SIR.L Regulatory News (SIR)

9 March 2017

Secure Income REIT Plc

(the "Company" or the "Group")

Results for the year ended 31 December 2016

Secure Income REIT Plc (AIM: SIR), the specialist long term income UK REIT, today announces its results for the year ended 31 December 2016.

Highlights

• EPRA NAV per share up 14.4% to 323.6p over the year to 31 December 2016

• Adjusted EPRA EPS up over 330% to 11.3p for the year, up from 2.6p

• Quarterly distributions commenced in August 2016:

• currently yielding an annualised 4.1% on 31 December 2016 EPRA NAV, with predictable growth prospects underpinned by annual contractual fixed and RPI linked rental uplifts

• expectation of uplift in dividend following majority of 2017 rent review cycle to an annualised c. 14p per share in August 2017, yielding c. 4.3% on December 2016 EPRA NAV

• Total EPRA NAV per share growth plus dividends returned 16.5% and Total Shareholder Return a sector leading 30% for the year

• Net Loan To Value ratio further reduced to 53.5%, down from 61.0% at 31 December 2015

• Continuing to deliver the strategy through a £196 million portfolio acquisition and two oversubscribed share placings in the year:

• March 2016: £282m secondary placing at 255 pence per share to widen shareholder base and increase liquidity in shares

• October 2016: £140 million placing of new shares at 298.6 pence per share to part finance the purchase of 55 Travelodge Hotels at a net initial yield of 7%, diversifying the portfolio, enhancing dividend yield, extending the weighted average unexpired lease term and lowering LTV

• Portfolio valuation up 7.0% like for like since 31 December 2015; total portfolio of £1.64 billion, valued at a blended net initial yield of 5.3%

• Highly defensive portfolio of assets producing £92.6 million of passing rent and with a weighted average unexpired lease term of 23.1 years with no tenant breaks

• External management team significantly aligned, with a 15.4% stake representing over £110 million invested at 31 December 2016 EPRA NAV

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

"2016 has been another year of significant progress for our business. The Company has reported a sector leading Total Shareholder Return for the year through the impact of the share issue and acquisition, growth in earnings and valuations, and commencing dividend payments. It is well placed to continue to deliver.

"If we are to take one lesson from 2016 it should be that we are now living in an era of unpredictable events and it is unwise for investors to assume that they will be able to anticipate correctly all the twists and turns that lie ahead. The majority of our tenants are global businesses and all have strong balance sheets and very long lease commitments, offering investors an opportunity to access a very attractive cash flow which should carry on its upwards trajectory regardless of the outcome of Brexit or other developments unfolding on the world's stage. These rentals will continue to rise either in line with RPI or annual fixed uplifts irrespective of whether the economy is expanding or contracting. This degree of predictability is both welcome and increasingly valued by investors."

ENQUIRIES:

Prestbury Investments LLP Tel: 020 7647 7647

Nick Leslau

Mike Brown

Sandy Gumm

FTI Consulting Tel: 020 3727 1000

Richard Sunderland

Claire Turvey

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

Mark Young

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

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,

Following the successful refinancing and reduction of leverage during the 2015 financial year, 2016 was another year of significant progress and delivery of the strategy for our business.

Our intention to widen the shareholder base and improve liquidity in the shares was realised in March last year through the successful secondary placing by six of the Company's original shareholders of some 61% of the Company's shares. In October we raised £140 million in a placing at 298.6 pence per share to part finance the acquisition for £196 million of a portfolio of 55 hotels which are let to Travelodge on long leases. Through the impact of the share issue and acquisition, together with earnings and valuation growth, the Company has delivered strong shareholder returns in 2016, increasing EPRA NAV per share by 14.4%, initiating quarterly dividend payments in August 2016 at a current annualised yield of 4.1% on EPRA NAV, further reducing the Group's Net Loan To Value ratio to 53.5%, significantly improving liquidity in the shares and assembling an enlarged and supportive shareholder base.

Results and financial position

The Group's EPRA NAV at 31 December 2016 is 323.6 pence per share having grown by 40.8 pence per share since 31 December 2015 and which, when added to the dividends paid in the year, results in a 16.5% return over the year.

* amounts reported in the Group income statement adjusted by £12.8 million (6.7 pence per share) to remove the spreading of fixed rental uplifts over the term of the lease. The adjustment reduces rental income and increases revaluation movement in equal amounts.

We have seen a significant valuation uplift in the year, amounting to a 7.0% increase on the portfolio owned throughout 2016. Including the Travelodge hotels portfolio acquired in the year, we report a blended net initial portfolio yield of 5.3% at 31 December 2016. After the majority of the 2017 rent reviews that will occur between May and July this year, that yield will increase to an estimated 5.4% by July 2017.

Adjusted EPRA EPS is 11.3 pence per share for the year, a very substantial increase above the prior year reflecting the positive impact of lower financing costs following the asset disposals and debt refinancing in the second half of 2015 and average rental uplifts in the year of 2.3%, together with the purchase of the Travelodge portfolio towards the end of October 2016.

The prospects for growth in the dividend and in Total Shareholder Return are underpinned by the Group's unusually long leases, with over 23 years unexpired and no tenant break options, and by the high degree of income certainty inherent in the rent review structures. 58% of the Group's rental income is subject to annual minimum fixed rental uplifts averaging 2.8% per annum with the remaining 42% of rental income subject to uncapped, upwards only RPI linked uplifts. The Company therefore generates annually increasing income even if there is no inflation, as well as the ability to capture further income growth during inflationary times.

Having financed the Travelodge acquisition by way of the £140 million equity issue together with debt finance at a portfolio loan to cost ratio of 31% and following the uplift in valuation of the portfolio across the board, we ended 2016 having further reduced our net loan to value ratio to 53.5%, down from 61% at the end of 2015. Interest cover has also improved from 1.6 times at the end of 2015 to 1.9 times at the end of 2016. We remain focussed on structural safety in our credit facilities. With fixed interest costs and our annually increasing property income, we remain confident that we can continue to deliver attractive returns to our shareholders.

Outlook

2016 was a bad year for the credibility of forecasters and showed how widely held views can fail to predict the outcome of key events or the market's reaction to them. The few who foresaw Brexit and a Trump victory were unlikely to have anticipated the stock market rallies or the subsequent upgrade in economic forecasts. Bullish investors and economists were typically right for the wrong reasons, outperforming the bears who were wrong for the right reasons and may yet be proved right. So how best to approach 2017 with European elections and yet another Greek debt restructuring looming whilst a mercurial new President seeks to reform US foreign and trade policy? How will Brexit unfold? Negotiations will extend well beyond 2017 and there is a wide range of outcomes. Indeed, we may have to wait until 2019 or beyond to know the precise nature of the UK's exit and the extent to which this impacts on the commercial property market. Scenarios stretch all the way from a relief rally as Mrs May secures her ambition of a smooth Brexit to a recessionary shock as the UK "crashes out" of the EU should the Government's "no deal is better than a bad deal" stance meet an equally intransigent EU. Intermediate scenarios create a variety of likely property losers with City office occupation exposed to any restrictions placed on investment banking activity and retail property vulnerable to any squeeze in real incomes caused by the fall in the pound. Strong views may abound but in practice investors are being asked to place their bets far in advance with little visibility as to the likely outcome. This extended period of uncertainty will encourage the Bank of England to keep interest rates lower for longer despite rising inflation. This should maintain if not intensify the search for yield, especially where there is some form of inflation protection.

If we are to take one lesson from 2016 it should be that we are now living in an era of unpredictable events and it is unwise for investors to assume that they will be able to anticipate correctly all the twists and turns that lie ahead. Mainstream commercial property prices have stabilised much more quickly than many anticipated, but it is still far too early to know whether this will be the full extent of any correction. Our tenants are less exposed to the volatile areas of the economy and property market and are continuing to grow their businesses, property footprints and profitability. But of still greater importance to us is that their balance sheets are strong, the vast majority are multinational businesses not solely exposed to the UK economy and their lease commitments run for many, many years. Our rents will rise in line with the RPI or fixed annual uplifts irrespective of whether the economy is expanding or contracting. Of course we very much hope that the UK continues to prosper and that Brexit negotiations are a success, but critically our cash flows are not dependent upon this. This gives rise to something rather unusual at a time of heightened uncertainty - a highly predictable and rising income return. Our investors can enjoy this attractive cash flow without needing to make a judgement on the timescale and outcome of Brexit or other events unfolding on the world's stage.

Properties that contain all the valued characteristics in our portfolio are relatively scarce. We support our investment adviser in maintaining its discipline in applying stringent selection criteria. In practice this leads to the vast majority of potential deals being declined on grounds of covenant strength, lease length, sector, quality of underlying real estate or pricing. October's £196 million Travelodge acquisition does, however, demonstrate that patience can be rewarded with well-priced purchases that enhance the Company's returns and dividend yield. In the meantime, our £1.64 billion portfolio is difficult to replicate and increased competition for well let alternative assets is continuing to push up prices, which is reflected in our valuations and performance since flotation in 2014.

Martin Moore

Chairman

9 March 2017

Investment Adviser's Report

Prestbury Investments LLP advises Secure Income REIT Plc and is pleased to report on the Group's operations for the year ended 31 December 2016.

Portfolio

The portfolio comprises 81 properties with secure, long term income and contractual uplifts offering inflation protection, producing £92.6 million of passing rent at 31 December 2016. The majority of the rent is derived from tenants whose businesses offer global spread and which have performed very well over many years, demonstrating strong defensive qualities. The portfolio is fully let for a weighted average term of 23.1 years from 31 December 2016 on full repairing and insuring leases with no break options.

Healthcare assets (54% 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 property in central London let to Groupe Sinoué, a French company specialising in mental health. Passing rent on the healthcare portfolio is as follows:

The leases on the Ramsay hospitals are all guaranteed by Ramsay Health Care Limited, the listed parent company of one of the top five private hospital operators in the world and a constituent of the ASX 50 index of Australia's largest companies, with a market capitalisation at 8 March 2017 of £8.5 billion.

The Ramsay hospitals are let on full repairing and insuring leases with a term to expiry at 31 December 2016 of 20.4 years without break. The rent increases in May each year by a minimum of a fixed 2.75% per annum throughout the lease term. In addition, at Secure Income REIT's option, rent could be increased in May 2017 to the higher of a 2.75% per annum uplift 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% per annum uplift and open market rental value. As a result of the minimum fixed uplift, the passing rent on this sub-portfolio will increase to at least £46.9 million on 3 May 2017.

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 8 March 2017 of £4.3 billion. Orpea owns 45% of Groupe Sinoué, 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 2016 of 27.6 years without break. The rent increases in May each year by a fixed 3.0% per annum throughout the lease term. As a result, the passing rent on the property will increase from £1.9 million to £2.0 million on 3 May 2017.

Leisure assets (34% 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 leisure portfolio is as follows:

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 8 March 2017 of £5.0 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 25.5 years without break 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 over the twelve months to April each year) for the UK leisure portfolio, which in 2016 resulted in an increase of 1.3%. The German properties are subject to fixed annual increases of 3.34% every July throughout the term, as a result of which the German rents will increase to £6.1 million on 29 July 2017 (translated at the 31 December 2016 exchange rate).

Hotel assets (12% of portfolio value)

The hotel assets comprise 55 Travelodge hotels, located in England and Scotland, let to Travelodge Hotels Limited which is the main operating company within the Travelodge Group trading in the UK, Ireland and Spain. Travelodge is the UK's second largest budget hotel brand, which owned 525 hotels and over 39,000 rooms as at 31 December 2015.

The average unexpired lease term is 26.3 years with no tenant break clauses, and the leases are on full repairing and insuring terms with Travelodge also responsible for reimbursing the Group for head lease rentals and any other amounts owing to the landlords of the 17 leasehold properties. There are upwards only uncapped RPI-linked rent reviews every five years throughout the term, the majority of which settled in October 2016 resulting in passing rent of £13.7 million at the balance sheet date.

Portfolio valuation yields at 31 December 2016

* this takes no account of any uplift on the open market review

† assuming RPI linked rents increase in line with the estimates of the external valuers, which amounted to 2.0%

Portfolio valuation by location

Portfolio valuation uplift in the year

Across the whole portfolio, there has been a valuation increase of £85.0 million before currency movements in the year. This figure includes the adverse impact of the increase in the rate of English SDLT from 4% to 5% during the year, which reduced the 2016 valuations by £11.9 million.

The healthcare valuations at 31 December 2016 reflect a weighted average net initial yield of 5.0% compared to 5.2% at 31 December 2015. Together with the 2.8% increase in passing rent and net of the increase in the SDLT rate, the result is a valuation uplift of £58.5 million (7.0%) in the year.

The UK leisure valuations at 31 December 2016 reflect a weighted average net initial yield of 5.2% compared to 5.4% at 31 December 2015. Together with the 1.3% increase in passing rent and net of the increase in the SDLT rate, the result is a valuation uplift of £12.6 million (2.9%) in the year. The German leisure valuations at 31 December 2016 reflect a weighted average net initial yield of 5.8% compared to 6.3% at 31 December 2015 which, together with the 3.34% increase in rent, resulted in a valuation uplift of €12.3 million (12.3%) in the year; currency translation movements have also increased the Sterling equivalent resulting in a net Sterling valuation uplift of £22.9 million (31.2%) in the German leisure assets over the year.

The hotel valuations at 31 December 2016 reflect a weighted average net initial yield of 6.5%, resulting in a valuation uplift of £3.8 million (2.0%) over the cost of the portfolio, with rents unchanged between the completion of the acquisition in October 2016 and the balance sheet date.

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 each relevant lease. The adjustments relate to those rents on the healthcare assets which increase by 2.75% (on 96% of healthcare rents) and 3.0% (on 4% of healthcare rents) every May, and those rents on the German leisure assets which increase by 3.34% every July.

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

* at the year end Euro conversion rate of €1:£0.8583

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 movements, 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 2016 average Euro conversion rate of €1:£0.8174

Financing

The Group's operations are financed by a combination of cash resources and non-recourse debt finance, where the assets at risk in the event of a loan default are limited to those within four ring-fenced sub-groups. Each facility is self-contained, with no cross default provisions between the four of them. The weighted average interest cost is 5.1% per annum and the weighted average term to maturity is 7.5 years from 31 December 2016. Key terms of the facilities outstanding at 31 December 2016 are 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 year end exchange rate of €1:£0.8583) with all Leisure portfolio loans cross-collateralised. The amortisation in each of years six and seven of the loan term comprises £3.2 million on the sterling facility and €0.7 million on the Euro facility.

The Group's gross and net debt at 31 December 2016 was as follows:

* including €71.8 million of Euro loans translated at the year end exchange rate of €1:£0.8583

† interest cover for these purposes is measured as current passing rent divided by current annualised interest cost

Following scheduled amortisation payments in January 2017, the total gross debt at the date of this report, including Euro denominated debt at the 31 December 2016 exchange rate, is £968.3 million. The extent of headroom on financial covenants at the balance sheet date is analysed in the business review on the following pages. There have been no defaults or potential defaults in any facility during the year or since the balance sheet date.

Business review

Key performance indicator - Total Accounting Return

The principal financial outcome that the Board seeks to achieve is attractive growth in shareholder returns. The Board monitors both Total Accounting Return, which is the movement in EPRA NAV per share plus distributions, and Total Shareholder Return, which is the share price movement plus distributions. The principal focus for the Board is on Total Accounting Return.

The Group's EPRA NAV per share at 31 December 2016 was 323.6 pence, which represents a 14.4% increase over the year. This amounts to a 40.8 pence per share uplift which, together with 5.8 pence per share of dividends, totals a 46.6 pence per share Total Accounting Return, equivalent to a 16.5% return over the year.

* adjusted by 6.7 pence (2015: 7.2 pence) to remove from the gross rent and revaluation uplift amounts reported in the income statement of rent smoothing adjustments. These adjustments arise from the requirements of the accounting standards to spread the impact of fixed rental uplifts evenly over the term of relevant leases. The rent smoothing adjustments reflected in this financial information increase rental income and reduce property valuation gains, and are adjusted in this table to better reflect the Group's actual rental income flows.

EPRA NAV takes the balance sheet measure of net asset value and excludes items that are considered to have no relevance to the assessment of long term performance. The Board considers EPRA NAV to be an appropriate measure as it provides for clearer and more consistent comparisons between the Company's performance and that of its peer group than the balance sheet measure of NAV.

In accordance with the EPRA guidance, to calculate EPRA NAV the Group's NAV is adjusted to exclude deferred tax on investment property revaluations relating to the German assets and is also adjusted for the dilutive impact of the shares to be issued in satisfaction of incentive fees payable in the period. The latter adjustment arises because, despite the incentive fee being accounted for in the results for the year, basic net asset value per share does not include the impact of the shares to be issued in satisfaction of that fee. EPRA NAV per share removes that apparent inconsistency and is reconciled to the balance sheet net asset value measured in accordance with IFRS in note 21 to the financial information.

Key performance indicator - Total Accounting Return (continued)

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

* adjusted for rent smoothing as described above

The key elements of the movements in net asset value presented under IFRS are substantially the same as those shown using the EPRA measure, with the principal differences being the exclusion of movements in deferred tax and interest rate swap revaluations from the EPRA measure, and the exclusion of the dilutive impact of the incentive fee share issue from the IFRS measure.

Key performance indicator - Adjusted EPRA earnings per share

The Company initiated quarterly payments of cash distributions to shareholders in August 2016 and its intention is to distribute its Adjusted EPRA EPS through payment of a fully covered cash dividend, paid quarterly.

EPRA EPS excludes from basic EPS any investment property revaluations, profits on the sale of investment properties, fair value movements in any interest rate derivatives and deferred tax, to give a measure of underlying earnings from core operating activities.

Adjusted EPRA EPS excludes any incentive fee (largely derived from investment property revaluations) and any significant non-recurring costs (namely the £2.0 million costs of the secondary placing in 2016). It is further adjusted to remove the effect of smoothing the fixed rental uplifts in order not to artificially flatter dividend cover calculations.

The Group's earnings per share measured in accordance with IFRS is reconciled to EPRA EPS and to Adjusted EPRA EPS in note 9 to the financial information.

Key performance indicator - adjusted EPRA earnings per share (continued)

The composition of the EPRA EPS measures is as follows:

Since the Group's financing costs changed materially as a result of the refinancing in 2015, the table below shows adjusted EPRA EPS before and after completion of the refinancing.

* completion of final tranche of refinancing on 2 October 2015

Adjusted EPS was 5.4 pence per share in the first half of the year and 5.9 pence per share in the second half. Quarterly cash dividend payments were initiated in August 2016 and two quarterly dividends totalling 5.8 pence per share were paid during the latter half of the year.

The Group's basic EPS, calculated in accordance with IFRS and without the EPRA adjustments, amounts to 48.2 pence per share in the year and 20.4 pence per share in the prior year. The IFRS measure is substantially higher in each of these years as it includes the impact of the investment property revaluations which amounted to 37.7 pence per share in 2016 and 39.1 pence per share in 2015. Basic EPS in 2015 also included 13.3 pence per share from profits on disposals of investment properties and a cost of 41.2 pence per share of early debt repayment costs incurred in connection with the 2015 refinancing.

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

Adjusted EPRA EPS: administrative expenses

As an externally managed business, the majority of the Group's overheads are covered by the advisory fees paid to the Investment Adviser. It is the Investment Adviser that then meets all office running costs and remuneration for the whole management and support team. In addition, in years where returns to investors have exceeded a benchmark (which is a compound growth rate of 10% per annum above the EPRA NAV the last time any incentive fee was paid, which in 2016 is a threshold EPRA NAV of 307.7 pence per share at 31 December 2016), the Investment Adviser receives 20% of the surplus above that priority return to shareholders. The Investment Adviser's share of the surplus is paid by way of an incentive fee, payable in shares following publication of the Group's audited annual results. Any such shares received are not permitted to be sold, save in certain limited circumstances, for a period of between 18 and 42 months following the end of the year for which they were earned.

The total of the Group's administrative expenses for the year were as follows:

The advisory fees payable to the Investment Adviser are calculated on a sliding scale based on 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 billion plus 0.75% thereafter. The fee for the 2016 year amounted to £7.0 million plus VAT (2015: £6.5 million plus VAT). The annualised fee payable on the Group's EPRA net asset value at 31 December 2016 would be £8.7 million plus VAT (a total cost of c. £9.6 million) in the theoretical situation where the Group's EPRA NAV remained constant throughout the year.

Until July 2016, the cash required to satisfy the advisory fee was subsidised by the pre-listing shareholders of the Company up to a maximum of £1.3 million per quarter. During the year, £2.8 million of the cash required to fund advisory fee payments was met by those shareholders. There are no further cash contributions due to subsidise the fees.

The other recurring administrative expenses are principally professional fees, including tax compliance and audit fees, which are billed directly to Group companies.

Because VAT cannot be applied to the rents on the Healthcare assets, there is an element of irrecoverable VAT incurred on the Group's running costs and included within the relevant line item in the table above. The proportion of VAT on general running costs disallowed averaged 59% during the year and is currently 51%.

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 (2015: £0.2 million) with the other three Directors being partners in the Investment Adviser and receiving no remuneration from the Company; and

· other costs of being listed, such as the fees of the nominated adviser required under the AIM rules, registrar fees and ongoing AIM listing fees, which amounted to £0.4 million in the year.

Adjusted EPRA EPS: net financing costs

Finance costs are analysed between the current debt facilities and those in place before the 2015 refinancing as follows:

The average interest rate paid during the year was 5.2% per annum (2015: 6.4% per annum) and the weighted average is currently 5.1% per annum. The Group's interest costs on all secured facilities are at fixed rates throughout their terms, providing certainty over the term of each facility of the Group's largest expense item.

Adjusted EPRA EPS: Currency translation

The majority of the Group's assets are located in the UK and the financial information is therefore presented in Sterling. 4.7% (2015: 4.2%) of the Group's EPRA NAV comprises assets and liabilities relating to properties located in Germany, valued in and generating net earnings in Euro. The fact that property assets and the secured debt are Euro denominated acts as a partial hedge of the currency risk, but the Group remains exposed to translation differences on the net results and net assets of these operations which are not hedged, with movements recognised in the statement of other comprehensive income.

The German properties are valued at €112.4 million as at 31 December 2016, with the Euro denominated secured debt amounting to €71.8 million. The Euro strengthened against Sterling over the year by nearly 17% and as a result there was a net currency translation gain of £4.1 million in EPRA NAV in relation to the German operations (2015: loss of £1.2 million).

Adjusted EPRA EPS: Tax

The Group operates under the UK REIT regime, so its UK and German rental operations (which make up the majority of the Group's earnings) are exempt from UK corporation tax, subject to the Group's continuing compliance with the UK REIT rules. The Group is otherwise subject to UK corporation tax.

German tax is payable on realised profits from the Group's German rental operations and the resulting tax charge for the year was £0.2 million (2015: £0.2 million). The balance sheet also includes a deferred tax liability of £8.5 million (2015: £5.7 million) relating to unrealised German capital gains tax on the investment properties which would only be crystallised on a sale of those assets. There are currently no plans to sell any of the Group's assets.

UK REIT rules restrict the extent to which financing costs are treated as tax deductible against profits. In the prior year the Group incurred a tax charge of £1.3 million on such excess interest. Following the refinancing in October 2015, this interest cover test has been met and there was therefore no UK tax charge for the 2016 financial year.

Key performance indicator - Net Loan To Value ratio

The Board monitors the Group's Net Loan To Value ratio with a view to creating a capital structure that will withstand varying market conditions. During 2016, the Net LTV fell from 61.0% to 53.5% reflecting the impact of both the acquisition of the Travelodge portfolio at a lower LTV than the existing portfolio and the property valuation uplifts in the year.

Key performance indicator - headroom on debt covenants

The extent to which financial covenants are tested varies amongst the four credit facilities. In order to provide the required robustness of the capital structure, debt covenants have been negotiated with the aim of protecting the Group as far as possible from movements in investment property valuations which are not related to changes in the rental cash flows:

· the £312.2 million Healthcare facility and the £60.0 million Travelodge facility, which together account for 38% of gross secured debt, are subject to LTV and interest cover tests throughout the loan term;

· the £218.8 million Healthcare facility, 23% of total gross secured debt, is not tested for LTV until September 2019 and is subject to an interest cover cash trap test throughout the loan term; and

· the £378.4 million Leisure facilities, which account for 39% of total secured debt, are not subject to any LTV default covenant or interest cover tests throughout the loan term, though there are LTV levels which could trigger a cash trap or full cash sweep from August 2018.

The Board reviews the headroom on all financial covenants at least quarterly. The headroom on key financial covenants at 31 December 2016 is set out below, together with the net initial valuation yield, the fall in valuation or the fall in projected rent that would trigger the relevant covenant at the first test date:

* assuming RPI linked rents increase in line with the RPI swap curve as at 3 March 2017

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 LTV 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 LTV 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 £64.3 million as at 31 December 2016, compared to £52.7 million as at 31 December 2015.

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 portfolio in future.

Nick Leslau

Chairman, Prestbury Investments LLP

9 March 2017

Strategic Review

Strategy and investment policy

The Group specialises in generating secure long term income streams from real estate investments and its policy is to distribute earnings by way of fully covered quarterly cash dividends.

Against a backdrop of significant reduction in income security in the UK real estate market caused by a marked decline in the average term to first tenant lease break or expiry, and mindful of the growing requirement amongst investors for long term, secure income flows, the Board aims to further build a substantial diversified long term income portfolio providing stable and growing income and capital returns for its shareholders.

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. The portfolio held at 31 December 2016 comprises 81 assets: 64 held freehold and 17 leasehold investment properties let for a weighted average term of 23.1 years from 31 December 2016 with no break options. All properties are fully let on full repairing and insuring leases. 42% of the current income is subject to RPI linked upwards only rent reviews (the majority of it on an annual review cycle) and 58% is subject to minimum fixed annual uplifts.

Income security is assessed by reference either to the financial strength of the tenants or to the extent of asset cover provided by way of residual asset value.

The Board believes that the Company offers attractive geared returns from high quality real estate, with financially strong tenants operating with well established brands in industry sectors with strong defensive characteristics. 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, in 2016 the Board has built on the existing portfolio through the £196 million acquisition of 55 Travelodge hotels.

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

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

Principal risks and uncertainties

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

The last twelve months have seen increased volatility and uncertainty in UK and global markets, including following the UK's vote to leave the EU, the ultimate impact of which is still unknown. This has at times created volatility and uncertainty in equity, debt, property and foreign exchange markets. Delivery of the Group's growth aspirations depends on access to capital markets and external factors including market volatility can have an impact on the ability to implement this strategy. However given the Group's long term income profile and its fixed rate debt, such conditions are unlikely to have a material impact on the status quo.

Going concern

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

Viability statement

The Board has assessed the prospects of the Group over the five year period from the balance sheet date to December 2021, which is the period covered by the Group's longer term financial projections. The Board considers the resilience of projected liquidity, as well as compliance with secured debt covenants and UK REIT rules, under a range of RPI and property valuation assumptions.

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

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

Group Income Statement

All amounts relate to continuing activities.

The notes form part of this financial information.

Group Statement of Other Comprehensive Income

The notes form part of this financial information.

Group Statement of Changes in Equity

Interim dividends totalling 5.8 pence per share (2015: nil) were paid during the year.

The notes form part of this financial information.

Group Balance Sheet

The notes form part of this financial information.

Group Cash Flow Statement

The notes form part of this financial information.

Notes to the Group Financial Information

The financial information set out in this report covers the year to 31 December 2016, with comparative figures relating to the year to 31 December 2015, and includes the results and net assets of the Company and its subsidiaries, together referred to as the Group.

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

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

a) Statement of compliance

The consolidated financial information has been prepared in accordance with 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 2016. Whilst the financial information included in this announcement has been computed in accordance with IFRS, as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The financial information does not constitute the Group's financial statements for the years ended 31 December 2016 or 31 December 2015, 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 year ended 31 December 2015 have been delivered to the Registrar of Companies and those for the year ended 31 December 2016 will be delivered following the Company's Annual General Meeting. The auditors' reports on both the 31 December 2016 and 31 December 2015 financial statements were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

b) Basis of preparation

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

Euro denominated results for the German assets have been converted to Sterling at the average exchange rate for the year of €1:£0.8174 (2015: €1:£0.7256), which is not considered to produce materially different results from using the actual rates at the time of the transactions. Year end balances have been converted to Sterling at the 31 December 2016 exchange rate of €1:£0.8583 (2015: €1:£0.7350).

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

The financial information has been prepared on the historical cost basis except that investment properties 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 area of judgement is the investment property valuation where, as described in note 10, the opinion of external valuers has been obtained at each reporting date using recognised valuation techniques and the principles of IFRS 13 "Fair Value Measurement".

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

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.

Standards and interpretations in issue not yet adopted

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

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

The IASB and IFRIC have also issued or revised IFRS 2, IFRS 4, IFRS 10, IFRS 11, IFRS 14, IAS 1, IAS 7, IAS 12, IAS 16, IAS 27, IAS 28, IAS 38, IAS 40, IAS 41 and IFRIC 22 but these are not expected to have a material effect on the operations of the Group.

c) Basis of consolidation

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

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

d) Property portfolio

Investment properties

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

Valuations are calculated, in accordance with RICS Valuation - 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.

Occupational leases

The Directors exercise judgement in considering the potential transfer of the risks and rewards of ownership in accordance with IAS 17 "Leases" for all occupational leases and headleases, and 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 occupational leases reflected in this financial information are classified as operating leases.

Headleases

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

Rental income

Revenue comprises rental income exclusive of VAT. 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 fair value of the property.

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 an instrument. Unless otherwise indicated, the carrying amounts of financial assets and liabilities are considered by the Directors to be reasonable estimates of their fair values.

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.

Trade and other payables

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

Cash and cash equivalents

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

Borrowings and finance charges

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

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

j) Fair value measurements

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

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

The Group owns 81 properties originally acquired in three portfolios. Although certain information about these portfolios is described individually within the Investment Adviser's report, when considering resource allocation and performance the Board reviews quarterly management accounts prepared on a basis which aggregates the performance of the portfolios and focuses on total 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 and prior year.

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

Revenue, which is stated after the impact of rent smoothing adjustments explained in note 4, includes £55.4 million (2015: £55.3 million) relating to the Group's largest tenant, and £25.3 million (2015: £34.9 million) relating to the Group's second largest tenant. No other single tenant contributed more than 10% of the Group's revenue in either year.

The rent smoothing adjustment arises through the Group's accounting policy in respect of leases, which requires the recognition of rental income on a straight line basis over the lease term in certain circumstances, including for the 58% (2015: 67%) of passing rent as at 31 December 2016 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.

Amounts shown above include irrecoverable VAT as appropriate.

Operating profit is stated after charging fees for:

The other non-audit services charged to income in the current year primarily relate to work as Reporting Accountants in connection with the March 2016 share placing.

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

Mike Brown, Sandy Gumm and Nick Leslau received no Directors' fees from the Group in either the current or prior year. Until 30 September 2016, Martin Moore's fees were paid to MRM UK Consulting Services Limited under the terms of his letter of appointment. Since 1 October 2016 he has been paid directly.

Included within interest on secured debt is an amount of £nil (2015: £35.0 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 ten basis point increase or decrease in LIBOR, was as follows:

The Group receives interest on its cash and cash equivalents 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 is at fixed rates.

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