Annual Financial Report

GCP STUDENT LIVING PLC ANNUAL FINANCIAL REPORT FOR THE PERIOD 26 FEBRUARY 2013 TO 30 JUNE 2014 GCP Student Living plc, (the "Group" or the "Company"), which was the firststudent accommodation real estate investment trust ("REIT") in the UK, todayannounces its results for the financial period since incorporation on26 February 2013 to 30 June 2014, including the 13 month trading period since theinitial public offering ("IPO") on 20 May 2013. The full annual report and financial statements can be accessed via theCompany's website at www.gcpuk.com/gcp-student-living-plc or by contacting theCompany Secretary by telephone on 01392 477500. Highlights for the period * Successful IPO of the Company raised £70.1 million through the placing and offer for subscription of ordinary shares in order to acquire the Company's seed asset, Scape East. * Ordinary shares of the Company admitted to the Specialist Fund Market of the London Stock Exchange ("SFM") and the Channel Islands Securities Exchange Authority Limited ("CISEA") on 20 May 2013. * Acquisition of The Pad, RHUL (£13 million) made in December 2013, ahead of target. * A further successful, oversubscribed open offer, placing and offer for subscription raised £42 million in May 2014 in order to fund the Company's acquisition of Scape Greenwich. * Forward purchase agreements for Phase 2 of The Pad signed in December 2013 and Scape Guildford signed in February 2014, due for completion in Q3 2015. * Year-on-year growth in student rental income of 3.3% in the academic year since IPO. * Scape East and The Pad fully occupied for the 2013/14 academic year. As at the date of the report, Scape East, Scape Greenwich and The Pad had achieved full occupancy for the 2014/15 academic year. * Operating profit of £10.1 million with total profit for the period of £7.7 million. * Annualised total return achieved of 11.5% to 30 June 2014, exceeding the Company's annualised target return of 8.0-10.0% per annum. * Company's target 5.5% annualised dividend yield in respect of the period to 30 June 2014 achieved with a total dividend of 6.10 pence per share paid to shareholders in respect of the period. * EPRA NAV* per ordinary share of 102.64 pence as at 30 June 2014 and EPRA NNNAV* per ordinary share of 102.68 pence at 30 June 2014. * External valuation of investments as at 30 June 2014 of £151.6 million. Robert Peto, Chairman, commented: "The IPO of the Company and the secondary capital raise in May 2014 were anoutstanding success with new investors subscribing for more shares than wereavailable. The Company has performed strongly since launch, with full occupancyhaving been achieved along with year-on-year rental growth above 3% and incomeand capital performance in excess of target. Going forward, the Company is wellpositioned to achieve its growth and earnings targets due to an ongoing supply/demand imbalance of high quality purpose-built accommodation in its coremarkets." For more information: Gravis Capital Partners LLP Tom Ward [email protected] 020 7518 1496 Cenkos Securities plc Dion Di Miceli [email protected] 020 7397 1921Tom Scrivens [email protected] 020 7397 1915 Buchanan Charles Ryland [email protected] 020 7466 5000Sophie McNulty [email protected] * The Company has adopted the EPRA best practice recommendations on reportingand accounting. EPRA NAV and EPRA NNNAV respectively are calculated on the samebasis as the `Economic NAV' and `Accounting NAV' that the Company has reportedpreviously. INVESTMENT OBJECTIVES The Company invests in UK student accommodation to meet the following keyobjectives: Dividend income To provide shareholders with regular, sustainable and long term dividends. The Company has achieved its annualised dividend yield target of 5.5% withreference to the IPO issue price in respect of the period to 30 June 2014,paying a total of 6.10 pence per ordinary share in the period since IPO. Capital appreciation To provide modest capital appreciation over the long term with income havingRPI inflation-linked characteristics. The valuation of the Company's property portfolio has increased by 3.5% overthe period providing capital appreciation to shareholders. Income for the2014/15 academic year has risen slightly in excess of RPI. Portfolio quality Focus on high quality, modern, purpose-built, private student residentialaccommodation and teaching facilities for students studying at leading academicinstitutions in and around London. The Company has further increased its property portfolio to include The Pad andScape Greenwich, high specification, modern, purpose-built residential studentaccommodation buildings in and around London. Key performance highlights * 6.10 pence - Dividends paid in 2013/14 * £5.0 million - Capital appreciation since IPO * 100% - Occupancy for 2013/14 academic year for Scape East and The Pad * 11.5% - Total shareholder return * 3.3% - Year-on-year rental growth for the 2013/14 academic year * 61 - Number of HEIs represented CHAIRMAN'S STATEMENT Introduction On behalf of the Board, I am pleased to announce a successful first financialperiod for the Company. The Company delivered a strong set of results over theperiod, achieving the target 5.5% annualised dividend in respect of the periodto 30 June 2014 and exceeding the annualised total target return of 8.0-10.0%per annum. The net assets of the Company have grown significantly over theperiod since IPO with the acquisition of The Pad and Scape Greenwich, risingfrom £70.1 million at IPO to £112.9 million at 30 June 2014. A full summary ofthe Company's results is set out below. The Company's IPO in May 2013 was oversubscribed, with £70.1 million raised.The total funds raised were used to acquire the seed asset, Scape East, a highspecification student accommodation scheme located directly opposite QMUL. Theproperty houses 588 studio bedrooms and c.30,000 sq ft of teaching facilities,retail space and communal facilities. The Company built on its initial acquisition by acquiring a newly built 116 bedscheme, The Pad, adjacent to RHUL, in December 2013. The property was fullyoccupied during the 2013/14 academic year and was acquired through an increasein the Company's senior debt facility with Barclays. The Company also enteredinto a forward purchase agreement for the acquisition of The Pad Phase 2, afurther 100 studio bed scheme targeted for completion in Q3 2015. The Company's growth path continued in May 2014 following a successful capitalraise of £42 million. The proceeds were used to acquire Scape Greenwich, apurpose-built, private student accommodation residence located in a primeLondon student residential location within 30 minutes of c.75% of London's HEIsand in close proximity to Ravensbourne College, a leading specialist digitalmedia HEI, and the University of Greenwich. The Company also entered into a forward purchase agreement to acquire ScapeGuildford, a high specification, purpose-built, private student accommodationresidence located adjacent to the University of Surrey in Guildford, due forcompletion in Q3 2015. Once complete, the scheme will comprise 141 rooms. Financial results The Company generated operating profit of £10.1 million for the first financialperiod to 30 June 2014, with profit for the period of £7.7 million and basicearnings per share of 10.50 pence. The net asset value of the Company hasincreased by 60.0% in the period to £112.9 million following the successfulcapital raise in order to fund the acquisition of Scape Greenwich. EPRA NAV perordinary share has increased by 5.64 pence with reference to the EPRA NAV atIPO of 97.00 pence per ordinary share to 102.64 pence. Property portfolio Since the acquisition of Scape East, the Company successfully acquired twoproperties, The Pad and Scape Greenwich, and secured forward purchaseagreements on a further two sites, The Pad Phase 2 and Scape Guildford, due forcompletion in Q3 2015. Capital values have performed slightly ahead ofexpectations with 3.4% uplift in the period since IPO, largely driven byincreasing rental rates. The external valuation of the portfolio stood at£151.6 million as at 30 June 2014. Dividends The Company paid dividends in respect of the financial period ended 30 June2014 of 6.10 pence per ordinary share. All dividends were made as PIDs inrespect of the Group's tax exempt property rental business. Financing and hedging The Company's financing strategy was enhanced in the period by successfullyrenegotiating a £40 million senior debt facility at a lower rate of interestwith Barclays Bank plc and by entering into a new interest rate swap with anotional value of £20.0 million at a fixed rate of 1.4% and floating rate of3 month LIBOR, bringing the weighted average cost of debt down from 4.4% to 3.0%at 30 June 2014. The Company continues to have significant headroom on itsloan-to-value and interest cover covenants. At 30 June 2014, the debt facilitywas fully drawn and the Company was operating with a property loan-to-value of26.7%. Alternative Investment Fund Managers' Directive The Company is classed as an externally managed AIF under the AIFMD. The Boardhas appointed the Investment Manager as the Company's AIFM with effect from1 April 2014. Langham Hall LLP was appointed on 22 July 2014 to providedepositary services in order to fully comply with the provisions of the AIFMD. Delisting from the CISEA The Company currently operates with a dual listing on both the SFM and theCISEA. At the date of the Company's IPO, the SFM was not a recognised exchangefor ISA investors and therefore a dual listing on the CISEA was required toensure ISA eligibility of the Company's ordinary shares for investors. Sincethe launch of the Company, amendments were made to the ISA regulations pursuantto which ISA investors can now invest in shares traded on the SFM. As announced to the market on 10 September 2014, following consultation withthe Company's legal and financial advisers, the Board has decided that it is nolonger in the interests of shareholders for the Company to retain a listing ofits ordinary shares on the CISEA, given the ongoing costs of such listing. TheCompany's ordinary shares will continue to trade on the SFM. The delisting fromthe CISEA is expected to take effect at 7am on 10 October 2014. Outlook The Company has performed strongly since IPO and has achieved its target incomeand return profiles, with strong occupancy and rental growth forecasted for theforthcoming 2014/15 academic year. Student numbers in the UK remain robust, with total placed applications for the2013/14 academic year 6% up on the previous year. Student applications for theforthcoming 2014/15 academic year were up 4% on the previous year, with EUstudent numbers up almost 5% and non-EU students up over 8%, indicating anincrease in potential demand for the Company's stock of accommodation. The supply/demand imbalance in and around London is expected to continue, withlimited new stock coming on stream and an increasing number of domestic and inparticular international students forecast for the forthcoming academic year. The providers who selectively choose strong locations and enhance their schemesthrough quality design and an operational platform with strong brand valueswill continue to have a competitive advantage in the market. The Investment Manager continues to review and source additional opportunitiesin line with the Company's investment policy and currently anticipates makingfurther investments in 2015. Robert PetoChairman16 September 2014 STRATEGIC REPORT The Strategic Report has been prepared in accordance with Section 414A of theCompanies Act 2006 (the "Act"). Its purpose is to inform members of the Companyand help them assess how the Directors have performed their legal duty undersection 172 of the Act to promote the success of the Company. Strategic Overview Investment objective The Company's investment objective is to provide shareholders with regular,sustainable, long-term dividends (with RPI inflation-linked characteristics)coupled with the potential for modest capital appreciation over the long term. Investment policy The Company intends to meet its investment objective through owning, leasingand licensing student residential accommodation and teaching facilities to adiversified portfolio of direct let tenants and HEIs. The Company will investin modern, mostly purpose-built, private student residential accommodation andteaching facilities located primarily in and around London where the InvestmentManager believes the Company is likely to benefit from supply and demandimbalances for student residential accommodation. Rental income will predominantly derive from a mix of contractual arrangementsincluding direct leases and/or licences to students ("direct let agreements"),leases and/or licences to students guaranteed by HEIs and/or leases and/orlicences directly to HEIs. The Company may enter into soft nominationsagreements (pari passu marketing arrangements with HEIs to place their studentsin private accommodation) or hard nominations agreements (longer-term marketingarrangements with HEIs of between 2 and 30 years in duration). The Company intends to focus primarily on accommodation and teaching facilitiesfor students studying at Russell Group universities and other leading academicinstitutions, regional universities with satellite teaching facilities in andaround London and at specialist colleges. The Company may acquire properties directly or through holdings in specialpurpose vehicles and properties may be held through limited partnerships,trusts or other vehicles with third party co-investors. Investment restrictions The Company will invest and manage its assets with an objective of spreadingrisk through the following investment restrictions: * the Company will derive its rental income from a portfolio of not less than 500 studios; * at least 90% by value of the properties directly or indirectly owned by the Company shall be in the form of freehold or long leasehold (over 60 years remaining at the time of acquisition) properties or the equivalent; * the Company will not invest in development assets or assets which are unoccupied or not producing income at the time of acquisition; and * the Company will not invest in closed-ended investment companies. Use of derivatives The Company may invest through derivatives for efficient portfolio management.In particular, the Company engages in interest rate hedging or otherwise seeksto mitigate the risk of interest rate increases as part of the Company'sefficient portfolio management. Borrowing and gearing policy The Company may use gearing to enhance returns over the long term. The level ofgearing will be governed by careful consideration of the cost of borrowing andthe Company may use hedging or otherwise seek to mitigate the risk of interestrate increases. Gearing, represented by borrowings as a percentage of grossassets, will not exceed 55% at the time of investment. It is the Directors'current intention to target gearing of less than 30% of gross assets in thelong term and to comply with the REIT condition relating to the ratio betweenthe Company's `property profits' and `property finance costs'. As at the periodend, the Company was operating with a property loan to value of 26.7%. The Directors currently intend, at all times, to conduct the affairs of theCompany so as to enable it to qualify as the principal company of a REIT forthe purposes of Part 12 of the Corporation Tax Act 2010 (and the regulationsmade thereunder). In the event of a breach of the investment guidelines and restrictions set outabove, the Investment Manager shall inform the Directors upon becoming aware ofthe same and if the Directors consider the breach to be material, notificationwill be made to a Regulatory Information Service. No material change will be made to the investment policy without the approvalof shareholders by ordinary resolution. BUSINESS AND STATUS OF COMPANY The Company is registered as a public limited company and is an investmentcompany within the terms of section 833 of the Act. The Company is a REIT forthe purposes of Part 12 of the Corporation Tax Act 2010. Notification has beensubmitted to, and acknowledged by, HMRC for the Company to enter the UK REITregime. The Company will be treated as a REIT so long as it continues to meetthe REIT conditions in relation to any accounting period. The Company was incorporated on 26 February 2013. The Company's shares wereadmitted to trading on the SFM and were listed on the Official List of theCISEA on 20 May 2013. The Company's performance along with the important events that have occurredduring the period under review, the key factors influencing the financialstatements and the principal risks and uncertainties for the financial periodare set out below. UK STUDENT ACCOMMODATION MARKET Overview Higher education is one of the UK's largest service exports, contributing anestimated £17.5 billion to the UK economy in 2011/12. Its continued growth is amainstay of UK government policy. In the period, the UK was the most populardestination for students studying English outside of their home country,attracting nearly 50% of students globally. In 2011/12, there were 435,000international students studying at publicly funded HEIs, and a further 53,000international students studying at alternative institutions, making the UK thesecond most popular destination for internationally mobile higher educationstudents (behind the USA). In July 2013, the UK government published an ambitious new strategy to expandthe UK's education exports industry to ensure that British higher educationcontinues to stay ahead in the global education market. It aims to secure anextra £3 billion of contracts for educational exports and attract a further90,000 international students by 2018. The international education sector is likely to grow partly due to demographicchange, with the total global population forecast to increase from nearly6.9 billion in 2010 to over 7.6 billion in 2020, and partly due to the increase inwealth and size of the middle classes in emerging economies. In the light of this, the Directors (as advised by the Investment Manager)expect that the rise in international student numbers will continue to increasein line with the OECD predictions on global student mobility, fromc.3.7 million international students in 2010 to c.8 million international studentsby 2025. It is expected that the long-term impact of higher domestic tuition feeswill be to increase the competitiveness of the best tertiary educationinstitutions in the country, particularly the Russell Group, as domesticstudents become more selective over where they will study as they take on moredebt. HEI applications The number of students in UK HEIs has doubled since 1991. This has been drivenby government policy, demographics and global mobility, with approximately1.7 million students studying full-time in the UK in 2012/2013, with c.22% fromoutside the UK. Student numbers for the 2013/14 academic year were c.37,000 up on the previousyear, with 677,000 applicants chasing 496,000 places. Full year applicants forUK HEIs have historically exceeded the number of available places and thiscontinued trend provides comfort that student numbers will continue to grow ata sustainable level and that demand will continue to outstrip supply. The number of students looking to study at UK HEIs continues to increaseyear-on-year. UCAS applications for 2014/15 show a 4% increase in the number ofapplications in spite of the continuing fall in the population of 18-year oldsin the UK. The increase was most marked in the number of EU (excluding the UK)and non-EU students which increased by 5% and 9% respectively. Charts showing the full-time student numbers, UCAS full-year applicants anduniversity applications can be found in the full annual report and financialstatements. Student accommodation - the importance of design and quality Purpose-built student accommodation has evolved as a product over the past15 years. Over this period, and in particular, following the introduction oftuition fees, students have become consumers in their own right and are makingtheir investment decisions for their higher education not just on price, butalso on a mix of quality of the academia and the quality and location ofaccommodation. Increasingly, students are demanding high quality living space with cleverdesign, quality materials, social areas in the buildings which provideopportunities for social groups to form and bond centred around work spaces,play space with games and TV areas and communal kitchens. Likewise, they aredemanding services that create wider social interaction such as talks, events,workshops and tie-ins with local businesses and educational establishments. This is particularly the case for international students who tend to demand ahigher class of accommodation than domestic students and who have a requirementfor greater social interaction. Student accommodation - supply/demand imbalance There is a fundamental supply/demand imbalance in the UK student accommodationsector which is responsible for the stability and the strong rental and capitalreturns produced in this financial period. The UK has seen a rising tide of student numbers since the early 1990s, withthe student population more than doubling over this period. Domestic studentapplications have increased year-on-year despite an ageing population andinternational student numbers continue to grow at a disproportionate rate, asevidenced by the 9% increase in applications by non-EU students for the 2014/15period. There is a structural shortfall of purpose-built student accommodation in mostof the UK. The supply of private student accommodation has failed to keep pacewith the increasing demand owing to the following: * the residential property market has recovered over the past 18 months, increasing land values as well as increasing the pressure on the private residential sector to house tenants other than students who are willing to pay higher rent levels; * the private rented sector has become subject to greater local authority and government legislation for houses in multiple occupancy; * universities are not developing new accommodation as they are becoming more focused on their core competency of investing in education; * development financing remains constrained; and * the introduction of CIL which will increase the cost of developing student accommodation. The London market The Company is focused on the London student accommodation market because thisis where the largest supply/demand imbalance exists in the UK market. Londonhas a number of important dynamics that separate it from the wider UK studenthousing market: * London has the largest number of students of any city in the UK, with over 400,000 students being educated at HEIs in the capital; * London has the largest number of international students of any city in the world with c.108,000 students in 2011 from over 200 countries; * London is home to some of the leading HEIs in the world which attract a significant number of international students - it has five of the 24 Russell Group universities, two of the top ten universities in the world and has a large number of world-renowned specialist colleges; * London is one of the most popular cities in the world to visit, with a huge global profile following the London 2012 Olympic Games; and * London universities are only able to supply accommodation to c.30% of first year and international students. The acute supply/demand imbalance is more pronounced in London than in anyother major UK city, as evidenced in the graph contained in the full annualreport and accounts. This graph highlights that in 2013, there were over250,000 domestic first year undergraduates, international students andpostgraduates studying in the capital with only 60,000 purpose-built studentaccommodation beds in halls of residence available in aggregate from both theuniversity and private sectors, indicating a structural supply shortfall ofc.190,000 beds. It is this shortfall that underpins the strong performance ofthe asset class in the capital. REVIEW OF THE FINANCIAL PERIOD Financial results The Company generated a strong set of results with £9.1 million of rentalincome generated in the period, resulting in a total of £7.5 million in netoperating income and a NOI margin for the period of 81.8% as detailed below.The Board anticipates as additional properties are acquired, further economiesof scale in asset and facilities management will be achieved across theCompany's portfolio. Total administration expenses incurred of £1.6 million comprise the InvestmentManager's fee and other service provider costs in the period. Total gains oninvestment properties of £5.0 million upon the revaluation of the Company'sinvestment portfolio as at 30 June 2014, resulting in operating profit for theCompany of £10.1 million. Finance costs of £2.4 million comprising loan andswap interest and swap break fees associated with the Company's improvedfinancing arrangements, giving total profit for the period of £7.7 million. At 30 June 2014, there were no dilutive equity instruments in issue andtherefore the Company's basic earnings per share were 10.50 pence per share. Financial performance For the period ended 30 June 2014Income statement £'000 Rental income 9,132 Operating expense (1,664) Gross profit (net operating income) 7,468 NOI margin 81.8% Administration expenses (1,646) Other costs (711) Gains on investment properties 5,010 Operating profit 10,121 Finance costs (2,412) Profit for the period 7,709 Dividends In order to maintain its REIT status, the Group is required to meet a minimumdistribution test for each accounting period for which it is a REIT. This testrequires the Company to distribute at least 90% of the income profits of theproperty rental business for each accounting period, as adjusted for taxpurposes. In respect of the financial period ended 30 June 2014, the Companypaid dividends of 6.10 pence per share. Capital raises The Company's IPO in May 2013 was oversubscribed, with £70.1 million raised.The total funds raised were used to acquire the Company's seed asset, ScapeEast, a high specification student accommodation scheme located directlyopposite QMUL. In May 2014, the Company raised a further £42 million by way ofan oversubscribed open offer, placing and offer for subscription to fund theacquisition of Scape Greenwich in accordance with the Company's investmentpolicy. Cash flow generation The Company generated cash and cash equivalents of £3.6 million at the end ofthe period. A total of £5.9 million of operating cash flows were generated inrelation to the Company's student accommodation portfolio. Total capital raisedin the period amounted to £112.1 million, which was used alongside theCompany's debt facility to finance the acquisitions of Scape East and ScapeGreenwich. An additional draw down on the facility was utilised to fund theacquisition of The Pad. The remaining cash flows relate to net financing costsin addition to payment of dividends, resulting in a net increase in cash andcash equivalents at the period end of £3.6 million. Debt financing The Company entered into significantly improved new financing arrangements withits lender, Barclays, following the renegotiation in May 2014 of a £40 millionfacility. This facility is now set to mature in May 2019 at a more favourablerate of interest. The previous interest rate swap has been terminated andreplaced with an interest rate swap with a notional value of £20 million. Thecost of cancelling the previous swap was £0.6 million. The new banking arrangements have reduced the Group's weighted average cost ofdebt from 4.4% to 3.0%. The Company is operating with a debt to property valueof 26.7% after the issue of new shares and the acquisition of Scape Greenwich. Banking covenants The Company debt facility includes loan-to-value and interest cover covenantsthat are measured at a Group level. The Company has maintained significantheadroom against all measures throughout the financial period and is in fullcompliance with all loan covenants at 30 June 2014. Asset performance The Company has experienced 3.3% year-on-year rental growth for the 2013/14academic year. The valuation of the Company's property portfolio has increasedby £5.0 million (3.4%) since the IPO or acquisition of assets. The portfolio has been 100% occupied for the 2013/14 academic year, all on51 week tenancies. As at the date of this report, Scape East, Scape Greenwich andThe Pad had achieved full occupancy for the 2014/15 academic year. Net assets Net assets attributable to equity holders at 30 June 2014 were £112.9 million.The increase in net assets since the IPO primarily relates to the May 2014capital raise. The acquisition of The Pad was funded by an increase in theCompany's existing debt facility and therefore had no effect on the net assetsof the Company. At 30 June 2014, there were 109,910,428 shares in issue giving an EPRA NAV perordinary share of 102.64 pence. The EPRA NAV excludes the fair valuemark-to-market valuation of the Company's financial derivative instrument,which is used to manage adverse effects of interest rate movements on theCompany's debt facility. Accordingly, taking into account the fair value mark-to-market valuation ofthis financial derivative instrument based on current gilt rates, the EPRA NAVat 30 June 2014, adjusted to reflect the cost of fixed rate debt (EPRA NNNAV),is 102.68 pence per ordinary share. Financial performance Net Assets 30 June 2014Assets £'000 Property 151,560 Receivables 1,362 Cash and cash equivalents 4,585 Total assets 157,507 Liabilities Payables (3,168) Deferred income (2,028) Senior loan (39,456) Total liabilities (44,652) Net assets 112,855 Number of shares 109,910,428 EPRA NAV per share 102.64p EPRA NNNAV per share 102.68p Net asset value and share price performance The Company's shares have traded at a premium to NAV since IPO, with an averagepremium over the period of 6.6%. The Company's share price hit an all-time highof 108.50 pence on three occasions, in September, October and November 2013. EPRA NAV has increased to 102.64 pence per ordinary share as at 30 June 2014(5.8% increase in 13 months). Dividends of 6.10 pence per ordinary share weredeclared and paid to shareholders, achieving the target 5.5% annualiseddividend yield in respect of the period to 30 June 2014. At the Company level,the annualised total return to 30 June 2014 was 11.5%, which exceeds theannualised target return of 8.0-10.0%. Historic share price and NAV performanceis set out in the charts in the full annual report and financial statements. COMPANY PERFORMANCE Key performance indicators Shareholder total return 11.5% Basic earnings per share 10.50 pence Dividend yield 5.5% EPRA NAV per share 102.64 pence Loan-to-value 26.7% Rental growth 3.3% PROPERTY PORTFOLIO Quality, design & brand The property portfolio is made up of high quality, modern, purpose-builtstudent accommodation focusing on international students, postgraduates anddomestic students alike. The living experience forms a mainstay of eachstudent's university life and the Company has put the quality, design,experience and performance of its assets at the heart of its operationalstrategy. This is achieved through the Company's investment selection and itschoice of Asset Managers. Scape is the Asset Manager for Scape East and Scape Greenwich. The vision ofthe Scape brand was to create a new kind of student accommodation; one that wasaffordable but with modern design based in the heart of London. By enlistingthe help of leading interior designers and top architects, Scape continues toensure that high standards of quality finishes and service are met. Years ofhard work and listening to student feedback has resulted in some of the beststudent accommodation in London. Alongside the striking design features, Scape also offers ample common spacefor students to socialise and study. High speed internet and wi-fi areavailable throughout each location. Scape constantly responds to studentfeedback, which has resulted in the provision of extra facilities andamenities, such as additional private rooms for group study, ping pong tablesand a gym. The Pad, located in Egham, comprises the remainder of the assets in theportfolio and provided the first private, purpose-built student accommodationin the local vicinity for RHUL's students. CRM is the Asset Manager for ThePad. The property provides high quality studios and en-suite accommodation tomeet the needs of the growing international and postgraduate student populationat RHUL. Approximately 90% of the residents of The Pad are internationalstudents, who are attracted by the large spacious rooms, high specificationfixtures and fittings and sociable communal areas spread across the buildingand the leafy courtyard areas. Scape East Scape East is a private student residence, completed in June 2012 under theScape brand, which seeks to provide affordable and aspirational hotel-stylestudent accommodation in private, purpose-built, high specification buildings. Scape East is located in Mile End, directly opposite QMUL, which is a RussellGroup HEI and one of London's leading universities with approximately 17,000students. Approximately 75% of all Scape East's direct let students study atQMUL. The impressive building encompasses a double height entrance andfloor-to-ceiling glazed reception. Spiral staircases and an open atrium at Scape East create a spacious andwelcoming entrance. Copper and bronze is a recurring theme, from theilluminated canopy on top of the building to the cladding surrounds. The greenroof space attracts insects and birds and the ground water provides heat forthe 25,000 sq ft of educational space and the communal areas. Residents have access to a private courtyard garden, free gym, TV and gameslounge, communal kitchen, study areas and two on-site restaurants. Most of thestudios at Scape East are the exclusively designed "Scape Studio", whichfeature integrated storage and work space, fully fitted kitchenette, breakfastbar and stunning en-suite shower room. The concept of modern studentaccommodation came from the Scape partners who enlisted leading interiordesigner Ab Rogers and design studio Praline to bring their vision to life. Theresult has yielded a superior alternative to traditional student housing, wherestriking design goes hand-in-hand with competitive prices and excellent Londonlocations. Additional rental income is generated through a 30-year FRI lease with annualRPI uplifts of teaching facilities, which has generated 6.5% of total revenuesfor Scape East for the 2013/14 academic year. As at 30 June 2014, Scape East was occupied by students from 22 different HEIsand of 65 different nationalities, with c.90% of tenants coming from outsidethe UK. Scape Greenwich Scape Greenwich is a private student residence which was completed in September2013 on the Greenwich Peninsula. Designed by award-winning architects, AHMM, itcomprises 280 studios and approximately 10,000 sq ft of communal facilities,kitchens, study areas and breakout rooms. Scape Greenwich is situated in aprime London student residential location within 30 minutes of c.75% ofLondon's HEIs and in close proximity to Ravensbourne College (withc.1,600 students), a leading specialist digital media HEI, and to the Universityof Greenwich (with c.26,000 students). Scape Greenwich is a stunning whiteconcrete building with an expansive glazed reception and versatile communaldining, theatre and lounge. Students also enjoy large shared balconies andlinked atria study spaces. Big picture windows provide bright, natural light asthey extend across the building. The bright white exterior is offset by thecolourful hues that cover the corridors. Scape Greenwich boasts a campus feel with shared study spaces, strikingcommunal areas, designer student studio apartments and an ideal location inLondon. All student rooms come with a fully-equipped kitchenette, a comfortabledouble bed with built-in storage, en-suite shower room and large windows.Communal balconies on alternate floors afford stunning views of Canary Wharf,the City and local parks. As at 30 June 2014, Scape Greenwich was occupied by students from 47 differentHEIs and of 48 different nationalities, with c.50% tenants coming from outsidethe UK. The Pad The Pad is a private student residence which was completed in September 2013under the CRM Students brand and is located adjacent to RHUL, in Egham. RHUL is ranked in 5th place in the world (1st in the UK) in the Times HigherEducation World University Rankings category of `International Outlook'. Thiscategory looks at diversity on campus and to what degree academics collaboratewith international colleagues on research projects, recognising it as a globaluniversity. It is home to more than 9,000 students from over 100 countries,with c.20% from outside the EU. The building is a modern, purpose-built student accommodation block offering116 rooms comprising of 15 studios and 101 en-suite rooms. The studios comprisefully furnished rooms with kitchenette and appliances provided and en-suiteshower room. En-suites in the main building are in clusters of 3-6 bedrooms inaddition to a small "house" of 9 rooms. The clusters share a large fully-fittedkitchen, living area and include fully-furnished study bedrooms with en-suiteshower rooms. The property opens out onto a large leafy courtyard area withpatios, outdoor seating and gardens for students to breakout in the summermonths. The Pad is the only purpose-built private student accommodation within fivemiles of RHUL. As at 30 June 2014, The Pad was occupied exclusively by students from RHUL,comprising of 36 different nationalities, with c.90% tenants coming fromoutside the UK. CORPORATE, SOCIAL AND ENVIRONMENTAL RESPONSIBILTY Sustainability The Company's aim is to operate a fully sustainable business model with a lowcarbon footprint. The Company's environmental sustainability measures includethe use of highly-efficient combined heat and power systems, ground source heatpumps and intelligent interior heating and lighting to minimise GHG emissions.The Company's property portfolio incorporates green roof space, rain waterharvesting and sustainable waste management, including diverting waste fromlandfill to generate renewable electricity and via the waste managementprocess. In the period to 30 June 2014, the Asset Manager converted c.80% ofproperty waste from Scape East and Scape Greenwich into renewable energy, withthe remaining c.20% into national recycling schemes. Environmental impact The Company is committed to being both socially and environmentally responsibleand recognises the impact the Company has on the environment. The Company hasdelegated the day-to-day asset and facilities management to the Asset Managerswho are responsible for the provision of energy supplies, including theprocurement of renewable energy, managing the Company's waste schemes andraising general awareness of environmental impact and waste reduction amongstthe Group's employees and residents. Details of the Company's GHG emissions are given in the Directors' report inthe full annual report and financial statements. Diversity and equality The Company is committed to achieving a working environment which providesequality of opportunity and freedom from unlawful discrimination on the groundsof race, sex, pregnancy and maternity, marital or civil partnership status,gender reassignment, disability, religion or beliefs, age or sexualorientation. The Company's policy aims to remove unfair and discriminatorypractices and to encourage full contribution from its diverse community. TheCompany is committed to opposing actively all forms of discrimination andvalues diversity amongst its workforce. Further information on the Company's diversity policy is included in theCorporate governance statement in the full annual report and financialstatements. Social and community The Company is committed to being socially responsible and the Directorsconsider community involvement to be an important part of that responsibility.The Company is indirectly involved with a number of social and local communityinitiatives via the Asset Manager, such as local employment schemes andinitiatives to give back to the local area via student bursaries, sponsorshipand local events. Human rights The Company respects human rights and aims to provide assurance to internal andexternal stakeholders that it will carry out its affairs in accordance with theprinciples of the Universal Declaration of Human Rights. No human rightsconcerns have arisen within the Company's operations or its supply chain duringthe period ended 30 June 2014. Employees On 1 April 2014, Scape took over the facilities and property managementfunction from the facilities manager, Grosvenor Facilities Services Limited. Itassumed the employment of those individuals providing asset and facilitiesmanagement services to Scape East and Scape Greenwich at that time, by way of anew subsidiary of the Company, GCP Operations Limited ("GCP Operations"). Scape continues to retain overall responsibility for the supervision andprovision of asset management services through oversight and management of theemployees of GCP Operations and has taken over responsibility for theprocurement and supervision of the facilities management services in connectionwith Scape East and Scape Greenwich on behalf of the Company. The Boardbelieves that the restructuring of the asset and facilities management serviceswill offer the Group higher service levels, improved brand awareness, greatercontrol over the service provided and cost savings. Gender breakdown The gender breakdown of the Group's Directors and employees as at 30 June 2014is detailed below: Male Female Directors 3 0Employees 29 14 RISK MANAGEMENT Role of the Board The Board of Directors has overall responsibility for risk management andinternal control within the Group. The Board recognises that risk is inherentin the operation of the Company and that effective risk management is key tothe success of the organisation. The Board has delegated responsibility for theassurance of the risk management process and the review of mitigating controlsto the audit committee. The Board, when setting the risk management strategy, also determines thenature and extent of the significant risks and its risk appetite inimplementing this strategy. A formal risk identification and assessment processhas been in place since IPO, resulting in a risk framework document whichsummarises the key risks and their mitigants. The Board undertakes a formal risk review with the assistance of the auditcommittee at least twice a year in order to assess the effectiveness of theGroup's risk management and internal control systems. During the course of suchreview, the Board has not identified, nor been advised of any failings orweaknesses which it has determined to be of a material nature. The principalrisks and uncertainties the Company faces are set out below. PRINCIPAL RISKS AND UNCERTAINTIES The principal financial risks, the Company's policies for managing these risksand the policy and practice with regard to financial instruments are summarisedin note 26 to the financial statements. The Board has also identified the following additional risks and uncertainties: Investment and strategy There can be no guarantee that the investment objective of the Company will beachieved. The Company is a REIT which invests in student residentialaccommodation. The Company focuses primarily on accommodation and teachingfacilities for students studying at universities and specialist colleges in andaround London. The Company's investment objective includes the aim of providing shareholderswith modest capital appreciation over the long term. The amount of any capitalappreciation will depend upon, amongst other things, the Company successfullypursuing its investment policy and the performance of the Company's assets.There can be no assurance as to the level of any capital appreciation over thelong term. The Company has already acquired three assets which meet the investmentstrategy. The Investment Manager and Asset Managers have significant experiencein the sector which should provide the Company with access to assets tocontinue to meet its investment strategy going forward. General property and investment market conditions The Company's performance depends to a significant extent on property values inthe UK. An overall downturn in the UK property market and the availability ofcredit to the UK property sector may have a materially adverse effect upon thevalue of the property owned by the Company and ultimately upon the net assetvalue and the ability of the Company to generate revenues. The Investment Manager provides the Board with quarterly updates on the studentaccommodation market and senior debt market to act as an early warning signalof any adverse market conditions ahead. Property valuation The valuation of the Company's property portfolio is inherently subjective, inpart because all property valuations are made on the basis of assumptions whichmay not prove to be accurate, and because of the individual nature of eachproperty. This is particularly so where there has been more limitedtransactional activity in the market against which the Company's propertyvaluations can be benchmarked by the Company's external valuation agents.Valuations of the Company's investments may not reflect actual sale prices,even where any such sales occur shortly after the relevant valuation date. The Company can invest in properties through investments in variousproperty-owning vehicles, and may in the future utilise a variety of investmentstructures for the purpose of investing in property. There can be no assurancethat the value of investments made through those structures will fully reflectthe value of the underlying property. The Company has entered into a valuation agreement with Knight Frank LLP toprovide quarterly valuations. Knight Frank is one of the largest valuers ofstudent accommodation in the UK and therefore has access to the maximum numberof data points to support their valuations. In addition to this, the Board ofDirectors has significant experience of property valuation and its constituentelements. Portfolio performance Returns achieved are reliant primarily upon the performance of the propertyportfolio. The Company may experience fluctuations in its operating results dueto a number of factors, including changes in the values of investments made bythe Company, changes in the Company's operating expenses, occupancy rates, thedegree to which the Company encounters competition and general economic andmarket conditions. The Company may be subject to concentration risk on its portfolio. Whilst it isthe Board's intention for the Company to acquire additional property assets,there can be no certainty that it will be able to do so. The Investment Manager and Asset Managers provide the Board with quarterlyreports on asset performance. The analysis provides both the Investment Managerand Board with the tools to adjust the Company's operational strategy in orderto maximise shareholder value. Rental income and occupancy rates Rental income and property values may be adversely affected by increased supplyof student accommodation and teaching facilities, the failure to collect rents,periodic renovation costs and increased operating costs. A decrease in rentalincome and/or in property values may materially and adversely impact the netasset value and earnings of the Company. The value of the Company's properties and, to a significant degree, theCompany's turnover, is dependent on the rental rates that can be achieved fromthe properties that the Company owns. Any failure to maintain or increase therental rates for the Company's rooms and properties generally may have amaterial adverse effect on the value of the Company's properties as well as theCompany's turnover and its ability to service interest on its debts in thelonger term. The Company may not be able to maintain occupancy rates, which may have amaterial adverse impact on the Company's revenue performance, margins and assetvalues. The Investment Manager will only propose to the Board those assets which itbelieves are in the most advantageous locations and benefit from large supplyand demand imbalances that can bear the entry of new competitors into themarket. In addition, the quality of assets that the Company acquires will beamongst the best in class to minimise occupancy risk. Dividends The Company's investment objective includes the aim of providing shareholderswith regular, sustainable dividends payable over the long term. Thedeclaration, payment and amount of any future dividends by the Company aresubject to the discretion of the Directors and will depend upon, amongst otherthings, the Company successfully pursuing its investment policy and itsearnings, financial position, cash requirements, level and rate of borrowingsand availability of profit, as well as the provisions of relevant laws orgenerally accepted accounting principles from time to time. There is noguarantee that any dividends will be paid in respect of any financial year orperiod. Borrowings The Company's investment strategy may involve securing borrowing facilities tofinance additions to the Company's portfolio. It is not certain that theCompany will be able to secure such facilities. Lack of access to debt or theutilisation of debt on more expensive terms than anticipated may adverselyaffect the Company's investment returns. While the use of borrowings should enhance the total return on the shares wherethe return on the Company's underlying assets is rising and exceeds the cost ofborrowing, it will have the opposite effect where the return on the Company'sunderlying assets is rising at a lower rate than the cost of borrowing orfalling, further reducing the total return on the shares. As a result, the useof borrowings by the Company may increase the volatility of the NAV per shareand the Company's ability to pay dividends to shareholders. The Company's borrowing policy provides for the Company to have no more than55% gearing in the short term and 30% in the long term, thereby reducing thevolatility that changes in debt rates can have on the Company. In addition tothis, the Investment Manager provides the Board with a quarterly update on thestate of the senior debt market to ensure debt facilities are renewed well inadvance of expiration, and interest rate derivatives are used where required tohedge fluctuations in underlying interest rates. Taxation The affairs of the Company are conducted so as to satisfy the conditions ofapproval as a REIT. Any change in the Company's tax status or in taxation legislation in the UK(including a change in interpretation of such legislation) could affect theCompany's ability to achieve its investment objective or provide favourablereturns to shareholders. In particular, an increase in the rates of stamp dutyland tax could have a material impact on the value of assets acquired. If the Company fails to remain a REIT for UK tax purposes, its profits andgains will be subject to UK corporation tax. The Board has ultimate responsibility for ensuring adherence to the UK REITregime and monitors the compliance reports provided by the Investment Manageron potential transactions to be undertaken, the Administrator on asset levelsand the Registrar on shareholdings. Compliance with laws or regulations The Company and its operations are subject to laws and regulations enacted bynational and local governments and government policy. Any change in the laws,regulations and/or government policy affecting the Company may have a materialadverse effect on the ability of the Company to successfully pursue itsinvestment policy and meet its investment objective and on the value of theCompany and its shares. The Company is subject to and will be required to comply with certainregulatory requirements that are applicable to closed-ended investmentcompanies that are admitted to trading on the SFM and the CISEA and listed onthe Official List of the CISEA. The Company must comply with the listing rulesof the CISEA, the London Stock Exchange Admission and Disclosure Standards andthe Disclosure and Transparency Rules. Any failure to comply with any futurechanges to such rules and regulations may result in the shares being suspendedfrom listing on the CISEA and/or trading on the SFM. The Company is voluntarilycomplying with certain of the Listing Rules of the UKLA; however, the UKLA doesnot have the authority to monitor such voluntary compliance or impose sanctionsin respect of any failure of such compliance by the Company. As announced by the Company on 10 September 2014, the Company has applied to bedelisted from the Official List of the CISEA. It is anticipated that thedelisting will take effect on 10 October 2014. The Board has appointed Wragge Lawrence Graham & Co LLP as legal counsel,Capita Company Secretarial Services Limited as Company Secretary and CapitaSinclair Henderson Limited as Administrator to ensure compliance with allrelevant laws and regulations. On behalf of the Board Robert PetoChairman16 September 2014 EXTRACTS FROM THE DIRECTORS' REPORT Share capital The Company was incorporated with a share capital of one ordinary share of onepence in the capital of the Company ("ordinary shares") issued at £1.00 (nilpaid). On 21 March 2013, 100,001 restricted shares of 50 pence each were issuedat par (fully paid) and a further 100,000 ordinary shares were issued at£1.00 per share (nil paid). On 20 May 2013, 70,000,000 ordinary shares were issued at £1.00 each fully paidpursuant to a placing and offer for subscription. Simultaneous to this issue,the restricted shares were redeemed and cancelled in accordance with theCompany's articles of association. On 31 July 2013, the Company's share premiumaccount was cancelled in order to create distributable reserves for the paymentof dividends. Following the result of an open offer, placing and offer for subscription bythe Company announced on 22 May 2014, the Company issued 39,810,427 ordinaryshares. These shares were admitted to trading on the SFM and CISEA on 28 May2014. At the general meeting held on 21 March 2013, the Company was grantedauthority to allot shares up to an aggregate nominal amount of £2,500,000 inaccordance with statutory pre-emption rights. Following the issue of new sharesin May 2014 and as at the date of this report, the Company may allot shares upto an aggregate nominal amount of £2,101,895.73. At 30 June 2014, and as at the date of this report, the Company's issued sharecapital comprised 109,910,428 ordinary shares. No shares were held in treasuryat the period end. At general meetings of the Company, shareholders are entitled to one vote on ashow of hands and on a poll, to one vote for every share held. The total votingrights of the Company at 30 June 2014 were 109,910,428. STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT ANDFINANCIAL STATEMENTS The Directors are responsible for preparing the annual report and financialstatements in accordance with applicable UK law and IFRS as adopted by the EU. Under company law, the Directors must not approve the financial statementsunless they are satisfied that they present fairly the financial position,financial performance and cash flows of the Group for that year. In preparing the financial statements, the Directors are required to: * select suitable accounting policies in accordance with IAS 8: `Accounting Policies, Changes in Accounting Estimates and Errors' and then apply them consistently; * present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; * provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance; * state that the Group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements; and * make judgements and estimates that are reasonable and prudent. The Directors are responsible for keeping adequate accounting records that aresufficient to show and explain the Company's transactions and disclose withreasonable accuracy at any time the financial position of the Group and enablethem to ensure that the consolidated financial statements comply with theCompanies Act 2006 and Article 4 of the IAS Regulation. They are alsoresponsible for safeguarding the assets of the Group and hence for takingreasonable steps for the prevention and detection of fraud and otherirregularities. Under applicable law and regulations, the Directors are also responsible forpreparing a Strategic report, Directors' report, Directors' remuneration reportand Corporate governance statement that comply with that law and thoseregulations, and for ensuring that the annual report includes informationrequired by the Listing Rules of the CISEA and the Disclosure and TransparencyRules of the UKLA. The Company is voluntarily complying with certain of thelisting rules of the UKLA. The financial statements are published on the Company's website,www.gcpuk.com/gcp–student–living–plc, which is maintained on behalf of the Company by theInvestment Manager. The work carried out by the Auditor does not involveconsideration of the maintenance and integrity of this website and accordingly,the Auditor accepts no responsibility for any changes that have occurred to thefinancial statements since they were initially presented on the website. Underthe investment management agreement, the Investment Manager is responsible forthe maintenance and integrity of the corporate and financial informationincluded on the Company's website. Visitors to the website need to be awarethat legislation in the UK covering the preparation and dissemination of thefinancial statements may differ from legislation in their jurisdiction. We confirm that to the best of our knowledge: * the financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; * this annual report includes a fair review of the development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that it faces; and * the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy. On behalf of the Board Robert PetoChairman16 September 2014 NON-STATUTORY ACCOUNTS The financial information set out below does not constitute the Company'sstatutory accounts for the period 30 June 2014 but is derived from thoseaccounts. Statutory accounts for the period 26 February 2013 to 30 June 2014will be delivered to the Registrar of Companies in due course. The Auditor hasreported on those accounts; their report was (i) unqualified, (ii) did notinclude a reference to any matters to which the Auditor drew attention by wayof emphasis without qualifying their report and (iii) did not contain astatement under Section 498 (2) or (3) of the Act. The text of the Auditor'sreport can be found in the Company's full annual report and financialstatements at www.gcpuk.com/gcp-student-living-plc. CONSOLIDATED & COMPANY INCOME STATEMENTFor the period 26 February 2013 to 30 June 2014 Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Continuing operations Note Revenue 5 9,132 4,461 Property operating expenses 6 (1,664) (573) Gross profit 7,468 3,888 Administration expenses 6 (1,646) (1,466) Other costs (711) - Operating profit before gains on investmentproperties 5,111 2,422 Fair value gains on investment properties 3 5,010 1,040 Fair value gains on investments insubsidiary companies 4 - 5,042 Operating profit 10,121 8,504 Finance income 7 6 2 Finance expenses 8 (2,418) (750) Profit before tax 7,709 7,756 Tax charge on residual income 12 - - Profit for the period 7,709 7,756 Earnings per share (basic and diluted) 15 10.50 10.56(pps) The accompanying notes below form an integral part of these financialstatements. CONSOLIDATED & COMPANY STATEMENT OF COMPREHENSIVE INCOMEFor the period 26 February 2013 to 30 June 2014 Consolidated Company 30 June 30 June 2014 2014 Notes £'000 £'000 Profit for the period 7,709 7,756 Other comprehensive income to bereclassified to profit and loss insubsequent periods 21 47 - Net gains on cash flow hedges Total comprehensive income for the period 7,756 7,756 The accompanying notes below form an integral part of these financialstatements. CONSOLIDATED & COMPANY STATEMENT OF FINANCIAL POSITIONAs at 30 June 2014 Consolidated Company 30 June 2014 30 June 2014Assets Notes £'000 £'000 Non-current assets Investment property 3 151,560 - Investment in subsidiary companies 4 - 129,020 Retention account 956 - 152,516 129,020Current assets Cash and cash equivalents 22 3,629 149 Trade and other receivables 19 1,315 3,484 Derivative financial instruments 21 47 - 4,991 3,633 Total assets 157,507 132,653 Liabilities Non-current liabilities Interest bearing loans and borrowings 20 (39,456) - Retention account (956) - (40,412) - Current liabilities Trade and other payables 18 (2,212) (19,798) Deferred income 18 (2,028) - (4,240) (19,798) Total liabilities (44,652) (19,798) Net assets 112,855 112,855 Equity Share capital 23 1,099 1,099 Share premium 24 39,937 39,937 Hedging reserve 47 - Retained earnings 71,772 71,819 Total equity 112,855 112,855 Number of shares in issue 109,910,428 109,910,428 EPRA NNNAV per share (pps) 16 102.68 102.68 EPRA NAV per share (pps) 16 102.64 N/A These financial statements were approved by the Board of Directors ofGCP Student Living plc on 16 September 2014 and signed on its behalf by: Robert PetoChairman Company number: 08420243 The accompanying notes below form an integral part of these financialstatements. CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the period 26 February 2013 to 30 June 2014 Share Share Hedging Retained capital premium reserve earnings Total £'000 £'000 £'000 £'000 £'000 Profit for the period - - - 7,709 7,709 Other comprehensive incomethat may be reclassifiedsubsequently to profit andloss Net gains on cash flowhedges - - 47 - 47 Total comprehensive income - - 47 7,709 7,756 Ordinary shares issued 1,099 111,001 - - 112,100 Share issue costs - (3,706) - - (3,706) Share premium cancelled on31 July 2013 - (67,358) - 67,358 - Dividends - - - (3,295) (3,295) Balance at 30 June 2014 1,099 39,937 47 71,772 112,855 The accompanying notes form an integral part of these financial statements. COMPANY STATEMENT OF CHANGES IN EQUITYFor the period 26 February 2013 to 30 June 2014 Share Share Hedging Retained capital premium reserve earnings Total £'000 £'000 £'000 £'000 £'000 Profit for the period - - - 7,756 7,756 Total comprehensive income - - - 7,756 7,756 Ordinary shares issued 1,099 111,001 - - 112,100 Share issue costs - (3,706) - - (3,706) Share premium cancelled on31 July 2013 - (67,358) - 67,358 - Dividends - - - (3,295) (3,295) Balance at 30 June 2014 1,099 39,937 - 71,819 112,855 The accompanying notes form an integral part of these financial statements. CONSOLIDATED & COMPANY STATEMENT OF CASH FLOWSFor the period 26 February 2013 to 30 June 2014 Consolidated Company 30 June 30 June 2014 2014 £'000 £'000Cash flows from operating activities Operating profit 10,121 8,504 Adjustments to reconcile profit for the period tonet cash flows: Gain from change in fair value of investmentproperties (5,010) (1,040) Gain from change in fair value of subsidiarycompanies - (5,042) Increase in other receivables and prepayments (641) (733) Increase in other payables and accrued expenses 1,473 287 Net cash flow generated from operating activities 5,943 1,976 Cash flows from investing activities Acquisition of investment properties (35,221) (35,221) Acquisition of subsidiaries, net of cash acquired (51,817) (51,817) Net cash used in investing activities (87,038) (87,038) Cash flows from financing activities Proceeds from issue of ordinary share capital 112,100 112,100 Share issue costs (3,706) (3,706) Loan arrangement fees (655) - Received from subsidiary companies - 13,386 Loan received for acquisition of subsidiary 14,866 - Part repayment of initial loan (32,645) (32,645) Finance income 6 2 Finance expenses (2,066) (750) Dividends paid in the period (3,176) (3,176) Net cash flow generated from financing activities 84,724 85,211 Net increase in cash and cash equivalents 3,629 149 Cash and cash equivalents at start of the period - - Cash and cash equivalents at end of the period 3,629 149 The accompanying notes form an integral part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD FROM 26 FEBRUARY 2013 TO30 JUNE 2014 1. General information GCP Student living plc is a closed-ended investment company incorporated in theUK on 26 February 2013. The registered office of the Company is located atBeaufort House, 51 New North Road, Exeter EX4 4EP. The Company's shares areadmitted to trading on the SFM and the CISEA and are listed on the OfficialList of the CISEA. Audited initial accounts for the period 26 February 2013 to 30 September 2013have been filed with the registrar of companies. 2. Basis of preparation These financial statements are prepared in accordance with InternationalFinancial Reporting Standards ("IFRS") issued by the International AccountingStandards Board ("IASB") as adopted by the European Union. The financialstatements have been prepared under the historical cost convention, except forinvestment property, investments in subsidiaries and derivative financialinstruments that have been measured at fair value. The audited financialstatements are presented in sterling and all values are rounded to the nearestthousand pounds (£'000), except when otherwise indicated. The Group has chosen to adopt the EPRA best practice guidelines for calculatingkey metrics such as net asset value and earnings. 2.1 Changes to accounting standards and interpretations The following accounting standards and their amendments were in issue at theperiod end but will not be in effect until after this financial period. Theyare not expected to impact significantly the financial statements. IAS 27 Separate Financial Statements (as amended in 2011) - amendments for investment entities (effective for annual periods beginning on or after 1 January 2014). IAS 32 Financial Instruments: Presentation - amendments to application guidance on the offsetting of financial assets and financial liabilities (effective for annual periods beginning on or after 1 January 2014). IFRS 10 Consolidated Financial Statements - amendments for investment entities (effective for annual periods beginning on or after 1 January 2014). IFRS 12 Disclosure of Interests in Other Entities - amendments for investment entities (effective for annual periods beginning on or after 1 January 2014). The following new standards and amendments to existing standards have beenpublished and are mandatory for the Group's accounting periods beginning after1 January 2014 or later periods, but the group has not decided not to earlyadopt them. IFRS 11 Joint Arrangements - amendments regarding the accounting for acquisitions of an interest in a joint operation (effective for annual periods beginning on or after 1 January 2016). IFRS 14 Regulatory Deferral Accounts (effective for annual periods beginning on or after 1 January 2016) IFRS 15 Revenue from Contracts (effective for annual periods beginning on or after 1 January 2017). IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018). The Group does not expect that the adoption of new accounting standards issuedbut not yet effective to have a significant impact on its financial statementsother than IFRS 10 Consolidated Financial Statements on adoption of which theGroup may be required to consolidate certain funds that are managed by theGroup. 2.2 Significant accounting judgements and estimates The preparation of these audited financial statements in accordance with IFRSrequires the Directors of the Company to make judgements, estimates andassumptions that affect the reported amounts recognised in the financialstatements. However, uncertainty about these assumptions and estimates couldresult in outcomes that require a material adjustment to the carrying amount ofthe asset or liability in the future. Judgements In the process of applying the Group's accounting policies, management has madethe following judgements which have the most significant effect on the amountsrecognised in the consolidated financial statements. Operating lease commitments - Group as lessor The Group has entered into commercial property leases on its investmentproperty portfolio. The Group has determined, based on evaluation of the termsand conditions of the arrangements, such as the lease term not constituting asubstantial portion of the economic life of the commercial property, that itretains all the significant risks and rewards of ownership of these propertiesand accounts for the contracts as operating leases. Valuation of property The valuations of the Group's investment property are at fair value asdetermined by the external valuer on the basis of market value in accordancewith the internationally accepted Royal Institution of Chartered Surveyors("RICS") Valuation - Professional Standards January 2014 (incorporating theInternational Valuation Standards) and in accordance with IFRS 13. Going concern The Directors have made an assessment of the Group's ability to continue as agoing concern and are satisfied that the Company has the resources to continuein business for the foreseeable future. Furthermore, the Directors are notaware of any material uncertainties that may cast significant doubt upon theCompany's ability to continue as a going concern. Therefore, the financialstatements have been prepared on the going concern basis. 2.3 Summary of significant accounting policies The principal accounting policies applied in the preparation of these financialstatements are set out below. a. Basis of consolidation The consolidated financial statements comprise the financial statements of theGroup and its subsidiaries as at 30 June 2014. Subsidiaries are consolidatedfrom the date of acquisition, being the date on which the Group obtainedcontrol, and will continue to be consolidated until the date that such controlceases. Control comprises the power to govern the financial and operatingpolicies of the investee so as to obtain benefit from its activities and isachieved through direct or indirect ownership of voting rights. In preparingthe financial statements, intra-group balances, transactions and unrealisedgains or losses have been eliminated in full. Uniform accounting policies areadopted in the financial statements for like transactions and events in similarcircumstances. b. Business combinations Where property is acquired, via corporate acquisitions or otherwise, managementconsiders the substance of the assets and activities of the acquired entity indetermining whether the acquisition represents the acquisition of a business. Where such acquisitions are not judged to be an acquisition of a business, theyare not treated as business combinations. Rather, the cost to acquire thecorporate entity is allocated between the identifiable assets and liabilitiesof the entity based on their relative fair values at the acquisition date.Accordingly, no goodwill or additional deferred taxation arises. Otherwise,acquisitions are accounted for as business combinations. Business combinations are accounted for using the acquisition method. The costof an acquisition is measured as the aggregate of the considerationtransferred, measured at acquisition date fair value and the amount of anynon-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controllinginterest in the acquiree either at fair value of the proportionate share of theacquiree's identifiable net assets. Acquisition costs (except for costs ofissue of debt or equity) are expensed in accordance with IFRS 3 BusinessCombinations. When the Group acquires a business, it assesses the financial assets andliabilities assumed for appropriate classification and designation inaccordance with the contractual terms, economic circumstances and pertinentconditions as at the acquisition date. Contingent consideration is deemed to be equity or a liability in accordancewith IAS 32. If the contingent consideration is classified as equity, it is notre-measured and its subsequent settlement shall be accounted for within equity.If the contingent consideration is classified as a liability, subsequentchanges to the fair value are recognised either in profit or loss or as achange to other comprehensive income. c) Functional and presentation currencyThe overall objective of the Group is to generate returns in Sterling and theGroup's performance is evaluated in Sterling. Therefore, the Directors considerSterling as the currency that most faithfully represents the economic effectsof the underlying transactions, events and conditions and have thereforeadopted it as the functional and presentation currency. d) Investment property Investment property comprises property held to earn rental income or forcapital appreciation or both. Investment property is measured initially at costincluding transaction costs. Transaction costs include transfer taxes andprofessional fees to bring the property to the condition necessary for it to becapable of operating. The carrying amount also includes the cost of replacingpart of an existing investment property at the time that cost is incurred ifthe recognition criteria are met. Subsequent to initial recognition, investment property is stated at fair value.Gains or losses arising from changes in the fair values are included in theincome statement in the period in which they arise under IAS 40 Investmentproperty. The determination of the fair value of investment property requires the use ofestimates such as future cash flows from assets (from lettings, tenants'profiles, future revenue streams, capital values of fixtures and fittings,plant and machinery, any environmental matters and the overall repair andcondition of the property) and discount rates applicable to those assets. Gains or losses on the disposal of investment property are determined as thedifference between net disposal proceeds and the carrying value of the asset. e) Investment in subsidiary companies All investments are designated upon initial recognition as held at fair valuethrough profit or loss, and are measured at subsequent reporting dates at fairvalue. In the Company's financial statements, investments in subsidiarycompanies which are 100% owned by the Company are valued at net asset value. Changes in fair value of investments and gains on the sale of investments arerecognised as they arise in the income statement. f) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and short-term deposits with anoriginal maturity of three months or less. g) Rent and other receivables Rent and other receivables are recognised at their original invoiced value.Where the time value of money is material, receivables are carried at amortisedcost. Provision is made when there is objective evidence that the Group willnot be able to recover balances in full. Balances are written off when theprobability of recovery is assessed as being remote. h) Trade and other payables Trade and other payables are initially recognised at fair value andsubsequently held at amortised cost. i) Revenue recognition i) Rental income Rental income receivable under operating leases is recognised on a straight-line basis over the term of the lease, except for contingent rental income which is recognised when it arises. Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if the payments are not made on such a basis. 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 option. (Premiums received to terminate or extend leases are recognised in the statement ofcomprehensive income when they arise). ii) Interest income Interest income is recognised on an effective interest rate basis and shown within the income statement as finance income. iii) Deferred income Deferred income is rental income received in advance during the accounting period. The income is deferred and is unwound to revenue on a straight line basis over the period in which it is earned. iv) Service charge income Service charges are received to cover expenditure on hard and soft facilities management. These are paid to the landlord and then on to the Asset Manager and reimbursed to the Group via the Group's nominations agreement. v) Operating segments All of the Group's revenue and results are generated from student accommodation provision operating in the UK. j) Tenant deposits Tenant deposits received which create corresponding liabilities are initiallyrecognised at fair value and subsequently measured at amortised cost wherematerial. Any difference between the initial fair value and the nominal amountis included as a component of operating lease income and recognised on astraight-line basis over the lease term. k) Taxes Corporation tax is recognised in the income statement except to the extent thatit relates to items recognised directly in equity, in which case it isrecognised in equity. In certain circumstances corporation tax may berecognised in other comprehensive income. As a REIT, the Company is exempt from corporation tax on the profits and gainsfrom its property investment business, provided it continues to meet certainconditions as per REIT regulations. Non-qualifying profits and gains of the Company (the residual business)continue to be subject to corporation tax. Therefore, current tax is theexpected tax payable on the non-qualifying taxable income for the year ifapplicable, using tax rates enacted or substantively enacted at the balancesheet date. l) Interest bearing loans and borrowings All loans and borrowings are initially recognised at cost net of directlyattributable transaction costs. All loans and borrowings are subsequentlymeasured at amortised cost with interest charged to the income statement at theeffective interest rate, and shown within finance costs. m) Dividends to shareholders Dividends due to the Company's shareholders are recognised when they becomepayable. For interim dividends this will be when they are paid and for finaldividends when approved by shareholders. n) Derivatives and hedging The Group uses interest rate swaps to hedge its risks associated with interestrates. Such derivative financial instruments are initially recognised at fairvalue on the date on which a derivative contract is entered into and aresubsequently re-measured at fair value. Derivatives are carried as assets whenthe fair value is positive and as liabilities when the fair value is negative. At the inception of a hedge relationship, the Group formally designates anddocuments the hedge relationship to which the Group wishes to apply hedgeaccounting and the risk management objective and strategy for undertaking thehedge. The documentation includes identification of the hedging instrument, thehedged item or transaction, the nature of the risk being hedged and how theGroup will assess the hedging instrument's effectiveness in offsetting theexposure to changes in the hedged item's fair value or cash flows attributableto the hedged risk. Such hedges are expected to be highly effective inachieving offsetting changes in fair value or cash flows and are assessed on anongoing basis to determine that they actually have been highly effectivethroughout the financial reporting periods for which they were designated. For the purpose of hedge accounting, hedges are classified as cash flow hedgeswhen hedging exposure to variability in cash flows that is either attributableto a particular risk associated with a recognised asset or liability or ahighly probable forecast transaction. The effective portion of the gain or loss on the hedging instrument isrecognised directly in other comprehensive income, while any ineffectiveportion is recognised immediately in profit or loss. Amounts taken to othercomprehensive income are transferred to profit or loss when the hedgedtransaction affects profit or loss, such as when the hedged financial income orfinancial expense is recognised or when a forecast sale occurs. If the forecast transaction or firm commitment is no longer expected to occur,amounts previously recognised in other comprehensive income are transferred toprofit or loss. If the hedging instrument expires or is sold, terminated orexercised without replacement or rollover, or if its designation as a hedge isrevoked, amounts previously recognised in other comprehensive income remain inequity until the forecast transaction or firm commitment occurs. 3. UK investment property Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Acquisitions arising from business combinations 53,550 - Acquisition of property 93,000 93,000 Fair value gains on revaluation of investment 5,010 1,040property Investment property transferred to subsidiary - (94,040)company Valuation at the end of the period 151,560 - The purchase of the property was financed by the payment of cash amounting to£35,221,000 and the novation of an existing loan of £57,779,000. 4. Investments in subsidiary companies Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 At the beginning of the period - - Value of assets transferred down to Subsidiary - 71,534 Purchases of subsidiary companies - 52,444 Total acquisitions - 123,978 Fair value gains on the revaluation of subsidiarycompanies - 5,042 Fair value - 129,020 Purchases of subsidiary companies includes additional incidental purchase costsof £711,000. 5. Revenue The following table analyses rental income received in the period to 30 June2014: Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Nomination rental income 2,360 1,116 Direct let rental income 6,107 2,525 Teaching space income 503 244 Retail space income 35 10 9,005 3,895 Income from subsidiary companies - 566 Sundry income 127 - Total revenue 9,132 4,461 Rental income in the Company relates to income on the property Scape East,received prior to the transfer of the property down to the subsidiary company. 6. Property operating and administration expenses Consolidated Company 30 June 30 June 2014 2014 £'000 £'000Property operating expenses Asset Managers' fees 901 389 Utilities 352 94 Insurance 39 34 Sales and marketing 118 56 Life cycle costs 91 - Payroll 163 - 1,664 573 Administration expenses 1,646 1,466 Total 3,310 2,039 Directors' remuneration for the period to 30 June 2014 is shown in note 10 andis included within administration expenses within the income statement. 7. Finance income Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Income from cash and short term deposits 6 2 Total 6 2 8. Finance expenses Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Bank charges 3 1 Swap interest 578 345 Loan interest 1,080 404 Loan arrangement fees amortised 111 - Swap break fees 646 - 2,418 750 9. Auditor's remuneration Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Audit fee 26 26 Other services 138 138 Total 164 164 The Company reviews the scope and nature of all proposed non-audit servicesbefore engagement, to ensure that the independence and objectivity of theAuditor are safeguarded. The fee for the audit of the annual report andfinancial statements for the period ended 30 June 2014 was £20,000. Anadditional fee of £6,000 was paid in relation to the audit of the initialaccounts for the period ended 30 September 2013. During the period underreview, the Auditor provided non-audit services in relation to the reportingaccountant services for the prospectuses at the time of the Company's launchand the acquisition of Scape Greenwich. The aggregate fees for these serviceswere £130,000. These non-audit fees are significantly higher than the statutoryaudit fees due to the work involved in the Company's IPO and the second capitalraise during the period under review. Ernst & Young LLP also provides routinetax compliance services to the Company. The fee for these services in theperiod under review was £8,300. 10. Directors' remuneration Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Mr Robert Peto 28 28 Mr Malcolm Naish 20 20 Mr Peter Dunscombe 20 20 Total 68 68 11. Staff costs Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Salaries 162 - Other benefits 1 - 163 - With the exception of the Directors, whose remuneration is shown in theDirectors' Remuneration Report, as at 30 June 2014 the Group employed43 members of staff, with an average of 34 employees during the period. 12. Taxation As a REIT, the Group's UK property rental business (both income and capitalgains) is exempt from tax. Any residual income from non-property business issubject to corporation tax at a rate of 22.55%, representing the best estimateof the average annual effective tax rate expected for the full year, applied tothe pre-tax income for the period. No tax charge has arisen on residual incomefor the period 26 February 2013 to 30 June 2014. 13. Operating leases The Group has entered into leases on its property portfolio. Leases aretypically direct-let agreements with individual students or higher educationinstitutions for the academic year or a shorter period. The Group also has asmall number or commercial leases on teaching and retail spaces and a number ofnomination agreements whereby blocks of beds are rented out for a set number ofyears. Future minimum rentals receivable under non-cancellable operating leases as at30 June 2014 are as follows: Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Within one year 7,536 - Between one and five years 5,157 - More than five years 10,411 - Total 23,104 - 14. Dividends 30 June Pence 2014Consolidated and Company per share £'000 For the period ended 30 June 2014 First interim dividend paid on 5 December 2013 2.00 1,403 Second interim dividend paid on 5 March 2014 1.35 946 Third interim dividend paid on 5 June 2014 1.35 946 Dividends paid during the period 4.70 3,295 Fourth interim dividend paid on 5 September 2014 1.40 1,539 Total 6.10 4,834 As a REIT, the Company is required to pay PIDs equal to at least 90% of theGroup's exempted income after deduction of withholding tax at the basic rate(currently 20%). The entire £4.8 million cash dividend payable for the periodfrom 26 February 2013 to 30 June 2014 was attributable to PIDs. 15. Earnings per share Basic earnings per share ("EPS") amounts are calculated by dividing profit forthe period attributable to ordinary shareholders of the Company by the weightedaverage number of ordinary shares during the period. As there are no dilutiveinstruments outstanding, basic and diluted earnings per share are identical. Weighted 30 June average 2014 Profit number of Pence per £'000 shares share Earnings per share Group 7,709 73,425,688 10.50 Earnings per share Company 7,756 73,425,688 10.56 Weighted average number of shares Shares in Weighted issue Days average Issue on admission to trading on the SFMon 20 May 2013 70,100,001 373 64,243,981 Following issue to trading on the SFMon 28 May 2014 109,910,428 34 9,181,707 109,910,428 407 73,425,688 The EPRA EPS may be calculated as: 30 June 2014 £'000 Group Earnings for basic EPS 7,709 Fair value gains on investment properties (5,010) Fair value movement on financial derivatives (47) Associated close out fees on financial derivatives 646 Group Earnings for EPRA EPS 3,298 Pence per share Group EPRA EPS 4.49 16. Net asset value per share (NAV) Basic NAV per share amounts are calculated by dividing net assets in thestatement of financial position attributable to ordinary equity holders of theCompany by the number of ordinary shares outstanding during the period. Asthere are no dilutive instruments outstanding, basic and diluted NAV per shareare identical. The following reflects the net asset and share data used in thebasic and diluted NAV per share computations: Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Net assets attributable to Ordinary shareholders(for calculation of EPRA NNNAV) 112,855 112,855 Financial derivative (47) - Adjusted net assets for calculation of EPRA NAV 112,808 112,855 Number of shares in issue 109,910,428 109,910,428 Pence per Pence per share share EPRA NNNAV 102.68 102.68 EPRA NAV 102.64 N/A 17. Business combinations The financial statements comprise the financial statements of the Company andits subsidiaries, GCP Scape East Limited, GCP Operations Limited, TernionDanehurst Limited and Leopard Guernsey Greenwich JV Limited, for the periodfrom 26 February 2013 to 30 June 2014. All subsidiaries are domiciled in the UK except for Leopard Guernsey GreenwichJV Limited, which is domiciled in Guernsey. Company and Country of Number and Capital and Profit afterbusiness registration, class of reserves at tax for the incorporation share held 30 June period ended and operation by the Group 2014 30 June 2014 Group holding £'000 £'000 GCP Scape East UK 2 Ordinary 100% 76,067 4,533Limited shares Ternion Danehurst UK 2 Ordinary 100% 12,958 1,411Limited shares Leopard Guernsey Guernsey 101 Ordinary 100% 40,162 603Greenwich JV sharesLimited GCP Operations UK 2 Ordinary 100% (167) (167)Limited shares Subsidiaries are fully consolidated from the date of acquisition, being thedate on which the Group obtained control, and will continue to be consolidateduntil the date when such control ceases. The financial statements of thesubsidiaries are prepared for the same reporting period as the parent company,using consistent accounting policies. All intra-group balances, transactions,unrealised gains and losses resulting from intra-group transactions anddistributions are eliminated in full. As at 30 June 2014, the Company owns 100%of the issued share capital of all subsidiaries. GCP Scape East Limited was incorporated on 15 November 2013, with 2 sharesissued to the Company at £1 per share. On 2 December 2013, the Group obtainedcontrol of Ternion Danehurst Limited, by acquiring 100% of the issued sharecapital. On 29 May 2014, the group obtained control of Leopard GuernseyGreenwich JV Limited, by obtaining 100% of the issued share capital. Theprincipal activity of GCP Scape East Limited, Ternion Danehurst Limited andLeopard Guernsey Greenwich JV Limited is the provision of student accommodationin line with the Group's investment strategy. GCP Scape East Limited, TernionDanehurst Limited and Leopard Guernsey Greenwich JV Limited were acquired inorder to provide Group shareholders with sustained long-term distributions withthe potential for modest capital appreciation over the long term and RPIinflation-linked income characteristics. GCP Operations Limited wasincorporated on 26 March 2014 and holds the employment contracts of theemployees engaged in facilities and asset management on behalf of the Company. The fair value of identifiable assets and liabilities of Ternion DanehurstLimited upon acquisition at 2 December 2013 and of Leopard Greenwich GuernseyJV Limited upon acquisition at 29 May 2014 were: Ternion Leopard Greenwich Danehurst Guernsey JV Limited Limited Total £'000 £'000 £'000Assets Investment properties 13,030 40,520 53,550 Trade receivables - 675 675 13,030 41,195 54,225 Liabilities Trade payables - 592 592 Deferred rental income 650 522 1,172 Retention account 82 515 597 Corporation tax provision 125 6 131 857 1,635 2,492 Total identifiable net 12,173 39,560 51,733assets at fair value Purchase consideration 12,173 39,560 51,733 Analysis of cash flows onacquisition: Cash consideration 12,173 39,560 51,733 Less: cash and cash - (1) (1)equivalents acquired 12,173 39,559 51,732 Ternion Danehurst Limited contributed £700,000 to revenue and £545,000 to theGroup's profit for the period between the date of acquisition and the statementof financial position date. Leopard Guernsey Greenwich JV Limited contributed£213,000 to revenue and £154,000 to the Group's profit for the period betweenthe date of acquisition and the statement of financial position date. If thecombinations had taken place at the beginning of the period, the Group's profitfor the period would have been £10,558,000 and revenue (rental income) wouldhave been £11,786,000. Contingent liability As discussed in note 29, as part of the sale and purchase agreement for LeopardGuernsey Greenwich JV Limited, an amount of contingent consideration has beenagreed. An additional cash payment is payable to the previous owners of LeopardGuernsey Greenwich JV Limited of £301,000 provided the property achieves 97%occupancy by 8 September 2014, being the end of the 2013/2014 academic year. As at 30 June 2014, the key performance indicators of Leopard GuernseyGreenwich JV Limited show that it is not probable that the target will beachieved and therefore no liability has been included in the financialstatements. 18. Other payables and accrued expenses Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Deferred income 2,028 - Property operating expenses payable 802 - Finance expense payable 241 - Amounts due to subsidiary companies - 18,756 Other expenses payable 1,169 1,042 Total 4,240 19,798 19. Trade and other receivables Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Prepayments 219 159 Landscaping cost recovery 284 - Rent receivable 434 - Amounts receivable from subsidiary companies - 3,325 Other receivables 378 - Total 1,315 3,484 20. Interest bearing loans and borrowings Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Initial loan transferred on the acquisition of ScapeEast on 20 May 2013 57,779 57,779 Part repayment of initial loan (32,645) (32,645) Loan transferred to subsidiary company - (25,134) Further loan drawn down following acquisition ofTernion Danehurst Limited on 2 December 2013 13,500 - Further loan drawn down following acquisition ofLeopard Guernsey Greenwich JV Limited on 29 May 2014 1,366 - Total loans drawn down 40,000 - Loan arrangement fees (655) - Loan arrangement fees amortised to date 111 - 39,456 - During the period from 26 February 2013 to 30 June 2014, loans were drawn downunder the Group's existing debt facility to the sum of £40 million. An initialloan of £57.7 million was transferred to the company on the acquisition of theproperty Scape East on 20 May 2013 of which £32.6 million was repaid on 23 May2013. An additional loan of £13.5 million was drawn down on 2 December 2013 tofinance the acquisition of Ternion Danehurst Limited and a further loan of£1.4 million was drawn down on 29 May 2014 to cover the costs of acquisition inrelation to Scape Greenwich. The facility is due to be fully repaid on 20 April2019. At 30 June 2014, the interest rate on the loans of £25.1 million and£13.5 million was 3.027% with the interest rate on the loan of £1.4 million being3.004%. The group uses gearing to enhance returns over the long term. The level ofgearing is governed by careful consideration of the cost of borrowing and theGroup uses hedging or otherwise seeks to mitigate the risk of interest rateincreases. Gearing, represented by borrowings as a percentage of gross assets,will not exceed 55% at the time of investment. It is the Directors' currentintention to target gearing of less than 30% of gross assets in the long termand to comply with the REIT condition relating to the ratio between the Group's`property profits' and `property finance costs'. The debt facility includes loan-to-value of and interest cover covenants thatare measured at a Group level and the Group has maintained significant headroomagainst all measures throughout the financial period. The Group is in fullcompliance with all loan covenants at 30 June 2014. 21. Financial derivatives and hedging 30 June Hedged 2014 amount Pay fixed Receive 3M TotalConsolidated only £'000 rate LIBOR Maturity £'000 Interest rate swap atfair value 20,000 1.440% 0.5090% 02/05/2017 47 Fair value of financial derivatives 47 Cash flow hedges The Group has entered into interest rate swap contracts with notional amountsof £20m whereby it pays a fixed rate of interest of 1.440% and receives avariable rate based on 3 month LIBOR on the notional amount. The swap is usedto hedge the exposure to the variable interest rate payments on the variablerate element of the Company's secured loans. Cash flows are expected to occur between the reporting date and May 2017 andwill be recognised through profit or loss at that time. The fair value of the interest rate swap at the end of the reporting period wasan asset of £47,000. Derivatives are classified in Level 2 in the fair value hierarchy under IFRS13. 22. Cash and cash equivalents Consolidated Company 30 June 30 June 2014 2014 £'000 £'000 Cash and cash equivalents 149 149 Subsidiary cash and cash equivalents 3,480 - 3,629 149 23. Share capital 30 June 2014Consolidated and Company £'000 Issued and fully paid: At 26 February 2013 1 ordinary share of £0.01 - Issued during period109,910,427 ordinary shares of £0.01 each 1,099 1,099 The share capital comprises one class of ordinary shares. At general meetingsof the Company, shareholders are entitled to one vote on a show of hands and ona poll, to one vote for every share held. There are no restrictions on the sizeof a shareholding or the transfer of shares, except for the UK REITrestrictions. 24. Share premium 30 June 2014 £'000Consolidated and Company Issued on admission to trading on the SFM and the CISEA on20 May 2013 69,399 Share issue costs at 20 May 2013 (1,921) Share premium cancelled on 31 July 2013 (67,358) Issued on 28 May 2014 41,602 Share issue costs at 28 May 2014 (1,785) Balance at 30 June 2014 39,937 25. Fair value IFRS 13 defines fair value as the price that would be received to sell an assetor paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date. The following methods and assumptionswere used to estimate the fair values. Cash and short-term deposits, trade receivables, trade payables, and othercurrent liabilities approximate their carrying amounts due to the short-termmaturities of these instruments. The fair values of the derivative interest rate swap contracts are estimated bydiscounting expected future cash flows using current market interest ratesyield curves and performance risk over the remaining term of the instrument. Valuation of investment property is performed by Knight Frank LLP, anaccredited external valuer with recognised and relevant professionalqualifications and recent experience of the location and category of theinvestment property being valued, however the valuations are the ultimateresponsibility of the Directors. The valuation of the Company's investment property at fair value is determinedby the external valuer on the basis of market value in accordance with theinternationally accepted RICS Valuation - Professional Standards (incorporatingthe International Valuation Standards). The determination of the fair value of investment property requires the use ofestimates such as future cash flows from assets (such as lettings, tenants'profiles, future revenue streams, capital values of fixtures and fittings,plant and machinery, any environmental matters and the overall repair andcondition of the property) and discount rates applicable to those assets. In the Company's financial statements, investments in subsidiary companieswhich are 100% owned by the Company are valued at net asset value. The following tables shows an analysis of the fair values of financialinstruments recognised in the balance sheet by level of the fair valuehierarchy*: Consolidated 30 June 2014 Level 1 Level 2 Level 3 TotalAssets measured at fair value £'000 £'000 £'000 £'000 Investment properties - - 151,560 151,560 Financial derivatives - 47 - 47 - 47 151,560 151,607 Company 30 June 2014 Level 1 Level 2 Level 3 Total Financial assets at fair value £'000 £'000 £'000 £'000 Investment in subsidiaries - - 129,020 129,020 - - 129,020 129,020 * Explanation of the fair value hierarchy: Level 1 - quoted prices (unadjusted) in active markets for identical assets orliabilities that the entity can access at the measurement date Level 2 - use of a model with inputs (other than quoted prices included inlevel 1) that are directly or indirectly observable market data Level 3 - use of a model with inputs that are not based on observable marketdata Sensitivity analysis to significant changes in unobservable inputs within Level3 of the hierarchy The significant unobservable inputs used in the fair value measurementcategorised within Level 3 of the fair value hierarchy of the Group's portfolioof investment property are: * ERV * Rental growth * Long-term vacancy rate * Discount rate/yield * Specific to property under development: construction costs, lease up period, construction period and development profit Significant increases/(decreases) in the ERV (per sqm p.a.) and rental growthp.a. in isolation would result in a significantly higher/(lower) fair valuemeasurement. Significant increases/(decreases) in the long-term vacancy rateand discount rate (and exit or yield) in isolation would result in asignificantly lower/(higher) fair value measurement. Generally, a change in the assumption made for the ERV (per sqm p.a.) isaccompanied by: * a similar change in the rent growth p.a. and discount rate (and exit yield); and * an opposite change in the long term vacancy rate The following table analyses: * the fair value measurements at the end of the reporting period; * a description of the valuation techniques applied; * the inputs used in the fair value measurement, including the ranges of rent charged to different units within the same building; and * for Level 3 fair value measurements, quantitative information about significant unobservable inputs used in the fair value measurement. Class Fair Value Valuation Key Unobservable Range Technique Inputs Student £151,560,000 Income ERV £180.00-£303.75 per weekProperty Capitalisation Rental Growth 2.5%-3.0% Tenancy Period 51 weeks Sundry Income £100 per bed per annum Facilities £1,800-£1,950 Management Cost per bed per annum Initial Yield 5.79%-6.23% blended (5.34%-7.50%) Gains and losses recorded in profit or loss for recurring fair valuemeasurements categorised within Level 3 of the fair value hierarchy amount to£5,010,000 and are presented in the income statement in line item `fair valuegains on investment properties'. All gains and losses recorded in profit or loss for recurring fair valuemeasurements categorised within Level 3 of the fair value hierarchy areattributable to changes in unrealised gains or losses relating to investmentproperty held at the end of the reporting period. The carrying amount of the Company's assets and liabilities, except forinvestment properties, is considered to be the same as their fair value. 26. Financial risk management objectives and policies The Company's principal financial liabilities, other than derivatives, areloans and borrowings. The main purpose of the Company's loans and borrowings isto finance the acquisition of the Company's property portfolio. The Company hastrade and other receivables, trade and other payables and cash and short-termdeposits that arise directly from its operations. The Company is exposed to market risk, interest rate risk, credit risk andliquidity risk. The Board of Directors review and agree policies for managingeach of these risks which are summarised below. Market risk Market risk is the risk that the fair values of financial instruments willfluctuate because of changes in market prices. The financial instruments heldby the Company are all fixed terms at fixed rates with the floating elementshedged on 50% of total borrowings. The Company's exposure to market risk islimited to the remaining 50% which is not hedged. Interest rate risk Interest rate risk is the risk that the future cash flows of a financialinstrument will fluctuate because of changes in market interest rates. TheCompany's exposure to the risk of changes in market interest rates relatesprimarily to the Company's long-term debt obligations with floating interestrates. To manage its interest rate risk, the Group enters into interest rateswaps to hedge the exposure to floating rate movements. At 30 June 2014, thefloating interest rate receivable on the swap was 0.5090%, whilst the swapinterest payable is fixed at a rate of 1.440%. At 30 June 2014, 50% of theCompany's floating rate borrowings were hedged. With all other factors remaining constant, if interest rates were to increaseby 1%, profit before tax would decrease by £200,000 p.a. due to the increase infinance costs. Credit risk Credit risk is the risk that a counterparty will not meet its obligations undera financial instrument or customer contract, leading to a financial loss. TheGroup is exposed to credit risk from its leasing activities and its financingactivities, including deposits with banks and financial institutions andderivatives. Credit risk is managed by requiring tenants to pay rentals in advance. Thecredit quality of the tenant is assessed based on an extensive credit ratingscorecard at the time of entering into a lease agreement. Outstanding tenants'receivables are regularly monitored. The maximum exposure to credit risk at thereporting date is the carrying value of each class of financial asset. The following table analyses the Group's exposure to credit risk for the periodended 30 June 2014. Consolidated Company 30 June 30 June 2014 2014 Total Total £'000 £'000 Deposit account 956 - Cash and cash equivalents 3,629 149 Financial derivatives 47 - Trade and other receivables 1,315 3,484 5,947 3,633 The deposit account, cash and cash equivalents and the financial derivativesare held with Barclays Bank plc which holds an A credit rating. Liquidity risk Liquidity risk is defined as the risk that the Group will encounter difficultyin meeting obligations associated with financial liabilities that are settledby delivering cash or another financial asset. Exposure to liquidity riskarises because of the possibility that the Group could be required to pay itsliabilities earlier than expected. The Group's objective is to maintain abalance between continuity of funding and flexibility through the use of bankdeposits and loans. The table below summarises the maturity profile of the Group's financialliabilities based on contractual undiscounted payments: Consolidated Less On than 3 3 to 12 1 to 5 OverPeriod ended 30 June 2014 demand months months years 5 years Total £'000 £'000 £'000 £'000 £'000 £'000 Loans - 303 908 44,614 - 45,825 Deferred income - 507 1,521 - - 2,028 Trade and other payables - 1,714 498 - - 2,212 Retention account - - - 956 - 956 - 2,524 2,927 45,570 - 51,021 The disclosed amounts for financial derivatives in the above table are the netundiscounted cash flows. Company Less On than 3 3 to 12 1 to 5 OverPeriod ended 30 June 2014 demand months months years 5 years Total £'000 £'000 £'000 £'000 £'000 £'000 Trade and other payables - 1,042 - - 18,756 19,798 - 1,042 - - 18,756 19,798 27. Capital management The primary objective of the Group's capital management is to ensure that itremains within its quantitative banking covenants and maintains a strong creditrating. No changes were made in the objectives, policies or processes duringthe period. The Group may use gearing to enhance returns over the long term. The level ofgearing will be governed by careful consideration of the cost of borrowing andthe group may use hedging or otherwise seek to mitigate the risk of interestrate increases. Gearing, represented by borrowings as a percentage of grossassets, will not exceed 55% at the time of investment. It is the Directors'current intention to target gearing of less than 30% of gross assets in thelong term and to comply with the REIT condition relating to the ratio betweenthe Group's `property profits' and `property finance costs'. As at the periodend, the Group was operating with a property loan to value of 26.7%. During the period, the Group did not breach any of its loan covenants, nor didit default on any other of its obligations under its loan agreements. 28. Related party transactions As defined by IAS 24 Related Party Disclosures, parties are considered to berelated if one party has the ability to control the other party or exercisesignificant influence over the other party in making financial or operationaldecisions. Subsidiaries GCP Student Living Plc as at 30 June 2014 owns a 100% controlling stake inGCP Scape East Limited, Ternion Danehurst Limited, GCP Operations Limited andLeopard Guernsey Greenwich JV Limited respectively. The table below discloses transactions and balances between the Company andsubsidiary entities. Company 30 June 2014 TotalTransactions during the period £'000 Assets and liabilities transferred to GCP Scape EastLimited 71,533 Income from GCP Scape East Limited 479 Income from Ternion Danehurst Limited 66 Income from Leopard Guernsey Greenwich JV Limited 22 Balances outstanding at the end of the period Receivable from GCP Scape East Limited 479 Receivable from Ternion Danehurst Limited 1,617 Receivable from GCP Operations Limited 22 Receivable from Leopard Guernsey Greenwich JV Limited 1,607 Payable to GCP Scape East Limited (17,833) Payable to Ternion Danehurst Limited (923) Directors The Directors of the Company and subsidiaries are considered to be the keymanagement personnel of the Group. Directors' remuneration for the period from26 February 2013 to 30 June 2014 totalled £68,000 and at 30 June 2014, abalance of £6,000 was outstanding. Further information is given in note 10. Investment Manager The Company is party to an Investment Management Agreement with the InvestmentManager, pursuant to which the Company has appointed the Investment Manager toprovide investment management services relating to the respective assets on aday-to-day basis in accordance with their respective investment objectives andpolicies, subject to the overall supervision and direction of the Board ofDirectors. For its services to the Company, the Investment Manager receives an annual feeat the rate of 1.0% of the net asset value of the Company (or such lesseramount as may be demanded by the Investment Manager at its own absolutediscretion). During the period from 26 February 2013 to 30 June 2014, the Groupincurred £828,550 in respect of investment management fees and expenses ofwhich £214,563 was outstanding at the period end. 29. Group contingent liabilities As part of the sale and purchase agreement for Leopard Guernsey Greenwich JVLimited, an amount of contingent consideration has been agreed. An additionalcash payment is payable to the previous owners of Leopard Guernsey Greenwich JVLimited of £301,000 provided the property achieves 97% occupancy by 8 September2014, being the end of the 2013/2014 academic year. As at 30 June 2014, the key performance indicators of Leopard GuernseyGreenwich JV Limited show that it is not probable that the target will beachieved and therefore no liability for this item has been included in thefinancial statements. 30. Events after the reporting period There were no material events after the reporting period that requiredisclosure in these financial statements. 31. Ultimate controlling party It is the view of the Directors that there is no ultimate controlling party. Annual General Meeting The Company's Annual General Meeting will be held at the offices of WraggeLawrence Graham & Co LLP, 4 More London Riverside, London SE1 2AU on Friday,24 October 2014 at 12.00 noon. The notice of this meeting can be found in the full annual report and financialstatements at www.gcpuk.com/gcp-student-living-plc. Directors Robert Peto (Chairman)Peter DunscombeMalcolm Naish All of the Directors are non-executive and independent of the InvestmentManager. National Storage Mechanism A copy of the annual report and financial statements will be submitted shortlyto the National Storage Mechanism ("NSM") and will be available for inspectionat the NSM, which is situated at www.morningstar.co.uk/uk/NSM. GLOSSARY OF KEY TERMS AIF Alternative Investment Fund AIFM Alternative Investment Fund Manager AIFMD Alternative Investment Fund Managers' Directive Barclays Barclays Bank plc CIL Community Infrastructure Levy CISEA Channel Islands Securities Exchange Authority Limited Company GCP Student Living plc COST OF BORROWING Cost of borrowing expressed as a percentage weighted according to period drawn down CRM Corporate Residential Management Limited - Asset Manager for The Pad DEBT MATURITY Weighted average period to expiry of Group borrowings EPRA European Public Real Estate Association EPRA COST RATIO Total operating costs as a percentage of gross rental income EPRA EARNINGS PER SHARE Recurring earnings from core operational activities excluding movements relating to revaluation of investment properties and interest rate swaps and the related tax effects, divided by the number of shares in issue EPRA NAV PER SHARE EPRA net asset value - includes all property at market value but excludes the mark to market of interest rate swaps EPRA NNNAV PER SHARE As EPRA NAV but includes both debt and interest rate swaps carried at market value FRI Full repairing and insuring GHG Greenhouse gas GROUP GCP Student Living plc HEI Higher Education Institution HMRC HM Revenue & Customs IASB International Accounting Standards Board IFRS International Financial Reporting Standards IPO Initial public offering LOAN-TO-VALUE Net debt expressed as a percentage of net assets excluding net debt NOI Margin Net operating margin expressed as a percentage and calculated as operating profit less property operating costs PID Property Income Distribution PORTFOLIO TOTAL RETURN Unleveraged weighted capital and income return of the investment portfolio weighted by net rental income QMUL Queen Mary University of London REIT Real Estate Investment Trust RHUL Royal Holloway University of London RICS Royal Institution of Chartered Surveyors RPI Retail price index Scape Scape Student Living Limited - Asset Manager for Scape East and Scape Greenwich SFM Specialist Fund Market of the London Stock Exchange SHAREHOLDER TOTAL Share price growth with dividend deemed to beRETURN reinvested on the dividend date UCAS Universities and Colleges Admissions Service UKLA United Kingdom Listing Authority UK Code UK Code of Corporate Governance ENDS Neither the contents of GCP Student Living plc's website nor the contents ofany website accessible from hyperlinks on the website (or any website) isincorporated into, or forms part of, this announcement.