Cadogan Annual Report 2020 by CadoganLondon

ANNUAL REPORT 2020

CADOGAN | ANNUAL REPORT 2020 CONTENTS•StrategicObjectives 4 • Financial Highlights 6 • Chairman’s statement 8 Strategic Repor t 10 • Chief Executive’s Review 12 • The Estate Today 34 • Financial Review 52 Governance 58 • Board of Directors 60 • Directors' Report 62 • Independent Auditor's Report 64 Financial Statemen ts 68 • Notes to the Financial Statements 74 • Five Year Summary 96 3

Cadogan’s long association with Chelsea began when Charles, Baron Cadogan, wed Elizabeth Sloane in 1717, some 300 years ago. Since that time, the family and place have grown together – evolving the Cadogan Estate into one of London’s most characterful and distinctive neighbourhoods. Stewardship and community are central to our approach. Our long-term commitment comes with responsibility to ensure that we are making a positive contribution towards a sustainable environment, protecting the area’s unique heritage and supporting a thriving community.

CStrategic Objectives DEFINED BY OUR HERITAGE. DEDICATED TO THE FUTURE. 4

CADOGAN | ANNUAL REPORT 2020 adogan is a family business which owns and manages an extraordinary property portfolio comprising mainly retail, residential and office assets in Chelsea and Knightsbridge. The business has a long heritage which provides a remarkable foundation upon which to base a contemporary, forward looking and dynamic business able to anticipate and respond swiftly to the changing needs of our customers and markets.

• As long-term stewards of Chelsea, we have a responsibility to make a positive contribution towards a sustainable environment and a thriving community.

* Sustainable Development Goals 5

• Our reputation is paramount. We always select the best external advisers and recruit the strongest internal team to deliver excellent customer service, be good neighbours and ensure that integrity is at the heart of all business decisions. CHELSEA 2030 A SUSTAINABLE FUTURE

• To protect and enhance the Estate’s position as one of the world’s leading locations in which to live, work and visit.

* STRATEGIC OBJECTIVES OUR CORE OBJECTIVES

Cadogan has been part of this community for over three centuries and, as an owner, manager and developer of extensive property holdings, has played an active role in shaping this remarkable neighbourhood. This long-term commitment comes with the responsibility to ensure a positive contribution towards a sustainable environment, protecting the area’s unique heritage and supporting a thriving Therefore,community.wehavemade our commitment to the Estate achieving Net Zero carbon emissions by 2030. We have combined this commitment with 12 ambitious targets supported by a multitude of initiatives, that build on existing work to target air quality, emissions, waste, water usage, green infrastructure and support of the local community. To achieve these stretching targets, we will need to work in partnership with many local stakeholders, combining forces to achieve and deliver significant change by 2030.

The details of these 12 targets are contained in a separate report which is Global Reporting Initiative (GRI) compliant and identifies the challenges ahead, our plans for addressing them and progress so far. It also explains the transparency with which we intend to approach this strategy and our commitment to being part of a more sustainable future for Chelsea. We will report annually on our performance against these targets. For further information, see p46 or view the full Chelsea 2030 report here We have made our commitment to the Estate achieving Net Zero carbon emissions by 2030

• We have a proud heritage and aim always to safeguard our future and protect our portfolio as a long-term investment – creating and maintaining outstanding buildings and environment.

£142.7M £152.6M £160.0M £166.7M £158.7M20202019201820172016 £5,985.5M £6,148.1M £6,160.6M £5,573.7M £4,795.0M20202019201820172016 4.6% (9.5%) (16.4%) 3.2% (0.3%)20202019201820172016 CADOGAN | ANNUAL REPORT 2020 Financial Highlights GROSS RENTAL INCOME GROSS PROPERTY VALUE TOTAL RETURN Five year growth Five year growth Five year average 4.1% PA (3.7%) PA (4.0%) PA 6

13.7% 13.9% 16.3% 19.7% 23.5%20202019201820172016 £37.6 £38.7 £38.0 £34.1 £28.32020202020192018201720162019201820172016 £92.6M £93.8M £105.8M £97.0M £98.1M FINANCIAL HIGHLIGHTS OPERATING PROFIT BEFORE CAPITAL ITEMS NET ASSETS PER SHARE BALANCE SHEET GEARING (FRS 102 basis) £97.0 M 2020 £28.3 2020 23.5% 2020 7

CADOGAN | ANNUAL REPORT 2020

I am proud of our response from the outset of the crisis - protecting the safety of our staff, customers and suppliers, while maintaining activity and vibrancy in the area write this report after a year that was dominated by the COVID-19 pandemic. This, coupled with the uncertainty of our future trading relationship with Europe, has led to the worst fall in UK GDP in history and London has been particularly affected due to its status as an international city. However, the impressive rollout of the vaccine is underway, infections are falling, and government has had the confidence to announce a timetable for relaxing the limitations on activity. We have reasons to look forward positively in 2021, albeit cautiously.

I am proud of our response from the outset of the crisisprotecting the safety of our staff, customers and suppliers, while maintaining activity and vibrancy in the area whenever possible. Through the establishment of a £20m Business Community Fund we have provided targeted financial assistance to the most vulnerable businesses and supported the local community and the NHS directly, through financial assistance and other initiatives. The events of the past year have highlighted the importance of our longstanding partners, and I am delighted we have been able to provide our contractors and suppliers with practical operational help and by paying them promptly, of Wecourse.arein the enviable position of being a long-term family business, with capital strength and high-quality assets. This has allowed us to provide assistance to our occupiers and the local community, while remaining financially strong and with adequate liquidity ourselves. However, the impact on the business has been considerable. Rental income net of the occupier support we provided fell by 4.8%. The total rent roll reduced by 1.9% from £171.0m to £167.8m, largely due to increased vacancy in our residential portfolio.

I Viscount Chelsea DL

StatementChairman's

CHAIRMAN’S STATEMENT

As I live in Chelsea, I was able to see at first hand the impact of the pandemic on daily life in the neighbourhood. With great support from the Royal Borough of Kensington and Chelsea (RBKC) when it was most needed, we were able to contribute to making life more bearable locally by, among other things, achieving the temporary (later made permanent by RBKC) pedestrianisation of Pavilion Road, our artisan food street, introducing over 500 outside seats (since increased to 1,000 seats) for al fresco dining and re-opening the Saturday food market safely on the Duke of York Square running track, with the cooperation of our neighbours. We were able to achieve these things and more because of the strength of our relationships with local COVID-19stakeholders.hastaken a terrible toll. It has claimed many lives, disrupted many more through illness, bereavement, the loss of employment and restrictions on daily life. I am very conscious that we owe our thanks to a long list of people who have supported society through this challenging time, foremost amongst them being those who work for the National Health Service. I am pleased my family has been able to support a wide range of charities both through the business and to a greater extent through the family charity chaired by my father The Earl Cadogan, and on which I have the privilege of being a trustee together with other members of my family. A highlight from a difficult year must, for me, be the chance between lockdowns to visit the St Giles Trust’s SOS Project to meet some of the people involved in this initiative to keep young people out of violence. I was struck by the enthusiasm of everyone involved despite the challenges they had faced in their lives. The past year has put unparalleled pressures on the Cadogan team and I am speaking on behalf of the Board as well as myself, when I express my appreciation for everything every single individual has done under the leadership of my Chief Executive, Hugh Seaborn and Finance Director, Sanjay Patel. I would also like to express my very personal thanks to my fellow Board Directors for the considerable extra demands placed on them as we have adapted to this unprecedented year. As I write this, I am looking forward to the imminent reopening of our shops and restaurants in the area, combined with the return of our own team and those of other businesses. After the past year, I will never take for granted the buzz of life in the streets and buildings of the Cadogan Estate and Chelsea.

perspective is an asset at this time of global crisis, as we are able to remind ourselves that as a truly global city, London has proved resilient and adaptable in the face of major events many times over its history. I have every confidence it will be so this time too. Despite the considerable challenges raised by COVID-19, we have been able to announce our commitment to become Net Zero carbon by 2030, alongside other ambitious sustainability targets. This commitment arises from a responsibility to ensure a positive contribution towards supporting a thriving community for future generations, as well as protecting the area’s unique heritage.

Total income from continuing operations reduced to £161.1m (compared to £171.0m in 2019). The business experienced a revaluation reduction of £795.2m equating to -14.2%. This fall in values was led by retail (down 24.6%) and residential (down

Viscount Chelsea DL 29 April 2021 9

Our5.7%).long-term

Strategic Report

OVERVIEW What an extraordinary year 2020 proved to be. Twelve months ago, few could have imagined the huge impact that COVID-19 would have, or that the pandemic would last so long. Although recovery will take considerable time, we now have reasons for optimism due to the impressive national rollout of the vaccination programme which has led to a detailed step plan from government for gradual release of the third and, hopefully, final lockdown. In the meantime, the UK has left the EU with a trade deal and while the implications of this are as yet unclear, the political uncertainty has reduced. Hugh Seaborn Chief Executive

CADOGAN | ANNUAL REPORT 2020

STRATEGIC REPORT

The final priority was to help our customers prepare for reopening and recovery after the end of each lockdown. Our support ranged from preparing an integrated marketing plan to help attract footfall and spend back to the area; introducing over 500 (now increased to 1,000) al fresco seats, umbrellas and heaters; providing guidance and materials for re-opening with safe distancing measures in place; organising webinars for our construction partners and business occupiers to advise on matters such as re-starting work on construction sites safely and government and other support available to small businesses.

The impact of the pandemic on Cadogan has been considerable, particularly due to our exposure to retail and hospitality businesses. However, I have nothing but admiration for the way in which every member of the Cadogan team responded allowing us to act swiftly to protect the health and wellbeing of our staff, contractors and visitors to the area, while simultaneously responding to the challenges faced by our customers and other stakeholders. In response to the uncertainty introduced by the pandemic, we moved quickly to conserve funds and reduce discretionary spend across the business to preserve liquidity. Consequently, substantial expenditure originally budgeted for 2020 was reduced or deferred. In addition, we engaged extensively with our customers, particularly those from the retail and hospitality sectors, to do what we could to support them.

The pandemic accelerated structural changes that had been underway for many years in retail as more transactions moved online. However, this pandemic has demonstrated to us that successful retailers will continue to need shops to build brand awareness and develop the customer experience, not just to transact from. They will not need as many stores as before, but they will look to site those that remain in excellently curated, high quality locations. This plays to the strengths of the Cadogan portfolio and management approach.

OUR RESPONSE TO COVID-19

• Working with the Fashion School, we provided accommodation as well as funding to assist the provision of 1,500 medical gowns per day to local hospitals. Over 32,000 gowns were delivered during the peak of the crisis in 2020.

• Through the Kensington and Chelsea Foundation, we helped to provide over 1,000 care packages a week to those most vulnerable and supported numerous other small charities in the borough, providing food banks, shelters, mental wellbeing, educational support for vulnerable children, connectivity of hospital patients and online services and platforms for local minority groups, amongst other equally deserving causes.

CADOGAN | ANNUAL REPORT 2020 THE BUSINESS COMMUNITY FUND

• The provision of car parking spaces plus hotel accommodation for NHS frontline workers from both Chelsea and Westminster Hospital and the Royal Brompton.

• Donations to the Chelsea and Westminster Hospital’s COVID-19 Rapid Response Fund which supported research, new treatments as well as providing patients and staff with much needed support.

By establishing a Business Community Fund, we were able to provide support to occupiers and the wider community, while protecting the character of Chelsea and therefore our business for the long-term. We supported the most vulnerable retail, hospitality, office and residential occupiers to protect local vibrancy and value, to maintain occupancy and because it was the right thing to do. We achieved this by providing targeted assistance in various ways, including waiving contracted rents, easing cash flows through monthly payments in arrears instead of quarterly payments in advance, and rent deferrals. For many of our leisure and hospitality businesses that were most severely affected by social distancing restrictions, we moved their rent to a turnover only basis, waiving fixed rentals completely.

Consistent with our values as a very long-term family business and our geographical concentration of assets, contributing towards a flourishing and sustainable local community is central to our approach. Our immediate response to the onset of the pandemic was detailed in last year’s annual report. In addition to the customer support outlined above, it included:

STRATEGIC REPORT

•including:Becoming the principal supporter of the Kensington & Chelsea Foundation. The Foundation represents a vital part of the local social infrastructure as it identifies and responds to the greatest needs in the local community. For this reason, we felt it was vital to meet the running costs of the Foundation, allowing their team to concentrate on reaching those who needed it most, while donors could be confident that every penny of their contribution reached charitable causes.

Once we had responded to the immediate priorities presented by the pandemic, we were able to address longer-term needs

• The Royal Court Theatre, renowned for supporting young and emerging writing talent.

• The St Giles Trust has created the SOS Project, a gang exit project aimed at young people. Their strength as a charity is that their counsellors have “been there” and so understand and make connections with the young people they are trying to help. Cadogan has sponsored the appointment of a new case officer who is working with individuals within the Borough who are at risk of being involved in violence, with the aim of helping them turn their lives around.

• Working in partnership with the British Fashion Council, we provided emergency grants to help safeguard creative talent and protect jobs in creative sectors synonymous with Chelsea.

• The pandemic has highlighted the significance of the digital divide in society. The Kensington and Chelsea Foundation identified an estimated 5,000 residents who are digitally excluded and 400 young people for whom home was not a safe or suitable learning space and desperately needed an alternative while schools were closed. We funded 57 laptops which were distributed to local youth organisations who were able to offer safe, quiet space for young people to learn together with trusted youth workers to supervise and organise. These remain much in need for home working sessions, catch up lessons and learning support.

• Cadogan Hall. Having decided not to take government furlough support, our team have been active, improving the venue and supporting rehearsals, recordings and the very limited performances when permitted.

• The Royal Philharmonic Orchestra, who are normally resident at Cadogan Hall.

We have increased our support for culture and the arts through the pandemic as these sectors have been particularly adversely affected. These uses have a vital role to play in shaping a destination and contributing greatly to the character of an area. For these reasons we have provided increased support to:

• Saatchi Gallery, which is arguably one of London’s foremost museums of modern art.

The trusts that are the ultimate owners of the business, are subject to a ten-yearly inheritance tax charge based on capital value, the next charge becoming due in 2022. This tax charge, which is expected to require in excess of £200m of cumulative dividends to the trusts, is mainly funded by the business. These funds have been released in part through increased dividends in previous years to build up a sinking fund, and in part through a planned distribution next year. Despite the support we have provided, along with government financial assistance, we have experienced an increase in business failures amongst retail occupiers. Where this has resulted in occupiers vacating, we have been successful in installing popups (short-term retail occupiers) to maintain the vibrancy of the area and mitigate empty property costs. As a result of this approach, we have virtually no vacant property in the commercial portfolio.

The periods of lockdown in response to COVID-19 have accelerated the structural shift in the way we shop, with online sales growing swiftly. This is partly reflected in the fall in retail values in 2020 and indeed in the previous year. This theme is well established, and we have been responding to the anticipated changes for many years through an approach that has included moving towards being a service provider and delivering exemplary customer service, working in partnership with retail and hospitality businesses to anticipate their changing needs, while actively managing the wider area to provide an environment and a mix of uses that complements the businesses that trade here. This approach is made possible by our concentration of ownership which allows us to curate and promote a thriving retail and leisure destination.

Against the backdrop of a global pandemic, the business has performed relatively well in 2020.

OVERVIEW OF 2020

Cadogan has certainly felt the impact, as our largest sector is retail (43.8% of value and 50.8% of income), which has been unable to trade for much of the year. This can be seen most visibly in the steep fall in total rental receipts because of rent waivers and potential inability to pay by some occupiers, accompanied by a decline in asset values (down 14.2% overall and retail down 24.6%).

CADOGAN | ANNUAL REPORT 2020

This subdued fall in operating profit relative to the total cost of providing rental support for our occupiers and debt provisions, reflects the mitigating steps we took to preserve funds and reduce discretionary expenditure across the business in response to the onset of the pandemic. The business experienced a like for like reduction of 14.2% (£795.2m) in the capital value of the portfolio which when added to the falls in 2019, amounts to a like for like decline of 22.3% (£1.38bn) over two years. In December 2019 we demerged two operating hotels, the Belmond Cadogan and 11 Cadogan Gardens, to the direct ownership of the trust settlements that ultimately own Cadogan Group. Their results are no longer reported as part of Cadogan Group from 2020 onwards. In 2019 the Group’s share of income from the hotels in the period up to demerger was In£15.0m.2020, we invested £56.1m in purchases and development which will produce further rental income over time. This was less than the previous year and budget, mainly because of the actions we took to preserve liquidity in the face of the uncertain length and potential severity of the pandemic.

Total income fell by 13.3% to £161.1m (from £185.9m in 2019). Total income from continuing operations fell by 5.8% to £161.1m (from £171.0m in 2019). This is net of rental support, rent free periods and write-offs of previously amortised lease incentives as a result of the pandemic, amounting to £10.2m. Cost of sales includes provisions for doubtful debts mainly arising as a result of the pandemic totalling £11.2m. Operating profit before capital items (an indicator of underlying operating performance as it excludes profit on the sale of investment properties and revaluation movements), reduced from £105.8m to £97.0m, down 8.4%.

Throughoutperformance.the year, we continued our focus on building strong relationships with our customers, delivering commercial and residential property of the highest standard to the market, and providing exceptional customer service (evidenced by our Net Promoter Scores). Key financial highlights of 2020 are set out on the next page.

STRATEGIC REPORT

From March 2020 the collection of income has been materially impacted by many of our occupiers’ limited ability to trade. Despite this we maintained a relatively strong rent collection

Throughout the year, we continued our focus on building strong relationships with our customers and delivering commercial and residential property of the highest standard to the market

STRATEGIC REPORT

Retail, our largest sector at 43.8% of the portfolio, produced the weakest valuation performance, down 24.6% to £2.10bn.

17.6% 5.7%

Property Portfolio £4.8 bn

Retailexpendituredecreased by 24.6% Office decreased by 1.8%

Taking account of the fall in 2019, the reduction in retail values over two years amounts to 34.1% reflecting the immediate impact of COVID-19 and the weakness caused by the structural change in consumer behaviour. The 2020 figure was the result mainly of a widening in yields and weaker occupational markets. Retail gross rental income decreased by 5.1% to £85.3m per annum (50.8% of the total rent roll).

Offices which represent 15.3% of the portfolio, have proved to be more resilient with a valuation decrease of 1.8% to £734m after a modest increase (2.7%) in the previous year. The portfolio has remained largely fully occupied through the year. Office rental income increased by 6.6% to £35.7m (21.3% of the total rent roll).

TOTAL

The residential sector represents 31.4% of the portfolio. It was subject to a valuation decline of 5.7% to £1.51bn, after adjusting for purchases, sales and capital expenditure. This follows a steep decline (-10.7%) in 2019. Gross rents for the market let portfolio fell by 9.1% to £30.1m, due mainly to a higher than average number of vacates that then took longer to return to market because of social distancing requirements during refurbishment. Adding ground rents from long leaseholds of £2.6m, residential comprised 21.3% of the total rent roll.

HIGHLIGHTSINVESTMENTVALUEPROPERTYOFPERFORMANCECOMMERCIALDECLINEDINVALUEBYRESIDENTIALDECLINEDINVALUEBY

Decrease of 14.2% adjusting for purchases, sales and capital

The fall in retail values in 2020, together with the sharp drop in 2019, amounts to 34.1% over two years after adjusting for additions and disposals. A significant element of this decline reflects the change in the way people shop and the increased movement of transactions online.

espite the fall in value this year, retail remains our largest sector, accounting for 43.8% by capital value and 50.8% of income.

The retail property sector in general is subject to considerable challenges. In response to the accelerated structural shift, physical retailers have been able to use Company Voluntary Arrangements (CVAs) to change lease terms including reducing rents. These factors, combined with changes to the planning system, making it easier to vary the use of retail space, are resulting in rapid change in the national retail market and particularly high streets. In this context, we welcome the government commitment to a fundamental review of the business rates system which is in need of long-term sustainable reform. At the end of 2020, the government abolished the VAT retail export scheme, which allowed visitors from outside the EU to reclaim the 20% VAT on goods bought here. This leaves the UK as the only European country not to offer tax-free shopping and will inevitably result in some visitor spend going elsewhere. This is an additional unwelcome challenge for retail and it will take time, once international travel returns, to understand the impact of this.

Despite these headwinds, our experience, even during COVID-19, is that retailers continue to require physical shops. However, they clearly need fewer but in the very best locations for their markets. Shops are needed to strengthen brand awareness, engage the consumer and provide an experience that supports all transaction channels (including online) and enhance profit margins.

D * - adjusted for purchases, sales and capital expenditure Retail Retail accounts for 43.8% of the value of the portfolio 20

RETAIL 2020£M 2019£M %CHANGE GROSS VALUE 2,100.8 2,779.4 -24.6% * GROSS RENTS 85.3 89.9 -5.1% CADOGAN | ANNUAL REPORT 2020

• We aim to work in partnership with retail brands so that we can understand and anticipate their requirements and introduce these into our estate management and marketing strategies.

STRATEGIC REPORT

• We are fortunate to own assets concentrated in famous destinations such as Sloane Street and the King’s Road which are renowned internationally. This brings with it a responsibility to protect and to strengthen these destinations, ensuring they evolve and remain relevant to present and future generations.

• Where our reach extends beyond our ownership, which includes Brompton Road and parts of the King’s Road, we have initiated Business Improvement Districts (BIDs). Our aim is to work with neighbouring property owners, business occupiers, local authorities and residents towards common goals.

• Our innovative leasing policy better aligns our interests as property provider with those of retailers, while removing some of the more confrontational elements of a traditional landlord and tenant leasing relationship. This includes removing conventional open market rent reviews so that occupiers have more predictable rentals, as well as introducing provisions to put us in control of factors such as alienation of leases, allowing us to manage the wider area holistically.

• Cadogan is in the enviable position of having long-term family ownership, allowing a consistent approach and ability to take decisions today, confident that we will reap the benefits into the future.

Our aim is to make sure that we meet the needs of the retail brands, so that they can trade profitably in our properties. We have developed and refined our approach to meeting this aim over many years:

• We aim to provide unrivalled destinations through the careful curation of shops, complemented by a diverse range of the best food and drink, culture and beautiful spaces which create an emotional connection with visitors – and a frequent desire to return.

• We develop strong relationships with our occupiers and with other stakeholders in the area, to support our broader estate management approach.

• Our physical presence at the heart of Chelsea and our singular geographical focus means we have intimate knowledge and understanding of the area, our markets and our customers.

• Concentration of ownership means we can ensure that every property contributes to the vitality of the wider area.

• We overlay this with exciting events and destination marketing which enlivens the area and draws a wider audience.

• We work to increase our understanding of retail trade and consumer behaviours through footfall, trading data and research coupled to our knowledge of the area.

• A vibrant and compelling destination makes it a more enticing place to live and connects the affluent residential catchment to the shops and restaurants.

Theterm.Estate was virtually fully occupied through 2020, finishing the year with a retail vacancy rate of 2.7% (eight units), compared to 1.4% (five units) at the start of the year. We achieved this partly by introducing a number of exciting, up and

The challenges of 2020 have demonstrated the attractiveness of Chelsea as a safe and exciting destination with the area attracting consistently better footfall than other Central London areas. We benefit from proximity to the centre of London, one of the world’s foremost global cities, while being situated within an established residential area with an affluent catchment.

CADOGAN | ANNUAL REPORT 2020 In 2021 we will commence works in partnership with the Royal Borough of Kensington and Chelsea, to improve the Sloane Street public realm, which were delayed by the pandemic. This will create an elegant, greener and more beautiful thoroughfare from the north of the street in Knightsbridge all the way to Sloane Square - dramatically enhancing the pedestrian experience for residents and visitors, while having a neutral impact for vehicles. This environment will further complement the extraordinary line up of luxury retail brands that trade on Sloane Street, cementing its position as one of the best places for luxury retail in the world.

After the hiatus attributed to political and particularly Brexit uncertainty, lettings activity rose in early 2020 before coming to a virtual stop during the first lockdown. Despite the most hostile environment for retail lettings in living memory, we secured four new permanent retail lettings plus 14 temporary lettings, the latter mainly on turnover rents. Amongst these were the celebrated jeweller Anabela Chan on Sloane Street, women’s fashion brand Pinko and Ben’s Greengrocers on King’s WeRoad.have experienced an increase in retail failures both in terms of CVAs and administrations. In total 16 occupiers failed during 2020, yet of these only six closed their shops permanently and the remainder continued to trade here despite closing stores elsewhere. These retailers have a track record of trading in Chelsea and the confidence to retain their business here, despite the challenges they are facing elsewhere. This reinforces our belief in Chelsea as a profitable retail destination in the long

While we are delighted with the quality of these occupiers, it is too early to say whether this level of activity will be sustained. We were thrilled that, following a trial pedestrianisation of our artisan food street Pavilion Road, the Council approved the pedestrianisation becoming permanent. This is a wonderful outcome for local residents, visitors and the Road’s many small businesses and will underpin the success of the wider area.

STRATEGIC REPORT

Since the year end we have seen an increase in activity as the vaccine rollout gathers pace and business confidence increases. New lettings have been completed, such as Ralph Lauren on Sloane Square, MZ Skin on the King’s Road and The Surprise public house on Christchurch Terrace.

coming brands as temporary lettings to maintain animation of the area. This approach allowed us to welcome new names including Anatomé a modern apothecary, De Fursac the French menswear brand, Façonnable high-end men’s fashion, Hayley Menzies the highly regarded London designer, Copit’s cult footwear and many others.

O Offices account for 15.3% of the value of the portfolio

OFFICES 2020£M 2019£M %CHANGE GROSS VALUE 733.5 744.4 -1.8% * GROSS RENTS 35.7 33.5 6.6% * - adjusted for purchases, sales and capital expenditure CADOGAN | ANNUAL REPORT 2020

Offices ffices account for 15.3% of the portfolio by capital value of £733.5m. By income, offices represent 21.3% of the total and gross rents rose by 6.6% over the year primarily due to new lettings and index linked rent reviews. Our offices have remained virtually fully let through 2020 and continue to be so, with almost no vacancies. As a result, there were just two new lettings during the year. They are typically occupied by private equity, family offices and investment businesses which value the proximity to residential areas, lively environment and local lifestyle. Coupled with the limited supply of quality space, these characteristics support our market. The office sector contributes by bringing an influx of workers to the area, adding activity as well as providing Cadogan with a healthy growing income which has been particularly welcome this year.

STRATEGIC REPORT

A theme that has been amplified by COVID-19 is the increase in flexible working for office workers, which will obviously have an impact on demand for office space as businesses adjust their requirements. It is too early to identify what this impact will be and how it will be influenced by other factors, yet we anticipate that businesses will continue to require high quality space in desirable locations, to attract their staff to the office. Another existing market theme is the increase in requirements from occupiers for a more advanced fit out specification from landlords, allowing them to take up occupation more easily. We will continue to invest to deliver the right space for the changing requirements of the market. London remains one of very few world capitals that offers an alluring mix of access to talent, finance, culture and services which makes it a highly attractive location in which to base businesses and to live. We have seen little impact since the start of the pandemic on our portfolio, presenting a mix of high grade, flexible space mostly in small units, at the heart of a mixed-use location.

Residential accounts for 31.4% of the value of the portfolio adjusted for purchases, sales and capital

RESIDENTIAL 2020£M 2019£M %CHANGE GROSS VALUE 1,505.1 1,620.4 -5.7% * GROSS RENTS 32.7 35.6 -8.1% CADOGAN | ANNUAL REPORT 2020 he gross value of our residential portfolio represents 31.4% (29.1% in 2019) of the total. Residential remains our second largest sector (after retail) and is an important part of the portfolio as it diversifies performance, drives our customer service credentials and reflects our character and influence as a local landowner and steward of the area.

Income from residential represents 19.5% (21.3% in 2019) of the portfolio. Compared to commercial property, the lower relative income produced by residential reflects the combination of reversionary long leases which produce very little income (but provide a return when the long leaseholders choose to enfranchise), and the private rented sector portfolio which generates a yield that tends to be lower than commercial property. T

Residential

* -

The diversification value of residential has been evidenced by relatively strong rent collection performance through the COVID-19 crisis, despite our providing help in cases of Thehardship.reduction in the size of the residential portfolio primarily reflects the fall in values this year, down 5.7% to £1.51bn (£1.62bn in 2019 when it was down 10.7%). Since the property cycle in Prime Central London turned in 2014, we have seen a cumulative reduction in value of the residential portfolio of 23%. Early 2020, prior to the arrival of COVID-19, showed signs of optimism as residential sales activity emerged from several years of low activity. This was quickly extinguished as the first lockdown approached and it remains to be seen to what extent this will return.

expenditure 26

sales activity started slowing from 2019, when it was announced that the Law Commission was reviewing leasehold reform legislation. Their report was published in July 2020 and followed by the government’s announcement in January 2021 that, among other things, they were going to ‘abolish’ marriage value – meaning that this element of value would be transferred to leaseholders. What is being proposed is an appropriation of value from landlords to leaseholders. This will inevitably suppress enfranchisement claims until the legislation is enacted and we anticipate it could potentially halve proceeds from such sales in future if implemented as announced. We understand and support the need for simplifying leasehold reform, which is long overdue, and are working to help ensure any reform is fair to all parties and does not create unforeseen problems in future. We also hold a private rented sector portfolio of just under 700 houses and flats. A large number of vacates in the period following the lifting of the first lockdown, along with safety measures implemented in response to the pandemic, meant that our ability to undertake refreshes and refurbishments in vacated units was limited. Accordingly, the value of vacant units subject to post-occupation upgrades increased markedly from 4.4% of total passing rent at the start of the year to 13.1% by the end of 2020. This is the main contributor to the reduction in rental income. There is healthy demand for the quality of accommodation and service that Cadogan offers, and resources are focused on returning these units to the Wemarket.have maintained our approach of delivering high quality accommodation and exemplary customer service, with the aim of engendering strong customer loyalty and retention over time. In 2020 the average length of stay by departing customers reduced from 3.69 to 3.38 years, due to an increase in vacates as international customers including overseas students, relocated to their home countries during the pandemic. New lets (most of which will have been upgraded) achieved rental uplifts on average of 0.8% compared to the market valuation in 2020. The London rental market has been subject to falling rents, partly due to decreased demand as a result of COVID-19. Our portfolio has fared relatively well, notwithstanding the increase in vacancies.

The proceeds from enfranchisement sales during 2020 were £22.4m compared to £40.6m in 2019, and significantly lower than the ten-year average prior to 2019 of £74m. These sales represent the disposal of interests in 23 units (2019 – 49 units) comprising five houses and 18 flats. Proceeds from nine other discretionary sales totalled £16.4m (2019 – £4.7m) reflecting the more buoyant market pre-pandemic and in quarter four, Enfranchisement2020.

STRATEGIC REPORT

LEISURE & OTHER 2020£M 2019£M %CHANGE GROSS VALUE 455.6 429.5 -1.9% * GROSS RENTS 14.1 12.0 17.5% CADOGAN | ANNUAL REPORT 2020 his category comprises hotels, restaurants, pubs, our regional portfolio established in 2018 and a variety of other properties such as schools, cultural and artistic venues, car parks and medical uses. Leisure and Other accounts for 9.8% of the value of the portfolio, up from 7.7% in 2019. The main reason for this increase in value is the capitalisation of construction costs of new hotels at 115-116 Sloane Street (the Beaverbrook Town House) and 1 Sloane Gardens (Hotel Costes) and the forward funding of a care home development in Chichester as part of our regional portfolio. The gross value of the regional portfolio was £81.8m at the year end (£76.8m in 2019). The portfolio was created to provide the business with higher income levels than is typically achievable from the Chelsea Estate. Acquisition activity has, however, been suspended since mid-2019, firstly due to Brexit and political uncertainty in the second half of 2019 and secondly, the need to conserve funds in light of the uncertainty as to length and severity of the pandemic. We continue to maintain a cautious stance on growth of the portfolio in 2021. Leisure & Other T

* -

Leisure and Other accounts for 9.8% of the value of the portfolio adjusted for purchases, sales and capital expenditure

Rental income increased by 17.5% (2019: 10.1%) principally due to growth in income of the regional portfolio and the result of a material rent review on a significant property in the portfolio. This sector, aside from the regional portfolio, is vital in supporting the communities within which we operate both now and in the future, as well as enhancing Chelsea as a destination. Therefore, the impacts of these uses far outweigh their size in the portfolio. For example, we own eight pubs in Chelsea. We do so because we consider them to be an important use for a compelling locality and to support the community, as elsewhere in the area many pubs have been lost to residential conversion. During 2020 we re-let a pub called The Surprise after the previous occupier vacated. Our foremost criteria for securing a new operator of this local pub, situated closely amongst residential homes on Christchurch Street, was a publican who would understand the neighbourhood, the sensitivity of being in close proximity to peoples’ homes and a willingness to engage proactively with their neighbours. We are fortunate in having been able to liaise closely with the active local residents’ association through this process and despite COVID-19, have found a publican who meets these Ourcriteria.subsidy of Cadogan Hall, the acclaimed concert venue owned and operated by Cadogan, rose from an average of £0.5m per annum over the previous eight years to over £1.2m in 2020 due to its closure for most of the year, during which time we have invested in new seating and redecoration. 29

STRATEGIC REPORT

Developments

We were able to maintain construction activities safely - safety being our first priority throughout - on the four largest projects through the first lockdown, by ensuring our contractors were fully aware of health and safety guidelines and regular safety visits were conducted to ensure procedures were working effectively. Following the end of the first lockdown, arrangements were put in place to allow most other smaller construction sites to recommence. It was important to us that construction resumed as soon as safely possible, both to continue to progress our plans and because many of our contractors and sub-contractors rely on the income arising from our activities, and we continued to ensure invoices were paid promptly to further support our suppliers.

e are constantly investing in the upgrading of the Estate through maintenance, restoration, refurbishment and redevelopment activities. This allows us to maintain and improve the wider environment and deliver homes and business space that meet the needs of our customers and our markets whilst at the same time increasing environmental sustainability. In 2020 our total expenditure on redevelopment and major refurbishments was reduced to £54.4m (£66.5m in 2019) due to the pandemic, which resulted in a slowdown or postponement of some existing projects to maintain safety on site and the need to funnel significant funds into the Business Community Fund.

Total expenditurecommittedwas £240m and the overall pipeline expenditure was £492m

CADOGAN | ANNUAL REPORT 2020

The substantial element of construction activity during 2020 was in three schemes: 1 Sloane Gardens, where we are working in partnership with the celebrated Parisian hotelier and restaurateur Jean-Louis Costes to open a new hotel in 2022; 115-116 Sloane Street, where we plan to open a new hotel and restaurant later in 2021 called The Beaverbrook Town House; 196/222 King’s Road, our largest scheme, which will when finished in 2023, comprise a Curzon cinema, rooftop bar, a public house, offices, flagship shops, community retail, affordable and market let flats and an enhanced Waitrose supermarket. We have managed this scheme carefully to be able to encourage Waitrose to stay open through construction, because of its importance locally.

STRATEGIC REPORT

Our development pipeline at the end of 2020 comprised 73 projects of which 36 were active. Total committed expenditure was £240m and the overall pipeline expenditure was £492m.

Continuing construction activity during the pandemic has sometimes been challenging for people living nearby, many of whom have had to work from home, due to noise and disturbance. We are very aware that our activities can and do impact upon those around us. As well as ensuring we respond to our neighbours during construction and mitigate the disturbance where possible, we aim to be exemplary in the way in which we consult and engage locally when preparing a scheme, to understand local concerns and consider how we can respond to them. A programme of regular communication ensures that people remain fully informed and engaged. Our aim is to be the most trusted local developer and therefore be able to adapt and respond to changing needs to ensure the area remains relevant and desirable to present and future generations of residents and visitors.

I expect trade to be relatively buoyant later in 2021, as it was during the summer 2020 reopening. I am encouraged by the level of interest we have received for shops, particularly since the government roadmap was issued, and the high retention of Chelsea stores by those businesses that have otherwise failed (administration or CVA), which supports our positive view of longer-term profitable retail trading on the Estate. The big unknowns are the pace and longevity of the economic recovery, unemployment and above all, the virus being contained.

The impact of the global pandemic is likely to continue for longer than hoped and expected. Although at the time of writing there are reasons for cautious optimism, particularly due to the national distribution of a vaccine, we cannot rule out further limitations to our business activities and we are prepared for this possibility.

he business has proved resilient despite being significantly impacted by the pandemic. This resilience reflects our conservative capital structure and high quality assets which resulted in healthy liquidity protecting us against further shocks while allowing us to prepare to meet the substantial tax bill (ten-yearly charge for inheritance tax) payable by the trusts that ultimately own Cadogan and which is due in 2022. It also puts us in a strong position to respond to opportunities when they arise.

CADOGAN | ANNUAL REPORT 2020

Outlook T

The national economy has absorbed major shocks, resulting in the potential for reduced demand for the business space and homes which we present to the market. However, the immediate outlook is positive as people are released from lockdown and make the most of the increased opportunities.

29 April

Beyond COVID-19, the trend for online shopping continues to accelerate. Our well-established strategic responses to this structural change in retail reflects our strengths and characteristics as a business able to take a long-term view, with a strong stake in ensuring the area thrives, and a very clear purpose – to make Chelsea wonderful. Our commitment this year to make the business Net Zero carbon by 2030 clearly reflects these values too. From the outset of the pandemic, Cadogan has been proactive, with clear priorities for dealing with the crisis and plotting a path for emerging successfully as the threat to health recedes and restrictions start to lift. The financial support we have provided to our occupiers and other stakeholders, coupled with the impact on asset values has inevitably affected our short-term development and growth plans, as we seek to preserve liquidity and our strong balance However,sheet. our long history teaches us many lessons on weathering adversity in all its forms, be it past wars, pandemics or economic and political crises. Our heritage provides strong foundations for a dynamic contemporary business which is able to innovate and adapt in response to crises, whatever their shape, and the transformation in markets that results. We are fortunate to work with an impressive team of advisors, consultants, contractors and partners who have supported this business through a challenging year and to whom I owe an enormous debt of gratitude. I would also like to offer my heartfelt thanks to the many people amongst these businesses and within the Cadogan team, who have been onsite throughout the pandemic, supporting us all so significantly. My overriding sense of 2020 is pride at how the business has been able to provide extensive assistance to our customers, support the NHS locally as well as charities within the Borough which are helping people most in need. We have maintained operational activities, enhanced the attractiveness of the area and protected the business. This could not have been achieved without the energy and talent of the Cadogan team who have worked tirelessly despite the disruption in their lives, and it feels right to conclude my report by expressing my immense appreciation for all that every single member of the team has done.

STRATEGIC REPORT

Hugh Seaborn Chief Executive 2021

CADOGAN | ANNUAL REPORT 2020 90% OVERALLSATISFACTIONCUSTOMER 86% RESPONSIVENESS 85% EASE OF WORKING The Estate Today CUSTOMER COMMITMENT We are committed to delivering an outstanding experience for our customers, living and working on the Estate, to ensure long lasting relationships. This contributes towards a strong sense of community across the neighbourhood, as well as supporting the business. We listen carefully to feedback from our customers and respond accordingly where we can. We receive real-time feedback through our customer research partner RealService* which provides us with the means to continually improve the customer experience and helps shape our business strategy. *RealService is a leading independent customer experience consultancy 34

We are constantly investing in upgrading the Estate through maintenance, restoration, refurbishment and redevelopment activities. This allows us to maintain and improve the wider environment and deliver homes and business space that meets the needs of our customers. Our aim is to be exemplary in the way in which we consult and engage locally, because it is crucial to understand local views and keep the community informed. Through this approach we aim to be the most trusted local developer, able to adapt and respond to the changing needs of society, customers and markets. This helps to ensure the area remains relevant and desirable to both residents and visitors, now and for the future. Our aim is to be exemplary in the way in which we consult and engage locally, because it is crucial to understand local views and keep the informedcommunity

LOCAL ENGAGEMENT

COMMUNITY ENGAGEMENT

STRATEGIC REPORT

We seek to maintain a regular dialogue with all customersand the wider community - throughout the year. This helps us to understand their priorities and work in partnership, as well as keeping them informed.

From the ‘Welcome pack’ received on arrival to the Estate, we communicate frequently with our retail customers. This includes regular newsletters and seminars to update them on neighbourhood news (from footfall trends to new openings, public realm investment and public affairs campaigns) and working alongside them on destination marketing and events programmes. Both residential and commercial customers receive complimentary access to our premium concierge service, Cadogan Concierge, which assists with day to day demands as well as bringing our community closer together – retail customers benefit from reaching an exclusive residential audience, while our residents enjoy invitations and exclusive offers from the array of shops, restaurant and cultural attractions on their doorstep.

CADOGAN | ANNUAL REPORT 2020 CUSTOMER AND COMMUNICATIONSTAKEHOLDER

Our newsletters, magazines and digital channels ensure that we keep audiences across the Estate informed. From Sloane Square magazine to Cadogan VIP and destination websites, newsletters and social feeds from Sloane Street, King’s Road, Duke of York Square and Pavilion Road, each works independently to reach a combined audience of over 150,0001 both locally and beyond, keeping followers up to date and creating continual reasons to enjoy the local area, or visit Chelsea.

The team ‘on the ground’ includes multilingual Welcome Ambassadors to provide a friendly face to visitors who may need assistance – and Area Supervisors who live locally and are key to our customer facing service provision. The Area Supervisors are first responders, central to our 24/7 emergency response capability. The regular feedback we receive consistently highlights how approachable, friendly, helpful and knowledgeable this team is. This extensive information helps customers become familiar with the area and with their new home or business space, as well as informing them of the services that we provide. Combined audience of Cadogan owned channels across print, digital and social as of March 2021.

OUR SUPPLIERS We work with a wide range of external advisors, contractors, suppliers and partners and particularly value long-term relationships with people and organisations who share our values and desire to deliver excellent results. They are expected to operate ethically and responsibly, ensure high standards of health and safety and support a positive relationship with our customers and the communities within which we operate. We pride ourselves on being a good client that consistently treats our suppliers fairly and transparently, while expecting commercially competitive outcomes. We host events and webinars for groups such as construction contractors, through which we can share knowledge and best practice on topics including health and safety, heritage and community engagement. This partnership approach receives much positive feedback, especially at turbulent times such as the last year.

STRATEGIC REPORT

Our suppliers are selected carefully because we see them as an extension of our own team, working in genuine collaboration, motivated by the same values and highest of standards.

Photography: Helen Cathcart 37

The Cadogan Charity is managed separately from business operations and has continued to grant donations to both local and national charities – over £12m over the last five years to causes including London’s Air Ambulance service, The Children’s Trust, Wellbeing of Women, Prince’s Trust and Alzheimer’s UK.

STRATEGIC REPORT

2 Calculated using the LBG Framework, a global standard for measuring corporate community investment and philanthropy.

Our long-term commitment to Chelsea comes with responsibility to ensure that we are making a positive contribution towards a sustainable environment, protecting the area’s unique heritage and supporting a thriving community – continually evolving to ensure it remains vibrant for future generations.

STEWARDSHIP IN THE COMMUNITY

• Enabling the Foundation, in partnership with Age UK, to provide weekly care packages for over 1,000 vulnerable and isolated people.

• Funding an additional caseworker for St Giles SOS – a project that helps young people involved with, or at risk of, criminal gang exploitation through intensive support and advice.

The Cadogan Charity

Chelsea is vibrant and full of character. We actively seek ways to contribute to thriving local communities and work closely with local groups, charities, educational and religious bodies as well as supporting cultural attractions.

In addition, the Cadogan family support and Chair the London Playing Fields Foundation, which transforms lives through sport and physical activity by protecting and promoting London’s playing fields; running social inclusion projects and directly managing several grounds across the capital.

In 2020, we became Principal Supporter of the Kensington & Chelsea Foundation. This enables us to benefit hundreds of outstanding grassroots organisations, ensuring that support directly reaches those who need it most. In covering the Foundation’s running costs, assurance can be given that every further penny raised goes directly to local causes.

• Further support, including staff fundraising activities, for the ‘Christmas in a box’ campaign to provide over 8,000 local families, homeless people or those at risk of isolation with support, gifts and food over the festive period.

STEWARDSHIP

REACHING THOSE WHO NEED IT MOST

We also work with the Foundation on additional funding for specific projects and actively encourage our customer network, from residents to retailers and restaurants, to do so. This has recently included:

In 2020, Cadogan’s direct and indirect charitable contribution was £502,500, supporting 184 organisations and 6,168 individuals. This is a 144% increase on 20192, excluding donations from the Cadogan Charity (see right).

This is a philanthropic enterprise aimed at contributing to the broad and varied cultural offer of Chelsea.

CULTURAL VIBRANCY

Aside from supporting local cultural icons such as the Saatchi Gallery and Royal Court Theatre, Cadogan owns and operates the 900 seat Cadogan Hall, which in addition to being home of the Royal Philharmonic Orchestra, hosts a diverse programme of music, debate and performance each year.

Cadogan usually hosts over 60 inclusive, complimentary events for the community each year. This includes the annual Summer Fete, ‘Chelsea in Bloom’ (London’s largest free flower festival), Community Awards, outdoor yoga and running classes at Duke of York Square and a Fine Food market each Unfortunately,weekend.

CADOGAN | ANNUAL REPORT 2020

@georgiatoffolo

COMMUNITY EVENTS

the usual programme could not run in 2020 – but activities went ahead wherever possible. This included complimentary fitness programmes for residents on Instagram TV, a ‘virtual sleepout’ (usually hosted on Duke of York Square) for local homeless charity Glassdoor which raised £140,000 and online seminars for local groups, including Cadogan’s Archivist discussing the burst of creativity and commerce that has followed challenging times historically in ‘Chelsea through Adversity’ for The Chelsea Society.

In addition, we encourage more diversity in the property industry through participating in the Pathways to Property initiative by the Reading Real Estate Foundation, providing work experience and guidance to young people who might otherwise not have access to such opportunities.

STRATEGIC REPORT

In an exciting new public-private venture created to help to get more local people into work, Cadogan funded an important new role, ‘Employment Opportunities Coordinator’. The aim is to proactively create employment opportunities for local residents - including marginalised communities, young people and the long-term unemployed – by understanding the needs of individuals, communities and employers and finding creative ways to bring them together. This includes identifying transferable skills and opportunities to reskill and upskill, helping to achieve potential and identifying good quality, sustainable opportunities.

CREATING EMPLOYMENT OPPORTUNITIES

SUPPORTING THE COMMUNITY £1.1 million is committed each year as rental subsidies for affordable, community and key worker housing. This allows many people who support our local community to live here, including NHS Staff, police, transport workers, firefighters and Anteachers.additional £150,000 is also given each year to support essential community facilities such as cultural centres, shelters, local churches and schools.

Backing for the medical profession was shown in several ways. A donation to Chelsea & Westminster Hospital’s COVID-19 Rapid Response Fund supported research and new treatment trials, provided patients with technology to communicate with loved ones, and initiated a memory box project to help the bereaved cope with loss. The funds have also contributed to an NHS staff wellbeing programme to help frontline workers.

CADOGAN | ANNUAL REPORT 2020 OUR

Throughout 2020, Cadogan helped to ensure Chelsea’s longer-term recovery from the pandemic through the creation of a ‘Business Community Fund’, which has so far delivered over £20 million in support.

THE BUSINESS COMMUNITY FUND

The ‘Business Community Fund’, has so far delivered over £20 million in COVID-19 support Sponsored accommodation and funding ensured the provision of 1,500 medical gowns-per-day to local hospitals through community business ‘The Fashion School’ - this saw over 32,000 gowns delivered during the peak of the crisis. Free car parking and hotel accommodation was offered for frontline workers, as well as subsidised key worker accommodation. Provision was made for the arts and supporting future creative talent significantly affected by the pandemic. A number of grants were created for key sectors synonymous with Chelsea including fashion, arts and crafts, music and food. This included the Nucleo Project, which grants free musical instruments and lessons to children in the area who wish to learn new skills, and a partnership with the British Fashion Council which saw 36 grants made to creative British fashion businesses. Cadogan also helped to finance a ‘digital inclusion’ project which, together with funding from others, saw over 100 laptops provided to youth organisations across the borough to mitigate the loss of a safe and secure learning environment for the most vulnerable children during school closures.

Core initiatives have included emergency rent support and relief measures for shops, restaurants, leisure operators and cultural attractions. On reopening, over 500 al fresco seats were provided, recently increased to 1,000, to create a safe and appealing environment, along with substantial measures to protect the local community and ensure social distancing – including clear signage, sanitisation stations and ‘picnic bubbles’ on Duke of York Square’s green.

A better life together RESPONSE TO COVID-19

STRATEGIC REPORT

Cadogan have been exceptionally supportive during the crisis and I am not sure that without the support of the Estate and the Government schemes, the business would have survived. Having navigated through these unprecedented times, I am more confident than ever of the strength of the Cassandra Goad brand and its business model. I am sure it will continue to flourish and add to the vibrancy and uniqueness of the retail experience of the Estate.CASSANDRA GOAD DIRECTOR, CASSANDRA GOAD Cadogan were quick to respond to the pandemic and reached out to support us immediately. It was refreshing that Cadogan took a forward thinking and long-term approach, not only on rent terms but in showing initiatives to try and boost trading with the pedestrianisation of the street, marketing support and a fully-funded courier bike delivery service.

LAURA, MILES AND CHRIS, CARAVAN RESTAURANTS (VARDO) Cadogan has been incredibly supportive with flexible payment terms, local marketing opportunities and pedestrianising our street which had a positive impact on footfall. It really has been a team effort and I’ll be forever grateful that our suppliers and landlords were able to help us.

ALEX HUNTER , FOUNDER, THE SEA, THE SEA It goes without saying that we are immeasurably grateful for your support during these incredibly challenging times. Your ongoing support, both financially and operationally, continues to help us survive and hopefully thrive again soon. We simply couldn’t do it without this.

ALEX BAILEY , MANAGER, HAINES OF SLOANE SQUARE

SIDONIE WARREN , FOUNDER, PAPERSMITHS Thank you for all the amazing work you are doing to bring life to Chelsea during such a difficult time for us businesses.

CADOGAN | ANNUAL REPORT 2020

2020 saw the completion of Rossetti Studios, rare surviving artist’s studios in the heart of Chelsea. Purchased by Cadogan in a near derelict state, they were rescued with a £4m renovation and restoration - safeguarding their original function, enhancing their character and refurbishing them to a modern-day standard. Built in 1894 in Queen Anne style, embodying the aesthetic ideals of ‘sweetness and light’ they have been beautifully renovated and are filled with original features. They have even retained their access portal or ‘canvas slit’, which can be used to remove large canvasses from first floor studios to street level without the need to navigate staircases and normal sized doors.

ENRICHING AND CONSERVING CHELSEA’S HERITAGE Conservation of the Estate’s rich heritage is essential. This includes cyclical repair and maintenance of existing buildings consistent with our strategic Conservation Management Plan, often using traditional skills and materials to ensure the best of modern design is in harmony with heritage surroundings.

The complex of eight studios will shortly be fully occupied by practising artists to contribute further towards Chelsea’s rich artistic pedigree. In a complete architectural juxtaposition, Duke of York Square’s recently completed restaurant building sees boundary-pushing contemporary architecture that respects and reflects its heritage environment receive several awards this year. A Civic Trust commendation recognised the positive contribution that it makes to its local community, with judges noting, ‘Well conceived and very 2020 providing indoor/outdoor dining experience. A real asset in these pandemic affected times’

STRATEGIC REPORT

Our long-term vision means we think carefully about our impact on future generations and the environment. From ensuring our historic buildings are as efficient as possible, to minimising water consumption and waste generation, we are continually seeking ways to reduce our impact on the Duringenvironment.2020,we have focused on addressing our impact and how we can act collaboratively with the local community to help drive significant positive change. As a result, we are pleased to announce the launch of a new ten-year sustainability vision, ‘Chelsea 2030’. This comprehensive strategy has a central commitment to achieving Net Zero carbon emissions alongside a further 12 targets framed under three pillars of stewardship: Environment, Heritage, and ChelseaCommunity.2030 has been developed in collaboration with local stakeholders and the community, and subject to peer review and industry analysis. We engaged with a wide range of experts, local organisations and community members through a series of roundtables and undertook a community survey which gained over 2,000 responses. We are pleased to announce the launch of a new ‘Chelseasustainabilityten-yearvision,2030’

CADOGAN | ANNUAL REPORT 2020

ENVIRONMENTAL STEWARDSHIP

AIM TARGET 2030 DETAIL WASTE T1. WASTE REDUCTION Send zero commercial operational and non-hazardous construction waste to landfill Reuse or recycle over 90% of commercial operational and construction waste AIR QUALITY T2. SUPPLIER CONSOLIDATION At least 40% of commercial customers join off-site consolidation scheme T3. ZERO-EMISSION SUPPLIERS 80% of suppliers to deliver by zero-emission transport T4. ELECTRIC INFRASTRUCTUREVEHICLE All service bays and residential parking lots to have EV charging by 2025, and all new developments with parking after 2021 to include EV charging WATER T5. WATER USE REDUCTION Reduce absolute mains water consumption by 50% CARBON EMISSIONS T6. NET ZERO EMISSIONS Net zero emissions across Cadogan's scope of influence INFRASTRUCTUREGREEN T7. IMPROVED INFRASTRUCTUREGREEN Improve quality and quantity of green infrastructure, including 25% increase in Urban Greening Factor WELLBEING & CULTURE T8. HEALTH & WELLBEING Make a measurable improvement to our communities’ health & wellbeing T9. EMPLOYMENT & SKILLS Increase local employment and support skills development T10. COMMUNITY COHESION Enhance community cohesion between local stakeholders CHARITY T11. TWINNING Deliver one twinning project a year T12. GIVING PROGRAMME Facilitate increase in charitable giving CHELSEA 2030 TARGETS STRATEGIC REPORT 47

NET ZERO PATHWAY CHELSEA 2030 2020 2019 % CHANGE LANDLORD PROCURED ELECTRICITY ( kWh ) 8,231,986 9,912,962 -17% OF WHICH IS RENEWABLE (%) 87% 91% -4% ONSITE RENEWABLE GENERATION ( kWh ) 18,144 18,144 0% LANDLORD PROCURED GAS ( kWh ) 7,562,623 7,272,343 4% TOTAL LANDLORD ENERGY ( k W h ) 15,824,952 17,224,652 -8% BUILDING ENERGY INTENSITY ( kWh/m 2 ) 181 198 -9% BUILDING CARBON INTENSITY ( tCO 2 e/m 2 ) 0.039 0.046 -14% STREAMLINED ENERGY AND CARBON REPORTING CADOGAN | ANNUAL REPORT 2020 The full Chelsea 2030 report is available to view here We plan to update progress on targets annually. In the meantime, we are able to report our performance in 2020 against a baseline of 2019. Our target of Net Zero carbon emissions by 2030 means we will reduce our emissions as much as possible over the next decade, and then offset the remainder. Find out more about how we are going to achieve this in the Net Zero Pathway report. In 2020, our carbon footprint dropped by 11%. This was largely driven by a 4% reduction in embodied carbon and 33% drop in occupier emissions, due to restricted activity as a result of COVID-19.In 2020, our carbon footprint dropped by 11%. This is largely driven by a 4% reduction in embodied carbon and 33% drop in occupier emissions 48

20192020971 1,003 TOTAL EMISSIONS PER £M OPERATING PROFIT BEFORE CAPITAL ITEMS SCOPE EMISSIONS SOURCE 2020 (tCO2e) 2019 (tCO2e) SCOPE 1 LANDLORD GAS 1,398 1,347 LANDLORD REFRIGERANT GAS 148 79 SCOPE 2 LANDLORD ELECTRICITY 1,919 2,534 SCOPE 3 DEVELOPMENTS 62,573 64,888 WATER (LANDLORD) 86 72 OTHER PURCHASED GOODS & SERVICES 11,219 11,484 CAPITAL GOODS 19 934 FUEL AND ENERGY RELATED ACTIVITY 406 477 WASTE 145 62 BUSINESS TRAVEL - 1 EMPLOYEE COMMUTING 50 55 TENANT OPERATIONS 15,437 22,953 INVESTMENTS 808 1,328 TOTAL TOTAL EMISSIONS 94,208 106,213 CARBON FOOTPRINT TCFD PILLAR RELEVANT INFORMATION GOVERNANCE Governance, page 58 STRATEGY Property Portfolio, page 19 Stewardship, page 39 RISK Approach to Risk Management, page 54 METRICS AND TARGETS Environmental stewardship, page 47 THIS REPORT ALIGNS WITH TASKFORCE FOR CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) STRATEGIC REPORT 49

STRATEGIC REPORT CADOGAN, A GREAT BRITISH BRAND UK PROPERTY AWARDS ‘Best Leisure Architecture’ for the Duke of York Restaurant CONSTRUCTORSCONSIDERATE SCHEME NATIONAL SITE AWARDS ‘Gold’ for 1 Sloane Gardens LABC EXCELLENCEBUILDINGAWARDS ‘Best large commercial project’ for The Cadogan Hotel FX DESIGN AWARD ‘Best Leisure Project’ for the Duke of York Restaurant LONDON LIFESTYLE AWARDS Shortlisted for ‘London’s Favourite Lifestyle Street’ for Pavilion Road and the King’s Road CIVIC TRUST AWARDS, Highly Commended for the Duke of York Restaurant DEZEEN AWARDS Duke of York Restaurant shortlisted for ‘Hospitality building of the year’ RESTAURANT & BAR DESIGN AWARDS, Shortlisted for the Duke of York Restaurant NLA AWARDS Duke of York Restaurant shortlisted for the ‘Welcoming’ category GQ FOOD & DRINK AWARDS ‘Best Restaurateur’ for Adam Handling, The Cadogan Hotel RICS SOCIAL IMPACT AWARDS Duke of York Restaurant shortlisted for ‘Leisure Category London Area’ RIBA AWARDS Shortlisted for the Duke of York Restaurant GQ FOOD & DRINK AWARDS The Cadogan Hotel shortlisted for ‘Best Hotel’ CONDE NAST JOHANSENS AWARDS For Excellence, ‘Best Urban Hotel’ for 11 Cadogan Gardens LUXURY LIFESTYLE MAGAZINE ‘Best Hotel for Design’ for 11 Cadogan Gardens and shortlisted for ‘Best Boutique Hotel’ recognitionandAwards OUR RECENT AWARDS AND RECOGNITION INCLUDE: 51

There was a like for like fall in the Estate’s capital values in 2020 of 14.2%.

CADOGAN | ANNUAL REPORT 2020

Financial

TRADING HIGHLIGHTS

The fall in rental income reflected mainly the impact of rent concessions provided to occupiers in response to COVID-19. Rent support was provided on a case-by-case basis. Concessions took various forms, including monthly rents, turnover rents, rent deferrals, rent-free periods and other arrangements such as concessions linked to lease re-gears, lease extensions, participation in marketing initiatives or Wheresimilar.rent concessions were given directly as a result of COVID-19 and certain conditions set out in the FRC’s amendment to FRS 102 in respect of COVID-19 related rent concessions were met, the concessions are recognised as a reduction to gross rental income over the period that the change in lease payments was intended to compensate. The total value of concessions recognised in 2020 as a reduction in rental income was £10.2m. Review Patel Finance Director

£158.7 M £96.2 M £8.5 M £795.2 M £726.8 M GROSS RENTAL INCOME FELL TO OPERATING PROFIT BEFORE CAPITAL ITEMS DECREASED TO PROFIT ON SALE OF INVESTMENT LOSSINCREASEDPROPERTIESTOONREVALUATIONOFINVESTMENTPROPERTIESLOSSONORDINARYACTIVITIESBEFORE TAXATION REVALUATION(INCLUDINGLOSSES) Decrease of 4.8% £38.8 M RESIDENTIAL PROPERTY DISPOSALDECREASEDPROCEEDSTO Decrease of 13.8% Decrease of 9.1% Increase of 72.7% Sanjay

The profit from the sale of investment properties in 2020, which includes profits from leasehold enfranchisements, contributed £5.8m compared to £4.9m in 2019. There was a smaller number of transactions completed - 32, compared to 53 in 2019 - but with higher average value and an increase in the average margin over book value. The consolidated income statement reflects the movement on the annual revaluation of the investment property portfolio.

TOTAL UK TAX CONTRIBUTION 2020£M 2019 £M Tax paid by Cadogan UK Corporation Tax 16.0 11.7 SDLT 0.1 3.5 Employer’s National Insurance 1.0 0.9 Non-domestic rates and Council Tax 2.2 1.9 Section 106 agreements 0.1 Irrecoverable VAT 3.5 5.1 Other 0.3 0.3 23.1 23.5 TAX COLLECTED AND PAID OVER BY CADOGAN PAYE and Employees’ National Insurance 2.6 2.4 VAT 20.6 11.0 23.2 13.4 TOTAL £46.3 £36.9 53

In relation to rent deferrals or rents outstanding, the rental income is recognised as normal with the deferred rent or rent receivable balance remaining in trade debtors until settled.

is mindful of its tax obligations and is liable for, and collects on behalf of HMRC, various taxes in its operations. The table below shows the tax paid by Cadogan and that collected and remitted to HMRC by Cadogan. As in previous years, the tax collected is significantly greater than the direct tax charge shown in our accounts, demonstrating our wider contribution to the UK economy. In addition to the tax set out in the table, Cadogan Group’s dividends flow through to several family trusts and are (save in the case of a charitable trust) subject to income tax. Furthermore, a substantial proportion of the dividend is used to provide for the ten-yearly charge to inheritance tax in relation to certain of the trust assets. In the case of the principal trust the next ten-yearly charge, due in 2022, is currently estimated at in excess of £135m before allowing for the tax charge on extracting the funds. We calculate that total dividends required by the family trusts from Cadogan to pay the 2022 inheritance tax charge amount to £218m. This represents 90% of the total cumulative dividends paid by Cadogan since 2013, the year after the last ten-yearly inheritance tax payment in 2012.

The dividend paid to shareholders in December 2020 was £17.4m. This was paid mainly to provide funds to the major shareholder so they can meet an upcoming ten-yearly inheritance tax charge due in 2022 and to a charitable trust to enable it to meet its charitable commitments. The major shareholder waived £24.0m of its share of the dividend in light of the pandemic. The total dividend was paid in December Cadogan2020.

STRATEGIC REPORT

All portfolio categories fell in value during the year resulting in a net revaluation loss of £795.2m (2019: £581.4m).

Operating profit before capital items fell by £8.8m to £97.0m. The reduction was less than the impairment provision for debts and the cost of rent concessions, due to management actions to reduce non-essential property expenses and delay the start of certain development projects.

Where there is a credit risk over recoverability of a balance that is contractually due, any impairment is booked as a cost in Cost of Sales. An impairment charge of £11.2m was booked in the income statement. This is a different accounting treatment to that of previous years, when the impairment charge was not significant and was deducted from gross rental income. Rent collections for residential tenancies averaged 94% throughout the year, with concessions mainly involving rent deferrals or delayed rent increases. This was slightly down on the normal collection rate of around 97%.

Rent collections for commercial occupiers averaged 81.8% in the three COVID-19 quarters compared to a pre-COVID collection rate of nearly 100% and 86.3% for the full year. Rent collections for the December 2020 quarter, the results of which will be included in the 2021 results, were 77.7% as at 21 April 2021, with discussions ongoing to collect further amounts.

The charge for current taxation in the year was £12.9m, an increase of £3.5m compared to 2019 despite the fall in operating profit, mainly because of a decrease in development costs expensed to the income statement. The overall figure for taxation in the income statement for 2020 was a credit of £52.4m (2019: credit of £76.0m), due mainly to a deferred tax credit on the revaluation loss in both years.

BALANCE SHEET AND BORROWINGS

Cadogan is a long-term property investor with a clear focus on high quality property assets located in central London. Because of its private ownership and long-term outlook, the Group aims for, and is able to achieve, a high level of resilience in all areas of the Cadoganbusiness.assesses

CADOGAN | ANNUAL REPORT 2020

Management of risk is an essential element in any modern business and Cadogan has a well-developed strategy and process for risk management. Overall responsibility for risk management lies with the Group board, which recognises that there are inherent risks in running any business and which is responsible for determining the Group’s risk appetite and for ensuring that the Group’s risk management system properly identifies, understands and manages all relevant risks.

We have undertaken a stress test with a severe but plausible downside COVID-19 scenario reflecting pessimistic assumptions for occupier default and the risk of expiring commercial leases not being renewed, to assess the potential impact on headroom for liquidity and loan covenant compliance, taking account of mitigations available. Details of the stress test are provided in the Going Concern section of the Directors’ Report on pages 62 to 63 and the conclusion was that, in the severe but plausible downside scenario modelled, we would satisfy all our loan covenants in 2021 and 2022.

risk under three principal headings: - Strategic risk - Financial risk - Operational risk The impact of COVID-19 cuts across all three risk headings that we consider. A summary of the impact of COVID-19 on the business, steps taken and outlook is included in the Chief Executive’s review on page 13 to 15 and pages 32 to 33 and the 54

IMPACT ASSESSMENT OF COVID-19

The value of our properties at the end of 2020 was £4.79bn, a decrease compared to the previous year’s figure of £5.57bn. On a like for like basis this reflected a reduction in value of 14.2% compared to a fall in 2019 of 9.4%. This was the primary reason for the fall in Group shareholders’ funds to £3.40bn with net assets per share falling to £28.32 from £34.07, a decrease of 16.7%. Cash flows from the Group’s property operations were lower than last year because of reduced rent receipts due to the pandemic. This was mitigated by a reduction in property investment and development activity and a significantly reduced dividend paid, resulting in a small net cash outflow. Year end borrowings, excluding cash funds (2019 – bank overdraft) increased during 2020 from £790.6m to £811.5m. During the year we received £50m from the first drawdown on a new £100m private placement completed in September 2020 (£50m due September 2021) and there was further utilisation of the revolving credit facility which was £90m drawn at the year end, an increase of £5m compared to 31 December 2019. There were loan repayments in the year totalling £26.7m, comprising £22.7m in respect of maturing loan notes from the 2008 private placement and £4.0m on another loan. There was a reduction of £7.4m in 2020 after translating our dollar denominated borrowings at the year end exchange rate and recognising the fair value of the related cross currency swaps. At 31 December 2020 the average maturity of our debt was 10.57 years (2019: 10.54 years) and the average effective rate of interest across all loans reduced from 4.97% in 2019 to 4.72%. Apart from the revolving credit facilities, all our debt is at fixed rates. There was an increase in year end balance sheet gearing to 23.5% from 19.7%. Gearing as measured under our loan covenants, increased to 20.4% from 17.1%, mainly as a result of the decrease in property values, while interest cover decreased slightly to 2.8 times from 3.0 times, comfortably in excess of our financial covenants. At the year end we had total undrawn facilities available to the Group of £210m under revolving credit facility arrangements. On 3 April 2020 we refinanced our revolving credit facilities, increasing them by £60m to £300m for a minimum duration of three years with two one-year extension options exercisable after the first and second anniversary of the start date. On 21 September 2020 we raised £100m from a private placement of which £50m is deferred to September 2021. The loan consists of four equal tranches of £25m with maturities ranging from 2048 to 2054.

The Group’s risk appetite and processes for managing risk are regularly reviewed by the board. The Finance Director, supported by the senior management team, is responsible for compiling the Risk Register which is updated on a regular basis. The Risk Register identifies the principal risks impacting on the business and the Group’s financial position. It provides an assessment of the likelihood of the identified risks materialising and includes an estimate of the potential impact of each area of risk on the business. The Register is formally reviewed by the board at least annually and this forms an important part of the overall risk management process. The Group also makes use of appropriate external specialists to advise on compliance with established policies and external regulations.

APPROACH TO RISK MANAGEMENT

STRATEGIC REPORT

Since the start of the pandemic our Operations Group, led by the Chief Executive and comprised of senior management responsible for operational activity, meets at least twice a week to discuss COVID-19 related issues and agree decisions and actions quickly. The Board receives regular updates and has held additional meetings when necessary.

results of stress tests on liquidity and borrowing covenants are summarised in the Financial Review on pages 52 to 54 and Directors’ Report on pages 62 to 63 (Going Concern).

Development risks – Cadogan regularly undertakes substantial development projects, but carefully considers the timing to ensure that the Group's exposure to development risk is controlled, both relative to the overall portfolio and to potentially competing schemes in the same area. Cadogan consults widely on development schemes to ensure that schemes are designed to the highest quality and to assist in obtaining the most appropriate planning consent.

Strategic risks

Risks associated with London's position as a global capital –London’s position as a global capital has been a significant factor in the overall prosperity of central London in recent years. There are risks to this position from several factors, most significantly from the Brexit negotiations, from terrorism, from under-investment in infrastructure and from adverse changes to the tax regime, particularly affecting overseas investors.

The Group monitors and is actively involved in consultation with the Royal Borough of Kensington and Chelsea where it considers that it could be affected by changes or developments to local planning policies. The Group is committed to close liaison with stakeholders and the community to ensure that its strategy and developments are understood externally. In addition, there are statutory and regulatory risks which are closely monitored.

The Group cannot manage or control these risks but Cadogan takes an active role in lobbying through organisations such as London First and the British Property Federation amongst 55

Property market risks – the risks arising from property cycles and from shorter-term unexpected changes in the market for property investment, development and occupation. Retail is subject to structural changes, such as the ongoing shift to online transactions, accelerated by COVID-19, which increases the risks to retail property owners and which our close estate management strategy responds to. The move to more flexible working caused by COVID-19 has made the long-term demand for office space less certain. COVID-19 could have a shortand long-term impact on occupational demand for different uses. Cadogan has been preparing for many years for the shift of retail sales to online by having a diversified asset portfolio, positioning its Estate towards luxury and distinctive retail propositions, increasing non-retail leisure and food and beverage options to increase attractiveness and increase dwell time in the area, and minimising vacant units with short-term lets to on-trend retail and hospitality occupiers. Most property markets are cyclical, and this is particularly true of central London. As a long-term investor the Group is less reliant than others on predicting property market cycles and aims to manage the impact of the property cycle and any other short-term fluctuations in values or activity levels by ensuring a relatively high proportion of committed longterm loan finance, planning for significant headroom against external financial covenants and high levels of available liquidity. These factors also assist the Group in managing cash flow and liquidity risks. Geographic concentration – the Group accepts the risks inherent in the small geographic area in which the Group’s properties are concentrated. The Group’s properties are primarily located in Kensington and Chelsea which for many years has been an area renowned for long-term prosperity and economic resilience. The Group also seeks to balance this geographic concentration through a diversified portfolio of uses and through close attention to the balance between sectors. The largest individual property represents 4.8% of the total portfolio value and the highest individual rent 3.8% of total annual rental income.

Compliance with social distancing guidelines means fewer workers allowed on some sites, affecting productivity. Material shortages have led to delays, particularly during the first lockdown. There is a need to incorporate additional flexibility in future development projects to allow a wider range of end uses following recent changes in planning use guidelines and changing market demand over time. Movement of international labour caused by travel restrictions has impacted some projects relying on specialist skills from other countries. The impact on development projects may be felt for many years through changes in the supply chain and loss of expertise in key suppliers and contractors.

COVID-19 has reduced visitors to central London, impacting retail trade. Cadogan has carefully curated its Estate over many years to create a vibrant local neighbourhood where spending is dominated by its residents and less reliant on visitor footfall. This was evidenced by the comparatively smaller reduction in local footfall during the pandemic than other central London areas.

COVID-19 has had a number of adverse effects on development activity. Some development projects have been delayed to preserve financing headroom in the face of uncertainty as to the length and severity of the pandemic.

Operational risks

Customer creditworthiness – Prior to COVID-19, Cadogan had high rent collection rates and few occupier defaults or failures. COVID-19 resulted in a sharp fall in rent collection rates and an increase in defaults. Cadogan responded quickly through a number of initiatives. It identified a list of the smaller and most financially vulnerable businesses and offered various financial support packages including deferrals, waivers, turnover only rents and monthly in arrears payments, the purpose being to enable them to survive the crisis and remain operational afterwards. The frequency of credit control meetings was increased from 8 to 12 times a year, and additional resource was recruited to liaise with customers to help assess and deal with their requests. These actions have resulted in minimising commercial vacancies and defaults and increased rent collection rates from the low level experienced at the start of the crisis.

COVID-19 resulted in most employees working from home for large parts of the last year, though staff have worked in the office outside of lockdowns to help support activity and occupiers on the Estate. The Group’s offices as well as tenanted buildings which it manages have been made COVID-secure. Risk assessments have been performed for all employees to ensure they can travel to the office and work safely in accordance with government guidelines. Managers consult with employees regularly to monitor their physical and mental wellbeing. The Operations Group of senior management, which has met at least twice a week during the pandemic, regularly discusses staff welfare and has arranged online mental health awareness training as well as access to confidential helplines for staff.

Refinancing risk – The Group seeks to manage refinancing risk using a spread of loan maturities. In normal circumstances loan terms, other than bank loans, are for an initial period of ten years or more. The incidence of maturities is spread to ensure that major refinancings are spaced out over time.

Property loss and damage – All the Group’s properties are insured against loss or damage on a full reinstatement basis, including three years’ loss of rental income. Cover includes terrorism risk which is provided by a major insurer and member of Pool Re. COVID-19 illustrated the limitations of insurance cover and highlights the importance of maintaining a strong financial position and liquidity headroom to enable the business to withstand uninsurable or unknown future events.

Financial risks Interest rate risk – The majority of long-term borrowings are at fixed rates of interest, achieved either by agreement with the lender, or through the interest rate derivatives market. The board requires at least 75% of long-term debt to be subject to fixed rates of interest. The Group does not undertake financial instrument transactions that are speculative or unrelated to trading activities. Board approval is required for the use of any new financial instrument.

CADOGAN | ANNUAL REPORT 2020 others, to ensure that the long-term health of London is at the forefront of the minds of national and local government.

COVID-19 has reduced international visitors to the UK which could adversely impact retail on the Estate in the short-term. This has been exacerbated by the withdrawal of tax-free shopping by the government, making the UK the only major European country that does not have a practical tax-free shopping scheme for overseas tourists. Inbound tourism is expected to resume as vaccination rates increase throughout the world in the coming months. Cadogan is working closely with its retailers on enhanced marketing strategies for attracting more UK and international visitors to the area in 2021 and beyond.

Foreign currencies – Some of the private placings of debt which the Group has undertaken have included a significant proportion of US dollar borrowings. All exposure to US dollars in relation to both interest and capital repayments has been swapped into sterling on the date on which the loans were committed, and as a result there is no residual foreign exchange risk exposure to the Group. Operationally the Group has no foreign currency exposure.

Health and safety risks – The Group accords a high priority to health and safety issues. Health and safety issues are always discussed at the monthly Property Management Committee meeting and all incidents are reported and reviewed on a monthly basis. From time to time the Group undertakes external reviews and audits of its health and safety policies and procedures, the results of which have confirmed the quality and integrity of health and safety practices.

Climate change – There are four climate specific risks identified: Medium-term impact of climate change on our property and business, including the risk of damage caused by river or surface water flooding and the risk caused by rising temperatures and extreme weather events. The 56

Compliance with financial covenants – The Group has provided financial covenants to its lenders to support its unsecured borrowings. The Group’s financial position is regularly monitored against the covenant requirements to ensure that the Group has significant financial headroom and is not at risk of breaching any of the covenants. Scenario planning is used to assess the sensitivity of potential changes to the principal financial measures which might impact the ability to meet covenant requirements.

Short-term changes in environmental and climate regulation including increasing building energy efficiency and reporting requirements. Changes in legislation are monitored internally, by trade bodies of which Cadogan is a member, and our legal advisers.

IT, telecommunications and business continuity risks – The Group ensures its IT and telecommunications systems are robust and fit for purpose, with an emphasis on the development of inherent resilience and backup capability. The Group has a detailed business continuity plan which is regularly reviewed and updated. The Group undertakes regular external cyber security reviews and implements any resulting recommendations for security improvements. As a result of its operational preparedness, Cadogan staff were able to transition seamlessly to working from home from the start of the first lockdown and IT systems have worked without any major downtime throughout the pandemic.

STRATEGIC REPORT

Medium-term, increasing energy and carbon pricing. Improved energy usage monitoring and management is intended to reduce consumption over time, alongside efficient equipment and renewable generation.

Loss of social licence to operate if we are perceived not to be acting in the wider interests of the area and the country. We actively engage with the local council, RBKC and stakeholders in the community. In December 2020 the board approved Cadogan’s new sustainability strategy, Chelsea 2030, which seeks to address and mitigate all the above risks.

Sanjay Patel Finance Director 29 April 2021 57

Group works closely with its principal insurer and external experts to support physical and transition climate risk assessments and strategies to implement mitigations.

Governance and Financial

Statements

CADOGAN | ANNUAL REPORT 2020The Earl Cadogan KBE DL Viscount Chelsea DL * Chairman The Hon. James Bruce * Deputy Chairman Hugh Seaborn CVO Chief Executive Sanjay Pat el Finance Director Charles Ellingworth * John Gordon * Harry Morley * Francis Salway * *Non-executive Paul Loutit 10 Duke of York Square, London SW3 4LY United London1Ernst2997357Kingdom&YoungLLPMoreLondonPlace,SE12AF Company Directors LIFE AUDITORCOMPANYREGISTEREDSECRETARYDIRECTORSPRESIDENTOFFICENUMBER 60

• the company’s purpose and values including maintaining a reputation for high standards of business conduct; and

Throughout 2020, the Directors have performed their duty to promote the success of the Company under section 172 of the Companies Act 2006, taking consideration of:

The Group’s success is judged by its members not only on measures of commercial returns but also its reputation, based on the way it deals with and treats its stakeholders and local Ourcommunities.coreobjectives, set out in page 5 of this report, encapsulate the above.

More information on the Group, its purpose and relationships with stakeholders is provided in the Strategic Report pages 10 to 33, The Estate Today pages 34 to 51 and our website www. cadogan.co.uk.

Statement of compliance with section 172 of Companies Act 2006 61

• the interests of stakeholders, including amongst others: employees, customers, suppliers, local authorities and local communities, by engaging with them to understand the issues to which they must have regard;

The Cadogan Group has an association of over 300 years with Chelsea, where it has been and remains the largest landowner.

• the need to act fairly between members of the company.

• the likely long-term consequences of decisions;

The Group has always taken a long-term view, promoted by its members who see it as their duty to hand over the business to the next generation in a better condition than when they inherited it, and strongly supported by the Board.

• the impact of our actions on our local communities and the environment;

GOVERNANCE

CADOGAN | ANNUAL REPORT 2020

Directors' Report

The ultimate holding company maintains liability insurance for its directors and officers and for those of its subsidiaries in respect of proceedings brought by third parties, subject to the conditions set out in section 234 of the Companies Act 2006. Such qualifying third party indemnity provision remains in force as at the date of approving the Directors’ Report.

Charitable Contributions

The 2021 budget has been prepared on a conservative basis that assumes a similar outcome to 2020 for rent receipts and impairments of rent receivables and a continued slowdown on investment and development activity. A further fall of 10% in property values is assumed in 2021. The forecast for 2022 assumes a continuation of reduced rent receipts, though improved from 2021, and no change in property values.

The Group has also assessed a severe but plausible downside scenario reflecting the following pessimistic assumptions: All expiring leases considered at medium to high risk are not renewed and no replacement occupier is found before 2023; and Those leases which are indicated by default risk analysis as being at high risk of default do in fact default.

The Group’s direct charitable contributions for the year were £497,000 (2019 – £134,000). In addition, the Cadogan Charity, a shareholder in the company, makes donations to a variety of local and national charities. Going Concern

The principal activity of the Group during the year continued to be property investment. The Group’s other activities include the operation of a concert hall. A review of the Group’s business during 2020 and its future prospects is contained in the Strategic Report on pages 10 to 57.

Principal Activity and Review of the Business

Dividends Interim dividends of £17,409,000 (2019 – £41,437,000) were declared and paid during the year. Risk Management

The Group has considerable financial resources derived from an established investment property portfolio in prime central London. The Group has substantial long-term committed financing arrangements and has access to overdraft and revolving credit facilities from its bankers.

A summary of the principal risks and uncertainties has been included in the Strategic Report on pages 54 to 57. Directors Of the directors listed on page 60, all held office for the financial year and up to the date of this report.

The directors present their report and the financial statements for the year ended 31 December 2020.

The directors have considered the appropriateness of adopting the going concern basis in preparing the financial statements for the year ended 31 December 2020 focusing on the continuing impact of COVID-19 on the economy, consumers and our occupiers. The assessment is based on the Group’s experience of COVID-19 on its business in the first 12 months of the pandemic and financial forecasts for the periods to 30 June 2022 (the review period) overlaid with a severe but plausible downside COVID-19 scenario.

DIRECTORS’ REPORT covenants without the need to rely on raising new financing.

Auditor A resolution concerning the re-appointment of Ernst & Young LLP as auditor will be proposed at the forthcoming annual general meeting. By order of the board Paul Loutit Secretary 29 April 2021 63

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

Directors’ Responsibilities Statement

Asset values would have to fall by 40% from 2020 closing values as at 31 December 2021 and by 35% from closing 2020 values over 18 months to 30 June 2022 to breach the gearing covenant. To breach the interest cover covenant, operating profit before capital items would have to fall by 44% compared to budget in 2021 and by 51% compared to the forecast for 2022. Based on these considerations, our experience of the actual impact of COVID-19 on the business over 12 months and the directors’ knowledge of Cadogan’s property portfolio and the market in which we operate, the directors have a reasonable expectation that the Group and Company has adequate resources to continue in operational existence at least to 30 June 2022. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Disclosure of Information to the Auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries of fellow directors and the Group’s auditor, each director has taken all the steps that he is obliged to take as a director in order to make himself aware of any relevant audit information and to establish that the auditor is aware of that information.

The directors are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 102. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the company and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent;

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these Werequirements.believethat the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

CADOGAN | ANNUAL REPORT 2020

Independent Auditor's Report to the Members of Cadogan Group Limited

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s ability to continue as a going concern. Other information

• give a true and fair view of the group’s and of the parent company’s affairs as at 31 December 2020 and of the group’s loss for the year then ended;

Conclusions relating to going concern

The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard.

Opinion We have audited the financial statements of Cadogan Group Limited (‘the parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2020 which comprise the Consolidated Income Statement, Consolidated and Company Statements of Comprehensive Income, Consolidated and Company Statements of Changes in Equity, Consolidated and Company Statements of Financial Position and the related notes 1 to 23, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice). In our opinion, the financial statements:

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group and parent company’s ability to continue as a going concern for the period to 30 June 2022.

• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Opinions on other matters prescribed by the Companies Act 2006

• the strategic report and directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or directors’ report.

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

Auditor’s responsibilities for the audit of the financial statements

• we have not received all the information and explanations we require for our audit

In our opinion, based on the work undertaken in the course of the audit:

INDEPENDENT AUDITOR'S REPORT

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and parent company and determined that the most significant are those that relate to the reporting framework (United Kingdom Accounting Standards including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland and the Companies Act 2006).

• We understood how Cadogan Group Limited is complying with those frameworks through enquiry with management, those responsible for legal and compliance procedures and the Company Secretary to understand how the group and the parent company maintains and communicates its policies and procedures in these areas. We corroborated our enquiries through our review of the Board meeting minutes and noted that there was no contradictory evidence. 65

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud that could give rise to a material misstatement in the financial statements. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and Ourmanagement.approach was as follows:

In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 63, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

• We assessed the susceptibility of the group’s and parent company’s financial statements to material misstatement, including how fraud might occur by meeting with management to understand where they considered there was susceptibility to fraud; determining which account balances are subjective in nature; understanding the key performance indicators; and considering the processes and controls which the group and the parent company have established to prevent and detect fraud, and how those controls are monitored.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

CADOGAN | ANNUAL REPORT 2020

Bob Forsyth Senior statutory auditor for and on behalf of Ernst & Young LLP, Statutory Auditor May 2021

London 6

• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved inquiry of members of senior management, and when appropriate those charged with governance regarding their knowledge of any non-compliance or potential non-compliance with laws and regulations that could affect the financial statements and reading minutes of meetings of those charged with governance.

Notes 1 to 23 form an integral part of these financial statements. Note OperationsContinuing£0002020 Discontinued£0002020Operations Total£0002020 OperationsContinuing£0002019 Discontinued£0002019Operations £0002019Total TURNOVER 2 161,113 161,113 170,963 14,964 185,927 Cost of sales (45,945) (45,945) (47,409) (8,080) (55,489) GROSS PROFIT 115,168 115,168 123,554 6,884 130,438 Administrative expenses (18,171) (18,171) (18,199) (6,392) (24,591) OPERATING PROFIT BEFORE CAPITAL ITEMS 96,997 96,997 105,355 492 105,847 Profit on sale of investment properties 3 8,473 8,473 4,907 4,907 Reduction in revaluation of investment properties (795,151) (795,151) (581,359) (581,359) Loss on the sale of discontinued operations (13,782) (13,782) OPERATING LOSS 5 (689,681) (689,681) (471,097) (13,290) (484,387) Interest receivable 169 169 33 7 40 Interest payable and similar expenses 4 (37,282) (37,282) (37,373) (37,373) LOSS BEFORE TAXATION (726,794) (726,794) (508,437) (13,283) (521,720) Tax credit on loss 7(a) 52,384 52,384 76,008 76,008 LOSS AFTER TAXATION ATTRIBUTABLE TO SHAREHOLDERS (674,410) (674,410) (432,429) (13,283) (445,712) LOSS PER SHARE 10 (562.0)p (371.4)p CADOGAN | ANNUAL REPORT 2020 68 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2020

Notes 1 to 23 form an integral part of these financial statements. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME £0002020 £0002019 Loss for the year attributable to shareholders (674,410) (445,712) Net gain recognised on cash flow hedges arising during the year 7,371 13,350 Movement on deferred tax relating to cash flow hedges (1,658) (2,269) Re-measurement loss recognised on defined benefit pension scheme (4,388) (989) Movement on deferred tax relating to pension liability 942 168 TOTAL OTHER COMPREHENSIVE INCOME FOR THE YEAR 2,267 10,260 TOTAL COMPREHENSIVE LOSS FOR THE YEAR (672,143) (435,452) COMPANY STATEMENT OF COMPREHENSIVE INCOME £0002020 £0002019 Profit for the year attributable to shareholders 62,693 68,398 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 62,693 68,398 FINANCIAL STATEMENTS 69 CONSOLIDATED AND COMPANY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020

Notes 1 to 23 form an integral part of these financial statements. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Calledcapitalshareup distributableNon-reserve Profit and accountloss Shareholders’equity £’000 £’000 £’000 £’000 At 1 January 2019 120,000 3,216,070 1,229,484 4,565,554 Profit/(loss) for year (473,498) 27,786 (445,712) Other comprehensive income/(loss) 11,081 (821) 10,260 Total comprehensive income for the year (462,417) 26,965 (435,452) Equity dividends paid (41,437) (41,437) At 31 December 2019 120,000 2,753,653 1,215,012 4,088,665 At 1 January 2020 120,000 2,753,653 1,215,012 4,088,665 Profit/(loss) for year (783,731) 109,321 (674,410) Other comprehensive income/(loss) 5,713 (3,446) 2,267 Total comprehensive income for the year (778,018) 105,875 (672,143) Equity dividends paid (17,409) (17,409) At 31 December 2020 120,000 1,975,635 1,303,478 3,399,113 COMPANY STATEMENT OF CHANGES IN EQUITY Called up share capital£’000 Profit and accountloss£’000 Shareholders’equity£’000 At 1 January 2019 120,000 1,253,951 1,373,951 Profit for year 68,398 68,398 Total comprehensive income for the year 68,398 68,398 Equity dividends paid (41,437) (41,437) At 31 December 2019 120,000 1,280,912 1,400,912 At 1 January 2020 120,000 1,280,912 1,400,912 Profit for year 62,693 62,693 Total comprehensive income for the year 62,693 62,693 Equity dividends paid (17,409) (17,409) At 31 December 2020 120,000 1,326,196 1,446,196 CADOGAN | ANNUAL REPORT 2020 70 STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020

Notes 1 to 23 form an integral part of these financial statements. Note £0002020 £0002019 FIXED ASSETS Tangible fixed assets 11 4,795,761 5,574,647 CURRENT ASSETS Derivative financial instruments expiring in more than one year 20 78,431 78,387 Derivative financial instruments expiring within one year 20 11,344 Stock 6 7 Debtors 13 139,901 126,672 Corporation tax 617 Cash at bank 18(b) 230,40911,454 216,410 CREDITORS amounts falling due within one year Bank overdraft 18(b) 15,020 Bank loans and other borrowings 15(a) 49,000 37,970 Trade and other creditors 14 71,301 77,931 Corporation tax 2,488 120,301 133,409 NET CURRENT ASSETS 110,108 83,001 TOTAL ASSETS LESS CURRENT LIABILITIES 4,905,869 5,657,648 CREDITORS amounts falling due after more than one year Bank loans and other long-term borrowings 15(b) 840,958 842,318 PROVISIONS FOR LIABILITIES AND CHARGES Deferred taxation 7(d) 656,700 721,231 NET ASSETS EXCLUDING PENSION LIABILITY 3,408,211 4,094,099 Defined benefit pension liability 19 9,098 5,434 NET ASSETS 3,399,113 4,088,665 CAPITAL AND RESERVES Called up share capital 16 120,000 120,000 Non-distributable reserve 17 1,975,635 2,753,653 Profit and loss account 17 1,303,478 1,215,012 EQUITY SHAREHOLDERS’ FUNDS 3,399,113 4,088,665 FINANCIAL STATEMENTS Viscount Chelsea DL - Director Hugh Seaborn - Director 29 April 2021 71 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 DECEMBER 2020

Notes 1 to 23 form an integral part of these financial statements. Note £0002020 £0002019 FIXED ASSETS Investments 12 117,317 117,317 CURRENT ASSETS Amounts due from subsidiary undertakings 1,329,021 1,283,720 CREDITORS amounts falling due within one year Other creditors 14 142 125 Taxation 142 125 NET CURRENT ASSETS 1,328,879 1,283,595 TOTAL ASSETS LESS CURRENT LIABILITIES 1,446,196 1,400,912 NET ASSETS 1,446,196 1,400,912 CAPITAL AND RESERVES Called up share capital 16 120,000 120,000 Profit and loss account 17 1,326,196 1,280,912 EQUITY SHAREHOLDERS’ FUNDS 1,446,196 1,400,912 The group financial statements consolidate the financial statements of Cadogan Group Limited and all its subsidiary undertakings drawn up to 31 December each year. No income statement is presented for Cadogan Group Limited as permitted by section 408 of the Companies Act 2006. CADOGAN | ANNUAL REPORT 2020 Viscount Chelsea DL - Director Hugh Seaborn - Director 29 April 2021 72 COMPANY STATEMENT OF FINANCIAL POSITION 31 DECEMBER 2020

Notes 1 to 23 form an integral part of these financial statements. Note £0002020 £0002019 Net cash inflow from operating activities 18(a) 67,041 93,654 Investing activities Interest received 169 40 Payments to acquire tangible fixed assets (1,722) (76,054) Capital expenditure on held tangible fixed assets (50,961) (60,963) Receipts from sales of tangible fixed assets 38,733 45,040 Net cash outflow from investing activities (13,781) (91,937) Financing activities Interest paid (37,718) (36,248) Net movement in long-term borrowings 23,341 36,000 Net movement in short-term borrowings 5,000 35,000 Equity dividends paid (17,409) (41,437) Net cash outflow from financing activities (26,786) (6,685) Increase/(decrease) in cash and cash equivalents 26,474 (4,968) Cash and cash equivalents at 1 January (15,020) (10,052) Cash and cash equivalents at 31 December 18(b) 11,454 (15,020) FINANCIAL STATEMENTS 73 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020

Going Concern

Cadogan Group Limited is a private company limited by shares incorporated in England (registered number 2997357). The Registered Office is 10 Duke of York Square, London, SW3 4LY.

CADOGAN | ANNUAL REPORT 2020 1. ACCOUNTING POLICIES

Based on these considerations, our experience of the actual impact of COVID-19 on the business over 12 months and the directors’ knowledge of Cadogan’s property portfolio and the market in which we operate, the directors have a reasonable expectation that the Group and Company has adequate resources to continue in operational existence for the period at least to 30 June 2022. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements. Basis of consolidation The group financial statements consolidate the financial statements of Cadogan Group Limited and all its subsidiary undertakings drawn up to 31 December each year. No income statement is presented for Cadogan Group Limited as permitted by section 408 of the Companies Act 2006.

The financial statements of Cadogan Group Limited were authorised for issue by the Board of Directors on 29 April 2021. The financial statements have been prepared on a historical cost basis except investment properties and derivative financial instruments that have been measured at their fair value. The financial statements are prepared in sterling which is the functional currency of the Group and rounded to the nearest £’000.

The Group’s business activities, together with the factors likely to affect its future development, its financial position, financial risk management objectives, details of its financial instruments and derivative activities, and its exposures to price, credit, liquidity and cash flow risk are set out in the Strategic Report on pages 10 to 57. The Group has considerable financial resources derived from an established investment property portfolio in prime central London. The Group has substantial long-term committed financing arrangements and has access to overdraft and revolving credit facilities from its bankers. The directors have considered the appropriateness of adopting the going concern basis in preparing the financial statements for the year ended 31 December 2020 focusing on the continuing impact of COVID-19 on the economy, consumers and our occupiers. The assessment is based on the Group’s experience of COVID-19 on its business in the first 12 months of the pandemic and financial forecasts for the period to 30 June 2022 (the review period) overlaid with a severe but plausible downside COVID-19 scenario.

The Group has also assessed a severe but plausible downside scenario reflecting the following pessimistic assumptions: all expiring leases considered at medium to high risk are not renewed and no replacement occupier is found before 2023; and those leases which are indicated by default risk analysis as being at high risk of default do in fact default.

74 1. ACCOUNTING POLICIES

The Group’s and company’s financial statements have been prepared in compliance with FRS 102. Basis of preparation

Notes to the financial statements

For both years, we have assumed there would be no new financing activity other than repayments of maturing private placement loan notes of £45m in March 2021 and £15m in December 2022, annual payments of £4m on a long-term loan and receipts of £55m in July 2021 and £50m in September 2021 from delayed drawdowns of private placements undertaken in 2018 and 2020 respectively. The severe but plausible downside scenario modelled demonstrates that over the period to 30 June 2022 the Group has significant liquidity to fund its ongoing operations and is operating with ample headroom above its debt financing covenants without the need to rely on raising new financing. Asset values would have to fall by 40% from 2020 closing values as at 31 December 2021 and by 35% from closing 2020 values over 18 months to 30 June 2022 to breach the gearing covenant. To breach the interest cover covenant, operating profit before capital items would have to fall by 44% compared to budget in 2021 and by 51% compared to the forecast for 2022.

(a) Statement of compliance

NRV for completed development property is assessed by reference to market conditions and prices existing at the reporting date and is determined by the Group, based on comparable transactions identified by the Group for properties in the same geographical market serving the same real estate NRVsegment.inrespect of development property under construction is assessed with reference to market prices at the reporting date for similar completed property, less estimated costs to complete construction and an estimate of the time value of money to the date of completion.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

The valuers used market value, in accordance with the Appraisal of Valuation Manual of the Royal Institution of Chartered Surveyors. The determined fair value of the investment property is most sensitive to the estimated yield and estimated rental values. Investment properties under construction are measured based on estimates prepared by independent real estate valuation experts. The key assumptions used to determine the fair value of investment property are further explained in note 11.

The Group makes an assessment over the recoverability of its lease receivables. Estimation of recovery is judgemental and is based on the Group’s detailed knowledge of the sector in which the tenant operates and the credit risk of the tenant.

Cash flow forecasts

The Group establishes provisions based on reasonable estimates, for possible consequences of audits by the tax authorities. The amount of such provisions is based on various factors, such as experience with previous tax audits and differing interpretations of tax regulations by the taxable Managemententity. estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. Further details are contained in note 7.

(b) Judgements and key sources of estimation uncertainty

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements:

Estimation of net realisable value for properties under development Development property is stated at the lower of cost and net realisable value (NRV).

The Group carries its investment property at fair value, with changes in fair value being recognised in the income statement. The Group engaged independent valuation specialists to determine fair value at 31 December 2020.

75 1. ACCOUNTING

The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

The Group has entered into commercial property leases as a lessor on its investment property portfolio. The classification of such leases as operating or finance lease requires the Group to determine, based on an evaluation of the terms and conditions of the arrangements, whether it retains the significant risks and rewards of ownership of these assets and accordingly whether the lease requires an asset and liability to be recognised in the statement of financial position.

NOTES TO THE FINANCIAL STATEMENTS

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee to obtain benefits from its activities.

Revaluation of investment properties

Impairment of lease receivables

Operating lease commitments

As part of the group’s assessment of going concern, monthly cash flow forecasts are prepared using estimates and assumptions based on management’s knowledge of the business and the experience of rental receipts, tenant default and expenditure. POLICIES

Capital gains tax and deferred tax liability

The total reduction in revenue recognised for rent concessions directly as a result of COVID-19 was £10.2m.

CADOGAN | ANNUAL REPORT 2020

The following criteria must also be met before revenue is recognised: Rental income The Group is the lessor in operating leases. Rental income arising from operating leases on investment property is recognised in the income statement on a straight-line basis over the lease term, except for contingent rental income which is recognised when it arises. Lease incentives are recognised as a reduction of rental revenue on a straight-line basis over the term of the lease. The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the directors are reasonably certain that the tenant will exercise that Amountsoption.received from tenants to terminate leases or to compensate for dilapidations are recognised in the income statement when the right to receive them arises.

The FRC has amended FRS 102 in respect of COVID-19 related rent concessions. The Group has granted a number of concessions in the year to tenants, typically in the form of a rent waiver. Where there is a change in rental income arising from rent concessions the Group has granted as a direct result of the COVID-19 pandemic, and all of the following three conditions are met, the concession is recognised as a reduction to revenue over the periods that the change in lease payments is intended to compensate: the change in rent payments results in revised consideration for the lease that is less than the consideration for the lease immediately preceding the change; any reduction in rent payments affects only payments originally due on or before 30 June 2021; and there is no significant change to other terms and conditions of the lease.

Rent concessions directly because of COVID-19

(d) Turnover and revenue recognition

The cost of defined benefit pension plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and the long-term nature of these plans, such estimates are subject to significant uncertainty. In determining the appropriate discount rate, management considers the interest rates of corporate bonds in the respective currency with at least AA rating, with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. The underlying bonds are further reviewed for quality, and those having excessive credit spreads are removed from the population bonds on which the discount rate is based, on the basis that they do not represent high quality bonds. The mortality rate is based on publicly available mortality tables for the UK. Future salary increases and pension increases are based on expected future inflation rates for the UK. Further details are given in note 19.

The Group has recorded an impairment charge in cost of sales on the income statement of £11.2m where the result of this review has indicated that there is increased risk over the recoverability of any of these receivables.

Interest income Interest income is recognised as it accrues using the effective interest rate (EIR) method. The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance income in the income statement.

Revenue is recognised to the extent that the Group obtains the right to consideration in exchange for its performance. Revenue is measured at the fair value of the consideration received, net of VAT and comprises gross rents including reverse premium received on early lease termination, commissions and other fees receivable. Turnover in the hotel and concert hall operations represents amounts derived from the provision of goods and services, stated net of VAT.

(e) Tangible fixed assets Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended.

In addition, the impact of COVID-19 has been assessed on recoverability of the Group’s lease receivables. The review considers the risk profile of tenants based on the detailed knowledge of our asset managers and finance department, including the sector in which the business operates and the credit risk of the tenant. Estimation of recoverability is more judgemental than previous years due to the uncertainty stemming from COVID-19 and therefore future market conditions could be materially different to the assumptions applied by management.

76 1. ACCOUNTING POLICIES

Pension and other post-employment benefits

(f) Land and buildings

The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in the arrangement. Group as a lessee A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Group is classified as a finance lease.

Profits or losses on the sale of investment properties are calculated by reference to the book value at the end of the previous year, adjusted for any subsequent capital expenditure. Such transactions are recognised on the exchange of contracts, providing that no material conditions remain outstanding.

An operating lease is a lease other than a finance lease. Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term, except for contingent rental payments which are expensed when they arise.

recognition, investment property is stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise, including the corresponding tax effect. For the purposes of these financial statements, in order to avoid double counting, the fair value reported in the financial statements is reduced by the carrying amount of any accrued income resulting from the spreading of lease incentives. Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in Investmentuse. property is derecognised either when it has been disposed of or when it is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the income statement in the period of de-recognition.

Land and buildings represent owner occupied properties and are initially recognised at cost which includes purchase cost and any directly attributable expenditure of a capital nature only. They are included in the financial statements at fair value at the year end. The surplus or deficit on revaluation is recognised in the nondistributable reserve and accumulated in the reserve unless a deficit, or its reversal, is below original cost in which case it is recognised in the income statement for the year.

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value not to be recoverable.

(h) Profit on sale of investment properties

(i) Investments

Depreciation is provided on all plant and equipment, at rates calculated to write off the cost, less estimated residual value, of each asset on a systematic basis over its expected useful life as follows: Plant and equipment 10% to 20%

(j) Leases

Group as a lessor Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Contingent rents are recognised as revenue in the period in which they are earned. POLICIES

77 1. ACCOUNTING

Investments in subsidiary undertakings are included at cost, less a provision for impairment in value where applicable.

NOTES TO THE FINANCIAL STATEMENTS

(g) Investment property Investment property comprises completed property and property under construction or re-development that is held to earn rentals or for capital appreciation or both. Property held under a lease is classified as investment property when it is held to earn rentals or for capital appreciation or both, rather than for sale in the ordinary course of business or for use in production or administrative functions. Investment property is measured initially at cost, including transaction costs. Transaction costs include transfer taxes, professional fees for legal services and initial leasing commissions to bring the property to the condition necessary for it to be capable of operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are Subsequentmet.toinitial

Current taxation including UK corporation tax is provided at the amounts expected to be paid (or recovered) using the tax rates and laws that have been substantially enacted at the balance sheet date. Deferred tax is recognised in respect of all material timing differences between taxable profits and total comprehensive income that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantially enacted at the balance sheet date. Deferred tax relating to investment property that is measured at fair value is measured using the tax rates and allowances that apply on the sale of the asset.

(o) Foreign currencies

CADOGAN | ANNUAL REPORT 2020

(m) Short-term debtors and creditors

(l) Loan notes

All interest-bearing loans and borrowings which are basic financial instruments are initially recorded at the present value of future payments discounted at a market rate of interest for a similar loan. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

78 1. ACCOUNTING POLICIES

• the instrument must be related to a firm foreign currency commitment;

Transactions in foreign currencies are initially recorded in the entity’s functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.

The Group’s criteria for interest rate swaps are:

for forward foreign currency contracts are:

• the instrument must be related to an asset or a liability; and • it must change the character of the interest rate by converting a variable rate to a fixed rate or vice versa.

(p) Derivative financial instruments and hedge accounting

Cash in the statement of financial position comprises cash at bank and in hand and is stated net of outstanding bank overdrafts.

(n) Taxation

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk.

Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

(k) Cash at bank and in hand

The effective portion of the gain or loss on the hedging instrument is recognised in the Statement of Comprehensive

Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the income statement in administrative expenses.

Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is

The Group uses forward foreign currency contracts to reduce exposure to foreign exchange rates. The Group also uses interest rate swaps to adjust interest rate exposures. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value.

• it must involve the same currency as the hedged item; and • it must reduce the risk of foreign currency exchange movements on the Group’s operations.

Cash flow hedges

Thenegative.criteria

For the purpose of cash flow hedge accounting, hedges are classified as cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.

Income (“SOCI”) in the non-distributable reserve, while any ineffective portion is recognised immediately in the income statement. Amounts recognised as other comprehensive income are transferred to the income statement when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised.

If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognised in the SOCI are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in SOCI remains separately in equity until the forecast transaction occurs or the firm commitment is met. When a derivative is held as an economic hedge for a period beyond 12 months after the end of the reporting period, the derivative is classified as non-current consistent with the classification of the underlying item. A derivative instrument that is a designated and effective hedging instrument is classified consistent with the classification of the underlying hedged item.

For defined benefit schemes, the regular cost of providing pensions to employees during the year is charged to operating profit in the year. The full cost of providing amendments to benefits in respect of past service is also charged to operating profit in the year. The net interest element is determined by multiplying the net defined benefit liability by the discount rate, at the start of the period taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or costs. Re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability (excluding amounts included in net interest) are recognised immediately in other comprehensive income in the period in which they occur.

NOTES TO THE FINANCIAL STATEMENTS

The defined net benefit pension asset or liability in the statement of financial position comprises the total for each plan of the present value of the defined benefit obligations (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published bid price.

Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayment in the statement of financial position. POLICIES

79 1. ACCOUNTING

(q) Pension benefits

For defined contribution schemes, the value of amounts charged to the income statement in respect of pension costs is the value of the contributions payable in the year.

2. TURNOVER AND ANALYSIS BY CLASS OF BUSINESS Turnover, group loss before taxation and net assets are analysed as follows: Property investment Hotels and Concert Hall Total Total £0002020 £0002019 £0002020 £0002019 £0002020 £0002019 Turnover Continuing operations Gross rental income and other sales 158,666 166,737 779 2,857 159,445 169,594 Other income 1,668 1,369 1,668 1,369 160,334 168,106 779 2,857 161,113 170,963 Discontinued operations Sales 14,964 14,964 Total turnover 160,334 168,106 779 17,821 161,113 185,927 Operating loss Continuing operations (688,481) (470,797) (1,200) (300) (689,681) (471,097) Discontinued operations (13,782) 492 (13,290) (688,481) (484,579) (1,200) 192 (689,681) (484,387) Net interest payable (37,113) (37,333) Loss before taxation (726,794) (521,720) Net Assets 3,388,809 4,078,305 10,304 10,360 3,399,113 4,088,665 3. PROFIT ON SALE OF INVESTMENT PROPERTIES £0002020 £0002019 Profits on sales of freeholds and receipt of long lease premiums, less directly related costs and expenses 8,473 4,907 All operations take place within the United Kingdom. The Group operates in two principal areas of activity, property investment and hotels and concert hall activities. The discontinued operations in the year ended 31 December 2019 relate to the hotel activities that were de-merged from the property group on 27 November 2019. CADOGAN | ANNUAL REPORT 2020 80

6. DIRECTORS AND EMPLOYEES £0002020 £0002019 Aggregate directors’ remuneration in respect of qualifying services 2,333 2,043 4. INTEREST PAYABLE AND SIMILAR EXPENSES £0002020 £0002019 Interest on bank loans and other borrowings 37,176 37,236 Foreign exchange gain on hedged loans (18,671) (10,342) Financial derivative loss 18,671 10,342 Interest on net defined pension liability 106 137 37,282 37,373 5. OPERATING LOSS £0002020 £0002019 Operating loss is stated after charging: Depreciation 226 308 Auditors’ remuneration: Audit of the financial statements – includes £83,000 in respect of the company (2019 – £79,000) 331 342 Other fees to auditors – tax services 332 237 – other services 194 Non-audit remuneration for the company is not disclosed in the individual financial statements as the consolidated financial statements are required to comply with regulation 5(1)(b) of Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2018 and present this information on a consolidated basis. Included within directors’ remuneration above are contributions to money purchase pension schemes for one director amounting to £38,000 (2019: one director – £38,000). The remuneration, excluding pension contributions, of the highest paid director was £1,155,000 (2019 – £1,066,000). Pension contributions of the highest paid director were nil (2019 – nil). NOTES TO THE FINANCIAL STATEMENTS 81

7. TAXATION (a) Tax on loss The tax credit is made up as follows: £0002020 £0002019 Current tax: UK corporation tax 12,574 9,687 Adjustments in respect of previous years 289 (247) Total current tax 12,863 9,440 Deferred tax: Origination and reversal of timing differences 478 2,198 Effect of increased tax rate on deferred tax balance 84,619 On freehold and investment properties (150,344) (87,646) Total deferred tax (65,247) (85,448) Tax credit on loss (52,384) (76,008) (b)Tax included in statement of total comprehensive income The tax charge is made up as follows: £0002020 £0002019 Deferred tax: Actuarial gain/(loss) on pension scheme (942) (168) Hedge accounting adjustments 1,658 2,269 Total deferred tax 716 2,101 Total tax charge on other comprehensive income 716 2,101 The average monthly number of persons employed by the Group, including executive directors, during the year was 93 (2019 – 90). 71 (2019 – 67) persons were employed within the property investment business and 22 (2019 – 23) persons were employed within the concert hall. Staff costs for the company were in respect of directors’ remuneration and amounted to £432,000 (2019 – £382,000). There were no pension contributions made by the company in the year (2019 – nil). 6. DIRECTORS AND EMPLOYEES (CONTINUED) £0002020 £0002019 Employee costs: Wages and salaries 7,114 6,630 Social security costs 885 849 Pension costs – defined contribution scheme 651 609 8,650 8,088 CADOGAN | ANNUAL REPORT 2020 82

(d) Deferred tax The deferred tax included in the statement of financial position is as follows: £0002020 £0002019 Included in provision for liabilities and charges 656,700 721,231 The liability/(asset) for deferred tax comprises the following: Accelerated capital allowances 21,146 16,956 Short lease premiums received (1,990) (116) On freehold and investment properties 635,423 703,123 Pension costs (1,729) (924) Hedge accounting adjustments 3,850 2,192 656,700 721,231 At 1 January 721,231 808,741 Income statement – deferred tax credit (65,247) (85,448) Income statement – loss on sale of subsidiary undertakings (4,163) Other comprehensive income 716 2,101 Total deferred tax (64,531) (87,510) At 31 December 656,700 721,231 (c) Factors affecting tax charge for the year The tax charge for the current year is lower than (2019 – lower than) the current standard rate of corporation tax in the UK of 19.00% (2019 – 19.00%). The difference is explained as follows: 2020% 2019% Standard tax rate 19 19 Actual current tax rate 7 15 Difference (12) (4) Explained by: Change in tax law and rates (2) Historical cost of property non-deductible for tax purposes (2) Deferred tax in respect of prior period (12)(12) (4) The company expects no deferred tax liabilities to reverse in 2021. NOTES TO THE FINANCIAL STATEMENTS 83

The profit/(loss) for the year has been retained by: The Company 45,284 26,961 Subsidiaries (737,103) (514,110) (691,819) (487,149)

CADOGAN

The UK corporation tax rate for the whole of 2020 was 19%. Accordingly, the Group’s result for the accounting period is taxed at an effective rate of 19.00% (2019 – 19.00%).

7. TAXATION (CONTINUED) (e) Factors that may affect future tax charges

8. DIVIDENDS £0002020 £0002019

This calculation relates to both the basic and diluted loss per share as there is no potential future shares or share options in the company.

ANNUAL REPORT 2020 84

The calculation of loss per ordinary share for 2020 is based on the deficit attributable to ordinary shareholders of £674,410,000 (2019 – deficit of £445,712,000) and on 120,000,000 ordinary shares (2019 – 120,000,000 ordinary shares) being the effective number of such shares in issue during the year.

The parent company’s profit before dividends for the financial year was £62,693,000 (2019 – £68,398,000). |

Interim dividend paid on 17 December 2020 17,409 Interim dividend paid on 13 November 2019 41,437 17,409 41,437 RETAINED PROFIT/(LOSS) FOR THE YEAR £0002020 £0002019

10. LOSS PER SHARE

The corporation tax rate was due to reduce to 17% from April 2020, however, this rate reduction was cancelled and the rate was maintained at 19%. At the balance sheet date, the setting of the rate of 19% from April 2020 had been substantially enacted and hence in accordance with accounting standards, the impact of maintaining the rate of 19% has been reflected in the Group’s financial statements at 31 December 2020. Any future rate changes will also impact the amount of future tax payments to be made by the Group.

11. TANGIBLE FIXED ASSETS Group investmentFreeholdproperties£000 buildingslandFreeholdand£000 propertiesTotal£000 Plant equipmentand£000 £000Total Cost or valuation At 1 January 2020 5,546,171 27,528 5,573,699 9,038 5,582,737 Revaluation (793,623) (1,528) (795,151) (795,151) Additions 46,789 46,789 12 46,801 Disposals (30,310) (30,310) (30,310) At 31 December 2020 4,769,027 26,000 4,795,027 9,050 4,804,077 Depreciation At 1 January 2020 8,090 8,090 Charge for the year 226 226 Disposals At 31 December 2020 8,316 8,316 Net book value At 31 December 2020 4,769,027 26,000 4,795,027 734 4,795,761 At 31 December 2019 5,546,171 27,528 5,573,699 948 5,574,647 The valuation of the Group’s freehold properties at 31 December 2020 was carried out by CBRE Limited (commercial properties) and Cluttons (residential properties), both firms are independent and regulated by the Royal Institution of Chartered Surveyors (RICS), on the basis of fair value, in accordance with the version of the RICS Valuation – Global Standards (incorporating the International Valuation Standards) and the UK supplement (“The Red Book”) as at the Valuation Date. The key assumptions used to determine the fair value of investment property are set out below: Property Type Fair Value Valuation Technique Key inputs (weightedRangeaverage)2020 2019 £m £m 2020 2019 Residential 1,505 1,620 Direct residualinvestmentcomparison,capital& • Freehold possessionvacantvalues per square foot • Discounts for nature of occupation • Capitalisation and deferment rates Average of £1,507 0%4.00%25%-5.50% Average of 0%£1,612-25%4.00%-5.50% Commercial 3,290 3,954 capitalisationIncome • ERV per sq. ft. Office/medical Retail (Zone A) • Equivalent yields £25 - £98 £882.1%-6.9%£975(4.03%) £20 - £103 £652.1%-5.6%£1,050(3.69%) The historical cost of freehold properties at 31 December 2020 was £2,193,997,000 (2019 – £2,121,240,000). These amounts are stated after the deduction of accumulated impairment losses of £2,611,000 (2019 – £2,611,000). NOTES TO THE FINANCIAL STATEMENTS 85

12. FIXED ASSET INVESTMENTS Company£000 Investment in subsidiary companies at cost At 31 December 2020 and 31 December 2019 117,317 Company Nature of business Proportion of voting rightsshares&held% Held directly Cadogan Estates Limited* Chelsea Land Limited* Held indirectly Cadogan Estates Property Investments Limited* Cadogan Developments Limited* Cadogan Hall Limited* Cadogan Holdings Limited* Cadogan Income Properties Limited* Chelsea Land Developments Limited* Frederick Court Limited* Sloane Gardens Hotel Limited* Cadogan Estates Management Limited* Cadogan Group Management Limited* Sloane Rewards Limited* Hugo House Limited 13/14 Herbert Crescent Residents Limited Sloane Court East Garden Limited* 7 Redburn Street Limited* 15 Redburn Street Limited* Cadogan House Residents Limited 76 Sloane Street (Management) Limited 15/16 Herbert Crescent Residents Association Limited Property Intermediateinvestmentholding company Property investment Property investment Venue PropertyPropertyPropertyNon-tradingNon-tradingPropertyPropertyNon-tradingNon-tradingNon-tradingNon-tradingNon-tradingPropertyNon-tradingPropertyPropertymanagementinvestmentinvestmentinvestmentinvestmentmanagementinvestmentmanagementmanagement 1001001001001001001001001001001001001006966535050402520 Details of the investments in which the company holds 20% or more of the nominal value of any class of share capital are as follows: All the above investments are holdings of ordinary shares. All companies are registered in England. Location of Registered offices Companies marked * – 10 Duke of York Square, London, SW3 4LY Hugo House Limited – Hugo House, 178-180 Sloane Street, SW1X 9QL 13/14 Herbert Crescent Residents Limited – 6 Sloane Street, London, SW1X 9LF Cadogan House Residents Limited – 2 Tower Centre, Hoddesdon, EN11 8UR 76 Sloane Street (Management) Limited – 76 Sloane Street, London, SW1X 9SF 15/16 Herbert Crescent Residents Association Limited – 15/16 Herbert Crescent, London, SW1X 0HB CADOGAN | ANNUAL REPORT 2020 86

At 31 December 2020 the Group had committed but undrawn credit facilities of £210m (2019 - £155m) under revolving credit facility arrangements expiring in April 2023. 13. DEBTORS Group £0002020 £0002019 Trade debtors 28,710 10,842 Other debtors 7,459 10,182 Accrued income 21,066 22,982 Amounts owed to group undertakings 82,666 82,666 139,901 126,672 14. TRADE AND OTHER CREDITORS Group Company £0002020 £0002019 £0002020 £0002019 Trade creditors 1,971 208 Other creditors and accruals 22,504 38,372 87 78 Social security and other taxation 559 365 55 47 Deferred income 46,267 38,986 71,301 77,931 142 125 15. BORROWINGS (a) Bank Loans and other borrowings Group £0002020 £0002019 Amounts falling due within one year: 6.941% commercial mortgage loan 2025 4,000 4,000 6.60% $45m unsecured loan notes 2020 33,970 5.04% £45m unsecured loan notes 2021 45,000 Other long-term borrowings falling within one year 49,000 37,970 NOTES TO THE FINANCIAL STATEMENTS 87

15. BORROWINGS (CONTINUED) (b) Other long-term borrowings Group £0002020 £0002019 Amounts falling due in two to five years: Revolving credit facility 90,000 85,000 6.941% commercial mortgage loan 2025 56,000 16,000 5.04% £45m unsecured loan notes 2021 45,000 3.45% £15m unsecured loan notes due 2022 15,000 15,000 6.75% $23m unsecured loan notes 2023 16,835 17,362 177,835 178,362 Amounts falling due after more than five years: 6.941% commercial mortgage loan 2025 44,000 3.75% £50m unsecured loan notes 2026 50,000 50,000 3.88% £15m unsecured loan notes 2027 15,000 15,000 5.25% $60m unsecured loan notes 2028 43,917 45,293 2.51% £25m unsecured loan notes 2028 25,000 25,000 3.62% £25m unsecured loan notes 2029 25,000 25,000 4.07% £50m unsecured loan notes 2030 50,000 50,000 5.53% $60m unsecured loan notes 2032 43,917 45,293 3.87% £25m unsecured loan notes 2034 25,000 25,000 5.77% $90m unsecured loan notes 2036 65,876 67,940 4.09% £25m unsecured loan notes 2039 25,000 25,000 2.79% £25m unsecured loan notes 2039 40,000 40,000 6.01% £30m unsecured loan notes 2041 30,000 30,000 6.87% £20m unsecured loan notes 2042 20,000 20,000 4.38% £25m unsecured loan notes 2044 25,000 25,000 5.92% $30m unsecured loan notes 2046 21,959 22,647 5.11% £25m unsecured loan notes 2046 25,000 25,000 2.42% £25m unsecured loan notes due 2048 25,000 2.42% £25m unsecured loan notes due 2049 25,000 7.40% $58m unsecured loan notes 2051 42,454 43,783 5.13% £40m unsecured loan notes 2056 40,000 40,000 663,123 663,956 Total other long-term borrowings expiring in more than one year 840,958 842,318 The commercial mortgage loan is secured by fixed charges over specific freehold investment properties of the Group. £799,959,000 (2019 – £ 795,288,000) of the total bank loans and long-term borrowings is subject to fixed rates of interest to maturity which average 4.72% (2019 – 4.97%). All the interest payments and principal repayments relating to the loan notes issued in US dollars were swapped into sterling at fixed exchange rates. This currency swap has the effect of reducing the effective interest rate on the US dollar loans from the rates shown above to an average effective rate of 5.61% (2019 – 5.72%). This, combined with the fixed interest rates payable on the sterling loans gives an overall effective interest rate across all the series of notes, fixed until maturity, of 4.52% (2019 – 4.78%). CADOGAN | ANNUAL REPORT 2020 88

• Increases and decreases in fair value of freehold land and building unless a deficit, or its reversal, is below original cost in which case it is recognised in the profit and loss account; and

This is the distributable reserve represented by the retained profit and loss.

17.16.RESERVESCALLEDUP SHARE CAPITAL 2020 Authorised, allotted, issued and fully paid 2019 Authorised, allotted, issued and fully paid Numbersharesof £000 Numbersharesof £000 Ordinary shares of £1 each 120,000,000 120,000 120,000,000 120,000 Non-distributable reserve

This reserve is used to record:

Profit and loss account

NOTES TO THE FINANCIAL STATEMENTS 89

• Increases in fair value of freehold and leasehold investment properties and decreases to the extent that such decreases relate to the increase on the same asset. This is offset by the removal of any historic fair value relating to leasehold investment properties which have been disposed in the year. These figures are stated net of the associated deferred tax asset or liability;

• Increases and decreases in the net fair value of derivative financial instruments. The figure is stated net of the associated deferred tax release or charge.

18. NOTES TO THE STATEMENT OF CASH FLOWS (a) Reconciliation of profit to net cash inflow from operating activities Group £0002020 £0002019 Group loss for the year (726,794) (521,720) Adjustments to reconcile profit for the year to net cash flow from operating activities: Revaluation of investment properties 795,971 581,359 Depreciation of tangible fixed assets 226 308 Profit on sale of investment properties (9,293) (4,907) Loss on disposal of subsidiaries 13,782 Difference between pension charge and cash contributions (830) (830) Net finance cost 37,113 37,333 Working capital movements: Decrease in stock 1 54 Increase in debtors (13,229) (9,053) Increase/(decrease) in creditors (156) 8,992 Taxation: Corporation tax paid (15,968) (11,664) Net cash inflow from operating activities 67,041 93,654 (b) Cash and cash equivalents Cash and cash equivalents comprise the following: Group £0002020 £0002019 Cash at bank 11,454 Bank overdraft - 15,020 CADOGAN | ANNUAL REPORT 2020 90

Post retirement mortality assumption 80% of the S2NxA tables with CMI 2019 projections using a long-term improvement rate of 1% per annum 80% of the S2NxA tables with CMI 2018 projections using a longterm improvement rate of 1% per annum

The Group operates both defined benefit and defined contribution funded pension schemes for its employees. The assets of these schemes are held separately from those of the Group in independently administered funds.

TheAssumptionsprincipal assumptions used to calculate Scheme liabilities include:

The most recent comprehensive actuarial valuation of the Scheme was carried out as at 25 December 2019, is currently in progress and will be completed no later than 31 March 2021. As part of this valuation, a new Schedule of Contributions will be agreed with the Group which could require higher or lower contributions to be paid under the existing Schedule of Conditions. The next valuation of the Scheme is due as at 31 December 2022. During the year £830,000 (2019 - £830,000) was paid by the Group as a contribution to the shortfall. Under the existing Schedule of Conditions, the Group currently expects to pay contributions of £1.07m in the year ended 31 December 2021.

NOTES TO THE FINANCIAL STATEMENTS 91

There were no plan amendments, curtailments or settlements during the period.

2020 2019 Discount rate 1.30% pa 2.10% pa

All members retire at age 60

Retirements

Fixed 5% pension increases 5.00% pa 5.00% pa Fixed 5% revaluation in deferment 5.00% pa 5.00% pa

19. PENSION

Defined benefit scheme

The Group’s defined benefit pension scheme, which is closed to new members in 1994 and was closed to future accrual for active members on 31 March 2014, is called the Cadogan Pension & Assurance Scheme (“the Scheme”). The following disclosures exclude any allowance for defined contribution schemes operated by the Group. The liability value does not include allowance for any discretionary benefits. The Scheme is subject to the Statutory Funding Objective under the Pensions Act 2004. A valuation of the Scheme is carried out at least once every three years to determine whether the Statutory Funding Objective is met. As part of the process the Group must agree with the Trustees of the scheme the contributions to be paid to address any shortfall against the Statutory Funding Objective.

Tax-free cash No allowance ARRANGEMENTS

19. PENSION ARRANGEMENTS (CONTINUED) Assets The major categories of assets as a proportion of total assets are as follows: Asset category 2020% 2019% Growth Assets: 26 26 Dynamic Real Return Fund (26%, 2019 – 26%) Protection Assets: 74 74 Corporate Bond Fund (34%, 2019 – 34%) Over 15 year Gilt Index Fund (40%, 2019 – 40%) Total 100 100 Amounts recognised in the statement of financial position: £0002020 £0002019 Fair value of plan assets 45,666 41,966 Present value of plan funded obligations (54,764) (47,400) Defined benefit pension liability (9,098) (5,434) Amounts recognised in the income statement over the year: £0002020 £0002019 Interest on liabilities (984) (1,231) Interest on assets 878 1,094 Total recognised in the income statement (106) (137) The actual return on the Scheme’s assets was an increase of £3,967,000 (2019: decrease of £4,348,000). The assets do not include any investment in shares or property of the Group. The projected charge to the income statement for the next period is £113,000. CADOGAN | ANNUAL REPORT 2020 92

NOTES TO THE FINANCIAL STATEMENTS 93

Recognised

Changes

The change in present value of the defined benefit obligation over the year was: £0002020 £0002019 benefit obligation at 1 January 47,400 42,968 cost 984 1,231 paid (1,097) (1,042) loss on liabilities 33 to demographic assumptions 145 (3,098) to financial assumptions 7,299 7,341 benefit obligation at 31 December 54,764 47,400 in other comprehensive income over the year: £0002020 £0002019 on scheme assets in excess of interest 3,089 3,254 loss on liabilities (33) on changes to demographic assumptions (145) 3,098 from changes to financial assumptions (7,299) (7,341) gains and losses recognised in other comprehensive income (4,388) (989)

Defined

Gain

Interest

Gains/(losses)

Losses

Interest

Re-measurement

The pension charge in respect of defined contribution schemes represents contributions payable by the Group to such schemes and amounted to £651,000 (2019 – £609,000), of which nil (2019 – nil) was unpaid at the balance sheet date.

Experience

Reconciliation of assets and defined benefit obligation

Benefits

Employer

The change in fair value of assets over the year was: £0002020 £0002019 value of assets at 1 January 41,966 37,830 on assets 878 1,094 contributions 830 830 paid (1,097) (1,042) on plan assets less interest 3,089 3,254 value of assets at 31 December 45,666 41,966

Experience

Fair

Benefits

Return

Defined contribution schemes

Fair

Changes

Outstanding capital commitments were as follows: Capital expenditure contracted for but not provided for in the financial statements 137,419 152,283

£0002020

Value at 1 January 89,731 86,723 Net changes in fair value through the income statement (18,671) (10,342) Net changes in fair value through other comprehensive Income 7,371 13,350 Value at 31 December 78,431 89,731 CAPITAL AND OTHER COMMITMENTS Group £0002020 £0002019

20. HEDGING ACTIVITIES AND DERIVATIVES

The Group enters into foreign currency and interest rate swap contracts with various counterparties, principally financial institutions with investment grade credit ratings. The valuation techniques applied to fair value these derivatives employ the use of market observable inputs and include swap models which use present value calculations. The model incorporates various inputs including the credit quality of counterparties and forward rates. As at 31 December 2020, the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment of these derivatives designated in hedge relationships recognised at fair value. There were no outstanding commitments for capital expenditure in the company at either year end. £0002019

21.

The Group has entered into foreign currency and interest rate swap contracts with notional amounts of $321m (2019 - $366m) whereby it pays a fixed rate of interest of between 5.20% and 7.40%. The swaps are used to hedge the exposure to the variable foreign currency and interest rate payments on the US dollar variable rate unsecured loans (note 15). The loans and interest rate swaps have the same critical terms and are fully effective. Cash flows are expected to occur between August 2023 and June 2051 and will be recognised through the income statement at that time.

The aggregate fair value of the interest rate swaps at the end of the reporting period was an asset of £78,431,000 (2019£89,731,000).

CADOGAN | ANNUAL REPORT 2020 94

22. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS 23. ULTIMATE OWNERSHIP The Group had the following future minimum operating lease receivables under non-cancellable operating leases in respect of investment properties at the year end: Viscount Chelsea D.L., Chairman and director of Cadogan Group Limited, rents a residential property owned by the Group. The rent paid by Viscount Chelsea in the year totalled £284,622. At 31 December 2020 the outstanding balance owed to the Group was £5,200 (2019 – £2,600). The annual rental charge is at market rate. The ultimate holding company is Cadogan Settled Estates Holdings Limited, which is registered in England and Wales and which is ultimately controlled by The Eighth Earl Cadogan’s 6 December 1961 Settlement. The consolidated financial statements of Cadogan Settled Estates Holdings Limited may be obtained from The Registrar of Companies, Companies House, Crown Way, Cardiff, CF14 3UZ. Group £0002020 £0002019 WithinDue: one year 148,923 154,293 Between one and five years 385,792 421,310 More than five years 439,049 439,894 973,764 1,015,497 NOTES TO THE FINANCIAL STATEMENTS 95

2020 2019 2018 2017 2016 Net assets Properties at valuation £m 4,795.0 5,573.7 6,160.6 6,148.1 5,985.5 Net borrowings £m 800.1 805.6 742.2 642.7 619.7 Equity shareholders’ funds £m 3,399.1 4,088.7 4,565.6 4,639.3 4,516.0 Net assets per share £ 28.33 34.07 38.05 38.66 37.63 Earnings Gross rents £m 158.7 166.7 160.0 152.6 142.7 Profit on sale of investment properties £m 8.5 4.9 8.0 6.9 10.7 Operating profit – before revaluation £m 105.5 110.8 106.1 100.7 103.3 Revaluation in year £m (795.2) (581.4) (89.1) 107.8 139.4 Loss on disposal of subsidiaries £m (13.8) Operating profit/(loss) £m (689.7) (484.4) 17.0 208.5 242.7 Net interest payable £m 37.1 37.3 36.0 36.5 36.4 Profit/(loss) before taxation £m (726.8) (521.7) (19.0) 172.0 206.3 Taxation £m (52.4) (76.0) (0.3) 26.3 (10.2) Profit/(loss) after taxation £m (674.4) (445.7) (18.7) 145.7 216.5 Earnings/(loss) for ordinary shareholders £m (674.4) (445.7) (18.7) 145.7 216.5 Earnings/(loss) per share p (562.0) (371.4) (15.6) 121.4 180.4 Key financial ratios Balance sheet gearing % 23.54 19.70 16.26 13.85 13.72 Gross rents/interest cover times 4.28 4.47 4.44 4.18 3.92 Interest cover times 2.84 2.97 2.95 2.76 2.84 FIVE YEAR SUMMARY CADOGAN | ANNUAL REPORT 2020 96

CADOGAN | ANNUAL REPORT 2020 97

10 Duke of York Square London SW3 4LY T. 020 7730 cadogan.co.uk4567