Interim results

7 September 2018

Secure Income REIT Plc

(the "Company" or the "Group")

Interim results for the six months ended 30 June 2018

Secure Income REIT Plc (AIM: SIR), the specialist long term income UK REIT, today announces its interim results for the six months ended 30 June 2018.

Highlights

• £436 million acquisition of two off-market portfolios during the period:

‐ £212 million hotels portfolio acquisition completed on 24 April 2018

‐ £224 million leisure portfolio acquisition completed immediately after the balance sheet date on 2 July 2018

‐ financed by £315.5 million (gross) equity issue at 365.0 pence per share and £128.7 million of new secured debt at c. 30% Loan To Cost ratio

• EPRA NAV of 382.4 pence per share, an increase of:

‐ 3.2% over the six months to 30 June 2018

‐ 4.8% above the March 2018 placing price

‐ 120% since listing in June 2014

• Adjusted EPRA EPS of 6.2p for the six months to 30 June 2018

• Total Accounting Return of 4.9% for the six months to 30 June 2018

• Total Shareholder Return of 8.1% for the six months to 30 June 2018

• Like for like portfolio valuation up 2.8% over the six months to 30 June 2018

• Portfolio externally valued at a blended net initial yield of 5.2%

• Net Loan To Value ratio further reduced to 44.4% (including the 2 July completion of the leisure portfolio), down from 49.6% at 31 December 2017

• Fully covered distributions currently yielding an annualised 4.1% on 30 June 2018 EPRA NAV

• 177 Key Operating Assets in defensive sectors producing £124.5 million per annum of passing rent at 30 June 2018:

‐ like for like passing rents up 2.4% over the period

‐ rents on portfolios acquired in the period added £26.6 million per annum to passing rents

• Strong and predictable growth prospects with long term inflation protection underpinned by annual portfolio rental uplifts:

‐ 48% of passing rent subject to fixed uplifts, 94% of which is reviewed annually

‐ 25% subject to annual upwards only RPI, 88% of which is uncapped

‐ 27% subject to three or five yearly upwards only RPI, 94% of which is uncapped

• Weighted average unexpired lease term of 21.4 years with no breaks

• Management team strongly aligned with shareholders, with a 13.5% stake worth c. £166 million at 30 June 2018 EPRA NAV

Martin Moore, Non-Executive Chairman of the Company, commented:

"The core attributes of our business remain very appealing with a net initial property yield of 5.2% secured on key operating assets in defensive sectors let to good covenants with RPI or fixed uplifts and a weighted average unexpired lease term of 21.4 years. The biggest strength of Secure Income REIT is that it is not dependent upon new acquisitions to continue to deliver an attractive risk-adjusted return and we continue to view the future prospects of the business with confidence."

* pro forma adjusted for 2 July 2018 completion of leisure portfolio acquisition

† the reduction in earnings per share and dividends per share for the six months to 30 June 2018 reflects the three month period between the placing to raise £315.5 million following exchange of contracts and the full deployment of funds raised on 2 July 2018 following completion of the acquisitions

For further information on the Company, please contact:

Notes to Editors

Secure Income REIT 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.

At 30 June 2018, the Group's investment property portfolio was valued at £2.3 billion, producing £124.5 million per annum of rental income from long term leases with a weighted average unexpired term to expiry of 21.4 years. All rental income is subject to fixed or RPI upwards only rent reviews. The Group's portfolio comprises key operating assets let to strong businesses in defensive sectors with high barriers to entry. The RPI linked rent reviews and fixed rental uplifts combine with fixed cost debt to drive healthy dividend growth, creating attractive and predictable returns.

The Company is advised by Prestbury Investments LLP which was adviser to Max Property Group plc until August 2014, when all of the assets of Max Property Group plc were sold to Blackstone Group. Prestbury Investments LLP is a partnership of real estate and finance professionals including Nick Leslau, Mike Brown, Tim Evans, Ben Walford and Sandy Gumm.

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 a UK REIT which floated on the AIM market of the London Stock Exchange in June 2014.

The Company's LEI is 213800M1VI451RU17H40

Further information on Secure Income REIT is available at www.SecureIncomeREIT.co.uk.

A Company presentation to analysts and investors will be held at 9.30 am today at:

Newgate

Sky Light City Tower

50 Basinghall Street

London, EC2V 5DE

The presentation will also be accessible via a live conference call and on-demand via the Company website: http://secureincomereit.co.uk/investor-centre/

Those wishing to attend the presentation or access the live conference call are kindly asked to contact Newgate on [email protected] or by telephone on +44 (0) 20 7680 6550.

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,

The first half of 2018 was a very active one for the company, with the simultaneous acquisition of two large off-market portfolios totalling £436 million gross cost, funded by an equity issue and two new non-recourse debt facilities.

These results reflect the £315.5 million share placing, which closed over a week earlier than planned on 29 March, and the acquisitions of the £212 million hotels portfolio, which completed on 24 April, and the £224 million leisure portfolio, which completed immediately after the balance sheet date on 2 July. The leisure portfolio is included in these financial statements in line with the Group's accounting policy to recognise acquisitions at the point of unconditional exchange.

Results and financial position

The Group's EPRA NAV at 30 June 2018 was 382.4 pence per share, an increase of 3.2% since 31 December 2017 which, when added to the dividends paid of 6.0 pence per share, represents a Total Accounting Return of 4.9% over the six months. The Total Shareholder Return for the period amounted to 8.1%.

The increase in EPRA NAV per share over the period was driven by a 2.8% like for like valuation increase, predominantly due to annual passing rent on the portfolio held throughout the period rising by 2.4%. With the addition of two newly acquired portfolios increasing annual passing rent by £26.6 million, the blended Net Initial Yield at 30 June 2018 is 5.2% and is expected to rise to 5.3% after completion of the rent reviews occurring in the next 12 months.

The Group's Adjusted EPRA EPS for the period is 6.2 pence per share. This is lower than the 6.7 pence per share reported for the equivalent period last year as a result of the 86.4 million shares issued at the end of March to finance the acquisitions, ahead of the completion of those acquisitions in April and July. Consequently, the results reported in this six month period reflect an increase of approximately 37% in the number of shares in issue half way through the period, with the £212 million hotels portfolio contributing to earnings for just over two months and no income contribution in this period from the £224 million leisure portfolio which completed immediately after the balance sheet date. This will normalise in the second six months of the year and beyond, with the enhanced earnings from the new portfolios fully on stream.

The Net Loan To Value ratio is 44.4% following completion of the purchase of the leisure portfolio on 2 July 2018, down from 49.6% at the end of 2017 and continuing its downward trajectory since listing in line with our strategy. Our expectation is that this ratio will, on our base case scenario (which assumes rents rising in line with the contractual terms, constant valuation yields and no acquisitions, disposals or lease variations), fall to below 40% in the next three years.

Outlook

The UK commercial property market continues to be highly polarised with logistics and alternative property values rising whilst retail values decline. In our judgment this is being driven by two separate structural shifts rather than a traditional property market cycle. The diversion of retail sales online and the extent to which that benefits logistics over retail property is now well understood, but the growth in popularity in alternatives has received less publicity. Nonetheless, alternative real estate is now firmly established within the investment universe with its market share of total annual UK commercial property volumes rising from 16% a decade ago to 34% last year - greater than the combined share of retail and industrial property. One of the key drivers is the desire for property investors to maintain income security. 20 years ago, new lease terms were granted on average for over 15 years and break clauses were rare. Today just 5% of new leases granted exceed 15 years, whilst average terms span just seven and 40% of leases contain break clauses.

Income security is particularly prized at a time of political and economic uncertainty caused by the ongoing Brexit negotiations. CBRE estimate that long lease property has benefitted from a 50 basis point relative yield movement compared to mainstream commercial property since the EU referendum, with long income yields compressing 39 basis points against an 11 basis point yield increase in the CBRE monthly index. Volatility of total returns for long income property has been less than half conventional commercial property over the last four years whilst net income growth has been higher. Liability matching provided by RPI uplifts is an attractive feature of alternatives not just to UK institutions; overseas investors made up 35% of buyers last year.

Whilst the sun continues to shine on our sector it is important that we continue to survey the horizon for dark clouds. Our tenants may operate in less cyclical, more defensive sectors but they are not entirely immune from a reversal in the UK economy. Certainly, the significant rise in retailer CVAs and administrations has put the risk of tenant default firmly back on the property market's agenda and placed owners of retail assets in the direct firing line. Even the much-favoured logistics sector cannot entirely side-step such risks given the high concentration of retail tenants occupying distribution space either directly or via their distribution partners. In this context our concerns are of a lower order, revolving around the possibility of a short-term reduction in tenant profitability and this is before we draw comfort from the protection provided by the very substantial global covenants that guarantee the leases of all our healthcare assets and the majority of our leisure assets.

Clouds also have the potential to form over Threadneedle Street as the Bank of England has finally started to raise interest rates. This has prompted a debate within the property industry as to the extent to which yields are vulnerable to future interest rate rises. History is no guide as there is little correlation between interest rates and property yields. Interest rates often rise when the economy is expanding, a time of increasing tenant demand and rental growth when property yields usually hold firm. Conversely rising interest rates at a time of economic weakness would typically be negative for property yields but the interplay between the level of interest rates and property yields is also critical. Short term rates are moving up but from all-time historic lows and are still only a fraction of property yields. Those property investors who borrow can continue to fix their debt at rates that are meaningfully yield accretive. Other investors who are more inclined to price assets against the risk free rate of long-dated gilts observe 15 year gilt yields today of 1.5%, a level that has only been lower for about one year over the last 10 and implies that the financial markets predict that future interest rate rises are likely to be extremely modest or that the impact of QE is keeping gilt yields artificially low. Either way this remains highly supportive of our current valuation yields, as does the gross redemption yield on long-dated index-linked gilts of 1.6%.

Our conclusion is that there remains a shortage of investments that can provide what many investors seek - an attractive level of income return combined with a highly predictable and appealing level of long term income growth. As such the core attributes of our business remain very appealing with a net initial property yield of 5.2% secured on key operating assets in defensive sectors let to strong tenant covenants with RPI or fixed uplifts and a weighted average unexpired lease term of 21.4 years. The biggest challenge faced by our investment adviser remains unchanged - to secure new deals that enhance earnings and shareholder returns at a time of limited supply and ever-growing competition for well-let stock in the alternative space. Whilst their enviable ability to unearth accretive opportunities continues to be a mark of distinction, the biggest strength of Secure Income REIT is that it is not dependent upon new acquisitions to continue to deliver an attractive risk-adjusted return. We therefore continue to view the future prospects of the business with confidence.

Martin Moore

Chairman

7 September 2018

Investment Adviser's Report

Prestbury Investments LLP, the investment adviser to Secure Income REIT Plc, is pleased to report on the operations of the Group for the six months to 30 June 2018.

The portfolio

The Group's portfolio has grown from 81 properties at 31 December 2017 to 140 at the balance sheet date and 177 following the completion of the purchase of the £224 million, 37 property leisure portfolio on 2 July 2018. At 30 June 2018, the Group was unconditionally committed to completing the acquisition of that portfolio and had issued an irrevocable drawdown notice to the relevant lenders in respect of the £69.5 million debt financing for the purchase. The acquisition completed on schedule on 2 July 2018, and therefore all portfolio and debt data in this report is inclusive of that portfolio.

The Group's portfolio offers secure, long term income and contractual rental uplifts offering inflation protection, producing £124.5 million of passing rent, up 30% from £95.7 million at 31 December 2017.

The basis of rent review for the portfolio is:

The Group invests in Key Operating Assets - those where operations on site are integral to the tenant's business, ensuring added income security for the landlord. The majority of the rent is secured by guarantors whose businesses offer global spread and which have performed very well over many years, demonstrating strong defensive qualities.

The portfolio is fully let for a weighted average term of 21.4 years from 30 June 2018 on full repairing and insuring terms, meaning that property running costs are low, there are only negligible void costs and there is no material capital expenditure or maintenance requirement.

Portfolio valuation

The portfolio is valued by qualified external valuers every six months for the Group's interim and annual reports. The overall change in composition of the portfolio over the six month period is as follows:

* the £224 million leisure portfolio acquisition included a number of hotels and is therefore split across these categories

The valuation increase comprises:

Yields and unexpired lease terms

The healthcare yields include the effect of the fixed rental uplift that took effect in May 2018 but do not reflect any additional uplift that might arise from the May 2017 Ramsay hospitals earnings-based rent review, which is currently being determined by an independent expert.

The leisure valuation yields include the effect of the RPI linked rental uplifts on the UK properties that took effect in June 2018 and resulted in a 3.4% uplift, while running yield reflects the assumption that RPI linked rents increase by either 2.5% or 2.7% in line with the estimates of the external valuers.

The hotels running yield reflects the assumption that RPI linked rents increase by 8.7% (three year reviews) and 12.0% (five year reviews) in line with the estimates of the external valuers.

Portfolio total rents

All properties are fully let on long leases to tenants. Passing rents on the principal tenants are as follows:

* £6.3 million (2017: £6.3 million) of the Merlin rents are Euro denominated

Further information on the larger tenants and guarantors underpinning each portfolio is given within the portfolio analyses that follow this section.

Healthcare assets (43% of portfolio value)

The healthcare assets comprise 20 freehold private hospitals: a portfolio of 19 located throughout England let to a subsidiary of Ramsay Health Care Limited, the listed Australian healthcare company, and a private psychiatric hospital in central London let to Groupe Sinoué, a French company specialising in mental health and guaranteed by its listed French parent company, Orpea SA.

Each lease on the Ramsay hospitals is guaranteed by Ramsay Health Care Limited, the listed parent company, 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 6 September 2018 of £6.1 billion.

The Ramsay hospitals are let on full repairing and insuring leases with a term to expiry at 30 June 2018 of 18.9 years without break. The rent increases in May each year by a minimum of a fixed 2.75% per annum throughout the lease term. In addition, at the Group's option, rent could be increased with effect from 3 May 2017 to the higher of the 2.75% per annum uplift or 57.525% of site earnings before interest, tax, depreciation, amortisation, rent and head office costs.

While the 3 May 2017 and 2018 fixed uplifts are reflected in these results, the earnings-based rent review at 3 May 2017 remains outstanding. In accordance with the process laid out in the leases, in the absence of agreement of the uplift with the tenant the matter has been referred to an independent expert. The expert's opinion, which has yet to be received, will be binding on the parties. These financial statements take no account of any potential increase in rental income that may arise from the review, as we consider that the estimate of the additional revenue in the period is not material, particularly as any uplift would need to be spread over the 20 years of the lease remaining as at the review date, meaning that the impact on this reporting period would not represent more than a fraction of the increase.

The lease on the London psychiatric hospital is guaranteed by Orpea SA, the parent 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 6 September 2018 of £6.6 billion. The hospital is let on a full repairing and insuring lease with a term to expiry at 30 June 2018 of 26.1 years without break. The rent increases in May each year by a fixed 3.0% per annum throughout the lease term.

Leisure assets (36% of portfolio value)

The leisure assets held throughout the period comprise four well known visitor attractions and two hotels, located in England and Germany, and include two of the UK's top three theme parks. The UK assets are Alton Towers theme park and the Alton Towers hotel, Thorpe Park theme park and Warwick Castle. The German assets are Heide Park theme park (the largest in Northern Germany) and the Heide Park hotel, both located in Soltau, Saxony.

The properties are held freehold and are let to substantial operating subsidiaries of Merlin Entertainments plc, the guarantor of each lease. Merlin is a FTSE 250 company with a market capitalisation at 6 September 2018 of £3.9 billion. Measured by the number of visitors, it is Europe's largest and the world's second largest operator of leisure attractions.

The average term to expiry of the Merlin leases is 24.0 years without break from 30 June 2018 and the tenants have two successive rights to renew them for 35 years at the end of each term. The leases are on full repairing and insuring terms. There are upwards only uncapped RPI linked rent reviews every June throughout the term (based on RPI in the twelve months to April each year) for the UK assets, which in 2018 resulted in a rental increase of 3.4%. The German properties are subject to fixed annual increases of 3.34% every July throughout the term, as a result of which the German rents increased from £6.3 million to £6.5 million on 30 July 2018 (translated at the 30 June 2018 rate).

In the period an additional 20 leisure assets were acquired in an off-market transaction including Manchester Arena, The Brewery on Chiswell Street, London and a UK wide portfolio of 18 freehold high street pubs.

Manchester Arena is a strategic eight-acre leasehold site located on top of Manchester Victoria Railway and Metrolink station. It comprises the UK's largest indoor arena by capacity and 160,000 sq ft of additional office and leisure space, together with a 1,000 space multi-storey car park and advertising hoardings. The Arena is let to SMG, the world's largest venue management company, for a further 27.0 years with annual RPI linked rent reviews collared between 2% and 5%. SMG operate c. 200 venues globally, hosting approximately 30,000 events each year, and the group has achieved 25 years of annual EBITDA growth. The offices and ancillary leisure space are let to tenants including Serco, Manchester City Council, Unison, JCDecaux and go-karting operator TeamSport. The leases on the Manchester site as a whole have an average term to expiry of 17.7 years and produce net passing rent of £5.9 million per annum as at 30 June 2018.

The Brewery at Chiswell Street is a predominantly freehold investment let to a specialist venue operator on a full repairing and insuring lease with a term to expiry of 13.0 years. It is the largest catered event space in the City of London and is located within five minutes' walk of the Moorgate entrance to the new Crossrail Station at Liverpool Street. The lease has five yearly fixed uplifts and passing rent of £3.4 million per annum as at 30 June 2018, with the next uplift falling due in in July 2021.

The portfolio of 18 high street pubs is let on individual leases either to or guaranteed by Stonegate Pub Company Ltd, one of the UK's largest privately managed pub companies. The portfolio produces passing rent of £2.0 million per annum as at 30 June 2018 and has an average unexpired lease term of 21.6 years. Rents are subject to five yearly RPI linked rental increases collared at 1% to 4% per annum compounded, with the next reviews falling due in February 2020. Stonegate held over 690 pubs and bars nationwide and reported revenue of £721 million and adjusted EBITDA of £106 million for the 52 weeks to 8 April 2018.

Hotel assets (21% of portfolio value)

The hotel assets comprise 131 Travelodge hotels, located in England and Scotland, let to Travelodge Hotels Limited which is the main operating company within the Travelodge Group trading in the UK, Ireland and Spain. Travelodge is the UK's second largest budget hotel brand, with 564 hotels and over 42,000 rooms as at 30 June 2018.

55 of the hotels were owned throughout the period. A further 59 were purchased in the £212 million acquisition that completed in April 2018 and the remaining 17 were purchased as part of the £224 million acquisition that completed in July 2018.

The average unexpired lease term is 23.9 years as at 30 June 2018 with no break clauses. The leases are on full repairing and insuring terms and Travelodge is also responsible for the cost of any headlease rentals and any other amounts owing to the superior landlords of the 55 leasehold properties. There are upwards only uncapped RPI linked rent reviews every five years throughout the term of each lease, with reviews falling due over a staggered pattern across the portfolio. No rent reviews fell due in the six month period to 30 June 2018.

Financing

At the balance sheet date, the Group had an unconditional commitment to complete the purchase of the £224 million leisure portfolio. That completion occurred on 2 July 2018. The purchase was part financed by £69.5 million of new secured debt which is undrawn at the balance sheet date with the balance financed by the share issue which completed at the end of March. The pro forma position, adjusting the 30 June 2018 financial position only for completion of the leisure acquisition, is set out below.

Because the property purchase was unconditional and the related loan irrevocably called for drawdown, with both the purchase and loan drawdown having completed very shortly after the balance sheet date on 2 July 2018, the financing analysis in this report includes the £69.5 million of new debt drawn immediately after the balance sheet date.

The Group's operations are financed by a combination of cash resources and non-recourse debt finance, where the equity at risk is limited to the net assets within six ring-fenced sub-groups. Each sub-group is self-contained, with no cross default provisions between the six of them.

The weighted average interest cost is 4.9% per annum, down from 5.1% per annum at 31 December 2017 following drawing of the £128.7 million new debt facilities which part financed the acquisitions in the period. To reduce uncertainty over the Group's interest cost, rates are fixed or capped as follows:

* including £69.5 million drawn on 2 July 2018

† rate shown is maximum rate

The weighted average term to debt maturity is 5.9 years at 30 June 2018 compared to 6.5 years at 31 December 2017. As the Group has grown substantially and the Net LTV ratio has reduced significantly in recent years, it should be in a position to access wider sources of capital in future. The reduction in the weighted average term to debt maturity is part of a strategy to allow the Group better access to such sources of capital.

Key terms of the facilities are as follows:

* including £69.5 million drawn on leisure and hotels loans on 2 July 2018

† comprising £316.8 million of senior and mezzanine Sterling loans secured on the UK assets and €71.8 million of senior and mezzanine Euro denominated loans secured on the German assets (translated at the period end exchange rate of €1:£0.8843) with all four loans cross-collateralised. The amortisation in each of the 12 month periods ending October 2021 and October 2022 comprises £3.2 million on the Sterling facility and €0.7 million on the Euro facility.

The Group's gross and net debt at 30 June 2018 was as follows:

* interest cover for these purposes is measured as passing rent divided by annualised interest cost, both as at the balance sheet date

The extent of headroom on financial covenants at the balance sheet date is analysed in the business review on the following pages. There have been no defaults or potential defaults in any facility during the period or since the balance sheet date.

Financial review

Key performance indicator - Total Accounting Return

The principal financial outcome that the Board seeks to achieve is attractive growth in shareholder returns. The Board monitors both Total Accounting Return, which is the movement in EPRA NAV per share plus distributions, and Total Shareholder Return, which is the share price movement plus distributions. As the share price is influenced by factors outside the control of the Group, the principal focus for the Board is Total Accounting Return.

The Board's primary focus is on the financial results, principally Net Asset Value ("NAV") per share and Earnings Per Share ("EPS"), adjusted to conform with the industry standard EPRA guidelines which it considers provide a better comparison with other real estate companies. However, the Board also considers the financial position and results prepared in accordance with accounting standards, without adjustment.

The analysis of movements in the Group's Net Asset Value and Net Asset Value per share is as follows:

EPRA NAV takes the balance sheet measure of net asset value and excludes items that are considered to have no relevance to the assessment of long term performance. In accordance with the EPRA guidance, to calculate EPRA NAV the Group's reported NAV is adjusted to exclude deferred tax on investment property revaluations relating to the German assets and is also adjusted to include the dilutive impact of any shares to be issued in satisfaction of any estimated incentive fee arising in the period. The latter adjustment arises because, despite any incentive fee being accounted for in the results for a period, basic net asset value per share does not include in the calculation of the number of shares in issue the impact of the shares to be issued in satisfaction of that fee until those shares are actually issued.

The Group's EPRA NAV per share at 30 June 2018 was 382.4 pence, which represents a 3.2% increase over the six months since 31 December 2017. This 12.0 pence per share uplift, together with 6.0 pence per share of distributions, results in a 4.9% Total Accounting Return for the six month period.

The analysis of movements in the Group's EPRA Net Asset Value and EPRA Net Asset Value per share is as follows:

* adjusted by £5.2 million or 1.9 pence per share (2017: £6.0 million or 2.6 pence per share) of Rent Smoothing Adjustments

The placing price for the March 2018 share issue was 365.0 pence per share which took the audited 31 December 2017 EPRA NAV and adjusted it for the two portfolio acquisitions on a pro forma basis. The new portfolios were included in that pro forma net asset value at their contract price, after excluding nearly £7.0 million of acquisition costs which were written off and hence reduced pro forma net assets. The external valuations of those portfolios at 30 June 2018 reflected a £5.2 million uplift over and above the contract price, thus the very small apparent dilutive effect of the placing is largely offset by the subsequent valuation uplift.

EPRA NAV is reconciled to the balance sheet net asset value measured in accordance with IFRS in note 17 to the interim financial statements. The calculation of Total Accounting Return and Total Shareholder Return is included in the Supplementary Information at the end of this report.

Rent Smoothing Adjustments

In addition to the valuation movements, Rent Smoothing Adjustments to investment property revaluations arise from the Group's accounting policy, in line with International Financial Reporting Standards, to spread the impact of any fixed or minimum rental uplifts evenly over the term of each relevant lease. The impact of this accounting treatment is to reflect a receivable, included in the book value of investment property, for the amount of rent included in the income statement ahead of actual cash receipts. The receivable increases over the first half of each lease term then unwinds to zero over the second half of each lease term. In order that the receivable does not overstate the value of the portfolio when included in the book value of the investment properties, any movement in the receivable is offset against property revaluation movements. Since this adjustment increases rental income and reduces property revaluation gains (or vice versa in the second half of each lease term) it does not change the Group's retained earnings or net assets.

The impact over time for each of the rental income flows subject to a Rent Smoothing Adjustment is as follows:

* at the period end Euro conversion rate of €1:£0.8843

The annual impact of this adjustment would only change if there are acquisitions, disposals or lease variations of properties with fixed or minimum RPI linked rental uplifts. The adjustment that is expected to be recognised on the portfolio during 2018 and the next three financial years, with the German adjustment translated at the average Euro conversion rate for the six months to 30 June 2018 of €1:£0.8795, is as follows:

Key performance indicator - Adjusted EPRA EPS

The Company's intention is to distribute its Adjusted EPRA EPS through payment of a fully covered cash dividend, paid quarterly.

The Group's basic EPS, calculated in accordance with accounting standards, not only includes property valuation movements and Rent Smoothing Adjustments but is also required to be calculated on the assumption that any shares issued in settlement of an incentive fee are treated as having been issued on the first day of the year when in fact they are issued some three months after the end of the year in which they have been earned. These factors have a distorting effect on the reported EPS. However, recognising the importance of the earnings per share measure calculated in accordance with accounting standards, the analysis of reported EPS in the period is as follows:

EPRA EPS excludes from basic EPS any investment property revaluations, profits on the sale of investment properties and related deferred tax to give a measure of underlying earnings from core operating activities.

Adjusted EPRA EPS takes EPRA EPS and removes the effect of Rent Smoothing Adjustments (in order not to artificially flatter dividend cover calculations) and any significant non-recurring costs. The measure also excludes any incentive fee and the associated irrecoverable VAT, which is considered to be linked to revaluation movements and therefore best treated consistently with revaluations.

EPRA Earnings and Adjusted EPRA Earnings in the period are analysed as follows:

* Adjusted EPRA EPS reflects the actual date shares are issued in settlement of any incentive fee, which in the period was in March 2018. All other EPS measures are calculated on the assumption that those shares are in issue from the start of the reporting period.

Adjusted EPRA EPS is reconciled to basic EPS in note 8 to the financial statements. The EPRA EPS calculations are set out in the Supplementary Information

Adjusted EPRA earnings per share - administrative expenses

The administrative expenses included in Adjusted EPRA EPS for the period, which are the same as those included in reported EPS, are as follows:

As an externally managed business, the majority of the Group's overheads are covered by the advisory fees paid to the Investment Adviser. The Investment Adviser meets all office running costs and remuneration for the whole management and support team. The other recurring administrative expenses are principally professional fees, including tax compliance and audit fees, which are billed directly to Group companies.

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, such as listing fees, nominated adviser's fees and registrar's fees, which totalled £0.2 million in the period.

Because VAT cannot be charged on the rents on the healthcare assets, there is an element of irrecoverable VAT incurred on the Group's running costs and included within the relevant line items in the table above. The proportion of disallowed VAT on administrative expenses and corporate costs was 44% during the period and is 37% on an annualised basis following completion of the portfolio acquisitions.

Adjusted EPRA EPS: net finance costs

Net finance costs in the period include six months of costs relating to the £967.3 million of debt in place at 1 January 2018, approximately two and half months of costs relating to the £59.2 million of debt financing the £212 million hotels portfolio, and no costs relating to the £69.5 million of debt drawn on 2 July 2018 to part finance the £224 million leisure portfolio.

* headlease costs are largely recoverable from tenants so this charge is netted off against the relevant amounts received in revenue

The current annualised weighted average interest rate (including the costs of the debt drawn on 2 July 2018) is 4.9%, down from 5.1% per annum at the start of the period. The Group's interest costs on all secured facilities are at fixed or capped rates throughout the life of the loans, providing certainty of the Group's largest expense item over the term of each facility. The capped rates apply to £26.5 million of debt, capped at a blended rate of 3.6% per annum including lenders' margins.

An incentive fee becomes due if total returns to investors over a financial year, as set out in audited accounts, exceed a compound growth rate of 10% per annum above the EPRA NAV per share the last time any incentive fee was paid. In the current year the threshold EPRA NAV plus distributions is 407.4 pence per share at 31 December 2018. If the threshold return is exceeded, the Investment Adviser receives 20% of any surplus above that priority return received by shareholders, with any such fee payable in shares. Any shares received are not permitted to be sold, save in certain limited circumstances, for a period of between 18 and 42 months following the end of the year for which they were earned.

In order to make a reasonable assessment of whether or not such a fee is likely to be payable in respect of the 2018 financial year, the Board has estimated the EPRA NAV of the Group at 31 December 2018, assuming that:

· the property portfolio valuation yields do not change from those applied as at 30 June 2018;

· there are no acquisitions, disposals or lease variations;

· any additional uplift in rent from the outstanding Ramsay rent review is not included, on the basis that the outcome of the review is not yet known with sufficient certainty;

· there are no currency translation gains or losses beyond those recognised at 30 June 2018;

· RPI uplifts are consistent with the expectations reflected in the June 2018 external investment property valuations; and

· the Group's Adjusted EPRA EPS over the remainder of the year is fully distributed on a quarterly basis.

This estimate does not constitute a forecast but represents an illustrative case considered to provide a reasonable basis for assessing whether an incentive fee will be payable, while recognising the limitations inherent in any estimate of future values. On the basis of these assumptions, no fee would be payable for the 2018 financial year and as a result no fee is accrued at 30 June 2018 (30 June 2017: £3.5 million).

Adjusted EPRA EPS - tax

The Group operates under the UK REIT regime, so its UK and German rental operations (which make up the majority of the Group's earnings) 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.

German tax was payable in the period at an effective rate of 16% on realised profits from the Group's German rental operations and the resulting tax charge for the period was £0.2 million (year to 31 December 2017: 17% effective rate and £0.2 million tax charge). The balance sheet also includes a deferred tax liability of £10.9 million (31 December 2017: £10.2 million) relating to unrealised German capital gains tax at a rate of 20.5% on the investment properties which would only be crystallised on a sale of those assets. There are currently no plans to sell any of the Group's assets.

Adjusted EPRA EPS - currency translation

The majority of the Group's assets are located in the UK and the financial statements are therefore presented in Sterling. 4% (31 December 2017 and 30 June 2017: 5%) of the Group's EPRA NAV relates to assets and liabilities relating to properties located in Germany, valued in and generating net earnings in Euros. The fact that both assets and liabilities are Euro denominated acts as a partial hedge of currency fluctuations, but the Group remains exposed to currency translation differences on the net results and net assets of these operations, with movements recognised in the statement of other comprehensive income.

The German properties are valued at €125.5 million as at 30 June 2018, with the Euro denominated secured debt amounting to €71.8 million. The net currency translation loss reflected in EPRA NAV in the period was £0.1 million (year to 31 December 2017: gain of £1.4 million).

Key performance indicator - Net Loan To Value ratio

The Board structures debt facilities with a view to maintaining a capital structure that will withstand varying market conditions. During the period and including the debt drawn on 2 July 2018, the Group's Net LTV fell from 49.6% to 44.4%. This reduction reflects the impact of £48.1 million of property valuation uplifts, £2.1 million of scheduled debt amortisation and the new £128.7 million secured loans arranged to part finance the £436 million portfolio acquisitions being at a Loan To Cost ratio of less than 30%, which is lower than the average for the rest of the portfolio.

Key performance indicator - headroom on debt covenants

Debt covenants have been negotiated with the aim of protecting the Group as far as possible from movements in investment property valuations which are not related to changes in rental cash flows.

The Board reviews the headroom on all financial covenants at least quarterly. The headroom on key financial covenants at 30 June 2018 is summarised below, together with the net initial valuation yield, the fall in valuation or the fall in rent that would trigger a breach of the relevant covenant at the first test date after the balance sheet date:

Key performance indicator - uncommitted cash

The Board considers that the ability to manage potential debt covenant breaches is at least as important as the level of the financial covenants themselves. The Group has negotiated headroom on financial covenants considered appropriate to the business and also certain cure rights, including the ability to inject cash into ring-fenced financing structures in the event of actual or prospective breaches of financial covenants. Consequently, along with managing the execution risk inherent in arranging and documenting credit facilities, the Board regularly monitors the Group's levels of uncommitted cash. Uncommitted cash is measured as cash balances outside ring-fenced structures secured to lenders, net of any creditors or other cash commitments and excluding any cash required to be retained under the regulatory capital rules of the AIFMD regime.

The Group's uncommitted cash was £59.6 million as at 30 June 2018, compared to £63.4 million as at 31 December 2017 and 30 June 2017.

Cash flow

The movement in cash over the period comprises:

The Company's dividend policy is to fully distribute the Group's adjusted EPRA earnings. The Group's 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 premises where necessary. Consequently, no capital expenditure, property maintenance or insurance costs have been incurred in the period and it is not expected that material costs of that nature will be incurred on the current portfolio. As a result, in the absence of asset purchases or disposals, cash balances should remain relatively stable over time.

Nick Leslau

Chairman, Prestbury Investments LLP

7 September 2018

Independent Review Report

Introduction

We have been engaged by the Company to review the condensed financial statements included within this interim report for the six months to 30 June 2018 which comprise the Group Income Statement, the Group Statement of Other Comprehensive Income, the Group Statement of Changes in Equity, the Group Balance Sheet, the Group Cash Flow Statement and the related notes.

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market ("AIM"). Those rules require that the interim report be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

As disclosed in note 2, the annual financial statements of the Group will be prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The condensed financial statements included in this interim report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed financial statements in the interim report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed financial statements in the interim report for the six months to 30 June 2018 are not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the rules of the London Stock Exchange for companies trading securities on AIM.

BDO LLP

Chartered Accountants and Registered Auditors

London, United Kingdom

7 September 2018

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Group Income Statement

All amounts relate to continuing activities.

Group Statement of Other Comprehensive Income

The notes form part of these condensed financial statements.

Group Statement of Changes in Equity

Interim dividends totalling 6.0 pence per share (31 December 2017: 13.6 pence per share; 30 June 2017: 6.6 pence per share) were paid during the period.

The notes form part of these condensed financial statements.

Group Balance Sheet

The notes form part of these condensed financial statements.

Group Cash Flow Statement

The notes form part of these condensed financial statements.

Notes to the Condensed Financial Statements

The condensed financial statements set out in this report cover the six months to 30 June 2018, with comparative amounts shown for the year to 31 December 2017 and the six months to 30 June 2017, and include 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 is listed on the AIM market of the London Stock Exchange.

Further information about the Group and Company can be found on its website, www.SecureIncomeREIT.co.uk.

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 which the Directors have considered and believe remains appropriate for the financial statements. The accounting policies adopted in this report are consistent with those applied in the Group's statutory accounts for the year to 31 December 2017, apart from the adoption of IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from Contracts with Customers" with effect from 1 January 2018, neither of which required any restatements to the Group's financial statements. The accounting policies are expected to be consistently applied in the financial statements for the year to 31 December 2018.

The IASB has issued one standard, IFRS 16 "Leases", that is mandatory for periods subsequent to 31 December 2018 (the date to which the Group's next annual financial statements will be prepared), which is relevant to the Group and has not been adopted early. The Directors' assessment of the impact of this new accounting standard remains unchanged from that reported in the 2017 financial statements, where it was noted that its adoption is not expected to have a material impact on the Group's financial statements since it will not result in significant changes of accounting policies for lessors.

No other new or revised standard is expected to be relevant to the Group and have a material effect on the Group's financial statements in future.

The Directors are required to assess whether it is appropriate to make provision at the balance sheet date for the relevant proportion of any incentive fee expected to be payable for the whole of the current financial year. In making this assessment, the Directors estimate the EPRA NAV per share of the Group at the end of the financial year. As described in note 18, this estimate does not constitute a forecast but represents an estimated illustrative case only, and is considered to provide a reasonable basis for estimating whether an incentive fee will be payable while recognising the limitations inherent in any estimate of future values.

Euro denominated results for the German operations have been converted to Sterling at an average exchange rate for the period of €1:£0.8795 (period to 30 June 2017: €1:£0.8603; year to 31 December 2017: €1:£0.8762) and period end balances converted to Sterling at the 30 June 2018 exchange rate of €1:£0.8843 (period to 30 June 2017: €1:£0.8779; year to 31 December 2017: €1:£0.8873).

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 2017 have been filed at Companies House. The independent auditor's report on the annual report and financial statements for 2017 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.

IFRS 8 "Operating Segments" requires operating segments to be identified on a basis consistent with 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.

At 30 June 2018 the Group owned 140 properties and was unconditionally bound to acquire a further 37 properties in a transaction which completed on 2 July 2018. These 177 properties were originally contracted for acquisition within six separate portfolios. Although certain information about these portfolios is described on a portfolio basis within the Investment Adviser's report or grouped by property type (Healthcare, Leisure and Hotels), when considering resource allocation and performance the Board reviews quarterly management accounts prepared on a basis which aggregates the performance of the portfolios and focuses on Total Accounting Return. The Board has therefore concluded that the Group has operated in, and was managed as, one business segment of property investment in both the current period and prior year.

The geographical split of revenue and applicable non-current assets was as follows:

Revenue comprises: