Empiric Regulatory News (ESP)

14 September 2016

Empiric Student Property plc

("Empiric" or the "Company" or, together with its subsidiaries, the "Group")

FINAL RESULTS FOR THE YEAR TO 30 JUNE 2016

The Board of Empiric Student Property plc (ticker: ESP), the owner and operator of modern, premium student accommodation across the UK, today announces the Company's audited results for the year ended 30 June 2016.

Financial Highlights

· 6.0 pence per share dividend paid in respect of the year ended 30 June 2016, in line with our target

· Operating profit of £30.0 million (2015: £12.6 million)

o £21.7 million revaluation gain (2015: £11.3 million)

o £21.6 million rental income from standing assets (2015: £8.3 million)

· NAV per share (basic) of 105.4 pence

o 2.1% increase from a NAV of 103.2 pence (basic) as at 30 June 2015 and net of all property acquisition costs

· Total return of the Group was 4.6% for the year to 30 June 2016, compared with -8.29% for the FTSE All Share REIT Index for the same period. The Group's total return was negatively impacted by the volatility in the market following the EU referendum which caused the share price to drop but it has since recovered

· £120 million of new debt raised through two new facilities

· As at 30 June 2016, the Group had, in aggregate, £216.6 million of committed debt in place of which £155.9 million had been drawn down

· As at 30 June 2016, the Loan to Value ratio ("LTV") was 22.7% (2015: 26.0%) (compared to a target of 35% and maximum of 40%), with a weighted average term to maturity for the debt of 9.7 years and a weighted average interest payable of 3.54%

· £286 million gross equity raised in three separate tranches, all priced at a premium to NAV and over-subscribed

Operational Highlights

· 75 assets (7,396 beds) in 29 prime cities and towns owned or contracted as at 30 June 2016, 52 of which were operational, 13 development assets reached, or are planned to reach, practical completion for academic year 2016/17 (1,726 beds) and 10 for later years

· 35 new assets contracted, equivalent to 3,879 beds in 19 towns and cities, during the year

· Total property portfolio valuation of £523.9 million as at 30 June 2016 (2015: £251.3 million)

· Standing asset valuation uplift of £11.2 million (2.6%) for the period compared to 30 June 2015

· Development asset valuation uplift of £10.5 million (48.4% of total portfolio uplift)

· Gross annualised rent on 52 operating properties of £33.1 million with entire operating portfolio fully let

· An average rental uplift of 2.8% targeted for the 2016/17 academic year

· Average valuation yield on our portfolio of operating assets and those that had reached practical completion as at 30 June 2016 was 5.9% (2015: 6.1%) compared with an average net yield on acquisition or on cost of 6.4%

· Launch of own operating and marketing platform, Hello Student®

· Empiric's shares were included in the FTSE EPRA/NAREIT Global Developed Index from 18 March 2016 helping to attract new investors and improve liquidity

Post Balance Sheet Highlights

· Agreed two new development debt facilities secured on a number of our forward funded assets amounting to, in aggregate, £63.4 million

· Acquired five new operating assets (323 beds) and one forward funded asset (185 beds)

The Rt Hon Baroness Dean of Thornton-le-Fylde, Chairman of Empiric Student Property plc, commented:

"At the time of this report, the country is still digesting the outcome of the EU referendum held in June 2016. While we cannot currently predict how the result of the referendum will impact on the country and the economy, we know that the UK Government remains committed to promoting UK higher education internationally, both in the EU (which represents only 6% of all full-time students in the UK) and further afield, in order to maintain the world-class reputation of our universities.

"With the supply/demand fundamentals of the sector persisting, Empiric continues to be well positioned with our diversified property portfolio delivering further rental growth and investors are also expected to benefit from the potential value to be added from our developments completing, our attractive investment pipeline and through our Hello Student® operating platform and brand.

"Empiric has grown substantially and the experience, knowledge and commitment of the whole team, with the support of the Board, provides a solid base for the future of the Company as we work towards our proposed 2025 Plan."

For further information on the Company, please contact:

Further information on Empiric can be found on the Company's website at www.empiric.co.uk.

Notes:

Empiric Student Property plc is a leading provider and operator of modern, direct-let, premium student accommodation across the UK and is committed to providing shareholders with regular, sustainable and growing (at least in line with RPI) dividends, together with the potential for capital appreciation over the medium to long term. Investing in both operating and development assets, the Company focuses on quality, with assets generally in prime central locations in top university cities and towns in the UK, attracting international students and/or those studying beyond first year, in particular, postgraduates. For the 2015/16 academic year, Empiric's customer base comprises 69% international students from 98 countries. 78% of the Company's customers are students beyond their first year of study.

The Company, an internally managed real estate investment trust ("REIT") incorporated in England and Wales, listed on the premium listing segment of the Official List of the Financial Conduct Authority and was admitted to trading on the main market for listed securities of the London Stock Exchange in June 2014. The Company is a constituent of the FTSE All Share and FTSE EPRA/NAREIT indices.

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

Sky Light City Tower

50 Basinghall Street

London, EC2V 5DE

In addition, a recorded webcast of this meeting and the presentation will also be available to download from the Company's website: www.empiric.co.uk.

CHAIRMAN'S STATEMENT

Overview

I am very pleased to introduce the financial results of Empiric Student Property plc for the year ended 30 June 2016. The Company again made significant progress during the financial year - we have increased our portfolio of purpose-built student accommodation to 7,396 beds (2015: 3,503 beds), funded by £286.4 million of gross equity proceeds and a further £120 million in debt. We also launched our operating platform, Hello Student®, and its website, hellostudent.co.uk.

The Company's market capitalisation as at 30 June 2016 was c. £540 million, with strong liquidity in its shares, benefitting from inclusion in the FTSE EPRA/NAREIT Global Developed Index (from March 2016) as well as the FTSE Small Cap/All Share Index.

The Company paid aggregate dividends for the financial year amounting to 6.0p per share compared to adjusted earnings per share of 1.89p (2015: 0.13p). We are targeting a basic EPRA annualised dividend of 6.1p per share for the next financial period (in line with our dividend growth target of not less than RPI) which we expect to be substantially, if not fully, covered by adjusted earnings per share from January 20171.

At the year-end, the Group owned or had committed to a significant, diversified portfolio of purpose-built student accommodation assets amounting to 75 buildings across 29 cities and towns in the UK - a result of the hard work of our executive team.

Performance Highlights

During the year to 30 June 2016, the Company raised gross equity proceeds of £286.4 million through three further equity fundraisings, all of which were priced at a premium to NAV and were significantly oversubscribed.

In addition, the Group secured a further £120 million of debt financing, of which £37.9 million was used to refinance existing debt. As at 30 June 2016, £155.9 million (excluding the Group's share of the debt relating to joint venture developments) was drawn down. We are pleased to have developed working relationships with several new lenders and, in line with our investment policy, we will continue to use leverage on a conservative basis to help drive our investment. As at 30 June 2016, the Loan to Value ratio ("LTV") was 22.7% (2015: 26.0%) (compared to a target of 35% and maximum of 40%), with a weighted average term to maturity for the debt of 9.7 years and a weighted average interest payable of 3.54%.

This funding has enabled us to invest in or commit to a further 35 buildings with 3,879 beds in 19 towns and cities over the course of the year. The Group's portfolio of assets (including its share of joint venture properties) was individually valued by CBRE at £523.9 million as at 30 June 2016 (2015: £251.3 million). Of these properties, 52 (4,257 beds) were operational over the 2015/16 academic year with gross annualised rent of £33.1 million (2015: 29 standing assets with 2,290 beds and gross annualised rent of £18.4 million). The first two properties being developed on a forward funded basis or through our joint venture development with Revcap Advisors Limited ("Revcap") reached practical completion by September 2015 and now form part of our portfolio of standing assets.

With the dividend declared for the quarter ended 30 June 2016 of 1.5p per share, we have paid out dividends in respect of the financial year, equating to 6.0p per share (2015: 4.0p per share), in line with our stated target for the year. Of this, 1.45p per share was paid as a property income distribution ("PID") under the UK Real Estate Investment Trust ("REIT") rules.

In February 2016, we took a significant step forward in the development of our operations capabilities with the launch of our operatingplatform, Hello Student®, which will help us to manage the marketing, management and maintenance of our buildings much more efficientlyand effectively. We believe that the benefits to the Group are twofold: cost savings through, amongst other things, the consolidation of service providers, plus an overall improvement in our marketing capabilities through a better understanding of our customers.

Change of Accounting Reference Date

In light of the Group's activities over the course of a year, the Board has concluded that an accounting reference date of 31 December is more appropriate and has approved this change. The Group's next audited results will be published for the six months to 31 December 2016.

The Board and Management

The achievements over the year are due to the hard work and commitment of our Executive Directors and their teams. Whether it has been securing finance, sourcing and delivering investment opportunities or developing a platform for the efficient operation of our properties, the Board remained committed to providing value to our investors throughout the course of the year.

In January 2016, Stuart Beevor joined the Board as an Independent Non-Executive Director. With over 35 years of real estate experience, including as managing director of Grosvenor Fund Management and as a non-executive director on the board of The Unite Group plc, Stuart's contribution to the Board has been invaluable.

In February 2016, Alexandra Mackesy stood down from the Board to follow her other interests and we wished her well for the future. Stuart Beevor has taken over her role as chairman of the Remuneration Committee and he has also joined the Audit Committee.

Our Staff

As the Group has grown and developed, we have expanded our team, in particular with customer facing staff employed by Hello Student Management Limited, as we believe that it is important for these roles to be filled by Group employees who work as part of our team, are part of our corporate culture and are incentivised to promote the values of the Group. Our staff are key to the Group's success and I would like to thank them for their individual contributions.

Our Shareholders

As a Board, we are committed to maintaining an open channel of communication with all of our shareholders. As well as regular news updates, the Company's website provides detailed information for investors. The Executive Directors have met with a significant number of our institutional investors, including a programme of site visits, and I have held a number of informal meetings with key shareholders. Jim Prower, our Senior Independent Director, and I try to ensure that shareholders have direct access to us.

2025 Plan

We are currently canvassing the views of our major shareholders in respect of our future strategy, looking forward to 2025. Any material change to our investment policy resulting from the 2025 Plan will be subject to a shareholder vote in a general meeting.

Outlook

At the time of this report, the country is still digesting the outcome of the EU referendum held in June 2016. While we cannot currently predict how the result of the referendum will impact on the country and the economy, we know that the UK Government remains committed to promoting UK higher education internationally, both in the EU (which represents only 6% of all full-time students in the UK) and further afield, in order to maintain the world-class reputation of our universities.

With the supply/demand fundamentals of the sector persisting, Empiric continues to be well positioned with our diversified property portfolio delivering further rental growth and investors are also expected to benefit from the potential value to be added from our developments completing, our attractive investment pipeline and through our Hello Student® operating platform and brand.

Empiric has grown substantially and the experience, knowledge and commitment of the whole team, with the support of the Board, provides a solid base for the future of the Company as we work towards our proposed 2025 Plan. It has been a pleasure to work with the staff, and I would like to thank them as well as my Board colleagues who bring their expertise and judgement to all of our discussions.

The Rt Hon the Baroness Dean of Thornton-le-Fylde

Chairman

14 September 2016

Our Business Model and Strategy

Our Aim

Our aim is to provide shareholders with regular, sustainable and growing long-term dividends, together with the potential for capital appreciation over the medium to long term. Our IPO target was 10,000 beds within five years through 300-400 beds in 25-30 cities.

Investment characteristics

Buildings

· Medium-sized assets with 50-200 beds

· Purpose-built or purpose-renovated or converted

· High-end concept layout and communal facilities

Locations

· Prime university cities and towns

· Walking distance to university

· Close proximity to shops, entertainment and transport links

Customers

· International students

· Beyond first year of study

· Upper quartile by rental spend

Our Business Model delivers value by building a portfolio of properties, through acquisition or development, to offer premium university student accommodation. We optimise the value from our buildings through:

· direct let model;

· active operational management;

· employment of appropriate leverage;

· standardised design specifications that are high quality but robust; and

· creating clusters of assets in towns and cities to facilitate economies of scale and operational benefits while ensuring each building retains its individual character.

Our Strategy

Our strategy is to focus on acquiring or developing, premium, direct-let student accommodation assets which are centrally located in prime university cities and towns in the UK and which meet the needs of both international students and a more mature customer base.

Development of an Operating Platform to Optimise Value

During the year, we developed our own operating platform, Hello Student®, to provide marketing, management and maintenance services to our operating portfolio. Key to this is a new internal, centralised platform for our marketing and financial control functions, run nationally and which will connect our entire portfolio of operating properties, in order to optimise cash and operational management as well as present a consistent brand when marketing to our customers.

In addition, we have started to employ, directly, our own building managers, assistant managers and community ambassadors to ensure a consistent level of service across the portfolio. A national facilities management company, Incentive FM, has been appointed to provide planned and emergency maintenance across the portfolio. As at 30 June 2016, 26 of 65 buildings which will be operational for the 2016/17 academic year had been migrated onto the Hello Student® platform. By September 2018, we plan to have all development and standing assets migrated to Hello Student®.

Key Performance Indicators

The Company's objective is to deliver attractive returns to shareholders through the execution of its investment policy which is set out on page 24 of the Annual Report. The Key Performance Indicators on which we will report each year to track the progress made are set out below.

Financial

EPRA Performance Measures

The table below shows additional EPRA performance measures which we provide to aid comparison of our performance with other European real estate businesses.

Our Market - Our Customers

The rapid expansion of the higher education sector is a global phenomenon and the internationalisation of higher education at a global level continues. UNESCO data indicates that, in 2013 (being the latest available data), there were 4.1 million internationally mobile higher education students around the world, double the number in 2000.

With approximately half a million students going abroad to study each year, China is the largest outbound student market in the world, representing one in five outbound students, and the number is continuing to rise.

While there has been a decline in the flow of outbound students from India as a result of factors such as an expanding local higher education sector and local currency depreciation, other large origin countries are showing significant increases in outbound student numbers. For example, outbound students from Saudi Arabia in 2013 numbered 74,000, an increase of 15% compared to 2012. Likewise outbound students from Nigeria increased by 5% to 52,000 over the same period. From an EU perspective, outbound students from France amounted to 84,000 in 2013, an increase of 32% compared to 2012.

The UK is the second most popular destination for international students after the USA, with a 10% share of the global market in 2013.

While the overall number of students enrolled in UK Higher Education Institutions ("HEIs") in 2014/15 of 2.27 million (the latest data available from HESA) declined by 1% compared to the previous year, this has been driven by a decline in part-time students (as a result of higher tuition fees and a tightening of visa restrictions) with the number of full-time students remaining unchanged at 1.7 million. A slight decline in UK full-time students was also offset by a 1% rise in students from the EU and the rest of the world.

Undergraduate enrolment at UK HEIs remained unchanged in 2014/15 at 1.39 million (approximately 82% of full-time enrolments), while postgraduate enrolment rose slightly to 305,000 driven largely by a 1.8% increase in postgraduate students from the EU.

The numbers of international students enrolled in HEIs in the UK reflect the trends of the global outbound market.

HESA data also indicates that the international student enrolment in 2014/15 showed particularly strong growth from countries such as Indonesia (27%) and the Gulf states such as Oman, Kuwait and Qatar (all in excess of 20%).

These market dynamics are reflected in our customer base - 70% of our customers are international students, representing 98 different nationalities with the largest segment of students originating from China and the rest of the Far East.

In January 2016, we commissioned a third party research project across a number of our properties in 19 locations. The objective of the research was to understand better the profile of our current customer base as well as to improve our understanding of the accommodation decision-making process and the student experience at our properties, principally in order to inform our marketing and brand strategy and support stakeholder communications. This research has provided valuable insight into our customer base, including how our customers reflect trends in the UK HEI sector.

Given the premium nature of our student accommodation, it appeals to international students as well as postgraduates and other more mature students (66% of our sample was over the age of 21) so, unsurprisingly, the proportion of UK students under the age of 20 and in their first year of undergraduate study was less than 4%. The research indicated a more significant proportion than expected of undergraduates, mainly in their second and third years of study.

The advantage for us is that, with the typical Masters student for instance, only staying at a particular university for one year, undergraduates represent a greater potential for rebooking.

Of the undergraduates living in Empiric accommodation, 42% were from the UK.

In addition, the research showed that a significant proportion (some 71%) of our customers (both UK and international) were already living in the UK prior to the start of the 2015/16 academic year. This has significant implications for how and where we market our student accommodation. We, therefore, have segmented our target market based on an individual's previous experience and path to an Empiric building:

· Re-bookers: Typically undergraduates or PhD students who were in the same accommodation during the previous year. They are strong advocates of a building and early bookers.

· Site Switchers: Typically second or third year undergraduates, including international students, moving between accommodation in the same town. They book early based on local knowledge with a high likelihood to recommend and rebook.

· City Switchers: Typically first year undergraduates and postgraduates, often UK citizens, moving from other towns in the UK. They rely on student accommodation websites and book late without much local knowledge. They have high expectations.

· New International: The core target market of international students in the UK. Typically Masters level, they have little prior knowledge of the UK and rely heavily on online information. They book late and have a low likelihood to rebook because they only study in the UK for one year.

This knowledge has helped us to inform our marketing and brand strategy - not only focusing on our presence in the international markets but developing a national brand to target City and Site Switchers. Information gleaned from the research also provided valuable insight into where prospective customers obtain information on student accommodation.

The importance of the internet and social media cannot be ignored and we are building a significant online presence. Further details of our marketing initiatives are set out in the CEO Operations Report on pages 30 to 34 of the Annual Report.

As well as determining where our customers come from, we have also been looking into where they are likely to study.

At IPO, we identified 27 university towns and cities with mainly Russell Group universities and other highly popular universities where the student population had limited access to purpose-built accommodation. We have since expanded our list of target locations to 36 and we continue to assess the higher education sector, in particular which universities are investing in future growth and attracting increasing numbers of students.

Key to this is the financial health of the HEIs which, according to a 2014/15 report by The Higher Education Funding Council into the financial situation of universities in England, had improved compared to 2013/14 and against expectations. Overall, the sector reported an operating surplus of £1.6 billion, equivalent to 5.8% of income. The report also found that there was significant variation in the financial performance of individual institutions and not necessarily favouring established Russell Group institutions. Analysis suggests that some newer HEIs, for example the University of Huddersfield, are running the highest operating surpluses. The expectation is that this variation is set to continue, with the gap between the highest and lowest performing HEIs widening in the forecast period to 2017/18.

Financial health enables capital investment, forecast to be at over £17.1 billion for the four years to 2017/18 in England alone, which is necessary as HEIs strive to maintain their global competitiveness. This is particularly important as changes to government and EU funding is forcing universities to become more reliant on tuition fees, particularly from international students.

With investment comes growth, and it is several of the regional non-Russell Group universities that are among those showing the largest increase in full-time student numbers as illustrated overleaf. It should be no surprise, therefore, that a number of these HEIs are located in the towns and cities that we target.

The expectations, however, of students are changing. They demand higher value for their money in every aspect of the student experience from tuition and facilities through to accommodation. With finite resources available to them, universities are having to become more sophisticated in their approach to asset management, investment and partnership, resulting in a growing number of opportunities for the private business sector to work in conjunction with the universities to develop alternative business models, including in respect of accommodation.

It is these opportunities that are driving the continued transformation of purpose-built student accommodation from a niche, alternative asset class within the overall residential property sector, to an increasingly mainstream investment proposition. There is growing appetite for this asset class from global institutions and, in 2015, investment in the UK surpassed that of North America for the first time.

There are challenges facing the sector, principally, as a result of UK's political landscape, including the tightening of visa restrictions for students and, most recently, the vote for the UK to leave the EU. With EU students making up only 6% of full-time students in the UK, exposure to this market is limited and, with strong demand from international students outside of the EU, it is likely that the sector should prove resilient to the change.

The fundamentals of the sector, such as the persistent supply/demand imbalance, that have historically resulted in the purpose-built student accommodation sector proving less volatile than commercial, remain the same.

At Empiric, we continue to assess the higher education sector in the UK to ensure that our business model, now and in the future, enables us to capitalise on the opportunities that exist in the purpose-built student accommodation market.

Chief Executive Officer's Q&A

Empiric has performed well again for the financial year ended 30 June 2016. What are the key features of the Group's performance?

Empiric is a growing company and during the year to 30 June 2016 we more than doubled the number of beds, trebled income generated from the portfolio and saw the value of our property portfolio increase by 108% compared to 30 June 2015. Key for me has been the strength of the impact of the first tranche of the Group's development assets reaching practical completion and what this represents in terms of Empiric's future performance.

From IPO we have invested in both operational and development assets. At the outset we envisaged that developments would consist of an equal number of Empiric forward funded third party developments ("forward funded assets") and direct developments with our joint venture partner, Revcap ("JV developments").

It has become clear that, whilst the direct developments generate a higher yield on cost, forward funded assets generate a better risk adjusted return with far lower management input. The forward funding package we offer is attractive to developers, providing efficiency and exit certainty, and has resulted in several follow-on acquisitions with developers around the country. This has meant that many of our acquisitions are now with known counterparties and are not only off-market, but also without an introducing agent - saving transaction costs for the further benefit of our shareholders.

At the time of our first annual results for the period ended 30 June 2015, we had not reached practical completion on any of our development assets so we were projecting the anticipated performance of forward funded assets, based on management appraisals (we model a projected yield on cost of 7.5%).

In August/September 2015, Kingsmill Studios in Huddersfield (a forward funded asset), Brunswick House in Southampton (a JV development) and Library Lofts in Exeter (a forward commitment) reached practical completion with yields on cost of 7.5%, 7.2% and 6.3%, respectively. For the first time, the Company benefitted from these uplifts in value as assets moved from development to operation at 31 December 2015. The latest valuation (at 30 June 2016) included another three newly completed properties (St Peter Street, Aberdeen; Buccleuch Street, Edinburgh; and Metrovick House, Newcastle) and ten are planned to reach practical completion in time for the 2016/17 academic year. In aggregate, our development activity has contributed 48.4% to the value uplift of our portfolio.

We anticipate that these latest ten assets to reach practical completion will have a further positive impact on NAV and income in the coming financial year. Looking further forward, we currently have another tranche of eight development assets for the 2017/18 academic year, amounting to 1,057 beds.

The Company has delivered on its target dividend of 6p per share in respect of the year ended 30 June 2016. What is your strategy on dividends and returns, generally, going forward?

The Company has grown steadily in the two years since its IPO in June 2014 and that growth has been underpinned by the support of our shareholders. A key attraction for our shareholders is the income derived from their investment through the payment of a regular dividend as well as capital appreciation.

As a growing business, we have regularly raised equity capital and those funds have been committed swiftly into our increasing portfolio of assets. Inevitably there is an element of "cash drag" though we have sought to minimise this through these smaller, more frequent equity fundraisings on the back of robust pipelines of attractive investment opportunities.

The Board is committed to paying shareholders a regular, sustainable and growing (at least in line with RPI) dividend, together with the potential for capital appreciation over the medium to long term. In order to achieve this, we manage the proportion of investment into income producing, standing assets versus development assets which have the potential to produce superior capital returns.

We also leverage our investments by securing long-term debt on standing assets and, since the year end, development debt on forward funded assets; recycling equity capital for further acquisitions and replacing it with more cost effective capital (the Group's weighted average interest payable at 30 June 2016 was 3.54%). The Group's LTV as at 30 June 2016 was 22.7% (2015: 26.0%) compared to a long-term LTV target of 35%.

You have previously talked about improving the Group's net operating income. What progress has been made on this and how is it being achieved?

One of our IPO targets was to acquire 300-400 beds per town or city where Empiric has a presence to allow us to benefit from efficiency gains. As we have acquired new assets, particularly standing assets, we have also inherited incumbent managers, existing facilities management arrangements with ad hoc utilities contracts, internet suppliers and maintenance agreements. As a result, there are often initial re-structuring costs involved to achieve those targeted levels of efficiency.

Over the past 12 months, we have undertaken a number of initiatives to improve the Net Operating Income generated by our portfolio of standing assets, including:

· reducing the number of property managers with whom we work and starting to bring the management of a number of the Group's properties in-house;

· negotiating portfolio-wide deals on utilities, for instance high speed broadband which is of critical importance to our customers, which enables us to offer a superior service for our customers but at a lower cost to the Group; and

· migrate the facilities management to specialist out-sourced service provider, Incentive FM, which has an existing national network and is able to undertake the day-to-day maintenance and repairs across our standing assets on a more efficient and cost effective basis.

These developments have been undertaken under the banner of our operating platform, Hello Student®. As at 30 June 2016, the Group was already starting to see the benefits coming in the future from these initiatives.

We are aiming to improve net operating income by up to 5% over the next three years.

Tell us more about Hello Student®.

The genesis of Hello Student® was our desire to bring more of the operational side of the business under our control, and to bring us closer to our customers and our managers. Hello Student® brings the marketing, management and maintenance together under one, branded platform.

The Hello Student® brand speaks directly to our customers - students - raising our profile and bringing coherence to our offering. The principal marketing tool for this is the hellostudent.co.uk website which was launched in February 2016.

The website provides prospective customers - first-time residents, re-bookers, re-locators and referrals - with details of all our standing assets as well as useful information on the town or city in which they are planning to study. From a marketing perspective, the website presents a strong brand image, quintessentially British, which our research indicates is appealing to our key target markets.

Behind the website is a bespoke, integrated booking and accounting engine. Direct booking is enabled for the majority of buildings which are currently managed through Hello Student® with customers redirected to our incumbent management partner firms' booking facilities for the remaining buildings. We aim to have our entire portfolio being marketed exclusively through the Hello Student® website by the beginning of the 2018/19 academic year.

A further development is the Hello Student® app with an anticipated roll-out across the whole of the UK from September 2017, following an initial trial in Nottingham. The app for hand-held devices will be a multi-functional tool for the use of customers, creating a direct link to the property and facilities management teams, enabling them to request basic amenities or additional chargeable services. The app will also facilitate communication between our customers, building communities, which we believe will enhance our marketing programme by encouraging re-bookings and referrals.

While the marketing and communication capability of Hello Student® is important, there are also cost and operational advantages, mentioned previously, such as planned and reactive maintenance for Hello Student® through Incentive FM, giving us national buying power and a single point of programming and planning.

Another key feature, which we believe will become more apparent as we progress, is that the Hello Student® regional, city and building managers work directly for the Group giving a sense of belonging and ownership, with a career path. This enables us to instil our values and positive, entrepreneurial corporate culture throughout the organisation, from Board level through to the customer interface.

Further information on Hello Student® is set out in my Operational Review.

With the increase in the number of properties acquired over the year, has there been a change in Empiric's customer base?

For the 2015/16 academic year, our customer base comprised 69% international students from 98 countries, and 78% were students beyond their first year of study which is strikingly similar to the respective statistics from the previous academic year (2015: 69% international students from 83 countries and 79% post first year undergraduate). The age range of our customers is 17-63 years old (2015: 18-49) with less than 4% of our customers under 20 in their first year of study and from the UK (2015: 2%).

In January 2016, we commissioned our own research into our customer base. We have come a long way since the days when Tim Attlee and I owned one student accommodation building and we were able, personally, to canvass our customers to assess what we were doing right and what needed to change. However, with 7,904 beds contracted (as at 14 September 2016), it is now even more critical for Empiric to know its customer base to ensure that: the facilities the Group provides match the requirements of our target market; we understand how those requirements change over time; and we focus our marketing activities in order to achieve the best possible return on this expenditure.

This research has highlighted some interesting information and further detail on this, as well as the student accommodation market, in general, is set out in the report on Our Market - Our Customers (see pages 12 to 17 of the Annual Report). A key area of interest to us is the high proportion of students (71%) who originally come from overseas jurisdictions but who were already in the UK before the start of the 2015/16 academic year. In terms of our business model, therefore, we are adjusting our marketing focus not only to target international students in their home countries but to build our Hello Student® brand across the UK so that we can attract students who are already here, either in another city or in another property.

How do you see the student accommodation market developing in the future?

Higher education is one of the UK's top exports and, notwithstanding the current uncertainty in the macro-economy as a result of the Brexit vote in June 2016, the UK Government is committed to maintaining the UK's world-class status in higher education. There were c. two applicants for every place accepted by an international first year student in 2015, suggesting that significant shrinkage in application numbers could be absorbed before acceptance numbers would suffer.

The most notable recent development in the higher education sector was the lifting of the UK Government's cap on the numbers of UK and other EU students in 2015. Figures from UCAS on first year acceptances for the 2015 cycle showed that an increase of over 11% for EU (excluding the UK) students compared to the previous year, indicating a rise in the number of EU students coming to the UK. These statistics also show an increase in the number of non-EU students and while this increase was relatively small year-on-year, acceptances are up nearly 40% compared to ten years ago.

International students, however, made up less than a quarter of the full-time student population in the UK in the 2014/15 academic year and only 13% of the first year acceptances in the 2015 cycle. The number of UK students has also showed steady growth, with 33% of school leavers now going to university (compared to 7% a generation ago) and increasing numbers going on to second degrees.

As a result, universities are focused on spending more on teaching facilities and research to maintain their competitiveness, rather than investing in accommodation for their students. We expect that this theme will continue and that the private sector will need to continue to address the shortfall in the supply of accommodation. This is where Empiric positions itself.

What are the implications for Empiric's future?

As at 30 June 2016, we had contracted on 7,396 beds, with a further 508 beds contracted since the year-end. With the remaining proceeds from the equity fundraising undertaken in February 2016 and having raised a further £63.4 million in debt subsequent to the year-end, we expect to reach our original target of 10,000 beds in the near term, all of which should be operational by September 2018. We see the developments in the market as a great opportunity for the Company and we have been looking at several areas for future growth.

Empiric has been described as a niche player in the student accommodation market, owning and operating premium purpose-built student accommodation targeting international and/or more mature students. We still believe that this is a significant "niche" market which will continue to present us with tremendous opportunities. However, we also know that there are other "niche" markets within the student accommodation sector which we believe should provide equally good prospects.

For example, with the focus of universities on funding their teaching and research programmes, together with building world-class facilities, we see various prospects to work more with the universities. This may be as simple as looking at more nominations arrangements, similar to the few we already have in place in Bath and Falmouth where beds are still direct-let to students at market rates but where the university markets the beds and guarantees full occupancy or through more direct relationships with the universities.

We have also been looking more closely at UK-based students and we have identified groups who we believe are not adequately provided for by current suppliers of private purpose-built student accommodation. A key theme at recent property conferences has been the provision of accommodation for students from less affluent backgrounds. At the other end of the spectrum, we are exploring demand for premium accommodation from UK students and other "sharers" from wealthier backgrounds.

We are exploring these prospects with a view to diversifying further within the student accommodation sector and evolving into a closely targeted "multi-niche" player, leveraging our experience and infrastructure, for our 2025 Plan. We are currently canvassing the views of our major shareholders and any material change to our investment policy will be subject to a shareholder vote in a general meeting. Whatever the future holds for Empiric, our focus will remain on providing value for our shareholders through regular, sustainable income returns and capital appreciation.

Investment Policy

Empiric's investment objective is to provide shareholders with regular, sustainable and growing (at least in line with the RPI inflation index) dividends, together with the potential for capital appreciation over the medium to long-term.

Empiric intends to meet its investment objective through acquiring, owning, leasing, and developing high quality student residential accommodation. We let to students in higher education on direct tenancy agreements.

We invest in and develop high quality, modern student accommodation, generally located in prime, city-centre locations in top university cities and towns, spreading risk through a diverse geographic exposure.

Each of our properties, generally, has:

· 50-200 beds in total

· Studios and 1-3 bedroom apartments

· Generous space per student bed

· All rooms with en-suite bathroom and kitchen facilities

· Communal facilities including a cinema room, gym, launderette, study rooms and break-out areas

Income

Rental income is predominantly generated from direct leases, as well as commercial lease opportunities within the properties. We target upper quartile rent and primarily accommodate postgraduate and international students. We have annual rent reviews and rent varies within each building and for each room.

Investment

We acquire individual buildings and portfolios of properties as assets. We undertake development of new buildings or refurbish or convert student accommodation with other development partners, through forward funding third party developers or on our own. Apart from the development assets held in 50/50 joint ventures during the development phase, we have sole ownership of all investments.

We intend to hold the investments for the long term, but will sell investments if a sale would represent a satisfactory return on the initial investment or enhances the value of Empiric, taken as a whole. There is no limit on disposals.

Investment Restrictions

· Generate income from no less than five separate buildings

· No single asset represents more than 20% of the gross asset value

· At least 90% of the properties directly and indirectly owned are freehold or long leasehold properties (with at least 100 years remaining)

· A maximum of 15% of NAV may be committed to spend on the equity requirement for development or forward funded projects, including conversions. This is conducted in special purpose vehicles with no recourse to other Empiric assets

· Rent from commercial leases is limited to 25% of the total rent receipts of any single building and 15% of total rent receipts

· No investment in other closed-ended investment companies

Borrowing Policy

The Company will maintain a conservative level of aggregate borrowings typically of 35%, but no more than 40%, of the Gross Asset Value (calculated at the time of draw down) and will comply with REIT provisions. This limit will be inclusive of the Group's pro rata share of development loans incurred in relation to joint venture development projects.

Borrowings employed by the Group may either be secured on individual assets without recourse to the Company or by a charge over some of the Group's assets to take advantage of potentially preferential terms. Development loans, however, will only be secured at the individual asset level, without recourse to the Group's other assets or revenues.

The Company may engage in interest rate hedging in respect of borrowings, or otherwise seek to mitigate the risk of interest rate increases, for efficient portfolio management purposes only.

Chief Investment Officer's Portfolio Review

Overview

The Company has continued to grow selectively its portfolio of premium, student accommodation assets, more than doubling the number of rooms contracted over the year to 30 June 2016. We have built a reputation as a reliable acquirer of standing assets and reliable funding partner on development assets. As a result, we are seeing more off-market transactions at competitive prices and the relationships we have formed with developers are leading to further transactions negotiated directly with these developers. Not only does this reduce acquisition costs (specifically, fees paid to third party introducers) but, importantly, we are working with development partners who know our design specifications and we can be sure will develop properties to our high standards.

We have expanded Empiric's presence across the UK with assets in 29 prime university towns and cities at the year end and we have also built our portfolios within key centres, either on an asset by asset basis (both operational and development assets) or through portfolio acquisitions. We target 300-400 beds per town or city, across multiple buildings, as we believe that this provides us with suitable scale to achieve operational efficiencies while enabling us to offer slightly different, distinctive accommodation to our customers.

While we were very active in acquiring assets, we also decided to withdraw from one conditional contract entered into in the previous financial year, Framwellgate House. Our investment team concluded that, given the specifics of the proposed contract, the Company's funds would be better invested in alternative projects. A key function of our investment team is to determine which of the vast number of proposals introduced to Empiric best meet the Company's investment objectives and which do not. On occasion, we recommend to the Board that we do not proceed with an acquisition where we believe that the conditions to a contract are not capable of being met (at all or within a reasonable timeframe) so that committed funds can be deployed elsewhere.

Assets

During the year to 30 June 2016, the Group invested in, or committed to, the freeholds (unless otherwise stated) of 35 assets, comprising a mix of operating properties, forward funded assets (funding of third party developments in return for a discount on the acquisition price) and a development project (to be developed by the Group directly), with an aggregate price of £251.2 million (including acquisition costs) (2015: 37 assets with an aggregate price of £228.5 million (including acquisition costs)).

The Group had also exchanged conditional contracts on three further properties (mainly forward commitments acquired subject to practical completion), for which the outstanding conditions had not been met as at 30 June 2016, with an aggregate price of £72.6 million (excluding acquisition costs) (2015: two assets with an aggregate price of £17.8 million (excluding acquisition costs)). In addition, the Group had exchanged conditional contracts on three further sites for development, subject to receipt of planning consent.

As at 30 June 2016, the Group owned, or was committed on, a total of 68 assets (representing 6,191 beds) (2015: 37 assets representing 3,503 beds) and had exchanged conditional contracts, including on sites subject to planning permission being obtained, (with the conditions or planning remaining outstanding at the year-end) on a further seven assets (representing 1,207 beds) (2015: three assets representing 229 beds), in a total of 29 towns and cities.

Summaries of these properties are set out in Tables 1 and 2 on pages 26 and 27 of the Annual Report.

Table 1 - Operating Assets (and Those that had Reached Practical Completion) as at 30 June 2016 (55 in total)

Notes:

(1) Reached practical completion as at the date indicated but was not operational as at 30 June 2016.

(2) 150 year lease, started in August 2010.

(3) In June 2016, the Group acquired a retail site adjacent to the Buccleuch Steet building which will be converted to provide, inter alia, an additional two studios resulting in a total of 88 beds for the property with an estimated total project cost of £0.65 million (not included in the price above).

(4) 999 year lease, started in March 2014.

(5) 199 year lease, started in December 2014.

(6) This building is to be significantly refurbished and, therefore, will not be operational for the 2016/17 academic year.

(7) Freehold/leasehold

The portfolio of 52 operating properties (2015: 29) was fully let for the 2015/16 academic year. The gross annualised rent for these properties was £33.1 million (2015: £18.4 million), of which £0.9 million (representing 2.7% of the gross annualised rent) was attributable to commercial revenue (2015: £0.8 million representing 4.4% of gross annualised rent). We have targeted an average uplift in annual rents of 2.78% for the 2016/17 academic year (2015/16: 3.0%).

The average net yield on acquisition of the operating properties, or on cost for those development assets that had reached practical completion, as at 30 June 2016 was 6.4% (2015: 6.6%). The average valuation yield as at 30 June 2016 was 5.9% (2015: 6.1%).

Table 2 Forward Funded and Development Assets as at 30 June 2016 and Forward Commitments and Sites Acquired Subject to Planning (20 in total)

(1) Subsequent to the year ended 30 June 2016, these assets have or are planned to reach practical completion and will be operational for the 2016/17 academic year.

(2) Development is being undertaken as a joint venture with Revcap and total investment to completion figure excludes Revcap's contribution.

(3) The Group had exchanged contracts on this property though certain conditions had not been satisfied as at 30 June 2016.

(4) Purchase price on acquisition.

(5) The Group had exchanged contracts on this site, subject to planning consent being obtained. Planning consent had not been obtained as at 30 June 2016.

Valuation

Each individual property in the Company's property portfolio has been valued by an external valuer, CBRE, in accordance with the RICS Valuation - Professional Standards January 2014 (the "Red Book").

As at 30 June 2016, the Group's property portfolio had a market value of £514.2 million (excluding the joint venture interests and the value of properties on which only conditional contracts had been exchanged at the year-end) (2015: £239.8 million). Of this, £443.4 million was attributable to operating assets or those which had reached practical completion, an increase of 4.7% in value compared to the aggregate purchase price or cost of development of £423.2 million (2015: £218.8 million, an increase of 4.3% compared to purchase price of £209.7 million). The aggregate valuation attributable to the forward funded and development assets that had unconditionally exchanged was £70.75 million, which is based on progress of the development of the assets to 30 June 2016.

The Group had also exchanged conditional contracts on seven properties and sites for which conditions (e.g. practical completion or planning consent) remained outstanding as at 30 June 2016 and, therefore, the value of these properties has not been included in the aggregate valuation of the Group's property portfolio as at 30 June 2016.

Post Balance Sheet Events

Since the period end, we have announced the acquisition of five assets which were operational and one forward funded development property which, together, represent a further 508 beds. Details of these acquisitions are set out in Table 3 below.

Table 3 - Assets Acquired Since 30 June 2016 to Date (6 in Total)

Our Investment Team

Our investment team has worked hard over the year in identifying investment opportunities, concluding the acquisition of a significant number of premium student accommodation assets and overseeing the development of new properties, all of which underpin the successful growth of our Company. Key to their success are the strong relationships which they have built within our sector - the agents we work with, vendors, development partners and the many professionals involved in adding a premium student accommodation asset to our portfolio. I would like to thank the team for all their efforts.

Tim Attlee

Chief Investment Officer

14 September 2016

Chief Executive Officer's Operations Review

Introduction

At its core, Empiric is an investor in, and developer of, student accommodation assets - buildings which yield rent. However, it is people who drive the value of those buildings: our customers who pay us the rent to live in the buildings and the managers who ensure the smooth operation of those buildings. Since Empiric's IPO just over two years ago, we have worked with a number of partner businesses to ensure that our portfolio of operating assets has been well marketed, managed and maintained but as a critical component in our value chain, we believe that, as our portfolio of student accommodation assets continues to grow, there are distinct advantages to bringing the operations management in-house.

In November 2015 we appointed Incentive FM to provide facilities management services on the first trial buildings and, in January 2016, we directly employed the first Empiric building managers. In February 2016, we launched our website, hellostudent.co.uk, the marketing face of our Hello Student® branded operating platform. The launch of the website was the culmination of many months of hard work on the part of 

our operations team developing a bespoke operating platform which includes an integrated booking system, a student focused brand and thenational facilities management. This is all underpinned by our staff, most notably, our customer-facing building, city and regional managerial staff but also the key people behind the scenes without whom Hello Student® would not exist.

In February 2016, we launched our website, hellostudent.co.uk. By September 2018 we plan to have all development and standing assets migrated to Hello Student®.

Integrated Operations Management

In our first six months after IPO, we were working with four management partner firms, mostly specialist national operators such as CRM Student and Collegiate AC. Our operational assets were listed on their respective marketing websites, they managed our properties and were responsible for collecting rents, contracting utilities and arranging maintenance, and they provided us with their accounts for the properties on a regular basis. For these services, we paid them a fee variously based on a percentage of net or gross rent and budgeted direct costs such as internet and utilities annually in advance.

By the end of June 2015, the number of partner management firms had increased to eight, mainly as a result of taking on existing relationships when we acquired new standing assets. While all specialists, levels of service were variable, purchasing power for smaller operators is limited and working with this large (and increasing) number of companies was inefficient.

The solution was to bring together the marketing, management and maintenance of our operating portfolio under one branded platform. The advantages of this are both financial and functional:

· Our single student-facing branded website, Hello Student®, will enable us to broaden our reach, drive re-bookers and referrals and engage students directly through a recognised brand across the UK;

· We have selected and reached agreement with CRM Students, the largest third party manager of student accommodation in the UK, to host the specialist booking engine which the Hello Student® website feeds into. This integrates marketing, bookings and accounting and facilitates monthly reporting to Empiric, enabling us to maintain accurate and timely data on all of our standing assets which will become increasingly important as the operating portfolio grows;

· We have started to employ building managers and, in June 2016, employed our first regional manager directly. These people are our customer interface and, as such, it is important that they project our values and corporate culture. We encourage a sense of brand ownership and belonging to our team, reinforced by a definitive career path. The staff costs are more than offset by the reduction in fees and costs paid to third party management companies;

· We are able to negotiate portfolio-wide deals on utilities and services, and the added purchasing power enables us to obtain better prices and, where possible, superior services (for example, high speed broadband); and

· We have selected and reached the agreement with Incentive FM, a nationwide facilities management provider, to provide a complete facilities management solution for our operating portfolio, again saving us costs as well as providing a superior service.

The Hello Student® Brand

In developing a brand through which we would communicate with our customers, it was important to identify the factors that had the most appeal to our target market, principally, international students and those beyond their first year of university, particularly, postgraduates. To this end, we undertook a survey of prospective students within these demographics in three international markets, namely India, China and South Korea. In collaboration with a specialist brand design agency, we developed a brand based on the results of the research: Hello Student®.

The principal tool is the Hello Student® website supported by social media. All buildings on the Hello Student® website also appear on other

managers' websites. Of the 65 buildings that are being marketed for September 2016 the majority of buildings managed by Hello Student® can be booked on the website, while the others click through to the external managers' websites.

Between its soft launch in February 2016 and 30 June 2016, the site had attracted approximately 18,000 visitors, with minimal external marketing. The website usage statistics indicate that it is drawing high quality traffic with an audience that is very engaged with the content on the site, visiting an average of four pages before exiting the site. A key statistic for us is that a total of 1,178 booking enquiries have been driven through the website to date which is comparatively higher than the conversion rate of enquiries of Hello Student® properties listed on

other sites.

As well as the Hello Student® website, we have in place a full set of brand guidelines and branded material to support local, on-site propertyteams to drive lettings and ensure consistency of the brand across the portfolio.

Marketing

Earlier this year we commissioned research into our existing customers which identified four distinct groups based on their circumstances prior to moving into one of our buildings - "New Overseas", "City Switchers", "Site Switchers" and "Re-bookers". Further details on this research are set out in "Our Market" (see pages 12 to 13 of the Annual Report). Differentiated by profile, experience, motivation and accommodation search behaviours, these key groups have been used as the basis to inform all of our subsequent marketing activity in order to deliver targeted messaging and engaging visuals relevant to the particular audience. Critically, while our current customers represent 98 different nationalities, 71% of them were already in the UK last year. Therefore, the majority of next year's tenants are likely to be in the UK already and that is a key focus of our marketing.

Our social media strategy, including Facebook, Twitter and Instagram, connects with potential and current residents and has seen a rapid take-up with over 50,000 followers. This enables us to actively communicate with our online student community in a low cost way: managing and executing social media takeovers with student focused influencers; launching global competitions using cinematic video content with a paid amplification strategy; and initiating social media paid advertising, targeted at students and parents in key geographic locations.

In August 2016, a key booking period, we launched an online advertising campaign based on the lifestyle, demographic and geographic profiles generated from the data gathered from the profiles of users of the Hello Student® website. The focus of the campaign, "We Do Homes", positions Hello Student® as a provider of high quality accommodation with a personal touch that not only provides a customer with

their own space for independence and privacy but communal areas to encourage social interaction with like-minded people from around the world. Our target groups for this campaign will be New Overseas customers as well as Site and City Switchers, particularly those who are not already familiar with the accommodation and service that we provide. This campaign, shot on location at Brunswick House in Southampton, is supported by an outdoor billboard campaign to increase awareness of the brand across the UK.

As a follow on, we plan to launch a beta version of a Hello Student® app which will be first trialled in Nottingham, with a view to rolling it out

across our operating portfolio from September 2017. The app will allow customers to purchase additional chargeable services such as dry cleaning, room servicing and shipping services as well as having direct contact with the building management and maintenance teams in order to request support. With access to promotions, discounts and notification of events, the app will also serve as a tool to build the community within a particular building, a city-wide portfolio of buildings or our wider national community. We see this as a useful tool to encourage Re-bookers as well as Site or City Switchers, particularly those are who already part of the Hello Student® community.

There are two key areas that we have focused on over the past eight months: the technology to convert the interest generated by our marketing efforts into bookings and manage information flows; and ensure that, once a customer has secured a bed in one of our buildings, we have the right team in place to ensure that they receive a service that reflects the brand values of Hello Student®.

Technology

Having considered the possibility of building a bespoke software product and reviewed the existing technology available in the market, we selected CRM Students' existing TCAS software as the basis of our new booking platform. We believe that TCAS, which powers other booking websites, provides the functionality that we require and is a proven product; a bespoke software product would be more expensive and unlikely to provide significantly better functionality. The TCAS software, which sits behind the Hello Student® website, has been

designed also to interact with industry standard accounting software, providing an integrated booking, accounting and reporting system.

This feature is currently enabled for the majority of buildings which are currently managed directly through Hello Student®.

The implementation and operation of this platform is being undertaken by a specialist team from CRM Students, seconded to Hello Student® Management Limited, hence providing us with a dedicated service, working seamlessly with our own employees. The team will provide marketing administration, document administration and provide monthly accounting and reporting data (on an individual SPV basis) to the Empiric accounts team.

Management

We believe that our buildings should be managed by our people. As at 30 June 2016, Hello Student® Management Limited had 39 full-time employees, comprising building managers, assistant managers and community ambassadors. These new managers have undergone induction and training so that they know what it is that we expect from them.

Their principal objective is to develop relationships within their local community, including the associated universities and, most importantly, our customers, both existing and prospective. As the principal customer interface, our site management teams are able to use the marketing and management tools at their disposal to encourage re-booking from existing customers and drive new bookings from prospective customers, with a view to achieving full occupancy on a site-by-site basis or across a particular city. They provide general oversight and reporting on the performance of outsourced providers with regards to marketing, booking, site accounting, facilities management, housekeeping and security.

Direct employment of site management has meant quicker decision making, consistency of approach, higher accountability and innovation from the onsite teams. Those employees with the right aptitude will have the opportunity to develop their careers within the Group, with the ability to progress from the management of one building to responsibility for an entire city portfolio, and so on eventually to a corporate level.

Not only does the Group benefit from increasingly consistent levels of customer service but the direct employment of managerial staff reduces costs as management fees paid to third parties decrease. While we are still in the early stages of this initiative, this is likely to have a positive impact on the Group's net operating income going forward.

Maintenance

Our facilities management is supported by Incentive FM, a specialist facilities management provider with an existing national network. Incentive FM will provide a comprehensive facilities management solution to complete all statutory requirements, planned preventative maintenance, general repairs and maintenance, utilities procurement and invoice management, site security and housekeeping. Incentive FM has the technical backend systems to provide clear and consistent reporting, both technical, to the building management teams, and monthly cost accounting, to Empiric's accounting team on behalf of Hello Student®.

There are also cost and operational advantages, as working with Incentive FM gives us national buying power and a single point of programming and planning. Again, we expect this to have a positive impact on the Group's Net Operating Income going forward.

The culmination of the roll-out of Hello Student® will deliver a premium brand experience across Empiric's entire portfolio coupled with greater

operational efficiencies.

Paul Hadaway

Chief Executive Officer

14 September 2016

Chief Financial Officer's Review

The financial results for the Group reflect another year of solid investment and growth.

Accounting Policies

The Group's annual consolidated financial statements have been prepared in accordance with IFRS.

Financial Results

The financial results for the Group for the year ended 30 June 2016 reflect another period of solid investment and growth, building our portfolio of purpose-built student accommodation assets. We have also invested in launching our operating platform, with a view to bringing the marketing, management and maintenance of the operating portfolio within our control.

The operating profit for the Group for the year to 30 June 2016 under IFRS was £30.0 million (2015: £12.6 million), the biggest contribution coming from the gain of £21.7 million, net of property acquisition costs, recognised on revaluing each property within the Group's property portfolio at the year-end (2015: £11.3 million). The operating profits have also benefitted from the rental income derived from the standing assets in the Portfolio, which operated on a fully let basis1 and produced rental income of £21.6 million in the period (2015: £8.3 million).

The Group's share of results from joint ventures in the period was £1.8 million, which primarily related to uplift in fair values of its properties (2015: £2.8 million). Administrative and other expenses, which include the ongoing costs of running the business, were £7.3 million equivalent to 1.4% of the value of the property portfolio as provided by CBRE, as at 30 June 2016 (2015: £4.8 million, equivalent to 1.9% of the value of the property portfolio as provided by CBRE, as at 30 June 2015).

Net financing costs for the period were £3.6 million net of money market investment income of £0.9 million (2015: £1.2 million and £0.2 million, respectively).

The profit before tax for the period was £28.1 million (2015: £14.2 million), with basic earnings per share for the period of 7.29p (7.23p on a diluted basis) (2015: 9.67p and 9.61p (diluted)).

No corporation tax has been charged in the period because of the Group's fulfilment of all of its obligations as a REIT including its policy of distributing at least 90% of its property related net income.

The NAV per share as at 30 June 2016 was 105.4p prior to adjusting for the fourth interim dividend of 1.5p per share (2015: 103.2p, prior to adjusting for the fourth interim dividend of 1p per share) and is shown net of all property acquisition costs and dividends paid during the year.

Asset Valuation

The Group's Portfolio has been independently valued by CBRE in accordance the Red Book. As at 30 June 2016, the aggregate market values of each property in our Portfolio was £523.9 million (excluding the joint venture interests not currently owned by the Group) (2015: £251.3 million).

In relation to the valuation of the properties in our portfolio at 30 June 2016, CBRE has highlighted a lack of transactional evidence in the aftermath of the EU referendum to gauge the impact of the result on values at that date (see Note 13 on page 101 of the Annual Report for more details).

Further details on the portfolio and valuation are set out in the Chief Investment Officer's Portfolio Review on pages 25 to 28 (inclusive) of the Annual Report.

Dividends

For the period ended 30 June 2016, the Company declared four interim dividends amounting, in aggregate, to 6.0p per share (of which 1.5p per share was declared on 26 July 2016) (2015: 4.0p per share including 1p per share declared after the period end), which achieves the target set last year of a 6% dividend yield based on the IPO price of 100 pence per share.

Of these dividends, 1.45p per share was declared as PIDs in respect of the Group's tax exempt property rental business and 4.55p per share was declared as ordinary UK dividends (2015: 2.32p per share and 1.68p per share, respectively).

The Group's adjusted basic EPRA earnings per share for the year was 1.89p (2015: 0.13p). The adjusted earnings per share figure takes the EPRA earnings per share for the year and adds the licence fee on forward funded developments that has not been recognised in the Statement of Comprehensive Income. We see this as a more relevant measure when assessing dividend distributions.

The Company is targeting an annualised dividend of 6.1p per share for the financial period commencing 1 July 2016, provided that the Company can continue to implement successfully its investment policy. This reflects the prior year dividend of 6p per share with an adjustment broadly in line with our dividend growth target of not less than RPI. The Directors anticipate that the dividend for the quarter beginning 1 January 2017 and going forward will be substantially, if not fully, covered by adjusted earnings per share.2

Accounting Reference Date

Following consideration of the Group's activities, in particular the focus of operational and development activity around the start of an academic year in September, the Board has concluded that it would be appropriate to change the accounting reference date of the Company from 30 June to 31 December, and intends to do so with effect from the period commencing 1 July 2016. Therefore, the next audited statutory accounts will be prepared and published for the six month period ending 31 December 2016.

Financing

In October 2014, the Company launched a share issuance programme enabling it to issue up to 300 million shares until 29 October 2015 (the "Share Issuance Programme"). In July and October 2015, the Company raised a total of £161.4 million in gross equity in two tranches under the Share Issuance Programme.

In March 2016, the Company launched a second share issuance programme enabling it to issue up to 165 million shares valid until 28 February 2017 (the "Second Share Issuance Programme"). The first tranche of the Second Share Issuance Programme, which closed on 16 March 2016, was significantly oversubscribed with the Company increasing the gross equity raised from an initial target of £90 million to £125 million.

As at 30 June 2016, the Company had raised during the year, in aggregate, gross equity proceeds of £286.4 million, with all three fundraisings priced at a premium to NAV and significantly oversubscribed.

On 29 February 2016, the Company's wholly-owned subsidiary Empiric Investments (Two) Limited ("EITL") agreed a further fixed rate term loan facility of £40.0 million with Canada Life Investments ("Canada Life"), secured against a portfolio of forward commitment assets on their completion which were expected to occur in time for the start of the 2016/17 academic year, held as a lending group by EITL (the "Canada Life Facility B"). The Canada Life Facility B is repayable in two tranches of £20 million in March 2024 and July 2031, respectively, and has an all in rate of 3.52% which is fixed throughout the term up to a LTV ratio of 50%.

On 1 April 2016, the Company's wholly owned subsidiary, Empiric Investments (Four) Limited ("EIFL") agreed a fixed rate term loan facility of £80 million arranged by Cornerstone Real Estate Advisers Europe LLP, a member of the Massachusetts Mutual Financial Group (the "Cornerstone Facility"). The Cornerstone Facility is secured against a portfolio of 18 operating assets, held as a lending group by EIFL. The Cornerstone Facility is repayable 12 years from the date of the initial draw down and has an all in rate of 3.24% which is fixed throughout the term up to a LTV of 55%. An additional committed facility of up to £40 million is available to the Group, to be requested on or before 7 December 2016, subject to meeting certain conditions. Part of the Cornerstone Facility was used to refinance £37.9 million of debt repaid to Santander and Royal Bank of Scotland.

As at 30 June 2016, the Group had, in aggregate, £216.6 million of committed debt in place of which £155.9 million had been drawn down. The Group's aggregate LTV ratio as at 30 June 2016 was 22.7% (2015: 26.0%) and it was in full compliance with its covenants.

Post Balance Sheet Events

Since the period end, the Group has agreed a £32.8 million development debt facility with AIB Group (UK) PLC (a member of Allied Irish Bank) and a £30.6 million development debt facility with Royal Bank of Scotland.

Further, the Company has announced the acquisition of five assets which were operational and one property under development which, together, represent a further 508 beds. Details of these acquisitions are set out in Table 3 of the Chief Investment Officer's Portfolio Review.

Alternative Investment Fund Manager ("AIFM")

The Company continues to be authorised as a full-scope AIFM and is regulated by the Financial Conduct Authority. The Company has engaged a specialist compliance consultancy, Portman Compliance Consulting LLP, to ensure that it adheres to all of its regulatory obligations.

Thanks

I would like to thank our Finance Team for their hard work and dedication over this period of significant growth in the business and meeting the challenges along the way.

Michael Enright

Chief Financial Officer

14 September 2016

(1) The Company budgets and models on the basis of 97.5% occupancy. Occupancy or income of the operational portfolio to this level and in excess is considered fully let.

(2) Shareholders should note that the figures in relation to dividends set out above and elsewhere in this Annual Report are for illustrative purposes only and are not intended to be, and should not be taken as, a profit forecast or estimate.

Principal Risks and Uncertainties

The Board has overall responsibility for risk management and internal controls within the Group.

The Audit Committee formally reviews the effectiveness of the Company's risk management processes on behalf of the Board.

The Board recognises that the operation of a company is not without risk but that effective risk management is key to the success of an organisation.

Approach to Managing Risk

The overall risk management process is designed to identify, evaluate and mitigate (rather than eliminate) significant risks that the Group faces. Therefore, the process can only provide reasonable, rather than absolute, assurance. The Company outsources certain services to its administrator, FIM Capital Limited (the "Administrator"), and other service providers, and a certain element of reliance is placed on the Company's service providers' own systems and controls.

The Board undertakes formal risk reviews with the assistance of the Audit Committee in order to assess the effectiveness of the Company's risk management and internal control systems. During the course of such reviews, the Board has not identified, nor been advised of, any failings or weaknesses which it has determined to be of a material nature.

Principal Risks

Principal risks have the potential to affect the Group's business materially - either favourably or unfavourably. Some risks may be unknown at present, and certain risks that are currently regarded as immaterial, and therefore not included here, might well become material in the future.

Property Market Risk

Funding Risk

Taxation Risk

Operational Risk

Group Statement of Comprehensive lncome

Group Statement of Financial Position

These financial statements were approved by the Board of Directors on 14 September 2016 and signed on its behalf by:

Paul Hadaway

Director

Company Statement of Financial Position

Group Statement of Changes in Equity

Company Statement of Changes in Equity

Group Statement of Cash Flows

Company Statement of Cash Flows

Notes to the Financial Statements

1. Accounting Policies

1.1 Trading Period

The consolidated financial statements of the Group reporting period is from 1 July 2015 to 30 June 2016.

1.2 Basis of Preparation

The consolidated financial statements of the Group for the period to 30 June 2016 comprise the Company and its subsidiaries, together referred to as the Group. These financial statements have been prepared on a going concern basis and in accordance with IFRS as issued by the International Accounting Standards Board ("IASB") as adopted by the European Union.

The Group's financial statements have been prepared on a historical cost basis, except for investment property and derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in Sterling which is also the Company's functional currency.

The Company has applied the exemption allowed under section 408(1b) of the Companies Act 2006 and has not presented its own statement of comprehensive income in these financial statements. The Group profit for the year includes a loss after taxation of £5.77 million (2015: £3.90 million) for the Company, which is dealt with in the financial statements of the Parent Company.

The financial information does not constitute the Group's statutory accounts for the year ended 30 June 2016 or the period from 11 February 2014 to 30 June 2015 but is derived from those accounts. The Group's statutory accounts for the period from 11 February 2014 to 30 June 2015 have been delivered to the Registrar of Companies. The Group's statutory accounts for the year ended 30 June 2016 will be delivered to the Registrar of Companies in due course. The Auditor has reported on both the 2015 and 2016 accounts; the reports were unqualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and did not contain any statement under Section 498 of the Companies Act 2006.

1.3 Going Concern

The consolidated financial statements have been prepared on a going concern basis.

1.4 Significant Accounting Judgements, Estimates and Assumptions

The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Judgements

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements:

(a) Fair Valuation of Investment Property

The market value of investment property is determined, by an independent external real estate valuation expert, to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Properties have been valued on an individual basis. The valuation experts use recognised valuation techniques and the principles of IFRS 13.

The valuations have been prepared in accordance with the Red Book. Factors reflected include current market conditions, annual rentals, lease lengths, and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property are set out in Note 13.

For properties under development the fair value is calculated by estimating the fair value of the completed property using the income capitalisation technique less estimated costs to completion and an appropriate developer's margin.

(b) Business Combinations

The Group acquires subsidiaries that own investment properties. At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the acquisition of an asset. The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property.

Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business combinations, rather, the cost to acquire the corporate equity is allocated between the identifiable assets and liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises.

(c) Fair Valuation of Interest Derivatives

In accordance with IAS 39, the Group values its interest's rate derivatives at fair value. The fair values are estimated by the JCRA with revaluation occurring on a six-monthly basis. The financial valuation expert will use a number of assumptions in determining the fair values including estimations of future interest rates and therefore future cash flows. The fair value represents the net present value of the difference between the cash flows produced by the contracted rate and the valuation rate.

(d) Operating Lease Contracts - the Group as Lessor

The Group has acquired investment properties which have commercial property leases in place with tenants. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases.

Summary of Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June 2016. Subsidiaries are those investee entities where control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if, and only if, it has:

(a) power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

(b) exposure, or rights, to variable returns from its involvement with the investee; and

(c) the ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;

(b) rights arising from other contractual arrangements; and

(c) the Group's voting rights and potential voting rights.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

The financial statements of the subsidiaries is prepared for the same reporting period as the Parent Company, using consistent accounting policies. All intra-Group balances, transactions and unrealised gains and losses resulting from intra-Group transactions are eliminated in full.

Segmental Information

The Directors are of the opinion that the Group is engaged in a single segment business, being the investment in the UK in student and commercial lettings.

Property, Plant and Equipment