Empiric Regulatory News (ESP)

14 September 2015

Empiric Student Property plc

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

FINAL RESULTS FOR THE PERIOD FROM 11 FEBRUARY 2014 TO 30 JUNE 2015

Empiric Student Property plc (ticker: ESP), an internally managed real estate investment trust ("REIT") investing in modern, premium, student accommodation, today announces its audited results for the period from 11 February 2014 to 30 June 2015.

Financial Highlights

· Audited NAV of 103.2 pence per share as at 30 June 2015 (1), a 5.2% increase from an opening NAV of 98.1 pence as at 30 June 2014 and net of all property acquisition costs.

· £218.8 million of the portfolio valuation was attributable to operating assets, an increase of 6.5% in value compared to the aggregate purchase price of £205.4 million (net of acquisition costs). The average holding period for the Group's assets was 146 days.

· Quarterly dividends paid amounting to 4.0 pence per share for the period ended 30 June 2015, of which 2.32 pence per share was paid as a property income distribution ("PID") under the REIT rules.

· The Company is targeting an initial dividend yield of 6%, based on the IPO price of 100 pence per share, for the financial year commencing 1 July 2015, provided that the Company can continue to implement successfully its Investment Policy (2).

· The Company listed on the Main Market (Premium Listing) of the London Stock Exchange on 30 June 2014 at an issue price of 100 pence per share and has a current market capitalisation of approximately £332 million.

· During the period, Empiric carried out two further equity fundraisings both priced above NAV, resulting in gross equity proceeds (including the IPO) of approximately £235.7 million, and agreed approximately £115.3 million of debt financing (including the Group's share of the debt relating to joint venture developments).

· The LTV ratio as at 30 June 2015 was 26.3% compared to target of 35% and a maximum limit of 40%.

· The Company's shares were included in the FTSE All Share Index from June 2015.

(1) For the purposes of calculating the audited NAV, the Company's property portfolio has been independently valued by CBRE as at 30 June 2015 and includes the Group's share of joint venture properties.

(2) Shareholders should note that the figures in relation to dividends set out above and elsewhere in this document are for illustrative purposes only and are not intended to be, nor should they be taken as, a profit forecast or estimate.

Operational Highlights

· Acquired or exchanged on a diversified portfolio of 40 student accommodation investments, comprising a mix of operating properties (29) and assets under development (11), centrally located across 20 prime university cities and towns in the UK - comprising an aggregate of 3,503 beds in operation or under development.

· The average purchase net initial yield of the operating properties was 6.6% against a valuation yield of 6.1% as at 30 June 2015.

· By focusing on mid-sized properties outside London, which are of less interest to many of our competitors, Empiric is able to secure high quality assets at better than average yields.

· Portfolio was fully let for the period (3).

· The average rent review increase for the 15/16 academic year is 3.25% (4).

· Started to develop our internal operations capability initially with the appointment in February 2015 of an operations director (a non-Board role) who has since been building this function, key to which will be a new centralised platform for marketing and financial control. Plan to develop relationships with local property managers through the appointment of a team of dedicated regional managers.

· The underlying fundamentals of Empiric's market in premium student accommodation are solid: increasing demand coupled with a supply shortage.

(3) 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.

(4) Represents the aggregate increase in gross rent on assets controlled by ESP in November 2014.

Post Balance Sheet Events

· Since the period end, the Group has continued on its growth trajectory. In July 2015, the Company raised gross equity proceeds of £75 million through a further offer of shares under its Share Issuance Programme.

· Further, the Company has announced the acquisition of three assets which were operational or expected to be operational by the end of September 2015 and seven properties under development which, together, represent a further 1,195 beds and bringing the total portfolio of investments (including one asset conditionally exchanged on) to 51 assets operational or under development with 4,820 beds across 25 cities and towns.

· Total property portfolio valuation of £365.4 million as at 14 September 2015 (including post balance sheet acquisitions at cost).

· Annualised rent roll as at 14 September 2015 is £23.3 million.

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

"The Board is committed to delivering on the stated objectives of providing shareholders with regular, sustainable and growing long-term dividends, together with the potential for capital appreciation over the medium to long term.

"The market outlook is strong as the fundamental market dynamics for student accommodation remain unchanged. As Empiric's profile grows in the sector boosted by its listed status, it is being presented with a richer and broader pipeline of attractive investment opportunities.

"The Group continues to grow the asset base to deliver good returns to shareholders and seeks further enhanced returns through development and financing activities as well as developing an in-house operational capability, offering operational benefits and potentially even stronger property returns. By doing this, I believe the Company will be serving its shareholders well, delivering excellent returns as we continue to grow, with a diversified portfolio and increased profitability through improved operational efficiencies."

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.

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 (PR Adviser)

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.

Notes:

Empiric Student Property plc (incorporated in England & Wales) is an internally managed real estate investment trust ("REIT") investing in modern, direct-let, premium, student accommodation, both standing and development assets, with a focus on quality and with assets generally in prime central locations in top university cities and towns in the UK. The Company 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.

Chairman's Statement

Overview

On 30 June 2015, Empiric Student Property plc ("Empiric" or the "Company" or, together with its subsidiaries, the "Group") celebrated its first anniversary as a listed company on the Main Market of the London Stock Exchange. Empiric has made significant progress since the initial public offering ("IPO") in June 2014, when it raised £85 million. Over the period, Empiric established a skilled executive and non-executive team with a wide sector experience, networks and knowledge; achieved Real Estate Investment Trust ("REIT") status in July 2014; and acquired or exchanged on 40 properties, resulting in a total net shareholder return (on the 100 pence IPO issue price) of 11.5% as at 30 June 2015. In addition, the Company's shares were included in the FTSE All Share Index from June 2015.

I am proud of Empiric's first set of results, which are the product of the executive team's hard work and specialist sector focus. Empiric offers both institutional and private investors the ability to capitalise on a growing UK university student population facing significant accommodation undersupply, in a target market where this is even more pronounced yet still with limited competition, with few listed competitors offering investors an opportunity to participate in this market. Our REIT status delivers added value to our shareholders who can benefit from the tax efficient structure.

Performance Highlights

Empiric continues to make excellent progress towards its operational and financial targets set at IPO, a clear indication that we have the right focus and that the Board is investing its shareholders' funds wisely.

During the period, Empiric carried out two further equity fundraisings both priced above NAV, resulting in gross equity proceeds (including the IPO) of over £235 million, and agreed approximately £115.3 million of debt financing (including the Group's share of the debt relating to joint venture developments). The Group succeeded in committing these funds into building a diversified portfolio of 40 student accommodation investments, comprising a mix of operating properties and assets under development.

Notwithstanding Empiric's intense period of growth, the Company has paid out quarterly dividends amounting to 4.0 pence per share for the period ended 30 June 2015, of which 2.32 pence per share was paid as a property income distribution ("PID") under the REIT rules.

Consistent with its investment policy, the Company has used leverage on a conservative basis to help drive investment returns, and has also diversified its lending relationships. The LTV ratio as at 30 June 2015 was 26.3% compared to target of 35% and a maximum limit of 40%.

The Board and Management

As an internally-managed REIT, one of Empiric's key attractions is the strength of the management team. Paul Hadaway (Chief Executive Officer) and Tim Attlee (Chief Investment Officer) are property professionals with a recognised track record. They are focused on delivering value to investors through their knowledge of and contacts within this specialist sector.

Over the past year, the Board has worked closely to develop Empiric and has been responsible for implementing Empiric's investment objective and policies; guiding its strategic direction; monitoring the performance of the Group and its assets; and regularly reviewing university sector and property market dynamics to optimise the Company's strategic position.

During the period, we started to develop our internal operations capability initially with the appointment of an operations director (a non-Board role) who has since been building this function, key to which will be a new centralised platform for marketing and financial control accounting.

The Board is committed to maintaining an open channel of communication with all shareholders, responding to the needs of both institutions and individuals alike. The Executive Directors are in regular dialogue with the investment community and I seek to ensure that shareholders have direct access to me at general meetings and through private meetings.

Key Drivers

The underlying fundamentals of Empiric's market in premium student accommodation are solid: increasing demand coupled with a supply shortage. In addition, since the introduction of university fees, students have come to expect better university services, higher-quality facilities and appropriate accommodation.

Notwithstanding the introduction of tuition fees, the number of students studying in the UK has continued on a growth trend. In particular, the number of international students is growing significantly. It is international students, together with students studying beyond their first year as undergraduates, which comprise our target market.

With the recent removal of the cap on UK/EU student admissions, universities need to expand to meet student growth and are struggling to cope with the consequent demand for accommodation, creating opportunities for the private sector. However, the construction of new beds has been matched by the increase in student numbers and, hence, the chronic undersupply remains unchanged.

Over the past year, competition has increased as more investors enter the student accommodation market. It is a sign of confidence in the improving economy and demonstrates a greater understanding of opportunities in the sector.

However, by focusing on mid-sized properties outside London, which are of less interest to many of our competitors, Empiric is able to secure high quality assets at better than average yields. We operate a robust investment process only acquiring assets matching Empiric's strict investment criteria with a focus on asset location and building type. The 6.5% uplift in the aggregate value of the operating portfolio compared to the aggregate purchase price, as well as high Net Initial Yields (compared to our competitors), demonstrate that Empiric has bought wisely.

Our Staff

Our staff have all worked hard to get the Company where it is today. They are key to our Company's success. I would like to thank them all for their contribution to our success to date. There is a great team at Empiric and we will continue to provide a stimulating and challenging environment for all employees to enjoy and within which to develop.

Outlook

The Board is committed to delivering on the stated objectives of providing shareholders with regular, sustainable and growing long-term dividends, together with the potential for capital appreciation over the medium to long term.

The market outlook is strong as the fundamental market dynamics for student accommodation remain unchanged. As Empiric's profile grows in the sector boosted by its listed status, it is being presented with a richer and broader pipeline of attractive investment opportunities.

The Group continues to grow the asset base to deliver good returns to shareholders and seeks further enhanced returns through development and financing activities as well as developing an in-house operational capability, offering operational benefits and potentially even stronger property returns. By doing this, I believe the Company will be serving its shareholders well, delivering excellent returns as we continue to grow, with a diversified portfolio and increased profitability through improved operational efficiencies.

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

Chairman

14 September 2015

Our Business Model

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 5 years through 300-400 beds in 25-30 cities.

Investment Characteristics

Locations

· Prime university cities and towns

· Walking distance to university

· Close proximity to shops, entertainment and transport links

Buildings

· Medium-sized assets with 50-200 beds

· Purpose built or purpose renovated or converted

· High-end concept layout and communal facilities

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 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 operational structure to optimise value

In our first year, we have been focused on building our property portfolio. Towards the latter half of the financial year, we have developed our internal operational capability and this is set to continue with greater momentum over the coming year. Key to this will be a new centralised platform for our marketing and financial control functions, run nationally and connecting our entire portfolio of operating properties, in order to optimise cash management as well as present a consistent brand when marketing to our customers. We plan to develop our relationships with our local property managers through the appointment of a team of dedicated regional managers.

Chief Executive's Q&A

Q: How have you performed against targets set at IPO in June 2014?

A: We have focused on setting out clear targets and delivering on them throughout the year. I am pleased to report that in Empiric's first year of operations, we have met or exceeded our operational targets, expanding faster than expected. I am pleased with our financial performance given that we have held our assets, on average, only 146 days. Gross annualised rent for the portfolio of properties acquired (or conditionally exchanged) by the end of 2014 was £8.4 million and by June 2015 this had increased to £18.4 million. We have paid dividends of, in aggregate, 4 pence per share for the year from IPO to 30 June 2015 and we are targeting an aggregate dividend payment of 6 pence per share for the financial year commencing 1 July 2015.

At IPO, we set a target of 10,000 beds in five years. This target was based on initial research into the student accommodation sector, showing approximately 2.4 million university students in the UK (2012). We focused on 25-30 university cities and towns selected by number of applicants per place, with over 1.1 million students who needed accommodation and aimed for less than 1% of this student market, equating to 10,000 beds. At the end of our first year of operations, we had committed to over 3,500 beds in 40 buildings across 20 cities and towns, which puts us well on track to achieving that target, demonstrating our ability to source and acquire high quality assets at attractive prices.

Q. Which students do you target and what is the true size of your market?

A: In May 2015, we commissioned a research report, which has shown that, in the 2013/14 academic year, there were 2.3 million students enrolled in UK Higher Education Institutions, of which almost three quarters (1.7 million) studied full-time and just under a quarter (540,000) were postgraduates. International students, from both inside and outside the EU accounted for 19% of the UK student population, some 435,000 students. Long-term growth in student numbers has been partially driven by students coming from outside the UK, a greater proportion of whom are studying at a postgraduate level.

Our customer make-up is mainly international, postgraduate and mature. This is a far cry from the 18 year-old who has just left school. International students, without a UK guarantor, pay 100% of their rent up front meaning that a large proportion of our annual income is collected in advance.

As the Empiric property portfolio has grown, the break-down is over 40% postgraduates, almost 70% international, representing 83 nationalities and an age range of 18-49. Only 2% are from the UK, in their first year and under the age of 20.

We are often referred to as operating in a "niche" market of second and third year undergraduate and postgraduate students, but, with the "main-stream" first year undergraduate market representing less than a third of the student population, it is a "niche" we are very happy to be in.

Q: What is your acquisition strategy?

A: Our business is to build a portfolio of properties from which we can generate an attractive return, and not to trade our assets. At the same time, we look to maximise shareholder returns through actively managing the properties: minimising vacancies by offering a superior space to our competitors, and refurbishing and extending where possible, to enhance the offering. We are principally a property company - we acquire or develop prime properties to create portfolios in city and town centres. Empiric will continue to develop a strong pipeline of acquisitions - raising funds and deploying them sensibly, but ensuring that we have sufficient funds allocated to complete what we start at any given point.

Student property has emerged as an investment grade asset class. There is a ready supply of suitable properties and potential development partners around the country, but with relatively limited end buyers and long-term investors to complement short-term developers. We operate in a fairly liquid market, due to the £5-£15 million lot size we target, well below the level favoured by institutions making direct investments, which presents a real opportunity.

We are currently focusing on 35 prime university cities and towns in the Russell Group and top regional universities, such as Hertfordshire, Huddersfield and Falmouth, which have recognised expertise in a variety of subjects.

The strength of the UK universities is key to the success of our business. The Times Higher Education university financial health check 2015 found that:

· Total UK universities income for 2013/14 was £30.7 billion, up 5.7% year-on-year.

· Total UK universities surplus for 2013/14 was £1.2 billion, up 12.6% year-on-year, demonstrating the financial robustness of the sector.

When we identify a potential acquisition, we operate a strict investment process to ensure that it is the right investment opportunity. Every potential acquisition goes to the Board for approval and is subjected to a thorough review before any investment decision is taken. The majority of properties we review are rejected. It is imperative we act responsibly for our shareholders - we have to be able to say with confidence that we have invested well, so that each asset delivers its expected return and progresses in terms of value.

Q: How do you structure internal operations and ensure you integrate your acquisitions?

A: Our principal focus is the acquisition of property assets to build our portfolio. However as the business grows, and the investment portfolio with it, the operations division will grow too. To date we have outsourced operations, including the marketing, management and maintenance of Empiric's properties to specialist service providers. As Empiric's portfolio has grown, we have developed relationships with leading national specialist service providers and also several less well-known, but equally professional, local operators.

Operations is becoming a significant part of our business and we are preparing for this. In February 2015, we appointed an operations director, Clint Bartman, who has been working on developing consistent internal operation processes, including benchmarking costs, management profitability, standardising contractual arrangements and reporting.

We are also streamlining our structure and approach to working with a range of incumbent building management service providers operating in silos according to different standards. Many are successful building managers with a strong local community knowledge. We do not need nor want to replace them, so from September 2016 they will start to report to a new regional management team. We are also creating a new centralised marketing and financial control platform, run nationally to represent our entire portfolio. This will streamline billing and cash collection, and allow us to present a consistent brand when marketing, nurturing ongoing business and ultimately creating a bigger footprint in the national student accommodation market.

Q: What makes your property assets so special?

A: Our student customer has a different lifestyle to the typical first-year student, and our buildings cater for this. They are looking for a studio or a 2/3 bedroom flat. Almost 70% are international and are paying significant levels of fees to be at university in the UK, so they want a homely environment and a quiet place to study.

Our buildings are unique and many have their own identity, with upmarket appeal, such as the Ballet School (Glasgow), Dean Clarke Lofts (Exeter), an old hospital, Algernon Firth (Leeds), historically an institute of pathology or Halsmere Studios (London), originally a 1930s music school. We design every interior as though it is a home, whilst standardisation and robustness ensures long-term economic benefits. Our standard design specification for each building includes a gym, cinema, shared work rooms, laundrette and communal areas for residents and their friends. This is not always possible for every building, but where we buy or develop properties in close proximity to each other, Empiric's customers can share such facilities.

Empiric buildings typically have 50-200 beds, which provide a friendly and individual setting. Due to the smaller building size, they tend to be in a central location, which is crucial; within walking distance of the university and close to shopping and amenities.

There is often ground floor commercial or retail space and gross annualised rent from these areas was approaching £1 million as at 30 June 2015. A number of buildings have restaurants or bars and several buildings around the country incorporate supermarket outlets such as Sainsbury's, Tesco and Morrisons.

International students generally pay a full year's rent upfront and, therefore, since a high proportion of our customers are international students, the Group's exposure to bad debt is limited. We are also able to reset rents annually, with clusters of mid-sized properties facilitating flexibility in setting rates for individual properties.

As we develop closer control of our operations we will look at secondary income streams such as daily room cleaning and full laundry services.

Q: Has your market environment changed since IPO?

A: Our underlying market dynamics are strong and we believe that they will remain that way for the foreseeable future. There are seven times as many students studying in the UK as there were a generation ago (based on acceptances of undergraduates compared to the 1970s) and despite many years of substantial private sector investment in purpose-built student accommodation, there is still very little purpose-built accommodation available for second and third year undergraduates and postgraduates.

HESA statistics for 2013-14 showed that university attendance was at a high and UCAS statistics for Autumn 2015 entry are up across all sectors particularly for, inter alia, students from the EU. Overlaid on that is the recovery in the UK economy, with the availability and cost of debt easing gradually.

Land values have increased over the past year, but this does vary from city to city. It is now not unusual to be outbid for a site and then to find the winning bidder falling away. There are many first-time student developers who underestimate construction costs of building and the quality of space needed. There is some overbidding for sites resulting in developers being unable to raise the development debt and looking for a forward funding route as an exit. This works to the Company's advantage as Empiric operates as both a funder or developer.

Student property has become much more readily understood as a development opportunity but the market remains fragmented. Although there have been high prices paid for some London portfolio transactions, they have not translated to single asset sale prices in the regions. There have been some hopeful asking prices in the provinces and we have had to say no to some well-located buildings where we consider that the net initial yield is just not sustainable. One of the advantages of our business is the "lettability" of these spaces - as long as we have the right building in the right location at the right price, we will let it.

Paul Hadaway

Chief Executive Officer

Chief Investment Officer's Market Update

The student accommodation sector in the UK has become a globally recognised investment class, with the first six months of 2015 seeing record levels of investment with approximately £3.75 billion of deals transacted compared with the previous record year of 2012 where deals worth £2.7 billion were transacted (Source: CBRE UK Student Market Investment Overview, June 2015). A key driver of the sector is the proven track record of returns, with a strong demand from students against a backdrop of a limited supply of purpose-built student accommodation.

Total student numbers have been on a long term growth trend in the UK with an approximate 7-fold increase in the last generation (based on University and College Admissions Services ("UCAS") acceptance figures for undergraduates dating back to the 1970s). Historical numbers peaked at 2.5 million in 2010/2011, then declined to 2.3 million for the 2013/14 academic year (source: Higher Education Statistics Agency ("HESA")). This decline, however, has been almost entirely the result of falling part-time student numbers with the number of full-time students largely unaffected. Figures from UCAS show that acceptances for undergraduates for the 2014/15 academic year increased by 3.4% (equivalent to approximately 16,800 places) over the previous year and applications for the 2015/16 academic year, so far, indicate a further 2% increase which would take application numbers above the 2010/11 peak.

A number of factors are driving the student numbers but key among these is the strong growth in students from outside of the UK; 5% from the EU and 14% from non-EU countries, representing a total of 19% of the 2013/14 student population. UCAS data indicates that applications on undergraduate courses by non-EU students increased by 5.7% for the 2014/15 academic year while acceptances by students from the EU (other than the UK) increased by 7.6% compared to just 3.2% for UK domiciled students. The demographic of students has changed with nearly 25% of students now being postgraduates. It is in this market that Empiric operates with just under 70% of customers in 2014/15 being international students from 83 different countries, 43% postgraduate and with an age range of 18-49. Whilst UK school leavers are not Empiric's target market, being only 2% of 2014/15 residents, 33% of UK school leavers now go to university.

These figures demonstrate that the UK continues to attract a large proportion of international students. Figures show that, in 2012, the UK was the second largest destination for international higher education with a 13% global share, second only to the USA with a 16% share. The global outbound student market (i.e. students enrolled outside their country of citizenship) is led by China which accounts for 19% and, of these students, 11% choose to study in the UK.

These international students are attracted to the quality of the UK's universities and teaching, a globally recognised qualification and the opportunity to enjoy life in the UK. According to recent research by the British Council, more than three quarters of new international students studying in the UK rate the UK educational offer as the same, better or much better than the main competitor country on each of these three factors. Further, approximately one in five international undergraduates expressed a desire to continue on to postgraduate study.

To date, the overall number of international students in higher education has been relatively unaffected by tighter immigration controls implemented by the last government. Instead, the current government appears keen to promote the UK as a destination for international students as the revenue generated is seen as an integral part of the UK's wider economic policy.

A further key government initiative that is expected to have a significant impact on student numbers is the removal of the cap on domestic students in 2015. Not only should this lead to an increase in UK student numbers but, paradoxically, it may fuel the growth in EU student numbers, as EU students are effectively treated as identical to those from the UK under EU regulations. The effect is that there is an increased market for UK universities to target. UCAS data for 2014/15 is showing early signs that universities may significantly increase their numbers of EU students who are attracted to English language based courses, the broader appeal of the UK and the buoyant UK jobs market. The growth of international students at UK universities has been countrywide and over the past ten years it has been faster outside than inside London.

There exists a persistent shortfall in purpose-built student accommodation, with recent figures showing that in the 35 selected premier university cities and towns in the UK now targeted by Empiric, all had a shortfall of purpose-built beds, with over 90% of students beyond their first year not having access to purpose-built accommodation. While, traditionally, purpose-built accommodation has been favoured by first year and international students, such accommodation is increasingly being sought by the postgraduate market. There is a finite supply of Victorian terraced houses, the quality of which no longer appeals to the more discerning student who can afford to pay for quality and such students are prepared to pay a premium to the price of houses of multiple occupation (HMO) accommodation. Despite the expansion of the sector in recent years, still only 7% of full-time students live in private sector purpose-built student accommodation ("PSPBSA"). The number of new PSPBSA beds built in 2013/14 equalled the increase in student numbers that year, keeping a status quo in the supply shortage.

The supply demand dynamics vary depending on local conditions with some university cities and towns outside London becoming more reliant on the revenues generated from the higher education sector. As a result, the expansion of universities and the student economy is increasingly seen as an integral part of their economic development plan. This is true for towns with a conscious regeneration agenda, such as Liverpool and Coventry, as well as the likes of Falmouth which is seeking, in part, to diversify its economy away from seasonal tourism.

According to The Times Highter Education university financial health check 2015, total university income in the UK was up 6% with total university surpluses up 12%. Moreover, 143 of the 160 institutions analysed were in surplus before exceptional items, with the top performers being smaller institutions and universities accredited after 1992, such as the University of Huddersfield.

Improving the student experience has become a priority in response to an increasingly competitive environment - this is evident in the growth in capital expenditure by the universities on new buildings and facilities as well as increasing staffing costs. Research is also a key factor in the competitiveness of a university but an increasing number of universities are having to rely on the surpluses from international students to subsidise research spending. It is predicted that with the lifting of the cap on student numbers, some universities could seize the opportunity to expand, putting further pressure on teaching and infrastructure costs… and therefore increasing the need for student accommodation.

In this context we are comfortable to continue our expansion towards the IPO target of 10,000 beds in this market.

Tim Attlee

Chief Investment Officer

Investment policy

Investment Policy

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 will 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 limited development of new buildings or refurbish or convert student accommodation with other development partners 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 Net Asset Value 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 Company'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 Financial Officer's Review

Accounting Policies

The Group's annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS").

Financial Results

The financial results for the Group for the period from 11 February 2014 (the date of incorporation) to 30 June 2015 reflect an intense period of investment and growth since the commencement of operations on the Company's IPO on 30 June 2014. The Company has also invested in growing its operational infrastructure in order to manage the growth of the business.

The operating profit for the Group for the period to 30 June 2015 under IFRS was £12.6 million, the biggest contribution coming from the gain of £11.3 million, net of property acquisition costs, recognised on revaluing the Group's property portfolio (the "Portfolio") at the period end. The operating profits have also benefited from the rental income derived from the standing assets in the portfolio, which operated on a fully let basis (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) and produced rental income of £8.0 million.

The Group's share of results from joint ventures in the period was £2.8 million, which related to uplift in fair values of its properties.

Administrative and other expenses, which include the ongoing costs of running the business, were £4.8 million, equivalent to 1.9% of the value of the Portfolio as provided by CBRE, as at 30 June 2015.

Net financing costs for the period were £1.2 million, including the impact of a reduction in the fair value of interest rate swap and cap derivatives of £0.2 million. Further information on financing and hedging is provided below.

The profit before tax for the period was £14.2 million, with basic earnings per Share for the period of 9.67 pence (9.61 pence on a diluted basis).

No Corporation Tax has been charged in the period because of the Group's fulfilment of all of its obligations as a Real Estate Investment Trust ("REIT") including its dividend distribution policy of distribution of at least 90% of its property related net income.

The Net Asset Value per Share as at 30 June 2015 was 103.2 pence, prior to adjusting for the fourth interim dividend of 1 pence per Share, compared with the Net Asset Value per Share of 98.1 pence at IPO and is shown net of all property acquisition costs and dividends paid during the year.

Assets

Investment overview

As at 30 June 2015, the Company had invested, or allocated for investment, £251.3 million in the freeholds (unless otherwise stated) of 37 direct-let student accommodation investments, comprising a mix of operating properties, forward commitment (assets acquired subject to practical completion), forward funded (funding of third party developments in return for a discount on the acquisition price) and development projects (the latter to be developed by the Group directly in conjunction with Revcap Advisors Limited ("Revcap")) (the "Property Portfolio"). The Group had also exchanged conditional contracts on three further properties for which the outstanding conditions (e.g. practical completion) had not been met as at 30 June 2015 and, therefore, the aggregate value of these properties of £20.6 million has not been included in the aggregate valuation of the Property Portfolio. In addition, the Group had exchanged conditional contracts on a further site for development, subject to receipt of planning consent.

A summary of the Property Portfolio and other properties as at 30 June 2015 is set out in Tables 1 and 2.

Table 1 - Operating assets as at 30 June 2015 (29 in total)

1 150 year lease, from August 2010.

2 Freehold/leasehold.

3 199 year lease, from December 2014.

4 999 year lease, from March 2014.

The portfolio of 29 operating properties was fully let(1) for the 2014/2015 academic year. The gross annualised rent for these properties was £18.4 million, of which £0.8 million (representing 4.4% of the gross annualised rent) was attributable to commercial revenue.

The average net initial yield of the operating properties as at 30 June 2015 was 6.6%. As the Company grows, its purchasing power is expected to increase with a resultant decrease in direct costs such as property management fees and utilities which should have a positive impact on yields.

Table 2 - Forward commitment, forward funded and development assets as at 30 June 2015 (11 in total)

1 Subsequent to the period ended 30 June 2015, these assets will have become operational for the 2015/16 academic year.

2 Purchase price on acquisition.

3 The Group acquired the land site at 95 Talbot Street, Nottingham on 20 February 2015. The details of a proposed forward funded development for the site are under negotiation. Revised planning permission has been received increasing the number of beds from 65 to 77.

4 The Group exchanged contracts on this property during the period to 30 June 2015 though certain conditions had not been satisfied at the period end.

5 Development is being undertaken as a joint venture with an affiliated investment fund of Revcap and total investment to completion figure excludes Revcap's contribution.

6 The Group exchanged conditional contracts on this site on 26 June 2015, subject to planning consent being obtained. Completion of the acquisition is expected in February 2016.

Valuation

The Company's Property Portfolio has been independently valued by CBRE in accordance with the RICS Valuation - Professional Standards January 2014 (the "Red Book"). As at 30 June 2015, the Property Portfolio had a market value of £251.3 million (excluding the joint venture interests not currently owned by the Group). Of this, £218.8 million was attributable to operating assets, an increase of 6.5% in value compared to the aggregate purchase price of £205.4 million (net of acquisition costs). The aggregate valuation attributable to the forward commitment, forward funded and development assets that had unconditionally exchanged was £32.5 million, which is based on progress of the development of the assets to 30 June 2015.

(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.

Dividends

For the period ended 30 June 2015, the Company declared four interim dividends amounting, in aggregate, to 4 pence per share (of which 1 pence per share was declared on 8 July 2015), which achieves the objective set out at the time of the Company's November 2014 fundraising.

Of these dividends, 2.32 pence per Share was declared as property income distributions ("PIDs") in respect of the Group's tax exempt property rental business and 1.68 pence per share was declared as ordinary UK dividends.

The Company is targeting an initial dividend yield of 6%, based on the IPO price of 100 pence per share, for the financial year commencing 1 July 2015, provided that the Company can continue to implement successfully its Investment Policy. (1)

Financing

At IPO, the Company raised equity capital in an amount of £85 million (gross) through a placing and offer of shares to the public. 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") and raised a total of £150.65 million in gross equity in two tranches under the Share Issuance Programme. As at 30 June 2015, the Company had raised, in aggregate, gross equity proceeds of £235.7 million.

On 24 October 2014, the Company's wholly-owned subsidiary Empiric Investments (One) Limited ("EIOL") agreed a five year £35.5 million term loan facility with The Royal Bank of Scotland plc ("RBS"). The RBS facility agreement is secured against eight of the Group's standing operating properties.

On 23 February 2015, the Company agreed an amended and restated facility with RBS, enhancing the facility to a revolving (re-drawable) term loan facility of £55.5 million available to EIOL (the "RBS Loan") with a termination date of 24 October 2019.

The amount of £35.5 million currently advanced under the original RBS Loan is fully hedged via a co-terminus five year interest rate swap. The rate of interest payable on this portion of the RBS Loan is equal to a margin of 1.9% above the swap rate. The balance of the amount available under the RBS Loan is subject to an interest rate that caps the LIBOR rate at 2.5% which runs coterminously with the term of the facility.

On 11 May 2015, the Company's wholly-owned subsidiary Empiric Investments (Two) Limited ("EITL") agreed a 15-year fixed rate £31.1 million loan facility with Canada Life Investments ("Canada Life"), secured against a portfolio of eight operating assets held as a lending group by EITL (the "Canada Life Loan"). The Canada Life Loan has a fixed interest rate of 3.97% which is fixed up to a loan-to-value ratio of 50%.

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

On 20 June 2015, the Group acquired Liverpool Edge Limited (now renamed Spring Roscoe Limited) which was subject to an existing term loan facility with Santander UK plc ("Santander") of which £18.7 million remained outstanding (the "Santander Loan"). The Santander Loan is secured against six of the Group's operating properties and is repayable in instalments of £187,500 per quarter. The Santander Loan is provided at a margin of 2.5% above LIBOR with a remaining term of approximately 4 years. The Group can give 90 days' notice on the debt and this facility will be reviewed in due course in the wider context of the Group's overall gearing strategy.

Empiric (Southampton) Limited, the joint venture development company owned on a 50/50 basis with an affiliated investment fund of Revcap, has entered into a development loan facility with Close Brothers Limited, for an amount of £10.0 million, to fund the development of the Brunswick House development project in Southampton.

Empiric (Glasgow) Limited, the joint venture development company also owned on a 50/50 basis with an affiliated investment fund of Revcap, has also entered into a development loan facility with Close Brothers Limited, for an amount of £10.1 million, to fund the development of the Willowbank development project in Glasgow.

As at 30 June 2015, the aggregate loan-to-value ratio was 26.3%.

Post Balance Sheet Events

Since the period end, the Group has continued on its growth trajectory. In July 2015, the Company raised gross equity proceeds of £75 million through a further offer of shares under its Share Issuance Programme.

Further, the Company has announced the acquisition of three assets which were operational or expected to be operational by the end of September 2015 and seven properties under development which, together, represent a further 1,195 beds. Details of these acquisitions are set out in Table 3 below.

Table 3 - Assets acquired since 30 June 2015 to date (10 in total)

1 These assets were acquired as forward commitment investments in August 2015 and September 2015, respectively, but which have commenced operations as at 14 September 2015.

Alternative Investment Fund Manager ("AIFM")

On 26 November 2014, the Company was authorised as a full scope AIFM and is regulated by the Financial Conduct Authority.

Employees

Empiric supports the principle of diversity in the workplace. The gender diversity split as at 30 June 2015 was as follows.

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 many challenges along the way.

Michael Enright

Chief Financial Officer

14 September 2015

Key Performance Indicators

Principal Risks and Uncertainties

Approach to managing risk

The 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, and not absolute, assurance. The Company outsources certain services to the Administrator, FIM Capital Limited, and other service providers, and 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.

The principal risks and uncertainties that the Group faces are set out below.

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, may turn out to be material in the future.

Property Market Risk

Funding Risk

Operational Risk

Taxation Risk

Consolidated Statement of Comprehensive Income

for the period from 11 February 2014 to 30 June 2015

Consolidated Statement of Financial Position

30 June 2015

Company Statement of Financial Position

30 June 2015

Consolidated Statement of Changes in Equity

for the period 11 February 2014 to 30 June 2015

Company Statement of Changes in Equity

for the period 11 February 2014 to 30 June 2015

Consolidated Statement of Cash Flows

for the period 11 February 2014 to 30 June 2015

Company Statement of Cash Flows

for the period 11 February 2014 to 30 June 2015

Notes to the Financial Statements

for the period 11 February 2014 to 30 June 2015

1. Accounting policies

1.1 Trading Period

The consolidated financial statements of the Group reporting period is from the date of incorporation 11 February 2014 to 30 June 2015 but the Group only commenced trading from 1 July 2014.

1.2 Basis of Preparation

The consolidated financial statements of the Group for the period to 30 June 2015 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 International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as adopted by the European Union. These are the first financial statements for the Group.

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 Company's functional currency.

The financial information does not constitute the Group's statutory accounts for the period ended 30 June 2015 but is derived from those accounts. Statutory accounts for the period ended 30 June 2015 will be delivered to the Registrar of Companies in due course. The Auditor has reported on the 2015 accounts; the report was 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 a 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 as explained in the Directors' Report on page 58.

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 real estate valuation experts, 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 RICS Valuation - Professional Standards January 2014 ("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.

(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 J.C. Rathbone Ltd 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 are subject to commercial property leases 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.

1.5 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 2015. 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:

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

· exposure, or rights, to variable returns from its involvement with the investee; and

· 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:

· the contractual arrangement with the other vote holders of the investee;

· rights arising from other contractual arrangements; and

· 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 United Kingdom in student and commercial lettings.

Property, Plant and Equipment

All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure which is directly attributable to the acquisition of the asset.

Depreciation has been charged to the Consolidated Statement of Comprehensive Income on the following basis:

· Fixtures and fittings - 15% reducing balance;

· Computer equipment - straight-line basis over three years.

Investment Property

Investment property comprises property that is held to earn rentals or for capital appreciation, or both, and property under development rather than for sale in the ordinary course of business or for use in production or administrative functions.

Investment property is measured initially at cost including transaction costs and is included in the financial statements on unconditional exchange. Transaction costs include transfer taxes, professional fees for legal services and initial leasing commissions to bring the property to the condition necessary for it to be capable of operating.

Subsequent to initial recognition, investment property is stated at fair value. Gains or losses arising from changes in the fair values are included in the Consolidated Statement of Comprehensive Income in the period in which they arise.

Investment property is derecognised when it has been disposed of or permanently withdrawn from use and no future economic benefit is expected from its disposal. The investment property is derecognised upon unconditional exchange. The difference between the net disposal proceeds and the carrying amount of the asset would result in either gains or losses at the retirement or disposal of investment property. Any gains or losses are recognised in the Consolidated Statement of Comprehensive Income in the period of retirement or disposal.

Joint Ventures

The Group is party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the Group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.

The Group classifies its interests in joint arrangements as either:

· Joint ventures: where the Group has rights to only the net assets of the joint arrangement

· Joint operations: where the Group has both the rights to assets and obligations for the liabilities of the joint arrangement.

In assessing the classification of interests in joint arrangements, the Group considers:

· The structure of the joint arrangement

· The legal form of joint arrangements structured through a separate vehicle

· The contractual terms of the joint arrangement agreement

· Any other facts and circumstances (including any other contractual arrangements).

Joint ventures are initially recognised in the Consolidated Statement of Financial Position at cost and are subsequently accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the Consolidated Statement of Comprehensive Income (except for losses in excess of the Group's investment in the joint venture unless there is an obligation to make good those losses).

Profits and losses arising on transactions between the Group and its joint venture are recognised only to the extent of unrelated investors' interests in the joint venture. The investor's share in the joint venture's profits and losses resulting from these transactions is eliminated against the carrying value of the joint venture.

Any premium paid for an investment in a joint venture above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations.

Rent and Other Receivables

Rent and other receivables are recognised at their original invoiced value net of VAT. A provision is made when there is objective evidence that the Group will not be able to recover balances in full.

Financial Assets

The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity.

The Group's accounting policy for each category is as follows:

Loans and Receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently impaired if there is doubt over recovery.

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the Consolidated Statement of Financial Position.

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less from inception.

Financial Liabilities

The Group's financial liabilities comprise mainly trade payables and other short term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Rental Income

The Group is the lessor in operating leases. Rental income arising from operating leases on investment property is accounted for on a straight-line basis over the lease terms and is included in gross rental income in the Consolidated Statement of Comprehensive Income due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the lease term on the same basis as the lease income.

Tenant lease incentives are recognised as a reduction of rental revenue on a straight-line basis over the term of the lease.The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the optionto continue the lease, where, at the inception of the lease, the Directors are reasonably certain that the tenant will exercise that option.

Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the Consolidated Statement of Comprehensive Income when the right to receive them arises.

Hedge Accounting

The Group's activities expose it to the financial risks of changes in interest rates.

The use of financial derivatives (interest rate swaps and caps) is approved by the Board of Directors and is consistent with the Group's risk management strategy.

Derivative financial instruments are initially measured at fair value on the contract date and are subsequently remeasured to fair value at each reporting date. Any difference between the transaction price and the initial fair value is recognised immediately in the Consolidated Statement of Comprehensive Income. The Group designates certain derivatives as hedges of the changes of fair value of recognised assets and liabilities ('cash flow hedges'). Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, no longer qualifies for hedge accounting or the Group chooses to end the hedging relationship.

Cash Flow Hedge

The Group has used a derivative instrument to convert its floating rate debt to a fixed rate in order to hedge the interest rate risk.

The Group designates this as a hedging instrument in the cash flow hedge. Changes in fair value of the hedging instrument are recognised in other comprehensive income to the extent that they represent an effective hedge, otherwise fair value changes are recognised as financial costs in the Consolidated Statement of Comprehensive Income.

Operating Leases

Rentals paid under operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight line basis over the period of the lease.

Taxation

Taxation on the profit and loss for the period not exempt under UK REIT regulations comprises current and deferred tax. Taxation is recognised in Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movement in equity, in which case it is also recognised as a direct movement in equity.

Current tax is expected tax payable on any non-REIT taxable income for the period, using tax rates enacted at the balance sheet date.

Share Based Payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period.

Share Capital

Ordinary shares are classified as equity. External costs directly attributable to the issuance of shares are recognised as a deduction from equity.

1.6 Standards Issued But Not Yet Effective

The following are new standards, interpretations and amendments, which are not yet effective and have not been early adopted in these financial statements, that will or may have an effect on the Group's future financial information:

· IFRS 9: Financial Instruments (effective 1 January 2018 subject to EU endorsement);

· IFRS 15: Revenue from Contracts with Customers (effective 1 January 2018 subject to EU endorsement).

The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's financial statements in the period of initial application, other than on presentation and disclosure.

2. Revenue

3. Property Expenses

4. Administrative Expenses

The Auditor has also received £78,350 in respect of providing reporting accountant services in connection with the initial public offering of the Company, £141,500 in relation to the October 2014 offering and a further £52,500 for the March 2015 offering. The fees relating to the listing and subsequent share offerings of the Company have been treated as share issue expenses and offset against share premium.

5. Net Finance Cost

6. Employees and Directors

The average monthly number of employees of the Group during the period was as follows.

A summary of the Directors' emoluments, including the disclosures required by the Companies Act 2006, is set out in the Directors' Remuneration Report on pages 44 to 57 of the Annual Report.

7. Profit Before Income Tax

The profit before income tax is stated after charging:

The Company has applied the exemption allowed under Section 408(1b) of the Companies Act 2006 and has not presented its own income statement in these financial statements. The Group profit for the period includes a loss after taxation of £3,548,530 for the Company, which is dealt with in the financial statements of the Company.

8. Corporation Tax

The Group became a Real Estate Investment Trust ("REIT") on 1 July 2014 and as a result does not pay UK corporation tax on its profits and gains from its qualifying property rental business in the UK provided it meets certain conditions. Non-qualifying profits and gains of the Group continue to be subject to corporation tax as normal. In order to achieve and retain REIT status, several conditions have to be met on entry to the regime and on an ongoing basis, including as follows:

i) at the start of each accounting period, the assets of the property rental business (plus any cash and certain readily realisable investments) must be at least 75% of the total value of the Group's assets;

ii) at least 75% of the Group's total profits must arise from the tax exempt property rental business; and

iii) at least 90% of the tax exempt profit of the property rental business (excluding gains) of the accounting period should be distributed.

In addition, full exemption on profits of the property rental business will not be available if the profit: financing cost ratio in respect of the property rental business is less than 1.25.

The Group met all of the relevant REIT conditions for the period ended 30 June 2015.

The Directors intend that the Group should continue as a REIT for the foreseeable future, with the result that deferred tax is no longer recognised on temporary differences relating to the property rental business.

A deferred tax asset in respect of the tax losses generated by the residual (non tax exempt) business of the Group will be recognised to the extent that their utilisation is probable. On the basis that the residual business is not expected to be income generating in future periods, a deferred tax asset has not been recognised in respect of such losses.

9. Earnings Per Share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

Reconciliations are set out below.

The ordinary number of shares is based on the time weighted average number of shares throughout the period since IPO. This excludes the period from 11 February 2014 to 30 June 2014 when the Group was dormant.

On 23 July 2015 a further share issuance was made of 70,921,985 ordinary shares. The issue price was 105.75 pence and the issuance raised £75 million before costs.

10. Net Asset Value Per Share (NAV)

Basic NAV per share is calculated by dividing net assets in the Statement of Financial Positions attributable to ordinary equity holders of the parent by the number of shares outstanding at the end of the period.

Diluted NAV per share is calculated using the number of shares adjusted to assume the conversion of all dilutive potential shares.

Net asset values have been calculated as follows:

11. Dividends Paid

On 30 October 2014, the Company announced the declaration of a first interim dividend in respect of the period from admission of the share capital of the Company on 30 June 2014 to 31 December 2014 of 1.5 pence per Ordinary Share, which was paid on 28 November 2014 to Ordinary Shareholders.

On 25 February 2015, the Company announced the declaration of a second interim dividend in respect of the period from 1 July 2014 to 31 December 2014 of 0.5 pence per Ordinary Share, which was paid on 20 March 2015.

On 28 May 2015, the Company announced the declaration of a third interim dividend in respect of the period from 1 July 2014 to 31 March 2015 of 1.0 pence per Ordinary Share, which was paid on 25 June 2015.

On 8 July 2015, the Company announced the declaration of a fourth final interim dividend in respect of the quarter ended 30 June 2015 of 1.0 pence per Ordinary Share, which was paid on 4 August 2015.

12. Property, Plant and Equipment

13. Investment Property

In accordance with IAS 40, the carrying value of investment property is their fair value as determined by external valuers. This valuation has been conducted by CBRE Limited, as external valuers, and has been prepared as at 30 June 2015, in accordance with the Appraisal & Valuation Standards of the Royal Institution of Chartered Surveyors ("RICS"), on the basis of market value. This value has been incorporated into the financial statements.

The independent valuation of all property assets uses market evidence and also includes assumptions regarding income expectations and yields that investors would expect to achieve on those assets over time. Many external economic and market factors, such as interest rate expectations, bond yields, the availability and cost of finance and the relative attraction of property against other asset classes, could lead to a reappraisal of the assumptions used to arrive at current valuations. In adverse conditions, this reappraisal can lead to a reduction in property values and a loss in net asset value.

No borrowing costs were capitalised during the period.

During the period, the Urban Sleep portfolio of properties was acquired through, inter alia, the assumption of £18,742,553 of bank borrowings, representing a non-cash transaction within the Consolidated Statement of Cash Flows.

Fair value hierarchy

The following table provides the fair value measurement hierarchy for investment property:

There have been no transfers between Level 1 and Level 2 during the period, nor have there been any transfers between Level 2 and Level 3 during the period.

The valuations have been prepared on the basis of market value which is defined in the RICS Valuation Standards, as:

"The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgably, prudently and without compulsion."

Market value as defined in the RICS Valuation Standards is the equivalent of fair value under IFRS.

The following descriptions and definitions relate to valuation techniques and key unobservable inputs made in determining fair values. The valuation techniques for student properties uses a discounted cash flow with the following inputs:

(a) Unobservable input: Rental income

The rent at which space could be let in the market conditions prevailing at the date of valuation.

(Range £98 per week - £325 per week).

(b) Unobservable input: Rental growth

The estimated average increase in rent based on both market estimations and contractual arrangements. Assumed growth of 3% used in valuations.

(c) Unobservable input: Net initial yield

The net initial yield is defined as the initial gross income as a percentage of the market value (or purchase price as appropriate) plus standard costs of purchase.

(Range: 5.75% - 6.75%).

(d) Unobservable input: Physical condition of the property

(e) Unobservable input: planning consent

No planning enquiries undertaken for any of the development properties.

(f) Sensitivities of measurement of significant unobservable inputs

As set out in the significant accounting estimates and judgements the Group's portfolio valuation is open to judgements and is inherently subjective by nature.

As a result the following sensitivity analysis has been prepared:

(g) The key assumptions for the commercial properties are net initial yield, current rent and rental growth. A movement of 3% in passing rent or 0.25% in the net initial yield will not have a material impact on the financial statements.

14. Joint Ventures

The Group entered into two joint ventures in the period.

Brunswick - Southampton

In July 2014 the Group entered a joint venture with an affiliated investment fund of Revcap Advisors Ltd ("Revcap") to develop a 173 room site in Southampton called Brunswick House. The total cost of the development is forecast to be £16.8 million. Funding for the development has been obtained with a contribution of equity, (50% from each entity), and draw downs from senior debt facility of £10.0 million from Close Brothers. The completion date for the development of the property is scheduled for September 2015.

Willowbank - Glasgow

In July 2014 the Group entered a joint venture with an affiliated investment fund of Revcap to develop a 178 room site in Glasgow called Willowbank. The total cost of the development is forecast to be £14.2 million. Funding for the development has been obtained with a contribution of equity (50% from each entity). The completion date for the development of the property is scheduled for July 2016.

Net assets and results of the joint ventures

The summarised balance sheets and results for the period and the Group's share of these joint ventures are as follows.

Movement in carrying value of the Group's investment in joint ventures

The carrying value of the Group's investment in joint ventures has increased by £8.4 million during the period ended 30 June 2015.

The following table shows how the increase has been achieved.

15. Trade and Other Receivables

As there were no trade receivables past due at the period end, no aged analysis of trade receivables has been included.

16. Cash and Cash Equivalents

The amounts disclosed on the statement of cash flow as cash and cash equivalents are in respect of the following amounts shown in the Consolidated Statement of Financial Position:

17. Trade and Other Payables

At 30 June 2015 there was deferred rental income of £2.3 million which was rental income that had been received that related to future years.

The Directors consider that the carrying value of trade and other payables approximates to their fair value.

18. Bank Borrowings

A summary of the drawn and undrawn bank borrowings in the period is show below:

The Group has entered into three separate banking facilities during the period, drawing on £85.3 million of debt while having an undrawn debt facility available of £20.0 million at 30 June 2015. The weighted average term to maturity of the Group's debt as at the period end is 8.07 years.

Bank borrowings are secured by charges over individual investment properties held by certain asset-holding subsidiaries. These assets have a fair value of £186,575,000 at 30 June 2015. In some cases the lenders also hold charges over the shares of the subsidiaries and the intermediary holding companies of those subsidiaries.

Any associated fees in arranging the bank borrowings unamortised as at the period end are offset against amounts drawn on the facilities as shown in the table below:

Maturity of bank borrowings

Each of the Group's facilities has an interest charge which is payable quarterly. Two facility interest charges are based on a margin above 3 month Libor while the other facility interest is fixed at 3.97%. The weighted average margin payable by the Group on its debt portfolio as at the period end was 3.2%.

19. Interest rate derivatives

To mitigate the interest rate risk that arises as a result of entering into variable rate linked loans, the Group entered into an interest rate cap and interest rate swap during the period. The interest rate cap has been taken out to cap the rate to which 3 month Libor can rise and is coterminous with the initial term of the facility. The premium of £238,500 is being settled over the life of the loan.

On the 24 October 2014 a derivative swap contract was taken out to hedge the interest rate risk on long term debt. The change in valuation of this derivative at 30 June 2015 was £206,331, recognised in other comprehensive income. The fair value loss at inception of £242,576 was recognised in finance costs in the Consolidated Statement of Comprehensive Income.

The Group will continue to review the level of its hedging in the light of the current low interest rate environment.

The interest rate derivatives are marked to market by the relevant counterparty banks on a quarterly basis in accordance with IAS 39. Any movement in the fair values of the interest rate cap are taken to the net finance costs in the Group Statement of Comprehensive Income.

Fair value hierarchy

The following table provides the fair value measurement hierarchy for interest rate derivatives:

The fair value of these contracts are recorded in the Group Consolidated Statement of Financial Position and is determined by forming an expectation that interest rates will exceed strike rates and discounting these future cash flows at the prevailing market rates as at the period end.

There have been no transfers between Level 1 and Level 2 during the period, nor have there been any transfers between Level 2 and Level 3 during the period.

20. Share Capital

Ordinary shares issued and fully paid at 1 pence each

Restricted shares

On 30 June 2014 the Company's ordinary shares were listed on the Official List of the Financial Conduct Authority and admitted to trading on the Main Market for listed securities of the London Stock Exchange. The Company's ticker symbol is ESP. The Company issued 85 million shares of £0.01 at a price of £1.00 and raised gross proceeds of £85 million.