Final Results

RNS Number : 8970Y

Empiric Student Property PLC

14 September 2015

Empiric Student Property plc

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

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

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

Financial Highlights

	As at 30 June 2015
Portfolio valuation (1)	£251.3m
Gross annualised rent on standing assets (fully let)	£18.4m
NAV per share (basic)	103.2p
Dividends per share paid in respect of the period	4.0p
Total shareholder return	11.5%
Average Net Initial Yield of operating portfolio	6.6%
Operating profit	£12.6m
Earnings per share (basic)	9.7p

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

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

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

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

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

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

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

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

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

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

Operational Highlights

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

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

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

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

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

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

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

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

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

Post Balance Sheet Events

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

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

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

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

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

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

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

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

For further information on the Company, please contact:

Empiric Student Property plc	(via Newgate below)
Paul Hadaway (Chief Executive)
Tim Attlee (Chief Investment Officer)
Michael Enright (Chief Financial Officer)

Akur Limited (Joint Financial Adviser)	Tel: 020 7493 3631
Tom Frost
Anthony Richardson
Siobhan Sergeant

Jefferies International Limited (Joint Financial Adviser and Broker)	Tel: 020 7029 8000
Gary Gould
Stuart Klein
Alex Collins

Newgate (PR Adviser)	Tel: 020 7680 6550
James Benjamin	Em: empiric@newgatecomms.com
Alex Shilov
Andre Hamlyn

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

Meeting for investors and analysts and audio recording of results available

A meeting for investors and analysts will be held at 9.30am today at:

Newgate (PR Adviser)

Sky Light City Tower

50 Basinghall Street

London, EC2V 5DE

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

Notes:

Empiric Student Property plc (incorporated in England & Wales) is an internally managed real estate investment trust ("REIT") investing in modern, direct-let, premium, student accommodation, both standing and development assets, with a focus on quality and with assets generally in prime central locations in top university cities and towns in the UK. The Company listed on the premium listing segment of the Official List of the Financial Conduct Authority and was admitted to trading on the main market for listed securities of the London Stock Exchange in June 2014.

Chairman's Statement

Overview

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

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

Performance Highlights

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

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

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

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

The Board and Management

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

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

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

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

Key Drivers

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

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

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

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

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

Our Staff

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

Outlook

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

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

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

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

Chairman

14 September 2015

Our Business Model

Our aim is to provide shareholders with regular, sustainable and growing long-term dividends, together with the potential for capital appreciation over the medium to long term. Our IPO target was: 10,000 beds within 5 years through 300-400 beds in 25-30 cities.

Investment Characteristics

Locations

· Prime university cities and towns

· Walking distance to university

· Close proximity to shops, entertainment and transport links

Buildings

· Medium-sized assets with 50-200 beds

· Purpose built or purpose renovated or converted

· High-end concept layout and communal facilities

Customers

· International students

· Beyond first year of study

· Upper quartile by rental spend

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

· direct let model;

· active operational management;

· employment of appropriate leverage;

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

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

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

What were we doing in the period to 30 June 2015?

Future outlook

Locations

Prior to our IPO in June 2014, we mapped out 27 cities that were home to either Russell Group or other highly ranked universities as centres of interest. By June 2015, we had identified further locations of interest and had established a presence in 20 university cities and towns, including 14 from the original list. Within each city, our assets are centrally located, in close proximity to the local university (or other higher education institutions) and convenient for local amenities.

With 84% of the student population outside London, we will continue to focus our attention on the regional cities and towns which exhibit our preferred characteristics such as a highly ranked and growing university, a high proportion of international students and a substantial under-supply of purpose-built student accommodation. Prime locations within these centres will continue to be key as we face less competition and acquire at more attractive yields.

Buildings

As at 30 June 2015, we had acquired or committed to 40 property assets, of which 11 were in development either through forward funding third party developers or through our 50/50 joint venture arrangement with Revcap Advisors Limited. These properties include purpose-built assets but most are unique buildings with their own individual characteristics, which have been re-developed as student accommodation to a high specification. They range in size from a 19 bed standing asset which forms part of a cluster of assets in Liverpool to a 179 bed forward funded development in Huddersfield.

Since the period end, we have acquired or committed to a further 11 assets, of which 8 are in development. As we progress towards our medium term target, we have a strong pipeline of investment opportunities that meet our strict criteria and we will continue to add to this pipeline. While we will continue to assess individual assets or opportunities, where possible, we will seek to deploy capital more efficiently through the acquisition of small portfolios which comprise suitable properties.

Customers

Approximately 70% of the students residing in our properties are from outside the UK, with representation from 83 nationalities. Over 40% of the students are postgraduates, above the national average studying at that level. The age of our customers ranges from 18 to 49 years. Only 2% of our customers are under the age of 20, in their first year of study and from the UK, which is a significantly lower proportion to other providers in the market.

International students and those studying beyond first year as undergraduates, in particular postgraduates, will remain our primary focus.

Development of an operational structure to optimise value

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

Chief Executive's Q&A

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

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

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

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

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

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

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

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

Q: What is your acquisition strategy?

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

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

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

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

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

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

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

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

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

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

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

Q: What makes your property assets so special?

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

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

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

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

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

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

Q: Has your market environment changed since IPO?

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

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

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

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

Paul Hadaway

Chief Executive Officer

Chief Investment Officer's Market Update

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

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

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

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

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

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

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

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

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

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

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

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

Tim Attlee

Chief Investment Officer

Investment policy

Investment Policy

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

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

Each of our properties, generally, has:

· 50-200 beds in total

· Studios and 1-3 bedroom apartments

· Generous space per student bed

· All rooms with en-suite bathroom and kitchen facilities

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

Income

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

Investment

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

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

Investment Restrictions

· Generate income from no less than five separate buildings

· No single asset represents more than 20% of the Gross Asset Value

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

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

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

· No investment in other closed-ended investment companies

Borrowing Policy

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

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

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

Chief Financial Officer's Review

Accounting Policies

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

Financial Results

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

The operating profit for the Group for the period to 30 June 2015 under IFRS was £12.6 million, the biggest contribution coming from the gain of £11.3 million, net of property acquisition costs, recognised on revaluing the Group's property portfolio (the "Portfolio") at the period end. The operating profits have also benefited from the rental income derived from the standing assets in the portfolio, which operated on a fully let basis (the Company budgets and models on the basis of 97.5% occupancy. Occupancy or income of the operational portfolio to this level and in excess is considered fully let) and produced rental income of £8.0 million.

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

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

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

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

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

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

Assets

Investment overview

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

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

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

Name	Notes	Location	No. of beds	Date of acquisition	Purchase price (£m)	Net Initial Yield	Valuation Yield
College Green	1	Bristol	84	July 2014	10.0	6.7%	5.8%
Picturehouse Apartments		Exeter	102	July 2014	11.4	6.3%	5.9%
Summit House		Cardiff	87	July 2014	9.6	6.4%	6.0%
The Brook		Selly Oak, Birmingham	106	July 2014	12.0	6.5%	6.2%
Edge Apartments		Selly Oak, Birmingham	77	August 2014	8.9	7.0%	5.9%
Centro Court		Aberdeen	56	September 2014	6.5	6.8%	6.0%
Talbot Studios		Nottingham	98	September 2014	8.2	6.9%	6.0%
Alwyn Court		Cardiff	51	October 2014	3.5	7.0%	6.0%
London Road	2	Southampton	46	November 2014	3.6	7.5%	6.0%
Curzon Point	3	Hatfield	116	December 2014	9.2	6.4%	6.0%
Dean Clarke Lofts	4	Exeter	30	December 2014	4.5	6.6%	6.0%
Algernon Firth		Leeds	111	January 2015	7.2	6.6%	6.3%
Northgate House		Cardiff	67	February 2015	5.2	7.0%	6.2%
Halsmere Studios		London	79	February 2015	13.3	6.4%	5.5%
Ballet School		Glasgow	103	March 2015	11.9	6.7%	6.0%
St Mark's Court		Leeds	85	March 2015	7.1	6.6%	6.0%
St Margaret's Flats		Durham	109	May 2015	5.1	7.5%	6.8%
CityBlock1		Lancaster	30	May 2015	2.1	6.1%	6.1%
CityBlock2		Lancaster	77	May 2015	5.6	6.1%	6.1%
CityBlock3		Lancaster	100	May 2015	7.9	6.1%	6.1%
CityBlock1		Leicester	98	May 2015	6.2	6.3%	6.3%
CityBlock2		Leicester	76	May 2015	4.8	6.3%	6.3%
Art School Lofts		Liverpool	64	June 2015	8.4	6.3%	6.3%
Maple House		Liverpool	147	June 2015	12.9	6.3%	6.3%
Chatham Lodge		Liverpool	50	June 2015	3.9	6.5%	6.5%
Hayward House		Liverpool	74	June 2015	5.4	6.3%	6.3%
The Octagon		Liverpool	19	June 2015	2.0	6.4%	6.4%
Grove Street Studios		Liverpool	28	June 2015	2.7	6.5%	6.5%
Caledonia Mill		Stoke-on-Trent	120	June 2015	6.3	6.5%	6.5%
Total/average yield			2,290		205.4	6.6%	6.1 %

1 150 year lease, from August 2010.

2 Freehold/leasehold.

3 199 year lease, from December 2014.

4 999 year lease, from March 2014.

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

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

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

Name	Notes	Location	Proposed no. of beds	Date of acquisition	Price paid or total investment to completion (£m)	Estimated completion date
Forward commitments
Library Lofts	1, 2, 4	Exeter	61	May 2015	6.8	September 2015
Claremont Place	1, 2, 4	Newcastle	88	May 2015	11.0	September 2015
Forward funded projects
Buccleuch Street		Edinburgh	86	July 2014	8.5	June 2016
Kingsmill Studios	1	Huddersfield	98	November 2014	7.2	September 2015
Talbot Street	3	Nottingham	77	February 2015	0.9	September 2016
Spital Court Studios		Aberdeen	123	March 2015	13.7	June 2016
William & Matthew House	4	Bristol	80	April 2015	0.2	September 2016
Welsh Baptist Chapel		Manchester	82	May 2015	7.9	September 2016
Oldgate House		Huddersfield	179	May 2015	11.0	September 2016
Development projects
Brunswick House	1,5	Southampton	173	July 2014	7.5	September 2015
Willowbank	5	Glasgow	178	December 2014	7.1	September 2016
Total			1,225		81.8
Framwellgate House	6	Durham	110	-	1.2	September 2017

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

2 Purchase price on acquisition.

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

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

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

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

Valuation

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

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

Dividends

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

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

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

Financing

At IPO, the Company raised equity capital in an amount of £85 million (gross) through a placing and offer of shares to the public. In October 2014, the Company launched a share issuance programme enabling it to issue up to 300 million shares until 29 October 2015 (the "Share Issuance Programme") and raised a total of £150.65 million in gross equity in two tranches under the Share Issuance Programme. As at 30 June 2015, the Company had raised, in aggregate, gross equity proceeds of £235.7 million.

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

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

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

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

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

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

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

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

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

Post Balance Sheet Events

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

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

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

Name	Notes	Location	No. of beds	Date of acquisition	Price paid or total investment to completion (£m)	Estimated completion date	Net Initial Yield
Operating
Maritime House		Falmouth	132	August 2015	8.1	N/A	6.7%
The Registry	1	Portsmouth	41	August 2015	4.5	N/A	6.5%
333 Bath Street	1	Glasgow	70	September 2015	7.2	N/A	6.5%
Forward commitments
1-3 James Street West		Bath	78	August 2015	7.7	September 2016	N/A
James House		Bath	169	August 2015	25.0	September 2016	N/A
Forward funded projects
Portobello Road		Sheffield	134	August 2015	10.7	June 2016	N/A
The Frontage		Nottingham	162	August 2015	18.5	September 2016	N/A
Bonhay Road		Exeter	139	September 2015	2.5	October 2017	N/A
Metrovick House		Newcastle	63	September 2015	7.4	July 2016	N/A
Development projects
Forthside		Stirling	207	August 2015	0.7	September 2017	N/A
Total			1,195		92.3

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

Alternative Investment Fund Manager ("AIFM")

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

Employees

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

	Male	Female
All Employees	7	4
Senior Management	3	0
Board Directors	5	2

Thanks

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

Michael Enright

Chief Financial Officer

14 September 2015

Key Performance Indicators

Measure	Description	Performance
NAV per share 2015: 103.2p (basic)	The value of the Group's total assets less the book value of its liabilities attributable to shareholders.	The Group's NAV per share as at 30 June 2015 was 103.2 pence growing 5.1% from NAV per share at IPO which was 98.1 pence.
Loan to Value ratio (LTV) 2015: 26.3%	The proportion of borrowings compared to Gross Asset Value (defined as total assets less current liabilities). Pursuant to the Company's Investment Policy, the Group's LTV will typically be 35% but no more than 40%, measured at the time of draw down.	The Group's LTV as at 30 June 2015 was 26.3%.
Total return to shareholders (TR) 2015: 11.5%	TR to shareholders is the ratio of growth in share price plus dividends paid as a percentage of IPO issue price.	The TR of the Group was 11.5% for the period to 30 June 2015, compared with 2.6% for the FTSE All Share Index for the year ended 30 June 2015. This performance is in the context of the average holding period for the Group's assets of 146 days.
Dividend yield against target 2015: 4.0%	Dividends paid to shareholders in respect of the year referenced to the IPO price per share paid by investors on launch of 100 pence.	The dividend yield per share based on the IPO price of 100 pence was 4% compared to a revised target for the year of 4%.
Earnings per share 2015: 9.7p (basic)	The post tax earnings generated that are attributable to shareholders.	Earnings per share (basic) for the period to 30 June 2015 was 9.7 pence.

Principal Risks and Uncertainties

Approach to managing risk

The risk management process is designed to identify, evaluate and mitigate (rather than eliminate) significant risks that the Group faces. Therefore, the process can only provide reasonable, and not absolute, assurance. The Company outsources certain services to the Administrator, FIM Capital Limited, and other service providers, and reliance is placed on the Company's service providers' own systems and controls.

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

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

Principal risks

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

Property Market Risk

Risk	Impact	Mitigation
The Group's property performance will depend on general property and investment market conditions.	An adverse change in the Group's property valuations may lead to the Group breaching its banking covenants. Market conditions may also negatively impact on the revenues earned from the property assets, which may impact the Group's ability to make distributions to Shareholders.	The Group's assets are located in multiple, prime locations, diversifying the risk of adverse changes to the Property Portfolio. The Group continually manages its activities so as to always operate within its banking covenant limits and constantly monitors its margins. Further, with international students paying in advance, the Group maintains substantial cash balances on account. The characteristics of the student property sector in recent years have demonstrated considerable robustness underpinned by a significant and beneficial supply and demand imbalance.
The ability of the Group to achieve its investment objective is dependent on both the rental income received from the properties and the appreciation in property values over time.	Rental income and property values may be adversely affected by an increased supply of student accommodation, failure to collect rents, increasing costs or any deterioration in the quality of the properties in the property portfolio.	The Group owned a diversified portfolio of 40 properties as at 30 June 2015, of which 29 are already operational and are managed by reputable property management companies. Therefore, the Group is not unduly exposed to any one student market nor is it reliant on only one property manager. The management of the property portfolio is overseen by the Group's Operations Director who liaises with the property managers to ensure rental income is collected on time (usually in advance at the start of an academic year), that the properties are well-maintained and the desired level of customer service is provided.
The Group will continue to focus exclusively on the student accommodation sector. It will, therefore, have direct reliance on the development of the higher education market in the UK, including a change in demand from international students.	An adverse change in the higher education market in the UK could lead to a reduction in student numbers and, therefore, demand for student accommodation. This, in turn, could result in reduced rental income and negatively impact the value of the property portfolio.	The Board monitors government policy and its impact on, and forecasts of, UK, EU and international student numbers studying in the UK. The Board is also careful to ensure that it acquires or develops student accommodation properties in top university cities and towns in the UK, such as the Russell Group or high growth universities. Further, the Directors seek to ensure that the Group's developments and, where possible, acquisitions of standing assets, are fit for alternative use such as private residential, subject to planning.
The Group faces competition in the student accommodation sector from a number of UK and international property investors, both existing and new, which may have access to larger financial resources and/or be targeting lower investment returns.	This may lead to an oversupply of rooms through overdevelopment, to prices for existing properties or land for development being inflated or to an adverse impact on rents to be achieved.	The Group is targeting 10,000 beds across 25-30 cities and towns compared to a student population across the UK (post first year and/or international) of over 1.7m. The Group's assets are situated in prime locations and, therefore, in times of reduced demand, these properties should be more attractive than the competition at the right price.
The Group's development activities are likely to involve a higher degree of risk than is associated with operating properties including general construction risks such as delays or health and safety problems, developments not being completed (while associated costs are still incurred) or changes in market conditions which could result in completed developments having substantial vacancies.	Any of the risks associated with the Group's development activities could reduce the value of the Group's assets.	Under the Company's investment policy, the Company may only commit up to a maximum of 15% of its Net Asset Value to expenditure on development or forward funded projects (excluding the cost of the land or property to be developed). Since IPO, a greater proportion of the Group's development activities has been undertaken through forward funded projects rather than direct developments. Investment into forward funded projects reduces the risk to the Company as the developer takes on the construction risk and the risk of cost over-runs.

Funding Risk

Risk	Impact	Mitigation
The Group's strategy anticipates the Company or certain Group companies incurring debt with interest payable based on LIBOR and it may hedge or partly hedge interest rate exposure on borrowings. However, such measures may not be sufficient to protect the Group from adverse movements in prevailing interest rates.	Future increases in the amount of interest payable by the Group on its borrowings would reduce the profitability of the Company.	Since IPO, the Executive Directors have been in active discussions with a number of debt providers and, to date, have secured facilities with four separate providers (including joint venture debt providers) and have agreed fixed rates or employed interest rate hedging which is in place for 65.4% of the variable rate debt. The weighted average term to maturity of the Group's debt is 8.07 years.
Acquisition of properties may be funded partly by borrowings. If the value of the Group's assets falls, the NAV of the Group's will reduce. Furthermore, the Group's borrowings contain loan to value covenants.	If the Group's assets decrease in value there is a risk that such covenants could be breached.	The Company's investment policy provides for a prudent borrowing (within a target of 35%) limit for the asset class of a maximum of 40% of the Gross Asset Value. The Board regularly reviews property valuations and would seek to take action in advance should it look like any property used as collateral had decreased in value to the extent that there was a risk that the Group might breach any of its loan to value covenants. The loan to value covenants have been negotiated to be as flexible as possible.
The Group may not be able to secure further debt on acceptable terms.	Without the continued availability of debt on acceptable terms, the Group may be unable to progress investment opportunities as they arise and continue to grow the Group in line with the long-term strategy.	The Executive Directors are in active discussions with a number of debt providers in order to secure future debt on acceptable terms. The forward funded developments' yields on cost reduce the need for gearing to meet the dividend requirement.

Operational Risk

Risk	Impact	Mitigation
The Group's ability to achieve its investment objective is partially dependent on the performance of the Executive Directors which cannot be guaranteed. As a result, the Group's performance will, to a large extent, be dependent upon the ability of the Company to retain key staff through suitable incentivisation and/or recruit individuals of similar experience and calibre on a timely basis.	Failure by the Executive Directors to acquire and manage assets effectively could materially adversely affect the Company's profitability, the Net Asset Value and the share price. Similarly, the departure of an Executive Director and either a delay or failure in recruiting a suitable replacement could have an adverse impact on the performance of the Group.	The Executive Directors' interests are aligned with those of other shareholders with each Executive Director currently holding a meaningful interest in the shares and their long term incentivisation to be satisfied in shares. The Remuneration Committee is taking external advice on the Directors' remuneration in order to formulate a remuneration policy that incentivises the Executive Directors to achieve the goals of the Company for the benefit of the shareholders, as a whole.
The Group may not be able to let the commercial units which form part of some of the properties it owns or acquires.	A number of the Group's properties include commercial units which generate between 5-20% (depending on each property) of the individual total rental income from such properties. If the Group was not able to lease some or all of these commercial units, it could have a material adverse effect on the Group's profitability, the Net Asset Value and the price of the shares.	Under the Company's Investment Policy, commercial leases are limited to 25% of total rent receipts of any single building and 15% of the Group's total rent receipts limiting the impact of any one commercial unit. For the period to 30 June 2015, the aggregate annualised rental income from commercial leases amounted to 4.4% of the Group's gross annualised rent for its operating assets.
The Group may not be able to maintain the occupancy rates of its properties or any other student accommodation properties it acquires.	If the Group is unable to maintain attractive occupancy levels (or to maintain such levels on economically favourable terms) in relation to its properties, there may be a material adverse effect on the Group's profitability, Net Asset Value and the share price.	The Board carefully assesses the Group's acquisitions to ensure that the properties are well located in prime university towns and cities. The diverse portfolio of mid-sized buildings reduces the impact of reduced occupancy in any one building on the overall portfolio and allows the Group to adjust its pricing property by property to ensure maximum occupancy levels for each property.
Construction of the Group's development projects may be subject to delays or disruptions that are outside of the Group's control	A delay in the timely construction of the Group's assets under development could result in one or more of the development assets not being delivered in time for the start of a particular academic year with a resultant impact on occupancy and revenue.	The Group's assets under development with a third party developer, generally, benefit from a one year rental guarantee for the first year of operations which covers the event of the asset not being delivered in time for the start of the academic year. For assets being developed by the Group (directly or through its joint venture arrangement with Revcap), the Group puts in place suitable insurance cover and arrangements with the responsible contractor or sub-contractor to cover the impact of any delay.

Taxation Risk

Risk	Impact	Mitigation
The Company operates as a UK REIT and has a tax efficient corporate structure with advantageous consequences for UK shareholders. Any change to the Company's tax status or in UK tax legislation (or interpretation thereof) could affect the Company's ability to achieve its investment objective or provide favourable returns to shareholders.	If the Company fails to remain a REIT for UK tax purposes, its profits and gains will be subject to UK corporation tax.	The Board is ultimately responsible for ensuring adherence to the UK REIT regime and monitors the compliance reports provided by the Executive Directors on potential transactions to be undertaken, the Administrator reports on asset levels and the Company's registrar and broker on shareholdings.

Consolidated Statement of Comprehensive Income

for the period from 11 February 2014 to 30 June 2015

	Notes	£
Continuing operations
Revenue	2	8,303,320
Property expenses	3	(2,170,297)
Gross profit		6,133,023
Administrative expenses	4	(4,793,640)
Change in fair value of investment property	13	11,283,174
Operating profit		12,622,557
Finance cost		(1,324,106)
Finance income		161,131
Net finance cost	5	(1,162,975)
Share of results from joint ventures	14	2,759,836
Profit before income tax		14,219,418
Corporation tax	8	-
Profit for the period		14,219,418

Other comprehensive income
Items that will be reclassified to profit and loss
Fair value loss on cashflow hedge		(206,331)
Total comprehensive income for the period		14,013,087
Earnings per share expressed in pence per share	9
Basic		9.67
Diluted		9.61

Consolidated Statement of Financial Position

30 June 2015

	Notes	£
Assets
Non-current assets
Property, plant and equipment	12	78,806
Investment property	13	239,775,000
Investments in joint ventures	14	8,378,373
Derivative financial assets	19	229,261
		248,461,440
Current assets
Trade and other receivables	15	4,174,311
Cash and cash equivalents	16	78,788,454
		82,962,765
Total assets		331,424,205
Liabilities

Current liabilities
Trade and other payables	17	4,055,152
Borrowings	18	750,000
Deferred rental income		2,376,990
		7,182,142
Non-current liabilities
Bank borrowings	18	83,398,182
Derivative financial liability	19	448,907
Total liabilities		91,029,231
Called up share capital	20	2,329,268
Share premium	21	82,280,103
Capital reduction reserve	22	141,416,891
Retained earnings	23	14,575,043
Cashflow hedge reserve		(206,331)
Total equity/net assets		240,394,974
Total equity and liabilities		331,424,205
Net Asset Value per share basic (pence)	10	103.21
Net Asset Value per share diluted (pence)	10	102.79

Company Statement of Financial Position

30 June 2015

	Notes	£
Assets
Non-current assets
Property, plant and equipment	12	78,806
Investments in subsidiaries	33	18
Investments in joint ventures	14	5,618,537
		5,697,361
Current assets
Trade and other receivables	15	403,877
Amounts due from Group undertakings	15	209,190,976
Cash and cash equivalents	16	58,863,095
		268,457,948
Total assets		274,155,309
Liabilities

Current liabilities
Amounts due to Group undertakings	17	50,641,757
Trade and other payables	17	1,035,820
Total liabilities		51,677,577
Called up share capital	20	2,329,268
Share premium	21	82,280,103
Capital reduction reserve	22	141,416,891
Retained earnings		(3,548,530)
Total equity		222,477,732
Total equity and liabilities		274,155,309
Net Asset Value per share basic	10	95.51
Net Asset Value per share diluted	10	95.13

Consolidated Statement of Changes in Equity

for the period 11 February 2014 to 30 June 2015

	Called up Share capital £	Share premium £	Capital reduction reserve £	Retained earnings £	Cash flow hedge reserve £	Total Equity £
Changes in equity
Profit for the period	-	-	-	14,219,418	-	14,219,418
Fair value loss on cashflow hedge	-	-	-	-	(206,331)	(206,331)
Total comprehensive income for the period	-	-	-	14,219,418	(206,331)	14,013,087
Issue of share capital	2,379,268	233,320,732	-	-	-	235,700,000
Share issue costs	-	(5,269,470)	-	-	-	(5,269,470)
Redemption of share capital at par	(50,000)	-	-	-	-	(50,000)
Share-based payments	-	-	-	355,625	-	355,625
Reduction in share premium	-	(145,771,159)	145,771,159	-	-	-
Dividends	-	-	(4,354,268)	-	-	(4,354,268)
Total contributions and distributions recognised directly in equity	2,329,268	82,280,103	141,416,891	355,625	-	226,381,887
Balance at 30 June 2015	2,329,268	82,280,103	141,416,891	14,575,043	(206,331)	240,394,974

Company Statement of Changes in Equity

for the period 11 February 2014 to 30 June 2015

	Called up Share capital £	Share premium £	Capital reduction reserve £	Retained Earnings £	Total Equity £
Changes in equity
Loss for the period	-	-	-	(3,904,155)	(3,904,155)
Total comprehensive income for the period	-	-	-	(3,904,155)	(3,904,155)
Issue of share capital	2,379,268	233,320,732	-	-	235,700,000
Share issue costs	-	(5,269,470)	-	-	(5,269,470)
Redemption of share capital at par	(50,000)	-	-	-	(50,000)
Share-based payments	-	-	-	355,625	355,625
Reduction in share premium	-	(145,771,159)	145,771,159	-	-
Dividends	-	-	(4,354,268)	-	(4,354,268)
Total contributions and distributions recognised directly in equity	2,329,268	82,280,103	141,416,891	355,625	226,381,887
Balance at 30 June 2015	2,329,268	82,280,103	141,416,891	(3,548,530)	222,477,732

Consolidated Statement of Cash Flows

for the period 11 February 2014 to 30 June 2015

	Notes	£
Cash flows from operating activities
Net cash flows generated from operations	29	3,730,743
Cash flows from investing activities
Purchase of tangible fixed assets		(95,210)
Investments in joint ventures		(5,618,537)
Purchase of investment property		(209,749,273)
Interest received		161,131
Net cash flows from investing activities		(215,301,889)
Cash flows from financing activities
Share issue proceeds		235,650,000
Share issue costs		(5,269,470)
Dividends paid		(4,354,268)
Restricted shares issued		50,000
Restricted shares redeemed		(50,000)
Bank borrowings		66,600,000
Loan arrangement fees paid		(1,194,371)
Finance costs		(1,072,291)
Net cash from financing activities		290,359,600
Increase in cash and cash equivalents		78,788,454
Cash and cash equivalents at beginning of period		-
Cash and cash equivalents at end of period		78,788,454

Company Statement of Cash Flows

for the period 11 February 2014 to 30 June 2015

	Notes	£
Cash flows from operating activities
Net cash flow used in operations	29	(3,023,190)
Cash flows from investing activities
Purchase of tangible fixed assets		(95,210)
Investments in joint ventures		(5,618,537)
Payments to/on behalf of subsidiaries		(209,190,976)
Repayments from subsidiaries		50,641,757
Interest received		122,989
Net cash flows from investing activities		(164,139,977)
Cash flows from financing activities
Share issue proceeds		235,650,000
Share issue costs		(5,269,470)
Dividends paid		(4,354,268)
Restricted shares issued		50,000
Restricted shares redeemed		(50,000)
Net cash from financing activities		226,026,262
Increase in cash and cash equivalents		58,863,095
Cash and cash equivalents at beginning of period		-
Cash and cash equivalents at end of period		58,863,095

Notes to the Financial Statements

for the period 11 February 2014 to 30 June 2015

1. Accounting policies

1.1 Trading Period

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

1.2 Basis of Preparation

The consolidated financial statements of the Group for the period to 30 June 2015 comprise the Company and its subsidiaries, together referred to as the Group. These financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as adopted by the European Union. These are the first financial statements for the Group.

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

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

1.3 Going Concern

The consolidated financial statements have been prepared on a going concern basis as explained in the Directors' Report on page 58.

1.4 Significant Accounting Judgements, Estimates and Assumptions

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

Judgements

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

(a) Fair valuation of Investment Property

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

The valuations have been prepared in accordance with the RICS Valuation - Professional Standards January 2014 ("the Red Book"). Factors reflected include current market conditions, annual rentals, lease lengths, and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property are set out in Note 13.

For properties under development the fair value is calculated by estimating the fair value of the completed property using the income capitalisation technique less estimated costs to completion.

(b) Business Combinations

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

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

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

(d) Operating Lease Contracts - the Group as Lessor

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

1.5 Summary of Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June 2015. Subsidiaries are those investee entities where control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

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

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

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

· the ability to use its power over the investee to affect its returns.

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

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

· rights arising from other contractual arrangements; and

· the Group's voting rights and potential voting rights.

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

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

Segmental Information

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

Property, Plant and Equipment

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

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

· Fixtures and fittings - 15% reducing balance;

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

Investment Property

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

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

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

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

Joint Ventures

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

The Group classifies its interests in joint arrangements as either:

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

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

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

· The structure of the joint arrangement

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

· The contractual terms of the joint arrangement agreement

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

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

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

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

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

Rent and Other Receivables

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

Financial Assets

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

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

Loans and Receivables

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

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

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

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

Financial Liabilities

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

Rental Income

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

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

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

Hedge Accounting

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

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

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

Cash Flow Hedge

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

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

Operating Leases

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

Taxation

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

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

Share Based Payments

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

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

Share Capital

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

1.6 Standards Issued But Not Yet Effective

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

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

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

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

2. Revenue

	Group For the period 11 February 2014 to 30 June 2015 £
Student rental income	7,587,994
Commercial rental income	379,984
Rental income	7,967,978
Development management fee	335,342
	8,303,320

3. Property Expenses

	Group For the period 11 February 2014 to 30 June 2015 £
Direct site costs	771,064
Technology services	715,366
Site offices and utilities	325,915
Cleaning and service contracts	182,150
Repairs and maintenance	175,802
	2,170,297

4. Administrative Expenses

	Group For the period 11 February 2014 to 30 June 2015 £
Salaries and Directors' remuneration	2,247,572
Legal and professional fees	993,856
Other administrative costs	1,410,112
Auditor's Fees
Fees payable for the audit of the Company's annual accounts	87,500
Fees payable for the review of the Company's interim accounts	25,000
Fees payable for the audit of the Company's initial accounts	8,500
Fees payable for the audit of the Company's subsidiaries	21,100
Total Auditor's Fees	142,100
	4,793,640

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

5. Net Finance Cost

Finance Cost	Group For the period 11 February 2014 to 30 June 2015 £
Fair value loss on interest rate cap	9,239
Interest expense on bank borrowings	1,072,291
Fair value loss on inception of interest rate swap	242,576
	1,324,106

Finance Income

Group

For the period 11 February 2014 to 30 June 2015

Interest received on bank deposits

161,131

6. Employees and Directors

	Group For the period 11 February 2014 to 30 June 2015 £
Total wages and salaries	1,125,450
Pension costs	102,188
Cash bonus	449,625
Share based payments	355,625
National insurance	214,684
Total	2,247,572

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

Management

Administration

Directors' remuneration	Group For the period 11 February 2014 to 30 June 2015 £
Salary and fees	873,481
Pension costs	102,188
Cash bonus	449,625
Share based payments	355,625
Total	1,780,919

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

7. Profit Before Income Tax

The profit before income tax is stated after charging:

Group and Company

Head office accommodation

162,130

Depreciation - owned assets

16,404

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

8. Corporation Tax

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

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

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

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

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

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

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

	Group For the period 11 February 2014 to 30 June 2015 £
Current tax
Income tax charge/(credit) for the period	-
Adjustment in respect of prior periods	-
Total current income tax charge/(credit) in the income statement	-
Deferred tax
Total deferred income tax charge/(credit) in the income statement	-
Total income tax charge/(credit) in the income statement	-
The tax assessed for the period is lower than the standard rate of corporation tax in the period.

	Group For the period 11 February 2014 to 30 June 2015 £
Profit before tax	14,219,418
Profit before tax multiplied by the rate of corporation tax in the UK of 20.75%	2,950,529
Exempt property rental profits in the period	(694,280)
Exempt property revaluations in the period	(2,913,925)
Effects of:
Non-allowable expenses	104,936
Deferred tax asset not recognised in respect of unutilised current period tax losses	552,740
Total income tax charge/(credit) in the income statement	-

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

9. Earnings Per Share

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

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

Reconciliations are set out below.

	Profit after tax £	Weighted average number of shares	Per-share amount pence
Basic EPS
Calculation of basic EPS	14,219,418	146,995,991	9.67
Diluted EPS
Adjustment for employee share options	-	937,500
Calculation of diluted EPS	14,219,418	147,933,491	9.61

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

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

10. Net Asset Value Per Share (NAV)

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

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

Net asset values have been calculated as follows:

	Company £	Group £
Net assets per Statement of Financial Positions	222,477,732	240,394,974

Ordinary shares:	Number	Number
Issued share capital	232,926,830	232,926,830
Issued share capital plus employee options	233,864,330	233,864,330

	Pence	Pence
Net Asset Value per share basic	95.51	103.21
Net Asset Value per share diluted	95.13	102.79

11. Dividends Paid

	Group and Company For the period 11 February 2014 to 30 June 2015 £
First interim dividend in respect of period ended 31 December 2014 at 1.5 pence per Ordinary Share	1,275,000
Second interim dividend in respect of period ended 31 December 2014 at 0.5 pence per Ordinary Share	750,000
Third interim dividend in respect of period ended 31 March 2015 at 1.0 pence per Ordinary Share	2,329,268
	4,354,268

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

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

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

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

12. Property, Plant and Equipment

	Group and Company
	Fixtures and fittings £	Computer equipment £	Total £
Cost
As at 11 February 2014	-	-	-
Additions	75,255	19,955	95,210
At 30 June 2015	75,255	19,955	95,210
Depreciation
As at 11 February 2014	-	-	-
Charge for period	11,558	4,846	16,404
At 30 June 2015	11,558	4,846	16,404
Net book value
At 30 June 2015	63,697	15,109	78,806

13. Investment Property

	Group and Company
	Properties under development £	Investment properties freehold £	Investment properties long leasehold £	Total £
As at 11 February 2014	-	-	-	-
Property additions	18,811,484	185,369,978	24,310,364	228,491,826
Change in fair value during the period	2,213,516	8,005,022	1,064,636	11,283,174
As at 30 June 2015	21,025,000	193,375,000	25,375,000	239,775,000

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

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

No borrowing costs were capitalised during the period.

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

Fair value hierarchy

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

	Date of valuation 30 June 2015	Total £	Quoted prices in active markets (Level 1) £	Significant observable inputs (Level 2) £	Significant unobservable inputs (Level 3) £
Assets measured at fair value:
Student properties		229,220,000	-	-	229,220,000
Commercial properties		10,555,000	-	-	10,555,000
		239,775,000	-	-	239,775,000

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

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

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

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

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

(a) Unobservable input: Rental income

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

(Range £98 per week - £325 per week).

(b) Unobservable input: Rental growth

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

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

(Range: 5.75% - 6.75%).

(d) Unobservable input: Physical condition of the property

(e) Unobservable input: planning consent

No planning enquiries undertaken for any of the development properties.

(f) Sensitivities of measurement of significant unobservable inputs

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

As a result the following sensitivity analysis has been prepared:

-3% in

passing rent

£'000

+3% in

passing rent

£'000

-0.25% in

net initial yield

£'000

+0.25% in

net initial yield

£'000

Increase/(decrease) in the fair value of investment properties

(7,930)

7,930

11,205

(10,300)

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

14. Joint Ventures

The Group entered into two joint ventures in the period.

Brunswick - Southampton

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

Willowbank - Glasgow

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

Net assets and results of the joint ventures

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

	Willowbank		Brunswick		Total
	Gross £	Share £	Gross £	Share £	Gross £	Share £
Investment property	6,850,000	3,425,000	16,150,000	8,075,000	23,000,000	11,500,000
Cash	153,228	76,614	(82,192)	(41,096)	71,036	35,518
Loans and borrowings	-	-	(6,817,257)	(3,408,629)	(6,817,257)	(3,408,629)
Other current assets	224,128	112,064	2,712,034	1,356,017	2,936,162	1,468,081
Other current liabilities	(288,218)	(144,109)	(2,144,977)	(1,072,488)	(2,433,195)	(1,216,597)
Net assets	6,939,138	3,469,569	9,817,608	4,908,804	16,756,746	8,378,373

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

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

The following table shows how the increase has been achieved.

Company

Investment in joint venture

Group

Investment in joint ventures

Capital invested in Willowbank

2,023,350

Capital invested in Brunswick

3,595,187

5,618,537

Net revaluation gains

2,759,836

Total investment in joint ventures

5,618,537

8,378,373

Carrying value at 11 February 2014

Carrying value at 30 June 2015

5,618,537

8,378,373

15. Trade and Other Receivables

	Company 30 June 2015 £	Group 30 June 2015 £
Trade receivables	-	482,633
Other receivables	330,657	818,814
Prepayments	-	2,700,114
VAT recoverable	73,220	172,750
Amounts due from Group undertakings	209,190,976	-
	209,594,853	4,174,311

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

16. Cash and Cash Equivalents

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

Company

30 June 2015

Group

30 June 2015

Cash at bank and in hand

58,863,095

78,788,454

17. Trade and Other Payables

	Company 30 June 2015 £	Group 30 June 2015 £
Trade payables	-	717,244
Other payables and accrued expenses	1,035,820	3,337,908
Amounts due to Group undertakings	50,641,757	-
	51,677,577	4,055,152

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

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

18. Bank Borrowings

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

	Group
	Bank borrowings drawn £	Bank borrowings undrawn £	Total £
As at 11 February 2014	-	-	-
Bank borrowings drawn in the period	85,342,553	-	85,342,553
Bank borrowings available but undrawn in the period	-	20,000,000	20,000,000
As at 30 June 2015	85,342,553	20,000,000	105,342,553

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

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

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

	Group 30 June 2015 £
Total bank borrowings drawn in the period	85,342,553
Less bank borrowings: due within one year	(750,000)
Bank borrowings drawn: due in more than one year	84,592,553
Less: Unamortised costs	(1,194,371)
Non-current liabilities: Bank borrowings	83,398,182

Maturity of bank borrowings

	Group 30 June 2015 £
Repayable between 1 and 2 years	750,000
Repayable between 2 and 5 years	52,742,553
Repayable in over 5 years	31,100,000
Non-current liabilities: Bank borrowings	84,592,553

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

19. Interest rate derivatives

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

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

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

30 June 2015

Non-current assets: Interest rate derivatives - cap

229,261

Non-current liabilities: Interest rate derivatives - swap

(448,907)

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

	30 June 2015 £
Interest rate cap premium	238,500
Changes in fair value of interest rate derivatives	(9,239)
	229,261

	30 June 2015 £
Total bank borrowings	85,342,553
Total fixed borrowings (at 3.97%)	(31,100,000)
Total floating rate borrowings	54,242,553
Notional value of borrowings under interest rate derivative - swap	35,500,000
Proportion of notional value of interest rate swap derivative to floating rate borrowings	65.4%

Fair value hierarchy

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

			Group
	Date of valuation	Total £	Quoted prices in active markets (Level 1) £	Significant observable inputs (Level 2) £	Significant unobservable inputs (Level 3) £
Assets/(liability) measured at fair value:	30 June 2015
Interest rate derivative - cap		229,261	-	229,261	-
Interest rate derivative - swap		(448,907)	-	(448,907)	-

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

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

20. Share Capital

Ordinary shares issued and fully paid at 1 pence each

		Group and Company
		30 June 2015 Number	30 June 2015 £
Issued on incorporation	11 February 2014	1	-
Issued at IPO	30 June 2014	85,000,000	850,000
Issued in relation to share issuance programme	24 November 2014	65,000,000	650,000
Issued in relation to share issuance programme	17 March 2015	82,926,829	829,268
As at 30 June 2015		232,926,830	2,329,268

Restricted shares

		Group and Company
		30 June 2015 Number	30 June 2015 £
Issued and fully paid £1.00 shares	29 April 2014	50,000	50,000
Redeemed at par value	30 June 2014	(50,000)	(50,000)
As at 30 June 2015		-	-

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

The Company put in place a share issuance programme permitting the issue of up to 300 million shares over a 12 month period concluding in October 2015. On 24 November 2014 the Company issued 65 million Ordinary Shares of £0.01 as the first tranche of the Share Issuance Programme at an issue price of £1.01, raising £65.65 million.

On 17 March 2015 a further 82.9 million shares of £0.01 were issued as part of the programme at an issue price of £1.025, raising £85 million.

21. Share Premium

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

	Group and Company	£
Share premium on Ordinary Shares issued in relation to IPO	30 June 2014	84,150,000
Share issue expenses in relation to IPO	30 June 2014	(1,868,576)
Transfer to Capital Reduction Reserve (see note 22)	30 July 2014	(82,281,424)
Share premium on Ordinary Shares issued in relation to share issuance programme	24 November 2014	65,000,000
Share issue expenses in relation to share issuance programme	31 October 2014	(1,510,265)
Transfer to Capital Reduction Reserve (see note 22)	4 February 2015	(63,489,735)
Share premium on Ordinary Shares issued in relation to share issuance programme	17 March 2015	84,170,732
Costs associated with the issue of ordinary shares		(1,890,629)
As at 30 June 2015		82,280,103

22. Capital reduction reserve

Group and Company		£
Balance on incorporation		-
Transfer from share premium		145,771,159
First interim dividend		(1,275,000)
Second interim dividend		(750,000)
Third interim dividend		(2,329,268)
As at 30 June 2015		141,416,891

On 30 July 2014 the Company cancelled the then value of its share premium account, by an Order of the High Court of Justice, Chancery Division. The cancellation resulted in £82.3 million being transferred from the share premium account into the capital reduction reserve.

On the 4 February 2015 the Company cancelled the then value of its share premium account, by way of an Order of the High Court of Justice, Chancery Division. The cancellation resulted in £63.5 million being transferred from the share premium account into the capital reduction reserve account.

The capital reduction reserve account is a distributable reserve.

Refer to note 11 for details of the declaration of dividends to Shareholders.

23. Other Reserves

	Group
	Share premium £	Capital reduction reserve £	Retained Earnings £	Cashflow hedge reserve £	Total reserves £
Changes in reserves
Profit for the period	-	-	14,219,418	-	14,219,418
Fair value loss on cashflow hedge	-	-	-	(206,331)	(206,331)
Total comprehensive income for the period	-	-	14,219,418	(206,331)	14,013,087
Issue of share capital	233,320,732	-	-	-	233,320,732
Share issue costs	(5,269,470)	-	-	-	(5,269,470)
Share-based payments	-	-	355,625	-	355,625
Reduction in share premium	(145,771,159)	145,771,159	-	-	-
Dividends	-	(4,354,268)	-	-	(4,354,268)
Total contributions and distribution recognised directly in reserves	82,280,103	141,416,891	355,625	-	224,052,619
Balance at 30 June 2015	82,280,103	141,416,891	14,575,043	(206,331)	238,065,706

24. Leasing Agreements

Future total minimum lease payments under non-cancellable operating leases fall due as follows:

On office space currently rented	Group £
Less than one year	140,840
Between one and five years	422,520
	563,360

Future total minimum lease receivables under non-cancellable operating leases on investment properties are as follows:

	Group £
Less than one year	6,073,330
Between one and five years	2,295,059
More than five years	4,345,993
	12,714,382

25. Contingent Liabilities

There were no contingent liabilities at 30 June 2015.

26. Capital Commitments

The Group and Company had capital commitments amounting to £13 million in respect of its two direct joint venture developments, Brunswick (Southampton) and Willowbank (Glasgow) as at 30 June 2015.

The Group had capital commitments relating to forward funded developments totalling £44 million as at 30 June 2015.

27. Related Party Disclosures

Key management personnel

Key management personnel are considered to comprise the Board of Directors. Please refer to note 6 for details of the remuneration for the key management.

Property purchases

There were a number of properties that were acquired from a joint venture between London Cornwall Property Partners Ltd (LCPP) and an affiliated investment fund of Revcap. These properties comprise College Green, Picturehouse Apartments, Summit House and Edge Apartments.

Name	Location	Vendor	Related party associated with the Vendor	Acquisition Price (£m)	Acquisition Date
College Green	Bristol	Bristol Student Housing LLP	LCPP¹ Revcap² Michael Enright⁴	9.97	1 July 2014
Picturehouse Apartments	Exeter	Prime Student Housing (Exeter) LLP	LCPP¹ Revcap² Michael Enright³	11.41	1 July 2014
Summit House	Cardiff	Prime Student Housing (Cardiff) LLP	LCPP¹ Revcap² Michael Enright³	9.58	1 July 2014
Edge Apartments	Birmingham	Prime Student Housing (Birmingham) Limited (Jersey)	LCPP¹ Revcap²	8.94	21 August 2014

1 Paul Hadaway and Tim Attlee are directors and shareholders in LCPP.

2 Stephen Alston is a partner of Real Estate Venture Capital Management LLP.

3 Michael Enright was a shareholder in the vendor for Picturehouse Apartments and Summit House.

4 College Green was purchased from Bristol Student Housing LLP to whom Mr Enright was a senior debt provider.

Share capital

The table below details the share transactions of related parties over the period.

Name	How related	No of shares	Transaction	Date
Tim Attlee	Director	875,000	Purchased	30 June 2014
Paul Hadaway	Director	1 875,000	Purchased Purchased	11 February 2014 30 June 2014
Michael Enright	Director	520,000	Purchased	30 June 2014
Baroness Brenda Dean	Chairman	33,500	Purchased	30 June 2014
Platform Securities Nominees Ltd (Jim Prower)	Director	23,760	Purchased	30 June 2014
Stephen Alston	Director	7,500	Purchased	17 March 2015

Share-based payments

Upon admission nil cost options were granted to Executive Directors in the amounts of:

Paul Hadaway 375,000 shares

Tim Attlee 375,000 shares

Michael Enright 187,500 shares

Details of the shares granted are outlined in note 30 - Share-based payments.

Other

Payments for professional services totalling £242,670 (excluding VAT) were made to Revcap during the period. Revcap is deemed to be a related party as a partner of one of its affiliated companies, Stephen Alston, is a Non-Executive Director of the Company.

28. Subsequent Events

Property transactions

Manchester

On 1 July 2015, the Group entered into a forward funding development agreement with Xian Developments Manchester Limited to develop a 93 bed student accommodation scheme on the site of the Grade II* listed, Welsh Baptist Chapel which the Group acquired in May 2015.

The investment required to complete the development in September 2017 of a direct-let, premium accommodation scheme is £6.9 million (which is in addition to the £1 million already paid for the acquisition of the site).

Stirling

On 3 August 2015, the Group concluded missives (equivalent to exchange of contracts under English law) to acquire the freehold of part of a site off Forthside Way in Stirling, which the Group also proposes to develop into a direct-let, premium student accommodation scheme.

The acquisition price is £650,000 (excluding acquisition costs) and the investment required to complete the scheme in September 2017 is £13 million.

Portsmouth

On 13 August 2015, the Group exchanged contracts to acquire on practical completion the freehold of a property which comprises a high quality turnkey student accommodation scheme converted from the former Portsmouth Land Registry on St Michael's Road, in central Portsmouth.

The acquisition price is £4.45 million and the Group will benefit from a 100% rental guarantee from the developer for the 2015/16 academic year.

Sheffield

On 14 August 2015, the Group acquired a forward funded development in Sheffield, known as Portobello House, a 134 bed new-build premium student accommodation scheme, for a total investment of £10.7 million.

Glasgow

On 10 September 2015, the Group exchanged contracts to acquire on practical completion the long leasehold of a property which comprises a conversion of an office block into a high quality turnkey student accommodation scheme on Bath Street, Glasgow. The acquisition price is £7.4 million and the Group will benefit from a 100% rental guarantee for the 2015/16 academic year.

Nottingham

On 19 August 2015, the Group acquired a forward funded, development in Nottingham, known as The Frontage, a 162 bed new-build premium student accommodation scheme, for a total investment of £18.4 million.

Bath

On 24 August 2015 the Group has exchanged contracts to acquire on practical completion the long leasehold (125 years) on a site to be developed into a high quality turnkey student accommodation scheme on James Street West, in Bath, for a price of £7.65 million (excluding acquisition costs) and on 20 August the Group also exchanged contracts to acquire on practical completion the freehold on a site to be developed into a high quality turnkey student accommodation scheme on James Street West, in Bath, for a total investment of £25 million (excluding acquisition costs).

Falmouth

On the 17 August 2015, the Group acquired the freehold of a high quality purpose-built student accommodation scheme on Pendennis Rise, in Falmouth, for £8.1 million (excluding costs).

Newcastle

On 10 September 2015, the Group exchanged contracts to acquire on practical completion the freehold of a turnkey student accommodation and retail scheme in central Newcastle for £7.4 million (excluding costs) known as Metrovick House.

During the period, the Group exchanged conditional contracts on Library Lofts, Claremont Place and William & Matthew House for aggregate consideration of £25.7 million (excluding costs). Conditions had not been satisfied as at 30 June 2015 on these property acquisitions. Since the period end William & Matthew House had all conditions satisfied. Library Lofts and Claremont Place will become unconditional on practical completion which is expected by the end of September 2015, when operations commence.

Other Transactions

On 8 July 2015, the Board declared a final interim dividend of 1.0 pence per share in respect of the quarter ended 30 June 2015, paid on 4 August 2015 to shareholders on the register on 17 July 2015.

On 23 July, the Board announced 70,921,985 shares to be issued at a price of 105.75 pence per share.

29. Reconciliation of profit before income tax to cash generated from operations

	Company £	Group £
Profit before income tax	(3,904,155)	14,219,418
Share-based payments	355,625	355,625
Depreciation charge	16,404	16,404
Finance income	(122,989)	(161,131)
Finance costs	-	1,324,106
Share of results from joint venture	-	(2,759,836)
Investment in subsidiaries	(18)	-
Change in fair value of investment property	-	(11,283,174)
	(3,655,133)	1,711,412
Increase in trade and other receivables	(403,877)	(4,174,311)
Increase in trade and other payables	1,035,820	3,816,652
Deferred rental income	-	2,376,990
Cash (used in)/generated from operations	(3,023,190)	3,730,743

30. Share-based Payments

The Company operates a share based remuneration scheme for Executive Directors.

Upon admission 937,500 nil cost options were granted to the Executive Directors (Paul Hadaway 375,000, Tim Attlee 375,000, and Michael Enright 187,500). The options will become exercisable subject to the Company meeting Total Shareholder Return (TSR) targets over the three year period to 30 June 2017. The methodology to be used to determine those TSR targets is set out in the Remuneration Report. Subject to the TSR targets being met an award would vest after 30 June 2017 in shares. Directors valued the nil cost options at £1 per share. As at 30 June 2015 the amount recognised relating to the options was £355,625.

The awards have the benefit of dividend equivalence. The Remuneration Committee will determine on or before vesting whether the dividend equivalent will be provided in the form of cash and/or shares.

Granted during the period

937,500

Outstanding at 30 June 2015

937,500

31. Financial Risk Management

Financial Instruments

The Group's principal financial assets and liabilities are those which arise directly from its operations: trade and other receivables, trade and other payables and cash and cash equivalents.

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

Risk Management

The Group is exposed to market risk (including interest rate risk), credit risk and liquidity risk.

The Board of Directors oversees the management of these risks.

The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

(a) Market Risk

Market risk is the risk that the fair values of financial instruments will fluctuate because of changes in market prices. The financial instruments held by the Group that are affected by market risk are principally the Group's bank balances along with the interest rate derivatives (swap and cap) entered into to mitigate interest rate risk.

(b) Credit Risk

Credit risk is the risk that 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 financial institutions. Credit risk is managed by requiring tenants to pay rentals in advance. The credit quality of the tenant is assessed based on an extensive credit rating scorecard at the time of entering into a lease agreement.

Outstanding tenants' receivables are regularly monitored. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial asset.

(i) Tenant Receivables

Tenant receivables, primarily tenant rentals, are presented in the Consolidated Statement of Financial Position net of allowances for doubtful receivables and are monitored on a case by case basis. Credit risk is primary managed by requiring tenants to pay rentals in advance and performing tests around strength of covenant prior to acquisition. There are no trade receivables past due as at the period end.

(ii) Credit Risk Related to Financial Instruments and Cash Deposits

One of the principal credit risks of the Group arises with the banks and financial institutions. The Board of Directors believes that the credit risk on short term deposits and current account cash balances are limited because the counterparties are banks, who are committed lenders to the Group, with high credit ratings assigned by international credit-rating agencies.

Liquidity risk arises from the Group's management of working capital and going forward, the finance charges and principal repayments on any borrowings, of which currently there are none. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due as the majority of the Group's assets are property investments and are therefore not readily realisable. The Group's objective is to ensure it has sufficient available funds for its operations and to fund its capital expenditure. This is achieved by continuous monitoring of forecast and actual cash flows by management.

The following table sets out the contractual obligations (representing undiscounted contractual cashflows) of financial liabilities:

30 June 2015	On demand £	Less than 3 months £	3 to 12 months £	1 to 5 years £	> 5 years £	Total £
Bank borrowings and interest	-	850,905	2,570,440	62,720,832	48,236,543	114,378,720
Swap derivatives	-	155,811	476,089	2,096,523	-	2,728,423
Trade and other payables	-	4,055,157	-	-	-	4,055,157
	-	5,061,873	3,046,529	64,817,355	48,236,543	121,162,300

32. Capital Management

The primary objectives of the Group's capital management is to ensure that it remains a going concern and continues to qualify for UK REIT status.

The Board of Directors monitors and reviews the Group's capital so as to promote the long-term success of the business, facilitate expansion and to maintain sustainable returns for shareholders.

Capital consists of ordinary shares, other capital reserves and retained earnings.

33. Subsidiaries

Those subsidiaries listed below are considered to be all subsidiaries of the Company at 30 June 2015, with the shares issued being ordinary shares.

	Company £
As at 11 February 2014	-
Additions in the period	18
As at 30 June 2015	18

In each case the country of incorporation is the UK.

	Ownership %	Principal activity
Empiric (Alwyn Court) Limited	100%	Property investment
Empiric (Baptists Chapel) Leasing Limited	100%	Property leasing
Empiric (Baptists Chapel) Limited	100%	Property investment
Empiric (Birmingham) Limited	100%	Property investment
Empiric (Bristol) Leasing Limited	100%	Property leasing
Empiric (Bristol) Limited	100%	Property investment
Empiric (Buccleuch Street) Limited	100%	Property investment
Empiric (Buccleuch Street) Leasing Limited	100%	Property leasing
Empiric (Centro Court) Limited	100%	Property investment
Empiric (Claremont Newcastle) Limited	100%	Property investment
Empiric (College Green) Limited	100%	Property investment
Empiric (Developments) Limited	100%	Development management
Empiric (Durham St Margarets) Limited	100%	Property investment
Empiric (Edge Apartments) Limited	100%	Property investment
Empiric (Exeter DCL) Limited	100%	Property investment
Empiric (Exeter LL) Limited	100%	Property investment
Empiric (Framwellgate Durham) Leasing Limited	100%	Property leasing
Empiric (Framwellgate Durham) Limited	100%	Property investment
Empiric (Glasgow Ballet School) Limited	100%	Property investment
Empiric (Glasgow Bath St) Limited	100%	Property investment
Empiric (Glasgow Otago Street) Leasing Limited	100%	Property leasing
Empiric (Glasgow Otago Street) Limited	100%	Property investment
Empiric (Hatfield CP) Limited	100%	Property leasing
Empiric (Huddersfield Oldgate House) Leasing Limited	100%	Property investment
Empiric (Huddersfield Oldgate House) Limited	100%	Property leasing
Empiric (Huddersfield Snow Island) Leasing Limited	100%	Property investment
Empiric (Lancaster Penny Street 1) Limited	100%	Property investment
Empiric (Lancaster Penny Street 2) Limited	100%	Property investment
Empiric (Lancaster Penny Street 3) Limited	100%	Property investment
Empiric (Leeds Algernon) Limited	100%	Property investment
Empiric (Leeds St Marks) Limited	100%	Property investment
Empiric (Leicester Peacock Lane) Limited	100%	Property investment
Empiric (London Camberwell) Limited	100%	Property investment
Empiric (London Road) Limited	100%	Property investment
Empiric (Northgate House) Limited	100%	Property investment
Empiric (Nottingham 95 Talbot) Leasing Limited	100%	Property leasing
Empiric (Nottingham 95 Talbot) Limited	100%	Property investment
Empiric (Picturehouse Apartments) Limited	100%	Property investment
Empiric (Portobello House) Leasing Limited	100%	Property leasing
Empiric (Portobello House) Limited	100%	Property investment
Empiric (Snow Island) Limited	100%	Property investment
Empiric (St Peter Street) Leasing Limited	100%	Property leasing
Empiric (St Peter Street) Limited	100%	Property investment
Empiric (Stirling Forthside) Leasing Limited	100%	Property leasing
Empiric (Stirling Forthside) Limited	100%	Property investment
Empiric (Summit House) Limited	100%	Property investment
Empiric (Talbot Studios) Limited	100%	Property investment
Empiric Acquisitions Limited	100%	Intermediate holding company
Empiric Investment Holdings (Four) Limited	100%	Intermediate holding company
Empiric Investment Holdings (Three) Limited	100%	Intermediate holding company
Empiric Investment Holdings (Two) Limited	100%	Intermediate holding company
Empiric Investments (Four) Limited	100%	Intermediate holding company
Empiric Investments (One) Limited	100%	Intermediate holding company
Empiric Investments (Three) Limited	100%	Intermediate holding company
Empiric Investments (Two) Limited	100%	Intermediate holding company
Empiric Student Property Trustees Limited	100%	Trustee of the EBT
Empiric (Bath James House) Limited	100%	Property investment
Empiric (Bath JSW) Limited	100%	Property investment
Liverpool Edge Limited	100%	Property investment
Grove St Studios Limited	100%	Property investment

This information is provided by RNS

The company news service from the London Stock Exchange

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