Results for the year ended 31 December 2017

9 March 2018

Secure Income REIT Plc

(the "Company" or the "Group")

Results for the year ended 31 December 2017

Secure Income REIT Plc (AIM: SIR), the specialist long term income UK REIT, today announces its results for the year ended 31 December 2017.

Highlights

• EPRA NAV per share up 14.5% to 370.4p over the year to 31 December 2017

• Adjusted EPRA EPS up 20.4% to 13.6p for the year

• Total EPRA NAV per share growth plus dividends returned 19% for the year, mirrored by Total Shareholder Return of 19%

• Portfolio valuation up 7.8% over the year to £1.77 billion at 31 December 2017

• Portfolio valued at a blended net initial yield of 5.1%

• Net Loan To Value ratio further reduced to 49.6%, down from 53.5% at 31 December 2016

• Fully covered distributions currently yielding 3.8% on 31 December 2017 EPRA NAV, up 19.1% on the year ended 31 December 2016

• 81 Key Operating Assets in defensive sectors producing £95.7 million per annum of passing rent at 31 December 2017, up from £92.6 million per annum over the year

• Strong and predictable growth prospects underpinned by annual fixed and RPI-linked uplifts

• Portfolio rents have inbuilt growth: 58% have fixed annual uplifts (min 2.8% per annum); 27% are subject to annual uncapped upwards only RPI; 15% with five yearly uncapped upwards only RPI

• Weighted average unexpired lease term of 22.2 years with no breaks

• Management team significantly aligned, with a 16.4% stake worth c. £140 million at 31 December 2017 EPRA NAV

• Two substantial off market acquisitions totalling £436 million announced today, alongside a proposed placing of ordinary shares targeting gross proceeds of up to £315.5 million conditional on shareholder approval at a general meeting, and an associated new £128.7 million debt financing at c. 30% loan to cost

- The acquisitions meet the Board's strict investment criteria and will be significantly dividend accretive, materially deleveraging the Group's balance sheet and reducing its weighted average cost of debt, while also maintaining its very long weighted average unexpired lease term. The acquisitions have the secure long term inflation protected income that is at the core of the Group's business and also present a number of value enhancing opportunities through asset management.

- Further details are contained in the announcement and circular to shareholders issued today, available in the Investor Centre of the Company's website at www.SecureIncomeREIT.co.uk.

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

"We are pleased to announce NAV per share growth of 14.5% for the year and a total shareholder return of 19%. Our portfolio of key operating assets in defensive sectors let to strong covenants on long leases provides income security whilst our upwards only RPI reviews and fixed rental uplifts generate both predictable and attractive levels of income growth.

Secure Income REIT has been a beneficiary of being an early mover into this market with its NAV per share more than doubling since float in 2014 but we believe that this has further to run. The weight of cash seeking well-let index-linked property is in our judgment far in excess of the stock currently available on the market, which continues to put upward pressure on prices.

In this context we are also pleased to announce the proposed purchase of two separate portfolios at a total cost of £436 million, offering an attractive net initial yield of 6% and an average unexpired lease term of over 20 years with 86% of the income offering RPI protection plus a further 13% with fixed uplifts. The assets include Manchester Arena, the UK's largest indoor entertainment arena, 76 Travelodge hotels and the largest catered event space in the City of London at the Chiswell St Brewery. The Board and management team are excited by the opportunities presented by the new transactions and intend to invest a further £5.25 million cash in new shares to support this £315.5 million placing."

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, secure, inflation protected income flows. The Group owns a portfolio of 81 well established operating real estate assets including some of the UK's top visitor attractions and theme parks: namely Alton Towers theme park and hotel, Thorpe Park and Warwick Castle, as well as 20 private hospitals and 55 Travelodge hotels in the UK.

Meeting for investors and analysts and audio recording of results available

A meeting for investors and analysts will be held at 9.30am today at:

Newgate Communications

Sky Light City Tower

50 Basinghall Street

London, EC2V 5DE

In addition, later in the day an audio recording of this meeting and the presentation will also be available to download from the Company's website: http://secureincomereit.co.uk/disclaimer/investor-centre

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,

I am very pleased to report another year of the Group delivering strong shareholder returns, demonstrating the benefits of the quality of the Group's portfolio and its secure long term rental flows with their in-built fixed and inflation linked uplifts.

The Board's stated intention is to continue in a disciplined way to build on the strong foundations of the business, only making acquisitions that meet stringent criteria. I am delighted to announce today that we have secured two significant off-market portfolio acquisitions that satisfy these conditions. The details of the acquisitions and related proposed share placing are set out in an announcement and circular to shareholders published today, both of which are available in the investor centre of the Company's website. We believe that these acquisitions will not only continue to deliver the strong and predictable income and capital returns that are at the heart of the Company's strategy but also present some exciting opportunities for value enhancement through asset management.

Results and financial position

The Group's EPRA NAV at 31 December 2017 was 370.4 pence per share, an increase of 14.5% over the year which, when added to the dividends of 13.6 pence paid in the year, represents a Total Accounting Return of 18.7%.

The results for the year ended 31 December 2017 do not include any effects of the proposed acquisitions.

The increase in EPRA NAV per share over the year was driven by a 7.8% like for like valuation increase due to rents rising by 3.3% and a 22 basis point yield improvement. The blended Net Initial Yield at 31 December 2017 of 5.1% is expected to rise to 5.2% by July 2018 on completion of the next round of annual rental uplifts.

The Group's Adjusted EPRA Earnings Per Share has increased by 20.4%, to 13.6p in 2017 from 11.3p in 2016, which largely reflects the positive impact of the £196 million Travelodge portfolio acquisition in 2016 and the increase in like for like passing rents over the year.

The Net Loan To Value ratio at 31 December 2017 was 49.6%, down from 53.5% at the end of 2016, and continuing its downwards trajectory in line with our strategy. Our expectation is that this ratio will continue to fall, with the decline enhanced by future earnings and dividend accretive acquisitions which will be financed at lower rates than the current levels of gearing.

Outlook

2018 has commenced with global stock markets providing a useful reminder that equity investors earn their rewards from living with volatility. Bond yields and interest rates have also begun to rise but remain at very low levels compared to any time in history. 30 year gilts offer a paltry 2% yield, insufficient compensation in our view against inflation running at 3% per annum. Meanwhile, inflation protection remains eye-wateringly expensive with index-linked gilts yielding minus 1.5%, guaranteed to produce a loss in real terms for any investor holding until redemption.

This background remains highly supportive for our business as the search for yield and income growth continues with roughly £4 billion raised in the UK stock market in the last 15 months by REITs in the logistics and alternative real estate sectors. Dedicated institutional long lease property funds have also been attracting cash at what appears to be a faster rate than most have been able to deploy it. Finally, mainstream institutional property investors continue to rebalance their portfolios, reducing their exposure to challenged high streets and taking advantage of strong overseas investor demand to switch out of cyclically high London office values. The cash released is typically being recycled into warehouses and alternatives. The squeeze is accentuated by the fact that high quality long lease assets are not so readily manufactured at a time when most strong businesses can raise cash more cheaply through the corporate bond market than via sale and leasebacks. The result is that the weight of cash seeking well-let index-linked property is in our judgement far in excess of the stock currently available on the market, which continues to put upward pressure on prices.

Early movers may have reaped the biggest rewards with the Group's NAV per share more than doubling since float in 2014, but we believe that we are only part way through this process and a significant value gap remains. To illustrate, if we take the current market projections for inflation over the next five years, we would anticipate dividend growth in the order of 6% per annum from our portfolio. When combined with a dividend yield of approaching 4%, this has the potential to provide a much healthier level of prospective return than current industry forecasts for UK commercial property, which are typically in mid-single figures over a similar time frame. With stronger covenants and longer leases generating, through fixed uplifts and upwards only RPI reviews, much greater income growth predictability than most property portfolios, we believe that our returns ought to be delivered with greater inflation protection and less risk. It is this potential to generate higher prospective returns at lower risk that is fuelling investor enthusiasm in our sector. Given that our Net Initial Yield of 5.1% stands at the same level as the all property Net Initial Yield on the IPD monthly index, we expect that this process has further to run and we continue to view the future with confidence.

We are also pleased to announce the next chapter in the Group's growth. Two separate portfolios satisfying our strict acquisition criteria have been secured off-market for a total cost of £436 million, offering an attractive net initial yield of 6.0% with average unexpired lease terms of over 20 years, and 86% of the income with RPI protection plus a further 13% with fixed uplifts. The Manchester Arena complex, the biggest single asset, includes the largest capacity indoor entertainment arena in the UK and the second largest in Europe, which is let to the world's biggest manager of sports and entertainment venues for a further 27 years. The budget hotel sector has been a happy hunting ground for the Group with excellent performance from our 2016 acquisition and we are pleased to have secured a further 76 Travelodge hotels. The acquisitions also include the well-known Chiswell Street Brewery, one of London's top three catered event spaces by capacity, and a small package of well-let pubs. Following the acquisitions, we expect a dividend yield of 4.3% on the 365.0 pence per share placing price, with a further diversified covenant profile and reduction in our Net Loan to Value from c. 50% to 46%, whilst maintaining our attractive total returns outlook. The Board and management team are excited by the opportunities presented by the new acquisitions and intend to invest a further £5.25 million cash in new shares to support this £315.5 million placing.

Martin Moore

Chairman

9 March 2018

Investment Adviser's Report

Prestbury Investments LLP is the investment adviser to Secure Income REIT Plc and is pleased to report on the operations of the Group for the year ended 31 December 2017.

Portfolio

The portfolio at 31 December 2017 comprised 81 properties, with secure, long term income and contractual rental uplifts offering inflation protection, producing £95.7 million of passing rent, up 3.3% from £92.6 million at 31 December 2016 on an unchanged portfolio over that period. The basis of rent review for the portfolio held at 31 December 2017 is:

· 58% subject to fixed annual uplifts with a weighted average uplift of 2.8% per annum

· 27% subject to annual uncapped upwards only RPI-linked reviews

· 15% subject to five yearly uncapped upwards only RPI-linked reviews

Every property is a Key Operating Asset - one where its operations are integral to the tenant's business, ensuring added income security. 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 22.2 years from 31 December 2017 with no break options, and on full repairing and insuring leases, meaning that property running costs are low and there is no capital expenditure requirement.

Portfolio valuation

The portfolio is valued by qualified external valuers every six months for the Group's interim and annual reports. The overall movements in rent and valuation are shown in the table below and are further explained for each sub-portfolio in the following sections.

The valuation increase comprises:

Yield movements in the year

* the healthcare yields take no account of any uplift from the outstanding earnings based May 2017 review on the Ramsay hospitals, which account for 96% of the healthcare rents at 31 December 2017

+ the leisure and hotels running yields are calculated using the external valuer's assessment of RPI at 2.5%

Portfolio total rents

As the composition of the portfolio has not changed over the year and all properties are fully let on long leases, the tenants also remained unchanged over the year with passing rent as follows:

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

The portfolio rents will increase every year as a result of the fixed and RPI-linked reviews, which as at 31 December 2017 operate as follows:

Healthcare assets (53% 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. Passing rent on the healthcare portfolio is as follows:

The leases on the Ramsay hospitals are all guaranteed by Ramsay Health Care Limited, the listed parent company of 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 8 March 2018 of £7.2 billion.

The Ramsay hospitals are let on full repairing and insuring leases with a term to expiry at 31 December 2017 of 19.4 years without break. The rent increases in May each year by a minimum of a fixed 2.75% per annum throughout the lease term and as a result will increase to at least £48.2 million on 3 May 2018. 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 to 57.525% of site earnings before interest, tax, depreciation, amortisation, rent and head office costs, and every fifth year thereafter to the higher of a 2.75% per annum uplift and open market rental value.

While the 3 May 2017 fixed uplift has taken effect, the earnings based rent review at that date 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 for consideration and whose opinion will be binding on the parties. Assuming there are no variations to the timetable agreed by the expert, this determination is expected to be received at the earliest in June 2018. The financial information in this announcement takes 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 2017 is not material, particularly as any uplift would need to be spread over the 20 years of the lease remaining at the review date.

The lease on the London psychiatric hospital is guaranteed by Orpea SA, the listed parent company of the Orpea Group, a leading European operator of nursing homes, post-acute care and psychiatric care, listed on Euronext Paris with a market capitalisation at 8 March 2018 of £5.8 billion. Orpea owns 45% of Groupe Sinoué, which is the parent company of the tenant. The hospital is let on a full repairing and insuring lease with a term to expiry at 31 December 2017 of 26.6 years without break. The rent increases in May each year by a fixed 3.0% per annum throughout the lease term and as a result will increase from £2.0 million to £2.1 million on 3 May 2018.

Leisure assets (34% of portfolio value)

The leisure assets are located in England and Germany and comprise four well known visitor attractions, including two of the UK's top three theme parks, and two hotels. The UK assets are Alton Towers theme park and the Alton Towers hotel, Thorpe Park theme park and Warwick Castle, while the German assets are Heide Park theme park (the largest in Northern Germany) and the Heide Park hotel, both located in Soltau, Saxony. Passing rent on the leisure portfolio is as follows:

The properties are held freehold and are let to substantial subsidiaries of Merlin Entertainments Plc, the guarantor of the leases. Merlin is a FTSE 250 company with a market capitalisation at 8 March 2018 of £3.8 billion. Measured by the number of visitors, it is Europe's largest and the world's second largest operator of leisure attractions.

The average term to expiry of the leisure leases is 24.5 years without break 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 over the twelve months to April each year) for the UK leisure portfolio, which in 2017 resulted in a rental increase of 3.5%. 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 will increase from £6.3 million to £6.6 million on 29 July 2018 (translated at the 31 December 2017 exchange rate).

Hotel assets (13% of portfolio value)

The hotel assets comprise 55 Travelodge hotels, 48 located in England and seven in Scotland, let to Travelodge Hotels Limited which is the main operating company within the Travelodge Group, trading in the UK, Ireland and Spain with 558 hotels and over 42,000 rooms as at 31 December 2017. Travelodge is one of the UK's leading hotel brands with approximately 19 million customers in 2017.

The average term to expiry of the leases is 25.4 years with no break clauses, and the leases are on full repairing and insuring terms, with Travelodge also responsible for reimbursing the Group for head lease rentals and any other amounts owing to the landlords of the 17 leasehold properties. There are upwards only uncapped RPI-linked rent reviews every five years throughout the term of each lease, the most recent of which settled in October 2017 resulting in passing rent of £14.1 million at the balance sheet date.

Financing

The Group's operations are financed by a combination of cash resources and non-recourse debt finance, where the assets at risk in the event of a loan default are limited to those within four ring-fenced sub-groups. Each facility is self-contained, with no cross default provisions between the four of them, and in all cases substantial financial covenant headroom is in place. The weighted average interest cost is 5.1% per annum and the weighted average term to maturity is 6.5 years from 31 December 2017.

The Group's gross and net debt at 31 December 2017 is as follows:

* including €71.8 million of Euro loans translated at the year end exchange rate of €1:£0.8873

† interest cover for these purposes is measured as passing rent divided by annualised interest cost at the date of measurement

Following scheduled amortisation payments in January 2018, the total gross debt at the date of this report, including Euro denominated debt at the 31 December 2017 exchange rate, is £966.3 million. There have been no defaults or potential defaults in any facility during the year or since 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.

Key terms of the facilities outstanding at 31 December 2017 are as follows:

* £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 year end exchange rate of €1:£0.8873) with all Leisure portfolio loans cross-collateralised. Cash amortisation of £3.2 million per annum on the sterling facility and €0.7 million per annum on the Euro facility applies from October 2020 to October 2022.

The Board's approach to managing the Group's capital structure includes ensuring that the risk of any breach of covenants within secured debt facilities is carefully managed. This includes structuring facilities to ring fence the extent to which the Group's assets are at risk, ensuring that levels of headroom over financial covenants are appropriate and maintaining a level of uncommitted cash to apply in curing debt defaults in the unlikely event that it is needed.

When evaluating the appropriateness of the level of secured debt, the Board has regard to the unusual nature of the Group's income streams, specifically that all of the occupational leases are significantly longer than conventional leases for UK real estate and that the Group's rental income increases annually, as a result of the annual minimum fixed rental uplifts on 58% of portfolio income, with the additional prospect of RPI uplifts on the rest of the portfolio. This structure gives rise to a naturally deleveraging debt profile on the assumption of constant valuation yields.

Business 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 dividends, and Total Shareholder Return, which is the share price movement plus dividends. The principal focus for the Board is on Total Accounting Return as the Total Shareholder Return, while important, is also subject to wider market movements not necessarily related to the Group itself.

The movements in net asset value as reported under IFRS and disclosed in the consolidated balance sheet are as follows:

* shares are issued in settlement of any incentive fee after the relevant year end, usually in March, following the issue of the Group's audited financial statements for that year

Business review (continued)

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. EPRA NAV also reflects any dilution in returns per share arising from the issue of shares in settlement of incentive fees payable in respect of the period. The Board considers EPRA NAV to be an appropriate measure as it provides for clearer and more consistent comparisons between the Company's performance and that of its peer group than the balance sheet measure of NAV.

In accordance with the EPRA Guidance, to calculate EPRA NAV the Group's consolidated net asset value is adjusted to exclude deferred tax on investment property revaluations relating to the German assets and is also adjusted for the dilutive impact of the shares to be issued in satisfaction of incentive fees payable in the period. The latter adjustment arises because, despite the incentive fee being accounted for in the results for the year, basic net asset value per share calculated in accordance with accounting standards does not include the impact of the shares to be issued in satisfaction of that fee.

The Group's EPRA NAV per share at 31 December 2017 was 370.4 pence, which represents a 14.5% increase over the year. The 46.8 pence per share uplift, together with dividends of 13.6 pence per share, results in a 60.4 pence per share Total Accounting Return, equivalent to an 18.7% return over the year.

* adjusted by 5.0 pence (2016: 6.7 pence) of rent smoothing adjustments explained below.

The key elements of the movements in net asset value presented under the EPRA measure are substantially the same as those shown in the financial information, with the principal differences being the exclusion of movements in deferred tax and the inclusion of the dilutive impact of the incentive fee share issue in the EPRA measure. EPRA NAV is reconciled to the balance sheet net asset value measured in accordance with accounting standards in note 22 to the financial information.

Rent smoothing

In addition to the valuation movements, a rent smoothing adjustment arises on investment property revaluations because accounting standards require that the impact of fixed rental uplifts is spread evenly over the term of each relevant lease. The adjustments relate to those rents on the healthcare assets which increase by 2.75% (on 96% of healthcare rents) and 3.0% (on 4% of healthcare rents) every May, and those rents on the German leisure assets which increase by 3.34% every July.

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

* at the year end Euro conversion rate of €1:£0.8873

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, any movement in the rent smoothing receivable is offset against property revaluation movements. As a result, this adjustment affects the income statement presentation, currently increasing rental income and reducing property revaluation movements, but not the Group's net assets. The annual impact of this adjustment is known with certainty unless there are acquisitions, disposals or lease variations. Assuming no change in the portfolio, the additional revenue and reduced valuation movement recognised during the year and expected for each of the next three financial years is as follows:

* at the 2017 average Euro conversion rate of €1:£0.8762

Key performance indicator - Adjusted EPRA earnings per share

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

The Group's basic EPS is calculated in accordance with accounting standards, which require that the weighted average number of shares in issue is calculated on the assumption that shares issued in settlement of any incentive fee are treated as having been issued on the first day of the following year when in fact they are generally issued some three months later. Basic EPS is therefore calculated on 230.5 million shares for 2017 and amounted to 59.5 pence per share which comprised:

Diluted EPS of 58.4 pence per share is based on the same earnings figure as basic EPS but is calculated on 235.1 million shares for 2017, which includes the 4.6 million shares still to be issued in settlement of the incentive fee for the year.

The Group's EPRA EPS excludes from basic EPS any investment property revaluations and related deferred tax, to give a measure of underlying earnings from core operating activities.

Adjusted EPRA EPS excludes any incentive fee (largely derived from investment property revaluations) and any significant non-recurring costs (such as the £2.0 million costs of the secondary placing in 2016). It is further adjusted to remove the effect of smoothing the fixed rental uplifts, in order not to artificially flatter dividend cover calculations. In calculating Adjusted EPRA EPS, the weighted average number of shares for 2017 was 229.7 million, reflecting the actual date on which shares were issued in settlement of the 2016 incentive fee, so as not to create a mismatch between the basis of calculating Adjusted EPRA EPS and dividends per share paid in the year.

The composition of the EPRA and Adjusted EPRA earnings measures is as follows:

The key components of the Group's earnings are its rental income, administrative expenses and finance costs. An analysis of the Group's rental income is included in the portfolio review earlier in this report and the other items are analysed below.

Adjusted EPRA EPS: administrative expenses

The Group's administrative expenses for the year, which are the same under accounting standards and the EPRA measures, were as follows:

Because VAT cannot be applied to the rents on the Healthcare assets, there is an element of irrecoverable VAT incurred on the Group's running costs which is included within each relevant line item in the table above. The proportion of disallowed VAT on general running costs averaged 48% during the year and was 48% as at 31 December 2017.

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 then meets office running costs and remuneration for the whole management and support team. The advisory fees payable to the Investment Adviser are calculated on a sliding scale based on the Group's EPRA NAV, payable at:

· 1.25% per annum on EPRA NAV up to £500 million; plus

· 1.0% on EPRA NAV from £500 million to £1 billion; plus

· 0.75% thereafter.

The advisory fee is further explained in note 24 to the financial information. The fee for the year amounted to £9.3 million plus VAT (2016: £7.0 million plus VAT). The annualised fee payable on the Group's EPRA net asset value at 31 December 2017 would be £9.9 million plus VAT (a total cost of £10.9 million) in the theoretical situation where the Group's EPRA NAV remained constant throughout the year.

The other recurring administrative expenses are principally professional fees, including tax compliance and audit fees, which are billed directly to Group companies. Fees paid to the auditors are disclosed in note 7 to the financial information.

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

· fees payable to the four Independent Directors of £0.2 million in the year (2016: £0.2 million), with the other three Directors being partners in the Investment Adviser and receiving no remuneration from the Company; and

· other costs of being listed, such as the fees of the nominated adviser required under the AIM rules, registrars' fees and AIM fees, which totalled £0.3 million (2016: £0.4 million) in the year.

In years where returns to investors exceed a benchmark, the Investment Adviser receives 20% of the surplus above that priority return to shareholders. The benchmark return to be met before any fee is paid is a compound growth rate of 10% per annum above the EPRA NAV the last time any incentive fee was paid. The Investment Adviser's share of the surplus, if any is earned, is met by way of an incentive fee, payable in shares following publication of the Group's audited annual results. Any such 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.

The benchmark EPRA NAV for the year ended 31 December 2017 was 343.0 pence per share. The actual results were significantly in excess of the benchmark therefore the Investment Adviser has earned a fee of £16.0 million in respect of the year, to be satisfied by the issue of 4.6 million shares, expected to occur in March 2018.

The incentive fee is further explained in note 24 to the financial information.

Adjusted EPRA EPS: net finance costs

Net finance costs are analysed as follows:

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

The current annualised weighted average interest rate is 5.1% per annum, which was also the average rate paid during the year (2016: 5.2% per annum). The Group's interest costs on all secured facilities are at fixed rates throughout the life of the loans, providing certainty of the Group's largest expense item over the term of each facility.

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 is payable on realised profits from the Group's German operations and the resulting tax charge for the year was £0.3 million (2016: £0.2 million). The balance sheet also includes a deferred tax liability of £10.2 million (2016: £8.5 million) relating to unrealised German capital gains tax 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.

On an IFRS basis, the current tax charge and the movement in deferred tax result in a net tax charge of £1.7 million (2016: £1.7 million). Deferred tax is excluded from Adjusted EPRA EPS as shown in note 10 to the financial information.

Currency translation

The majority of the Group's assets are located in the UK and the financial information is therefore presented in Sterling. 5.1% (2016: 4.7%) of the Group's EPRA NAV comprises assets and liabilities relating to properties located in Germany, valued in and generating net earnings in Euros. The fact that property assets and the secured debt are Euro denominated acts as a partial hedge of the currency risk, but the Group remains exposed to translation differences on the net results and net assets of these operations which are not hedged, with movements recognised in the statement of other comprehensive income.

The German properties are valued at €121.5 million as at 31 December 2017, with the Euro denominated secured debt amounting to €71.8 million. The Euro strengthened against Sterling over the year by over 3% and as a result there was a net currency translation gain of £1.2 million (2016: £3.0 million) on an IFRS basis. The deferred tax liability is excluded from EPRA NAV and as a result a further currency translation gain of £0.2 million arises in the movement in EPRA NAV in relation to the German operations (2016: £1.0 million).

Key performance indicator - Net Loan To Value ratio

The Board establishes initial Group Net LTV ratios and levels of financial covenant headroom with a view to creating a capital structure that will withstand varying market conditions.

During the year, Net LTV fell from 53.5% to 49.6% reflecting the property valuation uplifts in the year together with scheduled loan repayments.

Key performance indicator - headroom on debt covenants

The extent to which financial covenants are tested varies amongst the four credit facilities. In order to provide the required robustness of the capital structure, 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 the rental cash flows:

· the £309.1 million Healthcare facility and the £60.0 million Travelodge facility, which together account for 38% of gross secured debt, are subject to LTV and interest cover tests throughout the loan term;

· the £217.8 million Healthcare facility, accounting for 23% of total gross secured debt, is not tested for LTV until September 2019 (after which it is tested annually) and is subject to an annual interest cover cash trap test throughout the loan term; and

· the £380.4 million Leisure facilities, which account for 39% of total secured debt, are not subject to any LTV default covenant or interest cover tests throughout the loan term, though there are LTV levels which could trigger a cash trap or full cash sweep from August 2018.

The Board reviews the headroom on all financial covenants at least quarterly. The headroom on key financial covenants at 31 December 2017 is set out below, together with the net initial valuation yield, the fall in valuation or the fall in projected rent that would trigger the relevant covenant at the first test date:

* assuming RPI-linked rents increase in line with the RPI swap curve as at 27 February 2018

Key performance indicator - uncommitted cash

The Board considers that the ability to cure potential debt covenant breaches is an important risk management tool. The Group has negotiated headroom on financial covenants considered appropriate to the business and also certain cure rights, including the ability to inject cash (subject to certain limitations as to the frequency of cash cures) 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 represents cash balances outside ring-fenced structures secured to lenders, net of any creditors or other cash commitments and net of any cash required to be retained under the regulatory capital rules of the AIFMD regime.

The Group's uncommitted cash was £60.6 million as at 31 December 2017, compared to £64.3 million as at 31 December 2016.

Cash flow

The movement in cash over the year comprised:

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 the premises where necessary. Consequently, no capital expenditure, property maintenance or insurance costs have been incurred and it is not expected that material costs of that nature will be incurred on the portfolio in future.

The supplementary information included with this financial information includes details of the calculation of the EPRA measures referred to in this report.

Strategic Review

Strategy and investment policy

Against a backdrop of significant reduction in income security in the UK real estate market, caused by a marked decline in the average term to first tenant lease break or expiry, and mindful of the growing requirement amongst investors for long term, secure income flows, the Board aims to further build on the Group's existing portfolio of Key Operating Assets to create a substantial diversified long term income portfolio providing stable and growing income and capital returns for its shareholders. The Board defines a long term income stream as one with a weighted average term to maturity in excess of 15 years at the time of acquisition, and income security is assessed by reference either to the financial strength of the tenants or to the extent of asset cover provided by way of residual asset value.

The Board believes that the Company offers attractive geared returns from high quality real estate, with financially strong tenants operating with well established brands in industry sectors with strong defensive characteristics. An important characteristic of the portfolio is that assets acquired are "key operating assets", meaning they are business critical from the tenant's perspective. In that way, rental security is more certain as the site in question forms an essential part of the value of the tenant's own business.

The Board's intention is for the Group to continue to hold a diversified portfolio of long term, secure income streams from real estate investments across a range of property sectors, enhancing prospects for attractive total returns through earnings accretive acquisitions.

The Board believes that it will be able to seek further acquisition opportunities from a range of sources including operating businesses, non-REITs with latent capital gains fettering sale prospects, and opportunities where the Company's shares may be used as currency to unlock value. Acquisitions must be accretive to shareholder returns and will be financed with modest leverage and non-dilutive equity issues.

Key performance indicators

In order to monitor the successful delivery of the investment strategy, the Board monitors the following Key Performance Indicators:

· Total Accounting Return

· Adjusted EPRA earnings per share

· Net Loan To Value Ratio

· Headroom on debt covenants

· Uncommitted cash

Each of these is reported on in the Investment Adviser's Report on the preceding pages.

In addition to these measurable financial indicators, the Board is mindful of its responsibilities to its stakeholders. As an externally managed business, no Group company has employees and therefore the Group does not report on gender balance or the gender pay gap, nor on recruitment policies or procedures. The Board has, however, satisfied itself with the appropriateness of the Investment Adviser's approach to fairness and equality in its own operations and has received a confirmation from the Investment Adviser that it complies with all relevant laws and regulations.

The Group does not develop properties, and all of the physical upkeep of the investment properties is the responsibility of its tenants, so we do not report on environmental sustainability in this annual report as we do not have direct influence on the sustainability of the assets in their day to day operations.

Principal risks and uncertainties

The Board considers that the principal risks and uncertainties facing the Group are as follows:

The Group does not consider that the impending departure of the UK from the European Union ("Brexit") presents a risk in and of itself, largely as the Group is not dependent on access to European markets and is not expected to be directly impacted by changes in regulations or tariffs. However, the Board considers that Brexit does potentially weigh on all the risks highlighted above.

There have been periods of significant political, economic and market uncertainty since the referendum to leave the EU and this has at times expanded to equity, debt, property and foreign exchange markets. Delivery of the Group's growth aspirations depends on access to capital markets and external factors including market volatility can have an impact on the ability to implement this strategy. The impact of Brexit has been taken into account in evaluating the risks listed above. Given the Group's long term income profile and its fixed rate debt, such conditions are currently considered unlikely to have a material impact on the status quo but are considered to be relevant to the Group's growth aspirations in so far as there is an impact on the availability of debt and equity capital.

Going concern

The Board regularly monitors the Group's ability to continue as a going concern. Included in the information reviewed at quarterly Board meetings are summaries of the Group's liquidity position, compliance with loan covenants and the financial strength of its tenants and guarantors, together with scenarios for the Group's future performance and cash flows including stress test scenarios. Based on this information, the Directors are satisfied that the Group and Company are able to continue in business for the foreseeable future and therefore have adopted the going concern basis in the preparation of this financial information.

Viability statement

The Board has assessed the prospects of the Group over the five years from the balance sheet date to December 2022, which is the period covered by the Group's longer term financial projections. The Board considers the resilience of projected liquidity, as well as compliance with secured debt covenants and UK REIT rules, under a range of RPI and property valuation assumptions.

The principal risks and the key assumptions that were relevant to this assessment are as follows:

Based on the work performed, the Board has a reasonable expectation that the Group will be able to continue in business over the five year period of its assessment.

Group Income Statement

All amounts relate to continuing activities.

The notes form part of this financial information.

Group Statement of Other Comprehensive Income

The notes form part of this financial information.

Group Statement of Changes in Equity

Interim dividends totalling 13.6 (2016: 5.8) pence per share were paid during the year.

The notes form part of this financial information.

Group Balance Sheet

The notes form part of this financial information.

Group Cash Flow Statement

The notes form part of this financial information.

Notes to the Group Financial Information

The financial information set out in this report covers the year to 31 December 2017, with comparative figures relating to the year to 31 December 2016, and includes the results and net assets of the Company and its subsidiaries, together referred to as the Group.

The Company is incorporated in the United Kingdom. The address of the registered office and principal place of business is Cavendish House, 18 Cavendish Square, London W1G 0PJ. The nature and scope of the Group's operations and principal activities are described in the Chairman's Statement, the Investment Adviser's Report and the Strategic Review.

The Company is listed on the AIM market of the London Stock Exchange. Further information about the Group can be found on its website, www.SecureIncomeREIT.co.uk.

a) Statement of compliance

The consolidated financial information has been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union ("IFRS").

The financial information contained in this announcement has been prepared on the basis of the accounting policies set out in the financial statements for the year ended 31 December 2017. Whilst the financial information included in this announcement has been computed in accordance with IFRS, as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The financial information does not constitute the Group's financial statements for the years ended 31 December 2017 or 31 December 2016, but is derived from those financial statements. Those financial statements give a true and fair view of the assets, liabilities, financial position and results of the Group. Financial statements for the year ended 31 December 2016 have been delivered to the Registrar of Companies and those for the year ended 31 December 2017 will be delivered following the Company's AGM. The auditors' reports on both the 31 December 2017 and 31 December 2016 financial statements were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

b) Basis of preparation

The Group financial information is presented in Sterling as this is the currency of the primary economic environment in which the Group operates. Amounts are rounded to the nearest thousand, unless otherwise stated.

Euro denominated results for the German assets have been converted to Sterling at the average exchange rate for the year of €1:£0.8762 (2016: €1:£0.8174), which is not considered to produce materially different results from using the actual rates at the time of the transactions. Year end balances have been converted to Sterling at the 31 December 2017 exchange rate of €1:£0.8873 (2016: €1:£0.8583).

The Directors have, at the time of preparing the financial information, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis of accounting in preparing the financial information. Further details are given in the Strategic Review.

The financial information has been prepared on the historical cost basis except that investment properties are stated at fair value. The accounting policies have been applied consistently in all material respects.

The preparation of financial information requires the Directors to make judgements, estimates and assumptions that may affect the application of accounting policies and reported amounts of assets and liabilities as at each balance sheet date and the reported amounts of revenue and expenses during the year. Any estimates and assumptions are based on experience and any other factors that are believed to be relevant under the circumstances and which the Board considers reasonable. Actual outcomes may differ from these estimates.

Accounting policies which have a significant bearing on the reported financial condition and results of the Group may require subjective or complex estimates or judgements. The principal area of estimation uncertainty is the investment property valuation where, as described in note 11, the opinion of external valuers has been obtained at each reporting date using recognised valuation techniques and the principles of IFRS 13 "Fair Value Measurement". The principal area of judgement is the recognition of any additional revenue in the year as a result of an outstanding May 2017 rent review on the Ramsay hospitals, which is subject to determination by an independent expert. The Group has estimated the uplift under a range of scenarios and does not consider there to be a material increase in revenue in the year as a result of the rent review. The financial information therefore does not reflect any additional revenue arising as a result of this rent review.

The Group's accounting policies for property valuation and revenue recognition are set out in paragraph (d) below. Other policies material to the Group are set out in paragraphs (c) to (j) below.

Adoption of new and revised standards

No new or amended standards or interpretations issued by the International Accounting Standards Board ("IASB") or the IFRS Interpretations Committee ("IFRIC") have led to any material changes in the Group's accounting policies or disclosures during the year, other than an amendment to IAS 7 "Statement of Cash Flows" that requires disclosure of a reconciliation of changes in financial liabilities arising from financing activities, which is shown in note 23.

Standards and interpretations in issue not yet adopted

The IASB has issued the following standards that are mandatory for later accounting years, subject to endorsement by the EU, and which are relevant to the Group but have not been adopted early:

IFRS 9 deals with the classification and measurement of financial instruments and the Directors do not anticipate that its adoption will have a material impact on the Group's financial statements assuming that the existing capital structure and financing arrangements remain in place at the time that the standard becomes effective.

The Group's revenue is derived entirely from leases, which are outside the scope of IFRS 15 but within the scope of IFRS 16. IFRS 15 is not therefore expected to have an impact on the Group. Since IFRS 16 will not result in significant changes of accounting policies for lessors, the Directors do not expect that the adoption of this standard will have a material impact on the Group's financial statements.

The IASB and IFRIC have also issued or revised IFRS 12, IFRS 14, IFRS 17, IAS 7 and IAS 12 but these are not expected to have a material effect on the operations of the Group.

c) Basis of consolidation

Subsidiaries are those entities controlled by the Group. The Group has control within the meaning of this policy when it has power over an entity, is exposed to or has rights to variable returns from its involvement with the entity, and has the ability to use its power over the entity to affect those returns.

The consolidated financial information includes the financial information of the Group's subsidiaries prepared to 31 December under the same accounting policies as the Group as a whole, using the acquisition method. All intra-group balances and transactions are eliminated on consolidation.

d) Property portfolio

Investment properties

Investment properties comprise properties owned by the Group which are held for capital appreciation, rental income or both. They are initially recorded at cost and subsequently valued at each balance sheet date at fair value as determined by professionally qualified external valuers.

Valuations are calculated, in accordance with RICS Valuation - Global Standards 2017, by applying capitalisation yields to current and future rental cash flows with reference to data from comparable market transactions, together with an assessment of the security of income. Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement in the period in which they arise. Depreciation is not provided in respect of investment properties.

Acquisitions and disposals of investment properties are recognised on unconditional exchange of contracts where it is reasonable to assume at the balance sheet date that completion of the acquisition or disposal will occur. Gains or losses on disposal are determined as the difference between the net disposal proceeds and the carrying value of the asset in the previous balance sheet adjusted for any subsequent capital expenditure or capital receipts.

Occupational leases

The Directors exercise judgement in considering the potential transfer of the risks and rewards of ownership in accordance with IAS 17 "Leases" for all occupational leases and headleases, and determine whether such leases are operating leases. A lease is classified as a finance lease if substantially all of the risks and rewards of ownership transfer to the lessee. If the Group substantially retains those risks, a lease is classified as an operating lease. All occupational leases reflected in this financial information are classified as operating leases.

Headleases

Where an investment property is held under a headlease, the headlease is initially recognised as an asset at cost plus the present value of minimum ground rent payments. The corresponding rental liability to the head leaseholder is included in the balance sheet as a finance lease obligation. Cash deposits held by head leaseholders as guarantees of head leasehold obligations are included as non-current assets.

Rental income

Revenue comprises rental income exclusive of VAT, which is recognised in the income statement on an accruals basis and on a straight line basis over the term of the lease. Income relating to contractual rights that are subject to external factors, such as that arising from RPI-linked, site earnings or open market rent reviews, is only recognised in the income statement in the period in which it is determinable and reasonably certain. Where income is recognised in advance of the contractual right to receive that income, such as from leases with fixed rent uplifts, an adjustment is made to ensure that the carrying value of the relevant investment property including accrued rent does not exceed the fair value of the property.

e) Financial assets and liabilities

Financial assets and liabilities are initially recognised at their fair value when the relevant Group entity becomes a party to the unconditional contractual terms of an instrument. Unless otherwise indicated, the carrying amounts of financial assets and liabilities are considered by the Directors to be reasonable estimates of their fair values.

Trade and other receivables

Trade and other receivables are measured at amortised cost using the effective interest method, less any impairment.

Trade and other payables

Trade and other payables are measured at amortised cost using the effective interest method.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and deposits with maturities of three months or less held with banks and financial institutions.

Borrowings and finance charges

Secured debt is initially recognised at its fair value, net of any transaction costs directly attributable to its issue. Subsequently, secured debt is carried at amortised cost. Transaction costs are amortised over the life of the loan and charged to the income statement as part of the Group's finance costs.

Finance costs are charged to the income statement over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount.

Derecognition of financial liabilities

The Group derecognises financial liabilities when its obligations are discharged, cancelled or they expire. The difference between the carrying amount of those financial liabilities and the consideration paid, including any non-cash assets transferred and any new liabilities assumed is recognised in profit or loss.

f) Tax

Tax is included in the income statement except to the extent that it relates to income or expense items recognised through reserves, in which case the related tax is recognised either in other comprehensive income or directly in equity.

Current tax is the expected tax payable on taxable income for a reporting period at the blended tax rate for the period, using tax rates enacted or substantively enacted at the balance sheet date, together with any adjustment in respect of previous periods. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

g) Foreign currency translation

The results of subsidiary undertakings with a functional currency other than Sterling are translated into Sterling at the actual exchange rates prevailing at the time of the transaction, unless the average rate for the reporting period is not materially different from the actual rate, in which case that average rate is used.

The gains or losses arising on the end of year translation of the net assets of such subsidiary undertakings at closing rates and the difference between translating the results at average rates compared to the closing rates are taken to Other reserves. Monetary assets and liabilities denominated in foreign currencies are translated into Sterling at the rates of exchange ruling at the balance sheet date with any gains or losses arising on translation recognised in the income statement.

h) 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 income statement.

i) Share based payments

The fair value of payments to non-employees 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 over the relevant accounting period. The estimated number of shares to be issued in satisfaction of the services provided is calculated using the average daily closing share price of the Company for that period.

j) Fair value measurements

Fair value is the price that would be received on the sale of an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market. It is based on the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. A fair value measurement of a non-financial asset takes into account the best and highest value use for that asset.

 3. Operating segments

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.

The Group owns 81 properties, originally acquired in three portfolios. Although certain information about these portfolios is described individually within the Investment Adviser's report, 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 of the Group as a whole. 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 and prior year.

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

Revenue comprises:

Revenue recognised in the income statement includes rent smoothing adjustments as described in note 4. Revenue excluding those rent smoothing adjustments comprises:

The rent smoothing adjustment arises through the Group's accounting policy in respect of leases, which requires the recognition of rental income on a straight line basis over the lease term in certain circumstances, including for the 58% of passing rent as at 31 December 2017 (2016: 58%) which increases by a fixed percentage each year. At this stage in the lease terms, which is before the midway point in each lease, this results in an increase in revenue and an offsetting entry is recognised in the income statement as a reduction in the gains on investment property revaluation.

The Group's accounting policy for revenue recognition is disclosed in note 2d.

The Group's accounting policy for share based payments is disclosed in note 2i. Amounts shown above include irrecoverable VAT as appropriate.

Operating profit is stated after charging fees for:

The total charge for the fees above, including irrecoverable VAT, was £226,000 (2016: £786,000).

The Group had no employees in either the current or prior year. The Directors, who are the key management personnel of the Company, are appointed under letters of appointment for services. Directors' remuneration, all of which represents fees for services provided and which is included within corporate costs, was as follows:

Mike Brown, Sandy Gumm and Nick Leslau received no Directors' fees from the Group in either the current or prior year.

Net finance costs analysed by the categories of financial asset and liability shown in note 17 are as follows: