Interim Results and Pre-listing Annual Results

INTERIM RESULTS FOR THE THREE MONTH PERIOD TO 30 JUNE 2014 AND PRE-LISTING ANNUAL RESULTS FOR THE YEAR TO 31 MARCH 2014

Secure Income REIT Plc (the "Company" or the "Group"), a specialist long term income UK REIT, today announces its interim results for the three months to 30 June 2014 as well as its pre-listing results for the year to 31 March 2014.

Interim results highlights

• Admission to trading on AIM and conversion to REIT status on 5 June 2014 raising £15 million before expenses (£11.8 million net of expenses)

• EPRA net asset value per share rose to 184.5 pence, 6.0% above 5 June 2014 placing price of 174 pence

• Freehold portfolio of 28 well established, key operating real estate assets independently valued by CBRE at £1.47 billion (£1.46 billion on listing) at a net initial yield of 6.0% - valuation up 1% since listing

• Net assets growth benefitting from the Group's strategy of being geared into the recovery phase of the property market, through operating at a current net loan to value ratio of 77%

• Annualised rent roll of £93.4 million, of which 98% is secured on the strong covenants of Ramsay Healthcare Limited and Merlin Entertainments Plc

• Weighted average unexpired lease term of 25.5 years, all with annual fixed or RPI linked upwards only rent reviews

• Clear strategy to take advantage of tax efficient REIT status to acquire assets generating long term income streams, while benefitting from the Group's existing strong revenue and gearing for growth

Martin Moore, Independent non-executive Chairman of the Company, comments:

"The Group is extremely well positioned to take advantage of the current rally in commercial property prices and the continuing quest from investors seeking secure income streams. We are geared for growth and can look forward to an annually rising rental income stream for the next 25 years secured against excellent covenants."

9 September 2014

ENQUIRIES:

Notes on the interim results

The interim report covers a short three month period to 30 June 2014 being the half year for the amended reporting period following admission to listing on AIM. It is expected that future interim reports will cover the six months from 1 January to 30 June each year.

Notes on the pre-listing annual report

The annual report of the Company for the year ended 31 March 2014 is also included in the announcement. The annual report relates to the period prior to:

• the acquisition of the subgroup that owns the c. £728 million healthcare portfolio;

• the capital restructuring which included the capitalisation of c. £78 million of existing shareholder loans and the issue of £15 million of share capital at the time of listing; and

• entry into the UK REIT regime, which resulted in a material change to the tax status of the Group.

Accordingly the annual report covers only the theme parks portfolio, and does not reflect the impact of the capital reorganisation, listing and conversion to REIT status. Investors should therefore use caution when reviewing these accounts due to the material changes in the capital structure and financial position of the Group since listing in June 2014. If you are in any doubt about the contents of the annual report, you should contact your accountant, legal or professional adviser or financial adviser who specialises in advising on securities.

The interim report and the annual report will both be available on the Company's website at: www.SecureIncomeREIT.co.uk.

Notes to Editors

Secure Income REIT Plc is a UK REIT specialising 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 and the Group owns a freehold portfolio of 28 well established operating real estate assets including some of the UK's top visitor attractions and theme parks namely Madame Tussauds in London, Alton Towers theme park and hotel, Thorpe Park and Warwick Castle, as well as 21 private hospitals in the UK.

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.

SECURE INCOME REIT PLC

(formerly P1 Theme Park Holdings Limited)

INTERIM REPORT

RESULTS FOR THE THREE MONTHS ENDED 30 JUNE 2014

Chairman's Statement

Our maiden interim results reflect just a three month period, of which only the last 25 days were as a listed company. Nonetheless I am pleased to report a 6% increase in EPRA net asset value per share over such a short period. A modest increase of 1% in property valuation, arising from the increase in rents in our UK leisure assets at their June rent reviews, was magnified by the Group's strategy of being geared into the recovery phase of the property market, through operating at a current net loan to value ratio of 77%.

Perhaps of greater interest to shareholders is the continued upward trajectory of the property market since June. We have seen intense competition for well let properties with prices often bid significantly ahead of asking terms. Investors face a real challenge securing even a modest income return in the UK with deposit rates of less than 0.5% and long term index linked and conventional gilt yields of -0.4% and 2.8% respectively. Commercial property is enjoying a renaissance in investor interest due to its higher yield but typically this comes with less income security. The IPD monthly all property net initial yield currently stands at 5.7% but with an average unexpired lease term of approximately six years. The Group's property income duration of over 25 years without break, secured on excellent covenants and representing a net initial yield of 6%, offers excellent value in comparison.

Provided current buoyant conditions persist, we believe there is a good chance of yields compressing for the Group's assets and, when combined with financial gearing and an income stream contracted to rise annually, this provides the potential for a significant increase in net asset value over the remainder of the year. At a time of rising geopolitical risk we cannot rule out the possibility that our rising market is suddenly blown off course. However, were the recovery to falter, we draw comfort from the defensive quality of the Group's property income which served it well during the financial storms of 2008 when the assets were held privately.

With so much competition for stock, the biggest challenge currently facing property investors is sourcing new‎ deals at attractive prices. The Group is already geared for growth and raised little new cash on listing so suffers minimal dilution of returns through unallocated cash sitting on deposit. This gives the Group a comparative advantage over many of its peers, in that it can afford to be patient in waiting for the right deal without foregoing returns in a strongly rising market. It is our intention for acquisitions to be funded at least in part by equity placings. The Group also occupies a distinctive niche in which its REIT structure can help facilitate deals. Many of the best long term income streams are created by sale and leaseback transactions but the tax for a seller arising from low historic book costs can be a deterrent for vendors to structure deals and sell their assets. Most of our competitors seeking long term income streams lack the benefit of our REIT structure which allows us quite legitimately to take on and extinguish the tax liability, providing vendors with a clear financial incentive to deal with us.

Unlike many IPOs this year, our share price has consistently traded at a significant premium to float price and to net asset value. With very few shareholders selling their shares, trading volumes have been extremely low and we hope this is a reflection of the Group's excellent prospects for growth in net asset value.

In 2017, if not before, the Group will seek to refinance its £1.2 billion of debt. The current debt is covenant compliant, the security of income is attractive to the debt market and the loan to value ratio is anticipated to fall as the property value rises on the back of the contracted increases in rent. There are no longer any loan to value tests on Group debt. Nonetheless, securing a refinancing on the most advantageous terms for shareholders is a key priority for the board and the timing as to when the Group seeks to refinance is an important component in these deliberations.

98% of the Group's rents are secured on the strong covenants of Ramsay Healthcare Limited and Merlin Entertainments Plc. Ramsay reported strong growth in earnings and profits in its year end results to 30 June, as did Merlin in its interims to 30 June. Their respective market capitalisations are £6.1 billion and £3.6 billion.

To conclude, we believe the Group is extremely well positioned to take advantage of the current rally in commercial property prices and the continuing quest from investors seeking secure income streams.

Martin Moore

Chairman

9 September 2014

Report from the Investment Adviser

PrestburyInvestments LLP advises Secure Income REIT Plc and is pleased to report on the operations of the Group for the three months ended 30 June 2014.

Basis of preparation of the interim report

Note 2 to the interim report sets out the basis of preparation of the financial information in this report. Because the results and net assets presented in this report for the year to 31 March 2014 and the six months ended 30 September 2013 relate to periods where the capital structure and tax status of the Group were different to that which has been in place since the listing of the Company on 5 June 2014, we have not sought in this report to compare the results for the three months ended 30 June 2014 with those of prior periods, as the comparison is not meaningful.

The portfolio

The portfolio comprises 28 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.

Portfolio valuation yields at 30 June 2014

* Reversionary yield at the time of the latest contracted rent reviews in May, June and July 2014.

Portfolio valuation by location

Healthcare assets (49% of portfolio value)

The healthcare assets comprise 21 freehold private hospitals located throughout England. 20 of the hospitals are let to a subsidiary of Ramsay Health Care Limited, the listed Australian private healthcare group, and one Central London psychiatric hospital is let to a subsidiary of Orpea SA. The private hospitals let to Ramsay comprise 96% of the healthcare assets rent and fair value, 49% of the entire Group's rental value and 47% of the entire Group's property valuation.

The hospitals are let on 30 year full repairing and insuring leases with a term to expiry at 30 June 2014 of 23 years without break. The rent increases by 2.75% per annum throughout the lease term in May each year. In 2017 rent is reviewed to the higher of a 2.75% per annum increase or to 88.5% of 65% of site earnings before interest, tax, depreciation, amortisation, rent and head office costs. Every five years thereafter, rents are increased to the higher of 2.75% or open market value. Following the 3 May 2014 rent review the rent is £47.8 million per annum.

The leases on the 20 private hospitals are all guaranteed by Ramsay Health Care Limited, Australia's largest hospital operator, a constituent of the Australian Stock Exchange's ASX 100 index of 100 largest companies, with a market capitalisation at 8 September 2014 of £6.1 billion.

The tenant's rental obligations with regard to the central London psychiatric hospital in Lisson Grove were guaranteed by Capio Healthcare AB until 22 July 2014, on which date the guarantee was assigned to the tenant's new parent company, Orpea SA. Orpea SA is the parent company of the Orpea Group, a leading European operator of nursing homes, post-acute care and psychiatric care, listed on the French Stock Exchange with a market capitalisation at 8 September 2014 of £2.2 billion.

The Lisson Grove hospital accounts for 2% of total portfolio rents and value. Under the terms of the assignment, the rent review provisions for this hospital have been varied to remove the open market rent reviews. Instead the rent increases by a fixed 3% each year starting with the next review on 3 May 2015 (compared to 2.75% previously). A reversionary lease has been entered into which 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.As the assignment took place after the 30 June valuation, the benefit of the improvement in lease terms will be reflected for the first time in the year end valuation in December 2014.

There has been no change in the valuation of the healthcare assets during the period from listing to 30 June 2014, with the weighted average net initial yield of 6.2% unchanged and the fixed 2.75% rental income uplift on 3 May 2014 reflected in the valuation at 31 March 2014 and on listing.

Leisure assets (51% of portfolio value)

The leisure assets comprise five well known visitor attractions and two hotels located in England and Germany. The properties are all let to subsidiaries of Merlin Entertainments Plc and all leases are guaranteed by Merlin Entertainments Plc. Merlin Entertainments Plc is a London Stock Exchange listed FTSE 250 leisure group with a market capitalisation at 8 September 2014 of £3.6 billion. Merlin is Europe's largest and the world's second largest visitor attractions operator measured by number of visitors.

Visitor attractions account for 88% of the rent from the leisure assets and 89% of the 30 June 2014 valuation, while hotels account for 12% of the rent from the leisure assets and 11% of the 30 June 2014 valuation. The UK leisure portfolio accounts for 89% of the rent and comprises Madame Tussauds, London; Alton Towers theme park; Alton Towers hotel; Warwick Castle; and Thorpe Park. The German assets comprise Heide Park theme park and its associated hotel in Soltau, Saxony.

The average unexpired lease term of the leisure assets is 28 years and the tenants have two rights to renew these leases for 35 years at the end of each 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 2014 rent reviews have resulted in an average increase of 2.6% in the rents of the leisure assets, with the current rent now £45.6 million per annum.

Portfolio valuation uplift in the period

The investment property valuations at 30 June 2014 reflect a weighted average net initial yield for the leisure assets of 5.8% in line with the 31 March 2014 valuation yields. A 2.5% RPI rental uplift on 24 June 2014 for the UK properties has increased the UK property values since 31 March 2014 and since listing by £16.5 million. There has been no change in the Euro denominated valuation of the German properties with the fixed 3.34% rental income uplift in July 2014 reflected in the valuation at 31 March 2014, but currency translation movements have reduced the Sterling equivalent by £2.1 million, resulting in a net increase in the leisure assets valuation over the three months of £14.4 million. The healthcare assets valuations are unchanged and therefore the total portfolio uplift comprises:

The rent smoothing adjustment arises from the Group's accounting policy to spread the impact of fixed rental uplifts evenly over the whole term of relevant leases. The adjustments relate to the rents receivable on the healthcare assets (where rents increase by 2.75% every May) and the rents receivable on the German leisure assets (where rents increase by 3.34% every July).

The impact of the application 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. This receivable increases over the first half of the lease terms then unwinds over time, reducing to zero over the second half of the lease terms. The impact over time for each of the rental income flows subject to smoothing is as follows:

* at a Euro conversion rate of £1 : €0.81505

In order that the rent smoothing receivable does not, in combination with the book value of the investment properties, overstate the value of the property portfolio, the movement in the rent smoothing receivable is offset against property revaluation movements in the period. As a result, this adjustment impacts only on the income statement presentation and does not change the Group's net assets compared to the net assets that would be presented if the rents were not smoothed in this way.

Financial review

EPRA net asset value

The EPRA net asset value per share at 30 June 2014 of 184.5 pence per share represents a 6.0% increase over the placing price of 174 pence per share for the shares issued on 5 June 2014. The movements in EPRA net asset value for the three months ended 30 June 2014 are summarised as follows:

The adjustments shown above for the net proceeds of the share issue and for the capitalisation of shareholder loans prior to the listing are presented with a view to separating net assets movements arising from the capital restructuring and listing from the more routine net assets movements in the three month reporting period arising from other recurring changes in retained earnings, including valuation movements.

The Group's net results for the period are explained in more detail below.

Income statement

Movements in property valuations shown in the income statement are described in the portfolio section of this report. The other key recurring elements of the income statement are described below.

The general administrative expenses of the Group presented in this report for the period ended 30 June 2014 reflect only three weeks of operation as a listed business. The running costs of the business changed materially at the time of listing, with the major changes to the operating cost base set out below:

· the appointment of seven non-executive directors, four of whom are between them currently entitled to receive fees of £185,000 per annum and the other three of whom receive no remuneration;

· other costs of being listed, including listing fees, costs of statutory reporting and making regulatory announcements, all of which are expected to amount to approximately £400,000 per annum; and

· fees payable to Prestbury Investments LLP under an agreement entered into prior to listing by which Prestbury is entitled to receive cash fees based on a sliding scale relative to the Group's EPRA net asset value, currently payable at 1.25% per annum of EPRA net asset value. At the 30 June reported net asset value, this would amount to a fee of £3.9 million per annum. Until July 2016, the cash required to satisfy this advisory fee will be funded by the pre-listing shareholders of the Company up to a maximum amount of £5.3 million per annum (but not exceeding the amount of fees actually payable to Prestbury).

The Group's net financing costs for the three month period to 30 June 2014 include £21.1 million payable on external borrowings, which are still in place, and £1.7 million relating to shareholder loans before they were capitalised prior to listing. External finance costs for the three months ended 30 June 2014 comprise £20.1 million of interest payable, £0.7 million of amortised finance fees and £0.3 million of covenant release fees.

Effective on listing, the terms of the two loan facilities were amended in order to remove any loan to value tests for the period from listing until loan maturity and to amend any provisions of the facilities required to permit the capital reorganisation, listing and conversion to REIT status. The healthcare facility was also varied such that, with effect from 5 June 2014, it is no longer an amortising loan but has become an interest only loan. A covenant release fee in respect of the healthcare loan amounting to £11.9 million became payable (but not due) on 5 June 2014. The fee falls due in quarterly instalments, commencing on 29 July 2014, and will be charged to the income statement evenly over the term of the loan to July 2017.

Both of the bank loans are floating rate facilities with interest rate risk managed by way of interest rate swaps, with the entire principal amount of each of the facilities fixed by way of the swaps for the term of the relevant loan. The market value of the interest rate swaps at 30 June 2014 is a liability of £119.6 million. This liability will not actually be incurred unless and until the interest rate swap contracts are terminated. The market value of the liability can otherwise be expected to reduce to zero over the remaining term of the swap contracts which expire in line with the debt maturity dates in mid 2017.

The average interest rates paid during the three months to 30 June 2014 for each facility were as follows:

Tax

The Group entered the UK REIT regime with effect from 5 June 2014. The UK REIT rules exempt the profits of the Group's UK property rental business from UK corporation tax. All of the Group's UK rental operations will therefore be exempt from UK tax with effect from 5 June 2014 subject to the Group's continuing compliance with the REIT rules. The Group is otherwise subject to UK corporation tax.

Realised profits from the German property rental business are taxable in Germany. The German tax charge for the three month period to 30 June 2014 amounted to £0.1 million, which represents an effective rate of 21%.

In the event that a UK REIT has financing costs that are not covered at least 1.25 times by its profits, tax is payable at the corporation tax rate (currently 21%) on the interest that exceeds the threshold level that is covered 1.25 times by profits up to a cap of 20% of taxable profits. In the period from 5 June 2014 to 30 June 2014, the Group was subject to a tax charge of £0.2 million on excess interest.

In the three month period to 30 June 2014, the effect of the Company's election into the REIT regime includes the reversal of a deferred tax liability of £117.3 million relating to unrealised UK capital gains tax and the release of a deferred tax asset of £28.3 million to the statement of other comprehensive income, relating to the Group's negative derivative financial instrument valuations, as this deferred tax will no longer crystallise given the Group's REIT status. The Group retains a deferred tax liability of £3.3 million relating to unrealised German capital gains tax and a deferred tax asset of £0.7 million relating to the interest rate hedging of its Euro loan facility.

Cash flow

The movement in cash over the three months to 30 June 2014 comprises:

The property assets of the Group are let on full repairing and insuring terms, such that each tenant is obliged to keep the premises in good and substantial repair and condition, including where necessary to rebuild, reinstate, renew or replace the premises. Consequently it is not expected that material capital expenditure will be required for the current portfolio.

Gross proceeds of the placing of shares on 5 June 2014 were £15.0 million and the net proceeds were £11.8 million, with £0.2 million of the total £3.2 million costs relating to the issue of new shares charged to the share premium reserve, and £3.0 million relating to the listing and the reorganisation charged to administrative expenses in the income statement.

Financing

The Group's operations are financed by a combination of cash resources and non recourse debt finance. Non recourse debt means that the assets at risk in the event that any debt facility were to default are limited to those within a specific ring-fenced structure. The healthcare assets and the leisure assets each secure separate non recourse facilities.

The loans financing the leisure assets are amortising facilities split between a Sterling facility (£499.5 million at 30 June 2014) and a Euro facility (£53.6 million at 30 June 2014), with security cross-collateralised between the UK and German leisure assets. The facilities financing the leisure assets amortise quarterly by the application of net portfolio cash flow in repayment of debt.

Before 5 June 2014, the loan financing the healthcare assets amortised quarterly by the application of net portfolio cash flows in repayment of debt but thereafter became an interest only facility.

The Group's gross and net debt at 30 June 2014 is as follows:

All facilities remain within the relevant financial covenants. Debt maturity dates are May 2017 for the healthcare assets and July 2017 for the leisure assets. There are no loan to value tests before the maturity of the loans.

Secured cash is cash deposited in bank accounts under the control of lenders. Free cash is available to be applied for general corporate purposes for as long as there is no default under the relevant loan agreement. Cash held within the accounts that are not held as security within the structures over which lenders have security is not at risk in the event of a debt default.

Nick Leslau

9 September 2014

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

The financial information set out in this report covers the three month period to 30 June 2014, with comparative amounts relating to the year to 31 March 2014 and the six month period to 30 September 2013.

This financial report includes the results and net assets of the Company and its subsidiaries, together referred to as the Group.

The Company is incorporated and domiciled 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 principal activity of the Group is that of property investment.

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.

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 is deemed to be a "combination under common control" and as a result is outside the scope of IFRS 3 "Business Combinations". As such it is considered appropriate that the principles of merger accounting, as set out under UK GAAP, are 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 are required.

Accordingly, although these entities did not form a legal group for the comparative periods reported herein, the comparatives comprise the net assets of all entities as if the subsequently formed legal group had been in existence throughout all periods reported on. The comparatives for the year to 31 March 2014 presented in this report will be the comparatives disclosed in the Group's statutory accounts for the nine months ending 31 December 2014.

Earnings per share has been calculated on the assumption that the capitalisation of shareholder loans which occurred on 20 May 2014 had been in place throughout the whole period from 1 April 2013, with a corresponding effect on earnings and number of shares used in the EPS calculations (see note 6).

For the comparative periods reported herein, NAV per share (including diluted and EPRA NAV per share) has been calculated on the assumption that the capitalisation of shareholder loans had been in place throughout the whole period from 1 April 2013 with a corresponding effect on the number of shares used in the NAV per share calculations (see note 16).

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.

Euro denominated results for the German assets have been converted to Sterling at an average exchange rate for the period of £1: €0.81505 and period end balances converted to Sterling at the 30 June 2014 exchange rate of £1: €0.8005.

The condensed financial statements for the period are unaudited and do not constitute statutory accounts for the purposes of the Companies Act 2006.

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

Except as noted below, and except where no longer relevant to the Group, the accounting policies adopted in this report are consistent with those applied in the Group's statutory accounts for the year ended 31 March 2014 and are expected to be consistently applied in the period ending 31 December 2014. The following accounting policies became relevant only after the Group's listing and have therefore not been previously published.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of directly attributable issue costs. Costs not directly attributable to the issue are disclosed within administrative expenses in the Group income statement.

Share based payments

The fair value of payments that are to be settled by the issue of shares is determined on the basis of an estimate of the value of the services provided by non-employees over the relevant accounting period. The estimated number of shares to be issued in satisfaction of the services provided is calculated using the average closing share price of the Company for that period.

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.

The Group owns two property portfolios. Although these are described individually elsewhere in this report, they are not separately managed. The board receives quarterly management accounts prepared on a basis which aggregates the performance of investment properties 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 the current and prior periods.

All of the Group's revenues reflected in the income statement arose in the UK, except for £2.0 million (year to 31 March 2014: £8.0 million; six months to 30 September 2013: £4.0 million) which arose in Germany. Revenues, which reflect the impact of rent smoothing adjustments, include amounts of £14.4 million (year to 31 March 2014: £57.8 million; six months to 30 September 2013: £28.3 million) relating to the Group's largest tenant, and amounts of £11.8 million (year to 31 March 2014: £47.2 million; six months to 30 September 2013: £22.9 million) relating to the Group's second largest tenant. No other single tenant contributed more than 10% of the Group's revenue in any reporting period.

On issue in 2007, 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.

The tax assessed for the period varies from the standard rate of corporation tax in the UK applied to the profit / (loss) 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. Corporation tax could also be payable were the shares in a subsidiary company to be sold.

To remain a UK REIT, there are a number of conditions to be met in respect of the principal company of the Group, the Group's qualifying activity and its balance of business. Since entering the REIT regime the Group has continued to meet the relevant conditions required to retain REIT status. There are certain other conditions which if not met, do not result in expulsion from the REIT regime, including the two noted below which the Group does not currently comply with.

REIT rules require that within three years of entry into the REIT regime, a company is not a close company. The Company was when it entered the REIT regime, and continues to be, a close company. The board intends, in the course of implementing its investment strategy, either 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 REIT requirement within the three years to 5 June 2017.

The REIT regime imposes an interest cover test whereby profits of the tax exempt business of the Group must be at least 1.25 times its cost of financing. If this condition is not met, the Group is required to pay UK corporation tax on an amount equivalent to the excess financing costs or 20% of the tax exempt business profits if that is less. The Group has not met this test for the period since its listing, therefore tax is payable on the surplus interest cost. This amounted to £0.2 million for the period from 5 June 2014 to 30 June 2014.

The Group is subject to German tax on its German property rental business at an effective rate for the period and prior periods of 21%. A deferred tax liability is recognised for the German capital gains tax that would potentially be payable on the sale of those investment properties, and a deferred tax asset against the liability from the Euro interest rate hedging of the loan facility secured on the German properties.

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 each relevant period during which profits were earned.

Weighted average number of shares in issue

On 21 May 2014, by virtue of a reorganisation, as set out in note 2, the Company and SIR Hospital Holding Limited (the "Combined Companies") became a legal group. During and at the end of the periods ended 31 March 2014 and 30 September 2013 and in the current period 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 each period had the shareholder loans been capitalised on the basis of one share for each £1 of shareholder loans at the time they were advanced to the Combined Companies.

The profit attributable to the shareholders of the Combined Companies prior to 20 May 2014 has 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 is adjusted for the shares that it is estimated would need to be issued in respect of the period in settlement of performance fees earned, as explained in more detail in note 17.

The European Public Real Estate Association ("EPRA") publishes guidelines for calculating adjusted earnings designed to represent core operational activities. The EPRA EPS calculation is as follows:

The properties were independently valued at £1,471.8 million as at 30 June 2014 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 the RICS Valuation - Professional Standards January 2014 on the basis of fair value, supported by reference to market evidence of transaction prices for similar properties. Fair value represents the estimated amount that should be received for selling an investment property in an orderly transaction between market participants at the valuation date.

The properties were valued at £1,457.4 million as at 31 March 2014 and £1,436.6 million as at 30 September 2013 by Nick Leslau BSc (Hons) FRICS, a Chartered Surveyor and director of the Company, on the basis of fair value.

Included within the carrying value of investment properties at 30 June 2014 is £146.5 million (31 March 2014: £142.7 million; 30 September 2013: £134.5 million) in respect of the smoothing of fixed contractual rental uplifts. This balance arises through the Group's accounting policy in respect of leases with fixed uplifts, which requires the recognition of rental income on a straight line basis over the lease term. 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 at each reporting date was £1,315.1 million

Included within the Group's cash balances at 30 June 2014 is £25.4 million (at 31 March 2014: £24.9 million; at 30 September 2013: £24.8 million) of cash in accounts held as fixed security by the providers of secured bank debt.

In addition, as the Company is considered to be an internally managed Alternative Investment Fund, it is required by the Financial Conduct Authority to hold regulatory capital estimated at £0.4 million at 30 June 2014. Since 5 June 2014 and as at 30 June 2014, this regulatory capital is held in cash by the Company.

The movements in deferred tax balances in each period, analysed by the asset or liability giving rise to the balance, were as follows:

The following is the analysis of the deferred tax balances for financial reporting purposes:

With effect from 5 June 2014, there are no scheduled capital repayments, only quarterly repayments from the surplus net rental income on the leisure assets. Any balances not settled by quarterly repayments are payable in full at the end of the loan terms in 2017. The bank loans due within one year include an estimate of amortisation out of surplus net rental income (rental income less certain finance costs and administrative expenses) for the ensuing 12 months.

Interest has been hedged by way of interest rate swaps which fix the rate payable (inclusive of lenders' margin) at between 6.7% and 6.9% (and at a blended 6.8%) until the loan maturity dates.

There is no material difference between the fair value of the secured bank loans and their carrying values at each balance sheet date. The bank loans are secured by charges over the Group's investment properties and by fixed and floating charges over the other assets of certain Group companies but not including the Company itself. There have been no defaults or breaches of any loan covenants during the current or prior periods.

The terms of one of the secured bank loans were altered with effect from 5 June 2014 such that a restructuring fee of £11.9 million became payable to the lender. The fee, which is to be paid in quarterly instalments, will be charged to the income statement over the remaining term of the loan. Included within unamortised finance fees at 30 June 2014 is an amount of £11.6 million in respect of this fee.

The Group had no undrawn, committed borrowing facilities at each balance sheet date.

Shareholder loans amounting to £159.8 million were capitalised on 20 and 21 May 2014 (see note 2). Prior to their capitalisation, the shareholder loans were unsecured, interest free, subordinated to the bank loans and had no fixed repayment date. The earliest date that the shareholder loans could be repaid was following the repayment of the bank loans.

On issue in 2007, the shareholder loans were measured at fair value using an imputed interest rate. The difference between the fair value of the loans on inception and their face values at that date were accounted for as capital contributions. At 31 March 2014 and 30 September 2013 there was no material difference between the fair value of the shareholder loans and their carrying values.

The fair values of the Group's interest rate derivatives at each balance sheet date were as follows:

* swap contracts denominated in Euros, converted at the period end rate.

All of the above instruments expire on dates between April and July 2017 and are included in non-current liabilities.

The derivative contracts have been valued in accordance with IFRS 13 by reference to interbank bid market rates as at the close of business on the last working day prior to each balance sheet date by JC Rathbone Associates Limited, and include an adjustment for credit risk. All derivative financial instruments are classified as 'level 2' as defined in IFRS 13 and their fair values are calculated using the present values of future cash flows, based on market forecasts of interest rates and adjusted for the credit risk of the counterparties.

The Group uses all of its interest rate derivatives in risk management as effective hedges. The cash flow hedges consist of interest rate swaps that are used to protect against exposures to variability in future interest cash flows on bank loans which bear interest at variable rates. The amounts and timing of future cash flows are projected on the basis of their contractual terms. Gains and losses are initially recognised directly in equity, in the cash flow hedging reserve, and will be transferred to the income statement when the forecast cash flows affect the income statement.

Share capital represents the aggregate nominal value of shares issued. At 30 June 2014, the Company had an issued and fully paid share capital of 168,443,754 ordinary shares of £0.10 each (30 September 2013 and 31 March 2014: one ordinary share of £1).

On 16 April 2014, the Company's one ordinary share in issue of £1 was subdivided into ten ordinary shares of £0.10 each, such shares having the same rights and being subject to the same restrictions as the existing ordinary share of £1.

Non-interest bearing shareholder loans of £77,914,338 were capitalised on 20 May 2014 in exchange for the issue of 77,914,338 ordinary shares of £0.10 each at a value of £1 each. The excess over nominal value was credited to the share premium account. The directors of the Company consider that the market value of the loans as at the date of capitalisation was equal to their face value.

On 21 May 2014, the Company entered into a sale and purchase agreement pursuant to which it issued 81,908,717 ordinary shares of £0.10 each (at a value of £1 each) to Prestbury 1 Limited Partnership in consideration for the transfer of the entire issued share capital of SIR Hospital Holdings Limited to the Company. The merger relief principles of the Companies Act 2006 were applied in connection with this acquisition such that the excess consideration over nominal value was not credited to the share premium account. The investment in SIR Hospital Holdings Limited is carried at fair value and accordingly the credit was taken to the merger reserve.

On 23 May 2014, the Company, by written resolution, approved the reduction in the £70,122,904 standing to the credit of the share premium account and the cancellation of the £73,717,845 standing to the credit of the merger reserve. The amounts were released to retained earnings and are treated as realised profits.

The Company was re-registered as a public company limited by shares on 27 May 2014 and admitted to trading on AIM on 5 June 2014, raising £15 million before expenses through a placing of 8,620,689 new ordinary shares of £0.10 each at a price of 174 pence per share.

The nature and purpose of each of the reserves included within equity is as follows:

Share premium reserve: represents the surplus of the gross proceeds of share issues over the nominal value of the shares, net of the direct costs of equity issues.

Capital contribution reserve: represents the difference between the face value and fair value of shareholder loans. Amounts were reclassified to retained earnings evenly over the term of the loans until their capitalisation on 20 May 2014, when all remaining balances in the capital contribution reserve were transferred to retained earnings.

Other reserve: represents the cumulative exchange gains and losses on the translation of the Group's net investment in its German operations, as well as the impact on equity of the shares to be issued, as described in note 17, under the terms of both the Commitment Agreement and the performance fee arrangements.

Cash flow hedging reserve: represents the cumulative gains or losses, net of tax, arising on effective cash flow hedging instruments.

Retained earnings: represent the cumulative profits and losses recognised in the income statement.

Net asset value per share is calculated as the net assets of the Group attributable to shareholders at each balance sheet date, divided by the number of shares in issue at that date as follows:

* adjusted to reflect the reorganisation of the Group as described below

Diluted NAV per share is adjusted for the shares that it is estimated would need to be issued in settlement of performance fees earned, as explained in more detail in note 17. The diluted NAV per share at 30 June 2014 was 112.1 pence per share.

The European Public Real Estate Association has issued guidelines aimed at providing a measure of net asset value on the basis of long term fair values. The EPRA measure excludes items that are considered to have no impact in the long term, such as the fair value of derivative instruments and deferred tax balances. The Group's EPRA NAV is calculated as follows:

On 21 May 2014, by virtue of the reorganisation explained in note 2, the Company and SIR Hospital Holding Limited (the "Combined Companies") became a legal group. During and at the end of the periods ended 31 March 2014 and 30 September 2013, and in the current period 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 at 31 March 2014 and at 30 September 2013 as a denominator in the NAV per share calculations above would not provide meaningful information. Instead, the number of shares in issue at those dates has been determined based on the number of shares that would have been in issue had the shareholder loans been capitalised into shares on the basis of one share for each £1 of shareholder loans. The basic NAV has also been adjusted to reflect what it would have been had these loans been capitalised at these dates.

Interests in shares

The direct and indirect interests of the directors and their families in the share capital of the Company are as follows:

* Comprises 42,619,484 ordinary shares held by PIHL Property LLP and 57,471 ordinary shares held by the Saper Trust. Lesray LLP, a partnership in which Nick Leslau has a 42.6% legal interest and 50% of the voting rights owns 81.7% of PIHL Property LLP. The Saper Trust is a trust whose beneficiaries include Nick Leslau.

Directors' fees

Directors' fees of £17,000 were payable for the period from 31 May 2014 to 30 June 2014. As at 30 June 2014 all of these fees remained outstanding and are included within trade and other payables (note 11). Annual fees amounting to £185,000 per annum are payable to non-executive directors not connected to Prestbury Investments LLP ("Prestbury"). The directors connected to Prestbury (Nick Leslau, Mike Brown and Sandy Gumm) do not receive directors' fees.

Advisory fees payable

Nick Leslau, Mike Brown and Sandy Gumm hold partnership interests in, and are Chairman, Chief Executive and Chief Operating Officer respectively of, Prestbury Investments LLP, which is Investment Adviser to the Group under the terms of an agreement entered into on 30 May 2014 (the "Investment Advisory Agreement"). Under the terms of the Investment Advisory Agreement, advisory fees of £257,000 were payable in cash to Prestbury in respect of the period to 30 June 2014, all of which were outstanding as at the balance sheet date and are included within trade and other payables (note 11).

Commitment Agreement

On 29 May 2014, in connection with its listing, the Company entered into a Commitment Agreement with its existing investors at that time in order to fund (in whole or in part) the Company's payment of its contracted advisory fee to Prestbury during the period from admission of the Company's shares to trading on AIM on 5 June 2014 to 10 July 2016 (the "Commitment Agreement Period").

Under the terms of the Commitment Agreement, the cash funding of the advisory fees is required to be satisfied by way of subscription for shares. Each existing investor has agreed to subscribe for one share per quarter over the Commitment Agreement Period amounting to an aggregate of 54 new shares in the Company. The total subscription price payable by the existing investors for the shares to be issued to them in any quarter is equal to the advisory fee payable by the Company to Prestbury in respect of that quarter (subject to a maximum aggregate subscription price of £1,321,244 per quarter). The investments made under these arrangements since the balance sheet date are disclosed in note 18.

Performance fee

Under the terms of the Investment Advisory Agreement, Prestbury Incentives Limited, a wholly owned subsidiary of Prestbury Investments LLP, may become entitled to a performance fee. The fee, if any, will be payable annually and calculated at the lower of:

(i) 20% of the excess of shareholder returns over a 10% annual return with the hurdle automatically resetting each year to 10% over the previous year's EPRA NAV per share plus cumulative distributions paid since listing; and

(ii) 20% of the excess of year end EPRA NAV per share plus cumulative distributions paid over the 'high watermark', being EPRA NAV per share plus cumulative distributions per share as at the last time a performance fee was paid (or 172 pence per share, being the EPRA NAV per share at the time of listing, if performance fees have yet to be earned).

The performance fee will be settled in shares in the Company, subject to certain limited exceptions.

Before any fee is actually earned for the current financial period to 31 December 2014, the EPRA net asset value per share of the Group (after adding back any distributions to shareholders) must exceed 182 pence per share at 31 December 2014. If 182 pence per share has been achieved, 20% of shareholder returns in excess of that level would be attributable to Prestbury Incentives Limited and paid by way of the issue of shares (other than in certain limited circumstances where the fee would be payable in cash), sales of which are restricted, with the share sale restriction only lifted on a phased basis over a period from 18 to 42 months.

The performance fee which has been charged in the income statement for the period from listing to 30 June 2014 amounts to £0.8 million. This is offset in the Group's net asset value by an increase in reserves represented by shares to be issued in satisfaction of the estimated fee. In order to satisfy a fee of £0.8 million at 30 June 2014, 327,004 shares (c. 0.2% of the Company's issued share capital) would need to be issued at the average mid market closing share price of the Company for the period to 30 June 2014 of 249.6 pence per share. Consequently, recognising the cost of the performance fee in these condensed financial statements does not have any impact on the net asset value of the Group but, by reflecting the shares potentially to be issued, it marginally reduces the Group's net asset value per share and earnings per share.

The fee represents an estimate of performance fees for services to be performed in the period from 5 June 2014 to 31 December 2014, time apportioned to reflect the proportion of the services performed up to 30 June 2014. The total performance fee for the period to 31 December 2014 has been estimated at £6.8 million.

Neither the fee estimate for the financial period nor the underlying estimate of EPRA net asset value at 31 December 2014 constitutes a forecast. It is based on an estimate of the EPRA net asset value of the Group assuming that the property portfolio valuation yields do not change from those applied as at 30 June, that there are no material currency translation gains or losses, and that there is no material variation in actual movements in the Retail Prices Index (against which the UK leisure rents are indexed) as compared to current expectations. This represents an estimated illustrative case only, and is considered to provide a reasonable estimate of the performance fee for the period ended 30 June 2014 while recognising the limitations inherent in any estimate of future values.

If there were no further movements in the Group's EPRA net asset value in the period from 30 June 2014 to 31 December 2014, the fee as at 31 December 2014 would amount to £1.2 million and the amount attributable to the period ended 30 June 2014 would be £0.1 million.

Share purchase agreement

On 21 May 2014, the Company entered into a sale and purchase agreement with Prestbury 1 Nominee Limited (as nominee) and Prestbury 1 Limited Partnership (as beneficial owner), pursuant to which the Company issued 81,908,717 ordinary shares of £0.10 each (at a value of £1 each) to Prestbury 1 Nominee Limited as nominee for Prestbury 1 Limited Partnership in consideration for the transfer of the entire issued share capital of SIR Hospital Holdings Limited (formerly P1 Hospital Holdings Limited) to the Company. All of the members of Prestbury 1 Limited Partnership at the time of the agreement are shareholders in the Company and still hold these shares, amounting to 95% of the issued share capital of the Company at 30 June 2014.

On 1 July 2014, in accordance with the terms of the Commitment Agreement, the six existing investors subscribed for one new share each in the Company to fund the advisory fee of £0.3 million payable to Prestbury for the period from 5 June 2014 to 30 June 2014. Following admission of the six shares to trading on AIM on 7 July 2014 the Company's issued ordinary share capital increased to 168,443,760.

SECURE INCOME REIT PLC

(formerly P1 Theme Park Holdings Limited)

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014

These financial statements relate to a period:

• before the purchase of the subgroup that owns the healthcare portfolio, which represents about half of the net assets of the Group since the time of listing in June 2014;

• before a capital restructuring which included the capitalisation of existing shareholder loans and the issue of £15 million of share capital at the time of listing; and

• entry into the UK REIT regime, which resulted in a material change to the tax status of the Group.

Because they do not reflect the impact of the capital reorganisation, listing and conversion to REIT status, these financial statements are of limited relevance in current circumstances and they are not a useful point of reference in understanding the financial position of the Group as it has been since listing in June 2014.

The directors present their strategic report, together with the audited financial statements for the year ended 31 March 2014. 

Strategic Report for the year ended 31 March 2014

Change of name

The Company re-registered as a public company and changed its name from P1 Theme Park Holdings Limited to Secure Income REIT Plc on 27 May 2014.

Principal activities

The Company is the holding company of a group of companies whose principal activity is property investment. At 31 March 2014 the Group owned a portfolio of seven leisure assets leased to tenants on long term leases with an unexpired lease term at that date of 28 years.

Following the acquisition by the Company of the SIR Hospital Holdings Limited (then known as P1 Hospital Holdings Limited) group on 21 May 2014, the Group owns 28 freehold investment properties with a weighted average unexpired lease term of 25.8 years as at 31 March 2014. The results and net assets of the SIR Hospital Holdings Limited group are not included in these accounts.

The Group's operations are all conducted within the United Kingdom (83% of Group income) and Germany (17% of Group income).

Business review

Key performance indicators

The objective of the board is to achieve growth in the Group's net asset value per share. For periods prior to the listing of the Company including the periods covered by these financial statements, progress has been measured principally through growth in EPRA NAV (stripping out the impact of hedging valuations and deferred tax on investment property revaluation). During the year the Group has generated a £25.7m increase in EPRA NAV as set out below:

* includes the impact of rent smoothing adjustments in the year, further explained in note 8 to the financial statements.

Transition to International Financial Reporting Standards as adopted by the European Union ('IFRS')

The Company was admitted to trading on AIM on 5 June 2014. As a result the Group's accounting policies have been changed, where appropriate, to comply with IFRS. The main changes from the previous UK GAAP treatment relate to the recognition on the Group's balance sheet of the market value of derivative financial instruments, the adjustment to carry shareholder loans at their fair value, the change in presentation of movements in investment property valuations and the impact on the income statement presentation of the straight line recognition of rental income from fixed rent reviews.

Post balance sheet events

Details of the significant post balance sheet events are set out in note 22.

Principal risks and uncertainties

Property valuation movements and uncertainties in property valuation

The Group is a long term investor in commercial property and accordingly is exposed to movements in property valuations. Property values will vary as a result of a variety of factors, many of which are outside the control of the Group. In the event of downward movements in property values, the net asset value of the Group would be adversely affected. The valuation of property is inherently subjective, in part because property valuations are made on the basis of assumptions which may not prove to be accurate. As such, there is no assurance that the valuations of the Group's property investments will reflect actual sale prices or rental yields even where any such sales or entry into leases occur shortly after the relevant valuation date.

Tenant risk

During the year the Group derived its rental income from three tenants with one common guarantor. One tenant accounted for 88 per cent. of revenues. The directors regularly examine the financial affairs of the tenants and guarantors. They believe the tenants and guarantor to be financially strong and capable of meeting their lease obligations, but there can be no guarantee that they will remain able to comply with their obligations throughout the term of the relevant leases. Any tenant or guarantor failure could result in an adverse impact on the value of the Group's property assets, or a reduction in the Group's contracted rental income streams, or both.

Both the rental income and value of the properties owned by the Group may be affected by the operational performance of the tenants' businesses. This relates both to the business being carried out at a specific property and to the general financial performance of the tenants and guarantors within their wider operations. The operational performance of a tenant will be affected in turn by both local conditions and the wider economy. In the event of material default of lease obligations by a tenant or guarantor, the Group may suffer a rental shortfall and/or incur additional expenses and/or interest costs until the property is re-let. The specialised use of the properties may make such re-letting difficult. Such an event would likely result in legal and surveyors' costs, maintenance costs, insurance, rates and marketing costs and may have a material adverse impact on the financial condition and performance of the Group.

Borrowing

At the balance sheet date the Group had £554m of outstanding bank loans secured against investment properties valued at £730m. Whilst the use of borrowings should enhance growth in the net asset value of the Group where the value of the Group's property assets is rising, it would have the opposite effect in an environment where the property asset values are falling.

Certain Group companies (other than the Company itself) have granted security to lenders in the form of mortgages over investment property and fixed and floating charges over other assets. Should any fall in asset values or contracted rental income result in a Group company breaching covenants within the Group's credit agreements, Group companies may be required either to pay higher interest costs or to make early repayment of such borrowings, in whole or in part, together with any attendant costs, including the costs of terminating interest rate hedging instruments. In such circumstances the financial condition of the Group could be adversely impacted and the Group may be required to sell sufficient assets to repay such amount of the borrowings or meet the costs of terminating the interest rate hedging instruments.

While the board believes the Group has a prudent level of headroom on the financial covenants under its debt facilities, there can be no certainty with regard to future asset valuations and revenue generation. The loan to value covenants were tested on 5 June 2014, after which there are no loan to value covenants in the remaining term of the Group's debt facilities. However, if property valuations were to fall to a level such that the relevant Group company was considered to be unlikely to be able to meet its debt repayment obligations at maturity, and where the Group is unable to make such repayment out of existing cash resources, then Group companies may be forced to sell sufficient assets to repay part or all of the Group's secured debt. In such circumstances where the Group is required to sell its assets, it is conceivable that the Group may be required to do so at less than their optimum market value or at a time and in circumstances where the realisation proceeds are reduced due to a downturn in commercial property values generally, as a forced seller or because there is limited time to market the property.

Access to financing in the future will depend on suitable market conditions

The Group's debt facilities are due for repayment in July 2017 and, at the point of refinancing, the Group will be dependent upon access to financing from debt or equity markets or through asset sales to meet its repayment obligations. Access to such financing will depend on market conditions at the time and if market conditions are unfavourable the Group may not be able to obtain replacement financing or may only be able to obtain such financing at a higher cost or on more restrictive terms. In such circumstances, the Group may have to raise finance by other means such as asset sales on terms which might have an impact on shareholder returns. Furthermore, the terms of any refinancing might limit investment activity, total shareholder returns and/or the level of dividends the Company is able to pay.

Interest rate risk

The Group has borrowed on a variable rate basis and has entered into derivative instruments to mitigate the risk of movements in interest rates. The Group's policy is that any future variable rate borrowing should also be appropriately hedged. To the extent that the relevant members of the Group do not enter into hedging arrangements or if such arrangements are no longer available or are only available on unacceptable terms, the Group may be exposed to interest rate risk.

The current low interest rate environment has given rise to a significant liability relating to the interest rate derivatives. This does not represent a cash liability unless and until the instruments are terminated. However, should debt facilities be repaid early, some hedging instruments may need to be terminated or restructured which, depending on market interest rates at the time and the term to maturity of the instrument, could adversely impact on the financial condition and cash flows of the Group.

Exchange rate risk

The Group prepares its financial statements in Sterling. Some of the Group's business is conducted in Germany with its German assets generating Euro denominated revenues and financed with Euro denominated debt. As a result, the Group is subject to foreign currency exchange risk due to exchange rate movements which affect the Group's transactions and the translation of the results and underlying net assets of its foreign operations. The board periodically reviews exposure to foreign exchange risk with a view to mitigating risks where possible.

Group Income Statement and Group Statement of Other Comprehensive Income