SIR.L Regulatory News (SIR)

3 March 2016

Secure Income REIT Plc

(the "Company" or the "Group")

Results for the year ended 31 December 2015

Secure Income REIT Plc (AIM: SIR), the specialist long term income UK REIT, today announces its results for the year ended 31 December 2015.

Highlights

• EPRA NAV as at 31 December 2015 of 282.8 pence per share, up 9.4% after incurring early debt repayment costs amounting to nearly 16% of EPRA NAV as at 31 December 2014

• New long term debt financing arrangements totalling £903 million completed between August and October 2015:

- reducing interest cost by 23% from 6.8% to 5.2% per annum, saving c. £14 million on an annualised basis;

- extending term to maturity from less than two years to c. nine years on significantly improved terms; and

- facilitating payment of maiden distributions to shareholders

• Intention to pay quarterly distributions commencing in August 2016, initially reflecting a yield of 4.2% on 31 December 2015 EPRA NAV, with highly predictable growth prospects underpinned by annual contractual rental uplifts, either at fixed rates or upwards only uncapped RPI

• Net loan to value ratio of 61%, down from 70% at 31 December 2014 and 80% at listing in June 2014

• Asset sales in the year of £382 million at c. 8% above 31 December 2014 book values, comprising the sales of the freehold of Madame Tussauds in London for £332 million and New Hall hospital in Salisbury for £50 million

• Portfolio valuation up 6.3% since 31 December 2014 to £1.35 billion; net initial yield 5.3%, increasing to at least 5.45% on completion of 2016 fixed rental uplifts in July 2016

• Weighted average unexpired lease term of 23.5 years with no breaks

• Passing rent of £76.3 million as at 31 December 2015, secured entirely against major global multi-billion pound quoted businesses

• Announcement on 3 March 2016 of the intention to place a minimum of 43% of the existing issued share capital held by certain of the six founding shareholders of the Company, in order to:

- create more liquidity in share trading;

- better place the Company for expansion when new opportunities are identified for earnings accretive acquisitions; and

- enable continued compliance with the UK REIT rules

Martin Moore, Independent Non-Executive Chairman of the Company, commented: "The robustness of the Group's income streams and the less cyclical nature of its properties provide a great deal of comfort in turbulent markets. These market conditions also tend to be more fertile grounds for Prestbury to source and the Board to deliver favourable transactions. Our investment case remains that, at a time of historically low interest rates and bond yields, investors are faced with a shortage of places where they can obtain a healthy and growing income return combined with a good prospect of capital preservation. This is what we have set out to achieve with Secure Income REIT and, with the intention to pay maiden distributions in August this year, the Board views the future with confidence."

ENQUIRIES:

Prestbury Investments LLP Tel: 020 7647 7647

Nick Leslau

Sandy Gumm

FTI Consulting Tel: 020 3727 1000

Richard Sunderland

Claire Turvey

Stifel Nicolaus Europe (Nominated Adviser and Broker) Tel: 020 7710 7600

David Arch

Tom Yeadon

Notes to Editors

Secure Income REIT Plc is a UK REIT specialising in generating long term, inflation protected, secure income from real estate investments. Its investment strategy is designed to satisfy investors' growing requirements for high quality, secure, inflation protected income flows. The Group owns a freehold portfolio of 26 well established operating real estate assets including some of the UK's top visitor attractions and theme parks: namely Alton Towers theme park and hotel, Thorpe Park and Warwick Castle, as well as 20 private hospitals in the UK.

Forward looking statements

This document includes forward looking statements which are subject to risks and uncertainties. You are cautioned that forward looking statements are not guarantees of future performance and that if risks and uncertainties materialise, or if the assumptions underlying any of these statements prove incorrect, the actual results of operations and financial condition of the Group may differ materially from those made in, or suggested by, the forward looking statements. Other than in accordance with its legal or regulatory obligations, the Company undertakes no obligation to review, update or confirm expectations or estimates or to release publicly any revisions to any forward looking statements to reflect events that occur or circumstances that arise after the date of this document.

Chairman's Statement

Dear Shareholder,

During 2015 we have made significant progress at Secure Income REIT through a combination of selective disposals and a refinancing of all of the Group's debt, which have together reduced the Group's leverage and cost of debt. These initiatives have helped transform Secure Income REIT into a company which is in a position to begin making cash distributions as of August this year, thereby delivering on our objective at listing of creating a company which offers investors a growing distribution derived from a portfolio of high quality assets generating long term, secure income.

The two sales during the year were the freehold of Madame Tussauds in London, which was sold for £332.4 million reflecting a net initial yield of 4.5%, and New Hall hospital in Salisbury, which was sold for £49.8 million reflecting a net initial yield of 5.3%. The sale prices achieved were 8% above December 2014 book values and represented an important step on the way to securing new financing and positioning the Company to become a distribution paying REIT.

In August and September we secured over £900 million of new financing, completely replacing our original debt, extending our weighted average term to maturity by over seven years to nine years, reducing our annual interest cost by 23%, down to 5.2%, and reducing debt amortisation outflows.

These initiatives place the Company in a position where the Board intends to begin making quarterly cash distributions commencing with an interim payment in August 2016 at an annualised 11.75 pence per share, which equates to a distribution yield of 4.2% based on our 31 December 2015 EPRA NAV. Given that every property in our current portfolio has the benefit of an annual RPI review or fixed increase in rent, distributions should be able to grow reliably at an attractive rate.

As announced today, the Board is facilitating the intention of certain of the Company's six major shareholders to place a minimum of 77,514,509 shares in order to widen the investor base. This is intended to create more liquidity in the shares, ensure that the Company is better placed for expansion when the time is right, and enable it to continue to qualify under UK REIT rules.

Results and financial position

The EPRA NAV is 282.8 pence per share, which represents a 9.4% increase over the year as follows:

* adjusted by £13.0 million (7.2 pence per share) to remove the effect of spreading fixed rental uplifts over the term of the lease - adjustment reduces rental income and increases revaluation movement in equal amounts.

Adjusted EPRA EPS is 2.6 pence per share for the year as follows:

* 2014 comparative figures include two months prior to listing. Shares issued in April 2015 in satisfaction of the 2014 incentive fees are treated as having been issued on the last day of 2014 in calculating the weighted average shares in issue.

Over the course of the year, the portfolio valuation rose by 6.3% to £1.35 billion, reflecting a net initial yield of 5.3% and an equivalent yield of 6.4%. The Group enjoys significant income security with financially strong covenants and a weighted average unexpired lease term of 23.5 years. 58% of our rent roll is guaranteed by Ramsay Health Care Limited, listed on the Australian Stock Exchange with a market capitalisation of £6.9 billion* and one of the five largest private healthcare groups in the world. A further 39% of rents are guaranteed by Merlin Entertainments Plc, a FTSE 100 constituent with a market capitalisation of £4.7 billion*, the largest operator of visitor attractions in Europe and the second largest in the world. The remainder of our rent roll is guaranteed by Orpea SA, the European leader in dependency care, listed on Euronext Paris with a market capitalisation of £3.6 billion*.

As important as the security of income is its potential to grow. Two thirds of our rent roll is subject to annual fixed uplifts (ranging from 2.75% to 3.34% and averaging 2.8% per annum) and the remaining third is subject to annual RPI-linked upward only reviews. This combination of long income duration with rising rents, underpinned by financially strong tenants, is not only well sought after in the current market but proved highly resilient in the last recession.

Outlook

2016 has so far brought turbulence to stock markets around the world as investors grapple with greater uncertainty. China's slowdown has spurred a dramatic fall in commodity and oil prices which should benefit UK consumers, putting more money into their pockets, but this will only boost the UK economy if they have the confidence to go out and spend it. The risk of a possible Brexit has pushed Sterling towards seven year lows and the chance of further depreciation may deter some overseas investors from buying real estate in London, at the very least until the outcome of the referendum is known. We have also seen the share prices of major REITs fall further and faster than the market indices this year which may have been prompted by concerns as to whether we are reaching the end of another cycle for conventional commercial property. It is interesting to note that the share prices of REITs specialising in alternative, less cyclical sectors have been much more resilient.

The robustness of the Group's income streams and the less cyclical nature of its properties provide a great deal of comfort in turbulent markets. These market conditions also tend to be more fertile grounds for the Investment Adviser to source and the Board to deliver favourable transactions. Our investment case remains that at a time of historically low interest rates and bond yields, investors are faced with a shortage of places where they can receive a healthy and growing income return combined with a good prospect of capital preservation. This is what we have set out to achieve with Secure Income REIT and with the intention to pay maiden distributions in August this year the Board views the future with confidence.

Martin Moore

Chairman

3 March 2016

* as at 2 March 2016

Strategic Report

Strategy and investment policy

The Group is a property investment business specialising in owning long term, secure income streams from real estate investments, offering inflation protection. A long term income stream is considered to have a weighted average term to maturity in excess of 15 years at the time of acquisition. Income security is assessed by reference either to the financial strength of the tenants or to the extent of asset cover provided by way of residual asset value.

There are no other UK REITs specialising in long leases across a range of property sectors. Against a backdrop of significant reduction in income security in the UK real estate market caused by a marked decline in the average term to first tenant lease break or expiry, and mindful of the growing requirement amongst investors for long term, secure income flows, the Board aims to fill this gap in the market and further build a substantial diversified long term income portfolio.

The existing portfolio comprises 26 freehold investment properties let for a weighted average term of 23.5 years from 31 December 2015. All properties are fully let on full repairing and insuring leases. The portfolio is considered by the Board to offer attractive geared returns from high quality real estate, with financially strong tenants operating with well established brands in industry sectors with strong defensive characteristics. Having listed in 2014 and refinanced the Group's entire secured debt in 2015 to reduce the cost of debt and extend its term to maturity, the Board proposes to build on its existing portfolio to create a diversified portfolio of long term, secure income streams from real estate investments across a range of property sectors, enhancing prospects for attractive total returns through earnings accretive acquisitions.

The Board believes that it will be able to seek acquisition opportunities from a range of sources including operating businesses, non-REITs with latent capital gains fettering sale prospects, and structures where the Company's shares may be used as currency to unlock value. Throughout this process, the Directors' intention is to exercise strong capital discipline, using equity accretively and debt prudently to enhance returns for shareholders.

Business review

Key performance indicator - EPRA NAV per share

The principal financial outcome that the Board seeks to achieve is attractive growth in shareholder returns. Progress towards this objective has been specifically measured through growth in EPRA NAV, which is a measure of the fair value of a company on a long term basis, ignoring the impact of hedging valuations and any deferred tax. Once distributions are paid, this measure will include distributions paid to encompass Total Shareholder Return.

The Group's EPRA NAV per share at 31 December 2015 was 282.8 pence, which represents a 9.4% increase over the year as follows:

* adjusted by 7.2 pence (2014: 6.7 pence) to remove the impact of rent smoothing adjustments, which arise from the Group's accounting policy to spread the impact of fixed rental uplifts evenly over the whole term of relevant leases. The rent smoothing adjustments reflected in the financial information currently increase rental income and reduce property valuation gains, and are excluded in this table to better reflect the Group's actual rental income flows.

Key performance indicator - adjusted EPRA earnings per share

The Company will initiate quarterly payments of cash distributions to shareholders in August 2016. In order to monitor its ability to make distributions, the Board uses the Group's adjusted EPRA earnings per share ("EPS") as a key performance indicator. EPRA EPS excludes investment property revaluations, profits on sale of investment properties, fair value movements in any interest rate derivatives and deferred tax from the Group's reported earnings to give a measure of underlying earnings from core operating activities. Adjusted EPRA EPS excludes the incentive fee (largely derived from investment property revaluations) and the non-recurring costs of the reorganisation and listing (nil this year but expected to include the costs of the secondary placing, currently estimated at c. £2.0 million, in the 2016 financial year), and is further adjusted to remove the effect of smoothing the fixed rental uplifts in order not to artificially flatter dividend cover calculations now that distributions are to be initiated.

Since the Group's financing costs changed materially as a result of the refinancing, the table below shows adjusted EPRA EPS before and after completion of the refinancing to illustrate the position under the current capital structure:

* completion of final tranche of refinancing on 2 October 2015

Further details of the Group's financial performance are given in the Investment Adviser's Report.

Key performance indicator - net loan to value ratio

The Board monitors the Group's net loan to value ratio ("net LTV") with a view to managing the capital structure of the business throughout varying market conditions. During the year, the net LTV has fallen from 70% to 61% reflecting reduced debt levels following asset sales and the impact of unrealised property valuation surpluses.

Key performance indicator - uncommitted cash

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

The Group's uncommitted cash was £52.7 million as at 31 December 2015, compared to £12.2 million as at 31 December 2014. The balance increased materially during the year following the new loan financing arrangements and asset sales.

Key performance indicator - headroom on debt covenants

The extent to which financial covenants are tested varies across the portfolio. Covenants have been negotiated with the aim of protecting the Group as far as possible from movements in investment property valuations which are not related to changes in the rental cash flows:

· the Healthcare 2 loan is subject to LTV and interest cover tests throughout the loan term;

· the Healthcare 1 loan is not tested for LTV until September 2019 but is subject to an interest cover cash trap test throughout the loan term; and

· the Leisure loans are not subject to any LTV default covenant or interest cover tests throughout the loan term, though there are LTV levels which could trigger a cash trap or full cash sweep from August 2018.

The Board reviews the headroom on all financial covenants at least quarterly. As at 31 December 2015 the relevant positions were as follows, alongside the property net initial yield or the fall in projected rent that would be trigger the relevant covenant at the first test date:

* assuming UK leisure rents increase in line with the RPI swap curve as at 23 February 2016

Principal risks and uncertainties

Following the refinancing during the year, the Directors consider that the access to financing risk previously reported is no longer significant as at 31 December 2014. Apart from the BEPS issue included under liquidity risk there are no new risks reported this year.

Investment Adviser's Report

Prestbury Investments LLP advises Secure Income REIT Plc and is pleased to report on the operations of the Group for the year ended 31 December 2015.

Portfolio

The portfolio comprises 26 properties with secure, long term income and contractual uplifts offering inflation protection. The rent is derived from tenants whose businesses offer global spread and have performed very well over many years, including the recent recession, demonstrating their strong defensive qualities.

Healthcare assets (62% of portfolio value)

The healthcare assets comprise 20 freehold private hospitals: a portfolio of 19 located throughout England let to a subsidiary of Ramsay Health Care Limited, the listed Australian healthcare company, and a single property in central London let to Groupe Sinoue, a French company specialising in mental health. Passing rent on the current portfolio is as follows:

* excluding property sold in 2015

The leases on the Ramsay hospitals are all guaranteed by Ramsay Health Care Limited, the listed parent company of one of the top five private hospital operators in the world and a constituent of the ASX 50 index of Australia's largest companies, with a market capitalisation at 2 March 2016 of £6.9 billion.

The Ramsay hospitals are let on full repairing and insuring leases with a term to expiry at 31 December 2015 of 21.4 years without break. The rent increases by a fixed 2.75% per annum throughout the lease term in May each year. In addition, at Secure Income REIT's option rent could be increased in 2017 to the higher of 2.75% or 57.525% of site earnings before interest, tax, depreciation, amortisation, rent and head office costs, and every fifth year thereafter to the higher of a 2.75% uplift and open market rental value. As a result of the fixed uplift, the passing rent on this sub-portfolio will increase to £45.6 million on 3 May 2016.

The lease on the London psychiatric hospital in Lisson Grove is guaranteed by Orpea SA, the listed parent company of the Orpea Group, a leading European operator of nursing homes, post-acute care and psychiatric care, listed on Euronext Paris with a market capitalisation at 2 March 2016 of £3.6 billion. Orpea owns 45% of Group Sinoue, which is the parent company of the tenant.

The Lisson Grove hospital is let on a full repairing and insuring lease with a term to expiry at 31 December 2015 of 28.6 years without break. The rent increases by a fixed 3.0% per annum throughout the lease term in May each year and, as a result, the passing rent on the property will increase from £1.87 million to £1.92 million on 3 May 2016.

Leisure assets (38% of portfolio value)

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

* excluding property sold in 2015

The properties are all let to substantial operating subsidiaries of Merlin Entertainments Plc, the guarantor of the leases. Merlin is a FTSE 100 company with a market capitalisation at 2 March 2016 of £4.7 billion. Measured by the number of visitors, it is Europe's largest and the world's second largest operator of leisure attractions.

The average unexpired lease term of the leisure assets is 26.5 years and the tenants have two successive rights to renew these leases for 35 years at the end of each term. The leases are on full repairing and insuring terms. There are upwards only uncapped RPI-linked rent reviews every June throughout the term (based on RPI in the twelve months to April each year) for the UK leisure portfolio, which in 2015 resulted in an increase of 0.9%. The German properties are subject to fixed annual increases of 3.34% every July throughout the term, as a result which the German rents will increase to £5.1 million on 29 July 2016 (translated at the 31 December 2015 rate).

Portfolio valuation yields at 31 December 2015

Portfolio valuation by location

* adjusted for sales in the year to exclude sold assets from comparative figures

Portfolio valuation uplift in the year

The healthcare valuations at 31 December 2015 reflect a weighted average net initial yield of 5.2% compared to 5.5% at 31 December 2014, resulting in a valuation uplift of £67.4 million (8.8%) in the year.

The UK leisure valuations at 31 December 2015 reflect a weighted average net initial yield of 5.4% compared to 5.5% at 31 December 2014, resulting in a valuation uplift of £10.6 million (2.4%) in the year. The German leisure valuations at 31 December 2015 reflect a weighted average net initial yield of 6.3% compared to 6.5% at 31 December 2014, resulting in a valuation uplift of €7.5 million (8.1%) in the year; currency translation movements have, however, reduced the Sterling equivalent resulting in a net valuation uplift of £1.4 million (2.1%) in those German leisure assets over the year. Across the whole leisure portfolio, there has therefore been a valuation increase of £12.0 million (2.4%) in the year.

As a result of these valuation movements, the total portfolio uplift comprises:

In addition to these movements, a rent smoothing adjustment arises on investment property revaluations from the Group's accounting policy, consistent with International Financial Reporting Standards, to spread the impact of fixed rental uplifts evenly over the term of the relevant lease. The adjustments relate to those rents on the healthcare assets which increase by 2.75% (on 96% of healthcare rents) and 3.0% (on 4% of healthcare rents) every May, and those rents on the German leisure assets which increase by 3.34% every July.

The impact of this accounting treatment is to reflect a receivable, included in the book value of investment property, for the amount of rent included in the income statement ahead of actual cash receipts. This receivable increases over the first half of each lease term then unwinds, reducing to zero over the second half of each lease term. The impact over time for each of the rental income flows subject to smoothing is as follows:

* at the year end Euro conversion rate of €1:£0.7350

In order that the rent smoothing receivable does not, in combination with the book value of the investment properties, overstate the value of the property portfolio, any movement in the rent smoothing receivable is offset against property revaluation movements. As a result, this adjustment affects only the income statement presentation, increasing rental income and reducing property revaluation gains, and does not change the Group's net assets.

The annual impact of this adjustment is known with certainty unless there are acquisitions, disposals or lease variations. The additional revenue and reduced valuation movement recognised during the year and for each of the next three financial years is as follows:

* at the 2015 average Euro conversion rate of €1:£0.7256

Property sales in the year

During the year the Group sold Ramsay's New Hall Hospital in Salisbury and Madame Tussauds London. The sales raised funds at very attractive prices to repay debt and, in the case of Madame Tussauds, represented an opportunity to sell by far the largest asset by value in the portfolio.

New Hall Hospital was sold in March 2015 for £49.8 million, which represented a net initial yield of 5.3% and a sale price £3.8 million (8.2%) above its 31 December 2014 valuation. The sale completed in May 2015 and the net proceeds of £49.2 million were used in part repayment of secured debt and early debt repayment costs.

Madame Tussauds was sold in May 2015 for £332.4 million, which represented a net initial yield of 4.5% and a sale price £23.0 million (7.4%) above its 31 December 2014 valuation. The sale completed in August 2015 and the net proceeds of £330.1 million were used in part repayment of secured debt and early debt repayment costs, with surplus cash added to the Group's cash resources.

Financing

During the year and following repayment of a portion of the existing debt out of the proceeds of two asset sales, the Group's debt was refinanced with three new secured facilities, in order to provide a spread of risk and to better achieve improved financing terms. Following the refinancing, the Group's operations are financed by a combination of cash resources and non-recourse debt finance, where the assets at risk in the event of a loan default are limited to those within three ring-fenced sub-structures.

The impact of the sales and refinancing on the Group included:

· weighted average cost of debt reduced by 23% from 6.8% to 5.2% per annum, saving c. £14 million on an annualised basis on the £902.6 million (at exchange rates at the time of drawdown) of new debt;

· weighted average term to maturity at drawdown increased from under two years to nearly nine years;

· term to first debt expiry at drawdown increased from under two years to seven years; and

· while there remains some scheduled amortisation there are no full cash sweep arrangements, further freeing up cash flow to service distributions.

As noted in the Chairman's Statement in the 2014 annual report, accelerated repayment of the loan facilities previously in place resulted in various costs, including costs of termination of interest rate swaps. Prior to embarking on the early debt repayments, the Board first sought agreement with the previous lender, Bank of Scotland Plc, to share the early termination costs, mindful of the benefits to the lender of early repayment. Consequently, the total £88.1 million cash cost of early termination of the interest rate swaps as a result of the asset sales and refinancing was reduced by £27.5 million to a net £60.6 million. In addition, exit fees and other early termination costs payable in cash amounted to £8.4 million and a non-cash charge relating to the write off of the unamortised finance costs on the old loans amounted to £5.3 million, bringing total early repayment costs to £74.3 million.

As the balance sheet already recorded interest rate derivatives at their market values, there was minimal impact on the reported net asset value as a result of the swap terminations. However, since EPRA NAV excludes the market valuation of interest rate derivatives, the Group's EPRA NAV was reduced by £74.3 million or 41.2 pence per share in early debt repayment costs.

Each new facility is self-contained, with no cross default provisions between the three of them, and the key terms at drawdown were as follows:

* comprising £316.8 million of senior and mezzanine sterling loans secured on the UK assets and €71.8 million of senior and mezzanine Euro denominated loans secured on the German assets (translated at the actual exchange rate of €1:£0.6992 at the date of drawdown) with all leisure loans cross-collateralised.

The Group's gross and net debt at 31 December 2015 was as follows:

* including €71.8 million of Euro loans translated at the year end exchange rate of €1:£0.7350

Following scheduled amortisation payments in January 2016, total gross debt at the date of this report, including Euro denominated debt at the 31 December 2015 exchange rate, is £903.6 million.

There have been no defaults or potential defaults in any facility during the year or since the balance sheet date.

Financial review

EPRA net asset value

The Board measures the Group's progress primarily through the growth in EPRA net asset value ("EPRA NAV") per share. EPRA NAV strips out the impact of any hedging revaluations and deferred tax on investment property revaluations to provide a measure of the fair value of a property company on a long term basis. Once distributions are initiated the measure monitored by the Board will include distributions paid so as to represent Total Shareholder Return.

The EPRA NAV at 31 December 2015 of 282.8 pence per share represents a 9.4% increase over the year, which arose as follows:

The movements in investment property valuations are described above in the Portfolio section of this report. The other elements of the Group's EPRA NAV movements for the year are explained in the Income Statement section below.

EPRA triple net asset value

The EPRA triple NAV includes the mark to market values of any debt and hedging instruments, and any inherent tax liabilities not provided for in the financial information. This is calculated as follows:

EPRA earnings per share

In order to monitor the Group's recurring profitability and its ability to make appropriately covered distributions, the Board uses the Group's adjusted EPRA earnings per share ("EPRA EPS") as a key performance indicator. EPRA EPS excludes investment property revaluations, fair value movements and early termination costs of interest rate derivatives, and the relevant deferred tax on those items to give a measure of underlying earnings from core operating activities.

Adjusted EPRA EPS excludes the incentive fee (largely derived from investment property revaluations) and the non-recurring costs of the reorganisation and listing, and is further adjusted to exclude the effect of smoothing the fixed rental uplifts included in rental income (where the EPRA adjustments already exclude the rent smoothing impact in revaluations) in order not to artificially flatter dividend cover calculations now that distributions are to be initiated.

As a result, EPRA EPS and adjusted EPRA EPS are calculated as follows:

Income statement

The rental income profile and the credit strengths of the businesses paying the rent are disclosed in the Portfolio section of this report, along with details of the investment property revaluations and profits on disposals.

Administrative expenses and corporate costs charged to the income statement in the year, as shown in the table below, are not directly comparable year on year because the prior period only included nine months; because the Group's cost base changed significantly at listing in June 2014, with two months of the prior period reflecting the different cost base; and because the Group incurred material one-off costs in 2014 in connection with the pre-listing corporate reorganisation and listing.

The Group's administrative expenses are largely accounted for by the Investment Adviser's fee:

Irrecoverable VAT, which is included as appropriate in each of the line items above, arises on the proportion of the advisory fees and any other expenses incurred by the healthcare portfolio. The VAT disallowed averaged 54% in the year and is currently c. 61%.

The majority of the Group's overhead is borne by the Investment Adviser and compensated for by way of advisory fees payable to the Investment Adviser under an agreement entered into prior to listing, by which it is entitled to receive cash fees based on a sliding scale relative to the Group's EPRA NAV: fees are payable at 1.25% per annum on EPRA NAV up to £500 million, plus 1.0% on EPRA NAV from £500 million to £1,000 million plus 0.75% thereafter. Until July 2016, the cash required to satisfy this advisory fee is subsidised by the pre-listing shareholders of the Company up to a maximum of £1.3 million per quarter. During the year £5.0 million of the cash required to fund advisory fee payments was met by those shareholders.

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

· the cost of the four Independent Directors, whose fees totalled £0.2 million in the year. The other three Directors are partners in the Investment Adviser and receive no remuneration from the Company; and

· other costs of being listed, including nominated adviser fees, registrar fees and ongoing listing fees, which amounted to £0.3 million in the year.

Finance costs reflect amounts payable on the new and old debt facilities as follows:

The average interest rate paid across the old and new facilities during the year, excluding fees payable to lenders, was 6.4% per annum (2014: 6.8%). As at 31 December 2015, the average interest rate payable on the new facilities, which is expected to apply in future financial years until the first debt maturity in October 2022, was 5.2% per annum.

Currency translation

The majority of the Group's assets are located in the UK and the financial information is therefore presented in Sterling. Just over 4% of the Group's EPRA NAV relates to assets and liabilities relating to properties located in Germany, valued in and generating net earnings in Euros. The fact that assets and liabilities are Euro denominated acts as a partial hedge of the currency risk, but the Group remains exposed to translation differences on the net results and net assets of these operations which are not hedged, with movements recognised in the statement of other comprehensive income.

The German properties are valued at €100.1 million as at 31 December 2015, with the Euro tranches of the Group's secured debt facilities amounting to €71.8 million. The Euro weakened against Sterling over the year by 5.6% and as a result there was a net currency translation loss of £1.2 million in EPRA NAV in relation to the German operations.

Tax

The Group operates under the UK REIT regime, so its UK and German rental operations are exempt from UK corporation tax, subject to the Group's continuing compliance with the UK REIT rules. The Group is otherwise subject to UK corporation tax.

In the event that a UK REIT has financing costs within its exempt UK property business that are not covered at least 1.25 times by profits (calculated on a tax basis but before deducting financing costs and capital allowances), tax is payable at the UK corporation tax rate on the interest over that level, up to a cap of 20% of taxable property business profits before financing costs and capital allowances. During the year, the Group incurred a tax charge of £1.3 million (nine months to 31 December 2014: £0.7 million) on such excess interest at the average tax rate for the year of 20.25% (2014: 21%). The drawdown of the new financing facilities will result in this interest cover test being met, so this tax cost will reduce to zero at the start of the 2016 financial year.

German tax is payable on realised profits from the Group's German rental operations. The tax charge for the year of £0.2 million has been offset by a prior period credit of £0.2 million, which is the result of a number of historic adjustments to the tax charges up to and including 2014 following the conclusion of a tax audit relating to the years 2007 to 2012. The balance sheet also includes a deferred tax liability of £5.7 million (2014: £5.4 million) relating to unrealised German capital gains tax on the investment properties. A deferred tax asset of £0.5 million that previously arose on the Group's Euro interest rate swaps was written off during the year following the refinancing of the Euro loan facility and the termination of those swaps.

Cash flow

The movement in cash over the year comprised:

The investment properties of the Group are let on full repairing and insuring terms, with each tenant obliged to keep the premises in good and substantial repair and condition, including rebuilding, reinstating, renewing or replacing the premises where necessary. Consequently, no capital expenditure, property maintenance or insurance costs have been incurred and it is not expected that material costs of that nature will be incurred on the current portfolio in future.

Group Income Statement

All amounts relate to continuing activities.

The notes form part of this financial information.

Group Statement of Other Comprehensive Income

The notes form part of this financial information.

Group Statement of Changes in Equity

The notes form part of this financial information.

Group Balance Sheet

The notes form part of this financial information.

Group Cash Flow Statement

The notes form part of this financial information.

Notes to the Group Financial Information

The financial information set out in this report covers the year to 31 December 2015, with comparative figures relating to the nine month period to 31 December 2014, and includes the results and net assets of the Company and its subsidiaries, together referred to as the Group.

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

The Company has been listed on AIM since June 2014. Further information about the Group can be found on its website, www.SecureIncomeREIT.co.uk.

a) Statement of compliance

Prior to 21 May 2014, the Company and SIR Hospital Holdings Limited (the holding company of the subgroup that owns the healthcare assets) were entities under common control but did not form a single legal group. On 21 May 2014, by way of a reorganisation, the groups headed by these two companies became a legal group headed by the Company. This reorganisation is deemed to be a "combination under common control" and as a result is outside the scope of IFRS 3 "Business Combinations". As such it is considered appropriate that the principles of merger accounting are used to account for the reorganisation and these entities are treated as if they had always been part of a single group. No fair value adjustments are required.

Accordingly, although these entities did not form a legal group for the comparative period reported herein, the comparatives comprise the net assets of all entities as if the subsequently formed legal group had been in existence throughout the nine month period ended 31 December 2014. In particular, earnings per share figures (including diluted, EPRA and adjusted EPRA EPS) have been calculated on the assumption that the capitalisation of shareholder loans which occurred in May 2014 had been in place throughout the nine month period from 1 April 2014 with a corresponding effect on earnings and number of shares used in the EPS calculations (see note 9).

Except for the calculation of the number of shares in issue for EPS purposes, the consolidated financial information has been prepared in accordance with the International Financial Reporting Standards adopted for use in the European Union ("IFRS").

The financial information contained in this announcement has been prepared on the basis of the accounting policies set out in the financial statements for the year ended 31 December 2015. Whilst the financial information included in this announcement has been computed in accordance with IFRS, as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The financial information does not constitute the Group's financial statements for the periods ended 31 December 2015 or 31 December 2014, but is derived from those financial statements. Those accounts give a true and fair view of the assets, liabilities, financial position and results of the Group. Financial statements for the period ended 31 December 2014 have been delivered to the Registrar of Companies and those for the year ended 31 December 2015 will be delivered following the Company's Annual General Meeting. The auditors' reports on both the 31 December 2015 and 31 December 2014 financial statements were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

b) Basis of preparation

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

Euro denominated results for the German assets have been converted to Sterling at an average exchange rate for the year of €1:£0.7256 (nine months to 31 December 2014: €1:£0.79916), which is not materially different from the actual rates at the time of the transactions. Year end balances have been converted to Sterling at the 31 December 2015 exchange rate of €1:£0.7350 (2014: €1:£0.77877).

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

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

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

Accounting policies which have a significant bearing on the reported financial condition and results of the Group may require subjective or complex judgements. The principal ongoing area of judgement is the investment property valuation where, as described in note 10, the opinion of independent, external valuers has been obtained at each reporting date using recognised valuation techniques and the principles of IFRS 13 "Fair Value Measurement".

The Group's accounting policies for this matter, together with other policies material to the Group, are set out in paragraphs (c) to (j) below.

(i) Adoption of new and revised standards

No amended standard or interpretation issued by the International Accounting Standards Board ("IASB") or the IFRS Interpretations Committee ("IFRIC") has led to any material changes in the Group's accounting policies or disclosures during the year.

(ii) Standards and interpretations in issue not yet adopted

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

IFRS 9 deals with the classification and measurement of financial instruments and the Directors do not anticipate that its adoption will have a material impact on the Group's financial statements assuming that the existing capital structure and financing arrangements remain in place at that time. The Group's revenue is derived entirely from leases, which are outside the scope of IFRS 15 but within the scope of IFRS 16. IFRS 15 is not therefore expected to have an impact on the Group. Since IFRS 16 will not result in significant changes of accounting policies for lessors, the Directors do not expect that the adoption of this standard will have a material impact on the Group's financial statements.

The IASB and IFRIC have also issued or revised IFRS 11, IAS 16, IAS 38 and IAS 41 but these are not expected to have a material effect on the operations of the Group.

c) Basis of consolidation

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

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

d) Property portfolio

(i) Investment properties

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

Valuations are calculated, in accordance with RICS Valuation - Professional Standards January 2014, by applying capitalisation yields to current and future rental cash flows, with reference to data from comparable market transactions, together with an assessment of the security of income. Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement in the period in which they arise. Depreciation is not provided in respect of investment properties.

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

(ii) Occupational leases

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

(iii) Rental income

Revenue comprises rental income exclusive of VAT. Rental income is recognised in the income statement on an accruals basis. Contingent income, arising from RPI-linked rent reviews, is recorded in the income statement in the period in which it is earned. Rental income from leases with fixed rent uplifts is recognised on a straight line basis over the term of the lease. Where income is recognised in advance of the related cash flows, an adjustment is made to ensure that the carrying value of the relevant investment property including accrued rent does not exceed the valuation.

e) Financial assets and liabilities

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

(i) Financial assets

Financial assets are recognised initially at their fair value. All financial assets currently constitute "loans and receivables", which are measured at amortised cost using the effective interest method, less any impairment.

(ii) Trade and other payables

Trade and other payables are recognised initially at their fair value and subsequently at amortised cost.

(iii) Cash and cash equivalents

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

(iv) Borrowings and finance charges

Secured debt is initially recognised at its fair value, net of any transaction costs directly attributable to its issue. Subsequently, secured debt is carried at amortised cost. Transaction costs are amortised over the life of the loan and charged to the income statement as part of the Group's financing costs. Where there is a change in the terms of an existing loan that is not considered to be a substantial modification of that loan, any associated transaction costs are also amortised over the remaining life of the loan.

(v) Interest rate derivatives

The Group has used interest rate derivatives to hedge its exposure to cash flow interest rate risks. Derivatives are initially recognised at fair value on the date on which the derivative contract is entered into and subsequently measured at fair value.

Derivatives are classified either as derivatives in effective hedges or derivatives held for trading. It is anticipated that any hedging arrangements will generally be "highly effective" within the meaning of IAS 39 "Financial Instruments: Recognition and Measurement" and that the criteria necessary for applying hedge accounting will therefore be met. All derivatives held by the Group in the year met these criteria.

Hedges are assessed on an ongoing basis to ensure they continue to be effective. The gain or loss on the revaluation of the portion of an instrument that qualifies as an effective hedge of cash flow interest rate risk is recognised directly in other comprehensive income through the cash flow hedging reserve. Amounts accumulated in equity will be reclassified to the income statement in the period when the hedged items affect the income statement. The gain or loss on the revaluation of any derivative financial instrument classified as held for trading because it is not an effective hedge is recognised directly in the income statement.

There has been no hedge ineffectiveness to recognise in the income statement in the current year or prior period, so all movements in the fair value of these instruments are reflected in other comprehensive income.

The Group ceases to use hedge accounting if the forecast transaction being hedged against is no longer expected to occur. In such circumstances, the cumulative amounts in other comprehensive income are then reclassified from equity to profit or loss.

(vi) Derecognition of financial liabilities

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

f) Tax

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

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

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

g) Foreign currency translation

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

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

h) Equity instruments

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

i) Share based payments

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

j) Fair value measurements

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

IFRS 8 "Operating Segments" requires operating segments to be identified on the basis of internal reports about components of the Group that are reviewed by the chief operating decision maker to make decisions about resources to be allocated between segments and assess their performance. The Group's chief operating decision maker is considered to be the Board.

The Group owns two property portfolios. Although these are described individually within the Investment Adviser's report, the Board receives quarterly management accounts prepared on a basis which aggregates the performance of the portfolios and focuses on total shareholder returns. The Board has therefore concluded that the Group has operated in and was managed as one business segment, being property investment, in the current year and prior period.

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

Revenue, which reflects the impact of rent smoothing adjustments, includes £55.3 million (nine months to 31 December 2014: £42.9 million) relating to the Group's largest tenant, and £41.8 million (nine months to 31 December 2014: £35.8 million) relating to the Group's second largest tenant. No other single tenant or guarantor contributed more than 10% of the Group's revenue in either reporting period.

The rent smoothing adjustment arises through the Group's accounting policy in respect of leases, which requires the recognition of rental income on a straight line basis over the lease term in certain circumstances, including for the 67% (2014: 57%) of passing rent as at 31 December 2015 which increases by a fixed percentage each year. During the year, this resulted in an increase in revenue and an offsetting entry is recognised in the income statement as a reduction in the gains on investment property revaluation.

Operating profit is stated after charging fees for:

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

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

Included within interest on secured debt is an amount of £35.0 million (nine months to 31 December 2014: £40.7 million) which has been reclassified from other comprehensive income in respect of the Group's interest rate derivatives in effective hedges.

Net finance costs analysed by the categories of financial asset and liability shown in note 16 are as follows:

The Group's sensitivity to changes in interest rates, calculated on the basis of a 10 basis point increase or decrease in LIBOR, was as follows:

The Group receives interest on its bank balances so an increase in interest rates would increase finance income. There would be no impact on finance costs from a change in interest rates because all of the secured debt in place since 2 October 2015 is at fixed rates.

At the previous balance sheet date, interest on secured debt was fixed through interest rate swaps and as a result, changes in interest rates had an impact on the valuation of those interest rate swaps through other comprehensive income and equity, such that an increase in interest rates would result in a credit to other comprehensive income. Since those interest rate swaps were terminated during the year, at 31 December 2015 there were therefore no longer any changes in interest rates that would directly affect other comprehensive income and equity.

The profit on sale of investment properties arose as follows:

The tax assessed for the period varies from the standard rate of corporation tax in the UK applied to the profit before tax. The differences are explained below:

The Group elected into the UK REIT regime with effect from 5 June 2014. Subject to continuing compliance with certain rules, the UK REIT rules exempt the profits of the Group's UK and German property rental business from UK corporation tax. Gains on the Group's UK and German properties are also generally exempt from UK corporation tax, provided they are not held for trading or in certain circumstances sold in the three years after completion of a development.

To remain a UK REIT, there are a number of conditions to be met in respect of the Company, the Group's qualifying activity and the Group's balance of business. Since entering the UK REIT regime the Group has continued to meet these conditions. The condition requiring that the Company must not be a close company includes a grace period of three years from entry into the UK REIT regime. The Company was a close company when it entered the UK REIT regime and continues to be so, but has until 4 June 2017 to comply. The Board is seeking to widen its shareholder base with a view to meeting this requirement within the three year grace period.

One of the ongoing REIT tests is an interest cover test that requires the profits of the tax exempt property business of the Group (calculated on a tax basis, but before deducting financing costs and capital allowances) to be at least 1.25 times its cost of financing. If this condition is not met, the Company remains within the UK REIT regime but is required to pay UK corporation tax on an amount equivalent to the excess interest costs or 20% of the tax exempt business profits (calculated on a tax basis but before deducting financing costs and capital allowances) if that is less. The Group did not meet this test throughout the year, so tax of £1.3 million (nine months to 31 December 2014: £0.7 million) was payable. Following the debt refinancing during the year, the interest cover test is being met and therefore, assuming no material changes to the Group's capital structure, no such tax is expected to be payable in future financial years.

The Group is subject to German corporation tax on its German property rental business at a rate of 21%. During the year, the German tax charge of £0.2 million has been offset by a credit of £0.2 million arising from a tax audit relating to the years between 2007 and 2012 which has now been finalised, and further repayments relating to 2013 and 2014. This is expected to result in a net repayment of tax to the Group of £0.8 million, of which £0.7 million had been received by 31 December 2015. In addition, a deferred tax liability of £5.7 million (2014: £4.9 million) is recognised for the German capital gains tax that would potentially be payable on the sale of the relevant investment properties (see note 14).

Earnings per share ("EPS") is calculated as profit attributable to ordinary shareholders of the Company for each period divided by the weighted average number of ordinary shares in issue throughout the relevant period. Diluted EPS reflects shares to be issued, including any to be issued in settlement of incentive fees that were earned in the relevant period. Where shares are issued in one reporting period relating to the results of the prior period, the shares are treated, for the purposes of calculating the weighted average of shares in issue, as having been issued at the end of that prior period regardless of the actual date of issue.

On 20 May 2014, the Company and SIR Hospital Holdings Limited (the "Combined Companies") became a legal group. During the prior period until that date, the Combined Companies were entities under common control. It is considered that the use of the actual number of shares of the Combined Companies in issue prior to 21 May 2014 as a denominator in the EPS calculation would not provide meaningful information. Instead, the weighted average number of shares in issue has been determined based on the number of shares that would have been in issue in the period had the shareholder loans to the Combined Companies been capitalised on the basis of one share for each £1 of shareholder loans at the time they were advanced. The profit attributable to the shareholders of the Combined Companies prior to 20 May 2014 has also been adjusted to remove the impact of the amount included in finance costs in respect of the shareholder loans together with the related deferred tax.