RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020

RNS Number : 2570R

Triple Point Social Housing REIT

05 March 2021

 

THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.

5 March 2021

Triple Point Social Housing REIT plc

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

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020

The Board of Triple Point Social Housing REIT plc (ticker: SOHO) is pleased to announce its audited results for the year ended 31 December 2020.

	31 December 20 20	31 December 2019
EPRA Net Tangible Assets per share (equal to IFRS NAV per share )	106.42p	105.37p
E arnings per share (basic and diluted)               -      IFRS basis               -      EPRA basis	6.82p 4.61p	6.75p 3.39p
Total annual ised rental income	£31.6m 1	£25.4m 1
V alu e of the portfolio               -      IFRS basis               -      Portfolio valuation basis	£571.5m £611.6m	£471.6m £503.8m
Weighted average unexpired lease term	26.2 yrs	25.7 yrs
Dividend paid or declared per Ordinary S hare	5.18p	5.095p

Financial highlights

· EPRA Net Tangible Assets (equal to IFRS net asset value ) per share of   106.42 pence as at 31 December 2020 (2019: 105.37 pence), an increase of 1.0 % .

· Portfolio independently valued as at 31 December 2020  at £ 571.5 million on an IFRS basis (2019: £471.6 million) , reflecting a valuation uplift of 7.7 % against total invested funds of £530.7 million ² .   The properties have been valued on an individual basis.

· The Group's properties were valued at £611.6 million on a portfolio valuation basis (2019: £ 503.8 million ) , reflecting a portfolio premium of 7.0% or a £ 40.1 million uplift against the IFRS valuation ³ .

· The portfolio's total annualised rental income was   £31.6 million ¹ as at 31 December2020(2019: £ 25.4 million ) .

· Operating profit for the year ended 31 December 2020 was £30.2 million (2019: £ 26.9 million ) .

· Ongoing Charges Ratio of 1.57% as at 31 December 2019 (2019: 1.63%) .

· In October 2020 , a further £55 million of gross proceeds (£53.3 million net of costs) was raised through an issuance of new ordinary shares , and in December 2020 the existing debt facility was increased by £ 3 0 million .

Operational highlights

· Acquired 58 properties   (400 units) during the year   for a total investment cost of £ 78.9 million ( including costs ) bringing the total investment portfolio to 445 properties.

·     As at 31 December 2020, 20 out of the Group's 22 forward funding projects had reached practical completion. The Group had committed £56.2m (including acquisition costs) to these projects of which £2.8m remained oustanding at the end of the year. Of the remaining 2 schemes, one completed on 26 February 2021 and the final project is due to complete imminently.  

· IFRS blended net initial yield of 5.27% based on the value of the portfolio on an IFRS basis as at 31 December 2020 , against the portfolio's blended net initial yield on purchase of 5.90 % .

· Further  diversif ied the   portfolio: 

o  155local authorities

o  341 leases

o  20 Approved Providers

o  98 care providers

· A s at 31 December 2020 , the weighted average unexpired lease term (" WAULT ") was 26.2 years .

· 100% of rental income due and payable for the period ended 31 December 2020, and due and payable at 28 February 2021 has been collected ⁴ .

· 100% of contracted rental income was either CPI or RPI linked.

Post Balance Sheet Activity

· The Company declared a dividend of 1.295pence per ordinary share in respect of the period from 1 October to 31 December 2020.  This dividend will be paid on or around 26 March 20 21 to shareholders on the register at 12  March 20 21 .

· The dividend payable on 26 March 2021 brings the total dividend per Ordinary Share paid by the Company to 5. 18 pence per s hare in respect of the financial year to 31 December 2020 in line with the Company's stated target. The Company intends to maintain its strategy of paying a progressive dividend.

· Since the year end, the Group has acquired 1 property comprising 7 units, and exchanged on 1 property comprising 10 units, for £2.9 million (including acquisition costs) at net initial yields in line with the Company's existing portfolio.

Notes:

1     Excluding ongoing forward funded schemes that are under an agreement for lease

2     Including acquisition costs

3   A portfolio valuation basis assumes the portfolio of properties is held in a single company holding structure, is sold to a third party on arms-length terms, and attracts lower purchaser's costs of 2.30%

4     Due to a clerical error, there has been a short delay in the payment of an immaterial amount of rent representing c.£45k (0.16% of rent roll) for the quarter ended 31 December 2020. This is expected to be paid in full in the next 2 weeks

Christopher Phillips, Chairman of Triple Point Social Housing REIT plc, commented:

"T he fundamentals of our sector remain strong. The need is as great - if not greater - than ever before. Our counterparties remain committed to providing high-quality housing. In light of all this, we look forward to 2021, conscious of the challenges that lie ahead, but cautiously optimistic about the success that we can achieve if we work hard to deliver the housing that our country, and our residents, so desperately need . "

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

Triple Point Investment Management LLP   (Investment Manager)	Tel: [phone]
Ben Beaton
Max Shenkman
Isobel Gunn-Brown
Akur Capital ( Joint Financial Adviser)	Tel: [phone]
Tom Frost
Anthony Richardson
Siobhan Sergeant
Stifel (Joint Financial Adviser and   Corporate Broker)	Tel: [phone]
Mark Young
Mark Bloomfield
Rajpal Padam

The Company's LEI is 213800BERVBS2HFTBC58.

Further information on the Company can be found on its website at www.triplepointreit.com .

NOTES:

The Company invests in primarily newly developed social housing assets in the UK, with a particular focus on supported housing. The assets within the portfolio are subject to inflation-adjusted, long-term (typically from 20 years to 30 years), Fully Repairing and Insuring (" FRI ") leases with Approved Providers (being Housing Associations, Local Authorities or other regulated organisations in receipt of direct payment from local government). The portfolio comprises investments into properties which are already subject to an FRI lease with an Approved Provider, as well as forward funding of pre-let developments but does not include any direct development or speculative development.

There is increasing political pressure and social need to increase housing supply across the UK which is creating opportunities for private sector investors to help deliver this housing . The Group's ability to provide forward funding for new developments not only enables the Company to secure fit for purpose, modern assets for its portfolio but also addresses the chronic undersupply of suitable supported housing properties in the UK at sustainable rents as well as delivering returns to investors.

Triple Point Investment Management LLP (part of the Triple Point Group) is responsible for management of the Group's portfolio (with such functions having been delegated to it by Langham Hall Fund Management LLP, the Company's alternative investment fund manager).

The Company was admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange on 8 August 2017 and was admitted to the premium segment of the Official List of the Financial Conduct Authority and migrated to trading on the premium segment of the Main Market on 27 March 2018. The Company operates as a UK Real Estate Investment Trust (" REIT ") and is a constituent of the FTSE EPRA/NAREIT index.

CHAIRMAN'S STATEMENT

Introduction

When I wrote to shareholders in our Annual Report at the start of last year, I said that we looked forward to 2020 with optimism. I noted that we had challenges to tackle - particularly in terms of accommodating increased regulation and our share price - but our continued operational success left us well equipped to meet those challenges and more as we moved forward into 2020. Little did I know that 2020 would bring a challenge unique in our history. The social and economic damage it has wrought does not need repeating here. But I am pleased to report that, a year on, with vaccines having helped turn the tide in our fight against the pandemic, that optimism for our business seems justified. As this report shows, 2020 has been another year of strong performance, made possible by the tireless work of all our stakeholders.

Despite - or perhaps because of - the unprecedented pressures of 2020, our stakeholders across the board rose to the challenge. Commissioners continued to support our business model, referring residents into our housing whenever possible to relieve pressure on the NHS. Local Authorities continued to pay rent and care fees to ensure the viability of schemes. Approved Providers continued to provide essential housing services to keep properties as safe and suitable as possible for our residents. Care providers continued to provide care, implementing their infectious disease control policies and managing the challenges of social distancing to ensure our residents remained safe. As chairman of our Board, and a long-term participant in social housing, I was proud to see everyone pulling together in a time of adversity to focus on the ultimate purpose of our business: to provide better, safer, more affordable housing for some of the most vulnerable people in our society in a way that benefits our shareholders precisely because it benefits society.

Indeed, that we received 100% of rent during 2020, and paid all dividends in full, is testament to the resilience of not just our stakeholders, but also the wider business model which derives the strength of its rental income from the positive social impact it generates ¹ . As you know, the capital that we raise from investors is typically used to acquire, or fund the development of, newly-built or newly-renovated community-based homes, supported by local health Commissioners, that provide long-term homes for some of the most vulnerable people in society. In doing so, our properties can improve the health and wellbeing of our residents while generating cost-savings for the government. In light of these benefits, it is hardly surprising that the sector has received such widespread support during the pandemic. Investments that meet a social need are often the most resilient precisely because they provide the services that our society cannot live without. In this context, we were pleased to be shortlisted for Property Investor of the Year at the Laing Buisson Awards.

For all the resilience of our business model during 2020, we should not forget the tragic human cost of the pandemic. Inevitably in a portfolio of our size, a limited number of the individuals living in our properties were infected with the virus. This was despite the best efforts of our Approved Providers and care providers to protect our residents as much as possible - the heroic efforts of our key workers deserve particular gratitude. But it is also true that our portfolio was spared the widely-publicised high rates of infections in care homes during 2020, and we did not have any reports of Covid-19-related deaths. In part, this reflects the nature of our properties, which are smaller residential properties rather than institutional facilities with large common areas. But it also reflects the commitment of our counterparties who worked hard to contain and manage the virus, with much-needed PPE and hand-creams donated to care workers.

Beyond its human impact, Covid-19 also caused some difficulties during 2020 by delaying the deployment of our funds and the progress of our construction projects. As discussed more below, in the early weeks of the first lockdown Approved Providers understandably hesitated before signing long-term leases given the uncertainty of referrals. Building sites suffered from temporary shortages in personnel and materials because of social distancing and supply chain disruption. Despite these delays, we achieved full dividend cover on an EPRA earnings run-rate basis in August 2020 and was 97.6% as at 31 December 2020 (31 December 2019: 89.4%).

For all the challenges the year brought us in the short-term, there may well be some benefits over the longer-term. The social care system, which is often overlooked by the media and politicians, saw renewed political support as the importance of the social care system in easing the burden on the NHS became clear. This translated into a number of accelerated referrals into Supported Housing properties as Commissioners sought to create more capacity in hospitals, a trend which we think and hope will continue beyond the pandemic. Politically and medically, the pandemic may have reminded our country of the benefits of better integration between healthcare and social care, and the persistent demand for this type of housing helped us successfully complete both an equity raise and an extension to our debt facility during the year, as discussed more below.

Deployment

During March and April of 2020, our plans for deployment during 2020 looked set to fall short. With our country entering a sudden and unprecedented lockdown, the ability of our stakeholders to successfully launch new schemes became difficult. Commissioners were distracted by the challenges of Covid-19. Care providers were focused on protecting existing residents, sourcing PPE, and managing complex staffing schedules in the new world of social distancing. Without certainty of referrals and limited contact with care providers, Approved Providers were understandably cautious about signing new long-term lease commitments. All this resulted in a slow-down in the number of schemes that we completed in the second quarter of 2020, meaning that schemes did not launch as fast as we had hoped, and funds were deployed slower than expected.

But once the initial shock of the lockdown had passed, and operating conditions stabilised, our ability to acquire or develop properties continued. During the first half of the year, we acquired 16 properties, comprising 144 units, for a total investment cost of £29.9 million. From the start of lockdown in March until the end of the year, we acquired 51 properties, comprising 309 units, for a total investment cost of £59.6 million. Across the entire year, we bought 58 properties, comprising 400 units, for a total investment cost of £78.9 million at net initial yields in line with the Company's existing portfolio. The continued demand for this type of housing reflects not only the commitment of everyone - including government - to providing much-needed new housing to vulnerable individuals, but also the heightened awareness of the benefits that investment in the social care system provides to the NHS and wider society.

At the start of the year, we had seven forward funding projects under construction. All seven projects that were yet to be completed by the time the first national lockdown was imposed on 23 March 2020 inevitably suffered delays. Through maintaining close relationships with both the developers and contractors responsible for delivering these projects, we were able to work with all stakeholders to ensure that, by adapting operating practices to manage the virus, any resultant interruptions were minimised. It's testament to the success of this approach that we suffered no major setbacks on any of our projects and by the end of the year all but two had been completed. As of 31 December 2020, we have committed £56.2 million to 22 projects, with 20 projects already successfully completed (providing homes for 280 residents). Of the remaining 2 schemes, one completed on 26 February 2021 and the final project is due to complete imminently.  

As a result of all this deployment, at the end of the year we owned 445 properties (31 December 2019: 388), providing accommodation for 3,124 residents (31 December 2019: 2,728), having deployed since IPO an aggregate £530.7 million. A map showing the location of our properties can be found on page 12. In the period, we started leasing to five new Approved Providers (bringing the total to 20), 10 new care providers (bringing the total to 98) and working in six new Local Authorities (bringing the total to 155). The portfolio's weighted average unexpired lease term (including put/call options and reversionary leases) is 26.2 years (31 December 2019: 25.7 years).

Share Price

At the start of the year, our share price ranged between 90 pence and 100 pence. Our business was not immune from the turbulence caused by Covid-19 that swept across global financial markets. Our share price dropped sharply in mid-March, reaching a floor of 68 pence, before recovering to above 90 pence by the end of March. Since then, it has continued to gain momentum, consistently remaining above 100 pence and reaching an all-time high of 113.50 pence in November. On 31 December 2020, we traded at a premium of 4.77% to our net asset value of 106.42 pence per share.

It is worth noting that, despite all that happened last year, our share price was higher at the end of 2020 than it was at the beginning. This reflects not only the resilience of our rental income, but also our shareholders' endorsement of our impact-focused investment strategy. Our ambition in 2021 is to build upon our success in 2020 and maintain the upward momentum in our share price.

Debt and Equity

Our deployment at the start of 2020 was funded by the £38.3 million that we drew down from our revolving credit facility with Lloyds and NatWest in November 2019 (leaving £29.4 million undrawn). The facility had been increased from £70 million to £130 million in October 2019. Following further deployment, we drew down an additional £16.0 million in May 2020 and the final £13.4 million in October 2020.

In order to maintain target gearing levels following the recent equity raise and continue to meet demand for new properties, in December we signed a further £30 million increase in the revolving credit facility. This increased the total facility amount to £160 million and extended the initial term for a further 12 months, to 20 December 2023. The term of the revolving credit facility may be extended by a further year, to 20 December 2024 (subject to the consent of the lenders).

In terms of equity, in October 2020 we successfully raised a further £55 million of gross proceeds (£53.3 million net of costs) through an issuance of new ordinary shares. This was part of a 12-month placing programme (which will remain in place until the end of September 2021) undertaken with our joint financial advisers, Stifel Nicolaus Europe Limited and Akur Limited. During the raise, we were pleased to see further investment from existing shareholders, as well as first investments from new investors.

T he debt facility increase and equity raise do, of course, provide us with further capital to meet our attractive pipeline and persistent demand for Supported Housing. But they are also an endorsement from our lenders and investors of our investment strategy, even in the challenging circumstances.

Financial Results

As at 31 December 2020, our property portfolio was independently valued at £571.5 million on an IFRS basis. This reflects a valuation uplift of £40.7 million, or 7.7%, over our total investment cost (including acquisition costs). The valuation of £571.5 million equates to a blended valuation yield of 5.27%, an improvement over the portfolio's blended net initial yield of 5.90%. This yield compression of 63 basis points reflects our ability to buy high-quality properties at discounted prices off-market through the Investment Manager's network of trusted contacts in the sector.

As at 31 December 2020, our portfolio was also valued at £611.6 million on a portfolio valuation basis. This assumes a single sale of the property-holding SPVs to a third-party on an arm's length basis, with purchasers' costs of 2.3%. The portfolio valuation reflects a portfolio premium of £40.1 million, 7.02%, against the IFRS valuation.

In June 2020, the Royal Institute of Chartered Surveyors published guidance on the removal of material uncertainty clauses when valuing Supported Housing. Our independent valuer, Jones Lang LaSalle Limited, therefore no longer considers that there is material uncertainty when valuing Supported Housing. This reflects the timely receipt of rents in line with pre-Covid-19 levels and continued market activity.

EPRA earnings per share was 4.61 pence in the year and IFRS earnings per share was 6.82 pence. The EPRA NTA and audited IFRS NAV per share was 106.42 pence, an increase of 1.0% since 31 December 2019.

Dividends

On 14 May 2020, we paid a dividend of 1.285 pence per share for the period from 1 October 2019 to 31 December 2019, bringing our total dividends for 2019 to our target level of 5.095 pence per share.

During the rest of 2020, we paid three interim dividends of 1.295 pence per share each for the first three quarters of the year. On 4 March 2021, we declared a dividend of 1.295 pence per share for the final quarter of 2020, bringing the total dividend for 2020 to our full year target of 5.18 pence per share. This represents a 1.7% increase over 2019's aggregate dividend, reflecting the CPI-based rent reviews typically contained in our leases.

Full dividend cover on a look-through EPRA earnings run-rate basis was achieved in August 2020 and was 97.6% as at 31 December 2020.

Social Impact

From the day we launched, the central thesis of our investment strategy has been that, when deployed judiciously, private capital can be used to benefit society at the same time as shareholders. More than that, the strength of the returns we provide to shareholders derives precisely from the social impact that the investments generate. By funding the development of high-quality newly-built and newly-renovated homes for residents whose rent is funded by government, we save the government money at the same time as improving the well-being of residents and generating a steady, resilient income stream for our investors.

Although social impact is in our investment strategy's DNA, we welcome the rise and growing adoption of Environmental, Social and Governance metrics across the market and are committed to ensuring ESG and impact metrics are explicitly considered throughout our entire investment lifecycle. During 2020, the Investment Manager helped pioneer and design sector-wide ESG and impact metrics, signing up to become an early adopter. of sector-wide metrics which are to be tested and implemented throughout 2021 and beyond. This is further discussed in the Investment Manager's report on pages 34 to 35. Likewise, you will see elsewhere in this report an excerpt from an independent impact report by social impact consultants The Good Economy. We commissioned this report to ensure that we are publicly held up to our own high impact standards and continue to deliver a positive impact to society.

Outlook

Making predictions at a time like this is even more hazardous than usual. Circumstances are changing with such speed, and such consequence, that stating our outlook is particularly difficult. But if 2020 taught our business anything, it is that a well-executed investment strategy, predicated on meeting a critical social need, can prove resilient even in a time of significant disruption. I hope it is therefore not rash of me to predict that, if we and our stakeholders continue to manage the risk of the virus, and the government continues to support our investment model, in 2021 we will achieve further strong financial and operational performance as a result of the positive social impact we deliver.

Indeed, the fundamentals of our sector remain strong. The need is as great - if not greater - than ever before. Our counterparties remain committed to providing high-quality housing. In light of all this, we look forward to 2021, conscious of the challenges that lie ahead, but cautiously optimistic about the success that we can achieve if we work hard to deliver the housing that our country, and our residents, so desperately need.

Before I finish, I would like to say that much of our continued success is thanks to the Investment Manager's hard work. It has built on its strong relationships, and continually refined its processes, to deliver the high-quality homes that are central to our positive social impact alongside financial and operational performance. Likewise, we have benefited hugely from the hard work of our corporate broker and joint financial adviser Stifel Nicolaus Europe Limited, as well as our joint financial adviser Akur Limited, both of which were instrumental in the success of our equity raise during 2020.

Finally, I would like to thank our shareholders for their continued support, and my fellow Board members for their ongoing support and commitment throughout the year.

Chris Phillips

Chairman

4 March 2021

Note:

1 Due to a clerical error, there has been a short delay in the payment of an immaterial amount of rent representing c.£45k (0.16% of rent roll) for the quarter ended 31 December 2020. This is expected to be paid in full in the next 2 weeks

STRATEGY AND BUSINESS MODEL

The Board is responsible for the Group's Investment Objective and Investment Policy and has overall responsibility for ensuring the Group's activities are in line with such overall strategy. The Group's Investment Policy and Investment Objective are published below.

Investment Objective

The Group's investment objective is to provide shareholders with stable, long-term, inflation-linked income from a portfolio of social housing assets in the United Kingdom with a focus on Supported Housing assets. The portfolio comprises investments in operating assets and the forward funding of pre-let development assets, the Company seeks to optimise the mix of these assets to enable it to pay a covered dividend increasing in line with inflation and so generate an attractive risk-adjusted total return.

Investment Policy

To achieve its investment objective, the Group invests in a diversified portfolio of freehold or long leasehold social housing assets in the UK. Supported Housing assets account for at least 80% of the Group's gross asset value. The Group acquires portfolios of social housing assets and single social housing assets, either directly or via SPVs. Each asset is subject to a lease or occupancy agreement with an Approved Provider for terms primarily ranging from 20 years to 30 years, with the rent payable thereunder subject to adjustment in line with inflation (generally CPI). Title to the assets remains with the Group under the terms of the relevant lease. The Group is not responsible for any management or maintenance obligations under the terms of the lease or occupancy agreement, all of which are serviced by the Approved Provider lessee. The Group is not responsible for the provision of care to residents of Supported Housing assets.

The social housing assets are sourced in the market by the Investment Manager.

The Group intends to hold its portfolio over the long-term, taking advantage of long-term upward-only inflation-linked leases. The Group will not be actively seeking to dispose of any of its assets, although it may sell investments should an opportunity arise that would enhance the value of the Group as a whole.

The Group may forward fund the development of new social housing assets when the Investment Manager believes that to do so would enhance returns for shareholders and/or secure an asset for the Group's portfolio at an attractive yield. Forward funding will only be provided in circumstances in which:

(a)  there is an agreement to lease the relevant property upon completion in place with an Approved Provider;

(b) planning permission has been granted in respect of the site; and

(c)    the Group receives a return on its investment (at least equivalent to the projected income return for the completed asset) during the construction phase and before the start of the lease.

For the avoidance of doubt, the Group will not acquire land for speculative development of social housing assets.

In addition, the Group may engage third party contractors to renovate or customise existing social housing assets as necessary.

Gearing

The Group uses gearing to enhance equity returns. The Directors will employ a level of borrowing that they consider prudent for the asset class and will seek to achieve a low cost of funds while maintaining flexibility in the underlying security requirements and the structure of both the Company's portfolio and the Group.

The Directors intend that the Group will target a level of aggregate borrowings over the medium-term equal to approximately 40% of the Group's gross asset value. The aggregate borrowings will always be subject to an absolute maximum, calculated at the time of drawdown, of 50% of the Group's gross asset value.

Debt will typically be secured at the asset level, whether over a particular property or a holding entity for a particular property (or series of properties), without recourse to the Company and having consideration for key metrics including lender diversity, cost of debt, debt type and maturity profiles.

Use of Derivatives

The Group may use derivatives for efficient portfolio management. In particular, the Group may engage in full or partial interest rate hedging or otherwise seek to mitigate the risk of interest rate increases on borrowings incurred in accordance with the Investment Policy as part of the Group's portfolio management. The Group will not enter into derivative transactions for speculative purposes.

Investment Restrictions

The following investment restrictions apply:

·       the Group will only invest in social housing assets located in the United Kingdom;

·     the Group will only invest in social housing assets where the counterparty to the lease or occupancy agreement is an Approved Provider. Notwithstanding that, the Group may acquire a portfolio consisting predominantly of social housing assets where a small minority of such assets are leased to third parties who are not Approved Providers. The acquisition of such a portfolio will remain within the Investment Policy provided that at least 90% (by value) of the assets are leased to Approved Providers and, in aggregate, all such assets within the Group's total portfolio represent less than 5% of the Group's gross asset value at the time of acquisition;

·       at least 80% of the Group's gross asset value will be invested in Supported Housing assets;

· the unexpired term of any lease or occupancy agreement entered into (or in the case of an acquisition of a portfolio of assets, the average unexpired term of such leases or occupancy agreements) shall not be less than 15 years, unless the Investment Manager reasonably expects the term of such shorter lease or occupancy agreement (or in the case of an acquisition of a portfolio of assets, the average term of such leases or occupancy agreements) to be extended to at least 15 years;

· the maximum exposure to any one asset (which, for the avoidance of doubt, will include houses and/or apartment blocks located on a contiguous basis) will not exceed 20% of the Group's gross asset value;

· the maximum exposure to any one Approved Provider will not exceed 30% of the Group's gross asset value, other than in exceptional circumstances for a period not to exceed three months;

· the Group may forward fund social housing units in circumstances where there is an agreement to lease in place and where the Group receives a coupon (or equivalent reduction in the purchase price) on its investment (generally slightly above or equal to the projected income return for the completed asset) during the construction phase and before entry into the lease. Forward funding equity commitments will be restricted to an aggregate value of not more than 20% of the Group's net asset value, calculated at the time of entering into any new forward funding arrangement;

·       the Group will not invest in other alternative investment funds or closed-ended investment companies (which, for the avoidance of doubt, does not prohibit the acquisition of SPVs which own individual, or portfolios of, social housing assets);

· the Group will not set itself up as an Approved Provider; and

· the Group will not engage in short selling.

The investment limits detailed above apply at the time of the acquisition of the relevant asset in the portfolio. The Group will not be required to dispose of any investment or to rebalance its portfolio as a result of a change in the respective valuations of its assets or a merger of Approved Providers.

Investment Strategy

The Group specialises in investing in UK social housing, with a focus on Supported Housing. The strategy is underpinned by strong local authority demand for more social housing, which is reflected in the focus on acquiring recently developed and refurbished properties across the United Kingdom. The assets within the portfolio have typically been developed for pre-identified residents and in response to demand specified by local authorities or NHS commissioners. On acquisition, the properties are subject to inflation-adjusted, long-term (typically from 20 years to 30 years), fully repairing and insuring leases with specialist Approved Providers in receipt of direct payment from local government (usually Registered Providers regulated by the Regulator of Social Housing). The portfolio comprises investments made into properties already subject to a fully repairing and insuring lease as well as forward funding of pre-let developments. The portfolio will not include any direct development or speculative development investments.

Business Model

The Group owns and manages social housing properties that are leased to experienced housing managers (typically Registered Providers, which are often referred to as housing associations) through long-term, inflation-linked, fully repairing and insuring leases. The vast majority of the portfolio and future deal pipeline is made up of Supported Housing homes which are residential properties that have been adapted or built such that care and support can easily be provided to vulnerable residents who may have mental health issues, learning difficulties or physical disabilities. We are focused on acquiring specially or recently developed properties in order to help local authorities meet increasing demand for suitable accommodation for vulnerable residents (the drivers of this demand are discussed in the Investment Manager's report). Local authorities are responsible for housing these residents and for the provision of all care and support services that are required.

The Supported Housing properties owned by the Group are leased to Approved Providers which are usually not-for-profit organisations focused on developing, tenanting and maintaining housing assets in the public (and private) sectors. Approved Providers are approved and regulated by the Government through the Regulator of Social Housing (or in rare instances, where the Group contracts with care providers, the Care Quality Commission). All the Group's leases with Approved Providers are linked to inflation, have a duration of 20 years or longer, and are fully repairing and insuring - meaning that the obligations for management, repair and maintenance of the property are passed to the Approved Provider. The Approved Provider is also responsible for tenanting the properties. Typically, the Government funds both the rent of the individuals housed in Supported Housing and the maintenance costs associated with managing the property. In addition, because of the vulnerable nature of the residents, the rent and maintenance costs are paid directly from the local authority to the Approved Provider. The rent received from the local authority by the Approved Provider is then paid to the Group via the lease. Ultimate funding for the rent and maintenance comes from the Department for Work and Pensions in the form of housing benefit.

The majority of residents housed in Supported Housing properties require support and/or care. This is typically provided by a separate care provider regulated by the Care Quality Commission. The agreement for the provision of care for the residents is between the local authority and the care provider. The care provider is paid directly by the local authority. Usually the Group has no direct financial or legal relationship with the care provider and the Group never has any responsibility for the provision of care to the residents in properties the Group owns. The care provider will often be responsible for nominating residents into the properties and, as a result, will normally provide some voids cover to the Approved Provider should they not be able to fill the asset (i.e. if occupancy is not 100% it is often the care provider rather than the Approved Provider that will cover the cost). The Group receives full rent regardless of underlying occupancy, but monitors occupancy levels and the payment of voids cover by care providers, to ensure that Approved Providers are appropriately   protected.

Many assets that the Investment Manager sources for the Group have been recently developed and are either specifically designed new build   properties or renovated existing houses or apartment blocks that have been adapted for Supported Housing. The benefit of buying recently-developed stock is that it has been planned in response to local authority demand and is designed to meet the specific requirements of the intended residents. In addition, it enables the Group to work with a select stable of high-quality developers on pipelines of deals rather than being reliant on acquiring portfolios of already-built assets on the open market. This has two advantages: firstly, it enables the Group to source the majority of its deals off-market through trusted developer partners and, secondly, it ensures the Group has greater certainty over its pipeline with visibility over the long-term deal flow of the developers it works with and knows it will not have to compete with other funders.

As well as acquiring recently-developed properties, the Group can provide forward funding to developers of new Supported Housing properties. Being able to provide forward funding gives the Group a competitive advantage over other acquirers of Supported Housing assets as it enables the Group to offer developers a single funding partner for both construction and the acquisition of the completed property. This is often more appealing to developers than having to work with two separate funders during the build of a new property as it reduces practical and relationship complexity. As well as strengthening developer relationships, forward funding enables the Group to have a greater portion of new build properties in its portfolio which typically attract higher valuations, are modern and have been custom-built to meet the needs of the residents they house, helping to achieve higher occupancy levels. The Group benefits from the Investment Manager's long track record of successfully forward funding a range of property and infrastructure assets. The Group will only provide forward funding when the property has been pre-let to an Approved Provider and other protections, such as fixed-priced build contracts and deferred developer profits, have been put in place to mitigate construction risk.

Since the Company's IPO, the Group has set out to build a diversified portfolio that contains assets leased to a variety of Approved Providers, in a range of different counties, and serviced by a number of care providers. This has been possible due to the Investment Manager's 1 7 -year track record of asset-backed investments, its active investment in the Supported Housing sector since 2014, and the strong relationships it has enjoyed with local authorities for over a decade. These relationships have enabled the Group, in a relatively short space of time, to work with numerous Approved Providers, care providers and local authorities to help deliver new Supported Housing assets that provide homes to some of the most vulnerable members of society.

KEY PERFORMANCE INDICATORS

In order to track the Group's progress the following key performance indicators are monitored:

KPI AND DEFINITION	RELEVANCE TO STRATEGY	PERFORMANCE	EXPLANATION
1. Dividend
Dividends paid to shareholders and declared during the period.	The dividend reflects the Company's ability to deliver a low risk but growing income stream from the portfolio.	Total dividends of 5.18 pence per share were paid or declared in respect of the period 1 January 2020 to 31 December 2020. (2019: 5.095 pence)	The Company has declared a dividend of 1.295 pence per Ordinary share in respect of the period 1 October 2020 to 31 December 2020, which will be paid on 26 March 2021. Total dividends paid and declared for the period are in line with the Company's target.
2. EPRA Net Tangible Assets (NTA) (NEW)
The EPRA NTA is equal to IFRS NAV as there are no deferred tax liabilities or other adjustments applicable to the Group under the REIT regime.	EPRA NTA measure that assumes entities buy and sell assets, thereby crystalising certain levels of deferred tax liability.	106.42 pence at 31 December 2020.  (31 December 2019: 105.37 pence)	The EPRA NTA per share at IPO was 98.0 pence. This is an increase of 8.59% since IPO driven by growth in the underlying asset value of the investment properties.
3. Loan to Value (LTV)
A proportion of our investment portfolio is funded by borrowings. Our medium to long term target L T V is 40% with a hard cap of 50%.	The Company uses gearing to enhance equity returns. The LTV covenant on the revolving credit facility with Lloyds is < 50%.	31.5% LTV at 31 December 2020. (31 December 2019: 31.1% LTV)	Borrowings comprise a £68.5 million private placement of loan notes with MetLife and a £160 million secured revolving credit facility with Lloyds/NatWest of which £130 million was drawn as at 31 December 2020.
4. EPRA Earnings per S hare (NEW)
EPRA Earnings per share excludes gains from fair value adjustment on investment property that are included in the IFRS calculation for Earnings per share.	A measure of a Group's underlying operating results and an indication of the extent to which current dividend payments are supported by earnings.	4.61 pence per share for the year ended 31 December 2020, based on earnings excluding the fair value gain on properties, calculated on the weighted average number of shares in issue during the year. (31 December 2019: 3.39 pence)	EPRA EPS increased year-on-year by 36.0%. The outlook remains positive and we continue to invest to generate an attractive total return.
5 . Adjusted E arnings per S hare
Adjusted earnings per share includes adjustments for non-cash items. The calculation is shown in Note 35.	A key measure which reflects actual cashflows supporting dividend payments.	4.90 pence per share for the period ended 31 December 2020, based on earnings after deducting the fair value gain on properties, amortisation of loan arrangement fees and adding back capitalised interest; calculated on the weighted average number of shares in issue during the year. (31 December 2019: 3.50 pence)	This demonstrates the Group's ability to meet dividend payments from net cash inflows. It represents a dividend cover for the year to 31 December 2020 of 94.5%.
6 . Weighted A verage U nexpired L ease T erm (WAULT)
The average unexpired lease term of the investment portfolio, weighted by annual passing rents. Our target is a WAULT of at least 15 years.	The WAULT is a key measure of the quality of our portfolio. Long lease terms underpin the security of our income stream.	26.2 years at 31 December 2020 (includes put and call options). (31 December 2019: 25.7 years)	As at 31 December 2020, the portfolio's WAULT stood at 26.2 years and remains well ahead of the Group's minimum term of 15 years.
7. Adjusted Portfolio Earnings per Share (NEW)
The post-tax earnings adjusted for the market portfolio valuation including portfolio premium.	The Adjusted Portfolio EPS reflects the application of using the portfolio value and reflects the potential increase in value the Group could realise if assets are sold on a portfolio basis.	17.94 pence per share for the period ended 31 December 2020, as shown on page 140. (31 December 2019: 15.92 pence)	The Adjusted Portfolio EPS shows the value per share on a long-term basis. The increase in the Adjusted Portfolio EPS from the previous period is reflective of the larger portfolio size.

8 . Portfolio NAV
The IFRS NAV adjusted for the market portfolio valuation including portfolio premium.	The Portfolio NAV measure is to highlight the fair value of net assets on an ongoing, long-term basis and reflects the potential increase in value the Group could realise under the special assumption of a hypothetical sale of the underlying property investment portfolio in one single transaction.	The Portfolio NAV of £468.8 million equates to a Portfolio NAV of 116.39 pence per Ordinary Share, as shown on page 140. (31 December 2019: Portfolio NAV £401.9 million equated to 114.53 pence per Ordinary Share)	The Portfolio NAV per share shows a good market growth in the underlying asset value of the investment properties.
9. Exposure to Largest Approved Provider
The percentage of the Group's gross assets that are leased to the single largest Approved Provider.	The exposure to the largest Approved Provider must be monitored to ensure that we are not overly exposed to one Approved Provider in the event of a default scenario.	29.8% at 31 December 2020. (31 December 2019: 20.6%)	Our maximum exposure limit is 30%. The Group increased its target from 25% to 30% in order to acquire properties at a significant discount to market value that are leased to the Group's largest Approved Provider which provides high-quality housing services.
10. Total Return
EPRA NTA plus total dividends paid during the year.	The total return measure highlights the gross return to investors including dividends paid since the prior year.	EPRA NTA 106.42 pence at 31 December 2020. Total dividends paid during the year ended 31 December 2020 were 5.18 pence per share. Total return was 5.9% for the year to 31 December 2020. (31 December 2019: 6.5%)	The EPRA NTA per share at 31 December 2020 was 106.42 pence. Adding back dividends paid during the year of 5.18 pence per Ordinary Share to the EPRA NTA at 31 December 2020 results in an increase of 5.9%.

EPRA PERFORMANCE MEASURES

The table below shows additional performance measures, calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association (EPRA). We provide these measures to aid comparison with other European real estate businesses.

Full reconciliations of EPRA Earning s and NAV are included in Notes 3 5 and 3 6 of the consolidated financial statements respectively. A full reconciliation of the other EPRA performance measures are included in the Unaudited Performance Measures section of the Annual Report .

KPI AND DEFINITION	PURPOSE	PERFORMANCE
1. EPRA Earnings per S hare
EPRA Earnings per share excludes gains from fair value adjustment on investment property that are included in the IFRS calculation for Earnings per share.	A measure of a Group's underlying operating results and an indication of the extent to which current dividend payments are supported by earnings.	4.61 pence per share for the period to 31 December 2020. (31 December 2019: 3.39 pence) Full dividend cover on a look-through EPRA earnings run-rate basis was achieved in August 2020 and following the equity raise in October 2020 was 97.6% as at 31 December 2020.
2. EPRA Net Reinstatement Value (NRV) per share
The EPRA NRV adds back the purchasers' costs deducted from the IFRS valuation.	A measure that highlights the value of net assets on a long-term basis.	£463.3 million / 115.02 pence per share as at 31 December 2020. £397.2 million / 113.20 pence per share as at 31 December 2019.
3. EPRA Net Tangible Assets (NTA) per share
The EPRA NTA is equal to IFRS NAV as there are no deferred tax liabilities or other adjustments applicable to the Group under the REIT regime.	A measure that assumes entities buy and sell assets, thereby crystallising certain levels of deferred tax liability.	£428.6 million / 106.42 pence per share as at 31 December 2020.   £369.7 million / 105.37 pence per share as at 31 December 2019.
4. EPRA Net Disposal Value (NDV)
The EPRA NDV provides a scenario where deferred tax, financial instruments, and certain other adjustments are calculated as to the full extent of their liability.	A measure that shows the shareholder value if assets and liabilities are not held until maturity.	£420.9 million / 104.50 pence per share as at 31 December 2020. £364.7 million / 103.93 pence per share as at 31 December 2019.
5 . EPRA Net Initial Yield (NIY)
Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs.	A comparable measure for portfolio valuations. This measure should make it easier for investors to judge for themselves how the valuation of a portfolio compares with others.	5.27% at 31 December 2020. 5.29% at 31 December 2019.
6 . EPRA 'Topped-Up' NIY
This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents).	The topped-up net initial yield is useful in that it allows investors to see the yield based on the full rent that is contracted at 31 December 2020.	5.28% at 31 December 2020. 5.29% at 31 December 2019.
7 . EPRA Vacancy Rate
Estimated Market Rental Value (ERV) of vacant space divided by ERV of the w hole portfolio.	A "pure" percentage measure of investment property space that is vacant, based on ERV.	0.29 % as at 31 December 2020 1 . 0.00% as at 31 December 2019.
7. EPRA Cost Ratio
Administrative & operating costs (including & excluding costs of direct vacancy) divided by gross rental income.	A key measure to enable meaningful measurement of the changes in a Group's operating costs.	23.27% as at 31 December 2020. 28.35% as at 31 December 2019.

Note:

1 This has increased from 0.00% due to there being two properties in the portfolio without a lease, which are therefore vacant.

INVESTMENT MANAGER'S REPORT

Review of the Business

The Chairman has described well both the challenges that Covid-19 brought to the Group's business, and the impressive way that all stakeholders rose to the challenges. As Investment Manager, our priority was the safety and wellbeing of the Group's residents and the people who support them. As the lockdown began in early 2020, we moved quickly to speak to our Approved Providers and care providers to understand how they were coping and to offer help however we could. We made sure to share 'best practices' among counterparties with a focus on ensuring resident safety. Inevitably there have been cases of Covid-19 among individuals housed in our properties. But our Approved Provider and care provider partners have worked tirelessly to ensure that these were kept to a minimum, and for that we are incredibly grateful.

The diligence, collaboration and resourcefulness of all stakeholders is worth commenting on. Approved Providers postponed non-essential maintenance wherever necessary as a way of minimising the spread of infection while ensuring schemes remained safe and a good standard of housing was maintained. Care providers continued to provide the care and support that residents need and deserve, implementing their infectious diseases policies and successfully managing their complex staffing schedules at a time of social distancing. Regulatory obligations were eased during the height of lockdown, while government funding continued to flow uninterrupted. Although the continuing lockdowns present further challenges, we are pleased that Covid-19 was managed so capably and collaboratively by all stakeholders during 2020.

In this context, it is worth reflecting on the resilience of the Group's investment model, and its portfolio, during 2020. After some initial delays, we were able to continue deploying capital into new schemes, our forward funding projects continued, and existing schemes continued to operate well and safely. The Group received 100% of rent ¹ . It paid all dividends due in full, and achieved full dividend cover on a run-rate basis before the new equity raise on 23 October. The share price ended the year higher than it began, achieving an all-time high of 113.50 pence in November. The Group drew £29.4 million of debt from its revolving credit facility, secured a further £30 million increase to that facility, and raised £55 million of equity capital from both existing and new investors. This resilience may have contributed towards the Group being shortlisted for Property Investor of the Year at the Laing Buisson Awards, with the announcement of the results of the awards postponed until early 2021.

As mentioned in our Chairman's Statement above, during 2020 the Group bought 58 new schemes for a total investment cost (i.e. including acquisition costs) of £78.9 million using the proceeds of the extended revolving credit facility. These schemes provide 400 new units of accommodation. At the year end, the Group had 445 properties, containing 3,124 units of accommodation, leased to 20 Approved Providers, operating in 155 Local Authorities, with care provided by 98 different care providers. In terms of forward funding, during 2020 five of the Group's projects successfully completed. As such, as at 31 December 2020, 20 of the 22 projects that the Group has funded since inception were complete, and o f the remaining 2 schemes, one completed on 26 February 2021 and the final project is due to complete imminently. Covid-19 caused some construction delays from staff and materials shortages, but the successful completion of the projects reflects the resourcefulness and strength of the Group's counterparties as well as the continued demand by all stakeholders for high-specification properties in areas of proven demand that add to the country's overall housing stock.

Operational performance is always a function of the quality of the investment processes in place. Strong performance is only possible when good investments are made in the first place. We therefore continually iterate our due diligence processes on the principle that, as the market is always evolving and every transaction is different, our processes should be continually updated to reflect all of our latest experience. We continue to reject at least as many deals as we invest in, and during the year we piloted, and have begun adopting, a market-leading property management system, Coyote. This software drives efficiencies by managing properties through the entire investment lifecycle on a single digital platform, and by automating the generation of reports. It also gives us access to more data, which we can more easily analyse, and it enables us to use third-party analytics software.

This meticulous approach to due diligence has been developed over the 17 years that we have been an investment manager. Since 2004, Triple Point Investment Management LLP has been investing in high-impact investments which generate long-term predictable income streams. We invest where there is a social challenge because the greater the social need, the greater the demand, which in turn drives long-term financial performance. Over the years of investing in the social housing sector, we have developed a strong network which enables us to successfully source off-market deals and work with the sector's leading providers. We have also organically built a multi-disciplinary social housing team which contains a diverse blend of fund managers, social housing professionals, accountants, lawyers and surveyors. Being part of a wider fund management business means that we are able to keep in-house our business functions including finance, marketing, legal, property management and company secretary. We were recently authorised by the Financial Conduct Authority as a full scope Alternative Investment Fund Manager ("AIFM") and were appointed as the Company's AIFM, taking over the Group's risk and portfolio management from 1 July 2020, with the Board continuing to provide oversight and ensure the Group acts within the Company's Investment Policy.

As the number of properties under our management has grown, it has become more important than ever that we pro-actively manage the portfolio. Central to that is ensuring that all properties are properly maintained, and are looked after by the Approved Provider which has the most suitable processes, Commissioner relationships, and geographical focus for the specific properties. As part of this strategy, during 2020 we transferred away all 15 properties that the Group had with Westmoreland as part of Westmoreland's stock rationalisation programme. To that end, we selected one of the Group's existing Approved Providers which is already operating in the local areas with strong Commissioner relationships. 12 of the properties have already transferred with no material valuation impact, and the Approved Provider has already begun managing the properties to a high standard. Of the remaining three properties, we expect one property to transfer shortly to the same Approved Provider, and another property to transfer to another existing Approved Provider of the Group. The final property is a two-bedroom property with a value of less than £200,000 which is in the process of being sold. If and when we identify the need for further property transfers in future, we will take the same approach to ensure we remain a responsible, pro-active landlord focused on optimising the portfolio for the benefit of all stakeholders.

Market Review

One of the major themes for the Supported Housing market in 2020 was the robustness of its performance - reflected in its strong rent collection and resultant continuing market activity - at a time when many other property sectors suffered from the effects of the pandemic. As described elsewhere, the Group's investment model proved its resilience amid the disruptions of Covid-19, with all rent received and its valuations upheld. Supported Housing was in fact one of the first three property sectors to have its 'material uncertainty' clause removed from valuations by the Royal Institute of Chartered Surveyors.

Demand for supported housing remains strong - perhaps stronger than ever. The last available data forecast a shortfall of 46,771 units by 2024-2025. ² This demand has been driven by a growing UK population; a growing incidence of people with long-term care needs living to adulthood as a result of medical advances; and a government policy of moving people with care needs out of institutions and into the community, as enshrined in the Care Act 2014 and the Transforming Care Programme 2015. We do not have up-to-date demand data since the pandemic began, but our experience on the ground suggests that demand has grown as many Commissioners have found a way through the obstacles that too often prevent people being moved out of inappropriate institutional settings into community-based homes. Commissioners have sought to create space in hospitals for Covid-19 patients, and to achieve the long-term health and financial benefits unlocked through Supported Housing. Evidence suggests that every person living in Supported Housing saves the government about £200 per week compared to them being in a care home, and about £2,000 per week compared to them being in a hospital. ³ At the same time, the independence that comes with living in the community improves the health and well-being of residents. ⁴

The need for more, and better, community-based care settings was powerfully reinforced by a report by the Care Quality Commission published in October 2020 called Out of Sight - Who Cares?: Restraint, segregation and seclusion review. ⁵   The report describes how too many people in the UK with mental health conditions, learning disabilities or autism are restrained, secluded and segregated when they would be better served by a tailored package of care based in the community. In the words of the CQC, " This lack of support in the community often led to people becoming increasingly distressed and, in some cases, suicidal or violent " and most hospitals visited by the CQC were " not therapeutic environments " that " could add to people's distress " which was then " used as a rationale for using restraint, seclusion and segregation ". In conclusion, the CQC's first recommendation is that " People with a learning disability and/or autistic people who may also have a mental health condition should be supported to live in their communities ". To deepen its engagement with issues like these, in January 2021 the Company became a Supporter Member of Care England.

Another major theme in 2020, which was accelerated by Covid-19, was the growing awareness of the value of socially-impactful investments. The Group was established in 2017 to generate shareholder returns by investing where there is identified local need across the UK to deliver a positive social impact. As the Impact Report by The Good Economy states, the Group has delivered £136.1 million of Total Social Value in the year to December 2020. This is divided into £53.9 million of Social Impact (the value of improved personal outcomes for residents) and £82.1 million of fiscal savings (savings generated for public budgets through reduced costs). Overall, The Good Economy have calculated that, for every £1 invested, the Group will generate £3.62 in social value over the duration of the investment. Likewise, 65% of residents in a survey by The Good Economy reported a greater independence after moving into their accommodation. So it was encouraging in 2020 to see growing collaboration between market participants eager to enhance the positive impact that investing in high-quality social housing can have on society. In May 2020, a White Paper, Building a Sector Standard Approach for ESG Reporting ,   was   published to create a set of sector-wide ESG metrics. Because of the benefits that standardised metrics will bring, we have signed up as early adopters of those metrics which will be tested throughout 2021. Likewise, we are active participants in the Equity Impact Project being run by The Good Economy and Big Society Capital to standardise impact metrics for equity investors in social housing. This should create another set of valuable cross-sector metrics which will drive up impact performance by creating comparability for investors.

Our investment strategy has always been focused on investing where there is clear long-term social need, and where our properties will be managed by high-quality, well-governed counterparties. But the importance of environmental efficiency is becoming increasingly integral to our investment strategy. Residential housing contributes to 15% of carbon emissions in the UK, and the recent Energy White Paper is pushing for all social housing properties to have an Energy Performance Certificate ("EPC") rating of 'C' or above by 2035 - which is only 14 years away. ⁶ Although the government minimum for new tenancies is currently still only an 'E', we want to do better - and believe that, as a sector, we can do better. At the end of 2020, the entire portfolio of the Group had an EPC rating of 'E' or above except for 3 units which dropped to an 'F' after further testing, though they expect to be upgraded to at least an 'E' by April following works. 70% of the portfolio is rated 'C' or above, and 33% is rated 'B' or above. This compares favourably to the market, with only 56% of socially rented homes across the UK rated 'C' or above. ⁷ Moreover, the portfolio's rating will improve over time as we require an EPC rating of at least 'C' for existing or renovated properties that the Group buys, and at least a 'B' for new-build properties that the Group buys. Likewise, we require building contractors on forward funding projects to sign up to the guidelines of the Code of Considerate Contractors scheme as well as the Site Waste Management Plan 2008, both of which encourage environmental efficiency.

As mentioned, regulatory engagement reduced during Covid-19. The Regulator of Social Housing sensibly paused its In-Depth Assessments to enable Registered Providers to focus on operations. When the full lockdown eased in the summer, regulatory engagement re-started. In December 2020 one of the Group's Approved Providers, My Space Housing Solutions, which comprised 8.5% of the investment value of the Group's property portfolio at 31 December 2020, received a non-compliant rating of G3, V3. The Group's independent valuer, Jones Lang LaSalle Limited, confirmed that there should be no impact on the value of the Group's portfolio as a result of this rating. In October 2020, Westmoreland Supported Housing also received a Regulatory Notice concerning its compliance with the Rent Standard, though since the notice was published the Group has reduced its exposure to Westmoreland from less than 0.5% of the Group's portfolio value to 0%. We continue to speak directly to the Regulator to better understand the areas they want the sector to focus on and to ensure that our processes continue to evolve to reflect the latest regulatory guidance.

Financial Review

The annualised rental income of the Group was £31.6 million as at 31 December 2020. Excluding forward funding transactions, the rental income of the Group for 2020 was £28.4 million, compared to £21.1 million in the previous 12 months. The Group is a UK REIT for tax purposes and is exempt from corporation tax on its property rental business.

A fair value gain of £8.0 million was recognised during the period on the revaluation of the Group's properties.

Earnings per share was 6.82 pence for the year, compared to 6.75 pence for the year ending 31 December 2019. EPS includes the fair value gain on investment property which was lower this year compared to last year due to slower deployment.

The EPRA earnings per share excludes the fair value gain on investment property and was 4.61 pence for the year, compared to 3.39 pence for the year ending 31 December 2019. Adjusted portfolio earnings per share were 17.94 pence for the year, where post-tax earnings were adjusted for a valuation on a portfolio basis (as opposed to individual property IFRS basis) (2019: 15.92 pence).

From the beginning of this year, the EPRA NAV has been replaced by three EPRA NAV metrics which are shown in the Financial Statements on page 141. The one most comparable to the previously reported EPRA NAV measure is EPRA Net Tangible Asset (NTA), which, therefore, the Group has adopted as its primary reporting metric. The EPRA NTA per share as at the period end is 106.42 pence per share, the same as the IFRS NAV per share. The IFRS NAV adjusted for the portfolio valuation (including portfolio premium) was £468.8 million, which equates to a Portfolio NAV of 116.39 pence per share.

The audited IFRS NAV per share was 106.42 pence, a 1.0% increase from 105.37 pence as at 31 December 2019.

The EPRA ongoing charges ratio is calculated as a percentage of the average net asset value for the period under review. The ongoing charges ratio for the period was 1.57% compared to 1.63% at 31 December 2019.  

At the year end, the portfolio was independently valued at £571.5 million on an IFRS basis, reflecting a valuation uplift of 7.7% against the portfolio's aggregate purchase price (including acquisition costs). The valuation reflects a portfolio yield of 5.27%, against the portfolio's blended net initial yield of 5.90% at the point of acquisition. This equates to a yield compression of 63 basis points, reflecting the quality of the Group's asset selection and off-market acquisition process.

The Group's properties were valued at £611.6 million on a portfolio valuation basis, reflecting a portfolio premium of 7.0%, or £40.1 million, against the IFRS valuation, compared to a portfolio valuation of £503.8 million and a portfolio premium of 6.82% or £32.2 million uplift for the year ending 31 December 2019. The portfolio valuation assumes a single sale of the property-holding SPVs to a third-party on an arm's length basis with purchaser's costs of 2.3%.

The Group held cash and cash equivalents of £53.7 million at 31 December 2020 of which £0.9 million was restricted and £2.8 million was committed for the completion of forward funded transactions, leaving available cash of £50 million. During the year cash from operating activities increased by £8.2 million.

Debt Financing

During 2020, the Group drew and deployed the remaining £29.4 million of its £130 million revolving credit facility. The facility had been increased from £70 million to £130 million with Lloyds Bank Plc and National Westminster Bank in October 2019. Following a successful equity raise in October 2020 (with net proceeds of £55 million), the Group signed a further £30 million increase to the revolving credit facility, bringing the total facility to £160 million. As part of this, the facility's term was extended for a further 12 months to 20 December 2023 and, subject to lender consent, may be extended by a further year to 20 December 2024.

Under the increase and extension of the RCF, the interest rate for drawn funds remains at 1.85% per annum over three-month LIBOR. In the light of the ceasing of LIBOR as a benchmark rate during 2021, the Group has negotiated and agreed provisions within the terms of the increase and extension of the RCF setting pre-agreed terms for the transition of LIBOR to the new benchmark rate SONIA. The date for the transition from LIBOR to SONIA is 1 July 2021. The facility remains unhedged, though the Board regularly reviews potential hedging arrangements which can be put in place at any time during the term of the facility. Once fully utilised, the facility will have a loan-to-value of 40% against a defined security pool of the Group's properties in a separate, wholly-owned subsidiary. Once the increased facility is fully drawn, the gearing of the Group will be in the region of 40%.

The Group's facility with MetLife in the amount of £68.5 million requires the Group to maintain an asset cover ratio of 2.25x and an interest cover ratio of 1.75x. The RCF requires the Group to maintain on drawn funds a loan-to-value ratio of lower than 50% and an interest cover ratio in excess of 2.75x. At all times, the Group has complied with the debt covenants on both credit facilities.

The Group will continue to monitor capital requirements as the extended capacity under the revolving credit facility is drawn down.

Further information is set out in Note 19 of the financial statements.

Strategic Alignment and Asset Selection

Despite the challenges presented by Covid-19, the Group continued to execute on its investment strategy and secured both new equity and debt funding to deploy, allowing it to continue delivering inflation-protected income underpinned by a careful selection of secure, long-let and index-linked properties. During the year, the Group bought 58 properties for a total investment cost of £78.9 million (including acquisition costs).

	31 December 2020	31 December 2019	Change in 2020
Number of Assets	445	388	+57 1
Number of Leases	341	300	+41
Number of Units	3,124	2,728	+396 2
Number of Approved Providers	20	16	+4 3
Number of Forward Funding Agreements	22	22	0
WAULT (years)	26.2	25.7	+0.5

¹ One asset within the existing portfolio is currently being held for sale.

² Unit adjustments have been made to assets within the existing portfolio as a result of ongoing asset management activities and one asset within the existing portfolio being currently held for sale.

³ The Group transferred away all 15 properties that were leased with Westmoreland Supported Housing.

In addition, as at 31 December 2020 the Group had outstanding commitments of £2.8 million (including acquisition costs), for undrawn forward funding commitments.

Committed Capital	Total Funds (£m)
Total Invested since IPO	£530.7
Commitments to Forward Funding projects	£2.8
Total Invested and Committed Capital	£533.5

Property Portfolio

As at 31 December 2020, the portfolio comprised 445 properties with 3,124 units and showed a broad geographic diversification across the UK. The four largest concentrated areas by market value were the North West (22.2%), West Midlands (17.7%), East Midlands (12.7%) and London (9.4%). The IFRS value of the portfolio at 31 December 2020 was £571.5 million.

As at 31 December 2020, the Group had entered a total of 22 forward funding projects with 20 schemes having reached practical completion , with one scheme having completed on 26 February 2021 and the final project due to complete imminently.  

Rental Income

In total, the Group had 339 fully repairing and insuring leases (excluding agreement for leases on forward funding transactions). The Group had a total annualised rental income of £31.6 million on its standing investments.

During 2020, the Group entered into leases with another five Approved Providers and removed SOHO's exposure to Westmoreland, increasing its total to 20. This enhanced the Group's counterparty diversification. The Group's three largest Approved Providers by rental income were Inclusion Housing (31.1%), Falcon (11.0%) and Parasol Homes (10.7%).

The Group's three largest Approved Providers by units were Inclusion Housing (914), Falcon (366) and Hilldale (328).

As at 31 December 2020, the portfolio had a WAULT of 26.2 years (well in excess of the Group's minimum term of at least 15 years), with 98.5% of the portfolio's rental income showing an unexpired lease term above 21 years. The WAULT includes the initial lease term upon completion as well as any reversionary leases and put/call options available to the Group at expiry of the initial term.

Rents under the leases are indexed against either CPI (91.7%) or RPI (8.3%), which provides investors with the comfort that the rental income will increase in line with inflation. Some leases have an index 'premium' under which the standard rental increase is based upon CPI or RPI plus a further percentage point, reflecting top-ups by Local Authorities. These account for 8.5% of the Group's leases. For the purposes of the portfolio valuation, JLL assumed CPI and RPI to increase at 2% per annum and 2.5% per annum respectively over the term of the relevant leases.

Outlook and Pipeline

Despite the pressure on budgets exerted by the pandemic, the government has kept to its affordable housing spending commitments. On 8 September 2020 it was confirmed that, subject to the prevailing economic circumstances, over the next five years £12 billion will be made available to fund the development of new discounted homes to rent and buy. But the government also acknowledges that there is a requirement for private capital to complement public spending if this country is going to receive the homes it so desperately needs. While Supported Housing makes up a relatively small proportion of the social housing market, we can see the positive impact that the Group's investments have on the lives of the vulnerable individuals we house, and we remain determined to continue to use the Group's capital to make more specialised supported homes available to Registered Providers and Local Authorities so that waiting lists can be reduced. Our ability to do this is underpinned by the strong pipeline that we have maintained which in turn reflects ongoing demand for adapted independent community-based homes.

The recent government Social Housing White Paper ⁸ focused firmly on the rights of residents, promoting higher standards among social housing providers and creating greater transparency and accountability throughout the sector. It will take time for the ideas raised to be delivered upon but we will encourage our partners to move early and do our best to support them as they adapt and improve. We want to drive positive change, both internally through constantly improving and updating our investment and asset management processes, and throughout the wider sector by helping to establish universal metrics that can better measure the impact of private capital and the quality of social housing it provides. This is why we have chosen to participate in projects such as the Equity Impact Project referred to earlier.  

Our current pipeline has over £150 million of live investment opportunities which should enable us to deploy the proceeds from the Group's recent debt and equity raises. But 2020 has shown us that nothing should be taken for granted. Despite recent progress, the pandemic is sadly far from over and so we will continue to be watchful for unforeseen shockwaves that could impact the Group's business and the individuals living in its properties. This year the portfolio has proved to be resilient to the greatest of shocks and, while we will remain vigilant, it is this resilience that enables us to look to 2021 with renewed, cautious optimism.

Max Shenkman

Head of Investment

4 March 2021

Notes:

1  Due to a clerical error, there has been a short delay in the payment of an immaterial amount of rent representing c.£45k (0.16% of rent roll) for the quarter ended 31 December 2020. This is expected to be paid in full in the next 2 weeks.

2  National Housing Federation, Supported housing: Understanding need and supply (2015)

3  Mencap, Funding Supported Housing for All

4  Mencap, Funding Supported Housing for All

5  https://www.cqc.org.uk/publicati ons/themed-work/rssreview

6  HM Government, Energy White Paper: Powering our Net Zero Future, 2020

7  HM Government, Energy White Paper: Powering our Net Zero Future, 2020

8  https://www.gov.uk/government/publications/the-charter-for-social-housing-residents-social-housing-white-paper

PORTFOLIO SUMMARY

Region	Properties	% of funds invested *
North West	97	22.5
West Midlands	81	17.3
East Midlands	57	12.8
London	26	9.6
North East	45	9.2
South East	52	8.9
Yorkshire	36	9.0
South West	29	5.4
East	18	3.9
Scotland	2	0.9
Wales	2	0.5
Total	445	100.0

* calculated excluding acquisition costs

CORPORATE SOCIAL RESPONSIBILITY

A fundamental aspect of our ambition to be the leading UK Supported Housing investor, to the achievement of our long-term financial objectives, coupled with the aim of having a positive societal impact, is to ensure that we embed and drive ESG across the business.

Our business model (pages 24 to 25) seeks to ensure that our properties are suitable to meet residents' evolving needs and assist Local Authorities in meeting these demands for the benefit of the wider community. Our social impact is therefore at the heart of what we do, and we focus on investing where there is clear long-term social need. We maintain a robust corporate governance framework, and this is set out in further detail within our corporate governance report on pages 69 to 96. We recognise the importance of environmental efficiency, which is becoming increasingly integral to our investment strategy, and we have set out how we execute this strategy in practice in further detail below and on pages 34 to 35 of the Investment Manager's Report.

In conjunction with the Board's endorsement, the Investment Manager has an ESG integration policy in place, directly relating to the Company's investments with the aim of ensuring value for investors, coupled with creating value for society and the environment. Within this policy, the Investment Manager has set out principles which it will seek to incorporate throughout its business, for example, to consider the impact of operations on local communities and to uphold high standards of business integrity and honesty. Further, incorporated within the ESG integration policy, the Investment Manager has become a signatory to the United Nations Principles for Responsible Investment, committing to the principles set out therein to show dedication to strengthening environmental, social and governance considerations into its business.

Environment

Policy presents new challenges and opportunities for the real estate industry and the social housing market, with potentially profound implications for both owners and occupiers. A good investment strategy must incorporate environmental and social issues alongside traditional economic considerations. Impact assessment is central to our investment process and is demonstrated through the environmental, social and governance assessments in our due diligence. For example, we require every property we acquire to have a minimum energy performance rating of at least a 'C' on an Energy Performance Certificate ("EPC") for renovated properties and at least a 'B' on an EPC for new-build properties, notwithstanding the legal requirement for any privately rented properties to have a minimum energy performance rating of E on an EPC.

When acquiring assets, we look closely at their environmental impact, and encourage a sustainable approach for new development as well as the maintenance and upgrading of existing properties. Through our rigorous due diligence process, the high standards we expect from developers and significant investment in the Supported Housing sector, we have been able to provide capital and expertise that has enabled parties in the industry to professionalise and to lead to further high-quality housing. Offering residents resource-efficient and adapted living areas is critical to ensure our investments are fit-for-purpose and sustain their value over the long-term. As a landlord, we consider the opportunities we have to help reduce running costs for our lessees and occupiers, increase resident well-being and contribute to the prosperity of a location through supporting new building design and development. Ignoring these issues when considering property management and investments would risk the erosion of income and value as well as missing opportunities to enhance investment returns.

Climate Change and Greenhouse Gas Emissions

The Board is cognisant of the impact of the Group's operations on emissions. In supporting the construction of new build properties, we hope to encourage best practice, in turn helping to reduce the industry's impact on emissions and the consumption of depleting resources.

The Board has considered the requirements to disclose the annual quantity of emissions in tonnes of carbon dioxide equivalent for activities for which the Group is responsible and believes that the Group has no reportable emissions for the year ended 31 December 2020, and therefore has not included the information or methodologies for the calculation of emissions, for the following reasons:

· emissions from the Group's properties were the lessees' responsibility rather than the Group's;

· emissions produced from either the registered office of the Company or from the offices of other service providers are deemed to fall under the responsibility of other parties; and

· the Group has not leased or owned any vehicles which fall inside the scope of the GHG Protocol Corporate Standard.

In relation to the Streamlined Energy and Carbon Reporting (SECR), implemented by The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, for the year ended 31 December 2020 the Group is considered to be a low energy user.

Community

Our properties provide multiple benefits to local communities. They provide residents with safe and secure accommodation, tailored to meet their individual care needs. They provide Approved Provider lessees with a way of growing sustainably, allowing them to expand the number of individual lives they support and improve and they provide employment for local carers, housing managers and builders. While development and refurbishment can cause some minor short-term disruption to an area, these activities help create employment and, at the same time, help alleviate the UK's housing crisis.

Further information on the impact and benefits to the Community of our properties is set out in the Market Review section of the Investment Manager's Report

Business Relationships

As well as the critical day-to-day portfolio management, the Group has a set of corporate providers that ensure the smooth running of the Group's activities. The Group's key service providers are listed on page 143, and the Management Engagement Committee annually reviews the effectiveness and performance of these service providers, taking into account any feedback received. The Group also benefits from the commitment and flexibility of its corporate lenders for its debt facilities and works with a selection of high-quality trusted developer partners to source the majority of its deals off market and to who forward funding is provided. Each of these relationships is critical to the long-term success of the business. Therefore, the Group and the Investment Manager maintain high standards of business conduct by acting in a collaborative and responsible manner with all its business partners that protects the reputation of the Group as a whole.

Employees  

The Group has no employees and accordingly no requirement to separately report on this area.

The Investment Manager is an equal opportunities employer who respects and seeks to empower each individual and the diverse cultures, perspectives, skills and experiences within its workforce. The Investment Manager places great importance on company culture and the wellbeing of its employees and considers various initiatives and events to ensure a positive working environment.

Health and Safety

The Group is committed to fostering the highest standards in health and safety. Before the Group acquires a property, we ensure it includes all installations necessary to minimise the risk to the vulnerable people who will live in it. Day-to-day responsibility for health and safety in our properties is then shared by the Approved Providers and care providers who manage the housing and provide care. Nonetheless, our Investment Manager still requests confirmation from Approved Providers that all properties remain compliant and visit properties to verify this. Every quarter the Board is provided with updates on the health and safety of our residents.

Diversity  

We are an externally managed business and do not have any employees or office space. As such the Group does not operate a diversity policy with regards to any administrative, management and supervisory functions. A description of the Board's policy on diversity can be found in the Annual Report .

Human Rights

The Group is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover threshold and is therefore not obliged to make a slavery and human trafficking statement.

The Board are satisfied that, to the best of their knowledge, the Company's principal advisers, which are listed in the Shareholder Information section of the Annual Report , comply with the provisions of the UK Modern Slavery Act 2015.

Our business is solely in the UK and therefore we consider there is a low risk of human rights abuses.

SECTION 172(1) STATEMENT

The following disclosure describes how the directors have had regard to the matters set out in section 172(1)(a) to (f) when performing their duty under s172 and forms the directors' statement required under section 414CZA of the Act.

Stakeholder Engagement

This section describes how the Board engages with its key stakeholders, and how it considers their interests when making its decisions. Further, it demonstrates how the Board takes into consideration the long-term impact of its decisions, and its desire to maintain a reputation for high standards of business conduct.

Stakeholder	Why is it important to engage?	How have the Investment Manager/Directors engaged?	What were the key topics of engagement?	What was the feedback obtained and the outcome of the engagement?
Shareholders	A fundamental aspect of our ambition to be the leading UK Supported Housing investor, to the achievement of our long-term financial objectives, coupled with the aim of having a positive societal impact, is to ensure that we embed and drive ESG across the business.	The way in which we engage with our shareholders is set out on page 78 in our Corporate Governance Report	1  Financial and operational performance. 2  The regulatory environment of the Supported Housing sector. 3  Environmental, social and governance considerations. 4  The Company's key service provider appointments, including the AIFM and broker arrangements.	1.  Refer to shareholder engagement in the Annual Report. 2.  The Board and Investment Manager take into account shareholder concerns when speaking to the Regulator and agreed to keep shareholders updated of any developments. We understand the importance of, and are committed to, working with Registered Providers to address the concerns of the Regulator. Refer to the Market Review in the Investment Manager's Report. 3.  The Investment Manager has enhanced environmental, social and governance considerations within its investment process, and within its own business. Refer to Investment Manager's Report, and the Corporate Social Responsibility Report in the Annual Report. 4.  Shareholders were supportive of the change of AIFM as it resulted in some improvements to operational efficiency, and were satisfied that the terms of the existing services provided by the Investment Manager remained  unchanged. Shareholders were equally supportive of the appointment of the Broker, who have since engaged with shareholders, in particular in relation to the recent equity raise
Investment Manager	The Investment Manager is responsible for executing the Investment Objective within the Investment Policy of the Company.	The Board maintains regular and open dialogue with the Investment Manager at Board meetings and has regular contact on operational and investment matters outside of meetings.	In addition to all matters related to the execution of the Company's Investment Objective, the Board engaged with the Investment Manager on the structure of the Group, developments in the market and updates from the Regulator.	As a result of the engagement between the Board and the Investment Manager the Group has been able to execute its investment strategy and has considered what adjustments can be made to the Group's model that will uphold financial and governance standards while attracting further private investment long term. Additionally, the Investment Manager produces reports to the Board every quarter on various governance and operational matters at the Board's request. Capital allocation is also considered with regard to the views of the Board.
Approved Providers	Our relationship with Approved Providers is integral to ensuring rent received from the Local Authority is paid to the Group and that properties are managed appropriately to safeguard tenants. All of the Group's leases with Approved Providers are fully repairing and insuring - meaning that Approved Providers are responsible for management, repair and maintenance, in addition to tenanting the properties.	The Investment Manager maintains strong relationships with Approved Providers, having meetings every six months and are in regular dialogue on a variety of matters. Quarterly key performance indicator reporting is also provided.	The Investment Manager discussed a number of topics with Approved Providers including ensuring that properties are managed in accordance with their leases; financial reporting and governance; and specific property-related issues such as occupancy, health and safety issues, rent levels, management accounts and governance.	Refer to the Investment Manager's Report.
Care Providers	Our residents receive care from Care Providers. It is important to ensure that our vulnerable residents receive the best possible care. In addition, the Care Providers share the cost of voids with Approved Providers so we engage with Care Providers to ensure our Approved Providers are able to pay our rent in the event of empty units. Therefore, Care Providers play an essential role in the occupancy levels of our properties and strong engagement with the Group ensures the best possible care for our residents.	The Investment Manager engages with Care Providers as part of its due diligence process and regularly meets and engages with Care Provider representatives when inspecting the Group's portfolio and looking at occupancy figures every quarter.	The Investment Manager engages with Care Providers on: the specific care and support requirements of residents including health and safety compliance (refer to Investment Manager's Report); property management by Approved Providers; financial and operational capacity for new schemes; occupancy levels; and financial performance.	The Investment Manager rejected deals where care providers did not meet the high-quality standards expected or where care providers were unable to demonstrate the financial strength to meet its obligations under a Service Level Agreement. Following engagement, scope of works were agreed with care providers to produce high quality, fit for purpose properties that meet the specific care needs of residents. To maintain the Group's reputation for high standards of business conduct, care providers were changed where the standard of care expected by the Group were not met or where engagement identified care providers in financial difficulties.
Residents	We remain focused on providing homes to our residents which offer them greater independence than institutional accommodation, as well as meeting their specialist care needs.	The Investment Manager monitors resident welfare through engagement with Approved Providers. The Investment Manager receives quarterly reports from Approved Providers to ensure compliance with health and safety standards. Any concerns are raised to the Board. We do not generally engage with residents directly since they are vulnerable. Instead, day-to-day engagement is done by Care Providers and, to a lesser extent, Approved Providers.	We provide oversight of resident welfare by ensuring properties are safe and secure before residents move in by: monitoring compliance with health and safety standards; ensuring residents are looked after by competent counterparties; and requesting updates on any health and safety issues every quarter.	The Investment Manager actively engaged with care providers to ensure plans and processes were in place in respect of the Covid-19 pandemic, for the health and safety of the tenants. Resident issues raised as a result of engagement through care providers were addressed. Compliance issues have been remedied and any necessary works have been undertaken. The Group's investment decisions are informed by the long-term needs of our residents.
The Regulator of Social Housing	The Regulator regulates Registered Providers of social housing to ensure providers are financially viable and properly governed. It is important to ensure that the Regulator does not object to the way the Group invests and the way Approved Providers operate.	The Investment Manager is in regular contact with the Regulator through telephone calls and regular meetings.	Discussions focused on ensuring the market evolves in line with its requirements, to discuss how standards of Registered Providers can be improved and to address its concerns. Regulatory engagement reduced during the Covid-19 pandemic, to allow for Registered Providers to focus on operations. Engagement re-started in summer 2020.	The Investment Manager is working with Registered Providers to ensure the standards of the Regulator are met. Refer to the Investment Manager's Report for more detail.
Lenders	The Group's investments in social housing assets are partly funded by debt. Prudent debt financing is critical to achieve the target return promised to shareholders and to meet full dividend cover once equity proceeds have been fully deployed. Further, engagement with debt funders is also a significant signal to the sector that they are aligned with shareholders' interests e.g. long-term support of the sector social housing.	The Investment Manager engages with the existing lenders mainly via the reporting of financial and information covenants under the existing loan agreements on a quarterly basis. In addition, there are regular ad-hoc engagements in relation to general topics relating to the social housing sector as well as specific topics arising from the financial and operational performance of the Group's activities and any other general matters affecting the relationship between the Group and the lenders.	The Group engaged on the following topics: financial and information covenant reporting; active asset management activities undertaken by the Group e.g. altering leases and/or any other portfolio performance enhancing activity that requires lenders' consent. The Group also engaged with the lenders in relation to a further increase and extension of the Revolving Credit Facility to make sure sufficient debt capital is available during 2021 to meet deployment and dividend cover targets. There was also frequent liaison with lenders' rates desks in order to monitor the movement of the 3M Libor forward curve as part of the Group's monitoring of interest rates for the unhedged Revolving Credit Facility.	The Group is fully compliant with its debt covenants. The Investment Manager's pro-active engagement with the Group's lenders is welcome by its lenders and to date no concerns in relation to the performance of its loans have been raised by the lenders. The Investment Manager successfully increased and extended the Revolving Credit Facility. The Board continues to monitor compliance with debt covenants and keeps liquidity under constant review to make certain the Group will always have sufficient headroom in its debt facilities.

Principal Decisions

Principal decisions have been defined as those that have a material impact to the Group and its key stakeholders. In taking these decisions, the Directors considered their duties under section 172 of the Act.

AIFM arrangements

The Company appointed Triple Point Investment Management LLP as AIFM from 1 July 2020, replacing Langham Hall Fund Management LLP as the previous AIFM. 

The change in AIFM resulted in some improvements in operational efficiency, but in all other material respects, the provision and terms of service were effectively unchanged.

Extension of Debt Facility

During the year the Group secured a £30 million extension to its existing £130 million revolving credit facility. In considering whether to approve the transaction the Board had regard to the interests of the Group's shareholders, lenders and the community.

The Board believed that the extension of the debt facility was in the best interest of shareholders as it would provide additional capital and would allow the Group to continue to execute its pipeline and achieve a fully covered dividend. The Group was able to secure the extension of the debt facility on identical terms to its existing facility. Further, the Group maintained an active dialogue for the lender to appraise the Group's business model and its portfolio. As described in the Corporate Social Responsibility section on pages 42 to 43 the Board also considered that further funds available to be deployed into the Supported Housing sector would benefit the wider community.

Further details of the Group's debt financing are detailed on pages 36 of the Investment Manager's Report.

Equity Raise

The Board published a prospectus dated 30 September 2020, in relation to a placing, open offer and offer for subscription, and subsequently raised £55 million through the issue of 51,886,792 Ordinary Shares at a price of 106 pence per Ordinary Share (the "Issue").

The additional equity capital enabled the Company to capitalise on attractive acquisition and development opportunities available in the Supported Housing sector and have a further positive impact on society by increasing overall investment into adapted homes for vulnerable individuals who would otherwise be living in unsuitable accommodation. In addition, the Board considered that shareholders benefit from the scale up of the Group's portfolio as fixed costs are spread over a larger asset base, reducing the ongoing charges per Ordinary Share for shareholders. The Board considered that increasing the size of the Company would help to increase liquidity and make the Ordinary Shares more attractive to a wider investor base, particularly as certain institutional investors are constrained by the maximum percentage of an issuer which they can own.

RISK MANAGEMENT

The Board recognises that effective risk management is key to the Group's success and that a proactive approach is critical to ensuring the sustainable growth and resilience of the Group.

We operate in a low-risk environment, focusing on a single sub-sector of the UK real estate market to deliver an attractive, growing and secure income for shareholders. We have a specific Investment Policy, as outlined above , which we adhere to and for which the Board has overall responsibility. As our risk appetite is low, we do not undertake speculative development. Furthermore, we have experienced lessees in our properties and we possess a portfolio of high-quality assets with a robust WAULT to them.

As an externally managed investment company, we outsource key services to the Investment Manager and other service providers and rely on their systems and controls. The Board undertakes a formal risk review, with the assistance of the audit committee, twice a year to assess and challenge the effectiveness of our risk management and internal control systems. The Board regularly review the control reports of the key service providers and the external auditors note any deficiencies in internal controls and processes that have been identified during the course of the audit.  A description of the key internal controls of the Group can be found in the Annual Report .

The Investment Manager has responsibility for identifying potential risks at an early stage, escalating risks or changes to risk and relevant considerations and implementing appropriate mitigations which are recorded in the Group's risk register. Where relevant the financial model is stress tested to assess the potential impact of recorded risks against the likelihood of occurrence and graded suitably. The principal risks that have been subject to this methodology are noted in the Risk Heat Matrix below. The Board regularly reviews the risk register to ensure gradings and mitigating actions remain appropriate.

As part of this risk management evaluation the Board has identified and undertaken a robust assessment of the Group's emerging risks by assessing upcoming or potential changes in the market or regulatory environment. The Board considers the likelihood of the emerging risk materialising and its potential impact on the Group. Emerging risks are regularly monitored, and to the extent possible or practicable, mitigating actions are implemented.

Our risk management process is designed to identify, evaluate and mitigate (rather than eliminate) the significant and emerging risks we face and continues to evolve to reflect changes in the business and operating environment. The process can therefore only provide reasonable, and not absolute, assurance. It does however ensure a defined approach to decision making that decreases uncertainty surrounding anticipated outcomes, balanced against the objective of creating value for shareholders.

The Board has not identified or been advised of any failings or weaknesses in our risk management and internal control systems

Principal risks and uncertainties

The table below sets out what we believe to be the principal risks and uncertainties facing the Group. The table does not cover all of the risks that the Group may face. Additional risks and uncertainties not presently known to management or deemed to be less material at the date of this report may also have an adverse effect on the Group .

Risk Category	Risk Description	Risk Impact	Risk Mitigation	Impact	Likelihood	Change in year
Financial	Expensive or lack of debt finance may limit our ability to grow and achieve a fully covered dividend	Without sufficient debt funding at sustainable rates, we will be unable to pursue suitable investments in line with our Investment Policy. This would significantly impair our ability to pay dividends to shareholders at the targeted rate.	When raising debt finance the Investment Manager adopts a flexible approach involving speaking to multiple funders offering various rates, structures and tenors. Doing this allows the Investment Manager to maintain maximum competitive tension between funders. After proceeding with a funder the Investment Manager agrees heads of terms early in the process to ensure a streamlined, transparent fund-raising process. The Board also keeps liquidity under constant review and we will always aim to have headroom in our debt facilities ensuring that we have a level of protection in the event of adverse fund-raising conditions.	Moderate	Low	Stable
Financial	Floating rate debt exposes the business to underlying interest rate movements	The Group's Revolving Credit Facility is currently non-hedged and therefore interest is payable based on a margin over 3M Libor. Any adverse movements in the 3M Libor forward curve could significantly impair our profitability and ability to pay dividends.	The Group considers cash flow forecasts and ensures sufficient cash balances are held within the Group to meet future needs. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of financing through appropriate and adequate credit lines, and the ability of customers to settle obligations within normal terms of credit. The Group ensures, through forecasting of capital requirements, that adequate cash is available to fund the Group's operating activities. In addition the Board regularly reviews potential hedging arrangements which can be put in place at any time during the duration of the Revolving Credit Facility. The Group's 10-year and 15-year MetLife tranches have a fixed rate coupon.	Moderate	Low to Moderate	Decrease
Financial	Unable to operate within debt covenants	The borrowings the Group currently has and which the Group uses in the future may contain loan to value and interest covenants ratios. If property valuations and rental income decrease, such covenants could be breached, and the impact of such an event could include: an increase in borrowing costs; a requirement for additional cash collateral; payment of a fee to the lender; a sale of an asset or assets or a forfeit of any asset to a lender. This may result in the Group selling assets to repay drawn loan amounts resulting in a decrease on Group's Net Asset Value.	The Investment Manager monitors loan to value and interest covenants ratios on an ongoing basis. In the unlikely event that an event of default occurs under these covenants the Group has a remedy period during which it can cure the covenant breach by either injecting cash collateral or equity funded assets in order to restore covenant compliance.	High	Low	Stable
Property	Default of one or more Approved Provider lessees	The default of one or more of our lessees could impact the revenue gained from relevant assets. If the lessee cannot remedy the default or no support is offered to the lessee by the Regulator of Social Housing, we may have to terminate or negotiate the lease, meaning a sustained reduction in revenues while a replacement is found. Additionally, were a care provider not to renew the service level agreement with a lessee, this may result in a lessee having to cover rental payment on void units without receiving the corresponding housing benefit payment.	Under the terms of our Investment Policy and restrictions, no more than 30% of the Group's gross asset value may be exposed to one lessee, meaning the risk of significant rent loss is low. Were a lessee to default or were the Group to believe it likely that a lessee would default the Group would look to move the affected properties to another Approved Provider with whom the Group have a good relationship to ensure that both the provision of housing to vulnerable individuals and the income stream associated with the properties were preserved. In addition, the lessees are predominantly regulated by the Regulator of Social Housing, meaning that, if a lessee was to suffer financial difficulty, it is likely that the Regulator of Social Housing would look to ensure that the vulnerable residents did not have to be rehoused, however, an Approved Provider may seek to renegotiate the lease. The Investment Manager has continued to monitor the implications of the pandemic and maintains a specific Covid-19 related risk register with regards to the Group's Registered Providers and care providers.  The Investment Manager has remained in regular communication with counterparties and monitored financial strength, occupancy and referrals closely.  Details regarding the extent of the impact of Covid-19 on the Group's counterparties is detailed in the Annual Report.	Low to Moderate	Moderate	Increase
Property	Forward funding properties involves a higher degree of risk than that associated with completed investments	Our forward funded developments are likely to involve a higher degree of risk than is associated with standing investments. This could include general construction risks, delays in the development or the development not being completed, cost overruns or developer/contractor default. If any of the risks associated with our forward funded developments materialised, this could reduce the value of these assets and our portfolio.	Before entering into any forward funding arrangements, the Investment Manager undertakes substantial due diligence on developers and their main subcontractors, ensuring they have a strong track record. We enter into contracts on a fixed price basis and then, during the development work, we typically defer development profit until work has been completed and audited by a chartered surveyor. Further, less than 1.5% of our portfolio is forward-funded at present and we are limited by our Investment Policy which restricts us to forward funding a maximum of 20% of the Group's net asset value at any one time. Ultimately, with these mitigating factors in place, the flexibility to forward fund allows us to acquire assets and opportunities which will provide prime revenues in future years.	Low to Moderate	Low to moderate	Stable
Regulatory	Risk of an Approved Provider receiving a non-compliant financial viability or governance rating by the Regulator	Should an Approved Provider with which the Group has one or more leases in place receive a non-compliant rating by the Regulator, in particular in relation to viability, depending on the further actions of the Regulator, it is possible that there may be a negative impact on the market value of the relevant properties which are the subject of such lease(s). Depending on the exposure of the Group to such Approved Provider, this in turn may have a material adverse effect on Group's Net Asset Value until such time as the matter is resolved through an improvement in the relevant Approved Provider's rating or a change in Approved Provider.	As part of the Group's acquisition process, the Investment Manager conducts a thorough due diligence process on all Registered Providers with which the Company enters into lease agreements that takes account of their financial strength and governance procedures. The Investment Manager has established relationships with the Approved Providers with whom it works. The Approved Providers keep the Investment Manager informed of developments surrounding the regulatory notices. The Group has leases in place with four Approved Providers that have been deemed non-compliant by the Regulator. These assets did not suffer from an impairment in value as part of the Q4 valuation by the Group's independent Valuer. More detail on this risk can be found in the Annual Report .	Low	Moderate to High	Stable
Regulatory	Risk of changes to the social housing regulatory regime	Future governments may take a different approach to the social housing regulatory regime, resulting in changes to the law and other regulation or practices of the Government with regard to social housing.	As demand for social housing remains high relative to supply, the Board and the Investment Manager is confident there will continue to be a viable market within which to operate, notwithstanding any future change of Government. Even if Government funding was to reduce, the nature of the rental agreements the Group has in place means that the Group will enjoy continued lessee rent commitment for the term of the agreed leases.	High	Low to Moderate	Stable
Regulatory	Risk of not being qualified as REIT	If the Group fails to remain in compliance with the REIT conditions, the members of the Group will be subject to UK corporation tax on some or all of their property rental income and chargeable gains on the sale of properties which would reduce the funds available to distribute to investors.	The Group intends to continue to operate as a REIT and work within its investment objective and policy. The Group will retain legal and regulatory advisers and consult with them on a regular basis to ensure it understands and complies with the requirements. In addition, the Board oversees adherence to the REIT regime, maintaining close dialogue with the Investment Manager to ensure we remain compliant with legislation.	High	Low	Stable
Corporate	Reliance on the Investment Manager	We continue to rely on the Investment Manager's services and its reputation in the social housing market. As a result, our performance will, to a large extent, depend on the Investment Manager's abilities in the property market. Termination of the Investment Management Agreement would severely affect our ability to effectively manage our operations and may have a negative impact on the share price of the Company.	Unless there is a default, either party may terminate the Investment Management Agreement by giving not less than 12 months' written notice. The Board regularly reviews and monitors the Investment Manager's performance. In addition, the Board meets regularly with the Manager to ensure that we maintain a positive working relationship.	High	Low	Stable
Financial	Property valuations may be subject to change over time	Property valuations are inherently subjective and uncertain. Market conditions, which may impact the creditworthiness of lessees, may adversely affect valuations. The portfolio is valued on a Market Value basis, which takes into account the expected rental income to be received under the leases in the future. This valuation methodology provides a significantly higher valuation than the Vacant Possession value of a property. In the event of an unremedied default of an Approved Provider lessee, the value of the assets in the portfolio may be negatively affected. Any changes could affect the Group's net asset value and the share price of the Group .	All of the Group's property assets are independently valued quarterly by Jones Lang LaSalle, a specialist property valuation firm, who are provided with regular updates on portfolio activity by the Investment Manager. The Investment Manager meets with the external valuers to discuss the basis of their valuations and their quality control processes. Default risk of lessees is mitigated in accordance with the lessee default principal risk explanation provided above. In order to protect against loss in value, the Investment Manager's property management team seeks to visit each property in the portfolio once a year, and works closely with lease counterparties to ensure, to the extent reasonably possible, their financial strength and governance procedures remain robust through the duration of the relevant lease. Details of the impact of Covid-19 are described in the Annual Report.	Moderate	Moderate	Stable

Emerging Risks

The United Kingdom's Withdrawal from the European Union

The Board has continued to monitor the potential risks associated with Brexit. Despite the trade deal reached on 24 December 2020 between the UK and EU, it still remains unclear as to the extent or precise nature of the impact of Brexit on the UK economy or the Company. Nevertheless, with care, housing and social care, being UK based, the Group remains relatively insulated from the impact of Brexit.

The Board will continue to monitor the ongoing developments between the UK and the EU and the wider potential impact of Brexit on the Group and its stakeholder base. 

Covid-19 Pandemic

The outbreak of Covid-19 in early 2020 has negatively impacted economic conditions globally and is having an adverse and disruptive effect on the UK economy (triggering a technical recession after the second quarter of 2020). The Group's financial performance has proven to be resilient to the effects of Covid-19 thus far, however, its way of operating has adapted and is likely to need to continue to adapt in the near term in response to the developments relating to the Covid-19 outbreak. The Board has considered the potential significant and wide-ranging adverse effect on the Group, including a reduction in portfolio valuations, an increase in bad debts, void rates and costs, an adverse impact on existing banking covenants and health risks to the Group's employees and residents. The Directors have performed an assessment of the ability of the Company to continue as a going concern, which includes the impact of Covid-19 further details of which can be found in Note 2.

The Board will continue to monitor economic conditions and implement appropriate controls and processes in order to mitigate the potential impact of the pandemic on the Group.

GOING CONCERN AND VIABILITY

Going Concern

The Strategic Report and financial statements have set out the current financial position of the Group and Parent Company. The Board has regularly reviewed the position of the Company and its ability to continue as a going concern in Board meetings throughout the year. The Group has targeted high-quality properties in line with yield expectations and will continue to analyse investment opportunities to ensure that they are the right fit for the Group.

The Group has invested £530.7 million up to 31 December 2020, and £2.9 million (including acquisition costs) since the year end ¹ . The cash balance of the Group at year end was £53.7 million, of which £41.4 million was readily available for use. This is the cash balance at 31 December 2020 less any funds that are committed for future deployment, retentions, or working capital requirements. As stated in the Strategic Report, the Investment Manager has identified a visible pipeline of over £150 million of attractive investment opportunities for acquisition over the next 12 months. The Board has evaluated the financial position of the Group and plans to raise both debt and equity capital, as necessary, in order to fund the Group's investments for the next 12 months. Income generated from the Group's portfolio of assets is expected to substantially facilitate the payment of dividends to shareholders at the targeted rate. Based on this, the Board believes that the Group is in a position to manage its financial risks for the foreseeable future.

Impact of Covid-19

To date, Covid-19 has not impacted the Group's ability to continue as a going concern for reasons discussed below. As a result, the Directors believe that the Group is still well placed to manage its financing and other business risks and that the Group will remain viable, continuing to operate and meet its liabilities as they fall due despite the risk of Covid-19.

The Directors have performed an assessment of the ability of the Company to continue as a going concern, which includes the impact of Covid-19, for a period of at least 12 months from the date of signing these financial statements. The Directors have considered the expected obligations of the Company and its subsidiaries for the next 12 months and are confident that all will be met.

In considering the ability of the Group to continue as a going concern, the Directors also considered the impact of Covid-19 on their tenants. Tenants of the Group are Registered Providers who receive their housing benefit from Local Authorities, before it is passed to subsidiaries in the form of rental income. Local Authorities have confirmed they will not stop helping vulnerable people or paying for essential services during this time, and therefore the Directors do not foresee any issues in rent collection, however in the event of a downturn in revenue, variable costs would be reduced to enable the Group to meet its future liabilities. 100% of rental income due and payable for the period ended 31 December 2020 has been collected. 100% of all rent due and payable at 28 February 2021 has been collected. ²  

The Board believes that there are currently no material uncertainties in relation to the Group's and Company's ability to continue for a period of at least 12 months from the date of the approval of the Group and Parent Company's financial statements and, therefore, has adopted the going concern basis in the preparation of the financial statements, please see Note 2 of the financial statements for more information.

Viability Statement

In accordance with Principle 21 of the AIC Code, the Board has assessed the prospects of the Group over a period longer than 12 months required by the relevant 'Going Concern' provisions. The Board has considered the nature of the Group's assets and liabilities, and associated cash flows, and has determined that five years, up to 31 December 2025, is the maximum timescale over which the performance of the Group can be forecast with a material degree of accuracy and therefore is the appropriate period over which to consider the viability.

In determining this timescale the Board has considered the following:

· That the business model of the Group assumes the future growth in its investment portfolio through the acquisition of Supported Housing assets which are intended to be held for the duration of the viability period

· The length of the service level agreements between Approved Providers and care providers is typically five years

· The future growth of its investment portfolio of properties is achieved through long-term, inflation linked, fully repairing and insuring leases

· The Group's property portfolio has a WAULT of 26.2 years to expiry, representing a secure income stream for the period under consideration

· The Group's floating rate Revolving Credit Facility has an initial term of four years (of which three remain) which may be extended by a further two years.

In assessing the Company's viability, the Board has carried out a robust assessment of the emerging risks and principal risks facing the Group, including those that would threaten its business model, future performance, solvency, liquidity and dividend cover for a five year period.

The Directors' assessment has been made with reference to the principal risks and uncertainties and emerging risks summarised above and how they could impact the prospects of the Group and Company both individually and in aggregate.

The business model was subject to a sensitivity analysis, which involved flexing a number of key assumptions underlying the forecasts. The sensitivities performed were designed to provide the Directors with an understanding of the Group's performance in the event of a severe but plausible downturn scenario, taking full account of mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks outlined below:

· Rental income: 10% decrease in rent received.  This assumes that in the worst-case scenario of voids not being covered by care providers, the Registered Provider does not pay the Group 50% of the uncovered voids. Operational Occupancy at 31 December 2020 was 81% and so the sensitised model assumes 10% (rounded up) shortfall in rent and a 7% drop in property valuations. 

· Property valuations: As part of the transfer of assets from Westmoreland to Inclusion, we know that assets without a lease agreement will be valued at vacant possession value. We have therefore assumed that 10% of the portfolio (the void units) will be valued at vacant possession value - 48.6% of the original purchase price - rather than investment value. To further stress test this, we have applied an additional 20% reduction to the vacant possession value, meaning that the total drop in value of the Company's portfolio is 7% in the Downside and Mitigated cases. We believe that this is a very severe and prudent reduction in value given that the valuation yields have not been affected by Covid-19 and we have collected 100% of rent ² due throughout the pandemic, unlike many other property and healthcare sectors.

· Inflation: No inflation uplift on rental income but costs and dividends increase in line with inflation.

· Interest rates: sensitised to the average of the LIBOR curves provided by Lloyds and NatWest in September 2019, before the Covid-19 pandemic. Pre-Covid-19 forward curves for SONIA are not available so we have used the LIBOR curves and removed the additional 9bps margin from July 2021 onwards which only applies as a result of the change to SONIA. LIBOR has been confirmed at 2.55bps for Q1 2021, which compares with the pre-pandemic forecasts that have an average of 57bps. We therefore think this is a suitable and prudent downside assumption.

The outcome in the downturn scenario on the Group's covenant testing is that there are no breaches and the Group can maintain a covenant headroom on existing facilities.

In the downturn scenario mitigating actions to reduce variable costs would be required to enable the Group to meet its future liabilities.

The remaining principal risks and uncertainties, whilst having an impact on the Group's business, are not considered by the Directors to have a reasonable likelihood of impacting the Group's viability over the five year period.

Based on the results of this analysis, the Directors have a reasonable expectation that the Group and Company will be able to continue in operation and meet its liabilities as they fall due for the next five years.

Notes:

1  Including an acquisition of 1 property and exchange on 1 property.

2  Due to a clerical error, there has been a short delay in the payment of an immaterial amount of rent representing c.£45k (0.16% of rent roll) for the quarter ended 31 December 2020. This is expected to be paid in full in the next 2 weeks.

BOARD APPROVAL OF THE STRATEGIC REPORT

The Strategic Report was approved by the Board and signed on its behalf by:

Chris Phillips

Chairman

4 March 20 21

GROUP FINANCIAL STATEMENTS

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2020

		Year ended  31 December 20 20		Year ended 31 December 2019
	Note	£'000		£'000
Income
Rental income	5	28,393		21,112
Other Income		535		-
Total income		28,928		21,112
Expenses
Directors' remuneration	6	(307)		(307)
General and administrative expenses	9	(2,200)		(1,809)
Management fees	8	(4,100)		(3,869)
Total expenses		(6,607)		(5,985)
Gain from fair value adjustment on investment property	14	7,957		11,809
Loss from fair value adjustment on assets held for sale		(63)
Operating profit		30,215		26,936
Finance income	11	102		229
Finance costs	12	(5,723)		(3,448)
Profit for the year before tax		24,594		23,717
Taxation	13	-		-
Profit and total comprehensive income for the year		24,594		23,717
IFRS Earnings per share - basic and diluted	3 5	6.82p		6.75p

The accompanying notes form an integral part of these Group Financial Statements.

GROUP STATEMENT OF FINANCIAL POSITION

As at 31 December 2020

			31 December 20 20		31 December 2019
		Note	£'000		£'000
Assets
Non-current assets
Investment properties		14	572,101		472,349
Total non-current assets			572,101		472,349
Current assets
Assets held for sale			110		-
Trade and other receivables		15	4 ,152		4,287
Cash, cash equivalents and restricted cash		16	53,701		67,711
Total current assets			57,963		71,998
Total assets			630,064		544,347
Liabilities Current liabilities
Trade and other payables		17	4,969		8, 145
Total current liabilities			4,969		8, 145
Non-current liabilities
Other payables		18	1,517		1,514
Bank and other Borrowings		19	194,927		164,955
Total non-current liabilities			196,444		166,469
Total liabilities			201,413		174,614
Total net assets			428,651		3 69,733
Equity
Share capital		2 1	4,033		3,514
Share premium reserve		2 2	203,776		151,157
Treasury shares reserve		2 3	(378)		(378)
Capital reduction reserve		2 4	166,154		166,154
Retained earnings		2 5	55,066		49,286
Total Equity			428,651		36 9,733
IFRS Net asset value per share - basic and diluted		3 6	10 6.42 p		10 5.37 p

The Group Financial Statements were approved and authorised for issue by the Board on 4 March 202 1 and signed on its behalf by:

Chris Phillips

Chairman 

4 March 202 1

The accompanying notes form an integral part of these Group Financial Statements.

GROUP STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2020

		Share capital	Share premium reserve	Treasury shares reserve	Capital reduction reserve	Retained earnings	Total equity
Year ended 31 December 20 20	Note	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 201 9		3,514	151,157	(378)	166,154	49,286	369,733
Total comprehensive income for the year		-	-	-	-	24,594	24,594
Transactions with owners
Ordinary Shares issued in the year at a premium	2 1 , 2 2	519	54,481	-	-	-	55,000
Share issue costs capitalised	2 2	-	(1,862)	-	-	-	(1,862)
Dividends paid	2 6	-	-	-	-	(18,814)	(18,814)
Balance at 31 December 20 20		4,033	203,776	(378)	166,154	55,066	428,651

		Share capital	Share premium reserve	Treasury shares reserve	Capital reduction reserve	Retained earnings	Total equity
Year ended 31 December 2019	Note	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2019		3,514	151,157	-	183,921	25,569	364,161
Total comprehensive income for the year		-	-	-	-	23,717	23,717
Transactions with owners
Own shares repurchased	2 3	-	-	(378)	-	-	(378)
Dividends paid	2 6	-	-	-	(17,767)	-	(17,767)
Balance at 31 December 2019		3,514	151,157	(378)	166,154	49,286	369,733

The accompanying notes form an integral part of these Group Financial Statements.

GROUP STATEMENT OF CASH FLOWS

For the year ended 31 December 2020

		Year ended 31 December 20 20		Year ended 31 December 20 19
	Note	£'000		£'000
Cash flows from operating activities
Profit before income tax		24,594		23,717
Adjustments for:
Gain from fair value adjustment on investment property		(7,957)		(11,809)
Loss from fair value adjustment on assets held for sale		64		-
Finance income		(102)		(229)
Finance costs		5,723		3,448
Operating results before working capital changes		22,322		15,127
Decrease/ Increase in trade and other receivables		640		(11)
Increase in trade and other payables		1,545		1,188
Net cash flow generated from operating activities		24,507		16,304
Cash flows from investing activities
Purchase of investment properties		(95,609)		(137,724)
Prepaid acquisition costs (paid)		(3)		(884)
Restricted cash - (paid)		(2,862)		(8,375)
Restricted cash - released		4,042		11,348
Interest received		59		163
Net cash flow used in investing activities		(94,373)		(135,472)
Cash flows from financing activities
Proceeds from issue of Ordinary Shares at a premium		55,000		-
Ordinary Share issue costs capitalised		(1,862)		-
Own shares repurchased	23	-		(378)
Interest paid		(4,645)		(2,898)
Bank borrowings drawn	19	29,408		100,592
Restricted bank borrowings	19	-		10,460
Loan arrangement fees paid	20	(1,101)		(3,455)
Dividends paid	26	(18,814)		(17,767)
Net cash flow generated from financing activities		57,986		86,554
Net (decrease) in Cash, cash equivalents and restricted cash		(11,880)		(32,614)
Cash and cash equivalents at the beginning of the year		64,732		97,346
Cash and cash equivalents at the end of the year	16	52,852		64,732

The accompanying notes form an integral part of these Group Financial Statements.

NOTES TO THE GROUP FINANCIAL STATEMENTS

For the ended 31 December 2020

1.  CORPORATE INFORMATION

Triple Point Social Housing REIT PLC (the "Company") is a Real Estate Investment Trust ("REIT") incorporated in England and Wales under the Companies Act 2006 as a public company limited by shares on 12 June 2017 . The address of the registered office is 1 King William Street, United Kingdom, EC4N 7AF. The Company is registered as an investment company under section 833 of the Companies Act 2006 and is domiciled in the United Kingdom.

The principal activity of the Company is to act as the ultimate parent company of Triple Point Social Housing REIT PLC and its subsidiaries (the "Group") and to provide shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of social homes.

2.  BASIS OF PREPARATION

The financial information contained in this announcement has been prepared on the basis of the accounting policies set out in the statutory accounts for the year ended 31 December 20 20 . Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards (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 Company's statutory accounts for the years ended 31 December 20 20 or 20 19 , but is derived from those accounts. Those accounts give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole. Statutory accounts for 201 9 have been delivered to the Registrar of Companies and those for 20 20 will be delivered following the Company's Annual General Meeting. The auditor's reports on both the 20 20 and 20 19 accounts were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under s498(2) or (3) of the Companies Act 2006.

The principal accounting policies adopted in the preparation of this preliminary financial information are set out below.

The Group's Financial Statements have been prepared on a historical cost basis, as modified for the Group's investment properties, which have been measured at fair value. Gains or losses arising from changes in fair values are included in profit or loss.

The financial information contained in this results announcement has been prepared on the basis of the accounting policies set out in the statutory financial statements for the year ended 31 December 2019, with the exception for those that relate to new standards effective for the first time for periods beginning on or after 1 January 2020. The new standards impacting the Group are:

· definition of a Business (Amendments to IFRS 3);

· interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39   and IFRS 7); and

· amendments to references to the Conceptual Framework in IFRS Standards.

Whilst the financial information included in this announcement has been computed in accordance with the recognition and measurement requirements of IFRS, as adopted by the European Union, this announcement does not itself contain sufficient disclosures to comply with IFRS. The financial information does not constitute the Group's statutory financial statements for the years ended 31 December 2020 or 31 December 2019, but is derived from those financial statements.  Financial statements for the year ended 31 December 2019 have been delivered to the Registrar of Companies and those for the year ended 31 December 2020 will be delivered following the Company's Annual General Meeting. The auditors' reports on both the 31 December 2020 and 31 December 2019 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.

The Directors have given due consideration to the impact on the financial statements of the amendments as follows:

Definition of a Business (Amendments to IFRS 3)

Under these amendments, to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. An optional concentration test has also been added. This allows the acquirer to assess whether substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets. If such a concentration exists, the transaction is not viewed as an acquisition of a business and no further assessment of the business combination guidance is required. The optional concentration test has been performed and the Directors have concluded that at present, the adoption of the amendment and interpretation does not have a material impact on the financial statements in the period of initial application. In previous reporting periods, subsidiaries acquired by the Group were all treated as the acquisition of a group of assets rather than a business as there was not an integrated set of activities acquired in addition to the property. In the current reporting period, the optional concentration test has been performed which has determined that the fair value of the gross asset acquired is concentrated into a single asset, investment property and therefore is not a business combination. The Group has not purchased, and does not intend to purchase, any subsidiaries which incorporate any assets other than investment property.

Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

These amendments apply to all hedging relationships directly affected by uncertainties related to IBOR reform. At present, the Group does not have any hedging relationships and so these amendments have had no impact on the financial statements.

Amendments to references to the Conceptual Framework in IFRS Standards

The above provides amendments to various standards, however, some revisions are only with regards to references and quotes so that they refer to the revised Conceptual Framework.  The standards that have had proper updates that affect the Group are IFRS 3, IAS 1 and IAS 8 which have all been discussed above.

IFRS 16

As a result of Covid-19 there was an amendment to IFRS 16, Leases, for Covid-19 related rent concessions. The amendment to the standard has been considered, however at the reporting date had not been required to be applied.

New standards issued but not yet effective

· Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

The above is effective from 1 January 2021. The amendments state that if a financial contract results in a substantial modification as a direct result of IBOR  reform, a practical expedient can be applied and the changes will be accounted for by updating the effective interest rate. This may apply to future financial statements if the conditions are met. The amendments also allow a series of exemptions from the regular hedge accounting which may be relevant if the Directors decide to hedge in the future.

There are other new standards and amendments to standards and interpretations which have been issued that are effective in future accounting periods, and which the Group has decided not to adopt early. None of these are expected to have a material impact on the consolidated financial statements of the Group.

2.1.  Going concern

The Group has invested £530.7 million up to 31 December 2020, and £2.9 million since the year end. The cash balance of the Group at year end was £53.7 million, of which £41.4 million was readily available for use. This is the cash balance at 31 December 2020 less any funds that are committed for future deployment, retentions, or working capital requirements. As stated in the Strategic Report, the Investment Manager has identified a visible pipeline of over £150 million of attractive investment opportunities for acquisition over the next 12 months. The Board has evaluated the financial position of the Group and plans to raise both debt and equity capital, as necessary, in order to fund the Group's investments for the next 12 months. Income generated from the Group's portfolio of assets is expected to substantially facilitate the payment of dividends to shareholders at the targeted rate. Based on this, the Board believes that the Group is in a position to manage its financial risks for the foreseeable future.

To date, Covid-19 has not impacted the Group's ability to continue as a going concern for reasons discussed below. As a result, the Directors believe that the Group is still well placed to manage its financing and other business risks and that the Group will remain viable, continuing to operate and meet its liabilities as they fall due despite the risk of Covid-19.

The Directors have performed an assessment of the ability of the Group to continue as a going concern, which includes the impact of Covid-19, for a period of at least 12 months from the date of signing these financial statements. The Directors have considered the expected obligations of the Company and its subsidiaries for the next 12 months and are confident that all will be met.

In considering the ability of the Group to continue as a going concern, the Directors also considered the impact of Covid-19 on their tenants. Tenants of the Group are Registered Providers who receive their housing benefit from Local Authorities, before it is passed to subsidiaries in the form of rental income. Local Authorities have confirmed they will not stop helping vulnerable people or paying for essential services during this time, and therefore the Directors do not foresee any issues in rent collection, however in the event of a downturn in revenue, variable costs would be reduced to enable the Group to meet its future liabilities. 100% of rental income due and payable for the period ended 31 December 2020 has been collected ¹ . 100% of all rent due and payable at 28 February 2021 has been collected ¹ .

The Directors have also considered the financing provided to the Group. Norland Estates Limited and TP REIT Propco 2 Limited have bank facilities with MetLife and Lloyds Bank respectively. The loan secured by Norland Estates Limited with MetLife is subject to an asset cover ratio covenant of x2.25.  The latest external valuation was carried out at 31 December 2020 and at that point the asset cover ratio was x2.69. The loan is also subject to an interest cover ratio. The covenant ratio is not less than x1.75 and at 31 December 2020 the interest cover ratio was x4.89.

The loan secured by TP REIT Propco 2 Limited with Lloyds Bank is subject to a loan to value covenant of <50%. As at the 31 December 2020, the loan to value was 40%. The loan is also subject to an interest cover ratio. The covenant ratio is not less than x2.75 and at 31 December 2020 the interest cover ratio was x6.11. The loan had an initial term of four years expiring on 20 December 2022. On 15 December 2020, the Group extended the RCF's initially agreed four-year term by a year to 20 December 2023. The term of the RCF may be extended by a further year, to 20 December 2024 (subject to the consent of the lenders).

The Directors have also considered the circumstances that would lead to a covenant breach. For Norland Estates Limited, the property portfolio valuation at 31 December 2020 is based on a blended net initial yield of 5.21%. Yields would have to move by 142 bps before valuations fell to a level at which the asset cover ratio covenant was breached.

The interest cover ratio would need rental income collection to fall from its current level of 100% ² to 37% before the covenant is breached.

And for TP REIT Propco 2 Limited, as at 31 December 2020, its property portfolio valuation would need to fall by 20.1% before valuations fell to a level at which the loan to value covenant was breached. The interest cover ratio would need rental income collection to fall from its current level of 100% ² to 45% before the covenant is breached.

The Group has no short or medium term refinancing risk given the 10-year average maturity of its long term debt facilities with MetLife, the first of which expires in June 2028, and which are fully fixed at an all-in weighted average rate of 3.04%.

Based on the forecasts prepared and the intentions of the parent company, the Directors consider that the Company and its subsidiaries will be able to settle its liabilities for a period of at least 12 months from the date of signing these financial statements and therefore has prepared these financial statements on the going concern basis.

Under the downside model the forecasts have been stressed to show the effect if Care Providers were unable to cover the voids and the time taken to fill voids is 2 years. It assumes that the Registered Provider (the tenant) will not be able to pay the voids. Under the downside model the Company and its subsidiaries will be able to settle its liabilities for a period of at least 12 months from the date of signing these financial statements.

The Directors believe there are currently no material uncertainties in relation to the Group's ability to continue in operation for the period of at least 12 months from the date of approval of the Group's Financial Statements. The Board is, therefore, of the opinion that the going concern basis adopted in the preparation of the financial statements is appropriate.

Notes:

1  Due to a clerical error, there has been a short delay in the payment of an immaterial amount of rent representing c.£45k (0.16% of rent roll) for the quarter ended 31 December 2020. This is expected to be paid in full in the next 2 weeks.

2  Due to a clerical error, there has been a short delay in the payment of an immaterial amount of rent representing c.£45k (0.16% of rent roll) for the quarter ended 31 December 2020. This is expected to be paid in full in the next 2 weeks.

2.2. Currency

The Group financial information is presented in Sterling which is also the Company's functional currency.

3.  SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

In the application of the Group's accounting policies, which are described in note 4, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:

Estimates:

3.1.  Investment properties (note 14)

The Group uses the valuation carried out by its independent valuers as the fair value of its property portfolio. The valuation is based upon assumptions including future rental income and the appropriate discount rate. The valuers also make reference to market evidence of transaction prices for similar properties. Further information is provided in note 14.

The Group's properties have been independently valued by Jones Lang LaSalle Limited ("JLL" or the "Valuer") in accordance with the definitions published by the Royal Institute of Chartered Surveyors' ("RICS") Valuation - Professional Standards, July 2019, Global and UK Editions (commonly known as the "Red Book"). JLL is one of the most recognised professional firms within social housing valuation and has sufficient current local and national knowledge of both social housing generally and specialist supported housing ("SSH") and has the skills and understanding to undertake the valuations competently.

With respect to the Group's Financial Statements, investment properties are valued at their fair value at each Statement of Financial Position date in accordance with IFRS 13 which recognises a variety of fair value inputs depending upon the nature of the investment. Specifically:

Level 1 - Unadjusted, quoted prices for identical assets and liabilities in active (typically quoted) markets;

Level 2 - Quoted prices for similar assets and liabilities in active markets; and

Level 3 - External inputs are "unobservable". Value is the Director's best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and a determination of which assumptions should be applied in valuing such assets and with particular focus on the specific attributes of the investments themselves.

Given the bespoke nature of each of the Group's investments, all of the Group's investment properties are included in Level 3.

Judgements:

3.2.  Asset acquisitions

The Group acquires subsidiaries that own investment properties. At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the acquisition of an asset. The Directors consider whether a set of activities and assets which include an input and a substantive process that together significantly contribute to the ability to create outputs has been acquired in determining whether the acquisition represents the acquisition of a business. An optional concentration test is also performed which assesses whether substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets. If such a concentration exists, the transaction is not viewed as an acquisition of a business and no further assessment of the business combination guidance is required. The Group has not purchased, and does not intend to purchase, any subsidiaries which incorporate any assets other than investment property.

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

All corporate acquisitions during the period have been treated as asset purchases rather than business combinations because the optional concentration test has been performed which has determined that the fair value of the gross asset acquired is concentrated into a single asset, investment property and therefore is not a business combination.

3.3.  The Group as lessor (note 27)

The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of its properties and so accounts for the leases as operating leases. This evaluation involves judgement and the key factors considered include comparing the duration of the lease terms compared to the economic life of the underlying property asset, or in the case of sub-leased properties, the remaining life of the right-of-use asset arising from the headlease, and the present value of minimum lease payments compared to the fair value of the asset at acquisition.

The principal accounting policies applied in the preparation of the financial statements are set out below.

4.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1.  Basis of consolidation

The financial statements comprise the financial information of the Group as at the year-end date.

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. All intra-Group transactions, balances, income and expenses are eliminated on consolidation. The financial information of the subsidiaries are included in the financial statements from the date that control commences until the date that control ceases.

If an equity interest in a subsidiary is transferred but a controlling interest continues to be held after the transfer then the change in ownership interest is accounted for as an equity transaction.

Accounting policies of the subsidiaries are consistent with the policies adopted by the Company.

4.2.  Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially measured at cost, being the fair value of the consideration given, including expenditure that is directly attributable to the acquisition of the investment property. The Group recognises asset acquisitions on completion. After initial recognition, investment property is stated at its fair value at the Statement of Financial Position date. Gains and losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise in the Statement of Comprehensive Income. Subsequent expenditure is capitalised only when it is probable that future economic benefits are associated with the expenditure.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected to be obtained from the disposal. Any gain or loss arising on de-recognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recorded in profit or loss in the period in which the property is derecognised.

Investment properties under construction are financed by the Group where the Group enters into contracts for the development of a pre-let property under a forward funding agreement. The Group does not expose itself to any speculative development risk as the proposed property is pre-let to a tenant under an agreement for lease and the Group enters into a fixed price development agreement with the Developer. Investment properties under construction are initially recognised in line with stage payments made to the developer. The properties are revalued at fair value at each reporting date in the form of a work-in-progress value. The work-in-progress value of investment properties under construction is estimated as fair value of the completed asset less any costs still payable in order to complete, which includes the Developer's margin.

During the period between initial investment and the lease commencement date (practical completion of the works) a coupon interest due on the funds paid in the range of 6-6.75% per annum is payable by the Developer. The accrued coupon interest is considered as a discount on the fixed contract price. It does not result in any cash flows during the development, but reduces the outstanding balance payable to the developer on practical completion. When practical completion is reached, the completed investment property is transferred to operational assets at the fair value on the date of completion. 

Significant accounting judgements, estimates and assumptions made for the valuation of investment properties are discussed in note 3.

4.3.  Leases

Lessor

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group has determined that it retains all the significant risks and rewards of ownership of the properties it has acquired to date and accounts for the contracts as operating leases as discussed in note 3.

Properties leased out under operating leases are included in investment property in the Statement of Financial Position. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant leases.

Lessee

As a lessee the Group recognises a right-of-use asset within investment properties and a lease liability for all leases, which is included within other payables (note 18). The lease liabilities are measured at the present value of the remaining lease payments, discounted using an appropriate discount rate. The discount rate applied by the Group is the incremental borrowing rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. 

As leasehold properties meet the definition of investment property, the right-of-use assets are presented within investment property (note 14), and after initial recognition are subsequently measured at fair value.

Sub-leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the underlying property asset to the lessee. Sub-leases of leasehold properties are classified with reference to the right-of-use asset arising from the head lease. All other leases are classified as operating leases.

4. 

4.4.  Rent and other receivables

Rent and other receivables are amounts due in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets.

Rent receivables are initially recognised at fair value plus transaction costs and are subsequently carried at amortised cost, less provision for impairment.

Impairment provisions for current and non-current rent receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the rent receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the rent receivables. For rent receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised in the consolidated statement of comprehensive income. On confirmation that

the rent receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for all other receivables are recognised based on a forward-looking expected credit loss model using the general approach. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

4.5.    Cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash include cash in hand, cash held by lawyers and liquidity funds with a term of no more than three months that are readily convertible to a known amount of cash, and which are subject to an insignificant risk of changes in value.

Cash held by lawyers is money held in escrow for expenses expected to be incurred in relation to investment properties pending completion. These funds are available immediately on demand.

Restricted Cash represents cash held in relation to retentions for repairs, maintenance and improvement works by the vendors that is committed on the acquisition of the properties; and restricted bank borrowings.

4.6.    Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the Statement of Financial Position date, taking into account the risks and uncertainties surrounding the obligation.

4.7.  Trade and other payables

Trade and other payables are classified as current liabilities if payment is due within one year or less from the end of the current accounting period. If not, they are presented as non-current liabilities. Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method until settled.

4.8.  Bank and other borrowings

Bank borrowings and the Group's loan notes are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensure that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the Group Statement of Financial Position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payment while the liability is outstanding.

Modifications to borrowing terms are assessed when agreed with the lender to determine if they represent a substantial or non-substantial modification under IFRS 9. This involves the '10% test' comparing the discounted present value of the revised cash flows against the carrying value of the loan, as well as a review of any other qualitative changes to the terms. If the modifications are deemed substantial, the existing liability is extinguished and a new liability is recognised, with the difference between the carrying amount of the existing financial liability and the fair value of the modified financial liability at modification date being recognised in the Statement of Comprehensive Income.

4.9.  Taxation

Taxation on the element of the profit or loss for the period that is not exempt under UK REIT regulations would be comprised of current and deferred tax. Tax is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movement in equity, in which case it is recognised as a direct movement in equity. Current tax is the expected tax payable on any non REIT taxable income for the period, using tax rates enacted or substantively enacted at the Statement of Financial Position date, and any adjustment to tax payable in respect of previous periods.

4.10  Dividends payable to shareholders

Dividends to the Company's shareholders are recognised as a liability in the Group's Financial Statements in the period in which the dividends are approved. In the UK, interim dividends are recognised when paid .

4.11  Rental income

Rental income from investment property is recognised on a straight-line basis over the term of ongoing leases and is shown gross of any UK income tax. A rental adjustment is recognised from the rent review date in relation to unsettled rent reviews, where the Directors are reasonably certain that the rental uplift will be agreed.

Tenant lease incentives are recognised as a reduction of rental revenue on a straight-line basis over the term of the lease. These are recognised within trade and other receivables on the Statement of Financial Position.

When the Group enters into a forward funded transaction, the future tenant signs an agreement for lease. No rental income is recognised under the agreement for lease, but once the practical completion has taken place the formal lease is signed at which point rental income commences to be recognised in the Statement of Comprehensive Income.

4.12  Finance income and finance costs

Finance income is recognised as interest accrues on cash balances held by the Group. Finance costs consist of interest and other costs that the Group incurs in connection with bank and other borrowings. These costs are expensed in the period in which they occur. Borrowing costs that are separately identifiable and directly attributable to the acquisition or construction of forward funded assets that take a substantial period of time to complete are capitalised as part of the development cost in investment property (note 14).

4.13    Expenses

All expenses are recognised in the Statement of Comprehensive Income on an accruals basis.

4.14  Investment management fees

Investment advisory fees are recognised in the Statement of Comprehensive Income on an accruals basis.

4.15  Share issue costs

The costs of issuing or reacquiring equity instruments (other than in a business combination) are accounted for as a deduction from equity.

4.16        Treasury shares

Consideration paid or received for the purchase or sale of treasury shares is recognised directly in equity. The cost of treasury shares held is presented as a separate reserve ("the treasury share reserve"). Any excess of the consideration received on the sale of treasury shares over the weighted average cost of the shares sold is credited to retained earnings.

5.  RENTAL INCOME

	Year ended		Year ended
	31 December 20 20		31 December 2019
	£'000		£'000
Rental income - freehold assets	26,406		19,205
Rental income - leasehold assets	1,987		1,907
	28,393		21,112

  The lease agreements between the Group and the Registered Providers are fully repairing and insuring leases. The Registered Providers are responsible for the settlement of all present and future rates, taxes, costs and other impositions payable in respect of the property. As a result, no direct property expenses were incurred.

All rental income arose within United Kingdom.

6.  DIRECTORS' REMUNERATION

	Year ended		Year ended
	31 December 20 20		31 December 201 9
	£'000		£'000
Directors' fees	275		275
Employer's National Insurance Contributions	32		32
	307		307

  The Directors are remunerated for their services at such rate as the Directors shall from time to time determine. The Chairman receives a Director's fee of £75,000 per annum (2019: £75,000), and the other Directors of the Board receive a fee of £50,000 per annum (2019: £50,000). The Directors are also entitled to an additional fee of £7,500 (2019: £7,500) in connection with the production of every prospectus by the Company (including the initial Issue). (The additional fees are treated as a cost of issue not included as an expense through the Statement of Comprehensive Income).

A summary of the Directors' emoluments, including the disclosures required by the Companies Act 2006, is set out in the Directors' Remuneration Report within the Corporate Governance Report. None of the Directors received any advances or credits from any group entity during the year.

7.  PARTICULARS OF EMPLOYEES

The Group had no employees during the year other than the directors (201 9 : none).

8.  MANAGEMENT FEES

	Year ended		Year ended
	31 December 20 20		31 December 201 9
	£'000		£'000
Management fees	4,100		3,869
	4,100		3,869

On 20 July 2017 Triple Point Investment Management LLP was appointed as the delegated investment manager of the Company by entering into the property management services and delegated portfolio management agreement. Under this agreement the delegated investment manager will advise the Company and provide certain management services in respect of the property portfolio. A Deed of Variation was signed on 23 August 2018. This defined cash balances in the Net Asset Value calculation in respect of the management fee as "positive uncommitted cash balances after deducting any borrowings". The management fee is an annual management fee which is calculated quarterly in arrears based upon a percentage of the last published Net Asset Value of the Group (not taking into account uncommitted cash balances after deducting borrowings as described above) as at 31 March, 30 June, 30 September and 31 December in each year on the following basis with effect from Admission: 

· on that part of the Net Asset Value up to and including £250 million, an amount equal to 1% of such part of the Net Asset Value; 

· on that part of the Net Asset Value over £250 million and up to and including £500 million, an amount equal to 0.9% of such part of the Net Asset Value; 

· on that part of the Net Asset Value over £500 million and up to and including £1 billion, an amount equal to 0.8% of such part of the Net Asset Value; 

· on that part of the Net Asset Value over £1 billion, an amount equal to 0.7% of such part of the Net Asset Value.

Management fees of £4,100,000 (2019: £3,869,000) were chargeable by TPIM during the year. At the year-end £1,132,000 (2019: £986,000) was due to TPIM.

A Deed of Variation was signed on 30 June 2020 to appoint TPIM as the Group's alternative investment fund manager.

9.  GENERAL AND ADMINISTRATIVE EXPENSES

	Year ended		Year ended
	31 December 20 20		31 December 201 9
	£'000		£'000
Legal and professional fees	666		735
Audit fees	227		167
Administration fees	327		353
Lease transfer costs	343		-
Directors' fees (note 6)	307		307
Other administrative expenses	637		247
	2,507		1,809

  On 1 October 2019 Hanway Advisory Ltd, who are associated with Triple Point Investment Management LLP the delegated investment manager, were appointed to provide Administration and Company Secretarial Services to the Group. 

During the year Company Secretarial Services of £315,000 (2019: £336,000) were chargeable by Hanway Advisory Ltd. 

The audit fees in the table above are inclusive of VAT, and therefore differ to the fees in note 10 which are reported net of VAT.

On 30 June 2020 Triple Point Investment Management LLP was appointed as the fund's Alternative Investment Fund Manager (AIFM) to perform certain functions for the Group. During the year AIFM services of £76,000 (2019: £nil) were chargeable by TPIM. At the year-end £38,000 (2019: £nil) was due to TPIM.

Lease transfer costs represent legal and administrative costs incurred in relation to the transfer of 12 leases from Westmoreland.

10.  AUDIT FEES

	Year ended		Year ended
	31 December 20 20		31 December 201 9
	£'000		£'000
Group audit fees - current year	155		124
Group audit fees - prior year	15		-
Subsidiary audit fees	19		15
	189		139

Non audit fees paid to BDO LLP included £49,000 (2019: £45,000) in relation to quarterly eNAV and the half year interim reviews.

The audit fee for the following subsidiaries has been borne by the Company:

· TP REIT Super Holdco Limited	· Norland Estates Limited
· TP REIT Holdco 1 Limited	· TP REIT Propco 2 Limited
· TP REIT Holdco 2 Limited	· TP REIT Propco 3 Limited
· TP REIT Holdco 3 Limited	· TP REIT Propco 4 Limited
	· TP REIT Holdco 4 Limited

11.  FINANCE INCOME

	Year ended		Year ended
	31 December 20 20		31 December 201 9
	£'000		£'000
Other interest income	43		50
Interest on liquidity funds	59		179
	102		229

12.  FINANCE COSTS

	Year ended		Year ended
	31 December 20 20		31 December 201 9
	£'000		£'000
Interest payable on bank borrowings	4,627		2,992
Borrowing costs capitalised (note 14)	(128)		(60)
Amortisation of loan arrangement fees	1,163		457
Head lease interest expense	43		50
Bank charges	18		9
	5,723		3,448
Total finance cost for financial liabilities not at fair value through profit or loss	5,705		3,439

13.  TAXATION

As a UK REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business, provided it meets certain conditions as set out in the UK REIT regulations. For the current period, the Group did not have any non-qualifying profits and accordingly there is no tax charge in the period. If there were any non-qualifying profits and gains, these would be subject to corporation tax. It is assumed that the Group will continue to be a group UK REIT for the foreseeable future, such that deferred tax has not been recognised on temporary differences relating to the property rental business.

	Year ended		Year ended
	31 December 20 20		31 December 201 9
	£'000		£'000
Current tax
Corporation tax charge for the year	-		-
Total current income tax charge in the profit or loss	-		-

The tax charge for the period is less than the standard rate of corporation tax in the UK of 19% (2018:19%). The differences are explained below.

	Year ended		Year ended
	31 December 20 20		31 December 201 9
	£'000		£'000
Profit before tax	24,594		23,717
Tax at UK corporation tax standard rate of 19%	4,673		4,506
Change in value of investment properties	(1,500)		(2,244)
Exempt REIT income	(3,539)		(2,673)
Amounts not deductible for tax purposes	21		34
Unutilised residual current period tax losses	345		377
	-		-

UK REIT exempt income includes property rental income that is exempt from UK Corporation Tax in accordance with Part 12 of CTA 2010.

14.  INVESTMENT PROPERTY

				Operational assets £'000		Properties under development £'000		Total £'000
As at 1 January 2020				454,400		17,949		472,349
Acquisitions and additions				77,126		14,711		91,837
Fair value adjustment				7,049		908		7,957
Changes to head lease right-of-use assets				3		-		3
Borrowing costs capitalised (note 12)				-		128		128
Transfer of completed properties				27,128		(27,128)		--
Reclassified to assets held for sale				(173)		-		(173)
As at 31 December 2019				565,533		6,568		572,101
As at 1 January 2019				316,117		7,952		324,069
Acquisitions and additions				114,835		21,428		136,263
Fair value adjustment				11,134		675		11,809
Changes to head lease right-of-use assets				148		-		148
Borrowing costs capitalised (note 12)				-		60		60
Transfer of completed properties				12,166		(12,166)		-
As at 31 December 2019				454,400		17,949		472,349

Reconciliation to independent valuation:		31 December 2020		31 December 2019
		£'000		£'000
Investment property valuation		571,463		471,635
Fair value adjustment - headlease ground rent		1,457		1,453
Fair value adjustment - lease incentive debtor		(819)		(739)
		572,101		472,349

Properties under development represent contracts for the development of a pre-let property under a forward funding agreement. Where the development period is expected to be a substantial period, the borrowing costs that can be directly attributed to getting the asset ready for use are capitalised as part of the investment property value.

The carrying value of leasehold properties at 31 December 2020 was £36.5 million (2019: £35.3 million).

In accordance with "IAS 40: Investment Property", the Group's investment properties have been independently valued at fair value by Jones Lang LaSalle Limited ("JLL"), an accredited external valuer with recognised and relevant professional qualifications. The independent valuers provide their fair value of the Group's investment property portfolio every three months.

JLL were appointed as external valuers by the Board on 11 December 2017. JLL has provided valuations services to the Group. The proportion of the total fees payable by the Company to JLL's total fee income is minimal. Additionally, JLL has a rotation policy in place whereby the signatories on the valuations rotate after 7 years.

% Key Statistic

The metrics below are in relation to the total investment property portfolio held as at 31 December 2020.

Portfolio metrics		31 December 20 20	31 December 201 9
Capital Deployed (£'000) *		512,296	424,266
Number of Properties		445	388
Number of Tenancies***		341	300
Number of Registered Providers***		20	16
Number of Local Authorities***		155	149
Number of Care Providers***		98	88
Valuation NIY**		5.27%	5.27%

*calculated excluding acquisition costs

**calculated using IAS 40 valuations (excluding forward funding acquisitions)

*** calculated excluding forward funding acquisitions

	31 December 20 20		31 December 201 9
Region	*Cost £'000	% of funds invested	*Cost £'000	% of funds invested
North West	115,025	22.5	93,451	22.0
West Midlands	88,397	17.3	65,189	15.4
East Midlands	65,559	12.8	59,929	14.1
London	49,213	9.6	49,906	11.8
North East	47,088	9.2	43,691	10.3
Yorkshire	46,013	9.0	30,245	7.1
South East	45,682	8.9	43,697	10.3
South West	27,900	5.4	21,547	5.1
East	20,229	3.9	11,514	2.7
Scotland	4,530	0.9	2,437	0.6
Wales	2,660	0.5	2,660	0.6
Total	512,296	100	424,266	100

*excluding acquisition costs

Fair value hierarchy

	Date of valuation	Total	Quoted prices in active markets (Level 1)	Significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)
		£'000	£'000	£'000	£'000
Assets measured at fair value: Investment properties	31 December 2020	572,101	-	-	572,101
Investment properties	31 December 2019	472,349	-	-	472,349

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

The valuations have been prepared in accordance with the RICS Valuation - Professional Standards (incorporating the International Valuation Standards) by JLL, one of the leading professional firms engaged in the social housing sector.

As noted previously, all of the Group's investment properties are reported as Level 3 in accordance with IFRS 13 where external inputs are "unobservable" and value is the Directors' best estimate, based upon advice from relevant knowledgeable experts.

In this instance, the determination of the fair value of investment property requires an examination of the specific merits of each property that are in turn considered pertinent to the valuation.

These include i) the regulated social housing sector and demand for the facilities offered by each Specialised Supported Housing ("SSH") property owned by the Group; ii) the particular structure of the Group's transactions where vendors, at their own expense,  meet  the majority of the refurbishment costs of each property and certain purchase costs; iii) detailed financial analysis with discount rates supporting the carrying value of each property; iv) underlying rents for each property being subject to independent benchmarking and adjustment where the Group considers them too high (resulting in a price reduction for the purchase or withdrawal from the transaction); and v) a full repairing and insuring lease with annual indexation based on CPI or CPI+1% and effectively 25 years outstanding, in most cases with a Housing Association itself regulated by the Homes and Communities Agency.

The valuer treats the fair value for forward funded assets as work-in-progress value whereby the Group forward funds a development by committing a total sum, the Gross Development Value ("GDV") over the development period in order to receive the completed development at practical completion. The work-in-progress value of the asset increases during the construction period accordingly as payments are made by the Group which leads, in turn, to a pro-rata increase in the valuation in each quarter valuation assuming there are no material events affecting the GDV adversely. Interest accrued during construction as well as an estimation of future interest accrual prior to lease commencement will be deducted from the balancing payment which is the final payment to be drawn by the developer prior to the Group receiving the completed building.

Descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values are as follows:

Valuation techniques: Discounted cash flows

The discounted cash flows model considers the present value of net cash flows to be generated from the property, taking into account the expected rental growth rate and lease incentive costs such as rent-free periods. The expected net cash flows are then discounted using risk-adjusted discount rates.  

There are three main unobservable inputs that determine the fair value of the Group's investment property: 

1. the rate of inflation as measured by CPI; it should be noted that all leases benefit from either CPI or RPI indexation; and

2. the discount rate applied to the rental flows.

Key factors in determining the discount rates to assess the level of uncertainty applied include: the performance of the regulated social housing sector and demand for each specialist supported housing property owned by the Group; costs of acquisition and refurbishment of each property; the anticipated future underlying cash flows for each property; benchmarking of each underlying rent for each property (passing rent); and the fact that all of the Group's properties have the benefit of full repairing and insuring leases entered into by a Housing Association.

All of the properties within the Group's portfolio benefit from leases with annual indexation based upon CPI or RPI. The fair value measurement is based on the above items highest and best use, which does not differ from their actual use.

Sensitivities of measurement of significant unobservable inputs

As set out within the significant accounting estimates and judgements in note 3, the Group's property portfolio valuation is open to judgements and is inherently subjective by nature.

As a result, the following sensitivity analysis has been prepared:

Average discount rate and range:

The average discount rate used in the Group's property portfolio valuation is 6.62% (2019: 6.60%).

The range of discount rates used in the Group's property portfolio valuation is from 6.3% to 7.4% (2019: 6.3% to 7.1%).

	-0.5%  change in	+0.5% change in	+0.25% change  in	-0.25% change in
	Discount Rate	Discount Rate	CPI	CPI
	£'000	£'000	£'000	£'000
Changes in the IFRS fair value of investment properties as at 31 December 20 20	35,919	(32,643)	18,635	(17,811)
Changes as at 31 December 20 19	28,803	(26,203)	14,911	(14,257)

15.  TRADE AND OTHER RECEIVABLES

	31 December 20 20		31 December 201 9
	£'000		£'000
Prepayments	608		1,528
Other receivables	613		543
Lease incentive debtor	819		739
Rent receivable	2,112		1,477
	4,152		4,287

The Directors consider that the carrying value of trade and other receivables approximate their fair value. All amounts are due to be received within one year from the reporting date.

The Group applies the IFRS 9 simplified approach for rent receivables to measure expected credit losses using a lifetime expected credit loss provision for rent receivables. To measure expected credit losses on a collective basis, rent receivables are grouped based on similar credit risk and ageing.

The expected loss rates are based on the Group's historical credit losses experienced since incorporation in 2017. The historical loss rates are then adjusted for the current and forward-looking information on macroeconomic factors affecting the Group's tenants. Both the expected credit loss provision and the incurred loss provision in the current and prior period are immaterial. The Group does not hold any collateral as security.

The Group applies the general approach to providing for expected credit losses under IFRS 9 for other receivables. Both the expected credit loss and the incurred loss provision in the current and prior year are immaterial.

16.  CASH, CASH EQUIVALENTS AND RESTRICTED CASH

	31 December 20 20		31 December 201 9
	£'000		£'000
Cash held by lawyers	3,938		771
Liquidity funds	-		50,000
Restricted cash	849		2,979
Cash at bank	48,914		13,961
	53,701		67,711

Liquidity funds refer to money placed in money market funds. These are highly liquid funds with accessibility within 24 hours and subject to insignificant risk of changes in value. Interest at market rate between 0.59% and 0.75% per annum is earned on these deposits.

Cash held by lawyers is money held in escrow for expenses expected to be incurred in relation to investment properties pending completion. These funds are available immediately on demand.

Restricted cash represents retention money (held by lawyers only) in relation to repair, maintenance and improvement works by the vendors to bring the properties up to satisfactory standards for the Group and the tenants. The cash is committed on the acquisition of the properties. Restricted cash also includes forward funding monies held by Lloyds in a "lockbox" account which requires Lloyds to release on instruction, and also funds held in an escrow account in relation to the transfer of leases.

	31 December 20 20		31 December 201 9
	£'000		£'000
Total Cash, cash equivalents and restricted cash	53,701		67,711
Restricted cash	(849)		(2,979)
Cash reported on Statement of Cash Flows	52,852		64,732

17.  TRADE AND OTHER PAYABLES

Current liabilities

	31 December 20 20		31 December 201 9
	£'000		£'000
Other creditors	1,922		5,521
Accruals	2,929		1,913
Trade payables	79		672
Head lease ground rent (note 2 7 )	39		39
	4,969		8,145

The Other Creditors balance consists of retentions due on completion of outstanding works. The Directors consider that the carrying value of trade and other payables approximate their fair value. All amounts are due for payment within one year from the reporting date .

18.  OTHER PAYABLES

Non-current liabilities

	31 December 20 20		31 December 201 9
	£'000		£'000
Head lease ground rent (note 2 7 )	1,417		1,414
Rent deposit	100		100
	1,517		1,514

19.  BANK AND OTHER BORROWINGS

	31 December 20 20		31 December 201 9
	£'000		£'000
Bank and other borrowings drawn at year end	198,500		169,092
Less: loan issue costs incurred	(4,736)		(4,594)
Add: loan issue costs amortised	1,163		457
Unamortised costs at end of the year	(3,573)		(4,137)
Balance at year end	194,927		164,955

At 31 December 2020 there were undrawn bank borrowings of £30 million (2019: £29.4 million).

On 20 July 2018, the Group entered into a long dated, fixed rate, interest only financing arrangement in the form of a private placement of loan notes in an amount of £68.5 million with MetLife and affiliated funds. The Loan Notes are secured against a portfolio of specialist supported living assets throughout the UK, worth approximately £184 million. The Loan Notes represent a loan-to-value of 40% of the value of the secured pool of assets and are split into two tranches: Tranche-A, is an amount of £41.5 million, has a term of 10 years from utilisation and is priced at an all-in coupon of 2.924% pa; and Tranche-B, is an amount of £27 million, has a term of 15 years from utilisation and is priced at an all-in coupon of 3.215% pa. On a blended basis, the weighted average term is 12 years carrying a weighted average fixed rate coupon of 3.039% pa.

On 21 December 2018 the Group signed a secured £70 million Revolving Credit Facility with Lloyds Bank. The floating rate Revolving Credit Facility had an initial term of four years expiring on 20 December 2022. This could be extended by a further two years to 20 December 2024 if requested but is at the sole discretion of Lloyds Bank. The interest rate for amounts drawn is 1.85% per annum over three-month LIBOR. The revolving credit facility represents a loan-to-value of 40% secured against a defined portfolio of the Group's specialist supported housing assets.

On 29 October 2019 the Group secured a £60 million extension to the existing Revolving Credit Facility. As part of the extension, National Westminster Bank plc provided debt alongside Lloyds Bank plc and on identical terms providing the Group with the ability to draw a total of up to 130 million under the Revolving Credit Facility. 

On 15 December 2020, the Group secured a further extension of £30 million to the Revolving Credit Facility, and simultaneously extended the RCF's initially agreed four-year term by a year to 20 December 2023. The term of the RCF may be extended by a further year, to 20 December 2024 (subject to the consent of the lenders). Under the increase and extension of the RCF, the interest rate for drawn funds remains at 1.85% per annum over three-month LIBOR. In the light of the ceasing of LIBOR as a benchmark rate during 2021, the Group has negotiated and agreed provisions within the terms of the increase and extension of the Revolving Credit Facility setting pre-agreed terms for the transition of LIBOR to the new benchmark rate SONIA. The date for the transition from LIBOR to SONIA is 1 July 2021. For undrawn loan amounts the Company pays a commitment fee in the amount of 40% of the margin.  As at 31 December 2020, £130 million had been drawn under the revolving credit facility and when fully drawn, the RCF will represent a loan-to-value of 40% secured against a defined portfolio of the Group's specialist supported housing assets located throughout the UK and held in a wholly-owned Group subsidiary.

All financing arrangements are on a non-recourse basis to the Group.

The Group has met all compliance with its financial covenants on the above loans throughout the year.

The transition to SONIA is not expected to result in a substantial modification to the existing loan liability under IFRS 9 as the effect to the present value of the contractual cash flows are not expected to meet the 10% test.

Undrawn committed bank facilities - maturity profile

31 December 20 20	Total		< 1 year		1 to 2 years		3 to 5 years		> 5 years
	£'000		£'000		£'000		£'000		£'000
At 31 December 20 20	30,000		-		-		30,000		-
At 31 December 201 9	29,408		-		-		29,408		-

20.  NOTES SUPPORTING STATEMENT OF CASH FLOWS

Reconciliation of liabilities to cash flows from financing activities:

		Bank borrowings		Head lease		Total
		£'000		£'000		£'000
		(note 19)		(note 17,18)
At 1 January 2020		164,955		1,453		166,408
Cashflows:
Bank borrowings drawn		29,408		-		29,408
Repayment of principal on head lease liabilities		-		(39)		(39)
Loan arrangement fees paid		(1,101)		-		(1,101)
Non-cash flows:
-Amortisation of loan arrangement fees		1,163		-		1,163
-Loan arrangement fees paid in advance recognised in prepayments		502		-		502
-Head lease additions		-		-		-
-Accrued interest on head lease liabilities		-		42		42
At 31 December 2019		194,927		1,456		196,383

		Bank borrowings		Head lease		Total
		£'000		£'000		£'000
		(note 19)		(note 17,18)
At 1 January 2019		67,361		1,306		68,667
Cashflows:
Bank borrowings drawn		100,592		-		100,592
Repayment of principal on head lease liabilities		-		(39)		(39)
Loan arrangement fees paid		(3,455)		-		(3,455)
Non-cash flows:
-Amortisation of loan arrangement fees		457		-		457
-Head lease additions		-		138		138
-Accrued interest on head lease liabilities		-		48		48
At 31 December 2019		164,955		1,453		166,408

21.  SHARE CAPITAL

		Issued and fully paid		Issued and fully paid
		Number		£'000
At 1 January 20 20		351,352,210		3,514
Issued on public offer on 2 1 October 20 20		51,886,792		519
At 31 December 2018 and 31 December 20 20		403,239,002		4,033

		Issued and fully paid		Issued and fully paid
		Number		£'000
At 1 January 2019 and 31 December 2019		351,352,210		3,514

The Company achieved admission to the specialist fund segment of the main market of the London Stock Exchange on 8 August 2017, raising £200 million. As a result of the IPO, at 8 August 2017, 200,000,000 shares at one pence each were issued and fully paid. The Company was admitted to the premium segment of the Official List of the Financial Conduct Authority and migrated to trading on the premium segment of the Main Market on 27 March 2018.

Following a fourth public offer on 21 October 2020, a further 51,886,792 Ordinary Shares of one pence each were issued and fully paid.

Rights, preferences and restrictions on shares: All Ordinary Shares carry equal rights, and no privileges are attached to any shares in the Company. All the shares are freely transferable, except as otherwise provided by law. The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

The table above includes 450,000 treasury shares (note 23). Treasury shares do not hold any voting rights.

22.  SHARE PREMIUM RESERVE

The share premium relates to amounts subscribed for share capital in excess of nominal value.

	31 December 20 20		31 December 201 9
	£'000		£'000
Balance at beginning of year	151,157		151,157
Share premium arising on Ordinary Shares issue	54,481		-
Share issue costs capitalised	(1,862)		-
Balance at end of year	203,776		151,157

23.  TREASURY SHARES RESERVE

	31 December 20 20		31 December 201 9
	£'000		£'000
Balance at beginning of year	(378)		-
Own shares repurchased	-		(378)
Balance at end of year	(378)		(378)

The treasury shares reserve relates to the value of shares purchased by the Company in excess of nominal value. No treasury shares were purchased during the current year. During the year ended 31 December 2019, the Company purchased 450,000 of its own 1p Ordinary Shares at a total gross cost of £377,706 (£374,668 cost of shares and £3,038 associated costs). As at 31 December 2020 and 31 December 2019, 450,000 1p Ordinary Shares were held by the Company.

24.  CAPITAL REDUCTION RESERVE

	31 December 20 20		31 December 201 9
	£'000		£'000
Balance at beginning of year	166,154		183,921
Dividends paid	-		(17,767)
Balance at end of year	166,154		166,154

The capital reduction reserve relates to the distributable reserve established on cancellation of the share premium reserve. Dividends have been distributed out of Retained Earnings rather than the Capital Reduction Reserve in the year ended 31 December 2020.

25.  RETAINED EARNINGS

	31 December 20 20		31 December 201 9
	£'000		£'000
Balance at beginning of year	49,286		25,569
Total comprehensive income for the year	24,594		23,717
Dividends paid	(18,814)		-
Balance at end of year	55,066		49,286

26.  DIVIDENDS

	Year ended 31 December 20 20		Year ended 31 December 20 19
	£'000		£'000
1.25p for the 3 months to 31 December 2018 paid on 29 March 2019	-		4,392
1.27p for the 3 months to 31 March 2019 paid on 28 June 2019	-		4,463
1.27p for the 3 months to 30 June 2019 paid on 27 September 2019	-		4,456
1.27p for the 3 months to 30 September 2019 paid on 20 December 2019	-		4,456
1.285p for the 3 months to 31 December 2019 paid on 27 March 2020	4,509		-
1.295p for the 3 months to 31 March 2020 paid on 26 June 2020	4,544		-
1.295p for the 3 months to 30 June 2020 paid on 25 September 2020	4,544		-
1.295p for the 3 months to 30 September 2020 paid on 18 December 2020	5,217		-
	18,814		17,767

On 4 March 2021, the Company declared an interim dividend of 1.295 pence per Ordinary Share for the period 1 October 2020 to 31 December 2020. The total dividend of £5.21 million will be paid on 26 March 2021 to Ordinary shareholders on the register on 12 March 2021.

The Company intends to pay dividends to shareholders on a quarterly basis and in accordance with the REIT regime.

Dividends are not payable in respect of its Treasury shares held.

27.  LEASES

A.  Leases as lessee

The Group leases a number of properties that were previously held as finance leases. In the prior year these were reclassified to right-of-use assets under IFRS 16.

The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be paid after the reporting date:

		< 1 year		2-5 years		> 5 years		Total
		£'000		£'000		£'000		£'000
Lease payables
31 December 2020		40		159		14,366		14,565
31 December 2019		40		158		7,123		7,321

	31 December 20 20		31 December 201 9
	£'000		£'000
Current liabilities (note 17 )	39		39
Non-current liabilities (note 18)	1,417		1,414
Balance at end of year	1,456		1,453

The above is in respect of properties held by the Group under leasehold. There are 21 properties (2019: 20) held under leasehold with lease ranges from 125 years to 999 years.

The Group's leasing arrangements with lessors are headlease arrangements on land and buildings that have been sub-let under the Group's normal leasing arrangements (see above) to tenants. The Group carries its interest in these headlease arrangements as long leasehold investment property (note 14).

B.  Leases as lessor

The Group leases out its investment properties (see note 14 ).

The future minimum lease payments receivable by the Group under non-cancellable operating leases are as follows:

		< 1 year		2-5 years		> 5 years		Total
		£'000		£'000		£'000		£'000
Lease receivables
31 December 2020		31,585		126,471		665,886		823,942
31 December 2019		25,460		101,841		530,954		658,255

		< 1 year		2-5 years		> 5 years		Total
		£'000		£'000		£'000		£'000
31 December 2018		18,290		74,449		415,211		507,950

  Leases are direct-let agreements with Registered Providers for a term of at least 15 years and usually between 20 to 25 years with rent linked to CPI or RPI. All leases are full repairing and insuring (FRI) leases, the tenants are therefore obliged to repair, maintain and renew the properties back to the original conditions.

The following table gives details of the percentage of annual rental income per Registered Provider with more than a 10% share:

	31 December 20 20		31 December 201 9
Registered Provider	% of total annual rent		% of total annual rent
Inclusion Housing CIC	31		21
Falcon Housing Association CIC	11		13
Parasol Homes (previously 28A Supported Living)	11		13
My Space	-		11
Hilldale	-		11

Annual rental income for My Space and Hilldale amounted to less than 10% of the total annual rental income as at 31 December 2020.

Other disclosures about leases are provided in notes 5, 14, 17, 20 and 32.

28.  CONTROLLING PARTIES

As at 31 December 20 20 there is no ultimate controlling party of the Company.

29.  SEGMENTAL INFORMATION

IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal financial reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker (which in the Group's case is delegated to the Delegated Investment Adviser TPIM).

The internal financial reports received by TPIM contain financial information at a Group level as a whole and there are no reconciling items between the results contained in these reports and the amounts reported in the financial statements.

The Group's property portfolio comprised 445 (2019: 388) Social Housing properties as at 31 December 2020 in England, Wales and Scotland. The Directors consider that these properties represent a coherent and diversified portfolio with similar economic characteristics and, as a result, these individual properties have been aggregated into a single operating segment.  In the view of the Directors there is accordingly one reportable segment under the provisions of IFRS 8. All of the Group's properties are engaged in a single segment business with all revenue, assets and liabilities arising in the UK, therefore, no geographical segmental analysis is required by IFRS 8. 

30.  RELATED PARTY DISCLOSURE

Directors are remunerated for their services at such rate as the Directors shall from time to time determine. The Chairman receives a Director's fee of £75,000 per annum (2019: £75,000), and the other directors of the Board receive a fee of £50,000 per annum (2019: £50,000). The Directors are also entitled to an additional fee of £7,500 in connection with the production of every prospectus by the Company (including the Issue).

Dividends of the following amounts were paid to the Directors during the year:

Chris Phillips: £2,836 (2019: £2,776)

Peter Coward: £3,938 (2019: £3,823)

Paul Oliver: £4,031 (2019: £3,945)

Tracey Fletcher-Ray: £489 (2019: nil)

No shares were held by Ian Reeves as at 31 December 2020 (31 December 2019: nil).

31.  CONSOLIDATED ENTITIES

The Group consists of a parent Company, Triple Point Social Housing REIT PLC, incorporated in the UK and a number of subsidiaries held directly by the Company, which operate and are incorporated in the UK and Guernsey. The principal place of business of each subsidiary is the same as their place of incorporation.

The Group owns 100% of the equity shares of all subsidiaries listed below and has the power to appoint and remove the majority of the Board of those subsidiaries. The relevant activities of the below subsidiaries are determined by the Board based on simple majority votes. Therefore, the Directors of the Company concluded that the Company has control over all these entities and all these entities have been consolidated within the financial statements. The principal activity of all the subsidiaries relates to property investment.

The subsidiaries listed below were held as at 31 December 2020:

Name of Entity	Registered Office	Country of Incorporation	Ownership %
TP REIT Super HoldCo Limited*	1 King William Street, London, EC4N 7AF	UK	100%
TP REIT HoldCo 1 Limited	1 King William Street, London, EC4N 7AF	UK	100%
TP REIT HoldCo 2 Limited	1 King William Street, London, EC4N 7AF	UK	100%
TP REIT HoldCo 3 Limited	1 King William Street, London, EC4N 7AF	UK	100%
TP REIT HoldCo 4 Limited	1 King William Street, London, EC4N 7AF	UK	100%
TP REIT PropCo 2 Limited	1 King William Street, London, EC4N 7AF	UK	100%
TP REIT PropCo 3 Limited	1 King William Street, London, EC4N 7AF	UK	100%
TP REIT PropCo 4 Limited	1 King William Street, London, EC4N 7AF	UK	100%
Norland Estates Limited	1 King William Street, London, EC4N 7AF	UK	100%
FPI Co 244 Limited	1 King William Street, London, EC4N 7AF	UK	100%
PSCI Holdings Limited*	1 Le Truchot St Peter Port, GY1 1WD	Guernsey	100%
SL Hexham Limited	1 Le Truchot St Peter Port, GY1 1WD	Guernsey	100%
Creed Housing SPV 1 Limited	1 King William Street, London, EC4N 7AF	UK	100%
MSL (87) Limited	1 King William Street, London, EC4N 7AF	UK	100%
The Limes 1 Limited	1 King William Street, London, EC4N 7AF	UK	100%
Allerton SPV 16 Limited	1 King William Street, London, EC4N 7AF	UK	100%
SL Carsic Lane	1 Le Truchot St Peter Port, GY1 1WD	Guernsey	100%
SL Auckland	1 Le Truchot St Peter Port, GY1 1WD	Guernsey	100%
HS Derby 1 Limited	1 King William Street, London, EC4N 7AF	UK	100%
Rosewood (Dunwoody) Limited	1 King William Street, London, EC4N 7AF	UK	100%
Grolar Developments SPV 5 Limited	1 King William Street, London, EC4N 7AF	UK	100%
TDIONEDEV Limited	1 King William Street, London, EC4N 7AF	UK	100%
Creed Housing SPV 3 Limited	1 King William Street, London, EC4N 7AF	UK	100%
* indicates entity is a direct subsidiary of Triple Point Social Housing REIT plc.

The subsidiaries listed below were acquired in the year to 31 December 2020:
Name of Entity	Registered Office		Country of Incorporation	Ownership %
SL Hexham Limited	1 Le Truchot St Peter Port, GY1 1WD		Guernsey	100%
Creed Housing SPV 1 Limited	1 King William Street, London, EC4N 7AF		UK	100%
MSL (87) Limited	1 King William Street, London, EC4N 7AF		UK	100%
The Limes 1 Limited	1 King William Street, London, EC4N 7AF		UK	100%
Allerton SPV 16 Limited	1 King William Street, London, EC4N 7AF		UK	100%
SL Carsic Lane	1 Le Truchot St Peter Port, GY1 1WD		Guernsey	100%
SL Auckland	1 Le Truchot St Peter Port, GY1 1WD		Guernsey	100%
HS Derby 1 Limited	1 King William Street, London, EC4N 7AF		UK	100%
Rosewood (Dunwoody) Limited	1 King William Street, London, EC4N 7AF		UK	100%
Grolar Developments SPV 5 Limited	1 King William Street, London, EC4N 7AF		UK	100%
TDIONEDEV Limited	1 King William Street, London, EC4N 7AF		UK	100%
Creed Housing SPV 3 Limited	1 King William Street, London, EC4N 7AF		UK	100%
The subsidiaries listed below have been struck off since 31 December 2020:
FPI Co 244 Ltd	1 King William Street, London, EC4N 7AF	UK		100%
Creed Housing SPV 1 Ltd	1 King William Street, London, EC4N 7AF	UK		100%

32.  FINANCIAL RISK MANAGEMENT

The Group is exposed to market risk, interest rate risk, credit risk and liquidity risk in the current and future periods. The Board oversees the management of these risks. The Board's policies for managing each of these risks are summarised below.

32.1  Market risk

The Group's activities will expose it primarily to the market risks associated with changes in property values.

Risk relating to investment in property

Investment in property is subject to varying degrees of risk. Some factors that affect the value of the investment in property include:

      · changes in the general economic climate;

      · competition for available properties;

      · obsolescence; and

      · Government regulations, including planning, environmental and tax laws.

Variations in the above factors can affect the valuation of assets held by the Group and as a result can influence the financial performance of the Group.

The factors mentioned above have not had a material impact on the valuations of the investment properties as at 31 December 2020, and are not expected to in the immediate future, but will continue to be monitored closely.

Please refer to the Corporate Social Responsibility Report on pages 42 to 43 for further information on Environmental Policy which may effect the investment property valuations going forward. 

32.2.  Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Revolving Credit Facility with Lloyds Bank has been secured on a floating rate basis whereby the Group pays a margin of 1.85% per annum above 3-month LIBOR for drawn loan amounts throughout the loan term. Under the increase and extension of the RCF, the interest rate for drawn funds remains at 1.85% per annum over three-month LIBOR. In the light of the ceasing of LIBOR as a benchmark rate during 2021, the Group has negotiated and agreed provisions within the terms of the increase and extension of the RCF setting pre-agreed terms for the transition of LIBOR to the new benchmark rate SONIA. The date for the transition from LIBOR to SONIA is 1 July 2021.

The director's decision was not to put hedging arrangements in place from the date of signing the initial agreement, as up until the most recent Amended and Restated Agreement signed on 14 December 2020 under the terms of the Revolving Credit Facility, the Group has had full flexibility, and at its sole discretion, to put hedging arrangements in place at any time during the loan term.

In the Amended and Restated Agreement signed on 14 December 2020, a Hedging Trigger Event has been introduced which means a hedging agreement will be required to be entered into if the Projected Interest Cover falls below 400% on any date falling on or after the Rate Switch Date (which is the earlier of the 1 July 2021 or a date mutually agreed by the relevant parties). At 31 December 2020, the projected interest was 696%.

Throughout the loan term the Group has closely monitored changes in interest rates to determine if it is necessary to implement hedging. The liquidity table in 32.4 below outlines the bank borrowings and interest payable on bank borrowings with a floating interest rate. An increase in floating interest rates of 1% per annum would decrease the profit before tax, and the net asset value, by £1.1 million at 31 December 2020. The Board believes that a movement of 1% in the current economic climate is reasonably possible.

The fixed rate loan notes with MetLife do not have exposure to interest rate risk.

Exposure to interest rate risk on the liquidity funds is immaterial to the Group.

32.3.  Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risks from both its leasing activities and financing activities, including deposits with banks and other institutions as detailed in notes 16 and 19.

Credit risk related to financial instruments and cash deposits

One of the principal credit risks facing the Group arises with the funds it holds with banks and other institutions. The Board believes that the credit risk on short-term deposits and current account cash balances is limited because the counterparties are banks and institutions with high credit ratings.

Credit risk related to leasing activities

In respect of property investments, in the event of a default by a tenant, the Group will suffer a rental shortfall and additional costs concerning re-letting the property to another Social Housing Registered Provider. Credit risk is primarily managed by testing the strength of covenant of a tenant prior to acquisition and on an ongoing basis. The Investment Manager also monitors the rent collection in order to anticipate and minimise the impact of defaults by occupational tenants. Outstanding rent receivables are regularly monitored. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial asset.

The Group has  leases in place with five Registered Providers that have been deemed non-compliant by the Regulator. We continue to conduct ongoing due diligence on all Registered Providers and all rents

payable under these leases have been paid. The Group's valuer has confirmed that there is no impact on the value of the Group's assets as a result of the non-compliant rating. We continue to monitor and maintain a dialogue with the Registered Providers as they work with advisers and the Regulator to implement a financial and governance improvement action plan in order to address the Regulator's concerns and obtain a compliant rating.  The Board believes that the credit risk associated with the non-compliant rating is limited and all rents are received by the Registered Provider from local and central government.

The effects of Covid-19 on credit risk have been and continue to be assessed but so far all rents have been collected, and no expected credit losses have been identified.

32.4.  Liquidity risk  

The Group manages its liquidity and funding risks by considering cash flow forecasts and ensuring sufficient cash balances are held within the Group to meet future needs. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of financing through appropriate and adequate credit lines, and the ability of customers to settle obligations within normal terms of credit. The Group ensures, through forecasting of capital requirements, that adequate cash is available to fund the Group's operating activities.

The following table details the Group's liquidity analysis:

31 December 20 20			< 3 months		3-12 months		1-5 Years		> 5 years
	£'000		£'000		£'000		£'000		£'000
Headleases (note 2 7 )	14,565		10		30		159		14,366
Trade and other payables	4,908		4,717		191		-		-
Bank and other borrowings (note 19):
-  Fixed interest rate	68,500		-		-		-		68,500
-  Variable interest rate	130,000		-		-		130,000		-
Interest payable on bank and other borrowings:
-  Fixed interest rate	19,951		520		1,561		8,326		9,544
-  Variable interest rate	9,863		720		1,829		7,314		-
	247,787		5,967		3,611		145,799		92,410

31 December 2019			< 3 months		3-12 months		1-5 Years		> 5 years
	£'000		£'000		£'000		£'000		£'000
Headleases (note 28)	7,321		10		30		158		7,123
Trade and other payables	8,106		6,003		2,103		-		-
Bank and other borrowings (note 19):
-  Fixed interest rate	68,500		-		-		-		68,500
-  Variable interest rate	100,592		-		-		100,592		-
Interest payable on bank and other borrowings:
-  Fixed interest rate	22,033		520		1,561		8,326		11,626
-  Variable interest rate	10,725		720		2,019		7,986		-
	217,277		7,253		5,713		117,062		87,249

32.5 Financial instruments

The Group's principal financial assets and liabilities, which are all held at amortised cost, are those that arise directly from its operation: trade and other receivables, trade and other payables, headleases, borrowings and cash held at bank.

Set out below is a comparison by class of the carrying amounts and fair value of the Group's financial instruments that are included in the financial statements:

	Book value 31 December 20 20		Fair value 31 December 20 20		Book value 31 December 20 19	Fair value 31 December 20 19
	£'000		£'000		£'000	£'000
Financial assets:
Trade and other receivables	3,368		3,368		2,759	2,759
Cash held at bank	53,701		53,701		67,711	67,711
Financial liabilities:
Trade and other payables	4,930		4,930		8,106	8,106
Borrowings	194,927		205,272		164,955	173,035

33.  POST BALANCE SHEET EVENTS

Property acquisitions

Since 31 December 2020, the Group has acquired 1 property and exchanged on 1 property, deploying £2.9 million (including acquisition costs).

34.  CAPITAL COMMITMENTS

The Group had capital commitments of £2.8 million (2019: £24.3 million) in relation to the cost to complete its forward funded pre-let development assets at 31 December 2020.

35.  EARNINGS PER SHARE

Earnings per share ("EPS") amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period. As there are no dilutive instruments outstanding, both basic and diluted earnings per share are the same.

The calculation of basic and diluted earnings per share is based on the following :

	Year ended		Year ended
	31 December 2020		31 December 2019
Calculation of Basic Earnings per share
Net profit attributable to Ordinary Shareholders (£'000)	24,594		23,717
Weighted average number of Ordinary Shares (excluding treasury shares)	360,853,102		351,124,401
IFRS Earnings per share - basic and diluted	6.82p		6.75p

Calculation of EPRA Earnings per share
Net profit attributable to Ordinary Shareholders (£'000)	24,594		23,717
Changes in value of fair value of investment property (£'000)	(7,957)		(11,809)
EPRA earnings (£'000)	16,637		11,908
Non cash adjustments to include:
Interest capitalised on forward funded developments	(128)		(60)
Amortisation of loan arrangement fees	1,163		457
Adjusted earnings (£'000)	17,672		12,305
Weighted average number of Ordinary Shares (excluding treasury shares)	360,853,102		351,124,401
EPRA earnings per share - basic and diluted	4.61p		3.39p
Adjusted earnings per share - basic and diluted	4.90p		3.50p

Adjusted earnings is a performance measure used by the Board to assess the Group's dividend payments. The metric adjusts EPRA earnings for interest paid to service debt that was capitalised, and the amortisation of loan arrangement fees. The Board sees these adjustments as a reflection of actual cashflows which are supportive of dividend payments. The Board compares the Adjusted earnings to the available distributable reserves when considering the level of dividend to pay.

36.  NET ASSET VALUE PER SHARE

Basic Net Asset Value ("NAV") per share is calculated by dividing net assets in the Group Statement of Financial Position attributable to Ordinary Shareholders of the parent by the number of Ordinary Shares outstanding at the end of the period. Although there are no dilutive instruments outstanding, both basic and diluted NAV per share are disclosed below.

Net asset values have been calculated as follows:

	31 December 20 20		31 December 201 9
	£'000		£'000
Net assets at the end of the year	428,651		369,733
Shares in issue at end of the year (excluding treasury shares)	402,789,002		350,902,210
Dilutive shares in issue	-		-
IFRS NAV per share - basic and dilutive	106.42p		105.37p

37.  CAPITAL MANAGEMENT

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to minimise the cost of capital.

The Group considers proceeds from share issuance, bank and other borrowings and retained earnings as capital.

Until the Group is fully invested and pending re-investment or distribution of cash receipts, the Group will invest in cash equivalents, near cash instruments and money market instruments.

The level of borrowing will be on a prudent basis for the asset class and will seek to achieve a low cost of funds, whilst maintaining the flexibility in the underlying security requirements and the structure of both the investment property portfolio and the Group.

The Directors currently intend that the Group should target a level of aggregate borrowings over the medium term equal to approximately 40% of the Group's Gross Asset Value. The aggregate borrowings will always be subject to an absolute maximum, calculated at the time of drawdown, of 50% of the Gross Asset Value.

The fixed rate facility with MetLife requires an asset cover ratio of x2.25 and an interest cover ratio of x1.75. At 31 December 2020, the Group was fully compliant with both covenants with an asset cover ratio of x2.69 (2019: x2.64) and an interest cover ratio of x4.89 (2019: x4.78).

The RCF requires the Group to maintain a loan-to-value of less than 50%, and an interest cover ratio in excess of x2.75. At 31 December 2020, the Group was fully compliant with both covenants with a loan-to-value ratio of 40% and an interest cover ratio of x6.11.

 

END

 

 

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