24 Net deb t and derivati ve financial ins trument s ( continued) Contractual undiscounted ca sh outflows IFRS 7 Finan cial Instrum ents: Disclo sure, require s disclosure of t he maturit y of th e Group’ s and C ompany ’s remaining contr actual f inancial liabilities . The t ables be low show the c ontrac tual undisc ounted c ash out f lows arising fro m the Group’s gross de bt. < 1 year £m 1 to 2 years £m 2 to 3 years £m 3 to 4 years £m 4 to 5 years £m > 5 years £m To t a l £m Group At 3 1 De ce mber 2021 1 .5% unse cured c onve r tible bon ds 2025 – – – 17 5 . 0 – – 17 5 . 0 6.5% se cured b onds 2026 – – – – 17 5 . 0 – 17 5 . 0 1 .875% unsec ured gr een b onds 2031 – – – – – 35 0.0 350.0 Unse cure d priv ate plac ement n otes 2026 – 2034 – – – – 55.0 4 00.0 45 5.0 3.99% s ecure d loan 2024 – – 83.0 – – – 8 3.0 Unse cure d bank loan s – – – – 1 0.0 – 1 0.0 O ther lo ans – – – 12 . 3 – – 12 . 3 T o tal on mat urit y – – 83.0 1 8 7. 3 240.0 750.0 1, 2 6 0 . 3 Lease hold liabilities 52 .2 0. 8 0.8 0.8 0. 8 19 3 . 7 2 4 9 .1 Interest on borrowings 39.5 39.6 39.6 34.9 2 7. 2 10 0 . 9 2 8 1.7 Ef fec t of intere st rate swa ps 0.8 – – – – – 0.8 Gross loan commitments 92.5 4 0.4 12 3 . 4 223.0 26 8.0 1,0 4 4 . 6 1,7 91. 9 At 3 1 D ece mber 2020 1 .5% unse cured c onve r tible bon ds 2025 – – – – 17 5 . 0 – 17 5 . 0 6.5% se cured b onds 2026 – – – – – 17 5 . 0 17 5 . 0 Unse cure d priv ate plac ement n otes 2026 – 2034 – – – – – 45 5.0 4 55.0 3.99% s ecure d loan 2024 – – – 83.0 – – 8 3.0 Unse cure d bank loan s – – – – 12 5 . 0 – 12 5 . 0 Se cure d bank loan – 28.0 – – – – 28.0 T o tal on mat urit y – 28.0 – 8 3.0 30 0.0 630.0 1 , 0 41 . 0 Lease hold liabilities 0.7 52 .2 0.7 0.7 0.7 1 80.0 235.0 Interest on borrowings 3 4.6 34.6 34.3 34.5 29.6 8 8.6 256 .2 Ef fec t of intere st rate swa ps 1. 6 1. 8 0.9 0.9 0.4 – 5 .6 Gross loan commitments 36 .9 11 6 . 6 35 .9 11 9 .1 3 30 .7 89 8.6 1 , 5 3 7. 8 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 24 0 Reconciliation t o borrowings : Adjustments Gross loan commitments £m Interest on gross debt £m Ef fe ct o f interest rate swaps £m Leasehold liabilities £m Non-cash amortis ation £m Borrowi ngs £m Group At 3 1 De ce mber 2021 Matur ing in: < 1 year 92.5 (39.5) (0. 8) (52. 2) – – 1 to 2 year s 40.4 (39 .6) – (0. 8) – – 2 to 3 year s 12 3 . 4 (39.6) – (0 .8) (0.5) 82. 5 3 to 4 year s 223.0 (3 4. 9) – (0. 8) (6. 7) 18 0 . 6 4 to 5 year s 268.0 ( 2 7. 2 ) – (0. 8) 2 .1 2 4 2 .1 > 5 year s 1, 0 4 4 . 6 (10 0 . 9 ) – ( 1 93.7) (5.8) 74 4 . 2 1,7 9 1.9 ( 28 1.7 ) (0.8) (249. 1) (10 .9 ) 1, 2 4 9 . 4 At 3 1 D ece mber 2020 Matur ing in: < 1 year 36.9 (34 .6) ( 1. 6) ( 0.7 ) – – 1 to 2 year s 116 . 6 (3 4.6 ) (1. 8 ) (52 .2 ) ( 0 .1) 2 7. 9 2 to 3 year s 35.9 (34.3) (0. 9) (0 .7 ) – – 3 to 4 year s 11 9 .1 (34 .5 ) (0. 9) (0 .7 ) (0 .7 ) 82 .3 4 to 5 year s 3 3 0.7 (29 .6) (0. 4) (0 .7) (4. 8) 295.2 > 5 year s 898 .6 (88 .6) – (1 80.0) (2.2) 6 2 7. 8 1 , 5 3 7. 8 (25 6.2 ) (5.6) (235 .0) ( 7. 8 ) 1, 0 3 3 . 2 < 1 year £m 1 to 2 years £m 2 to 3 years £m 3 to 4 years £m 4 to 5 years £m > 5 years £m To t a l £m Company At 3 1 De ce mber 2021 1 .875% unsec ured gr een b onds 2031 – – – – – 35 0.0 350.0 Unse cure d priv ate plac ement n otes 2026 – 2034 – – – – 55.0 4 00.0 45 5.0 3.99% s ecure d loan 2024 – – 83.0 – – – 8 3.0 Unse cure d bank loan s – – – – 1 0.0 – 1 0.0 Intercom pany loan – – – 175 . 0 – – 17 5 . 0 T o tal on mat urit y – – 83.0 17 5 . 0 65 .0 750.0 1, 0 7 3 . 0 Lea sehold l iabilit y 2 .1 2 .1 2 .1 2 .1 2 .1 21. 0 3 1. 5 Intere st on de bt 28.2 28 .2 28.2 23 .6 2 1. 5 10 0 . 9 23 0.6 Ef fec t of intere st rate swa ps 0.8 – – – – – 0.8 Gross loan commitments 3 1 .1 30.3 11 3 . 3 20 0.7 8 8.6 871 .9 1 ,335.9 At 3 1 D ece mber 2020 Unse cure d priv ate plac ement n otes 2026 – 2034 – – – – – 45 5.0 4 55.0 3.99% s ecure d loan 2024 – – – 83.0 – – 8 3.0 Unse cure d bank loan s – – – – 12 5 . 0 – 12 5 . 0 Intercom pany loan – – – – 17 5 . 0 – 175 . 0 T o tal on mat urit y – – – 83.0 3 00.0 45 5.0 838 .0 Lea sehold l iabilit y 2 .1 2 .1 2 .1 2 .1 2 .1 23.0 33.5 Intere st on de bt 22.8 22 .9 23.0 2 3 .1 1 8.3 82. 9 19 3 . 0 Ef fec t of intere st rate swa ps 1. 6 1. 8 0.9 0.9 0.4 – 5 .6 Gross loan commitments 26 .5 26.8 26 .0 1 0 9 .1 320 .8 56 0.9 1 , 0 7 0 .1 24 1 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 24 Net deb t and derivati ve financial ins trument s ( continued) Reconciliation t o borrowings : Adjustments Gross loan commitments £m Interest on gross debt £m Ef fe ct o f interest rate swaps £m Leasehold liabilities £m Non-cash amortis ation £m Borrowi ngs £m Company At 3 1 De ce mber 2021 Matur ing in: < 1 year 3 1 .1 (2 8.2) (0 .8) ( 2 .1 ) – – 1 to 2 year s 30.3 (28 .2) – ( 2 .1 ) – – 2 to 3 year s 113 . 3 (28 .2) – ( 2 .1) (0.5) 82 .5 3 to 4 year s 2 0 0.7 (23 .6) – ( 2 .1 ) (6. 7) 1 68.3 4 to 5 year s 88 .6 ( 2 1. 5 ) – ( 2 .1 ) (5 .3) 5 9.7 > 5 year s 8 71. 9 (10 0 . 9 ) – ( 21. 0 ) (5.8 ) 74 4 . 2 1 ,335.9 (2 30.6) (0 .8) ( 31. 5 ) (18 . 3 ) 1, 0 5 4 .7 At 3 1 D ece mber 2020 Matur ing in: < 1 year 26.5 (22 .8) (1. 6 ) ( 2 .1 ) – – 1 to 2 year s 26. 8 (22 .9) (1. 8 ) ( 2 .1 ) – – 2 to 3 year s 26 .0 (23. 0) (0.9) ( 2 .1) – – 3 to 4 year s 1 0 9 .1 ( 2 3 .1 ) (0 .9) ( 2 .1 ) (0 .7) 82. 3 4 to 5 year s 320 .8 ( 1 8.3 ) (0. 4) ( 2 .1 ) (4 . 8) 295.2 > 5 year s 560.9 (82. 9) – (23.0) (10 . 8 ) 444. 2 1 , 0 7 0 .1 (19 3 . 0 ) (5.6) (3 3.5 ) ( 1 6.3) 8 21. 7 Derivative financi al instruments cash flows The f ollowing table pr ovide s an analysis of the anti cipated c ontrac tual cash f lows for t he deri vative f inancial instr uments using undisc ountedc ash flows . The se amount s repres ent the gr oss c ash flows of t he deri vative f inancial instr uments an d are set tled a s eith eranetpay ment or re ceipt . 20 21 Receivable £m 20 21 Payable £m 2020 Receivable £m 2020 Payab le £m Group Matur ing in: < 1 year 0.7 ( 1.5 ) – (1. 6 ) 1 to 2 year s 1. 0 (1. 0 ) – (1. 8 ) 2 to 3 year s 1. 0 (1. 0 ) 0 .1 (1. 0 ) 3 to 4 year s 0.5 (0.5) 0 .1 (1. 0 ) 4 to 5 year s – – 0 .1 (0.5) > 5 year s – – – – Gross c ontractual cash flows 3.2 (4.0) 0.3 (5 .9) Company Matur ing in: < 1 year 0.7 ( 1.5 ) – (1. 6 ) 1 to 2 year s 1. 0 (1. 0 ) – (1. 8 ) 2 to 3 year s 1. 0 (1. 0 ) 0 .1 (1. 0 ) 3 to 4 year s 0.5 (0.5) 0 .1 (1. 0 ) 4 to 5 year s – – 0 .1 (0.5) > 5 year s – – – – Gross c ontractual cash flows 3.2 (4.0) 0.3 (5 .9) De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 24 2 Financial instruments – risk manage ment The G roup is expo sed t hrough it s operati ons to the fol lowing financial r isks: — credit ris k; — market ris k; and — liqui dit y ris k. In comm on with all oth er busines ses , the Group is ex pos ed to risks t hat arise f rom its us e of financial ins trumen ts. Th e following de scribe s the Gro up’ s o bjecti ves, p olicie s and proc ess es for m anaging tho se risks an d the meth ods use d to meas ure them. Fur the r quantitat ive inform ation in resp ect of t hese r isks is pres ented thr oughou t thes e financial s tatemen ts. Fur ther inf ormation on r isk as require d by IFRS 7 is give n on page s 1 0 0 to 1 1 9. The re have be en no subs tanti ve change s in the Group’s exposure to f inancial ins trument r isks, it s objecti ves, p olicie s and proc ess es for manag ing those r isks or the m ethod s used to m easure the m from pre vious ye ars. T he Group’s loan-to-value r atio has incre ased to 20.8% as at 31 Dec ember 2021 but remains mo des t. Principal financial instruments The p rincipal f inancial instr uments us ed by th e Group, from whic h financ ial instrume nt risk arise s, are trad e rece ivables , accr ued inc ome arising fr om the spre ading of lease inc entive s, c ash at bank , trade and oth er payable s, flo ating rate bank loans , fixe d rate loans and pr ivate plac ement n otes, s ecure d and unse cured b onds and inter est rate swap s. Gen eral o bjec tive s, po licies a nd pro ces ses The B oard has o verall res ponsibilit y fo r the deter mination of the Gro up’ s r isk manage ment objec tive s and pol icies and, whils t retaining ultimate resp onsibilit y for th em, it has d elegated the au thori ty to exe cuti ve manage ment for d esigning and op erating pro ce sses t hat ensure th e ef fec tive imple mentati on of the objec tive s and poli cies. The o verall objec tive of t he Boar d is to set pol icies that s eek to re duce ris k as far as po ssible with out unduly af fe cting th e Group’ s f lexibilit y and it s abilit y to max imise return s. Fur ther det ails regarding the se po licies are se t out be low: Credit risk Cre dit risk is the ris k of financial lo ss to the Gro up if a custom er or co unterpar t y to a f inancial instr ument fails to m eet it s contra ctual obligation s. The G roup is mainly expo sed to c redit ris k from leas e contr acts in rel ation to its p roper t y p or tf olio. It is Gro up polic y to asse ss the cre dit risk of n ew tenants b efore enter ing into such c ontract s. Th e Board ha s a Credit C ommit tee whic h asse sse s each new te nant bef ore a new leas e is signed . The rev iew include s the late st set s of financial s tatemen ts, ex tern al ratings when available an d, in some cas es, f orec ast inform ation and bank o r trade ref erenc es. Th e cove nant stren gt h of each tenan t is determine d base d on this rev iew and, if approp riate, a depo sit or a guar antee is obt ained. T he Commi tte e also re views exis ting tenant co venants f rom time to time. The imp act of C ovid- 1 9 has gi ven rise to high er estima ted prob abilities of def ault for some o f the Group’s occupie rs thoug h the es timated risk is c onsidere d lower than in 2020. Impairmen t calculatio ns have be en car ried ou t on trade re cei vables and ac cru ed inco me arising as a result of th e spreading of lea se incen tives us ing the for ward-loo king, simpl ifie d approac h to the exp ecte d credi t loss mo del within IFRS 9. In additio n, the Cre dit Commi tte e has rev iewed it s register of te nants at highe r risk, p ar ticularly in th e retail or ho spitali ty s ec tors, th ose in administratio n or CVA and the top 69 ten ants by size with the re maining occ upiers co nsidere d on a sec tor by se ctor b asis. As th e Group op erates pre dominantly in c entral Lon don, it is subjec t to some g eograp hical risk . Howev er , this is mitigate d by the wide r ange of tenants f rom a bro ad spe ctrum of b usines s sec tors. Cre dit risk also ar ises fr om cash an d cash e quivalents an d depo sits with b anks and f inancial instit utions . For banks an d financial instit utions , only indepe ndently rate d par tie s with a minimum rating of inves tment gra de are acc epted. T his risk is also r educ ed by the shor t p eriod s that mone y is on depo sit at any one tim e. The c arr ying am ount of finan cial ass ets rec orde d in the finan cial statem ents rep resent s the Group’s ma ximum expo sure to credi t risk witho ut taking a cco unt of the value of any c ollateral ob tained. Market risk Market risk is t he risk that t he fair value or f uture ca sh flows of a f inancial instr ument will f luctuate due to c hanges in mar ket price s. Market risk aris es for th e Group fro m its use of var iable interest b earing ins trumen ts (interes t rate risk). The G roup monitor s its intere st rate exp osure on at lea st a quar terly b asis. Se nsitiv it y analysis pe rf orme d to asce r tain the impac t on prof it or los s and net as sets of a 5 0 basis po int shif t in interest r ates would re sult in an increase of £ 0. 1 m (2020 : £0.8m) or a d ecre ase of £0. 1 m (2020: £ 0.7 m). 24 3 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 24 Net deb t and derivati ve financial ins trument s ( continued) It is curr ently Group p olicy tha t generally b etw een 60 % and 85% of ex ternal Gro up borrowings (excluding f inance leas e payables) are at fi xed rates . Where th e Group wishe s to var y the amo unt of ex ternal f ixed rate de bt it holds (subjec t to it being gen erally be twe en 60% and 85% of expe cte d Group bo rrowings, as no ted abov e) , t he Group make s use of interes t rate deri vatives to a chieve the d esired inter est rate prof ile. Although t he Boar d acce pts that this p olicy n either p rotect s the Group e ntirely fro m the risk of pay ing rates in exce ss of curr ent market rate s nor eliminates f ully the c ash flow r isk asso ciated wit h variabilit y in interes t payme nts, it c onsider s that it achie ves an approp riate balanc e of exp osure to the se risks . At 3 1 De cemb er 202 1 , t he prop or tion of fi xed deb t held by the G roup was abov e this range at99% (2020 : 85%) following the g reen b ond issu e in Novembe r 202 1 which has a f ixed inter est rate. I t was initially used to r epay amount s drawn under t he Group’s revolving cre dit facili ties, whic h have a float ing interest rate . During bot h 202 1 an d 2020 , th e Group’ s bo rrowings at variable rate wer e denominate d in sterling. The G roup manage s its c ash flow inter est rate risk b y using floating- to-f ixed intere st rate swaps . When th e Group raise s long-term bor rowings, it is gen erally at fi xed rates . Liquidi ty ris k Liquidit y risk ar ises f rom the Gro up’ s m anageme nt of working c apit al and the f inance char ges and pr incipal rep ayment s on its deb t instr uments . It is the risk t hat the Group will en counter dif f icult y in me eting its f inancial obligatio ns as they f all due. The G roup’ s pol icy is to ensure t hat it will always have suf f icient he adroom in it s loan facilit ies to allow it to me et its liabilit ies when th ey be come du e. T o achie ve this aim, it se eks to maint ain commit ted f acilities to me et the ex pec ted re quirement s. The G roup also s eeks to redu ce liquidit y risk by f ixing inter est rate s ( and h ence c ash flow s ) on a p or tion of it s long-term b orrowings. T his is fur the r explaine d in the ‘market risk ’ se ction ab ove. E xecut ive mana gement re cei ves rolling t hree- year proje ctions of c ash f low and loan balan ces o n a regular b asis as par t of th e Group’ s fore cas ting proc ess es. At the b alanc e sheet d ate, thes e project ions indicate d that the G roup expe cte d to have suf f icient liquid re sourc es to me et its obligati ons under all re asonab ly expe cted c ircumstan ces . The G roup’ s loan fac ilities and ot her bor rowings are spre ad acros s a range of bank s and financ ial institu tions so as to minimise any poten tial conc entratio n of risk. T he liquidit y risk of th e Group is mana ged ce ntrally by the f inanc e depar tm ent. Capit al disclosures The G roup’ s capi tal com prises al l compo nents of e quit y (share capit al, share pre mium, other re ser ve s, retain ed earnings an d non- controlling interest). The G roup’ s objec tive s when maintaining c apital are: — to safe guard the en tit y’s abilit y to cont inue as a going con cern s o that it c an continue to p rovide ab ove avera ge long-ter m returns fo r shareh olders; and — to prov ide an above av erage annualis ed total r eturn to share holders . The G roup sets t he amount of c apital i t requires in pro por tion to ris k. Th e Group mana ges its c apital s truc ture and makes a dj us tments to i t in light of chang es in ec onomic c onditions an d the risk ch aracter istics of t he under lying ass ets. In ord er to maintain or adjust the c apital str ucture , the Group may var y t he amount of div idends p aid to shareho lders subjec t to the r ules impos ed by it s REIT stat us. It may als o se ek to rede em bon ds, retur n capit al to sharehold ers, is sue new shar es or sel l asset s to reduc e debt. C onsis tent with oth ers in its indus tr y , the Gro up monitors c apit al on the basis of N A V gear ing and loan-to -value ratio. D uring 202 1 , th e Group’ s s trateg y , which wa s unchange d from 2020, was to maint ain the NAV gearing below 8 0% in normal circ umstan ces . Thes e two g earing ratio s, as well as t he net intere st cov er ratio, are def ine d in the list of def initions on p ages 27 4 and are d erive d in note 42. The G roup is also re quired to ensur e that it has su f ficient p roper t y as sets w hich are not subjec t to fi xed or f loating charge s or other encumb rance s. Mos t of the Group’s debt is unse cured an d, acc ordingly , the re was £4. 8bn (202 0: £4 .3bn) of uncharge d prope r t y as at 3 1 Decembe r 20 21 . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 24 4 25 Financial as set s and liabilities and f air values Ca tegori es of f inanc ial as set s and li abilit ies Fair value through profit and loss £m Financial as se ts he ld at amor tised cost £m Financial liabilities held at amor tised cost £m To t a l carr y ing value £m Group Financial assets Cash and cash equivalents – 68.5 – 6 8.5 O ther as set s – curren t 1 – 1 3 .1 – 1 3 .1 – 81. 6 – 81. 6 Financial liabilities 1 .5% unse cured c onve r tible bon ds 2025 – – ( 1 68.3) ( 1 68.3) 6.5% se cured b onds 2026 – – (18 2 . 4 ) (18 2 . 4 ) 1 .875% unsec ured gr een b onds 2031 – – (3 4 6.0 ) (3 46 .0) Unse cure d priv ate plac ement n otes 2026 – 2034 – – (4 5 3.0 ) (4 5 3.0 ) 3.99% s ecure d loan 2024 – – (82 .5) (82 .5) Bank b orrow ings due af ter on e year – – (4 .9) (4 .9 ) O ther lo ans – – ( 12 . 3 ) ( 12 . 3 ) Lease hold liabilities – – ( 70.6) ( 70 .6) Derivative f inancia l instruments (0. 8) – – (0. 8) O ther liabili ties – c urrent 2 – – (78 .4) ( 78.4) (0. 8) – (1 ,398.4 ) (1 ,39 9.2) At 3 1 De ce mber 2021 (0.8) 8 1.6 (1, 3 9 8 . 4 ) ( 1 , 3 1 7. 6 ) Financial assets Cash and cash equivalents – 5 0.7 – 5 0.7 O ther as set s – curren t 1 – 3 4.0 – 34.0 – 8 4 .7 – 8 4 .7 Financial liabilities 1 .5% unse cured c onve r tible bon ds 2025 – – ( 16 6 . 4 ) ( 16 6 . 4 ) 6.5% se cured b onds 2026 – – (18 3 . 6 ) ( 18 3 . 6 ) Unse cure d priv ate plac ement n otes 2026 – 2034 – – (452 .9 ) (4 52 .9) 3.99% s ecure d loan 2024 – – (82 .3) (82 .3) Bank b orrow ings due af ter on e year – – (14 8 . 0 ) (14 8 . 0 ) Lease hold liabilities – – (66 .6) (6 6.6) Derivative f inancia l instruments (5. 6) – – (5 .6) O ther liabili ties – c urrent 2 – – (55. 7) (55. 7) (5. 6) – (1 ,1 5 5 . 5 ) ( 1, 16 1. 1) At 3 1 D ece mber 2020 (5 .6) 8 4 .7 ( 1,1 5 5 . 5 ) (1, 0 7 6 . 4 ) 1 In 2021 , ot her a sse ts inc lude s all am ount s sho wn as tr ade an d oth er re cei vabl es in no te 20 exc ept le ase in ce ntiv es an d cos ts; s ales an d so cial s ecu rit y ta xe s; and p repa yme nts of £ 48.6 m (2020: £ 4 2.2 m) for th e Gro up. Al l amou nts ar e non- inter est b ear ing an d are re cei vab le with in one y ear. 2 In 2021 , ot her li abili ties i nclu de all am oun ts sho wn as tr ade an d oth er pay able s in note 2 2 exce pt def err ed in com e and s ales an d so cial s ecu rit y ta xe s of £4 9.9m (2 020: £51 . 0m) for t he Gr oup. A ll amo unts a re non -inte res t be aring a nd are du e wit hin one y ear. 24 5 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 25 Financial as set s and liabilities and f air values ( continued) Fair value through profit and loss £m Financial as se ts he ld at amor tised cost £m Financial liabilities held at amor tised cost £m To t a l carr y ing value £m Company Financial assets Cash and cash equivalents – 68.2 – 6 8.2 O ther as set s – curren t 1 – 1, 8 7 5 . 9 – 1, 8 7 5 . 9 – 1 , 9 4 4 .1 – 1 , 9 4 4 .1 Financial liabilities 1 .875% unsec ured gr een b onds 2031 – – (3 4 6.0 ) (3 46 .0) Unse cure d priv ate plac ement n otes 2026 – 2034 – – (4 5 3.0 ) (4 5 3.0 ) 3.99% s ecure d loan 2024 – – (82 .5) (82 .5) Bank b orrow ings due af ter on e year – – (4 .9) (4 .9 ) Intercom pany loan – – (1 68.3) ( 1 68.3) Lease hold liabilities – – ( 2 4 .1) ( 2 4 .1) Derivative f inancia l instruments (0 .8) – – (0. 8) O ther liabili ties – c urrent 2 – (1, 2 6 2 . 9 ) ( 16 . 4 ) (1, 2 7 9 . 3 ) (0. 8) (1, 2 6 2 . 9 ) (1, 0 9 5 . 2 ) (2 ,358.9) At 3 1 De ce mber 2021 (0.8) 6 81. 2 (1 ,095.2) ( 414 . 8 ) Financial assets Cash and cash equivalents – 5 0 .1 – 5 0 .1 O ther as set s – curren t 1 – 1, 6 6 0 . 3 – 1, 6 6 0 . 3 – 1, 710 . 4 – 1, 710 . 4 Financial liabilities Unse cure d priv ate plac ement n otes 2026 – 2034 – – (452 .9 ) (4 52 .9) 3.99% s ecure d loan 2024 – – (82 .3) (82 .3) Bank b orrow ings due af ter on e year – – ( 12 0 .1 ) ( 12 0 .1) Intercom pany loan – – (16 6 . 4 ) ( 16 6 . 4 ) Lease hold liabilities – – (25 .3) (25 .3) Derivative f inancia l instruments (5 .6) – – (5. 6) O ther liabili ties – c urrent 2 – (1 ,055.3 ) ( 1 6.7) ( 1, 07 2 . 0 ) (5. 6) ( 1 ,055.3 ) (8 6 3.7 ) (1, 9 24 . 6 ) At 3 1 D ece mber 2020 (5 .6) 6 5 5 .1 (8 6 3.7 ) ( 214 . 2 ) 1 In 2021 , ot her a sse ts inc lude s all am ount s sho wn as tr ade an d oth er re cei vabl es in no te 20 exc ept le ase in ce ntiv es an d cos ts; s ales an d so cial s ecu rit y ta xe s; and p repa yme nts of £23. 0m (2020: £22. 0m) fo r the C omp any. All am ount s are n on-in tere st be arin g and ar e rec eiv able wi thin o ne ye ar . 2 In 2021 , ot her li abili ties i nclu de all am oun ts sho wn as tr ade an d oth er pay able s in note 2 2 exce pt def err ed in com e and s ales an d so cial s ecu rit y ta xe s of £2.4 m (2020: £0.9 m) for the C om pany. Al l amou nts ar e non- inter est b ear ing an d are due w ithin o ne ye ar . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 24 6 Rec oncil iatio n of net f inan cial a sse ts an d liabili ties to g ros s debt: Group 20 21 £m 2020 £m Company 20 21 £m 2020 £m Net f inancial a sset s and liabili ties ( 1 , 3 1 7. 6 ) (1, 0 7 6 . 4 ) ( 414 . 8 ) ( 2 14 . 2 ) O ther as set s – curren t ( 1 3 .1 ) (3 4.0 ) ( 1,875.9) (1, 6 6 0 . 3 ) O ther liabili ties – c urrent 78 .4 55 .7 1,279.3 1, 0 7 2 . 0 Cash and cash equivalents (6 8. 5) (5 0 .7) (6 8. 2) ( 5 0 .1) Gross debt ( 1 ,320.8) ( 1,1 0 5 . 4 ) ( 1,079.6) ( 852 .6) Fair value measurement The t able below s hows the fair value s, wher e applicab le, of borr owings and deri vative f inancial instr uments h eld by the Gro up, together wi th a rec onciliation to n et finan cial asse ts and liabilitie s. Det ails of inputs an d valuation met hods use d to deri ve the fair value s are shown in n o te 24 . Group C ompany Carr ying value £m Fair value £m Carr ying value £m Fair value £m Fair value hierarchy At 3 1 De ce mber 2021 1 .5% unse cured c onve r tible bon ds 2025 ( 1 6 8.3 ) ( 174 . 0 ) – – L evel 1 6.5% se cured b onds 2026 (18 2 . 4 ) (205. 7) – – Leve l 1 1 .875% unsec ured gr een b onds 2031 (3 46 .0) (3 4 4. 6) (3 4 6.0) (34 4 .6) L evel 1 Unse cure d priv ate plac ement n otes 2026 – 2034 (4 5 3 .0) ( 4 9 3 .1 ) (4 5 3. 0) ( 4 9 3 .1 ) Leve l 2 3.99% s ecure d loan 2024 (82.5 ) (85 .6) (82 .5) (8 5.6) Le vel 2 Bank b orrow ings due af ter on e year (4. 9) (1 0.0) (4 .9) (1 0.0) Le vel 2 O ther lo ans ( 12 . 3 ) (12 . 3 ) – – Le vel 2 Intercom pany loan – – ( 1 6 8.3 ) ( 174 . 0 ) Lev el 2 Derivative f inancia l instruments (0. 8) (0.8) (0. 8) (0.8) Le vel 2 ( 1 ,250.2) (1 ,32 6. 1 ) (1 ,055.5) ( 1,1 0 8 .1) Am ounts no t fair value d: Cash and cash equivalents 68.5 68 .2 O ther as set s – curren t 1 3 .1 1, 8 7 5 . 9 Lease hold liabilities ( 70.6) ( 2 4 .1 ) O ther liabili ties – c urrent ( 78.4) (1, 2 7 9 . 3 ) Net f inancial a sset s and liabili ties ( 1 , 3 1 7. 6 ) ( 414 . 8 ) At 3 1 D ece mber 2020 1 .5% unse cured c onve r tible bon ds 2025 (16 6 . 4 ) ( 174 . 2 ) – – L evel 1 6.5% se cured b onds 2026 (18 3 . 6 ) (2 20. 3) – – Lev el 1 Unse cure d priv ate plac ement n otes 2026 – 2034 (45 2. 9) (52 6. 4) (4 52. 9) (52 6. 4) Leve l 2 3.99% s ecure d loan 2024 (82 .3) ( 8 9 .1 ) (82. 3) ( 8 9 .1 ) Lev el 2 Bank b orrow ings due af ter on e year (14 8 . 0 ) (15 3 . 0 ) ( 12 0 .1 ) ( 12 5 . 0 ) Le vel 2 Intercom pany loan – – (16 6 . 4 ) ( 174 . 2 ) Le vel 2 Derivative f inancia l instruments (5. 6) (5.6) (5 .6) (5.6) Le vel 2 (1, 0 3 8 . 8 ) (1,16 8 . 6 ) ( 8 2 7. 3 ) (920 .3) Am ounts no t fair value d: Cash and cash equivalents 5 0 .7 5 0 .1 O ther as set s – curren t 34.0 1, 6 6 0 . 3 Lease hold liabilities (66 .6) (2 5. 3) O ther liabili ties – c urrent (55. 7) ( 1, 07 2 . 0 ) Net f inancial a sset s and liabili ties (1, 0 76 . 4 ) (2 14 . 2 ) The f air values of the f ollowing finan cial asse ts and liabilitie s are the sam e as their car r ying value s: — Cash and cash e quival ents. — T rad e rece ivables , other re cei vables and ac crue d incom e include d within trade an d other re ceiv ables. — T rad e payables , other pay ables and ac cruals in cluded wi thin trade and ot her payable s. — Leasehol d li abi lities. The re have be en no trans fers b et ween Le vel 1 and Lev el 2 or Leve l 2 and Leve l 3 in either 2021 or 202 0. 24 7 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 26 Net debt to c ash flow r econciliatio n Net debt reconciliation The t able below s hows net de bt movem ent during the y ear as a result of c ash f lows and other n on-c ash move ments . Non-cash changes 2020 £m Cash flows £m Imp ac t of is sue a nd arrangemen t costs £m Fair value adjus tment s £m Acquisitions £m Unwind of disco unt £m Dispos als £m T ransfer from non-current to cu rrent £m 20 21 £m Group Current liabilitie s Borrowings – 12 . 3 – – – – – – 12 . 3 Lease hold liabilities – – – – – – – 51. 2 51. 2 Non-current liabilities Borrowings 1, 0 3 3 . 2 200.2 3.8 – – ( 0 .1 ) – – 1 , 2 3 7. 1 Lease hold liabilities 6 6.6 – – – 2.5 1.7 (0.2) ( 51. 2 ) 19 . 4 T o tal liabili ties fr om financing activ ities 1, 0 9 9 . 8 2 12 . 5 3.8 – 2.5 1. 6 (0.2) – 1,32 0.0 Cash and cash equivalents ( 50 .7 ) ( 1 7. 8 ) – – – – – – (68 .5 ) Net debt 1 , 0 4 9 .1 19 4 . 7 3.8 – 2.5 1. 6 (0.2) – 1, 2 51. 5 Company Current liabilitie s Lease hold liabilities 1. 2 – – – – – – – 1. 2 Non-current liabilities Borrowings 82 1.7 228 .2 3.5 1. 3 – – – – 1, 0 5 4 . 7 Lease hold liabilities 2 4 .1 – – – – (1. 2 ) – – 22.9 T o tal liabili ties fr om financing activ ities 8 4 7. 0 228.2 3.5 1. 3 – (1. 2 ) – – 1, 07 8 . 8 Cash and cash equivalents ( 5 0 .1 ) ( 1 8 .1 ) – – – – – – (6 8. 2) Net debt 796 .9 2 1 0 .1 3.5 1. 3 – (1. 2 ) – – 1, 010 . 6 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 24 8 27 Deferr ed ta x Revaluation surplus/(deficit) £m Other £m To t a l £m Group At 1 Januar y 2021 3.5 (3.0 ) 0.5 (Credi ted)/charge d to the inc ome st ateme nt ( 1.6 ) 0.5 ( 1.1 ) Chang e in ta x rates in th e incom e state ment 0 .1 (0.8) ( 0.7 ) Charged to other comprehensive i nc ome 0.9 0.5 1. 4 Cre dited to e quit y – (0 .7) (0 .7 ) Chang e in ta x rates in oth er co mprehe nsive in come 0.4 ( 0 .1) 0.3 At 3 1 De ce mber 2021 3.3 (3 .6) ( 0.3) At 1 Januar y 2020 3.3 ( 2 .1 ) 1. 2 Cre dited to th e inco me sta tement (0. 3) (1. 7 ) (2.0) Chang e in ta x rates in th e incom e state ment 0.3 ( 0 .1 ) 0.2 Charg ed/(cre dited) to ot her c ompreh ensiv e incom e 0 .1 (0 .4) (0 .3) Charg ed to e quit y – 1. 3 1. 3 Chang e in ta x rates in oth er co mprehe nsive in come 0 .1 – 0 .1 At 3 1 D ece mber 2020 3.5 (3 .0) 0.5 Company At 1 Januar y 2021 – ( 3 .1) ( 3 .1 ) Charg ed to th e incom e state ment – 1. 0 1. 0 Cre dited to e quit y – (0 .7) (0 .7 ) Chang e in ta x rates in th e incom e state ment – (0. 8) (0.8) At 3 1 De ce mber 2021 – (3.6) (3.6 ) At 1 Januar y 2020 – (3. 2) (3. 2) Cre dited to th e inco me sta tement – (1. 0 ) (1. 0 ) Charg ed to e quit y – 1. 3 1. 3 Chang e in ta x rates in th e incom e state ment – (0.2) (0.2) At 3 1 D ece mber 2020 – ( 3 .1 ) ( 3 .1 ) Def erred t a x on the bal ance sh eet rev aluation surplus is c alculated o n the basis of t he charge able gains that would cr y stallis e on the sale ofthe pro per t y po r tf olio at each b alanc e sheet date . The c alculation t akes acc ount of any available inde xation on the his toric al cost o f the prop er ties . Due to the Gro up’ s REIT st atus, def erred t a x is only provid ed at eac h balanc e she et date on prop er ties ou tside th e REIT ring-fence. Where ap plicab le, deferre d ta x ass ets in the C ompany h ave bee n rec ognised in re spe ct of all t ax los ses an d other temp orar y dif fe rence s where t he Direc tors be lieve it is pr obable that th ese as sets will b e rec overe d. 28 Share c apital The m oveme nt in the number of 5 p ordinar y shares in is sue is shown in th e table be low: Numb er of sh ares i n issu e fully p aid Number At 1 Januar y 2020 111 , 7 7 3 , 2 8 6 Iss ued as a re sult of awards v esting un der th e Group’s Per form ance S hare Pla n 16 5 , 3 6 4 Iss ued as a re sult of the e xercise o f share opt ions 1 22 ,761 At 3 1 D ece mber 2020 111 , 9 6 1 , 411 Iss ued as a re sult of awards v esting un der th e Group’s Per form ance S hare Pla n 1 8 7, 6 3 8 Iss ued as a re sult of the e xercise o f share opt ions 1 59 ,4 61 At 3 1 De ce mber 2021 112 , 2 0 8 , 5 1 0 1 Pro ce ed s fro m the se is sue s were £1.8m (2020: £ 0.6m). The n umber of out stan ding share options an d other sh are awards granted ar e disclose d in the rep or t of the Rem uneration C ommit tee an d n o t e 13 . 24 9 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 29 R eser ves The f ollowing des cribe s the nature and p urpo se of each r eser v e within shareho lders’ equi ty : Reser ve Description and purpose Share p remium A mount sub scr ibed f or share c apit al in exces s of nominal v alue les s direct ly att ribut able iss ue co sts. Other reser ves: Merger Revaluation Other Prem ium on the is sue of share s as eq uit y consi deratio n for the a cquisit ion of Lon don Merc hant Se curi ties plc (L MS) . Revalua tion of the o wner- oc cupie d prope r ty a nd the as soc iated de ferre d ta x. Equit y po r tion of the c onve r tible bon ds for th e Group and in terco mpany loan s for the C ompa ny . Fair value of e quit y instr ument s grante d but n ot yet exer cise d under sh are-b ased p ayme nts. Ret ained e arnings Cumul ative ne t gains and los ses r eco gnise d in the Gro up incom e state ment tog ether w ith oth er items s uch as divide nds. Other reser ves Group 20 21 £m 2020 £m Company 20 21 £m 2020 £m Merger reser ve 910 . 5 9 1 0.5 910 . 5 91 0.5 Revaluation reser ve 15. 5 1 3 .1 – – Equit y po r tion of the c onve rt ible bon ds 7. 5 7. 5 – – Equit y po r tion of long- term interc ompa ny loan – – 7. 5 7. 5 Fair value of e quit y instr ument s under sh are-b ase d paym ents 7. 6 8.3 7. 6 8.3 9 4 1 .1 939.4 9 25.6 92 6.3 30 Non-controlling interest In Septe mber 2021 , the Gro up exercise d its dev elopmen t option at 1 9-35 Baker S tre et W1 with The Po r tman Est ate (“T PE” ). As per th e agre ement , the Gro up acquired T PE’s 45% non-c ontrolling inte rest fo r a consid eration of £5 3.4m and dispo sed of p roper tie s in 1 7 -39 Ge orge St reet , 1 6-20 Baker Stre et, 27 -33 Rober t A dam Stre et and 26-2 7 C astlere agh S treet W1 for g ross pr oce eds of £ 45.2m. T he Group’s original h eadlease s for the d evelopm ent site were sur render ed and a new 1 2 9-year h eadleas e was subse quently gr anted prov iding additio nal develop ment right s acros s the 1 9-35 Baker S tree t W1 site. This surren der and re grant of the h eadlease s was a non- cash trans action an d has be en treate d as a £1 00.7 m dispos al and subs equent a cquisition . As par t of th e sche me, the Gro up will develop a por ti on of the site fo r TPE and th e cos ts ass ociated wi th this are rec ognise d as trading sto ck per I AS 2 Invento ries. 3 1 Prof it / (los s ) for the yea r attrib utable to m embers o f Der went Lon don plc Prof it /(loss) for the y ear in the Gro up income s tatemen t includes a p rofit of £1 1 .6m (2020 : £1 .8m) ge nerated b y the Co mpany . T he Comp any has taken a dvanta ge of the exemp tion allowed un der se ction 4 08 of the C ompanies A ct 200 6 and has not p resen ted its ow n income sta tement in the se finan cial statem ents. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 250 32 Dividend Di vid end p er sh are Payment date PID p Non-PID p To t a l p 20 21 £m 2020 £m Current year 2021 final di vide nd 1 1 June 2022 35.50 18 . 0 0 53.50 – – 2021 interim di vide nd 1 5 O cto ber 2021 23.0 0 – 23.0 0 25. 8 – 58.50 18 . 0 0 76 .5 0 25 .8 – Prior year 2020 fin al divi dend 4 June 2021 35.0 0 1 7. 4 5 52.4 5 5 8.8 – 2020 inter im divid end 1 6 O ctob er 2020 22.0 0 – 22. 00 – 24 .6 5 7. 0 0 1 7. 4 5 74 . 4 5 58.8 24 .6 201 9 f inal di vide nd 5 June 2020 34.4 5 1 7. 0 0 51. 4 5 – 5 7. 6 Div idend s as repo r ted in the Group s tatem ent of chan ges in e quit y 84 .6 82.2 202 1 inte rim divid end wit hholding ta x 1 4 Januar y 2022 (3. 5) – 2020 interim div iden d withho lding ta x 1 4 Januar y 202 1 3.2 (3 .2) 201 9 inte rim divid end wit hholding ta x 1 4 Januar y 2020 – 2.8 Div idend s paid as re por te d in the Group c ash f low sta tement 84.3 81. 8 1 Subje ct to s hare hold er app rova l at the A GM on 13 May 2022. 33 Ca sh and ca sh equivalent s Group 20 21 £m 2020 £m Company 20 21 £m 2020 £m Cash at b ank 68.5 5 0.7 68.2 5 0 .1 34 C apital co mmitment s Co ntract s for capi tal exp enditure en tered into by th e Group at 31 Dec ember 2021 and not prov ided f or in the acc ounts re lating to the con struc tion, de velopme nt or enhanc ement of t he Group’s i nve stme nt prope r ties amounte d to £5 1 .2m (2020: £ 1 8 3.5m) , whilst that re lating to the Gro up’ s t rading prope r ties amoun ted to £0.9m (2020: £0.4m) . Th e expen diture on inves tment pr oper tie s for 2020 has be en re- pres ented to re move £ 49.6m of co sts alrea dy acc ounted f or within gro ssing up of headle ase liabilitie s. At 3 1 De cemb er 202 1 and 31 De cemb er 2020, there were no m aterial obligation s for the pur chase, re pair or maintenanc e of invest ment or tr ading proper t ies. In Januar y 2022, the Group ente red into a co nstru ction c ontrac t for the re deve lopment of 1 9 -35 Baker Stre et W1 , amo unting to £ 1 58.4m. 35 Contingent liabilities In 202 1 , t he Group ente red into a 50:50 joint vent ure with La zari Inves tment s Limited, D er went L azari B aker Stre et Limite d Par tner ship ( se e note 1 8) . Subjec t to rec eiving p lanning on a sch eme which inc ludes the t hree leas ehold pro per ties wi thin the joint ven ture and a four th prop er t y owned b y the fre eholde r , and a re gear of the h eadlease , an additional £7 .3m of de ferre d consid eration is pay able to Laz ari Inves tments L imited. Th e defer red co nsideratio n is treated a s a continge nt liabilit y in acco rdance wi th IAS 37 Prov isions, C ontingen t Liabilitie s and Co ntingent A sset s, as the am ount is only con firme d by the o ccurre nce of unc er tain f uture eve nts not who lly within the con trol of the Gr oup. The C ompany an d its subs idiaries are par t y to cro ss guar antees s ecuring c er tain bank lo ans. At 3 1 D ece mber 2021 and 3 1 De cemb er 2020, there wa s no liabilit y that c ould arise for t he Comp any from t he cros s guarante es. Where t he Com pany enters into f inancial gu arantee co ntract s and guaran tees th e indebtedn ess of ot her com panies within th e Group, the Co mpany con siders th ese to b e insurance ar rangemen ts, and ac count s for the m as such. In this re spe ct, th e Compan y treats th e guarante e cont ract as a c ontingent liabili ty unt il such time that i t bec omes p robable that t he Com pany will be re quired to make a pay ment under th e guarante e. 251 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 36 Leases 20 21 £m 2020 £m Operati ng leas e receipts Minimum leas e rec eipts und er non- canc ell able ope rating leas es to be r ece ive d : not l ater than on e year 18 8 . 5 19 9 . 2 later t han one ye ar and no t later tha n fiv e years 60 9.4 6 0 7. 5 later t han fi ve year s 833.5 918 . 7 1, 6 31. 4 1,7 2 5 . 4 Group 20 21 £m 2020 £m Company 20 21 £m 2020 £m Headlease obligat ions Minimum leas e payme nts und er headle ase s that fall du e: not l ater than on e year 52.2 0.7 2 .1 2 .1 later t han one ye ar and no t later tha n fiv e years 3.2 5 4.3 8.3 8.4 later t han fi ve year s 19 3 .7 180.0 21. 0 23.0 2 4 9 .1 235 .0 31. 4 33.5 Future c onting ent rent p ayable on h eadleas es (0. 3) (1. 7 ) – – Future f inanc e charg es on he adleas es (1 78 .2) ( 1 6 6. 7) ( 7. 3 ) (8 .2) Pre sent valu e of headle ase liabili ties 70 .6 66 .6 2 4 .1 25 .3 Pre sent valu e of minimum headle ase ob ligations: not l ater than on e year 51.2 – 1. 2 1. 2 later t han one ye ar and no t later tha n fiv e years ( 0 .1 ) 49.6 5.3 5 .1 later t han fi ve year s 19 . 5 1 7. 0 1 7. 6 19 . 0 70.6 6 6.6 2 4 .1 25. 3 The G roup has approx imately 61 1 lease s granted to i ts tenants . The se var y dep endent o n the indiv idual tenant and th e respe cti ve prop er t y and demis e but t ypi cally are let for a te rm of fi ve to 20 years , at a market rent wi th prov isions to revie w to market rent e ver y fi ve year s. St andard leas e provisio ns include se r vice c harge pay ments an d reco ver y of othe r direct c ost s. The we ighted aver age leas e leng th of the lease s comm encing during 2021 was 8.4 years (2020: 1 4 . 7 year s) . Of t hese le ases, o n a weighted ave rage ba sis, 94% ( 2020: 9 7%) included a rent f ree or half rent p erio d. 37 Post b alanc e sheet even ts In Januar y 2022, the Group ac quired the lea sehold inter est in 230 Bl ack friars Ro ad SE 1 for £5 5.0m befo re cos ts. In Januar y 2022, the Group exch anged c ontrac ts for the disp osal of i ts fre ehold intere st in New Riv er Y ar d EC1 for £67 .5m befo re cos ts and rental top-ups . In Januar y 2022, the Group sign ed the main c onstr uctio n contr act for t he 1 9 -35 Baker Stre et W1 develop ment amo unting to £ 1 58.4m. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 252 38 List o f subsidiaries a nd joint ventures A full lis t of subsidiarie s and joint vent ures as at 31 Dec ember 2021 is set out b elow: Owne rship 2 Princ ipal acti vit y Subsidiaries As ta C ommerc ial Limite d 10 0 % Prop ert y investment Barga te Quar ter L imited 65% Inve stment C ompany BBR (Co mmerci al) Limite d 10 0 % Dormant BBR Pro per t y Limi ted 1 10 0 % Dormant Cale donian Pr oper ti es Limite d 10 0 % P ropert y investment Cale donian Pr oper t y Es tate s Limited 10 0 % Proper t y Investment Cale donian Pr oper t y Inve stm ents L imited 10 0 % Proper ty Investment Car lton Co nstr uctio n & Dev elopme nt Com pany Limite d 10 0 % Dor mant Ce ntral Lo ndon C ommer cial Est ates Limi ted 10 0 % Proper ty investment Char lot te Apar tm ents L imited 10 0 % Proper ty investment 80 Cha rlot te Str eet Limi ted 1 10 0 % Proper ty investment Der we nt As set Mana geme nt Limite d 1 10 0 % Prop ert y management Der we nt Cen tral Cro ss Limi ted 1 10 0 % Proper ty Investment Der we nt Henr y Woo d Limite d 1 10 0 % Proper ty Investment Der we nt Lond on Ange l Building Limite d 10 0 % Proper t y In vestm ent Der we nt Lond on AD Limi ted 1 10 0 % Energ y Pro duction Der we nt Lond on As ta Limite d 10 0 % Pr ope r ty t rading Der we nt Lond on As ta Resi dential L imited 10 0 % Dormant Der we nt Lond on Baker S tre et Limite d 10 0 % Proper t y investment Der we nt Lond on BH Limite d 1 10 0 % Proper ty investment Der went London Brixton Limited 1 10 0 % Proper ty investment Der we nt Lond on BSP L imited 10 0 % Proper ty investment Der we nt Lond on Capi tal No. 3 (Je rsey) L imited 1 10 0 % Financ e Company Der we nt Lond on Charlo tte S tre et (Comm ercial ) Limite d 10 0 % Dormant Der we nt Lond on Charlo tte S tre et Limite d 1 10 0 % Dormant Der we nt Lond on Cop yrigh t House L imited 1 10 0 % Dormant Der went London Development Ser vices Limited 1 10 0 % Development Ser vices Der went London F arringdon Limited 1 10 0 % Proper ty Investment Der went London Featherstone Limit ed 1 10 0 % Proper ty Investment Der we nt Lond on Galler y L imited 1 10 0 % Proper ty Investment Der we nt Lond on Graf ton L imited 1 10 0 % Dormant Der went London George Street Limited 1 10 0 % Pr oper t y T ra ding Der we nt Lond on Gree n Energ y L imited 1 10 0 % Energ y Pro duction Der we nt Lond on Holden H ouse L imited 1 10 0 % Proper ty Investment Der we nt Lond on Holfor d Works Limi ted 1 10 0 % Proper ty Investment Der we nt Lond on Hors efer r y Limite d 1 10 0 % Proper ty Investment Der we nt Lond on Howla nd Limite d 1 10 0 % Dormant Der we nt Lond on KSW Limite d 1 10 0 % Proper ty Investment Der we nt Lond on No.2 Limite d 1 10 0 % Proper ty Investment Der we nt Lond on No.4 Limite d 1 10 0 % Proper ty Investment Der we nt Lond on Oliv er’s Y ard Limi ted 1 10 0 % Proper ty investment Der we nt Lond on Page S tre et (Nomine e) Limited 10 0 % Dormant Der we nt Lond on Page S tre et Limite d 1 10 0 % Proper ty investment Der we nt Lond on Savile Ro w Limite d 1 10 0 % Proper ty investment Der we nt Lond on White Cha pel Limi ted 1 10 0 % Proper ty investment Der we nt Lond on White C ollar L imited 1 10 0 % Proper ty investment Der we nt Lond on Whit fie ld Stre et Limi ted 1 10 0 % Proper ty investment Der we nt Valley Cent ral Limite d 1 10 0 % Proper ty investment Der we nt Valley Employe e T r ust Limi ted 1 10 0 % E m p l o y e e Tr u s t Der we nt Valley Financ e Limite d 10 0 % Investment Holding Der we nt Valley Limite d 10 0 % Ho lding C ompany Der we nt Valley Londo n Limite d 1 10 0 % Proper ty investment Der went V alley Proper ty Developments Limited 1 10 0 % Proper ty Investment Der we nt Valley Prop er t y Inves tment s Limite d 1 10 0 % Proper ty Investment 253 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED Owne rship 2 Princ ipal acti vit y Der we nt Valley Prop er t y T rading L imited 1 10 0 % Pr oper t y T ra ding Der we nt Valley Railway Comp any 1 10 0 % Dormant Der we nt Valley West End L imited 1 10 0 % Proper ty Investment Kensing to n Comm ercial Pr oper t y Inve stm ents L imited 10 0 % Proper ty Investment LMS (Cit y Ro ad) Limite d 10 0 % Propert y Investment LMS Fin ance L imited 10 0 % Inves tment Holding LMS O f fic es Limi ted 10 0 % Proper ty Investment Lon don Merc hant Se curi ties Limi ted 1 10 0 % Holdin g Com pany Mer brook B ond P roper t y Uni t T rus t 10 0 % Prop er t y Unit T rus t Th e New Rive r Comp any Limite d 10 0 % Proper ty Investment Urban first Li mited 10 0 % Investment Holding West L ondon & S uburba n Prop er t y Invest ment s Limited 10 0 % Proper ty Investment Joint v entures Der we nt La zari Ba ker Stre et GP L imited 50% Manag ement C ompany Dor ring ton D er went Holdings L imited 50% H olding C ompan y Dor ring ton D er went Inve stme nts Limite d 50% Inve stmen t Company Pre sco t Stre et GP Limi ted 50% Manage ment Co mpany Pre sco t Stre et Nomin ees L imited 50% Dormant Primis ter Limite d 50% Proper t y In vestm ent 1 Indic ates subs idiar y under tak ings held dire ctly. 2 All ho lding s are of or dinar y s hare s. The C ompany c ontrol s 50% of the v oting rights of i ts joint vent ures, which ar e acco unted for an d disclose d in acc ordanc e with IFRS 1 1 Joint Arrangemen ts. All of th e entitie s above are inc orp orated and d omiciled in Engl and and Wales, with t he excep tion of Der went L ondon C apital No. 3 (Je rsey) Limite d and Merbr ook Bo nd Prop er t y Unit T rus t, which are inc orp orated an d domiciled in Jer sey. In addition, all the e ntities ar e registere d at 25 Savile Row, London , W1 S 2ER, wi th the exce ption of: — Der wen t London C apital No. 3 (Je rsey) L imited, which is re gistere d at 4 7 Espl anade, S t Helier , JE1 0BD, Channel Islan ds; — Dor ring ton Der wen t Holdings Limited and D orring ton D er went Inves tment s Limited, whic h are registe red at 1 6 Hans Road, L ondon, S W 3 1 R T; — Primiste r Limited, whic h is registere d at Quadran t House, F loor 6, 4 Th omas More S quare, Lon don, E 1 W 1Y W; — Merb rook Bo nd Prop er t y Unit T r ust, which is re gistere d at 26 New Stre et, S t Helier , Jer sey, JE 2 3R A . 39 Relate d par t y disclosur e Det ails of Direc tors’ remun eration are gi ven in the rep or t of the Re muneration C ommit tee on p ages 1 72 to 1 93 and n ote 1 1 . De tails of trans action s with joint vent ures are shown in n ote 1 8. A f ull list of subsi diaries and joint ve ntures is gi ven in note 38. O ther re lated p ar t y trans action s are as follows: Group During th e year , the Gro up ceas ed its c ontribu tions (2020 : £ 0. 1 m) to th e running cos ts of Bux to n Jones C onsultan ts Limited , a company of which John B urns, th e previo us CEO of the Group, is a dire ctor . In Septe mber 2021 , £2.0m owed b y The Por t man Esta te, the non- contr olling 45% owner o f one of the Gro up’ s s ubsidiaries , was set tled a s par t of th e acquisition of t he non- contro lling interes t. This amo unt was previo usly include d within othe r rece ivables in no te 20 as at 3 1 De cemb er 2020. The Group al so dispos ed of 1 7 -39 Ge orge S tree t, 1 6 - 20 B aker Stre et, 27 -33 Robe r t Adam Str eet and 26-27 Castlere agh Str eet W1 for gro ss pro ce eds of £ 45.2m. Se e note 30 for f ur ther de tails. 38 List o f subsidiaries a nd joint ventures (continued) De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 254 Co mpany The C ompany r ecei ved intere st fr om and paid intere st to som e of its subsi diaries during the y ear . T hes e transac tions are summar ised b elow: Interest income/( expense) Balanc e rec eivable/ (payable) 20 21 £m 2020 £m 20 21 £m 2020 £m Related par ty 22 Kingsway L imited – – – (3 3. 5) 80 Cha rlot te Str eet Limi ted 9 .1 8.3 224. 4 20 9.6 BBR (Co mmerci al) Limite d 2 – ( 0 .1 ) – – BBR Pro per t y Limi ted 2 – (0 .3) – – Der we nt As set Mana geme nt Limite d – – (1. 0 ) ( 0.9) Der we nt Cen tral Cro ss Limi ted 7. 6 7. 5 181. 0 18 5 . 4 Der we nt Henr y Woo d Limite d (0.2) ( 0 .1 ) (5 .3) ( 3 .1 ) Der we nt Lond on AD Limi ted – – (5.0) – Der we nt Lond on Ange l Squar e Limited (0 .2) (0. 3) – ( 7. 2 ) Der we nt Lond on BH Limite d 0.2 – 14 .7 – Der went London Brixton Limited 1. 8 1. 5 43.5 41 . 9 Der we nt Lond on BSP L imited – – 3.3 – Der we nt Lond on Capi tal No. 3 (Je rsey) L imited 1 (3. 9) (3. 9) (16 8 . 3) ( 1 66.3) Der we nt Lond on Charlo tte S tre et Limite d 2 – ( 0 .1 ) – – Der we nt Lond on Cop yrigh t House L imited 2 – ( 0 .1 ) – – Der went London Development Ser vices Limited 2 .7 1. 2 8 0.3 42 .7 Der went London F arringdon Limited (0. 6) (0.4) (16 . 0) (1 0.2) Der went London Featherstone Limit ed 0.9 0.9 20.4 2 1. 9 Der we nt Lond on Galler y L imited – – (0.2) ( 0.5) Der went London George Street Limited – – (4. 5) – Der we nt Lond on Graf ton L imited 2 – (0. 4) – – Der we nt Lond on Gree n Energ y L imited – – (4 .6) (4. 9) Der we nt Lond on Holden H ouse L imited 4.9 4.6 11 8 . 3 11 5 . 4 Der we nt Lond on Holfor d Works Limi ted 0.5 – 15 . 9 – Der we nt Lond on Hors efer r y Limite d ( 0 .1 ) – (3 .0) – Der we nt Lond on Howla nd Limite d 2 – (0 .3) – – Der we nt Lond on KSW Limite d (4 .4) (4 .0 ) ( 1 0 7. 0 ) (10 2 .7 ) Der we nt Lond on No.2 Limite d 1 .1 – 12 8 . 0 – Der we nt Lond on No.4 Limite d – – (20.0 ) – Der we nt Lond on Oliv er’s Y ard Limi ted 5.2 5 .0 12 4 . 6 12 5 . 9 Der we nt Lond on Page S tre et Limite d (0.2) – (5. 8) – Der we nt Lond on Savile Ro w Limite d ( 0 .1 ) – (4. 5) (0.5) Der we nt Lond on White Cha pel Limi ted – – (1. 5 ) – Der we nt Lond on Whit fie ld Stre et Limi ted 1.9 1. 8 4 6 .1 45.4 Der we nt Valley Cent ral Limite d 4.2 2.9 11 6 . 3 8 1. 4 Der we nt Valley Londo n Limite d 2.4 8 .1 113 . 8 18 2 . 3 Der went V alley Proper ty Developments Limited ( 7. 9 ) (6 .8) ( 1 94.7) ( 1 7 7. 3 ) Der we nt Valley Prop er t y Inves tment s Limite d (5 .0) (4. 4) ( 12 2 . 9 ) ( 112 . 9 ) Der we nt Valley Prop er t y T rading L imited 0.3 0.2 6 .1 5.8 Der we nt Valley Railway Comp any 2 – – (0.2) (0.2) Der we nt Valley West End L imited ( 0 .1 ) 0 .1 (3.7 ) 1. 8 Lon don Merc hant Se curi ties Limi ted 3 (5.6) (0 .3) (13 9 . 0 ) ( 1.6 ) 14 . 5 20.6 42 9.5 4 3 7. 7 1 Th e paya ble ba lanc e at 31 De cem ber 2 021 includ es th e inte rco mpany l oan of £168.3m (2 020: £1 66.4 m) incl ude d in note 24. 2 Dormant co mpany . 3 Bal ance o wed i nclu des s ubsi diarie s whic h for m par t of t he LM S sub- grou p. The C ompany h as not made any p rovision f or bad or do ubtf ul debts in re spe ct of rel ated par t y de btors. Interc ompany b alanc es are repayab le on demand exc ept the lo an from D er went Lond on Capit al No. 3 (Jerse y) Limited, th e payme nt and rep ayment ter ms of which mirror th ose of the c onver tib le bonds . Interes t is charge d on the on- demand inter company b alanc es at an arm’ s leng th b asis. 255 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 40 EPR A perf ormance measures and core r ecommendations ( unaudited) Summ ar y ta ble of E PR A per fo rman ce mea sur es 20 21 2020 Pence per share Pence pe r shar e p p EPR A Earnin gs £ 12 2 . 0 m 10 8 .7 9 £ 111 . 0 m 9 9 .1 9 EPR A Net T angib le Ass ets £4,45 4.2 m 3,959 £ 4,28 0.9m 3 , 8 12 EPR A Net Di spos al Value £4,369.6m 3,884 £ 4, 1 34.8m 3,6 82 EPR A Net Re instate ment Value £ 4 , 8 39 .7m 4 ,3 01 £ 4,646.5m 4 ,1 3 8 EPR A C ost R atio (inc luding dire ct v acan cy c ost s) 24. 3% 30.5% EPR A Net Init ial Yield 3.3% 3 .7% EPR A ‘ toppe d-up’ Net Init ial Yie ld 4 .4% 4. 8% EPR A Vacanc y Rate 1. 6 % 1. 8 % The d efinition o f these m easure s can be f ound on pa ges 27 4 and 275. Numb er of sh ares Earnin gs per share Ne t ass et v alue p er s har e Weighted a verage At 31 Dec emb er 20 21 ’000 2020 ’000 20 21 ’000 2020 ’000 For us e in basic m easure s 112 ,1 3 9 111 , 9 12 112 , 2 0 9 111 , 9 6 1 Diluti ve ef fe ct of sh are-b ased p ayme nts 273 35 0 30 8 3 41 For us e in diluted me asure s 112, 412 11 2 , 2 6 2 112 , 5 1 7 112 , 3 0 2 The £1 75m unse cured c onver tib le bonds 2025 (‘202 5 bo nds’) have an ini tial conver sion pric e set at £ 44.9 6. The G roup rec ognise s the ef fe ct of c onversio n of the bon ds if they are b oth dilutiv e and, base d on the sh are price , likely to conver t . For the year s ende d 3 1 De cemb er 2020 and 202 1 , t he Group did not re cog nise the diluti ve impact of t he conv ersion of th e 202 5 bon ds on its earnings p er share (EPS) or n et asse t value (NAV) p er share me trics a s, base d on the sh are price at t he end of e ach year , the b onds were n ot expect ed to conv ert. The f ollowing table s set ou t reco nciliations b etwe en the IFR S and EPR A earnings fo r the year an d earnings pe r share. Th e adj us tments made b etw een the f igure s are as follows: A – Dispo sal of inve stment an d trading prop er t y (including the G roup’ s share in joint ve ntures), and asso ciated ta x and n on-c ontrolling interest. B – Revaluatio n moveme nt on inves tment pro per t y and in joint ve ntures, wr ite- down of trading prop er t y and as sociate d defer red ta x and non-c ontrolling int eres t. C – Fair value move ment and ter mination co sts rel ating to deriv ative f inancial instr uments , asso ciated no n-co ntrolling intere st and loan arrange ment co sts wr it ten of f . De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 256 Earnings and earnings per share IFRS £m Adjustments EPR A basis £m A £m B £m C £m Y ear e nde d 3 1 De cemb er 2021 Net pr oper t y an d other in come 1 8 7. 5 (0.7 ) 1. 4 – 18 8 . 2 T o tal adminis trativ e expe nses ( 3 7.1 ) – – – ( 3 7.1 ) Revaluation surplus 13 0 . 8 – ( 13 0 . 8 ) – – Prof it on disp os al of inves tment s 10 . 4 (10 . 4 ) – – – Net f inanc e cos ts ( 2 8 .1) – – – ( 2 8 .1 ) Move ment in fair v alue of deri vativ e finan cial instr ument s 4.8 – – (4 . 8) – Finan cial deri vativ e terminati on cos ts (1. 9 ) – – 1. 9 – Share of r esults of jo int ventur es (13 . 9 ) – 14 . 2 – 0.3 Profit b efore tax 2 52.5 ( 11 .1 ) ( 115 . 2 ) (2 .9) 12 3 . 3 Ta x c r e d i t 1. 3 – (1. 5 ) – (0.2) Prof it fo r the yea r 253. 8 ( 11 .1) ( 1 1 6.7) (2. 9) 12 3 .1 Non-cont rolling interest (1. 5 ) – 0.4 – ( 1.1 ) Earnings attributable to equ it y shareholders 252. 3 ( 11 .1 ) ( 11 6 . 3 ) (2.9) 12 2 . 0 Earnings per share 224 .99 p 10 8 .7 9 p Dilute d earnings p er shar e 224. 4 4p 10 8 . 5 3 p Y ear en ded 31 De cemb er 2020 Net pr oper t y an d other in come 18 3 . 0 (5.2) 1. 8 – 17 9 . 6 T o tal adminis trativ e expe nses ( 3 7. 8 ) – – – ( 3 7. 8 ) Revaluation deficit (1 9 6 .1) – 19 6 .1 – – Prof it on disp os al of inves tment s 1.7 (1.7 ) – – – Net f inanc e cos ts (30.2) – – 0 .1 ( 3 0 .1 ) Move ment in fair v alue of deri vativ e finan cial instr ument s (1. 9 ) – – 1. 9 – Finan cial deri vativ e terminati on cos ts (1. 7 ) – – 1. 7 – (Los s)/ prof it be fore ta x (83 .0) (6 .9) 1 9 7. 9 3.7 111 . 7 Ta x c r e d i t 1. 6 (1. 0 ) – – 0.6 (Los s)/ prof it for t he year (8 1. 4 ) ( 7. 9 ) 1 9 7. 9 3.7 112 . 3 Non-cont rolling interest 3.8 – ( 5 .1 ) – (1. 3 ) Earnin gs att ribut able to equi ty s hareho lders ( 7 7. 6 ) ( 7. 9 ) 19 2 . 8 3 .7 111 . 0 (Los s)/ e arnings pe r share (69 .3 4p) 9 9 .1 9 p Dilute d (los s) /earnings pe r share (69 .3 4p) 98.88p The dilute d loss p er share fo r the per iod to 31 Dec ember 2020 was res tric ted to a loss of 6 9.34p per s hare, as the los s per s hare canno t be redu ced b y dil ut ion in acc ordance wi th IAS 33, E arnings per Shar e. 257 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 40 EPR A pe rf ormanc e measur es and cor e recomm endations (unaudited) (continued) EPR A ne t ass et val ue met rics 20 21 £m 2020 £m Net as set s att ribut able to equi t y shareho lders 4,44 1 .8 4 ,263.2 Adjustment for: Revaluation of trading proper ties 1. 9 1. 4 Def erre d ta x on rev aluation sur plus¹ 1.7 1. 8 Fair value of de rivati ve f inancial ins trume nts 0. 8 5.6 Fair value adjust ment to s ecure d bon ds 8.0 9.3 Non- cont rolling inte rest in re spe ct of th e abov e ¹ – (0. 4) EPR A Ne t T a ngibl e Ass et s 4,454.2 4 ,280.9 Per s har e mea sure – d ilute d 3,959p 3 , 8 12 p Net as set s att ribut able to equi t y shareho lders 4,44 1 .8 4 ,263.2 Adjustment for: Revaluation of trading proper ties 1. 9 1. 4 Fair value adjust ment to s ecure d bon ds 8.0 9.3 Mark-to -market of f ixe d rate debt (69 .5) ( 1 2 7. 8 ) Unamor tise d issue an d arrangemen t cost s (12 . 6 ) ( 11 . 3 ) EPR A Ne t Disp os al Value 4,3 69.6 4, 1 34.8 Per s har e mea sure – d ilute d 3,884p 3,6 82p Net as set s att ribut able to equi t y shareho lders 4,44 1 .8 4 ,263.2 Adjustment for: Revaluation of trading proper ties 1. 9 1. 4 Def erre d ta x on rev aluation sur plus 3.3 3.5 Fair value of de rivati ve f inancial ins trume nts 0. 8 5.6 Fair value adjust ment to s ecure d bon ds 8.0 9.3 Non- cont rolling inte rest in re spe ct of th e abov e – (0 .7 ) Purchasers’ cos ts² 383.9 36 4.2 EPRA Net Reinst atement V alue 4 ,8 3 9.7 4,64 6.5 Per s har e mea sure – d ilute d 4 , 3 01p 4 ,1 3 8 p ¹ O nly 50 % of th e defe rre d ta x on th e rev aluat ion sur plus i s exclu ded . ² Incl ude s Sta mp Du ty L an d T a x . T ot al co sts a ssum ed to b e 6.8 % of the p or t fol io’s fair va lue. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 258 Co st ra tio 20 21 £m 2020 £m Adminis trativ e expe nses 3 7.1 3 7. 8 Write- of f/impair ment of re cei vables 0. 8 1 0 .1 Se r vice c harge wai ver – 4 .1 Other proper t y costs 10 . 4 1 0.5 Dilapidation receipts (0 .9) – Net s er vic e charge c os ts 3.4 2. 8 Se r vice c harge c ost s rec overe d throug h rents b ut not s eparate ly invoic ed (0 .6) (0.4) Manag ement f ees r ece ive d less e stimate d prof it elem ent (3. 5) (3.5 ) Share of j oint ventur es’ exp ense s ( 0 .1 ) – EPR A c ost s (inclu ding direc t vac anc y co sts) ( A) 46 .6 61. 4 Dire ct vac ancy c os ts ( 6 .1 ) (9.0 ) EPR A co sts (excluding dire ct v acanc y co sts) (B) 4 0.5 52 .4 Gross rental inco me 19 4 . 2 202 .9 Ground rent ( 1. 4) ( 1.1 ) Se r vice c harge c ompon ents of r ental inc ome (0.5) (0 .4) Share of j oint ventur es’ rent al inco me les s ground r ent (0.5) – Adjuste d gros s rent al inco me (C) 191. 8 201 .4 EPR A c ost r atio (inc luding dire ct va can cy c ost s) (A /C) 24. 3% 30.5% EPR A co st ratio (exclu ding direc t vacan cy co sts) (B/C) 2 1 .1 % 26.0% In additi on to the t wo EPR A co st rati os, th e Group ha s calcul ated an ad ditional c ost r atio bas ed on i ts prop er t ypor t fo lio fair value to r eco gnise th e ‘to tal retur n’ nature of th e Group’s activ itie s. Prop er t y po rt fo lio at fair value (D) 5,64 6.3 5,3 55.5 Por t fol io cos t ratio ( A /D) 0.8% 1 .1% The G roup has not c apitalis ed any ove rheads in ei ther 2021 or 20 20. 259 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 40 EPR A pe rf ormanc e measur es and cor e recomm endations (unaudited) (continued) Net In itial Y ield an d ‘ topp ed-up’ Ne t Initia l Yiel d 20 21 £m 2020 £m Prop er t y po rt fo lio – whol ly owne d 5 ,64 6.3 5,355. 5 Share of j oint ventur es 50.0 – Less non-EPRA proper ties 1 ( 785 .3) (57 4.4 ) Co mplete d prope r ty p or t folio 4 , 9 11 . 0 4 , 7 8 1 .1 Allowanc e for: Estim ated pur chase rs’ co sts 33 4.0 3 2 5 .1 EPR A prop er t y por t fo lio valuatio n (A ) 5,245.0 5 ,1 0 6 . 2 Ann ualise d contr acte d renta l incom e, net of g round ren ts 17 5 . 9 18 9 . 2 Share of j oint ventur es 2 .5 – Less non-EPRA proper ties 1 (0.5) (2. 8) Add outst anding rent reviews 0 .1 2.6 Les s est imate of non- reco verab le expen ses (3 .5 ) (2.6) (3. 9) (2.8) Curre nt inco me net of n on-re cov erable exp ens es (B) 174 . 5 18 6 . 4 Contrac tual rental increases across the p ort folio 55 .5 5 8.0 Less non-EPRA proper ties 1 – (0.2) Contrac tual rental increases across the EPR A por t folio 55.5 5 7. 8 ‘ T op ped- up’ net annualis ed re nt (C) 230.0 24 4 .2 EPR A net ini tial yield (B / A ) 3. 3% 3 .7% EPR A ‘ topp ed-up’ ne t initial yie ld (C/ A ) 4 .4% 4. 8% Vacan cy rat e 20 21 £m 2020 £m Ann ualise d estima ted rent al value of va cant pr emise s 3.8 4 .7 Por t fol io estim ated ren tal value 293.8 2 9 1. 2 Less non-EPRA proper ties 1 (59 .9) (42 .5 ) 233.9 24 8 .7 EPR A vac ancy r ate 1. 6 % 1. 8 % ¹ I n acc orda nce w ith EP RA b es t prac tic e gui delin es , ded uct ions ar e mad e for de vel opme nt pro pe rt ies , lan d and lon g-da ted r ever sio ns. Proper ty-rel ated capital expenditure 20 21 2020 Gr oup (ex cl. Joint ventures) £m Joint ventures (50 % sha re) £m To t a l Group £m Gro up (exc l. Joint ventures) £m Joint ventres (50 % shar e) £m To t a l Gro up £m Acquisi tions 353.6 60.0 413 . 6 4 3.5 – 4 3.5 Development 14 6 . 6 0.2 14 6 . 8 1 3 4 .1 – 13 4 .1 Investment properties Increm ental lettable space 0 .1 – 0 .1 – – – No increment al l et table space 16. 7 – 16 . 7 1 6.3 – 1 6.3 T enant incentive s 2.5 – 2.5 1. 5 – 1.5 Capi talis ed intere st 12 . 0 – 12 . 0 9.9 – 9. 9 T o tal ca pital ex pen diture 53 1. 5 60.2 5 9 1.7 205.3 – 205.3 Co nversi on from a ccr ual to cas h basis¹ ( 1 0 7. 6 ) (0.2) ( 1 0 7. 8 ) 11 . 9 – 11 . 9 T o tal c apital ex pen diture on a c ash bas is 423.9 60.0 4 83.9 2 1 7. 2 – 2 1 7. 2 ¹ T he c onve rsi on fr om acc rua l to ca sh bas is fi gure in clud es £100.7 m in re lat ion to th e reg rant o f a hea dleas e at 19-35 Bak er St ree t W1 , se e note 3 0. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 260 4 1 T ot al return (unaudited) 20 21 p 2020 p EPR A net t angible as set s on a diluted b asis At end of y ear 3,959 3 , 8 12 At st ar t of year ( 3 , 8 12 ) ( 3,957) Increase/ ( decrease) 147 ( 14 5 ) Div idend p er shar e 75 73 Incr ease /( de cre ase) inclu ding div iden d 222 ( 72) T o tal ret urn 5.8% ( 1. 8 % ) 42 Gearing an d interes t cover NA V gearing 20 21 £m 2020 £m Net debt 1, 2 51.5 1 , 0 4 9 .1 Net assets 4,44 1 .8 4,31 5. 1 N AV ge a r i ng 28.2% 24.3% Loan-to-value ratio 20 21 £m 2020 £m Group loan- to-value Net debt 1, 2 51.5 1 , 0 4 9 .1 Fair value adjust ment of s ecure d bo nds (8 .0) (9. 3) Unamo r tised dis coun t on unse cure d gree n bonds 1. 8 – Unamor tise d issue an d arrangemen t cost s 12 . 6 11 . 3 Lease hold liabilities (70 .6) (66 .6) Drawn d ebt net of c ash 1 ,1 8 7. 3 98 4.5 Fair value of pr oper t y p or t folio 5,6 4 6.3 5,355.5 Group lo an-to -value rati o 21. 0 % 18 . 4% Propor tionally consolidated loan-to-val ue Drawn d ebt net of c ash 1 ,1 8 7. 3 98 4.5 Share of j oint ventur es ca sh and c ash equi valents (1. 2) (0.6) Drawn d ebt net of c ash 1 ,18 6 .1 983. 9 Fair value of pr oper t y p or t folio 5,6 4 6.3 5,355.5 Share of f air value of pro per t y po r tf olio of joint v enture s 50.0 – Fair value of pr oper t y p or t folio inc luding Group’s share of join t venture s 5,696.3 5,355.5 Propor tionally cons olidat ed loan-to-value 20.8% 18 . 4 % 261 Governance Strategic repor t Financial St atements N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED 42 Gearing an d interes t cover (continued) Net in ter est c over ra tio 20 21 £m 2020 £m Group net interest cover ratio Net pr oper t y an d other in come 1 87 .5 18 3 . 0 Adjustments for: O ther income (3 .5 ) (3 .5) O ther proper ty income (2.0) (0 .9) S urrend er premium s rec eive d (3.6) (0 .9) Wri te-d own of trading p roper t y 1. 4 1. 8 P rofi t on dispo sal of tra ding prop er ties (0.7 ) (5.2) Adjuste d net pr oper t y inc ome 1 79. 1 1 7 4.3 Finan ce in com e – (0.2) Fina nce costs 2 8 .1 30.3 2 8 .1 3 0 .1 Adjustments for: F inanc e inco me – 0.2 O the r finan ce co sts (0.2) (0.2) A mor tis ation of f air value adjustm ent to se cure d bond s 1. 3 1. 3 A mor tisatio n of issue and arran gement c osts (2.5) (2.2) F inance co sts c apitalise d 12 . 0 9.9 Net inte rest p ayable 38. 7 3 9 .1 Group n et intere st co ver rati o 46 3% 4 46% Propor tionally consolidated net interest cover ratio Adjuste d net pr oper t y inc ome 1 79. 1 1 7 4.3 Share of j oint ventur es’ net p rope rt y in come 0. 4 – Adjuste d net pr oper t y inc ome in cluding share o f joint vent ures 1 79.5 1 7 4.3 Net inte rest p ayable 38. 7 3 9 .1 Prop or tion ally con solidate d net inte rest c over r atio 46 4% 44 6% De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 262 43 Signif icant acc ounting policies Basis of consolidation The G roup finan cial statem ents inc orpor ate the finan cial statem ents of D erw ent Londo n plc and all of its s ubsidiaries , togethe r with the Group’s share of the res ults of its joint ve ntures. Subsidiarie s are all entit ies (including st ruc tured enti ties) over which t he Group has c ontrol . The Gr oup contr ols an entit y wh en the Gro up is exp ose d to, or has right s to, variable return s from it s involveme nt with the en tit y and has th e abilit y to af fec t those r eturns thro ugh its powe r over the e ntit y . Subs idiaries are co nsolidate d from th e date on which c ontrol is tran sferre d to the Gro up. They are n o longer con solidate d from the d ate that cont rol cea ses. Joint ven tures are tho se enti ties over w hose ac tivi ties the G roup has joint c ontrol, e stab lished by c ontrac tual agr eeme nt. Interes ts in joint venture s are acc ounted f or using the e quit y metho d of acc ounting as pe rmit ted by IFR S 1 1 Joint A rrangem ents, an d following the proc edure s for this me thod s et out in IA S 28 Investm ents in As soc iates and Joint Ventures . The e quit y metho d require s the Group’s share of the joint ve nture’ s po st-t ax p rofit o r loss fo r the year to b e pres ented se parately in the inc ome st atement an d the Group’s share of the joint venture’s net as sets to b e prese nted sep arately in the b alance sh eet . Intra-gro up balanc es and any unre alised gains and lo sse s arising from int ra-group tran sacti ons are eliminated in pr eparing the con solidate d financial s tatemen ts. Unrealis ed gains arising f rom trans actions w ith joint vent ures are eliminated to t he ex tent of the Gr oup’ s interes t in the joint vent ure conc erne d. Unrealise d los ses are eliminate d in the same way, but only to th e ex tent that the re is no evid ence of impair men t. Gross proper t y i ncome Gros s prop er t y income ar ises f rom tw o main source s: (i) Ren tal inc ome – T his arises f rom ope rating lease s granted to te nants. A n oper ating lease is a leas e other th an a financ e lease. A finan ce leas e is one where by subst antially all the ris ks and rewards of own ership are pa sse d to the les see. Re ntal inco me is rec ognise d in the Group inc ome st atement o n a straight-lin e basis over t he term of th e lease in acc ordanc e with IFRS 1 6 L ease s. This includ es the ef f ect of le ase ince ntive s given to ten ants, which are n ormally in the f orm of rent f ree or h alf rent perio ds or cap ital co ntributio ns in lieu of rent f ree p eriods , and the ef f ect of c ontrac ted ren t uplif ts and p ayment s rec eive d from tenant s on the grant of lea ses. W here the tot al consi deration due un der a lease is m odif ied, for ex ample, where a c once ssion is g ranted to a tenant , the re vise d total amount du e under the le ase is rec ognise d on a straig ht-line basis o ver the rem aining term of the leas e. Fo r incom e from prop er t y lease d out und er a finan ce lease , a lease re ceivab le asset is r eco gnised in th e balanc e shee t at an amount equal to th e net inves tment in th e lease, as d efine d in IFRS 1 6 Le ases . Minimum l ea se paym ents re ceiv able, again def ined in IFRS 1 6, are appo r tione d bet ween f inance in come an d the redu ction of th e outs tanding leas e rec eivable so as to p roduc e a cons tant pe riodic rate of retur n on the remaining ne t investm ent in the leas e. Co ntingent rent s, being th e dif feren ce be twe en the rent c urrently rec eivable an d the minimum lease pay ments w hen the ne t investm ent in the leas e was originally c alculate d, are rec ognise d in prop er t y incom e in the year s in which they are re cei vable. (ii) Surr ende r prem iums – Payme nts rec eive d from te nants to surren der their le ase obligation s are rec ognise d immediately in the G roup inco me statem ent. In circum stanc es wher e surrend er payme nts rec eive d relate to sp ecif ic pe riods, t hey are def erred an d rec ognise d in thos e perio ds. Other income O ther inc ome con sists of c ommissions , fee s charge d to tenants fo r the manag ement of c er tain Group pr oper tie s and administratio n ser v ices p rovide d to joint ventur es. O ther inc ome is re cognis ed in the Gr oup incom e stateme nt in acc ordance wi th the deli ver y of se r vice s as req uired by IFRS 1 5 Reve nue from C ontrac ts with C ustomer s. Ser vice charg es Ser vic e charge inc ome rel ates to expe nditure that is dire ctly re cove rable from ten ants, excluding man ageme nt fee s which are include d in ‘other inc ome’ . Se r vice c harge inco me is rec ognise d as reve nue in the pe riod to which i t relates as r equired by IFR S 1 5 Rev enue fro m Contract s with Customers. 263 Governance Strategic repor t Financial St atements 43 Signif icant acc ounting policies (continued) Exp enses (i) Le ase p aymen ts – Wh ere inves tment pro per ties ar e held under o perating lea ses, t he leaseh old interes t is clas sifie d as if it were h eld under a f inance le ase, which is re cog nised at it s fair value on the b alanc e sheet , within the inve stmen t proper t y c arr ying v alue. Upon initial rec ognitio n, a cor respo nding liabilit y is include d as a financ e lease liabili ty. Minimum lease pay ments are app or tione d bet we en the f inance c harge and the r educ tion of the ou tst anding liabilit y so as to pro duce a c onst ant perio dic rate of interes t on the rem aini ng finan ce leas e liabilit y . Co ntingent rent s payable, b eing the dif fere nce b etwe en the re nt current ly payable and th e mini mum leas e paym ents whe n the lease l iabilit y was originally c alculated, are c harged a s expen ses within pr oper t y exp enditure in th e years in whic h they ar e payable. (ii) Dil apidations – Dilapidation s monies re ceiv ed fr om tenants in re spec t of their leas e obligations ar e reco gnised imm ediately in the Group inc ome st atement , unless the y relate to f uture cap ital exp enditure . In the lat ter cas e, where t he cos ts are co nsidere d to be rec overab le they are c apitalise d as par t of th e carr y ing value of the pro per t y. (iii) Rever se sur rende r prem iums – Payme nts made to ten ants to surren der their lea se obligation s are charge d directly to t he Group inco me statem ent unles s the paym ent is to enable th e probable re deve lopment of a pr oper t y. In the lat ter cas e, where th e cos ts are con sidered to b e rec overab le, they are c apitalise d as par t of th e carr y ing value of the pro per t y. (iv) Othe r prop er t y exp endi ture – Vacant pr oper t y co sts an d other pro per t y co sts are ex pens ed in the ye ar to which they r elate, with t he excep tion of the initial dire ct co sts inc urred in ne gotiating and arran ging lease s which are, in acc ordanc e with IFRS 1 6 Le ases, a dded to the c arr ying value of t he relevant p roper t y and re cog nised as an ex pens e over the le ase term on t he same b asis as the lea se incom e. Employee b enef its (i) Sh are-b ase d remun erat ion Equit y s et tle d – The C ompany op erates a long- term ince ntive pl an and share op tion sch eme. Th e fair value of the c onditional award s of share s granted und er the long-te rm incen tive pl an and the opti ons grante d under the sh are option s cheme are d etermine d at the date of grant . This fair value is the n expen sed on a s traight-line b asis over th e vest ing perio d, base d on an es timate of the numbe r of share s that will event ually vest . At each rep or ting date, the n on-market b ased p er form ance cr iteria of the lon g-term inc entive p lan are rec onsider ed and th e expen se is revis ed as ne ce ssar y. In respe ct of th e share option s chem e, the fair value of th e options gr anted is calcul ated using a binomial l at tice pric ing mode l. Under the t ransition al provision s of IFRS 1 , n o expen se is rec ognise d for opti ons or con ditional share s grante d on or bef ore 7 Novemb er 20 02. (ii) Pensions (a) De fine d con tribu tion pl ans – Ob ligations for c ontribu tions to def ined c ontribu tion pe nsion plans ar e reco gnised a s an expen se in the Gro up income s tateme nt in the per iod to which th ey relate . (b) De fine d ben efi t pla ns – The Gr oup’ s net ob ligation in resp ect of d efine d bene fit p ost- employm ent plans , including pe nsion plans , is calcul ated sep arately for e ach plan by e stimating th e amount of f uture ben efit t hat employe es have e arne d in return for their se r vice in th e current an d prior p eriods . That b enef it is disco unted to deter mine its pre sent value, an d the fair value of any plan as set s is deduc ted. Th e discount r ate is the yield at t he balanc e she et date on A A cr edit rate d bonds t hat have maturi ty dates app roximating the ter ms of the Gro up’ s o bligations. T he calc ulation is pe r forme d by a qualif ied ac tuar y using the pr ojecte d unit cre dit metho d. Any ac tuarial gain or los s in the pe riod is re cognis ed in full in th e Group st atement of c omprehe nsive inc ome. Business combinations Busine ss co mbinations are ac counte d for under t he acquisit ion metho d. Any exc ess of t he purcha se pric e of busines s combinati ons over the fair value of t he ass ets, liabiliti es and co ntingent liabilitie s acquire d and resulting def erre d ta x there on is rec ognise d as goo dwill. Any disco unt is credite d to the Gro up income s tateme nt in the per iod of ac quisition. Go odwill is re cognis ed as an as set and re viewe d for impairme nt. Any imp airment is re cognis ed imme diately in the Group inc ome st atement an d is not subs equently r evers ed. A ny residual goo dwill is review ed annually for imp airment . N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 264 Inves tme nt pro per t y (i) Va luation – Inves tment pro per tie s are thos e that are held ei ther to ear n rental inc ome or fo r capit al apprec iation or bot h, including tho se that are unde rgoing red evelopm ent. Inve stment p roper tie s are meas ured initially at c ost, in cluding relate d transac tion c osts . Af ter initial re cogni tion, the y are carr ied in the Gro up balanc e shee t at fair value adjusted f or the car r ying value of lea sehold intere sts and leas e incenti ve and let ting c ost re ceivab les. Fair value is the p rice that w ould be re ceiv ed to sell an inv estm ent prop er t y in an order ly transac tion b etwe en market p ar ticipants at t he meas urement date. T he valuation is und er taken by ind epend ent valuers w ho hold re cognis ed and re levant profe ssional qu alific ations and hav e rece nt expe rienc e in the locat ions and c ategorie s of proper t ies being valued. Sur pluses or d efici ts resulting f rom change s in the fair value of inve stmen t proper t y are r epor te d in the Group inc ome st atement in the year in whic h they arise . T he Group lea ses ou t investm ent prop er ties und er oper ating leases wi th rents ge nerally payab le monthly or quar ter ly . Th e Group is exp ose d to changes in th e residual value of pr oper tie s at the end of c urrent leas e agre ement s, and mitigate s this risk by ac tively manag ing its tenant mix in or der to ma ximise the w eighted ave rage leas e term, minimise vac ancies ac ross t he por t folio an d ma ximise exp osure to tenant s with stro ng financial c haracter istic s. The G roup also gr ants lease in centi ves to enc ourage hig h qualit y tenants to remain in prop er ties f or longer leas e terms. (ii) Ca pit al expe nditur e – Capi tal exp enditure, b eing cos ts direc tly at tribut able to the red evelopm ent or ref urbishmen t of an investm ent prop er t y , up to the p oint of it being c ompleted f or its inten ded use , are capit alised in th e carr y ing value of that pro per t y . In addit ion, in acc ordanc e with IA S 23 Borro wing Cos ts, f inance c osts t hat are direc tly att ributab le to such exp enditure are c apitalis ed using th e Group’s average c ost of b orrowings during ea ch quar ter . (iii) Dis pos al – P roper tie s are treate d as dispo sed wh en the Group t ransfer s the signif icant r isks and rewards of o wnership to th e buyer . Gen erally this would o ccur on c ompletion of c ontrac t. On disp osal, any gain or lo ss is calc ulated as th e dif feren ce bet we en the net dispo sal proc ee ds and the c arr ying v alue at the las t year end p lus subse quent c apitalise d expe nditure during th e year . Where t he net dispo sal proc ee ds have yet to b e finalis ed at the b alance s heet date, t he proc ee ds rec ognise d refle ct the Dire ctor s’ bes t estimate of the amo unts exp ecte d to be re ceiv ed. Any c ontingen t conside ration is re cognis ed at fair value at th e balanc e shee t date. The f air value is calcul ated using f uture disc ounted c ash flows b ase d on expe cte d outco mes with e stimate d probabilit ies taking a cco unt of the risk and unc er taint y of eac h input. (iv) Development – When the G roup beg ins to redev elop an existing inv estme nt prop er t y for con tinued us e as an investm ent prop er t y or acquire s a prope r ty wi th the subs equen t intention of dev eloping as an inves tment pr oper t y, the prop er t y is class ifie d as an invest ment prop er t y and is acc ounted f or as such . When the G roup begin s to redev elop an existing inve stme nt prope r t y with a view to s ale, the prop er t y is transfe rred to t rading prope r ties and he ld as a current a sset . The pro per t y is reme asured to f air value as at the date of transf er with any gain or los s being take n to the incom e statem ent. T he reme asured amo unt bec ome s the dee med c ost at whic h the prop er t y is then c arrie d in trading prope r ties. T rading proper ty and trading sto ck T rading pr oper t y rel ates to prop er t y being de velope d for sale . T rading sto ck relate s to develop ment exp enditure whic h is due to be dispo sed of to third par tie s under dev elopmen t agre ements . In acco rdance wi th IAS 2 Inve ntories , trading prop er t y and trading sto ck are held at t he lower of c ost and n et realisab le value. Proc ee ds from s ale are rec ognise d in the Group’s i nc ome st atement wh en title has b een tr ansferr ed to the purc haser as r equired by IFR S 1 5 Rev enue fro m Contr acts wit h Custome rs. Proper ty, plant and equipment (i) Own er -oc cupie d pro per t y – O wner- occupi ed prop er t y is state d at its re valued amo unt, which is deter mined in the s ame manne r as inves tment pro per t y. It is deprec iated over i ts remaining usef ul life (40 ye ars) with the dep reciation in cluded in administ rative exp enses . On revaluatio n, any accum ulated dep reciation is e liminated against t he gros s carr ying amo unt of the prop er t y con cern ed, and the n et amount re state d to the revalue d amount . Subse quent dep reciation c harges are a d juste d bas ed on the r evalued am ount for e ach prop er t y . Any dif f erenc e bet ween t he depre ciation char ge on the rev alued amoun t and that which wo uld have be en charge d under his toric co st is trans ferre d, net of any rel ated def erred t a x, bet we en the rev aluation rese r ve and ret ained ear nings as the prop er t y is utilise d. Surpluse s or def icits re sulting from ch anges in the f air value are repor te d in the Group s tateme nt of comp rehensi ve inco me. The l and eleme nt of the prop er t y is not dep reciate d. (ii) A r tw ork – Ar t wor k is state d at revalued am ounts on th e basis of op en market value. (iii) Other – Plant an d equipment is d eprec iated at a rate of be twe en 1 0 % and 25% per annum which is c alculated to wr ite of f the co st, le ss est imated resi dual value of the indiv idual ass ets, ov er their exp ec ted usef ul live s. 265 Governance Strategic repor t Financial St atements 43 Signif icant acc ounting policies (continued) Investments Inves tments in joint v entures , being tho se enti ties over wh ose ac tivi ties the G roup has joint c ontrol, as e stab lished b y contra ctual agre ement , are include d in the Group’s balanc e shee t at cos t togethe r with the Gro up’ s s hare of pos t-acquisi tion rese r ves, o n a net equi ty basis . Investm ents in subsi diaries and joint ve ntures are inc luded in the C ompany ’s balanc e shee t at the lower of c ost and re cov erable amount . Any impairm ent is rec ognise d immediately in th e income s tateme nt. Non-current asset s hel d for sale Non- current as sets ar e clas sifie d as held for s ale if their c arr ying value will b e reco vered t hrough a sale tr ansac tion rathe r than through con tinuing use. This c ondition is re garded as m et if the s ale is highly probable, t he ass et is available for imme diate sale in its pre sent con dition, b eing activ ely markete d and manage ment is c ommit ted to the s ale which should b e expe cte d to qualif y for re cogni tion as a comp leted sale wit hin one year f rom the date of cl assif icatio n. Non- current as sets , including rel ated liabilitie s, clas sifie d as held f or sale are mea sured at the low er of carr y ing value and fair value le ss co sts of disp osal. Financial assets (i) C ash an d cash e quiva lent s – Cash c omprise s cash in han d and on- demand de posit s. Cas h equivalent s compr ise shor t- term, highly liquid inves tment s that are readily c onver tible to kn own amounts of c ash and whic h are subject to an insig nific ant risk of chang es in value. (ii) T rade re ceivables – T rade re ceiv ables are re cognis ed and c arrie d at the original tr ansac tion value. This b alanc e is subject to impairme nt testing und er IFRS 9 using the f or ward-looking , simplif ied appr oach to the ex pe cted cr edit los s mode l. (iii) Lea se inc enti ve rec eiv ables – In ac cordan ce with IFR S 1 6, ren tal inco me is rec ognise d in the Group inc ome st atement on a s traight- line basis o ver the ter m of the leas e. This include s the ef fe ct of lea se ince ntives g iven to tenant s (in the for m of rent fre e per iods, halfrent p eriods or c apit al contrib utions in lieu of r ent fre e perio ds) and any cont racted r ental uplif ts grante d at lease inc eption . Ther esult is a rec eivable b alance in cluded wi thin accr ued inc ome in the b alance sh eet . This balan ce is subjec t to impairment te sting under IFR S 9 using the for ward-lo oking, s implifie d approa ch to the exp ec ted cre dit loss mo del. Financial liabilities (i) Ban k loans an d fi xed ra te loan s – Bank loans and f ixe d rate loans are includ ed as f inancial liabilities o n the balan ce she ets at th e amount s drawn on the par ti cular facili ties. Intere st payab le is expens ed as a f inance c ost in th e year to which it re lates . Wh ere there h as be en a change to the te rms of a debt a gree ment, su ch as the app licable intere st rate or b enchmar k rate, this is ass ess ed under IFR S 9 using quantit ative and quali tativ e asse ssmen ts to determine i f the debt m odifi cation is c onsidere d subs tantial enoug h to be de emed an ex t inguishment . It is comm on for loan fa cilities ag reem ents to include e x tension optio ns which ex tend th e loan matur it y out by on e year . W hen the se option s are exercise d as per t he agre ement , with no ch anges to othe r terms, this is d eeme d to be a mo dific ation of the lo an and not an ex ting uishment. (ii) Non- conve r tible b onds – T hese are in cluded as a f inancial liabilit y on t he balan ce she et net of th e unamor tise d disco unt and co sts on issu e. The dif fe rence b et ween this c arr ying v alue and the re demption v alue is reco gnised in th e Group inc ome st atement ove r the life of the b ond on an ef fe cti ve interes t basis. Intere st payab le to bond ho lders is exp ense d in the year to w hich it relate s. (iii) Conv er tible b onds – T he fair value of the liabili ty c ompo nent of a co nver tible bon d is determine d using the mar ket interes t rate for an equi valent non- conver t ible bond. T his amount is re corde d as a liabilit y on an amor t ised c ost b asis until ex tinguishe d on conv ersion or maturit y of t he bond s. The re mainder of th e proc eeds is al locate d to the conv ersion op tion. This is re cog nised an d included in shareh olders’ e quit y , net of inc ome ta x ef f ect s and is not sub seque ntly re-me asured. Is sue c osts are ap por tion ed be twe en the liabilit y and the e quit y comp onent s of the co nver tible bon ds base d on their c arr ying am ounts at the d ate of issue. T he por tio n relating to th e equit y c ompon ent is charge d direc tly against e quit y . The is sue co sts app or tione d to the liabilit y are am or tised o ver the lif e of the bo nd. The is sue co sts app or tione d to equit y are n ot amor tise d. N O TES TO T HE FI NAN CIA L ST A TEMENTS CONT I NUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 266 (iv) Financ e leas e liabili ties – Finan ce leas e liabilities aris e for tho se inves tment pro per tie s held under a le asehold inter est and acc ounted f or as inves tment pro per t y. The liabilit y is initially calc ulated as th e prese nt value of the minimum leas e payme nts, re ducing in subse quent ye ars by the ap por tionm ent of pay ments to th e lesso r , as de scrib ed abov e under the h eading for lea se paym ents. (v) Inter est r ate de riv ative s – The Gr oup uses de rivati ve financ ial instrum ents to manag e the interes t rate risk as sociate d with the finan cing of the Gro up ’s busines s. No trading in f inancial instr uments is un der taken. At ea ch repo r ting date, thes e interest r ate derivati ves are m easure d at fair value, being th e estimate d amount th at the Group wo uld rec eive or p ay to terminate the a greem ent at the b alance sh eet date, t aking into acc ount curr ent interes t rates and th e current cr edit rating of the c ounterp ar ties. T he gain or loss a t each fair value re measurem ent is rec ognise d in the Gro up income s tatemen t bec ause the Gro up does n ot apply he dge acc ounting. (vi) T ra de payab les – T r ade payable s are rec ognised an d carr ied at the o riginal trans action value . Deferred ta x Def erred t a x is the ta x exp ec ted to be p ayable or rec overable o n dif ferenc es be twe en the c arr ying am ounts of ass ets and liabili ties in the finan cial statem ents and th e corr espon ding ta x base s used in th e ta x comp utation s, and is ac counte d for using the b alanc e sheet liabili ty meth od. De ferre d ta x liabilities are g enerally re cognis ed for al l ta xable tempo rar y dif feren ces an d deferre d ta x ass ets are re cognis ed to the ex tent that i t is probable th at ta xable prof its will be av ailable against which d educ tible temporar y dif feren ces c an be ut ilised. In re spec t of the def erre d ta x on the rev aluation surplus , this is calculate d on the b asis of the char geable gains that wo uld cr yst allise on the s ale of the inves tment p or tf olio as at the re por ting date. T he calcul ation take s acco unt of available indexat ion on the histo rical c ost of th e prope r ties. Def erred t a x is calculate d at the ta x rate s that are exp ecte d to apply in the p erio d, base d on Act s subst antially enac ted at the y ear end, when th e liabilit y is set tled o r the ass et is realise d. Def erre d ta x is include d in profit o r loss fo r the per iod, exce pt when it re lates to item s rec ognise d in other c omprehe nsive inc ome or dire ctly in equit y. Ca sh flo w T rans actio ns in the cas h flow st atement und er oper ating, inve sting and f inancing act ivitie s have be en prep ared ne t of value adde d ta x in order to re flec t the tr ue cash inf lows and ou tf lows of the Gro up. Dividends Div idends p ayable on the ordinar y s hare capit al are rec ognise d in the year in whic h they are de clare d. 2 67 Governance Strategic repor t Financial St atements 20 21 £m 2020 £m 2 019 £m 2 018 £m 2 017 £m 2 016 £m 2 015 £m 2 014 £m 2 013 £m 2 0 12 £m Income statement Gross proper t y income 19 9 . 8 20 4 .7 19 2 . 7 19 6 . 0 17 2 . 2 15 6 . 0 15 2 . 0 13 8 . 4 131. 6 12 4 . 8 Net pr oper t y inc ome an d other in come 1 87 .5 18 3 . 0 18 2 . 6 18 5 . 9 16 4 . 8 14 9 . 2 14 8 . 6 13 6 .1 1 24.3 11 7. 0 Prof it on disp os al of prop er ties an d inves tment s 10 . 4 1. 7 13 . 8 5.2 5 0.3 7. 5 40.2 30.2 53.5 10 . 8 Profit /(loss) before ta x 252.5 (8 3.0) 28 0.6 2 21. 6 3 14 . 8 54 .5 779.5 7 5 3.7 4 6 7. 9 228. 1 Earnings and dividend per share EPR A Earnin gs 12 2 . 0 111 . 0 11 5 .1 12 6 .1 10 5 . 0 85 .7 78 .7 5 8.6 5 5 .1 51. 3 EPR A Earnin gs per sh are (p) 10 8 .7 9 9 9 .1 9 10 3 . 0 9 11 3 . 0 7 94.23 76. 9 9 71. 3 4 5 7. 0 8 53. 87 50.36 Dividen d paid (p) 75. 45 73 .45 6 7. 7 5 13 6 . 5 0 1 0 7. 8 3 44 .66 4 0.6 0 3 7. 4 0 34.50 31. 8 5 Interim /fin al divide nd for t he year ( p) 76. 50 74 . 4 5 72 .4 5 65.85 5 9 .73 52. 36 43.4 0 39.6 5 36 .50 3 3.7 0 Spe cial div idend p aid (p) – – – – 75 .0 0 52 .0 0 – – – – Net asset va lue Net assets 4,44 1 .8 4,31 5. 1 4,4 76.9 4 ,263.4 4, 1 93.2 3, 999.4 3,9 95.4 3,075 .7 2,37 0.5 1, 9 18 . 0 Net as set valu e per sh are (p) – undilute d 3,9 59 3,808 3,956 3,76 7 3 ,70 3 3,530 3, 528 2 ,9 31 2, 24 8 1, 8 24 EPR A NTA per share ( p) – diluted 3,95 9 3 , 8 12 3,95 7 3 ,7 75 3 , 714 3,5 50 3, 532 2,9 06 2, 262 1, 8 8 4 EPR A NDV pe r share (p) – dilute d 3,88 4 3,6 82 3 , 8 47 3,6 96 3 , 6 17 3,45 0 3,463 2,80 0 2,222 1,7 6 4 EPR A NRV p er share ( p) – dil ute d 4,3 01 4 ,1 3 8 4 ,290 4, 092 4 , 0 11 3 ,8 52 3,8 25 3 ,1 6 3 2 , 470 2, 076 T o tal ret urn (%) 5.8 (1. 8 ) 6.6 5.3 7. 7 1. 7 23.0 3 0 .1 2 1. 9 12 . 7 Proper ty por tfolio Prop er t y po rt fo lio at fair value 5,64 6.3 5,355.5 5, 475 . 2 5 ,1 9 0 . 7 4,850.3 4,94 2.7 4,954.5 4, 1 68. 1 3 , 3 5 3 .1 2,8 59.6 Revaluation surplus/( defici t) 13 4 . 5 (19 5 .7 ) 15 4 . 6 8 4 .1 14 9 .7 ( 42. 6) 6 51. 4 6 71. 9 3 3 7. 5 17 5 . 3 Ca sh fl ow st atem ent Cash flow 1 (1 41. 2 ) (58 .4) (2 2.3) (24 5 . 9) 2 4 7. 8 19 . 6 (4 3 .6) (57 .3) (6 5.9) 1. 9 Net cash from / (used in) f inancing acti vities 74 . 7 ( 2 7. 2 ) (16 . 6 ) 25. 2 (298 .2) ( 5 7. 0 ) 2.0 23.4 42 . 9 ( 31. 4 ) Gearing and debt Net debt 1, 2 51.5 1 , 0 4 9 .1 9 8 1. 6 956.9 6 5 7. 9 904.8 9 11 . 7 1, 0 13 . 3 94 9.2 8 74 . 8 NAV gearing (%) 28.2 2 4.3 2 1. 9 22.4 15 . 7 22.6 22.8 32 .9 40.0 45 .6 Loan-to-value ratio ( %) 20.8 18 . 4 16 . 9 1 7. 2 13 . 2 1 7. 7 1 7. 8 24 . 0 28. 0 30.0 Net inte rest c over r atio (%) 464 4 46 462 4 91 454 370 3 62 286 279 26 3 ¹ C ash f low is t he ne t cas h fro m ope rati ng and in ves ting ac ti vit ies le ss th e div iden d paid . A list of def initions is p rovide d from p age 27 4 . TE N - YEAR S U M MAR Y (UN AU DI TE D) De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 268 EPRA M easure Def inition 2 021 2020 EPRA Per formance Measures EPR A Earnin gs Earnings from operational activities £12 2 . 0 m £ 111 . 0 m EPR A undilute d earnin gs per shar e EP RA e arnings div ide d by the weig hted ave rage numb er of ordin ar y share s in issu e during the f inancial y ear 10 8 .79 p 9 9 .1 9 p EPR A Net T angib le Ass ets (N T A ) As sumes t hat entit ies bu y and se ll asse ts, th ereby c r yst allising c er tain leve ls of unavoid able defe rred t a x £4,45 4.2 m £ 4,280. 9m EPR A dilute d NT A pe r share EPR A N T A di vide d by the n umber of or dinar y share s in issue at t he fin ancial ye ar end adjuste d to includ e the ef fe ct s of poten tial dilutiv e share s issua ble under t he Group’s share op tion sc heme s and the conver tible bon ds 3,959p 3 , 8 12 p EPR A Net Di spos al Value (NDV ) R epres ent the s hareho lders’ valu e under a disp os al scen ario, whe re defe rre d ta x, f inancial ins trume nts and c er tain ot her adjust ments ar e calc ulated to t he ful l ex tent of the ir liabilit y, net of any res ulting ta x £4,369.6m £4, 1 34.8m EPR A dilute d NDV per sha re EPR A NDV di vide d by the num ber of or dinar y share s in issue at t he fin ancial ye ar end adjuste d to includ e the ef fe ct s of poten tial dilutiv e share s issua ble under t he Group’s share op tion sc heme s and the conver tible bon ds 3,88 4p 3 ,682p EPR A Net Re instate ment Value (NR V ) NAV adjusted to r efle ct the v alue require d to rebuild t he enti ty an d ass uming that ent ities n ever s ell ass ets . Ass ets an d liabilitie s, suc h as fair valu e movem ents o n financ ial deri vative s are not ex pe cte d to cr ys tallis e in norm al circums tanc es and d eferr ed ta xe s on prop er t y valuatio n surplus es are exc luded £ 4 , 83 9 .7m £ 4,646.5m EPR A dilute d NRV per s hare EPR A NRV di vide d by the numb er of ordin ar y shares in is sue at th e fin ancial ye ar end adjuste d to includ e the ef fe ct s of poten tial dilutiv e share s issua ble under t he Group’s share op tion sc heme s and the conver tible bon ds 4 , 3 0 1p 4 ,1 3 8 p EPR A c ost r atio (inc luding dire ct vaca ncy cos ts) Adminis trativ e and ope rating c ost s (including c ost s of direc t vacan cy) divi ded by g ros s rental in come 24.3% 30.5% EPR A net ini tial yield Ann ualise d rental in come b ase d on the c ash ren ts pas sing at the b alanc e she et date, les s non-r eco verable p rope r ty o perat ing exp ense s, div ided b y the marke t value of the EP RA p rope r ty p or t folio, incre ase d by es timated p urchas ers’ co sts 3.3% 3 .7 % EPR A ‘ topp ed-up’ ne t initial yie ld This m easure in corp orate s an adjustme nt to the EPR A NI Y in resp ect of the ex piration of r ent fre e pe riods (or oth er unex pired lea se inc entiv es suc h as disco unted re nt per iods and s tepp ed ren ts) 4 .4% 4. 8% EPR A vac ancy r ate Estima ted rent al value (ER V ) of immediate ly available sp ace di vide d by the ER V of the EPR A p or t folio 1. 6 % 1. 8 % E PR A SUMM A RY (UN AU DI TE D) 269 Financial St atements Governance Strategic repor t EPR A SUMMA RY CONTINUED EPRA M easure Def inition 2 021 2020 EPRA Sust ainabi lit y Performance Measures Environmental Sustainability Per formance Measures T otal electr icity consumption Energ y us e acro ss our tot al mana ged p or tf olio (l andlord/comm on area s ) – annu al kWh 7, 9 5 3 ,1 1 4 8, 398,6 62 Like -fo r-like to tal ele ct rici t y consumption Ener g y use acro ss our l ike-for -like por t fo lio (lan dlord/commo n areas) – annual k Wh 6,969, 7 4 9 6,983, 1 50 1 T otal fuel c onsum ption Ener g y use acro ss our to tal mana ged p or t folio (l andlord / co mmon area s ); a total of ga s, oil and bi omass c onsump tion – annual k Wh 1 7, 2 8 8 , 7 1 9 18 , 0 6 9 , 8 4 6 Like -fo r-like to tal f uel consumption Ener g y use acro ss our l ike-for -like por t fo lio (lan dlord/commo n areas); a total o f gas, oil and bi omass c onsum ption – annua l kWh 1 6,055,685 1 5,455,31 2 1 Building e nerg y in tensi ty Ene rg y use acr oss o ur total man aged p or t folio ( landlor d/ c ommon area s ) – k Wh per m 2 68 .65 72 . 47 T o tal direc t gre enhou se gas (GHG) emiss ions T o tal mana ged p or t folio em ission s (landlor d influe nce d por t foli o emis sions); a total of S cop e 1 emissio ns – annual me tric tonn es CO 2 e 3 ,1 7 3 3,32 6 T o tal indire ct gre enho use gas (GHG) emi s sions T o tal mana ged p or t folio em ission s (landlor d influe nce d por t foli o emis sions); Scop e 2 ene rg y-us e - annual met ric tonne s CO 2 e 1 ,678 1, 9 4 7 Like -for -like tot al direc t gre enhou se gas (GHG) emis sions Like-for-like emissions (landlord influence d port folio emissions, building rel ated on ly) ; S cop e 1 energ y u se – annual me tric tonn es C O 2 e 2 , 9 41 2, 8 42 1 Like -for -like tot al indire ct gre enhou se gas (GHG) emis sions Like-for-like emissions (landlord influence d port folio emissions, building rel ated on ly) ; S cop e 2 energ y u se – annual me tric tonn es C O 2 e 1, 47 0 1, 6 17 1 Gre enhous e gas (GHG) intensi ty from build ing energ y consumpti on Intensi t y ( S cop es 1 & 2) pe r m 2 /£m turno ver /f air market valu e (repor te d in tC O 2 e/m 2 ) – kg C O 2 e/m 2 /year 0 . 013 0.01 5 T o tal water c onsump tion Water us e acro ss our tot al manag ed po r tf olio (excluding re tail con sumptio n) – annual m 3 1 0 2 ,1 6 8 9 5 , 719 Like- for-l ike total water consumption Water use ac ros s our like-f or-like p or tf olio (excluding re tail con sumptio n) – annual m 3 88,95 4 88,335 1 Building water inte nsit y Water us e acro ss our tot al manag ed po r tf olio (excluding re tail consumption) – m 3 /m 2 /year 0.29 0.2 9 T o tal weig ht of waste by dispo salro ute Waste gen erate d acros s our tot al manag ed po r tf olio – annual m etric tonne s and pro por tio n by dispo sal rou te 1 ,15 7 1,16 2 Like- for-l ike total weig ht of wasteb y dispos al rou te Waste gen erate d acros s our like- for-l ike por t folio – an nual metr ic tonne s and pro por tio n by dispo sal rou te 695 777 1 ¹ Pr ior ye ar re sta ted to r efle ct a c hang e in met hod olog y o f the like -f or-l ike po rt fo lio. S ee t he EPR A Re por t ing se cti on in ou r 2021 Annu al Res pon sibili t y Rep or t for f ull ex pla nati on. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 270 EPRA M easure Def inition Social Perf ormance Measures Employee gender diversit y Perc enta ge of male and f emale emp loyee s in the or ganisation’s gove rnanc e bo dies (commi tte e or bo ards res ponsib le for the s trateg ic guidan ce of th e organisat ion) Se e pag e 1 71 Gen der pay r atio Ra tio of the b asic sal ar y and/or remun eration of m en to wom en. As w e have le ss than 250 e mploye es we are n ot oblige d by the Equ alit y Ac t 201 0 (Ge nder Pay G ap Inform ation) Reg ulation s 20 1 7 to disc lose our gend er pay gap inf ormatio n New hire s and turn over T ot al numbe r and rate of ne w employe e hires an d employ ee turn over during th e repo r ting per iod Se e pag e 56 Employ ee he alth and saf et y O cc upation al health an d safet y p er for mance wi th rel ation to dire ct emplo yee s Se e pag e 63 and 66 As set h ealth and s afet y asses sments Prop or tion o f asse ts con trolle d for whic h health an d safet y imp acts have b een re viewe d or as ses sed f or comp lianc e or improve ment Se e pag e 63 and 66 As set h ealth and s afet y complian ce Any in cident s of non- comp liance w ith reg ulation s and/or volunt ar y st andards c onc erning th e health an d safet y imp acts o f asse ts ass ess ed dur ing the rep or ting p eriod Employ ees t raining and development Avera ge hour s of training tha t the organis ation’s employe es hav e unde rt aken in the r epor tin g perio d Se e the EPR A Re por ting se ction in o ur 202 1 An nual Respon sibi lit y Repor t Employ ee pe r forman ce app raisals P erce ntage o f total emp loyee s who re cei ved re gular p er for mance an d car eer de velopm ent rev iews during t he rep or ting pe riod Co mmunit y enga gemen t, impac tass ess ments an d development program mes Perc ent age of as sets un der op eratio nal con trol that h ave implem ented loc al comm unit y engage ment , impac t asse ssm ents and / or development program mes Governance Perform ance Measures Co mposi tion of th e highes t governance body Numbe r of execu tive b oard m embe rs, numb er of inde pend ent /non- exec utiv e boar d memb ers, av erage te nure of the go verna nce b ody and numb er of inde pen dent /non-e xecu tive b oard me mber s with com peten cies re lating to env ironme ntal and s ocial to pics Se e pag e 1 26, 1 27 , 1 32, 1 39 a n d 14 0 Proc ess for nominating and se lec ting the high est governancebody Nominat ion and se lec tion pro ces s for th e highe st gove rnanc e bo dy and it s memb ers, a nd the cr iteria us ed to g uide the no mination an d selec tion process Se e pag e 1 4 4 to 1 47 Proce ss for managi ng con flic tsofintere st Pro ces s for th e highe st gove rnanc e bo dy to ensur e conf lict s of intere st are avoi ded and m anage d Se e pag e 1 39 271 Financial St atements Governance Strategic repor t PR I NCI P A L PROPE RT IE S (UN AU DI TE D) Value banding £m Of f ic es (O), Re ta il /r es ta ur an t (R), Residen tial (Re ), Industrial (I), Leisu re (L) Freehold ( F ) , Leasehold (L) BRE EA M Rating Approximate net a rea sq f t Wes t End: Ce ntr al (6 1 %) Fitzrovi a 1 (3 3%) 80 Cha rlot te Str eet W1 2 200 + O/R/Re F E xcel lent 3 49,4 00 1 - 2 Ste phen S tre et & T o tte nham Co ur t Walk W 1 200+ O/R/L F Ver y Go o d 266 ,200 250 Euston R oad NW1 1 00- 200 O F 16 5 , 9 0 0 90 Whi tf ield S tree t W1 1 00- 200 O/R/Re F 10 8 , 9 0 0 Holde n House , 54-6 8 Ox fo rd Str eet W1 1 00- 200 O/R F 90,600 Henr y Wo od Hous e, 3- 7 L angham P lac e W 1 5 0 -10 0 O/R/L L 79,9 00 Middles ex Hous e, 34-42 Clevel and S treet W1 5 0 -1 0 0 O F Ver y G o o d 6 5 ,70 0 Net work B uilding, 95-1 0 0 T ot tenh am Cour t R oad W1 5 0 -10 0 O/R F 6 4,200 Char lot te Building, 1 7 Gre sse S tre et W1 5 0 -10 0 O L 4 7, 2 0 0 88-9 4 T ot tenh am Cour t Ro ad W1 5 0 -10 0 O/R F 45,9 00 80 -85 T o tte nham Co ur t Road W1 25-5 0 O/ R F 44 ,500 Rathb one S tudios , 3- 10 Rathbon e Plac e W1 25- 50 O/R/Re/L L/F 42 ,5 0 0 60 Whi tf ield S tree t W1 5 0 -1 0 0 O F 36 ,200 43 an d 45-51 Whit field S tre et W1 25- 50 O F 30,90 0 1 -5 Maple P lace an d 1 2- 1 6 Fi tzroy S tre et W1 0 -2 5 O F 20,30 0 1 71 -1 7 4 T ot tenham C our t Ro ad W1 0 -2 5 O/R F 16 , 2 0 0 76- 78 Charlot te S tre et W1 0 -25 O F 11 ,1 0 0 50 O x ford S tree t W1 3 0 -2 5 O/ R F 6 ,1 0 0 V ic t o r ia (9%) Horsefer ry Hous e, Horseferr y Road SW1 1 00- 200 O F 16 2 ,7 0 0 Gre enc oat and G ordon Ho use, Fran cis Str eet SW1 1 00 - 200 O F 13 8 , 6 0 0 1 Pag e Stre et SW1 1 00- 200 O F E xcel lent 1 2 7, 8 0 0 Francis House, 1 1 Fra ncis Stre et SW 1 0 -2 5 O F 52 ,6 00 6-8 Gr eenc oat P lace S W1 25 -5 0 O F 32, 40 0 Paddington (7%) Brun el Building , 2 Canals ide Walk W2 200 + O/ R L E xc ellen t 24 3 ,4 0 0 Soho/Covent Garden (7 %) Soh o Plac e W1 20 0+ O/R/L L * Out stan ding, E xce lle nt 28 5,000 Bush H ouse, S outh We st Wing , Str and WC2 25-5 0 O F 10 3 ,7 0 0 Bake r St ree t /Mar y leb one (3%) 1 9-35 Bake r Stre et W1 1 00 - 200 O/R/Re L * Out sta nding , * Ver y G o o d 298 ,000 Baker S tre et JV wi th La zari Inve stm ents (50 % share) 38-42, 54-6 0 & 66 Baker S tre et W1 O/R L 6 1 ,000 Ma y f a ir (2 %) 25 Savile Row W1 5 0 -10 0 O/R F Ve r y Go o d 43, 000 De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 272 Value banding £m Of f ic es (O), Re ta il /r es ta ur an t (R), Residen tial (Re ), Industrial (I), Leisu re (L) Freehold ( F ) , Leasehold (L) BRE EA M Rating Approximate net a rea sq f t West End : Borders/other ( 8%) Islington /Camden (7% ) Ang el Building, 4 07 St. J ohn St reet EC1 200 + O/ R F E xce llent 268 ,30 0 4 & 1 0 Pen tonville Ro ad N 1 5 0 -10 0 O F Ver y G o o d 53,4 00 Holfo rd Works , Cruiksha nk Stre et WC1 25 -5 0 O/I F 41 , 6 0 0 401 S t. John S tree t EC1 0 -25 O F 12 , 3 0 0 Brix ton ( 1 %) Blue S tar Ho use, 234-2 4 4 Stoc kwe ll Road SW 9 25 -5 0 O/R F 53,4 00 City: Border s (30% ) Old S tr eet (1 2%) White C ollar Fa ctor y, Old St reet Yard EC1 200 + O/R/Re F Ou tst anding , E xce llent , Ver y Go o d 2 9 1, 4 0 0 1 Oli ver ’ s Y ard EC1 1 00- 200 O/R F 1 86, 000 Th e Feath ersto ne Building, 6 6 Cit y Road EC1 5 0 -10 0 O/R F *O uts tan ding 1 25 ,000 Clerken well ( 10% ) 20 Farrin gdon Roa d EC1 1 00- 200 O/R/L L 16 6 , 3 0 0 88 Roseber y Avenue EC1 1 00- 200 O F 10 3 ,7 0 0 More lands , 5- 27 Old S tree t EC1 5 0 -10 0 O/R L Ou tst anding 88 ,70 0 T ur nmill, 63 C lerkenwel l Road EC1 5 0 -10 0 O/R F E xce llent , Ver y Go o d 70, 30 0 1 9 Char ter hous e Stre et EC1 5 0 -10 0 O F 6 3 ,70 0 5-8 Hard wick S treet a nd 1 61 Ro sebe r y Avenue EC1 25 -5 0 O F 34, 000 1 5 1 Roseber y Avenue EC1 0 -2 5 O F 24 , 9 0 0 3-4 Hardwic k Str eet EC1 0 -2 5 O F 11 , 8 0 0 Shoreditch/ Whitechapel ( 8% ) T e a Building, 5 6 Shore ditch High S tre et E 1 20 0+ O/R/L F 2 7 1 ,10 0 Th e White Chap el Building E 1 1 00- 200 O/ L F 27 3,7 00 P r o v i n c i a l (1% ) S c o t l a n d (1% ) St rathkelv in Retail Par k, Bish opbr iggs , Glasg ow 25-5 0 R/L F 325 ,5 00 Lan d, Bisho pbrig gs, Gl asgow 25 -5 0 – F 5,50 0 acres ¹ I nclu des No r th of O x ford S tre et ² Ex clud es so ld res ide ntial 3 Inc lude s 36-38 a nd 42-44 Ha nway S tre et W1 * O n-track for Post- Completion target ( ) Pe rce nta ges w eigh ted b y valuat ion T ech B elt (4 2%) 273 Financial St atements Governance Strategic repor t LI ST OF D EFI N ITIO N S ( UNA UD I T E D) Be tt er Building s Par tn ersh ip (BBP) The BB P is a collab oration of t he UK’s leading comme rcial prop er t y owner s who are wor king togethe r to improve the s ustainabilit y of exis ting c omm ercial building s toc k. Build ing Research Est ablish ment Environme ntalAs sess ment Meth od (BREEA M) An en vironment al impact a sse ssment m etho d for non- dome stic buildings. Per fo rmanc e is measure d acros s a serie s of ratings; Pas s, Goo d,Ver y Goo d, Exc ellent and O uts tanding. Capital re turn The ann ual valuation move ment arising on t he Group’s por t folio expre sse d as a per cent age retur n on the valuation at t he beginning ofthe ye ar adjusted for a cquisition s and capit al expe nditure. Carb on emission s Scop es 1 , 2 and 3 Sc ope 1 – direc t emissi ons; Sc ope 2 – indire ct emis sions; and Sc ope 3 – oth er indirec t emission s. CDP The C DP is an organisation whi ch works wi th shareho lders and liste dcompanie s to facilit ate the disclos ure and repo r ting of climatechang e data and infor mation. Company V oluntar y Arrangement (CV A) An ins olvenc y proc edure allowing a c ompany with d ebt problem s or that is inso lvent to reac h a voluntar y a greem ent with it s credito rs to repay i ts debt ov er a fixe d per iod. Depa rt ment for Envir onment , Food and R ural Af fair s(DEFRA ) The government department responsible for environmental prote ction, f ood p roduc tion and st andards, a griculture , fishe ries andrural c ommunitie s in the United K ingdom. Dilute d figur es Repo r ted res ults adjusted to include t he ef fe cts of p otential dilutive share s issuable unde r the Group’s share option s cheme s and the co nver t ible bo nds . Earnin gs/ e arnings per s hare (EPS) Earnings rep resen t the prof it or los s for the ye ar at tribut able to equit y sh areholder s and are divi ded by th e weighted av erage number of o rdinar y shares in is sue during the f inancial ye ar to arri ve at earnings p er share. Energ y P erf ormanc e Cer tific ate (EPC) An EP C is an ass et rating det ailing how energ y e f ficien t a building is, rate d by carb on dioxide e mission on a s cale of A-G, wh ere an A rating is the m ost en erg y ef f icient. T hey are legally re quired for any building that is to be p ut on the mar ket for sale or re nt. Es timated ren tal value (ERV ) This is th e ex ternal valuer s’ opinion as to the op en market ren t which, on t he date of valuation, c ould reas onably be ex pec ted to b e obtain ed on a new let ting o r rent revie w of a prope r ty. Europea n Public Real Es tate As sociat ion (EPRA ) A not-f or-prof it ass ociatio n with a memb ership of Europe’s leading prop er t y comp anies, inve stors and c onsultan ts which str ives to est ablish b est pra ctice s in acc ounting, re por ting and c orpo rate gover nance an d to provid e high qualit y informat ion to investo rs. EPR A ’s Bes t Prac tices R eco mmendatio ns includes g uideline s for the c alculation of t he following p er forman ce mea sures which th e Group has a dopted. — EPR A ear nings per s hare Earnings f rom oper ational act ivitie s. — EPR A net r eins tat emen t value (NRV ) p er sha re NAV adj us ted to ref lect th e value require d to rebuild the enti ty and as suming that entit ies neve r sell as sets . Ass ets and liabilities , such as f air value movem ents on f inancial deri vative s are not exp ec ted to cr ys tallise in no rmal circums tanc es and def erred t a xes on prop er t y valuation surplus es are exclude d. — EPR A net t ang ible as set s (NT A ) per sha re As sumes th at entitie s buy and s ell ass ets, th ereby cr ys tallising c er tain levels o f unavoidable defe rred t ax . — EPR A net d ispos al value (NDV ) p er shar e Repre sent th e shareholde rs’ value under a disp osal s cenar io, where d eferre d ta x, f inancial instr uments an d cer t ain other adjustmen ts are calcul ated to the f ull ex tent of the ir liabilit y , net of any re sulting ta x. — EPR A co st ra tio (inc luding dir ect v acan cy co st s) EPR A co sts as a p ercent age of gro ss rent al incom e less groun d rent (including share o f joint venture gr oss ren tal inco me less g round rent ) . EPR A c osts inc lude administrati ve exp enses , other pr oper t y c osts , net ser vic e charge c osts an d the shar e ofjoint venture s’ overhe ads and op erating exp ense s (net of anyser vic e charge c osts), adj us ted for s er vic e charge co sts re cover ed throu gh rents and m anagem ent fee s. — EPR A co st ra tio (excluding dir ec t vac ancy c ost s) Calcul ated as ab ove, but wi th an adjustment to exc lude direc t vac ancy c osts . — EPR A net in itial y ield (NIY ) Annualis ed ren tal incom e base d on the c ash rent s passing atthe b alance sh eet date, le ss non-r eco verable prop er t y ope rating expe nses , divide d by the mar ket value of the EPR A prop er t y por t folio, in crease d by es timated purc haser s’ cost s. De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 2 74 — EPR A ‘ topp ed-up’ ne t initial y ield This me asure inco rporate s an adjustment to t he EPR A NIY inresp ect o f the expiratio n of rent-fr ee pe riods (or othe r unexpire d lease inc entiv es such a s discounte d rent pe riods andstep ped r ents) . — EPR A vac ancy r ate Estimate d rental v alue (ERV ) of immediately avail able spac e divid ed by the ER V of the EPR A po r tf olio. In addition , the Group has a dopted th e following re comme ndation forin vestment proper t y repor ti ng. — EPR A like-for -like re nt al incom e grow th The g row th in rental inc ome on pr oper tie s owned t hrougho ut the cur rent and pre vious ye ar under re view. This grow th rateinclude s revenu e rec ognition an d lease ac counting adj ustments but excludes proper ties held for devel opment ineithe r year and pr oper tie s acquired o r dispos ed of in eith eryear . Fair value ad justment An ac count ing adj us tment to chan ge the bo ok value of an as set or liabilit y to its mar ket value. Global Real E st ate Sust ainabilit y Benchm ark ( GRESB) The G lobal Real Es tate Sust ainabilit y Ben chmark is an initiati ve set up to ass ess th e environme ntal and s ocial per f ormanc e of public and pri vate real es tate inves tment s and allow inves tors to under stand t heir per fo rmanc e. Ground rent The r ent payable by th e Group for i ts lease hold prop er ties. Un der IFRS, a liabilit y is re cog nised using th e discoun ted paym ents due. Fixe d lease p ayment s made are alloc ated b etwe en the inter est payable an d the redu ction in the o utst anding liabilit y. Any variable paym ents are re cog nised in the inc ome s tatement in t he peri od to which it relates. Headr oom This is th e amount lef t to draw under t he Group’s loan facilitie s (i.e.the tot al loan facili ties les s amounts alre ady drawn). Intere st rat e swap A finan cial instrum ent where t wo par tie s agre e to exchange an interes t rate obligation f or a prede termine d amount of time. The seare gen erally use d by the Gro up to conver t f loating rate debttof ixed r ates. IS S- O eko m ISS- Oeko m is an ESG rating ser v ice that p rovide s corp orate and coun tr y ESG res earch and ra tings that enables i ts client s to identif y material s ocial and env ironment al risks and op por tunitie s. Key Per forman ce Indicator s (KPIs ) Ac tiviti es and be haviours , aligne d to both busin ess obje ctiv es andindiv idual goals , against which t he per fo rmanc e of the Group isannually as sess ed. Pe r formanc e meas ured agains t them is refer ence d in the Annu al Repor t. Lea dership in Energ y a nd Environmen tal Design (LEED) LEED is a US bas ed env ironmental imp act as ses sment me thod forbuildings. P er forman ce is mea sured acr oss a se ries of ratings – Ce r tifie d, Silver , G old and Pl atinum. Lease incentives Any inc entiv e of fere d to occupi ers to enter into a lea se. T ypic ally theinc entive w ill be an initial rent-f ree or h alf rent perio d, stepp ed rents , or a cas h contrib ution to f it-ou t or similar co sts. Loa n- to -value ratio (L T V ) Drawn de bt net of c ash divide d by the f air value of the prop er t y por t fol io. Drawn debt is e qual to drawn facilit ies less c ash and theunamo r tised e quit y elemen t of the con ver tible bon ds. Managed por tf oli o This is th e repor ting p or t folio we use to m easure and re por t our environ mental dat a e.g. u tilit y usage , waste gene rated and c arbon emissio ns. Th e prope r ties within this p or tf olio are direc tly manage d by the Gr oup i.e. we have op erational c ontrol . Mark -to-market The dif f erenc e bet ween t he bo ok value of an ass et or liabilit y and itsmar ket value. MSCI Inc. (MSCI) MSCI Inc . is a comp any that prod uces in depen dent be nchmarks o f prop er t y returns . The Gro up measure s its p er forman ce against both t he Ce ntral Lond on Of f ices In dex and the UK A ll Prope r ty Inde x. National Aus tralian Built Environm ent Rating S ystem(NAB ERS ) This is a building pe rf ormanc e rating sy stem which pro vides an ener g y per for mance b enchmar k using a simple star r ating syste m ona 1 -6 sc ale. This he lps prop er t y owner s unders tand and comm unicate a building’s per for mance v ersus oth er similar buildingsto occ upiers. Rat ings are validated on an annual b asis. N AV g e a r i n g Net deb t divide d by net as sets . Net as set s per shar e or net as set value (NA V ) Equit y shareho lders’ fun ds divide d by the numb er of ordinar y share s in issue at the b alanc e sheet d ate. Net deb t Bor rowings plus bank ov erdraf t less c ash and c ash equi valents. Net inter est c over ratio Net pro per t y inco me, excluding all no n-co re items divi ded by interes t payable on b orrowings and n on-utilisa tion fee s. Proper ty income distribution ( PID ) Div idends f rom prof its of the G roup’ s ta x-exemp t prope r ty r ental busine ss under t he REIT reg ulations . Non-PID Div idends f rom prof its of the G roup’ s ta xable re sidual busine ss. 275 Governance Strategic repor t Financial St atements Real Es tate Inves tment T rus t (REIT ) The UK Re al Estate Inve stme nt T rus t (“REIT ” ) regime was laun ched on 1 Januar y 20 0 7 . O n 1 July 2007 , D er went Lon don plc ele cted to conv er t to REIT st atus. The REI T legislatio n was introduc ed to pro vide a st ruct ure which clos ely mirrors th e ta x outc omes of dire ct owne rship in prope r ty andrem oves t ax ine qualitie s bet ween dif f erent real e state inves tors. It p rovide s a liquid and public ly available vehicle whic h ope ns the prop er t y market to a wide r ange of inves tors. A REIT is exempt f rom co rporat ion ta x on qualif y ing incom e and gains of its pro per t y rent al busines s prov iding various c onditions are met . It remains subjec t to cor poratio n ta x on non- exempt inco me and gains e.g . interest inc ome, tr ading activ it y and development fees. REIT s m ust distrib ute at least 9 0% of the Gro up ’s income p rofit s from i ts ta x exempt p roper t y ren tal busine ss, by way of div idend, know n as a prope r ty in come dis tribution (P ID ). The se distribu tions can b e subject to wi thholding ta x at 20%. If the Gr oup distribu tes prof its fro m the non- ta x exempt busin ess, the dist ribution will b e ta xed as an or dinar y dividen d in the hands ofthe inve stors (non -PID ). Renewable Ener g y Guaran tees of Or igin ( REGO) The REG O schem e administered b y Ofg em provid es transp arenc y tocon sumers ab out the p ropor tio n of elec tricit y that s upplier ’ s source/provide from renewable generation. Rent rev iews Rent re views take pl ace at inter val s agre ed in the lea se (ty pically ever y f ive y ears) and their p urpos e is usually to adjust the re nt to thecur rent market le vel at the re view date. For upwar ds only rent revi ews, the re nt will either re main at the sam e level or incr ease (ifmarket r ents are highe r) at the revie w date. Repor ting of Injuries , Diseas es and Danger ous Occ urrence s Regulation s (RI DDORs) The r egulatio ns plac e a legal dut y on employ ers to rep or t wor k-relate d deat hs, major in juri es or ov er- three -day injuri es, work-rel ateddisea ses and dan gerous oc curre nces (ne ar miss acci dents) to the He alth and Safet y E xec utive . Reversion The r eversio n is the amount b y which ERV is highe r than the ren t roll of a prop er t y or por t fol io. The rev ersion is de rive d from c ontrac tual rent al increas es, rent r eviews , lease ren ewals and the le tting of spac e that is vac ant and available to o ccupy or un der deve lopment orref urbishmen t. Scien ce Bas ed T arge t initiative (SBTi) The S cienc e Base d T arge ts initiativ e ( SBT i) is a coll aborati on bet we en CDP , th e United Nation s Global C ompac t, World Res ource s Institute ( WRI) and th e World Wide Fund f or Nature ( WWF ). The SBT i def ines and pro motes b est pra ctice in s cienc e- bas ed targ et set ting and ind epend ently ass ess es and app roves comp anies’ targe ts. S cienc e-bas ed targ ets prov ide com panies with a cle arly def ined pathway to f uture -proof gr owt h by spe cif ying how muc h and how quickly t hey ne ed to redu ce their g reenho use gas emissi ons. Sc rip div idend Der wen t London p lc sometim es of fer s its shareh olders th e opp or tunit y to rec eive div idends in th e form of shar es instead o f cas h. This is kn own as a scrip div idend. Str eamli ned energ y and carb on repor ting ( SECR) The SECR r egulatio ns were intro duce d in April 201 9 and r equire comp anies inc orpor ated in the UK to unde r take enhanc ed disclos ures of their en erg y and c arbon e missions in th eir finan cialrepor ting . T ask Fo rce on Climate -rel ated Financial Disclo sures( TCFD) Set up b y the Financial S tabilit y B oard (FSB) in resp onse to the G20 Financ e Ministers and C entral B ank Gover nors re ques t for gre ater level s of decision -usef ul, climate-re lated info rmation; the TCFD was aske d to develop clim ate-relate d disclos ures that c ould promo te more inform ed inve stment , credi t ( or lending ), and insuranc e under writing d ecision s. In turn, this wo uld enable stake holders to un derst and be tte r the con centra tions of car bon- relate d ass ets in the f inancial se ctor and t he financ ial system’s exp osures to cl imate-relate d risks . ‘T opped-up’ rent Annualis ed ren ts gener ated by the p or t folio plus ren t contra cted from e xpir y of rent-f ree p eriods an d uplif ts a gree d at the bal ance she et date . T ot al proper t y re turn (TP R) T ot al prop er t y return is a p er forman ce mea sure calcul ated by the MSCI an d define d in the MSC I Global Meth odolog y S tandar ds forRe al Estate Inve stmen t as ‘t he perc enta ge value change p lus netinc ome ac crual, re lativ e to the capi tal employe d’ . T ot al return The m oveme nt in EPRA n et tangib le asset s per share o n a dil ute d basis b et ween the b eginning and th e end of eac h financial y ear plusthe di vidend p er share p aid during the ye ar expres se d as a per centa ge of the EPR A ne t tangible as sets p er share on a dilute d basis at th e beginning of th e year . T ot al shareh older return ( TSR) The g row th in the ordinar y shar e price as qu oted on th e London Sto ck E xchange plus div idends p er share re cei ved for t he year , expre sse d as a per cent age of the sh are price at t he beginning oftheye ar . LIS T OF DEF IN I TIONS CONTINUED De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 276 T rans mission and dis tribution ( T&D ) The e missions as soc iated with th e transmissi on and distrib ution loss es in the gr id from th e transp or tation of e lectr icit y from i ts generation source. Underlying p or tfolio Prop er ties th at have be en held for t he whole of th e year (i.e. excludingany ac quisitions or disp osals m ade during the ye ar) . Underlying valuatio n increase The v aluation increa se on the und erlying p or t folio. Unmana ged por tf olio This is th e por t folio of sing le-let prop er ties wh ere we have no ope rational co ntrol. We do n ot repor t e nvironmen tal data f rom thispor t fo lio. Yields — Ne t initi al yield Annualis ed ren tal incom e base d on the c ash rent s passing attheb alance sh eet date, le ss non-r eco verable prop er t y ope rating expe nses , divide d by the mar ket value of the prop er t y , incre ased b y estimate d purchas ers’ co sts. — Reversionar y yield The an ticipated y ield to which the n et initial yield will r ise onc e the rent reache s the estimated rental values. — T ru e equiv alent y ield The c onst ant capi talisation r ate which, if applie d to all cas h flows f rom the p or t folio, including c urrent rent , rever sions to valuers’ e stimated r ental value and s uch items a s voids and exp enditure s, equate s to the valuation hav ing taken into acc ount notio nal purchas ers’ co sts . Rent is assum ed to be rec eive d quar terly inadv ance. — Y ield shift A move ment in the y ield of a prop er t y asse t, or like-f or-like por t fol io, over a giv en year . Y ield compr ession is a c ommonly - use d term for a re duct ion in yields. 27 7 Governance Strategic repor t Financial St atements CO M MUNI C A T I ON W I T H OUR SH A R EHOL DE RS Shareholder enqui ries Enquiries re lating to shareh olders , such as que ries c oncer ning notif icati on of change of ad dress , dividen d payme nts and lostsh are cer tif icate s, should b e made to the C ompany ’s regis trars,Equiniti. The C ompany h as a share acc ount, man ageme nt and dealing facilit y f or all shareho lders via Equiniti L imited. This of f ers shareh olders s ecure ac ces s to their ac count de tails held onthesh are registe r , to amen d address inf ormation an d paym entinstr uctio ns direct ly , a s well as prov iding a simple and conv enient way of bu ying and se lling the Co mpany ’ s ordinar y share s. For intern et ser v ices v isit: w w w. s ha r e vi e w.c o. uk The S hareview D ealing ser vic e is also available by te lephone on +44(0) 3456 0 3 7 037 be twe en 8.00 am and 4.30pm , Monday to Friday (excluding public hol idays in Englan d and Wales) . The b est way to e nsure that div idends are re cei ved as quick ly as po ssible is to instr uct th e Comp any’s regist rars to pay the m directly into a bank or b uil ding so ciet y acc ount; ta x vo ucher s are then mailed to share holder s separate ly . This me thod als o avoids the riskof div idend ch eque s being del ayed or lo st in the po st. Div idendman date forms are avail able from th e registr ars, eit her from t heir websi te at: w w w. sh a re v i ew. c o.u k o r by telephon e on the Equ initi genera l shareholder helpline num ber . Advis ers Stock brokers JP Morgan C azen ove UBS Solicitors Sl aughter & May L LP Audit or Pricew aterhouseCoopers LLP Registr ars Equini ti Limi ted Financial a nd dividend c alendar – 2022 Our for t hcoming f inancial and div idend c alendar fo r 202 2 is prov ided b elow. Thes e dates are prov isional and subje ct to change . For up to date infor mation, ref er to the f inancial calen dar on our cor porate web site at: ww w .der wentlondon. com/ investors/ calen dar Financial calendar Fina l res ults an nounc ed 2 4 Februar y Q1 Business update 05 May Ann ual Ge ner al Mee ting 1 3 May Inte rim re sult s anno unce d 1 1 Augu st Q3 Business update 0 3 N ovember Dividend calendar Final div idend Inter im dividen d Ex-dividend date 28 Apr il 08 September Record date 29 Apr il 09 September Dividend paid 01 June 1 4 Octo ber Web si te Financial inf ormation ab out th e Company, including annual rep or ts, public ann ouncem ents and s hare pric e data, is availab le from the Co mpany ’ s websi te at: ww w .derwentlondon.com Our Regis trar s Equiniti (EQ) Equinit i Limite d Aspe ct House Lan cing Busines s Park La ncing West Sus sex BN99 6D A Unite d Kingdo m Equ initi genera l shareholder helpline: Calling f rom the UK : 037 1 38 4 2 1 92 Calling f rom over seas: +4 4 (0 ) 1 21 4 1 5 704 7 Line s are open 8. 30am to 5.30pm , Monday to Friday (excludingpublic holi days in England an d Wales ) Company secre tarial David Lawler Company Secret ary Der went London 25 Sav ile Row London W 1S 2 E R Unite d Kingdo m T ele phone: +44 (0)2 0 7659 300 0 Emai l: company .se cretary @derwentlondon.com Inv es tor relations Robert Duncan Hea d of Inves tor Re lati ons & S trat egic Pl annin g Der went London 25 Sav ile Row London W 1S 2 E R Unite d Kingdo m T ele phone: +44 (0)2 0 347 8 42 1 7 Emai l: rober [email protected] De rw ent Lo ndon p lc Rep or t & Ac cou nts 2021 2 78 MSCI N ES ISS O ekom De sign ed an d prod uce d by Brunswick Creative ww w.bruns wickg roup.c om Thi s repo r t is prin ted on A rc oprin t Ex t ra Whit e. It is m ade fr om FSC ® cer tified and o ther controlled mat erial. Pri nted s ust ainably i n the UK by P urep rint , a Car bon Ne utr al com pany with FSC ® Chai n of cus tod y andIS O 1 4 001-cer t ifie d env ironm ent al man agem ent s yste m rec ycli ng 1 00 % of all dr y wa ste. A WAR DS A ND R E COGNI TI ON Der wen t London wo n numerous awards f or its ac hievemen ts and buildings in202 1 , a sample of whic h are shown b elow. EPR A Gold f or Annual Rep or t Britain’s Most Admire d Companie s – se ctor win ner and 38 th ove rall EPRA Sust ainabilit y Repor ting Awar ds 202 1 – Go ld award FTSE4Good – Memb er sin ce 20 03 GRESB (G lobal R eal Est ate Sus tainab ilit y Be nchma rk) 2021 – sco re of 81 , Gre enst ar stat us, ‘A ’ rat ed pub lic dis clos ure CDP – Ma nagement C rating Pw C’s Building Public Trust EG co mpany of t he ye ar CGI a nnual re por t of th e year DISCLO SU RE I NS IGHT ACTION Der went London plc Regis tered of f ice: 25 Savile Row, London W1 S 2ER T +44 (0)20 7 6 59 3000 ww w .der wentlondon. com Regis tered No: 1 81 9 699 Der went Lo ndon plc Repor t & Ac counts 202 1
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