Half Yearly Report

29 September 2015

Secure Income REIT Plc

(the "Company" or the "Group")

Interim results for the six months ended 30 June 2015

Introduction of distribution in 2016 following significant progress with £903 million of new financing and £382 million of asset sales

Secure Income REIT Plc (AIM: SIR), the specialist long term income REIT, today announces its interim results for the six months ended 30 June 2015 and provides an update on activities since the period end.

Highlights:

• New long term financing arrangements in place after 30 June 2015 totalling £903 million:

- reducing interest cost by 23% from 6.8% to 5.2% per annum;

- extending term to maturity from less than two years to nine years on significantly improved terms; and

- facilitating initiation of distribution payments

• Intention to pay distributions commencing in autumn 2016, currently expected to reflect a yield exceeding 4% on 30 June 2015 pro forma EPRA NAV with attractive compound growth prospects ahead of inflation

• Asset sales in the period of £382 million at c. 8% above 31 December 2014 book values, comprising the sales of the freehold of Madame Tussauds in London for £332 million and the New Hall hospital in Salisbury for £50 million

• Pro forma EPRA NAV† of 275.3 pence per share, up 6.5% after incurring early debt repayment costs amounting to 14% of EPRA NAV as at 30 June 2015

• Pro forma loan to value ratio† of 62%, down from 70% at 31 December 2014 and 80% at listing in June 2014

• Portfolio valuation up 6% since 31 December 2014 to £1.3 billion; net initial yield 5.3% and equivalent yield 6.4%

• Weighted average unexpired lease term of 24 years; all rents subject to annual uplifts either at fixed rates or upwards only RPI linked terms

• Passing rent of £76 million as at 30 June 2015, secured entirely against major global multi billion pound quoted businesses

† pro forma figures are adjusted for completion of the sale of Madame Tussauds and the refinancing of the Group's entire debt, which have occurred since the balance sheet date. Pro forma adjustments amounting to a 41 pence per share EPRA NAV reduction are shown in the Investment Adviser's Report.

Martin Moore, Independent Non-Executive Chairman of the Company, commented: "Since the start of the year we have secured over £900 million of new financing that, together with proceeds from selective asset sales, replaces our existing debt in its entirety, resulting in significantly lower leverage and a debt package with lower cost and longer maturity. As of autumn next year we will be in a position to begin making attractive cash distributions, thereby providing early delivery on our IPO objective. We believe that in the current environment there is a shortage of investment opportunities which provide secure and growing income combined with a good prospect of capital preservation. Our portfolio, let to multi-billion pound covenants for an average of over 24 years with annual uplifts in rental, provides a compelling opportunity for investors and we look to the future with confidence."

ENQUIRIES:

Prestbury Investments LLP Tel: 020 7647 7647

Nick Leslau

Mike Brown

Sandy Gumm

FTI Consulting Tel: 020 3727 1000

Richard Sunderland

Stifel Nicolaus Europe (Nominated Adviser and Broker) Tel: 020 7710 7600

David Arch

Tom Yeadon

Notes to Editors

About Secure Income REIT

Secure Income REIT Plc floated as a Real Estate Investment Trust on the AIM segment of the London Stock Exchange in June 2014. Upon Admission, the Company had a share price of 174p, representing a market capitalisation of £293 million, which has subsequently grown to c. £450 million.

The Company specialises in generating long term, inflation protected, secure income from real estate investments. Its investment strategy is designed to satisfy investors' growing requirements for high quality, safe, inflation protected income flows.

In its unaudited interim results for the six months ended 30 June 2015 the Company reported gross assets of £1.3 billion and, with a weighted average unexpired lease term of 24 years across its portfolio, all with annual fixed or RPI rental uplifts, the Company has one of the longest income profiles in the quoted property sector.

The Company's Board is chaired by Martin Moore and comprises three further independent Directors in Leslie Ferrar, Jonathan Lane and Ian Marcus, as well as three members of the Prestbury team in Nick Leslau, Mike Brown and Sandy Gumm.

The Company is externally managed by Prestbury Investments LLP which was also external manager to Max Property Group Plc until August 2014, when it was sold to Blackstone Group.

Forward looking statements

This document includes forward looking statements which are subject to risks and uncertainties. You are cautioned that forward looking statements are not guarantees of future performance and that if risks and uncertainties materialise, or if the assumptions underlying any of these statements prove incorrect, the actual results of operations and financial condition of the Group may differ materially from those made in, or suggested by, the forward looking statements. Other than in accordance with its legal or regulatory obligations, the Company undertakes no obligation to review, update or confirm expectations or estimates or to release publicly any revisions to any forward looking statements to reflect events that occur or circumstances that arise after the date of this document.

Chairman's Statement

Dear shareholder,

During 2015 we have made significant progress at Secure Income REIT through a combination of selective disposals and a complete debt refinancing, which have together reduced the Group's leverage and cost of debt. These two initiatives have helped transform Secure Income REIT into a company which is in a position to begin making cash distributions as of autumn next year, thereby delivering on our objective at listing of creating a company which offers investors a growing distribution derived from a portfolio of high quality assets generating long term income from exceptionally strong tenants.

The two sales during the period were the freehold of Madame Tussauds in London, which was sold for £332.4 million reflecting a net initial yield of 4.5%, and New Hall hospital in Salisbury, which was sold for £49.8 million reflecting a net initial yield of 5.3%. The sale prices achieved were 8% above December 2014 book values and represented an important step on the way to securing new financing and positioning the Company to become a distribution paying REIT.

In August and September we secured over £900 million of new financing, completely replacing our original debt, extending our weighted average term to maturity by over seven years to nine years, and reducing our annual interest cost by 155 basis points, or 23%, down to 5.2%.

These initiatives place the Company in a position to begin making cash distributions commencing with an interim payment in autumn 2016, and targeting an annual payout which would equate to a distribution yield in excess of 4% based on our 30 June 2015 pro forma EPRA NAV of 275.3 pence per share. Given that every property in our current portfolio has the benefit of an annual RPI review or fixed increases in rent, distributions should be able to grow above the currently forecast level of inflation at an attractive rate.

The Board is now actively engaged with the Company's six major shareholders to discuss how best to widen the investor base. This would create more liquidity in the shares, ensure that the Company is better placed for expansion when the time is right, and enable it to continue to qualify under UK REIT rules.

Results and financial position

The pro forma EPRA NAV, adjusted for completion of the sale of Madame Tussauds and the refinancing of all of the Group's debt, both of which have occurred since the balance sheet date, is 275.3 pence per share, which represents a 6.5% increase since 31 December 2014.

Adjusted EPRA EPS for the six months to 30 June 2015 was 3.4 pence per share compared to 6.7 pence per share for the nine months to 31 December 2014 (with the 2014 comparative period including two months prior to listing).

In the six months to the end of June 2015, the portfolio valuation rose by 6% to £1.3 billion, showing a net initial yield of 5.3% and an equivalent yield of 6.4%. The Group enjoys an exceptional level of income security with financially strong covenants and a weighted average unexpired lease term of over 24 years. 58% of our rent roll is guaranteed by Ramsay Health Care Limited, listed on the Australian Stock Exchange with a market capitalisation of £5.6 billion and one of the five largest private hospital groups in the world. A further 39% of rents are guaranteed by Merlin Entertainments Plc, a FTSE 100 constituent with a market capitalisation of £3.8 billion, the largest operator of visitor attractions in Europe and the second largest in the world. The remainder of our rent roll is guaranteed by Orpea SA, the European leader in dependency care, listed on Euronext Paris with a market capitalisation of £3.1 billion.

As important as the security of income is its potential to grow. Two thirds of our rent roll is subject to annual fixed uplifts (ranging from 2.75% to 3.34%) and the remaining third is subject to annual RPI upward only reviews. This combination of long and safe income duration with rising rents is not only well sought after in the current market but proved highly resilient in difficult economic circumstances, with the portfolio showing an unlevered total return some 6.5% per annum higher than the IPD UK Quarterly Index during its period of private ownership from purchase in mid-2007 to listing in 2014. Such resilience is a comfort at a time of increased economic uncertainty.

Outlook

We have seen elevated levels of stock market volatility in recent weeks with the FTSE 100 now down 7% over the last two years. Fixed interest investments have fared better overall but offer meagre levels of income return with yields ranging from 0.6% in Germany to 2.2% in the US for government bonds of 10 year maturity. Those seeking inflation protection need to pay heavily with index linked gilts yielding minus 0.8%. At such historically low levels of yields, bonds are particularly vulnerable to falls in value should interest rates normalise, QE programmes unwind or investors take fright at the growing level of government indebtedness. In the meantime, UK interest rates have sat for more than six years at their lowest ever level since the Bank of England's inception in 1694.

This presents a challenging environment for investors with a shortage of investment opportunities able to provide a reasonable level of secure and growing income combined with a good prospect of capital preservation. However, the Group's portfolio provides exactly this and, following the asset sales and the refinancing, the Group is now in a strong position to commence distributions next autumn and the Board views the future with confidence.

Martin Moore

Chairman

29 September 2015

Investment Adviser's Report

Prestbury Investments LLP is the investment adviser to Secure Income REIT Plc and is pleased to report on the operations of the Group for the six months ended 30 June 2015.

Given the significance of the asset sales and refinancing completed after the period end, we have addressed these matters first before turning to a review of the underlying portfolio.

Pro forma adjustments for Madame Tussauds sale and new financing

Since 30 June 2015, the sale of Madame Tussauds London has completed and the Group's entire debt portfolio has been refinanced with three new long term, fixed rate, non-recourse facilities.

The sale of Madame Tussauds exchanged unconditionally prior to the balance sheet date so the results for the six months ended 30 June 2015 include the profit realised on sale of £20.8 million over the 31 December 2014 book value. The £332.4 million sale consideration, which was received on 25 August 2015, is shown on the balance sheet as a receivable.

As the new financing arrangements and the completion of the sale of Madame Tussauds, together with the associated debt repayment and interest rate swap termination, occurred after the balance sheet date, these transactions cannot be reflected in the results for the six months ended 30 June 2015. As they are material transactions, however, we have shown below the relevant adjustments to present a pro forma EPRA NAV in order to provide a better understanding of the current financial position of the Group.

The adjustment for the sale of Madame Tussauds reflects receipt of the cash consideration and payment of the costs of sale. The net proceeds received were applied in part to debt repayment and associated interest rate swap breakage costs which are reflected within the "completed financing and debt repayment" adjustment.

The new financing arrangements comprise three separate ring-fenced facilities in order to provide a spread of risk and to achieve improved financing terms. The "completed financing and debt repayment" adjustment includes the completion of the two new secured loans announced on 9 September 2015. The "committed financing and debt repayment" represents a secured loan entered into on 25 September 2015, which is expected to be drawn on 2 October 2015 subject to satisfaction of customary drawdown conditions. The impact of these transactions on the Group includes:

· weighted average cost of debt reduced from 6.8% to 5.2% per annum;

· weighted average term to maturity increased from under two years to nine years;

· term to first debt expiry increased from under two years to seven years; and

· while there remains some scheduled amortisation there are no full cash sweeps, freeing up cash flow to service distributions

As noted in the Chairman's Statement in the Group's results announcement on 12 March 2015, any acceleration of repayment of the loan facilities previously in place results in costs arising from the early debt repayment, including on termination of the relevant interest rate swaps. The sales of New Hall hospital and Madame Tussauds between them resulted in the early repayment of £252.8 million of debt and £22.2 million of swap termination costs. The three new loan facilities will result in the repayment of the balance of £897.3 million of the existing facilities and the payment of swap break and other loan costs expected to amount to £80.5 million. This includes an estimated £22.3 million of break costs that will not crystallise until the last of the three facilities is drawn, which is expected to be on 2 October 2015. However, prior to embarking on the early debt repayments, the Board first sought agreement with the previous lender, Bank of Scotland Plc, to share the early termination costs, mindful of the benefits to the lender of early repayment. Consequently, the early termination costs have been reduced by a total of £27.5 million to a net £75.2 million.

The net early termination costs will be reported within the Group's financing costs for the year ended 31 December 2015. As the balance sheet already records interest rate derivatives at their market values, there is a minimal impact on the reported net asset value as a result of the swap terminations, but the Group's EPRA NAV is reduced by £77.4 million or 43 pence per share, being those early termination costs net of deferred tax and other finance fees written off.

The early repayment of debt and its replacement with lower cost, longer term financing has transformed the Group's overall cost of debt, saving an estimated £14.0 million in annual interest costs on the £902.6 million of debt in place under the new financing arrangements.

Each new facility is self-contained, with no cross default provisions between them, and the key terms are as follows:

* comprising a £316.8 million sterling loan secured on the UK assets and a €71.8 million Euro denominated loan secured on the German assets (translated at the actual rate of £1: €0.6992 at the date of drawdown) with the two loans cross-collateralised.

Each facility has been designed so that if the breach of any financial covenant could result in a default or cash trap, there are currently appropriate levels of headroom over those covenants. Cure rights, including the injection of cash or acceptable property assets into the borrowing structure, also exist to allow remedial action to be taken if possible.

The loans are subject to minimum interest cover levels. The extent to which financial covenants are tested varies across the portfolios, with the aim of protecting the Group as far as possible from movements in investment property valuations which are not related to changes in the rental cash flows. By value 35% of the Group's new £902.6 million debt is subject to annual LTV tests, with a further 24% not tested for LTV until September 2019 and the remaining 41% not subject to any LTV default covenant throughout the loan term. There are, however, LTV levels which would trigger a cash trap in 76% of the loans by value.

The portfolio

The portfolio comprises 26 properties with secure, long term income and contractual uplifts derived from tenants whose businesses offer global spread and have performed very well over many years, demonstrating their strong defensive qualities.

Healthcare assets (62% of portfolio value)

The healthcare assets comprise 20 freehold private hospitals located throughout England, 19 of which are let to a subsidiary of Ramsay Health Care Limited, the listed Australian healthcare company, and the other to a subsidiary of Groupe Sinoue, a French company specialising in mental health. The hospitals let to Ramsay comprise 96% of the healthcare assets' passing rent and 95% of their fair value.

The Ramsay hospitals are let on full repairing and insuring leases with a term to expiry at 30 June 2015 of 21.9 years without break. The rent increases by a fixed 2.75% per annum throughout the lease term in May each year, except in 2017 when it is increased to the higher of a 2.75% uplift and 57.525% of site earnings before interest, tax, depreciation, amortisation, rent and head office costs, and every fifth year thereafter when it is increased to the higher of a 2.75% uplift and open market value. The rent from the Ramsay hospitals is currently £44.4 million per annum.

The leases on the Ramsay hospitals are all guaranteed by Ramsay Health Care Limited, Australia's largest hospital operator, one of the top five private hospital operators in the world and a constituent of the ASX 50 index of Australia's largest companies, with a market capitalisation at 25 September 2015 of £5.6 billion.

The tenant's rental obligations with regard to the central London psychiatric hospital in Lisson Grove are guaranteed by Orpea SA, the parent company of the Orpea Group, a leading European operator of nursing homes, post-acute care and psychiatric care, listed on Euronext Paris with a market capitalisation at 25 September 2015 of £3.1 billion. Orpea owns 45% of Group Sinoue.

With a current rent of £1.9 million per annum, the Lisson Grove hospital accounts for 2% of the Group's passing rent, and represents 3% of the gross property assets. The rent increases in May each year by 3%. A reversionary lease will take effect on expiry of the existing lease in May 2037 and extend the term by a further seven years, with fixed rental increases of 3% per annum throughout this extended term.

Total healthcare passing rent is currently £46.3 million per annum and will rise to £47.6 million on 3 May 2016.

Leisure assets (38% of portfolio value)

The leisure assets comprise four well known visitor attractions and two hotels, located in England and Germany. The properties are all let to subsidiaries of Merlin Entertainments Plc, the guarantor of the leases. Merlin is a FTSE 100 company with a market capitalisation at 25 September 2015 of £3.8 billion. Measured by the number of visitors, it is Europe's largest and the world's second largest operator of leisure attractions.

The UK leisure assets are:

· Alton Towers theme park and the Alton Towers hotel

· Thorpe Park theme park

· Warwick Castle

In addition the leisure portfolio includes two German assets: Heide Park theme park and the Heide Park hotel, both located in Soltau, Saxony. The German assets, which generate Euro denominated rents, make up 15% of the leisure portfolio passing rent and 6% of the total Group rent.

Across the leisure portfolio the visitor attractions account for 83% of the passing rent and fair value, with hotels making up the balance.

The average unexpired lease term of the leisure assets as at 30 June 2015 is 27.0 years and the tenants have the right to renew these leases for 35 years at the end of the current and next term. The leases are full repairing and insuring leases and there are no break options. There are upwards only uncapped RPI-linked rent reviews every June throughout the term for the UK leisure portfolio and fixed annual increases of 3.34% every July throughout the term for the German properties. The 2015 rent reviews resulted in an increase of 0.9% in the RPI-linked rents of the UK leisure assets, meaning the total rent as at 30 June 2015 was £29.7 million per annum including £4.6 million of Euro denominated German rents (translated at the 30 June 2015 rate of £1: €0.7083), which increased to £4.7 million in July 2015. The next UK rent reviews will be on 24 June 2016 and the German rents will rise to £4.9 million on 29 July 2016 (translated at the 30 June 2015 rate).

Portfolio valuation yields at 30 June 2015

Portfolio valuation by location

* adjusted for sales in the period to exclude sold assets from comparative figures.

Portfolio valuation uplift in the period

The healthcare valuation yields include the effect of the fixed rental uplifts in May 2015 and reflect a weighted average net initial yield of 5.2% compared to 5.5% at 31 December 2014.

The UK leisure valuation yields include the effect of the 0.9% RPI linked rental uplifts in June 2015 and reflect a weighted average net initial yield of 5.4% compared to 5.5% at 31 December 2014.

The German leisure valuation yields include the effect of the fixed rental uplifts in July 2015 in the weighted average net initial yield, which was 6.0% at 30 June 2015 compared to 6.5% at 31 December 2014, but reduces to 6.3% once the impact of the fixed rental uplift which took effect in July is taken into account. Adverse currency translation movements in the period to 30 June 2015, reflecting the strength of Sterling against the Euro, have more than offset the resulting uplift in the German assets.

Property sales in the period

Ramsay's New Hall Hospital in Salisbury was sold in March 2015 for £49.8 million, which represented a net initial yield of 5.3% and a sale price £3.8 million (8.3%) above its 31 December 2014 valuation. The sale completed in May 2015 and the net proceeds of £48.8 million were used in part repayment of secured bank loans and hedging break costs. The impact of this sale and the associated debt repayment is fully reflected in the results and balance sheet reported in these financial statements.

Madame Tussauds London was sold in May 2015 for £332.4 million, which represented a net initial yield of 4.5% and a sale price £23.0 million (7.4%) above its 31 December 2014 valuation. The sale completed in August 2015, with the net cash proceeds applied in partial repayment of the secured bank debt, with surplus cash adding to the Group's cash resources. The profit on disposal is reflected in the income statement in these financial statements, while the completion of the sale and associated debt repayment is included in the pro forma adjustments shown at the start of this report.

Financial review

EPRA NAV per share

The principal financial outcome that the Board seeks to achieve is attractive growth in shareholder returns. Progress towards this objective is specifically measured through growth in EPRA NAV plus any distributions paid. EPRA NAV is a measure of the fair value of a property company on a long term basis, ignoring the impact of hedging valuations and any deferred tax.

The refinancing, which became fully committed on 25 September 2015, has had a material and positive effect on the Group's capital structure and a transformational effect on its cash flows. As reported in the Chairman's Statement, the various new loan agreements were entered into after the balance sheet date, and it is therefore not permitted to reflect the impact of the refinancing in the financial statements themselves. However, so as to present a more up to date representation of the financial position of the Group, we focus in this Investment Adviser's report on pro forma results and net assets, adjusted for the impact of the refinancing and completion of the sale of Madame Tussauds, details of which are more fully explained at the start of the report.

The pro forma EPRA NAV is 275.3 pence per share, which represents a 6.5% increase since 31 December 2014.

Adjusted EPRA earnings per share

In order to monitor the Group's recurring profitability and its ability to make distributions, the Board uses the Group's adjusted EPRA earnings per share ("EPRA EPS") as a key performance indicator. EPRA EPS excludes investment property revaluations, fair value movements and early termination costs in interest rate derivatives, and the relevant deferred tax to give a measure of underlying earnings from core operating activities.

An adjusted EPRA EPS is also presented, excluding any performance fee as that is largely derived from investment property revaluations, and non-recurring costs including the reorganisation and listing costs incurred in 2014, as the Board believes this enables a more consistent comparison of underlying recurring earnings.

The net finance costs for the period to 30 June 2015 reflect the debt structure in place prior to the new financing arrangements which were committed in August and September 2015. The impact of the refinancing includes a reduction in the weighted average cost of debt from 6.8% per annum to 5.2% per annum. The annualised reduction in the net finance costs of the Group from the £902.6 million of debt in place following drawing of all the new facilities would be £14.0 million, adding 7.7 pence per share in adjusted EPRA EPS. This would, however, be partially offset by a reduction in net contribution (rental income less interest, also on an annualised basis) from the sold properties of £0.9 million or 0.5 pence per share.

Income statement

The rental income profile and the credit strengths of the businesses paying the rent are disclosed in the Portfolio section of this report, along with details of the investment property revaluations and the profit on sale of investment properties.

Rental income includes accounting adjustments for the "smoothing" of rents arising from fixed uplifts so as to record the income arising on a straight line basis. The impact of this accounting treatment is to reflect a receivable, included in the book value of investment properties, for the amount of rent included in the income statement in advance of actual cash receipts. This receivable increases over the first half of each lease term then unwinds, reducing to zero over the second half of each lease term. The impact over time for each of the rental income flows subject to smoothing is as follows:

* at the period end Euro conversion rate of £1 : €0.7083

So that the rent smoothing receivable does not, in combination with the book value of the investment properties, overstate the value of the property portfolio, any movement in the rent smoothing receivable is offset against property revaluation movements. As a result, this adjustment affects only the income statement presentation and does not change the Group's net assets. The amount of rent receivable included in the income statement for the period in advance of cash receipt as a result of this adjustment amounted to £6.8 million or 3.7 pence per share.

Administrative expenses charged to the income statement for the period comprise advisory fees of £3.3 million, other administrative expenses of £0.4 million and corporate costs of £0.3 million.

Advisory fees are payable to the Investment Adviser under an agreement entered into prior to listing by which it is entitled to receive cash fees based on a sliding scale relative to the Group's EPRA NAV, payable at 1.25% per annum on EPRA NAV up to £500 million, 1.0% per annum on EPRA NAV from £500 million to £1,000 million and 0.75% thereafter. Until July 2016, cash required to satisfy this advisory fee is recovered from the pre-listing shareholders of the Company up to a maximum of £5.3 million per annum. During the period the £2.5 million cash required to fund advisory fee payments was met by those shareholders.

Corporate costs are those costs necessarily incurred as a result of the Company being listed and comprise:

· the cost of the board of seven Directors, four of whom received fees totalling £0.1 million in the period. The other three Directors are partners in the Investment Adviser and receive no remuneration from the Company; and

· other costs of being listed, including broker/nominated adviser fees and registrar fees, which amounted to £0.2 million in the period.

Tax

The Group operates under the UK REIT regime, so its UK rental operations are exempt from UK corporation tax, subject to the Group's continuing compliance with the UK REIT rules. The Group is otherwise subject to UK corporation tax.

In the event that a UK REIT has financing costs arising on its UK rental business that are not covered at least 1.25 times by profits, tax is payable at the UK corporation tax rate on the interest over that level, up to a cap of 20% of taxable profit. In the period the Group incurred a current tax charge of £0.3 million on such excess interest. The drawdown of all of the new financing facilities is expected to result in this interest cover test being met from the date of closing the last of the three new loan agreements, so this tax cost is expected to reduce to zero from the 2016 financial year.

Realised profits from the Group's German rental operations are taxable in Germany, in respect of which a tax credit of £0.1 million arose in the period following the conclusion of a tax audit relating to the years between 2007 and 2012. This will result in a net repayment of tax to the Group totalling £0.2 million, of which £0.1 million had been received by 30 June 2015.

As the Group's German operations are subject to tax, the results include a deferred tax liability of £5.4 million relating to unrealised German capital gains tax on the investment properties and a deferred tax asset of £0.5 million relating to the Group's Euro interest rate swaps. Following the refinancing of the Euro loan facility and the termination of the relevant swaps after the balance sheet date, this deferred tax asset has been written off and is therefore adjusted in calculating the pro forma EPRA NAV.

Cash flow

The movement in cash over the period comprises:

All investment properties are let on full repairing and insuring terms, with each tenant obliged to keep the premises in good and substantial repair and condition, including rebuilding, reinstating, renewing or replacing the premises where necessary. Consequently it is not expected that material capital expenditure will be required for the current portfolio.

Secured cash is held in bank accounts under the control of the lenders. Free cash held within the secured portfolio structures is available to be applied for general corporate purposes for as long as there is no default under the relevant loan agreement. Free cash held outside the secured portfolio structures would not be at risk in the event of any default and amounted to £10.3 million at 30 June 2015 and £48.5 million on a pro forma basis adjusted for the completion of the Madame Tussauds sale and the new financing arrangements.

Nick Leslau

Chairman, Prestbury Investments LLP

29 September 2015

Group Income Statement

All amounts relate to continuing activities.

The notes form part of this interim report.

Group Statement of Other Comprehensive Income

The notes form part of this interim report.

Group Statement of Changes in Equity

The notes form part of this interim report.

Group Balance Sheet

The notes form part of this interim report.

Group Cash Flow Statement

The notes form part of this interim report.

Notes to the Interim Report

 1. General information about the Group

The financial information set out in this report covers the six month period to 30 June 2015, with comparative amounts relating to the nine month period to 31 December 2014 and the three month period to 30 June 2014, and includes the results and net assets of the Company and its subsidiaries, together referred to as the Group.

The Company is incorporated in the United Kingdom. The address of the registered office and principal place of business is Cavendish House, 18 Cavendish Square, London, W1G 0PJ.

The Company was listed on AIM on 5 June 2014. Further information about the Group can be found on its website, www.SecureIncomeREIT.co.uk.

 2. Basis of preparation and accounting policies

Prior to 21 May 2014, the Company and SIR Hospital Holdings Limited (the holding company of the Group that owns the healthcare assets) were entities under common control but did not form a single legal group. On 21 May 2014, by virtue of a reorganisation, the groups headed by these two companies became a legal group headed by the Company. This reorganisation was deemed to be a "combination under common control" and as a result is outside the scope of IFRS 3 "Business Combinations". As such it was considered appropriate that the principles of merger accounting, as set out under UK GAAP, were used to account for the reorganisation and these entities are treated as if they had always been part of a single group. No fair value adjustments were required.

Accordingly, although these entities did not form a legal group for the whole of the comparative period reported herein, the comparative figures comprise the net assets of all entities as if the subsequently formed legal group had been in existence throughout all of the periods reported on. In particular:

· earnings per share figures (including diluted, EPRA and adjusted EPRA EPS) have been calculated on the assumption that the capitalisation of shareholder loans which occurred in May 2014 had been in place throughout the whole period from 1 April 2014, with a corresponding effect on earnings and number of shares used in the EPS calculations (see note 7); and

· NAV per share figures (including adjusted basic, diluted and EPRA NAV) have been calculated on the assumption that the capitalisation of shareholder loans had been in place throughout the whole period from 1 April 2014 with a corresponding effect on the number of shares used in the NAV per share calculations (see note 17).

Except for the above EPS and NAV matters, the financial information contained in this report has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union, and on a going concern basis. The accounting policies adopted in this report are consistent with those applied in the Group's statutory accounts for the period ended 31 December 2014 and are expected to be consistently applied in the year to 31 December 2015.

Euro denominated results for the German assets have been converted to Sterling at an average exchange rate for the period of £1: €0.7326 and period end balances converted to Sterling at the 30 June 2015 exchange rate of £1: €0.7083.

The condensed financial statements for the period are unaudited and do not constitute statutory accounts for the purposes of the Companies Act 2006. The annual report and financial statements for 2014 have been filed with Companies House. The independent auditor's report on the annual report and financial statements for 2014 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under sections 498 (2) or 498 (3) of the Companies Act 2006.

The Group's financial performance is not subject to material seasonal fluctuations.

3. Operating segments

IFRS 8 "Operating Segments" requires operating segments to be identified on the basis of internal reports about components of the Group that are reviewed by the chief operating decision maker to make decisions about resources to be allocated between segments and assess their performance. The Group's chief operating decision maker is considered to be the Board as a whole.

The Group owns two property portfolios. Although these are described individually within the Investment Adviser's report, the Board receives quarterly management accounts prepared on a basis which aggregates the performance of the portfolios and focuses on total returns on shareholders' equity. The Board has therefore concluded that the Group has operated in and was managed as one business segment, being property investment, in both the current and prior periods.

The geographical split of revenue and applicable non-current assets required by IFRS 8 was as follows:

Revenue, which reflects the impact of rent smoothing adjustments, includes £28.1 million (nine months to 31 December 2014: £42.9 million; three months to 30 June 2014: £14.4 million) relating to the Group's largest tenant, and £23.6 million (nine months to 31 December 2014: £35.8 million; three months to 30 June 2014: £11.8 million) relating to the Group's second largest tenant. No other single tenant or guarantor contributed more than 10% of the Group's revenue in any reporting period.

 4. Finance costs

On issue in 2007, interest free shareholder loans were measured at fair value using imputed interest rates of between 11.2% and 11.7%. The difference between the fair value of the loans on inception and their face values at that date was being unwound over the minimum term of the loans prior to their capitalisation in May 2014.

 5. Profit on sale of investment properties

The profit on sale of investment properties arose as follows:

As described in note 19, £332.4 million of sale proceeds, shown as investment property sale proceeds receivable on the balance sheet, were received after the balance sheet date in August 2015.

 6. Tax

The tax assessed for the period varies from the standard rate of corporation tax in the UK applied to the profit before tax. The differences are explained below:

The Group elected into the UK REIT regime with effect from 5 June 2014. Subject to continuing compliance with certain rules, the UK REIT rules exempt the profits of the Group's UK property rental business from corporation tax. Gains on the Group's UK properties are also exempt from tax, provided they are not held for trading or sold in the three years after completion of development.

To remain a UK REIT, there are a number of conditions to be met in respect of the Group's principal company, Secure Income REIT Plc, the Group's qualifying activity and the Group's balance of business. Since entering the UK REIT regime the Group has continued to meet these conditions with the exception of one condition where a grace period of three years from entry into the UK REIT regime applies. The relevant rule requires that the company must not be a close company. The Company was a close company when it entered the UK REIT regime, and continues to be so but has until 4 June 2017 to comply. The Board intends, in the course of implementing its investment strategy, to issue new shares or to place sufficient of the existing shares to new investors (or a combination of both) so that the shares of the Company are widely enough held to meet this requirement by 4 June 2017 and hence avoid expulsion from the UK REIT regime at that time.

Furthermore, one of the ongoing REIT tests is an interest cover test requires the profits of the tax exempt business of the Group to be at least 1.25 times its cost of financing. If this condition is not met, the Company remains within the UK REIT regime but is required to pay UK corporation tax on an amount equivalent to the excess interest costs or 20% of the tax exempt business profits if that is less. The Group has not met this test throughout the period, so tax of £0.3 million (nine months to 31 December 2014: £0.7 million; three months to 30 June 2014: £0.2 million) is payable. Following the refinancing described in note 19, the interest cover test is expected to be met and therefore no such tax is expected to be payable commencing from the 2016 financial year.

The Group is subject to German corporation tax on its German property rental business at an effective rate of 21%. During the period, however, a net German tax credit of £0.1 million has arisen following the conclusion of a tax audit relating to the years between 2007 and 2012, which is expected to result in a net repayment of tax totalling £0.4 million to the Group of which £0.3 million had been received by 30 June 2015. In addition, a deferred tax liability is recognised for the German capital gains tax that would potentially be payable on the sale of the relevant investment properties, and a deferred tax asset is recognised against the interest rate derivatives hedging the loan facility secured on those properties (see note 11).

 7. Earnings per share

Earnings per share is calculated as profit attributable to ordinary shareholders of the Company for each period divided by the weighted average number of ordinary shares in issue throughout the relevant period.

On 21 May 2014, by virtue of a reorganisation, the Company and SIR Hospital Holdings Limited (the "Combined Companies") became a legal group. Until 20 May 2014, the Combined Companies were entities under common control. It is considered that the use of the actual number of shares of the Combined Companies in issue prior to 21 May 2014 as a denominator in the EPS calculation would not provide meaningful information. Instead, the weighted average number of shares in issue has been determined based on the number of shares that would have been in issue in those comparative periods had the shareholder loans been capitalised on the basis of one share for each £1 of shareholder loans at the time they were advanced. The profit attributable to the shareholders of the Combined Companies prior to 20 May 2014 has also been adjusted to remove the impact of the amount included in finance costs in respect of shareholder loans together with the related deferred tax.

Diluted EPS reflects shares to be issued in settlement of any performance fees that arose in the relevant period.

The European Public Real Estate Association ("EPRA") publishes guidelines for calculating adjusted earnings designed to represent core operational activities. As well as the standard EPRA earnings figure, an adjusted EPRA earnings calculation has also been presented, excluding any performance fee, which is largely derived from investment property revaluations, and the non-recurring costs of the reorganisation and listing. The Directors consider this enables a more consistent comparison of underlying earnings. Since no performance fee has arisen in the period, no adjustment is required as at 30 June 2015.

 8. Investment properties

The properties were independently valued at £1,346.9 million as at 30 June 2015 (31 December 2014: £1,625.4 million; 30 June 2014: £1,471.8 million) by CBRE Limited, Commercial Real Estate Advisors, in their capacity as external valuers. The valuation was prepared on a fixed fee basis, independent of the portfolio value and was undertaken in accordance with RICS Valuation - Professional Standards January 2014 on the basis of fair value, supported by reference to market evidence of transaction prices for similar properties.

Included within the carrying value of investment properties at 30 June 2015 is £153.7 million (31 December 2014: £154.4 million; 30 June 2014: £146.5 million) in respect of the smoothing of fixed contractual rental uplifts. This balance arises through the Group's accounting policy in respect of leases, which requires the recognition of rental income on a straight line basis over the lease term in certain circumstances, including for the 67% of passing rent which increases by a fixed percentage each year. The difference between rents on a straight line basis and rents actually receivable are included within, but do not increase, the carrying value of investment properties.

All of the investment properties are held as security under fixed charges in respect of secured bank borrowings. The historic cost of the Group's investment properties as at 30 June 2015 was £1,053.9 million (31 December 2014 and 30 June 2014: £1,315.1 million).

The Board determines the Group's valuation policies and procedures, and is responsible for overseeing the valuations. Valuations are based on information provided from the Group's financial and property reporting systems, such as current rents and the terms and conditions of lease agreements, and assumptions used by the valuer (based on market observation and their professional judgement) in the valuation model.

At each reporting date, certain partners and employees of the Investment Adviser, who have recognised professional qualifications and are experienced in valuing the types of property owned by the Group, initially analyse movements in the property valuations from the prior reporting date. Fair value changes (positive or negative) over a certain threshold are considered. Changes in fair value are also compared to appropriate external sources for reasonableness. Once the Investment Adviser has considered the valuations, the results are discussed with the Group's independent auditors, focusing on properties with unexpected fair value changes and, if applicable, properties undergoing significant refurbishment. The Audit Committee also considers the valuation process as part of its overall responsibilities.

The fair value of the investment property portfolio has been determined using an income capitalisation technique, whereby contracted and market rental values are capitalised with a market capitalisation rate. This technique is consistent with the principles in IFRS 13 and uses significant unobservable inputs, such that the fair value measurement of each property within the portfolio has been classified as level 3 in the fair value hierarchy as defined in IFRS 13. There have been no transfers to or from other levels of the fair value hierarchy during the year.

The key inputs for the level 3 valuations were as follows:

The principal sensitivity of measurement to variations in the significant unobservable outputs is that decreases in net initial yield, decreases in reversionary yield and increases in RPI will increase the fair value.

 9. Trade and other receivables

10. Cash and cash equivalents

Secured cash is held in accounts over which the providers of secured bank debt have fixed security. As the Company is considered to be an internally managed Alternative Investment Fund, it is also required by the Financial Conduct Authority to hold a balance of regulatory capital in liquid funds, which is maintained in cash.

 11. Deferred tax

The movements in deferred tax balances in each period were as follows:

 12. Trade and other payables