DIGS.L Regulatory News (DIGS)

GCP STUDENT LIVING PLC

LEI: 2138004J4ID66FK38H25

ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2021

GCP Student Living plc, (the "Company" or together with its subsidiaries, the "Group"), which was the first student accommodation REIT in the UK, today announces its results for the financial year ended 30 June 2021.

The full annual report and financial statements and the Notice of the AGM can be accessed via the Company's website at www.gcpstudent.com or by contacting the Company Secretary by telephone on 01392 477500.

AT A GLANCE1

HIGHLIGHTS1,3

· Total shareholder return2 of 31.9% for the year driven by a recovery in the share price at the year end. Annualised total shareholder return since IPO2 of 10.2%, compared to the Company's target return of 8-10%.

· Total NAV return2 of 15.0% for the year and annualised total NAV return since IPO2 of 13.1%.

· Dividends of 0.75 pence per share paid in respect of the year.

· EPRA NTA2 per share of 195.05 pence at 30 June 2021.

· Total rental income for the year of £36.3 million (30 June 2020: £47.8 million). The Company's rental income continues to be materially adversely impacted as a result of the disruption caused by the Covid-19 pandemic.

· High-quality portfolio of eleven assets with 4,116 beds located primarily in and around London, with a valuation of over £1.1 billion at 30 June 2021.

· Bookings across the Group's portfolio for the 2020/21 academic year were c.68% with the majority (c.64%) of rooms booked being occupied or subject to nominations arrangements.

· Blended NIY2 of operational portfolio of 4.30% (30 June 2020: 4.44%).

· At 15 October 2021, 80% of rooms across the Group's portfolio of student accommodation have been booked for the 2021/22 academic year, and of these rooms 83% have been occupied by residents.

· Post period end, the Company received a cash offer to acquire the Company, which was recommended to shareholders by the Board. On 6 September 2021, shareholders approved the acquisition, which if completed, is expected to occur in the coming months, subject to conditions.

· On the basis of the cash exit of 213 pence per share, the Company will have delivered a shareholder total return since IPO2,4 of 190.0%, representing an annualised total shareholder return since IPO2,4 of 13.9.% and a return on equity since IPO2.4 of 2.6 times.

1. These financial statements are prepared in accordance with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The financial highlights above include performance measures based on EPRA best practice recommendations which are designed to enhance transparency and comparability across the European real estate sector. See glossary for definitions.

2. Alternative performance measure - see below for definitions and calculation methodology.

3. This report includes statements that are, or may be deemed to be, 'forward-looking statements'. These include statements regarding the intentions, beliefs or current expectations of the Directors and the Investment Manager regarding future events and performance of the Company, at the date of the report only.

4. Based on the period from IPO to the date of the announcement of the recommended cash offer on 16 July 2021.

David Hunter, Chairman, commented:

'Through its strategic focus on providing high-quality student accommodation primarily in and around London, the Company has delivered exceptional returns to shareholders since its IPO in 2013.

The year under review has been dominated by the Covid-19 pandemic, with the UK's departure from the EU adding to wider market uncertainty. Notwithstanding the resultant operational challenges faced by the Company during the year, the focus on assets in and around London has delivered strong NAV performance. This has been driven by valuation uplifts underpinned by strong institutional demand for private student residential accommodation assets in the Company's core market, as evidenced by the approach to acquire the Company which was received post year end.

If the proposed acquisition completes, the Company will have delivered a total shareholder return since IPO of 190.7%, representing an annualised total shareholder return since IPO of 13.9% and a return on equity since IPO of 2.6 times, on the basis of the cash exit of 213 pence per share.

On behalf of the Board, I would like to thank shareholders for their continued support of the Company since IPO.'

ABOUT THE COMPANY

GCP Student Living plc, a FTSE 250 company, was the first real estate investment trust in the UK to focus on student residential assets.

The Company seeks to provide shareholders with attractive total returns in the longer term through the potential for modest capital appreciation and regular, sustainable, long‑term dividends with inflation‑linked income characteristics.

It invests in properties located primarily in and around London where the Investment Manager believes the Company is likely to benefit from supply and demand imbalances for student residential accommodation and a growing number of international students.

The Company has a premium listing on the Official List of the FCA and trades on the Premium Segment of the Main Market of the London Stock Exchange. The Company had a market capitalisation of £732.6 million at 30 June 2021.

INVESTMENT OBJECTIVES AND KPIs

The Company's purpose as a REIT is to invest in UK student accommodation to meet the following key objectives:

Further information on Company performance can be found below.

1. Alternative performance measure - see below for definitions and calculation methodology.

2. The Company's portfolio was fully occupied at the start of the 2019/20 academic year.

PORTFOLIO OVERVIEW

At 30 June 2021, the Company's portfolio comprised eleven assets with c.4,100 beds, providing high-quality, modern student accommodation.

Location of assets by total capital value:

81% in and around London

19% rest of the UK

Blended NIY

4.30%

Bookings

68%1

For detailed portfolio information see below.

1. Bookings for 2020/21 academic year.

CHAIRMAN'S STATEMENT1

Through its strategic focus on providing high-quality student accommodation primarily in and around London, the Company has delivered exceptional returns to shareholders since its IPO in 2013.

Introduction

The year under review has been dominated by the Covid-19 pandemic, with the UK's departure from the EU adding to wider market uncertainty. Students seeking to attend universities in the UK for in-person learning for the final term of the 2019/20 academic year and all of the 2020/21 academic year have been faced with considerable challenges through a combination of travel restrictions, lockdowns and the closure of academic institutions as teaching moved online. Events leading from this have resulted in a reversal during the year of the Company's hitherto strong operational performance.

Notwithstanding the resultant operational challenges faced by the Company during the year, the focus on assets in and around London has delivered strong NAV performance, with the EPRA NTA2 per share rising by 13.5% to 195.05 pence per share. This has been driven by valuation uplifts underpinned by strong institutional demand for private student residential accommodation assets in the Company's core market, as evidenced by the approach to acquire the Company which was received post year end, as detailed below.

Offer to acquire the Company

On 11 August 2021, the Company published a circular to shareholders containing the details of the Board-recommended acquisition of the Company by a special purpose vehicle formed by a consortium comprising Scape Living plc and iQSA Holdco Limited (the "Consortium"), to be funded by their respective primary shareholders, these being APG Asset Management N.V. and Blackstone Group International Partners LLP. In arriving at its recommendation, the Board has factored in the increasingly positive news flow in recent months, most notably the Covid-19 vaccine rollout, as well as the extremely strong investment appetite and transaction activity in the purpose-built student accommodation sector.

However, the Board has tempered these factors with a recognition that, because of the continued global impact on travel caused by the Covid-19 pandemic and the effect of Brexit on student movement from the EU, as well as a volatile geopolitical environment, there remain considerable risks to student numbers. .By way of reference, in the academic year 2020/21, 73% of bookings were from overseas students.

Consequently, whilst the Board remains confident in the standalone prospects for the Company, having negotiated several improved proposals from the Consortium the Board believes that the acquisition allows shareholders to capture anticipated future value today, whilst eliminating the associated uncertainties. In addition, the Board recognises that the acquisition allows shareholders the opportunity to fully exit in cash at a price which represents an all-time high share price and an attractive premium to the EPRA NTA2 of 195.05 pence per share at the year end.

On 6 September 2021, shareholders voted in favour of the acquisition. If the transaction completes (subject to certain conditions being met, including clearance from the CMA) each shareholder in the Company will receive 213 pence per share in cash. If the conditions are met, the transaction is expected to occur in the coming months.

On the basis of the cash exit of 213 pence per share, the Company will have delivered a total shareholder return since IPO2,3 of 190.0%, representing an annualised total shareholder return since IPO2,3 of 13.9% and a return on equity since IPO2,3 of 2.6 times.

1. This report includes statements that are, or may be deemed to be, 'forward-looking statements'. These include statements regarding the intentions, beliefs or current expectations of the Directors and the Investment Manager regarding future events and performance of the Company, at the date of the report only.

2. Alternative performance measure - see below for definitions and calculation methodology.

3. Based on the period from IPO to the date of the announcement of the recommended cash offer on 16 July 2021.

Student welfare

The Directors are mindful of the Company's social responsibilities. The wellbeing of the residents and staff in the Group's buildings throughout the Covid-19 pandemic has remained of paramount importance to the Board, the Investment Manager and the Property Managers. Further, the Company's willingness to offer rental concessions during the year demonstrates to students, the Group's current and future2 customers, that it continues to support them in this difficult period.

Investment activity

The Group's forward-funded development, Scape Brighton, opened to students in two stages across the last quarter of 2020. Scape Brighton adds to the Group's presence in the Brighton market alongside Circus Street, Brighton.

In light of the disruption and market uncertainty caused by the Covid-19 pandemic, in November 2020 the Directors decided not to exercise the Company's right to acquire a second asset in the same locality as Scape Guildford.

Financial results

The Company's rental income for the financial year has been materially adversely impacted as a result of the disruption caused by the Covid-19 pandemic. The investment portfolio generated rental income of £36.3 million over the period to 30 June 2021 (30 June 2020: £47.8 million), representing c.60% of budgeted revenues of £60.1 million for the financial year.

The Company's EPRA NTA1 increased from 171.78 pence per share at the start of the year to 195.05 pence per share at 30 June 2021, representing an increase over the period of 13.5%.

Dividends

Noting the ongoing uncertainties relating to the Covid-19 pandemic, the impact on the Company's revenues and a desire to manage the business in a prudent and conservative manner, in November 2020, the Directors decided to reduce the Company's dividend payments to shareholders. In July 2021, following the receipt of the recommended cash offer, the Directors suspended dividends until further notice.

The Company has paid dividends in respect of the year ended 30 June 2021 of 0.75 pence per share. The dividends were paid in full as PIDs. The total dividend for the year was 188% covered by adjusted EPS1 of 1.41 pence.

In light of the offer to acquire the Company, the Directors do not currently expect that any further dividends will be declared or paid to shareholders.

Financing

At 30 June 2021, the Group's available debt facilities totalled £335 million, of which £288.2 million was drawn. At that date, the Group's current blended cost of borrowing on its drawn debt was 2.94% with an average weighted maturity of approximately four years. The loan‑to‑value1 of the Group at the year end was 21%.

Post year end the Company entered into an agreement with Wells Fargo & Company to extend its £45 million redrawable credit facility to January 2023. Further details of the Group's debt facilities are set out in note 17 to the financial statements.

Environmental, social, governance ("ESG")

The Board considers the integration of responsible investment principles across the Group, the assets within its investment portfolio and the operations of its advisers to be of fundamental importance. The Company has a GRESB three 'green star' rating, an EPRA sBPR gold award and a 'BB' MSCI ESG rating.

The Board has an ESG committee chaired by Gillian Day which oversees the formulation and implementation of the Group's ESG strategy. The Company has a long-term target2 of a 0.5% per annum like‑for‑like reduction in energy consumption, water consumption and general waste production from a baseline of 2018 to 2021. On a like-for-like basis the Company's emissions reduced by 11% for the year ended 30 June 2021, primarily due to reduced occupancy. 

The Investment Manager is a signatory to the Principles for Responsible Investment. Its policy on Responsible Investment may be found on its website, www.graviscapital.com.

1. Alternative performance measure - see below for definitions and calculation methodology.

2. This report includes statements that are, or may be deemed to be, 'forward-looking statements'. These include statements regarding the intentions, beliefs or current expectations of the Directors and the Investment Manager regarding future events and performance of the Company, at the date of the report only.

Investment management and property management arrangements

With effect from 1 July 2020, the Company entered into revised investment management arrangements with the Investment Manager and new property management arrangements with its primary Property Manager, Scape. The revised management arrangements provide the Company with a competitive investment management fee basis and more closely align property management fees to relevant operational metrics. The revised arrangements are set out below.

In the first quarter of 2021, ORIX Corporation, a diversified financial services company based in Japan, acquired a 70% stake in the Investment Manager.

If the transaction to acquire the Company completes, the Consortium has indicated that following purchase it intends that the investment management arrangements with the Investment Manager will be terminated. It is expected that the Property Manager will be retained to provide property management services in respect of certain assets.

Board changes

A number of Board changes have taken place during the year. Robert Peto retired as a Director and Chairman of the Company on 4 November 2020 and I was appointed as Chairman in his place. On behalf of the Board, I would like to thank Robert for his leadership of the Company and his service to shareholders since the IPO in 2013. Further, the Board appointed Russell Chambers as a Director of the Company, with effect from 1 February 2021.

Continuation vote

If the recommended offer to acquire the Company does not complete in accordance with the Company's articles of association, a continuation resolution is scheduled to be put to shareholders at the annual general meeting to be held later in 2021. Further information will be set out in relation to the continuation resolution when the notice of the annual general meeting is published. In the event that the takeover of the Company by the Consortium is completed ahead of that date, the Company will not hold its annual general meeting as currently constituted and no continuation vote will be put to shareholders.

Final thoughts

On behalf of the Board, I would like to thank the Investment Manager for its substantial contribution to the creation and operation of the Company and to Scape for managing the properties so effectively. I would also like to thank my Board colleagues for their valued contribution through a period of intense operations and corporate challenges for the Company. Further, I would like to thank shareholders for their continued support of the Company since IPO.

David Hunter

Chairman

18 October 2021

COMPANY PERFORMANCE SINCE IPO

Annualised total shareholder return since IPO1

8-10% Target at IPO

13.9%2,3 on exit

Relevance to strategy: Total shareholder return measures the delivery of the Company's strategy, to provide shareholders with attractive total returns in the longer term.

Dividends per share since IPO

42.11p since IPO

Relevance to strategy: The total dividend reflects the Company's ability to deliver regular, sustainable, long-term dividends and is a key element of total return.

Annualised total NAV return since IPO1

13.1%2 at 30 June 2021

Relevance to strategy: Total NAV return measures the delivery of the Company's strategy, to provide shareholders with modest capital appreciation.

Blended NIY1

4.30% at IPO

6.29% at 30 June 2021

Relevance to strategy: Blended NIY over time demonstrates the yield shift experienced in the student accommodation sector since IPO.

Number of beds

558 at IPO

4,116 at 30 June 2021

Relevance to strategy: Number of beds measures the delivery of the Company's strategy, to invest and manage assets with the objective of spreading risk.

Average annualised student rental growth since IPO1

3.7% at 30 June 2021

Relevance to strategy: Student rental growth is a key measure of the quality of the portfolio.

Gross asset value

£93.0m at IPO

£1.2bn at 30 June 2021

Relevance to strategy: Gross asset value demonstrates delivery of the Company's strategy, through the acquisition of eleven properties.

Share price

100p at IPO

213p2 on exit

Relevance to strategy: Share price is a measure of delivery of the Company's strategy, to provide shareholders with attractive total returns in the longer term.

Market capitalisation

£70.0m at IPO

£732.6m at 30 June 2021

Relevance to strategy: Market capital demonstrates the successful growth of the Company over the period since IPO.

1. Alternative performance measure - see below for definitions and calculation methodology.

2. Shareholders will receive a cash exit 213 pence per share on completion of the recommended acquisition of the Company, if it occurs.

3. Based on the period from IPO to the date of the announcement of the recommended cash offer on 16 July 2021.

STRATEGIC REPORT

STRATEGIC OVERVIEW

The Company's investment objective is to provide shareholders with attractive total returns in the longer term.

10.2%

Annualised total shareholder return since IPO1

0.75p

Dividends paid in respect of the year

Business model

The Company's investment strategy is set out in its investment objective and policy below. It should be considered in conjunction with the Chairman's statement and the strategic report which provide an in-depth review of the Company's performance and future2 strategy.

Investment objective

The Company's investment objective is to provide shareholders with attractive total returns in the longer term through the potential for modest capital appreciation and regular, sustainable, long‑term dividends with inflation-linked characteristics.

Investment policy

The Company intends to meet its investment objective through owning, leasing and licensing student residential accommodation and teaching facilities to a diversified portfolio of direct let tenants and HEIs. The Company will mostly invest in modern, purpose-built, private student residential accommodation and teaching facilities located primarily in and around London, where the Investment Manager believes the Company is likely to benefit from supply and demand imbalances for student residential accommodation.

The Company may also invest in development and forward‑funded projects which are consistent with the objective of providing shareholders with regular, sustainable dividends and have received planning permission for student accommodation, subject to the Board being satisfied as to the reputation, track record and financial strength of the relevant developer and building contractor.

Rental income will predominantly derive from a mix of contractual arrangements including direct leases and/or licences to students ("direct let agreements"), leases and/or licences to students guaranteed by HEIs and/or leases and/or licences directly to HEIs. The Company may enter into soft nominations agreements (pari passu marketing arrangements with HEIs to place their students in private accommodation) or hard nominations agreements (longer-term marketing arrangements with HEIs of between two and 30 years in duration). Where the Company invests in properties which contain commercial or retail space, it may derive further income through leases of such space. Where the Company invests in development and forward‑funded projects, development costs will typically be paid in stages through construction, with a bullet payment at completion.

The Company intends to focus primarily on accommodation and teaching facilities for students studying at Russell Group universities and other leading academic institutions, regional universities with satellite teaching facilities in and around London and specialist colleges.

The Company may invest directly or through holdings in special purpose vehicles and its assets may be held through limited partnerships, trusts or other vehicles with third party co-investors.

Borrowing and gearing policy

The Company may seek to use gearing to enhance returns over the long term. The level of gearing will be governed by careful consideration of the cost of borrowing and the Company may seek to use hedging or otherwise seek to mitigate the risk of interest rate increases. Gearing, represented by borrowings as a percentage of gross assets, will not exceed 55% at the time of investment. It is the Directors' current intention to target gearing of approximately 30% of gross assets in the long term and to comply with the REIT condition relating to the ratio between the Group's 'property profits' and 'property finance costs'.

Use of derivatives

The Company may invest through derivatives for efficient portfolio management. In particular, the Company may engage in interest rate hedging or otherwise seek to mitigate the risk of interest rate increases as part of the Company's efficient portfolio management.

Investment restrictions

The Company invests and manages its assets with the objective of spreading risk through the following restrictions:

· the Company will derive its rental income from a portfolio of not less than 500 studios;

· the value of any newly acquired single property will be limited to 25% of gross assets, calculated as at the time of investment;

· the Company mostly invests in modern, purpose-built, private student residential accommodation and teaching facilities located primarily in and around London. Accordingly, no less than 75% of the Group's property portfolio will comprise assets which are located in and around London, calculated as at the time of investment;

· at least 90% by value of the properties directly or indirectly owned by the Company shall be in the form of freehold or long leasehold (over 60 years remaining at the time of acquisition) properties or the equivalent;

· the Company will not:

i. invest more than 20% of its gross assets in undeveloped land;

ii. commit more than 15% of its gross assets to forward-funded projects in respect of such undeveloped land, such commitment to be determined on the basis of the net construction funding requirements (and associated advisory costs) of such projects at the time of commitment up to their completion in both cases as measured at the time of investment;

· the Company will not invest in completed assets which are not income generative at, or shortly following, the time of acquisition; and

· the Company will not invest in closed-ended investment companies.

The Directors currently intend, at all times, to conduct the affairs of the Company so as to enable it to qualify as the principal company of a REIT group for the purposes of Part 12 of the CTA (and the regulations made thereunder).

In the event of a breach of the investment guidelines and restrictions set out above, the Investment Manager shall inform the Directors upon becoming aware of the same and, if the Directors consider the breach to be material, notification will be made to a regulatory information service. The Company has not breached its investment guidelines and restrictions during the year.

No material change will be made to the investment policy without the approval of shareholders by ordinary resolution.

Business and status of the Company

The Company is registered as a public limited company and is an investment company within the terms of section 833 of the Companies Act 2006. The Company is a REIT for the purposes of Part 12 of the CTA. The Company will be treated as a REIT so long as it continues to meet the REIT conditions in relation to any accounting period.

The Company was incorporated on 26 February 2013. Its shares trade on the Premium Segment of the Main Market of the London Stock Exchange.

1. Alternative performance measure - see below for definitions and calculation methodology.

2. This report includes statements that are, or may be deemed to be, 'forward-looking statements'. These include statements regarding the intentions, beliefs or current expectations of the Directors and the Investment Manager regarding future events and performance of the Company, at the date of the report only.

INVESTMENT MANAGER'S REPORT

The Investment Manager has assembled a portfolio of assets which, following the acquisition of the Company by the Consortium, will have delivered an annualised total shareholder return since IPO1 of 13.9%.

PORTFOLIO PERFORMANCE

Introduction

Travel restrictions combined with lockdowns and the closure of academic institutions through the financial year have restricted the ability of students to attend universities and occupy their student accommodation. These factors have resulted in a reduction to occupancy levels across the portfolio, impacting revenue for the year. Notwithstanding this, strong institutional appetite for private student accommodation assets has driven up the value of assets in the expectation of attractive longer-term returns.

Portfolio performance update

The key drivers of the Company's returns are based on the three fundamentals of where, what and how the Company acquires and operates assets. Focusing on modern, purpose-built, private student residential accommodation located primarily in and around London forms the basis of how the Investment Manager seeks to add value over the long term. The success of this approach has been demonstrated by the price which the Consortium has offered to acquire the Company, and the returns since IPO that this will realise for shareholders.

The Group's portfolio generated rental income of £36.3 million for the year to 30 June 2021 (30 June 2020: £47.8 million) comprising income from direct lets of rooms to students, nominations agreements with HEIs and long-term commercial leases, as set out in the chart below. This represents c.60% of budgeted revenues of £60.1 million for the financial year. The portfolio has continued to be impacted by the restrictions on global mobility and closure of academic institutions resulting from the Covid-19 pandemic.

The Group's buildings have remained operational throughout the pandemic with the Investment Manager and Property Managers remaining focused on ensuring the wellbeing of residents and staff by providing a safe and secure environment in line with UK Government regulations. The Board, the Investment Manager and the Property Managers have all prioritised the safety and wellbeing of students and the Group's employees from the outset.

The Property Managers have implemented comprehensive safety procedures to ensure the Company's buildings are a safe place to live and work and have received assurance on the protocols from the British Safety Council.

For the academic year 2020/21, approximately 68% of booked rooms were occupied and/or subject to nominations agreements. Post year end, at 15 October 2021, approximately 80% of rooms across the Group's portfolio of student accommodation have been booked for the 2021/22 academic year, and of these rooms 83% have been occupied by residents. The level of bookings at the same date for the previous academic year was 70%.

On 5 November 2020, the Company reported that the Company's nominations agreement with a subsidiary of INTO University Partnerships ("INTO") was in arrears of c.£1.9 million at 30 September 2020. On 17 November 2020, the Company announced that it and INTO had agreed to a full settlement of all arrears of £1.9 million, in addition to a variation to the nominations agreement between them. The previous nominations agreement was for 210 beds at the Group's Scape Mile End asset up until the end of the 2024/25 academic year. The revised arrangements between the Company and INTO are for 105 beds, at a premium rate, up until the end of the 2020/21 academic year and include additional parent company financial guarantees.

1. Alternative performance measure - see below for definitions and calculation methodology.

REVENUE BY TYPE

£24.5m: Direct let income2£6.3m: Commercial income

£5.3m: Nominations income

£0.2m: Ancillary income2. Net of Discounts

On 15 February 2020, the Company announced that it had terminated its 15-year occupational lease with a WeWork subsidiary ("WeWork") in respect of commercial space at Scape Shoreditch. Ahead of termination, the Company collected a payment of c.£3.1 million (including VAT) covering all arrears and rent due to the end of June 2021.

The payment was equal to the maximum amount available of WeWork's parent company guarantee. The Company has taken vacant possession of the commercial space at Scape Shoreditch. The Investment Manager is pursuing opportunities to re-let the commercial space at Scape Shoreditch including plans for refitting the premises.

In order to support direct let students during this difficult period, in January 2021 the Company offered rental concessions of up to 100% for a six‑week period, which was applied to final instalments for the academic year due in April 2021. The loss of rental income arising from this rent concession was approximately £0.7 million or c.0.15 pence per share.

In the year under review, the Company has achieved strong NAV growth driven by valuation uplifts. The Company's EPRA NTA1 per share increased from 171.78 pence at 30 June 2020 to 195.05 pence at 30 June 2021, an increase of 13.6%. This was driven by a like‑for‑like portfolio valuation uplift of 11.0%. The market valuation of the portfolio was £1.14 billion at 30 June 2021.

The valuation uplift for the year has been driven primarily by strong investment demand for private student accommodation in the Company's core London market, which has been the Investment Manager's focus since IPO.

This includes valuation uplifts on Scape Bloomsbury of £25.2 million, Scape Wembley of £21.9 million and Scape Mile End of £17.2 million. The blended net initial yield1 of the Company's operational portfolio at 30 June 2021 was 4.30% (30 June 2020: 4.44%).

During the year, the Company's forward-funded development at Scape Brighton became operational, notwithstanding reduced levels of activity across the construction sector. Scape Brighton opened to students in two stages in September and early November 2020. Its construction costs have been part-funded through the Company's £55.0 million development facility, of which £15.0 million was drawn at the year end. The Company's outstanding capital commitments, including in respect of the construction costs at Scape Brighton, were approximately £3.9 million and will be funded through the Company's available cash resources.

STUDENTS PER BED RATIO

London: 3.8

Brighton: 4.1

Bristol: 2.7

National average: 3.1

Source: HESA, Knight Frank Research.

1. Alternative performance measure - see below for definitions and calculation methodology.

MARKET UPDATE

The UK student accommodation market

The Covid-19 pandemic has created unprecedented challenges for global mobility, including that of students. With this backdrop, it is encouraging to note that applications and acceptances for higher education courses are at record levels. The UK remains a global leader in the provision of higher education, with some of the highest-ranking universities in the world, including two in the top ten in 20211, making it attractive to both domestic and international students, for whom the UK is the second most popular destination for further education after the USA2.

Approximately 81% of the Company's portfolio is located in and around London. Demand for full-time higher education courses in London remains strong relative to the rest of the UK. London is home to 23 universities, with more universities (four) ranked in the top 40 by The Times Higher Education World University Rankings than any other city in the world. Approximately 30% of the 2.5 million students in the UK study in London and the South East3. International students in particular favour London as a destination for higher education given its continued reputation as a global centre of academic excellence. A quarter of all international students in the UK choose to study in London.

Student numbers supportive of occupancy and growth

Applications and acceptances for higher education courses in the UK were at record levels for the 2020/21 academic year. UCAS end-of-cycle data for the 2020/21 academic year showed that 570,475 students had accepted places onto higher education courses in the UK, representing a year-on-year increase on pre-pandemic levels of 5.4%.

This growth has been driven by a year‑on‑year increase in acceptances of 16.9% for non‑EU international students to 52,755 and a 4.5% increase in domestic students to 485,400. The number of EU students has also increased by 1.7% to 32,320. The increase in acceptances for domestic students has, in part, been underpinned by record entry rates of 18 year-olds into higher education.

Looking forward, UCAS clearing data published on 7 September 2021 relating to acceptances for the upcoming 2021/22 academic year shows a further increase in students placed onto higher education courses in the UK with a year-on‑year increase of 5% for non-EU international students. The effect of Brexit is impacting student numbers from the EU due to the obligation to now pay international student rates rather than domestic, with acceptances falling by 56%.

The UCAS data above supports the Investment Manager's view that students will continue to invest in their education and enrol on courses to further their future employment prospects.

The continued rise in the number of applications from non-EU international students suggests that students remain willing to travel to study abroad in order to obtain qualifications delivered in the English language and are making applications on the basis that they will do so. However, with the continued global impact on travel caused by the Covid-19 pandemic and the effect of Brexit on student movement from the EU, there remains considerable uncertainty on occupancy levels for at least one further academic year and possibly beyond.

The Board and the Investment Manager continue to monitor global events as they relate to student numbers, including relations between the US, the UK and China. In 2020/21, one in four of the Company's student bookings were from China.

1. The Times Higher Education World University Rankings 2021.

2. OECD.

3. HESA.

Strong supply-side barriers

The investment returns from student accommodation vary considerably between cities in the UK. The Investment Manager has focused on constructing a portfolio in those markets which demonstrate a structural undersupply of private student accommodation. Furthermore, short-term supply dynamics, driven by the consequences of the pandemic, should not detract from the longer-term divergence of returns from student accommodation between cities in the UK with an undersupply of student housing and those with less restrictive planning regulations.

The Investment Manager expects London and Brighton to remain undersupplied as a result of a combination of high land values and challenging planning restrictions. Modern student accommodation is in short supply in both markets, as illustrated by existing university stock in London, of which an estimated two-thirds is over 20 years old1.

The beneficial impact of these supply-side barriers on the Company's portfolio, coupled with the outlook for demand for accommodation in its assets and investment activity in the student accommodation sector, is reflected by the strong valuation increases achieved both during the period and since the Company's IPO in 2013. The Investment Manager believes these fundamentals will continue to drive strong performance over the longer term, in the event that the recommended offer for the Company does not complete.

Transactional activity

Investment volumes of student accommodation assets exceeded £5.9 billion in 2020, the highest level of transactional activity in the UK ever recorded. This included the £4.7 billion acquisition of the iQ Student portfolio by Blackstone Group in May 2020 which was the largest-ever student property transaction in the UK, at an estimated yield of 4.2%. Other notable transactions included the acquisition of a c.£600 million mixed portfolio of student accommodation and residential units by Quadreal in November 2020, for a reported yield for the student element of below 4.0%.

Further, the sale of Scape Canalside to an institutional buyer was completed in October 2020, for a price of c.£100 million, believed to reflect an estimated yield of 4.2%.

Private capital continues to be deployed in the acquisition of student accommodation in the UK throughout 2021. Approximately £600 million of transactions have completed for assets during Q2 2021.

1. JLL London Student Housing.

FINANCIAL REVIEW

Rental income

The Company generated rental income for the year ended 30 June 2021 of £36.3 million from the Company's property portfolio. This represents c.60% of budgeted income for the financial year. The portfolio has continued to be impacted by the restrictions on global mobility and closure of academic institutions resulting from the Covid-19 pandemic, which led to the majority of students vacating their rooms. The Company's commercial and nominations income has also been impacted, with the Company receiving reduced rents due for the financial year.

Property operating costs

The Company's net operating margin has reduced to 57% for the period, primarily due to the reduction in revenue detailed above and an increase in operating costs. Property expenditure of £15.3 million was incurred during the year, a significant increase of £5.7 million year‑on‑year, predominantly due to the accounting treatment of three factors. Firstly, the Scape property management fees of £2.2 million (previously paid by the Investment Manager from its fee) are now being paid directly by the Company and recognised in property operating costs. The investment management fees have been reduced accordingly, refer to note 28.

Secondly, the termination of the WeWork lease in February 2020 resulted in a write-off of £2.1 million of lease incentives held on the statement of financial position. This was offset by a £3.1 million settlement from WeWork recognised in income. Finally, bad debts of £1.0 million were written off in the year in respect of students unable to occupy their rooms due to the ongoing pandemic.

Administration expenses

Total administration expenses of £8.6 million comprise fund running costs, including the Investment Manager's fee and other service provider costs in the period. Administration costs are carefully monitored and controlled by the Investment Manager and the Board to ensure that the Company receives value for services received.

Other costs

These include the initial legal and professional fees associated with the recommended cash offer of £0.4 million and aborted transaction costs of £0.1 million in relation to a forward purchase agreement of a second asset in the same locality as Scape Guildford. Further costs associated with the recommended cash offer were incurred post year end which are not reflected in the financial statements.

Net financing costs

Net finance costs of £10.0 million in the year principally comprise loan interest associated with the Company's financing arrangements. These costs have increased year-on-year due to the Company drawing on redrawable credit and development facilities, in line with expectations (refer to note 17).

Profitability

Profit before tax and fair value gains on investment properties of £1.9 million was generated in the period.

Total fair value gains on investment properties through revaluation of the Company's investment portfolio were £112.8 million for the year, positively impacting operating profit and generating EPS of 25.21 pence. The adjusted EPS1 for the period was 1.41 pence2 excluding fair value gains on investment properties and adjusting for non‑recurring transactions costs and licence fees receivable on forward funding agreements..

Financial performance

Condensed profit and loss

1. Alternative performance measure - see below for definitions and calculation methodology.

2. Refer to note 3 for detailed calculation.

Ongoing charges

The Company's ongoing charges ratio1 was 1.0% for the year ended 30 June 2021, calculated in line with the AIC methodology, excluding direct property costs. This ratio has decreased from 1.3% in the prior year as a result of the Company entering into a new investment management agreement with the Investment Manager.

Dividends

In order to maintain its REIT status, the Company is required to meet a minimum distribution test for each accounting period for which it is a REIT. This test requires the Company to distribute at least 90% of the property rental profits from its property rental business for each accounting period, as adjusted for tax purposes.

In respect of the financial year ended 30 June 2021, the Company paid dividends of 0.75 pence per ordinary share. The dividends were paid in full as a PID in respect of the Group's tax exempt property rental business. The Company has fulfilled all of its obligations under the UK REIT regime and was in full compliance with the REIT requirements at 30 June 2021 and at the date of this report.

The total dividend of 0.75 pence for the year was 188% covered by adjusted EPS1 of 1.41 pence2.

Cash flow generation

The Company held cash and cash equivalents of £44.6 million at the end of the financial year. A total of £15.4 million of operating cash flows were generated in relation to the Company's student accommodation portfolio. The Company drew down £6.1 million on the Company's development facility and continued the forward‑funding of the construction of Circus Street and Scape Brighton. The remaining cash outflows during the year relate the cost of servicing the Company's debt facility in addition to payment of dividends, resulting in a net decrease in cash and cash equivalents at the year end.

Debt financing

The Company's loan facilities total £335.0 million, of which £288.2 million was drawn at 30 June 2021. These facilities include fully drawn fixed interest rate term facilities with PGIM for an aggregate amount of £235 million, which are secured against certain of the Group's operational assets, and have an average weighted maturity of approximately four years. In addition, the Group has £100 million of floating rate borrowing facilities with Wells Fargo (of which £53.2 million was drawn as at 30 June 2021) comprising a development facility of £55 million and a £45 million redrawable credit facility. The loan‑to‑value of the Group at the year‑end date was approximately 21%.

Asset performance

Bookings for the 2020/21 academic year were at reduced levels, however the Company saw headline like-for-like student rental growth1 of 2.6% for the 2020/21 academic year and also benefited from yield compression. The valuation uplift for the financial year has been predominantly driven by uplifts on Scape Bloomsbury of £25.2 million, Scape Wembley of £21.9 million and Scape Mile End of £17.2 million.

Further information on property valuations is given in note 13 to the financial statements.

1. Alternative performance measure - see below for definitions and calculation methodology.

2. Refer to note 3 for detailed calculation.

Lifecycle reserve

The Company's lifecycle cash reserves were £3.1 million at the year end and are held within cash and cash equivalents. The reserves are held for future lifecycle expenditure to ensure the properties are maintained at the level needed to sustain the current rents and any assumed future rental growth.

Net assets

In October 2019, EPRA announced updated best practice recommendations which included new NAV metrics to replace EPRA NAV. The Company has adopted EPRA NTA 1 as its principal measure of NAV. Net assets attributable to equity holders at 30 June 2021 on an IFRS basis were £887.4 million, up from £781.4 million at 30 June 2020.

The increase in net assets since the prior year end was primarily driven by an increase in the valuation of the property portfolio. At 30 June 2021, there were 455,019,030 shares in issue, giving an EPRA NTA1 per share of 195.05 pence.

NAV and share price return

The Company's ordinary shares have traded at an average premium1 to EPRA NTA1 per share (ex-income) of 0.7% since IPO, with an average discount1 over the financial year of 17.0%..EPRA NTA1 per share has increased from 171.78 pence at 30 June 2020 to 195.05 pence per share at 30 June 2021, a 13.5% increase year‑on-year. Dividends of 0.75 pence per ordinary share were paid to shareholders.

The annualised total shareholder return since IPO1 was 10.2% at the year end, compared to the annualised target return of 8 to 10%. The total shareholder return1 for the year was 31.9%. On the basis of the cash exit of 213 pence per share, the Company will have delivered a total shareholder return since IPO1,3 of 190.0%, representing an annualised total shareholder return since IPO1,3 of 13.9% and a return on equity since IPO1,3 of 2.6 times.

Financial performance

Condensed balance sheet

1. Alternative performance measure - see below for definitions and calculation methodology.

2. Following the recommended cash offer for the Company, the Directors suspended the fourth quarterly dividend. Therefore, EPRA NTA (ex-income) is equivalent to EPRA NTA (cum-income). 

3. Based on the period from IPO to the date of the announcement of the recommended cash offer on 16 July 2021

Gravis Capital Management Limited

18 October 2021

PROPERTY PORTFOLIO

The Company's property portfolio consists of high-quality, modern student accommodation, located primarily in and around London.

11

Number of assets at 30 June 2021

4,116

Number of beds at 30 June 2021

At 30 June 2021, the Company's portfolio comprised eleven high‑quality, modern student accommodation buildings, of which 81% of the total capital value was located in and around London.

Key

1: Number of beds

2: Date of acquisition

3: Book cost

4: Valuation at 30 June 2021

5: NIYa,b

1 Scape Shoreditch

1: 541

2: Sep 2015

3: £166.8m

4: £227.3m

5: 4.33%

2 Scape Bloomsbury

1: 432

2: Apr 2017

3: £167.3m

4: £219.6m

5: 3.75%

3 Scape Mile End

1: 588

2: May 2013

3: £94.4m

4: £181.6m

5: 4.20%

4 Scape Wembley

1: 578

2: Jun 2016

3: £78.0m4: £127.2m

5: 4.15%

5 Scape Brighton

1: 555

2: Jul 2018

3: £92.5m4: £107.2m

5: 5.00%

6 Circus Streetc

1: 4502: Aug 2017

3: £63.5m

4: £85.0m

5: 3.80%

7 Scape Greenwich

1: 2802: May 2014

3: £40.5m4: £66.7m

5: 4.34%

8 The Pad

1: 2202: Dec 2013

3: £31.4m4: £35.3m

5: 5.80%

9 Podium

1: 1782: Dec 2017

3: £29.6m

4: £32.9m5: 5.65%

10 Scape Guildford

1: 1412: Sep 2015

3: £19.1m4: £29.8m

5: 5.15%

11 Water Lane Apartments

1: 1532: Feb 2016

3: £18.8m4: £24.7m

5: 5.15%

Top five HEIs attended

1. Royal Holloway2. UCL3. QMUL4. Sussex5. Brighton

Top five nationalities represented

1. British2. Chinese3. Indian4. French5. American

4.30%

Blended net initial yielda,b

80%

Studio rooms in the Company's buildingsd

a) The blended net initial yield is calculated by the Company's independent valuer on operational assets only.

b) Alternative performance measure - see below for definitions and calculation methodology.

c) The office element remains under construction

d) Excluding Circus Street, Brighton which is let under a 20-year FRI lease to Kaplan.

FEATURED ASSETS

SCAPE SHOREDITCH

541

Number of beds

Scape Shoreditch is situated in a prime London location in Shoreditch, N1. The property was acquired by the Company in September 2015.

Built over eleven floors, the building comprises 541 studio bedrooms and c.10,000 sq ft of communal areas. The rooms are fully equipped for city living, with integrated storage and work space, fitted kitchenette and dining area and an en suite shower room. Located in the building are a gym, study lounge, games room, cinema and large communal kitchen. On the upper levels are landscaped rooftop gardens with four pavilions, including a barbecue terrace, offering spectacular views over London and down through the central glass roof into the commercial space.

The property generates c.£10 million of gross revenue per annum when fully occupied, through a combination of direct let tenancies and commercial income. The commercial lease at the property generates c.25% of total gross annual revenues when tenanted. The property has generated a valuation uplift of £16.6 million for the year to 30 June 2021.

Asset location

Scape Shoreditch offers students a complete London living solution in one of London's most fashionable districts, Tech City, London's technology and media district. The property is located two minutes from Old Street station, within a 15-minute walk of BAYES Business School, University of Arts and University of Law, with City, University of London (and LSE, UCL and QMUL all located within a short journey of the property.

SCAPE BLOOMSBURY

432

Number of beds

Scape Bloomsbury is situated in a prime central London position in Bloomsbury, WC1. The property was acquired by the Company in April 2017.

The property is a 110,000 sq ft ten-storey building situated on half an acre of freehold land which was previously used as a Government office before being converted into student accommodation in 2008.

Following acquisition in April 2017, the Group reconfigured and refurbished the property to the high specification typical of the Group's existing standing assets and the Scape brand.

The property provides 432 beds and generates c.£10 million in gross revenue per annum when fully occupied, through a combination of long-term contracts and short-term lets. The property has generated a valuation uplift of £25.2 million for the year to 30 June 2021.

Asset location

Scape Bloomsbury is one of the most prime private student accommodation schemes in London, located in Bloomsbury within a few hundred metres of some of the world's leading universities. The property is within a short walking distance of UCL, SOAS and two teaching hospitals, UCH and GOSH. LSE, King's College, City, University of London and University of the Arts are also within walking distance, bringing the total number of students in close proximity to Scape Bloomsbury to c.100,000.

STAKEHOLDERS

Stakeholders are integral to the long-term sustainable success of the Group. They include customers, shareholders, employees, local communities and suppliers.

STAKEHOLDER ENGAGEMENT

Section 172

The Board of Directors recognises that, both individually and collectively, its overarching duty is to act in good faith and in a way that is most likely to promote the success of the Company and the Group. As set out in section 172 of the Companies Act 2006, the Directors act for the benefit of shareholders and in the interests of stakeholders as a whole, having regard, amongst other matters, to:

· the likely consequences of any decision in the long term;

· the interests of the Group's employees;

· the need to foster the Group's business relationships with suppliers, customers and others;

· the impact of the Group's operations on the community and the environment;

· the desirability of the Group maintaining a reputation for high standards of business conduct; and

· the need to act fairly between shareholders of the Company.

The Directors seek to understand the needs and priorities of the Company's stakeholders in accordance with section 172 of the Companies Act 2006. All Board discussions include consideration of the longer-term consequences of any key decisions and their implications for the relevant stakeholders.

The Group's key stakeholders comprise customers, shareholders, employees, suppliers and the local communities in which it operates.

The section below sets out why and how the Group engages with these stakeholders and the actions taken by it to ensure that their interests are taken into account in the Board's decision making.

1. This report includes statements that are, or may be deemed to be, 'forward-looking statements'. These include statements regarding the intentions, beliefs or current expectations of the Directors and the Investment Manager regarding future events and performance of the Company, at the date of the report only.

SUSTAINABILITY

The Company aims to operate a fully sustainable business model with a low carbon footprint for all its stakeholders.

Responsible investment

The Board considers the integration of responsible investment principles across the Group, the assets within its investment portfolio and the operations of its advisers to be of fundamental importance. The Board has established an ESG Committee and a Board member has been allocated specific responsibility for ESG matters.

The Investment Manager is a signatory to the Principles for Responsible Investment ("PRI"). The PRI, established in 2006, is a global collaborative network of investors working together to put the six Principles for Responsible Investment into practice. More information can be found at: www.unpri.org.

The Investment Manager has established a dedicated Responsible Investment Committee to assess ESG issues and integrate sustainability across its business, including the embedding of responsible investing policies in its investment management processes.

Prior to a new investment being approved, the Investment Manager assesses how the investment fares against key relevant ESG criteria, laid out in an ESG checklist tailored for the Company. The checklist typically covers the counterparty's commitment and capability to effectively identify, monitor and manage potential ESG-related risks and opportunities, and, to the extent applicable, the availability of relevant policies and procedures, alignment with industry or investment specific standards and ratings and compliance with relevant ESG-related regulation and legislation.

As a firm-wide approach, the Investment Manager applies a process of positively screening for investments that promote sustainability or benefit society, including, but not limited to, the areas of climate change mitigation and adaptation, energy transition, critical infrastructure, affordable living, social housing, education and healthcare. The Investment Manager excludes investments which focus on animal testing, armaments, alcohol production, pornography, tobacco, coal production and power, and nuclear fuel production. Its policy on Responsible Investment can be found on its website: www.graviscapital.com.

Sustainable buildings

The Group's environmental sustainability measures include the use of highly efficient combined heat and power ("CHP") systems, ground source heat pumps and intelligent interior heating and lighting to minimise GHG emissions. CHP is a highly efficient process that captures and utilises the heat that is a by-product of the electricity generation process. By generating heat and power simultaneously, CHP can reduce carbon emissions by up to 30% compared to the separate means of conventional generation via a boiler and power station.

The Company's property portfolio incorporates green roof space, solar panels, rainwater harvesting and sustainable waste management, including diverting waste from landfill to generate renewable electricity via the waste management process. In the year to 30 June 2021, a total of c.500 tonnes of property waste has been diverted from landfill, with Scape procuring the conversion of 82% of all property waste into renewable energy and 16% into national recycling schemes. The property waste has been recycled into various consumer products such as cups and bottles and renewable energy, with approximately 230,000 kWh of electricity being generated during the year.

Energy efficiency

The Company's buildings are either constructed, or acquired, as newly operational properties and therefore conform to the Company's requirements for the highest standards of energy efficiency. The properties are designed with this in mind, with 100% of the portfolio with an EPC rated B or above.

At Scape Mile End an LED lighting conversion has been carried out, replacing all existing fluorescent lighting with LED equivalents to improve energy efficiency across the building. Energy consumption for a fluorescent lamp is up to ten times the usage of LED equivalents and therefore significant financial savings can be achieved by upgrading building light fittings.

EPC ratings

An energy performance certificate ("EPC") is required by law whenever a building is bought, sold or rented. An EPC is a key measure of an asset's energy efficiency, and grades the property from A (most efficient) to G (least efficient).

The Company portfolio (by gross internal area) at 30 June 2021 is rated as follows:

A: 17%

B: 83%

C-G: 0%

Greenhouse gas emissions

Methodology/notes:

Methodology:

The principal methodology used to calculate the emissions reflects the UK Government's Environmental Reporting Guidelines 2019 version. The Company has reported on all the emission sources required under the regulations. An operational control approach was used to define the Company's organisational boundary and responsibility for GHG emissions. The Company owns 100% of the property assets it operates and has therefore reported on that basis. All material emission sources within this boundary have been reported upon, in line with the requirements of the regulations.

Intensity ratio:

In order to express the GHG emissions in relation to a quantifiable factor associated with the Company's activities, the intensity ratio per square foot has been chosen. It is considered that this intensity ratio will provide a uniform basis of comparing data between the Company's different properties and take into account the commercial areas within the properties. This will also allow comparison of the Company's performance over time, as well as with other companies in the Company's peer group. Consumption per bed has also been presented for comparison purposes.

Scope of data:

Scape Brighton became operational during the year and therefore emissions on an absolute basis have increased. Excluding Scape Brighton, emissions have decreased by 11% on an absolute basis.

District heating:

Scape Greenwich is the only property with district heating and cooling systems and therefore consumption and like-for-like data is identical.

Appropriate denominator:

Consumption per bed has been chosen as the denominator.

Landlord obtained utility consumption:

All data has been obtained from metered buildings, no estimation has been used.

Disclosure on own offices:

The Company does not occupy any premises and outsources all of its services on a fee basis.

Water consumption

Waste and recyclingTotal weight of waste by disposal route(Annual metric tonnes and proportion by disposal route)

30 June 2021

514 tonnesWaste to energy: 82%Waste to recycling: 16%

Waste to landfill: 2%

EPRA codeWaste-Abs

30 June 2020

820 tonnesWaste to energy: 86%Waste to recycling: 14%

Waste to landfill: 0%

EPRA codeWaste-Abs

Methodology/notes:

Water source:

All of the water consumed at the Company's buildings is purchased through water utility companies.

Appropriate denominator:

Consumption per bed has been chosen as the denominator.

Landlord obtained utility consumption:

All data has been obtained from metered buildings, estimation has been used for two months' water consumption at Water Lane Apartments (where no data was available) based on average consumption during the year.

Employee data

RISK MANAGEMENT

Robust risk assessments and reviews of internal controls are undertaken regularly in the context of the Company's overall investment objective.

Role of the Board

The Directors have overall responsibility for risk management and internal controls within the Group. They recognise that risk is inherent in the operation of the Group and that effective risk management is an important element in the success of the organisation. The Directors have delegated responsibility for the assurance of the risk management process and the review of mitigating controls to the audit and risk committee.

The Directors, when setting the risk management strategy, also determine the nature and extent of the significant risks and the Company's risk appetite in implementing this strategy. A formal risk identification and assessment process has been in place since IPO, resulting in a risk framework document which summarises the key risks and their mitigants.

The Directors undertake a formal risk review with the assistance of the audit and risk committee at least twice a year in order to assess the effectiveness of the Group's risk management and internal control systems. During the year under review, the Directors have not identified, nor been advised of, any failings or weaknesses which they have determined to be of a material nature. The principal risks and uncertainties which the Group faces are set out below.

Internal control review

The Board is responsible for the internal controls relating to the Group including the reliability of the financial reporting processes and for reviewing their effectiveness.

The Directors have reviewed and considered the guidance supplied by the FRC on risk management, internal control and related finance and business reporting. An ongoing process has been established for identifying, evaluating and managing the principal and emerging risks faced by the Group and is kept under regular review by the Board, through the audit and risk committee. This process, together with key procedures established with a view to providing effective financial control, was in place during the year under review and at the date of this report.

The internal control systems are designed to ensure that proper accounting records are maintained, that the financial information on which business decisions are made, and which is issued for publication, is reliable and that the assets of the Group are safeguarded.

The following are the main features of the Group's internal control and risk management systems:

· a defined schedule of matters reserved for decision by the Board, which is reviewed by the Board at least annually;

· the audit and risk committee regularly reviews the Company's internal controls, risk management systems and risk matrix;

· the Company has defined investment criteria, as set out in the investment policy. Compliance with these criteria is regularly reviewed by the Investment Manager, particularly when considering possible new investments;

· the Board has a procedure to ensure that the Company can continue to be approved as an investment company by complying with sections 1158/1159 of the Corporation Tax Act 2010;

· the Investment Manager and Administrator prepare forecasts and management accounts which allow the Board to assess the Company's activities and to review its performance;

· contractual agreements with the Investment Manager and other third party service providers, and adherence to them, are regularly reviewed;

· the services and controls at the Investment Manager and at other service providers are reviewed annually and assurance letters are provided by service providers to the Company on an annual basis;

· the audit and risk committee receives and reviews assurance reports on the controls of all third party service providers, including the Depository, Investment Manager and Administrator, undertaken by professional service providers; and

· the Investment Manager's Risk Officer continually reviews the Investment Manager's controls in its capacity as AIFM to the Company. Risk Officer reports are submitted to the committee on a six-monthly basis.

The risk management process and Group systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Company's objectives. It should be recognised that such systems can only provide reasonable, not absolute, assurance against material misstatement or loss.

The Directors have carried out a review of the effectiveness of the systems of internal control as they have operated over the period and up to the date of approval of the report and financial statements.

There were no matters arising from this review that required further investigation and no significant failings or weaknesses were identified.

Internal control assessment process

Robust risk assessments and reviews of internal controls are undertaken regularly in the context of the Company's overall investment objective. The Board, through the audit and risk committee, has categorised risk management controls under the following key headings:

· operational risk;

· market risk;

· financial risk; and

· emerging risks.

In arriving at its judgement of what risks the Group faces, the Board has considered the Group's operations in the light of the following factors:

· the nature and extent of risks which it regards as acceptable for the Group to bear within its overall business objective;

· the threat of such risks becoming reality;

· the Group's ability to reduce the incidence and impact of risk on its performance;

· the cost to the Group and benefits related to the review of risk and associated controls of the Group; and

· the extent to which the third parties operate the relevant controls.

A risk matrix is in place against which the risks identified and the controls to mitigate those risks can be monitored. The risks are assessed on the basis of:

· the likelihood of them happening;

· the impact on the business if they were to occur; and

· the effectiveness of the controls in place to mitigate them.

This risk register is reviewed at least every six months by the audit and risk committee and at other times as necessary.

The Board, during the course of these reviews, has concluded that geopolitical risk should be included as a principal risk this year due to the ongoing uncertainty in regard to the UK's exit from the EU, relations between the UK, US and China and the Covid-19 pandemic.

The majority of the day-to-day management functions of the Group are sub-contracted, and the Directors therefore obtain regular assurances and information from key third party suppliers regarding the internal systems and controls operating in their organisations. In addition, each of the third parties is requested to provide a copy of its report on internal controls each year, where available, which is reviewed by the audit and risk committee.

PRINCIPAL RISKS AND UNCERTAINTIES

The Directors have identified the following principal risks and uncertainties and the actions taken to manage each of these. If one or more of these risks materialised, it could have the potential to significantly impact the Group's ability to meet its investment objective.

1. Alternative performance measure - see below for definitions and calculation methodology.

Emerging risks

As part of the Company's risk management processes, emerging risks are considered at the formal reviews of the Company's risk matrix. Emerging risks include trends which are characterised by a high degree of uncertainty in terms of their occurrence, probability and their potential impact.

1. This report includes statements that are, or may be deemed to be, 'forward-looking statements'. These include statements regarding the intentions, beliefs or current expectations of the Directors and the Investment Manager regarding future events and performance of the Company, at the date of the report only.

GOING CONCERN ASSESSMENT AND VIABILITY STATEMENT

Going concern

In assessing the Group's ability to continue as a going concern, the Directors have considered the Company's investment objective, risk management policies, capital management (see note 21 to the financial statements), the quarterly NTA and the nature of its portfolio and expenditure projections.

Material uncertainty

On 6 September 2021, the shareholders of the Company approved resolutions relating to the acquisition of the Company by the Consortium. The acquisition is subject to certain conditions including CMA approval, and if occurs, is estimated to complete in the coming months. The Directors are aware that the Consortium has stated its intention to break up the Group after completion of the proposed acquisition. If this were to happen, it would materially change the Directors' assessment of going concern for the Group, and therefore a material uncertainty has been identified. Further information is given in note 2.2 to the financial statements.

Continuation vote

The Company's articles of association include provisions for a continuation vote to be held every three years. A continuation resolution is scheduled to be put to shareholders at the annual general meeting to be held later in 2021. In the event that the acquisition of the Company by the Consortium is completed ahead of that date, the Company will not hold its annual general meeting as currently constituted and no continuation vote will be held.

Directors' assessment

The Directors believe that the Group has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future, being a period of twelve months from the date of approval of this report. In addition, the Board has had regard to the Group's investment performance, the price at which the Company's shares trade relative to the NTA per share and ongoing investor interest in the continuation of the Company (including feedback from meetings and conversations with shareholders by the Group's advisers).

Based on their assessment and considerations, including consideration of the material uncertainty detailed above, the Directors have concluded that the financial statements of the Company and the Group should continue to be prepared on a going concern basis and the financial statements have been prepared accordingly.

Viability statement

The Directors have also made an assessment of the viability of the Company, in order to meet the requirements of the UK Code, notwithstanding the approval by shareholders of the recommended cash offer and the material uncertainty identified in relation to this matter. Further information is given in note 2.2 to the financial statements.

The Directors have assessed the prospects of the Group over a period longer than the period used in the going concern assessment of twelve months from the date of approval of these financial statements. The Board has determined that a five-year period constitutes an appropriate period to provide its viability statement. They have therefore assessed the viability of the Company over a five-year period to 30 June 2026, assuming the acquisition of the Company by the Consortium does not complete. The Company does not have a fixed life, it assumes long-term hold periods for the assets in its portfolio and analyses its financial model over a five-year horizon. The weighted average maturity of the Company's debt facilities is approximately four years.

The Directors have considered the financial position of the Group and the potential impact on the Company's principal risks and uncertainties detailed above, in particular the risk that reduced occupancy due to the Covid-19 pandemic could have on future years, which could materially affect the valuation and cash flows of the Company's investments and, therefore, the viability of the Company. The principal risks that the Directors consider have been most impacted by the pandemic are 'net income and property values' risk and 'property valuation' risk. The Directors have also considered the Company's policy for monitoring, managing and mitigating its exposure to these risks.

This assessment involved an evaluation of the potential impact on the Group of these risks occurring. Where appropriate, the Group's financial model was subject to a sensitivity analysis involving flexing a number of key assumptions in the underlying financial forecasts in order to analyse the effect on the Group's net cash flows and other key financial ratios including loan covenants.

Additionally, the Company considers the impact of structural changes in light of wider macro-economic conditions, with regard to refinancing and asset sales.

The impact of Covid-19 on market conditions within which the Company operates has been significant. As a result, additional testing has been carried out to reflect the Company's ability to operate in unfavourable conditions.

The impact of these assumptions has been measured against the Company's key metrics:

· profitability;

· loan covenants;

· the level of financial headroom; and

· compliance with the REIT rules.

Alongside the five-year forecast stress testing, the Board has undertaken reverse stress testing conducted with respect to the 2021 financial year regarding the effect of income and valuation sensitivities on viability and key loan covenants.

Based on the results of the analysis and current booking levels, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment, in the event that the recommended offer for the Company does not complete.

This strategic report has been approved by the Board and signed on its behalf by:

David Hunter

Chairman

18 October 2021

Governance

BOARD OF DIRECTORS

David Hunter - Chairman

Gillian Day - Chair of the remuneration committee

Malcolm Naish - Senior Independent Director and Chair of the management engagement committee

Marlene Wood - Chair of the audit and risk committee

Russell Chambers - Director

EXTRACTS FROM THE DIRECTORS' REPORT

Share capital

At the annual general meeting held on 4 November 2020, the Company was granted authority to allot ordinary shares of the Company up to 10% of the Company's total issued share capital at that date, amounting to 45,501,900 ordinary shares. No ordinary shares have been allotted under this authority during the year. As at the date of this report, the Company may allot further ordinary shares up to an aggregate nominal amount of £455,019 under its existing authority.

At the annual general meeting held on 4 November 2020, the Company was granted authority to purchase up to 14.99% of the Company's ordinary share capital in issue at that date on which the notice of annual general meeting was published, amounting to 62,006,679 ordinary shares. This authority will expire at the conclusion of, and renewal will be sought at, the annual general meeting to be held later this year.

Shares bought back by the Company may be held in treasury, from where they could be reissued at or above the prevailing NTA quickly and cost effectively. This provides the Company with additional flexibility in the management of its capital base. No shares were bought back or held in treasury during the year or at the year end.

At the year end, and at the date of this report, the issued share capital of the Company comprised 455,019,030 ordinary shares. At general meetings of the Company, ordinary shareholders are entitled to one vote on a show of hands and, on a poll, to one vote for every ordinary share held.

At 30 June 2021, the total voting rights of the Company were 455,019,030, and at the date of this report are 455,019,030.

Dividends

Dividends totalling 0.75 pence per ordinary share have been paid in respect of the year ended 30 June 2021 as follows:1

1. Refer to note 8 for further information.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

In respect of the annual report and financial statements

The Directors are responsible for preparing the annual report and financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

Under company law, the Directors must not approve the financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group for that year. In preparing the financial statements, the Directors are required to:

· select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance;

· state that the Group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements;

· make judgements and estimates that are reasonable and prudent; and

· prepare financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a strategic report, Directors' report, Directors' remuneration report and corporate governance statement that comply with that law and those regulations, and for ensuring that the annual report includes information required by the Listing Rules and Disclosure Guidance and Transparency Rules of the FCA.

The financial statements are published on the Company's website, which is maintained on behalf of the Company by the Investment Manager. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website.

Under the investment management agreement, the Investment Manager is responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Visitors to the website need to be aware that legislation in the UK covering the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the Group; and

· this annual report includes a fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties that it faces.

The Directors consider that the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board

David Hunter

Chairman

18 October 2021

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 30 June 2021 or the year ended 30 June 2020 but is derived from those accounts. Statutory accounts for the year ended 30 June 2020 have been delivered to the Registrar of Companies and those for 2021 will be delivered in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full annual report and financial statements at www.gcpstudent.com.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2021

The accompanying notes below form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

These financial statements were approved by the Board of GCP Student Living plc on 18 October 2021 and signed on its behalf by:

David Hunter

Chairman

Company number: 08420243

The accompanying notes below form an integral part of these financial statements.

1. Alternative performance measure - see APM section below for definitions and calculation methodology.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2021

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2020

The accompanying notes below form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2021

The accompanying notes below form an integral part of these financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 30 June 2021

Part 1. Basis of preparation

This section includes the Company's accounting policies applied to the financial statements in accordance with IFRS. Specific accounting policies have been included with the note to the financial statements.

1. General information

GCP Student Living plc is a REIT incorporated in England and Wales on 26 February 2013. The registered office of the Company is located at 51 New North Road, Exeter EX4 4EP. The Company has a premium listing on the Official List of the FCA and trades on the Premium Segment of the Main Market of the London Stock Exchange. The Company had a market capitalisation of £732.6 million at 30 June 2021.

2. Basis of preparation

These financial statements are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The financial statements have been prepared under the historical cost convention, except for investment property and financial instruments, which have been measured at fair value. The audited financial statements are presented in Pound Sterling and all values are rounded to the nearest thousand pounds (£'000), except when otherwise indicated.

These financial statements are for the year ended 30 June 2021. Comparative figures are for the previous accounting period, the year ended 30 June 2020.

The Group has chosen to adopt the EPRA best practice guidelines for calculating key metrics such as net asset value and earnings, which are presented alongside the IFRS measures where applicable.

In adopting the going concern basis of accounting, the Directors have identified a material uncertainty, set out in note 2.2. There have been no accruals or adjustments to the financial statement figures in relation to the material uncertainty.

2.1 Changes to accounting standards and interpretations

In the current period, the Group has applied a number of amendments to IFRS including IFRS 16 Covid-19 related rent concessions and changes to interest rate benchmark reform. These amendments also include annual improvements to IFRS, changes in standards, legislative and regulatory amendments, changes in disclosure and presentation requirements, including updates relating to Covid-19. The adoption of these updates has not had a significant impact on the Group's financial statements.

Further to the above, there are no new IFRS or IFRIC interpretations that are issued but not effective that would be expected to have a significant impact on the Group's financial statements.

2.2 Significant accounting judgements and estimates

The preparation of these financial statements in accordance with IFRS requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. 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 in the future.

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.

Operating lease commitments - Group as lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a substantial portion of the economic life of the commercial property, that it retains all the significant risks and rewards of ownership of these properties and recognises the contracts as operating leases.

Going concern

The Directors have made an assessment of the Group's ability to continue as a going concern and are satisfied that the Company has the resources to continue in business for the foreseeable future, for a period of twelve months from the date of approval of this report.

In making their assessment, the Directors have considered the potential impacts of the acquisition of the Company by the Consortium and the ongoing Covid-19 pandemic on the Group, operations and the investment portfolio.

The Directors, the Investment Manager and other service providers have put in place contingency plans to minimise disruption from the Covid-19 pandemic. The Group is a REIT traded on the London Stock Exchange, where assets are not required to be liquidated to meet day-to-day redemptions. Whilst the economic future is uncertain, the Directors believe it is possible the Group could experience further deductions in income and/or property valuations, however this should not be to a level which would threaten the Group's ability to continue as a going concern.

The Directors have a reasonable expectation that the Group has sufficient cash resources and financing available to meet its liabilities as they full due over the next twelve months. The Company has suspended the payment of dividends until further notice, following the recommended cash offer for the Company, and has cash balances which exceed any short-term liabilities. In forming this expectation, the Directors have considered the results of forecasting and stress testing carried out by the Investment Manager, including analysis of the ongoing impact of the Covid-19 pandemic on market conditions and its impact on the Company.

The Directors are not aware of any material uncertainties, other than as set out below, that may cast significant doubt upon the Group's ability to continue as a going concern and the Group's financial position in respect of its cash flows, borrowing facilities and investment commitments. Therefore, the financial statements have been prepared on a going concern basis.

Material uncertainty

The Directors note that the Consortium has stated its intention to break up the Group after completion of the proposed acquisition. If this were to happen, it would materially change the Directors' assessment of going concern for the Group. Notwithstanding this, the Directors have concluded that it remains appropriate to prepare the consolidated financial statements on a going concern basis while highlighting this as a material uncertainty for the Company. There have been no accruals or adjustments to the financial statement figures in relation to the material uncertainty.

In reaching this conclusion the Directors have considered the following:

· if the acquisition occurs, it is estimated to complete in the coming months, however it remains subject to several conditions, including clearance from the CMA, the outcome of which is not certain; and

· the Directors approving these consolidated financial statements will not be those tasked with breaking up the Group post acquisition. They therefore do not currently have sufficiently reliable and precise information on which to adopt a basis other than going concern.

Estimates

Valuation of property

The Group's investment properties are valued at fair value as determined by the external valuer in accordance with the RICS Valuation Global Standards 2017 and IFRS 13. Refer to note 13 for further details of the judgements and estimates made in determining the valuation of property.

2.3 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are stated in the notes to the financial statements.

a) Basis of consolidation

As a real estate entity, the Company does not meet the definition of an investment entity and therefore does not qualify for the consolidation exemption under IFRS 10. The consolidated financial statements comprise the financial statements of the Group and its subsidiaries at 30 June 2021. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control, and will continue to be consolidated until the date that such control ceases.

An investor controls an investee when the investor 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. In preparing these financial statements, intra-group balances, transactions and unrealised gains or losses have been eliminated in full. The subsidiaries all have the same year end as the Company. Uniform accounting policies are adopted in the financial statements for transactions and events in similar circumstances.

b) Functional and presentation currency

The overall objective of the Group is to generate returns in Pound Sterling and the Group's performance is evaluated in Pound Sterling. Therefore, the Directors consider Pound Sterling as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions and have therefore adopted it as the functional and presentation currency.

c) Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being the investment and provision of student accommodation facilities (including ancillary retail, commercial and teaching facilities) in the UK.

Part 2. Review of the financial year

This section includes information on performance of the Company, including rental income, EPRA metrics, operating and administration expenses and information of dividends for the year. The EPRA metrics have been reconciled to the IFRS measures where appropriate and are included to enhance comparability across the real estate sector.

3. EPRA metrics

3.1 EPRA earnings

Basic EPS is calculated by dividing profit for the year attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares during the year. As there are no dilutive instruments in issue, basic and diluted EPS are identical. The following reflects the earnings and share data used in the basic and diluted share computations and EPRA EPS1 and Group-specific adjusted EPS1 computations.

1. Alternative performance measure - see APM section below for definitions and calculation methodology

A Group-specific adjusted EPS1 has been calculated to show EPRA earnings1 excluding non-recurring transaction costs and adding licence fees on forward-funding agreements which are treated as capital items in the financial statements. These adjustments have arisen from the following:

1. For the year ended 30 June 2021:

i. licence fees of £486,000 from the developer of Circus Street, Brighton in respect of a forward-funding agreement;

ii. licence fees of £1,590,000 from the developer of Scape Brighton in respect of a forward-funding agreement;

iii. write-off of lease incentive relating to terminated lease at Scape Shoreditch of £2,073,000;

iv. aborted transaction costs of £119,000 in relation to a forward purchase agreement of a second asset in the same locality as Scape Guildford; and

v. £442,000 of costs relating to the recommended cash offer.

2. For the year ended 30 June 2020:

i. licence fees of £986,000 from the developer of Circus Street, Brighton in respect of a forward-funding agreement;

ii. licence fees of £3,220,000 from the developer of Scape Brighton in respect of a forward-funding agreement; and

iii. aborted transaction costs of £3,765,000 in relation to the Scape Mile End Canalside acquisition, including a write-off of the deposit under the forward purchase agreement.

3.2 EPRA NAV1

EPRA announced updated best practice recommendations which included revised NAV metrics to replace EPRA NAV1 and EPRA NNNAV1.These comprise: EPRA NDV1, EPRA NTA1 and EPRA NRV1. The Company has adopted EPRA NTA1 as its principal measure of NAV for the year ended 30 June 2021 and for future periods. The revised EPRA metrics are shown below.

1. Alternative performance measure - see below for definitions and calculation methodology.

3.3. EPRA cost ratio1

Further EPRA metrics are disclosed in notes 11 and 12 to the financial statements.

1. Alternative performance measure - see below for definitions and calculation methodology.

4. Income

1. Ancillary income includes income received through services provided to students such as laundry, cleaning and vending machines.

2. Other income relates to the recharge of property operating expenses, including staff costs, incurred centrally by the Group and shared with Scape and the owners of non-Group properties managed by Scape.

Accounting policy

Rental income, including direct lets to students, nomination agreements to HEIs and leases to commercial tenants receivable under operating leases, is recognised on a straight‑line basis over the term of the lease, except for contingent income in respect of rental guarantees which is recognised when it arises.

Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if the payments are not made on such a basis. 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.

Other income includes the recharge of a proportion of shared property operating expenses, incurred centrally by the Group, to entities outside the Group. The amount recharged is calculated by allocating the underlying costs to the relevant properties using the number of beds at each property. A mark-up on cost is applied where the recharge relates to staff costs.

5. Property operating and administration expenses

1. These are the initial legal and professional costs incurred by the Company in relation to the recommended cash offer for the Company. The costs include professional advice provided to the Board as well as the cost of providing due diligence information to the Consortium as part of the bidding process. Additional costs have been accrued since the year end and will be recognised in subsequent reporting periods.

Investment management fees are further disclosed in note 28 and Directors' remuneration is further disclosed in note 26.

Property management agreements

During the year under review, the Group had two Property Managers. The Group is responsible for all fees payable in relation to property management costs incurred by it.

Collegiate Accommodation Consulting Limited

Under the terms of its asset and facilities management agreement, Collegiate is entitled to a fee of 5.5% of the total rental income collected per annum attributable to Water Lane Apartments. The fee is calculated and paid monthly in arrears.

Scape

For the financial year ended 30 June 2021, the Company received property management services from Scape Student Limited.

Under the terms of its asset and facilities management agreements, Scape was entitled to a fee which was calculated and paid quarterly in arrears and was one quarter of the Investment Manager's fee attributable to those assets in the Group's portfolio for which it provided asset and facilities management services. The fee paid to Scape was paid from the Investment Manager's fee.

In the period since the Company's IPO in 2013, Scape and its affiliates have grown into a global developer, manager and operator of PBSA in the UK, Australia and Europe with c.30,000 student beds in operation or under construction globally. In order to align the Group's property management arrangements with those entered into by Scape and its affiliates globally, and as announced by the Company on 27 August 2020, new property management agreements have been entered into between the Group and Scape, including in respect of Circus Street and Scape Brighton.

Under the terms of the property management arrangements, with effect from 1 July 2020, Scape is entitled to an annual property management fee (payable quarterly in arrears) in respect of the management of PBSA of 4% of the total income and 1.25% of net operating income attributable to the Group's PBSA managed by Scape. An annual property management fee (payable quarterly in arrears) of 2% of income is payable in respect of the management of the Group's non-PBSA commercial space.

The property management fees payable by the Group to Scape are subject to a minimum fee where the provision of academic services by UK higher education institutions is affected such that the Group's occupancy is materially and adversely affected by a pandemic and/or epidemic, including in the current Covid-19 pandemic. Such fee shall be calculated as 80% of the Group's relevant budgeted annual property management fees, payable quarterly in arrears.

As part of a wider separation of the businesses of the Investment Manager and Scape, and in light of their time commitments to the Scape business, during the year, Nigel Taee (Chairman of Scape) and Tom Ward (Global CEO of Scape) resigned as directors of the Investment Manager. Mr Ward served as the Company's lead portfolio manager in its early years following IPO. The Directors thank Mr Ward for his substantial contribution to the Company during that time. For the avoidance of doubt, neither Mr Taee nor Mr Ward were involved in the provision of investment management services to the Company immediately prior to their resignations.

At 30 June 2021, the directors of the Investment Manager indirectly owned a c.6% interest in Scape Student Limited. Prior to the separation of the businesses of the Investment Manager and Scape as detailed above, the directors held an interest of approximately 75% in Scape Student Living Limited (the company's previous registered name).

The Consortium has indicated that following its purchase of the Company it intends that the Property Manager will be retained to provide property management services in respect of certain assets. The companies under common control with Scape provide property management and ancillary services to Scape Living plc, a member of the Consortium. The controlling parties of Scape also, indirectly, hold a small minority interest in Scape Living plc.

Administration agreement

Link Alternative Fund Administrators Limited has been appointed as the Administrator to the Company and its subsidiaries. It provides the day‑to-day administration services for these entities. It is also responsible for the Company's general administrative functions, such as the calculation and publication of the NTA and maintenance of the Company's accounting and statutory records. Under the terms of its administration agreement, Link Alternative Fund Administrators Limited is entitled to an administration fee of £150,000 per annum (exclusive of VAT). The administration agreement is terminable upon six months' written notice.

Company secretarial agreement

Link Company Matters Limited has been appointed by the Company to provide company secretarial functions required by the Companies Act 2006. The Secretary is entitled to a fee of £71,000 per annum in respect of the Company and £2,000 per annum in respect of each UK subsidiary. The company secretarial fees are subject to an annual RPI increase. The secretarial agreement is terminable upon six months' written notice.

Depositary agreement

Langham Hall UK Depositary LLP has been appointed as Depositary to the Company. The Depositary is responsible for ensuring the safekeeping of custody assets and the non-custody assets of the Company entrusted to it (held on trust for the Company as applicable); the oversight and supervision of the Investment Manager and the Company; and for ensuring the Company's cash flows are properly monitored. Under the terms of the depositary agreement, the Depositary is entitled to a fee of £51,000 per annum, subject to an annual RPI increase. The depositary agreement is terminable by either the Company and/or the Investment Manager upon six months' written notice.

Accounting policy

All property operating expenses and administration expenses are charged to the income statement and are accounted for on an accruals basis.

6. Auditor's remuneration

The Company reviews the scope and nature of all proposed non-audit services before engagement, to ensure that the independence and objectivity of the Auditor are safeguarded. Audit fees are recognised within administration expenses in the statement of comprehensive income and comprise the following:

The audit and risk committee has considered the independence and objectivity of the Auditor and has conducted a review of non-audit services which the Auditor has provided during the year under review. The audit and risk committee receives an annual assurance from the Auditor that its independence is not compromised by the provision of such non-audit services.

7. Taxation

Corporation tax has arisen as follows:

Reconciliation of tax charge to profit before tax:

The Group has unrelieved excess management expenses of £21,482,000 (2020: £23,355,000) and a non-trade loan relationship deficit of £5,051,000 (2020: £1,572,000). As it is unlikely that the Group will generate sufficient taxable profits in the future to utilise these amounts, therefore no deferred tax asset has been recognised in respect of these items.

Accounting policy

Corporation tax is recognised in the income statement except where in certain circumstances corporation tax may be recognised in other comprehensive income.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

As a REIT, the Group is exempt from corporation tax on the profits and gains from its property rental business, provided it continues to meet certain conditions as per REIT regulations.

Non-qualifying profits and gains of the Group (residual income) continue to be subject to corporation tax. Therefore, current tax is the expected tax payable on the non-qualifying taxable income for the year if applicable, using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

8. Dividends

1. Amounts shown in pence per share.

2. Dividend was paid after the year end and is not accrued for as a provision in the financial statements.

3. Following the recommended cash offer for the Company, the Directors decided to suspend the Company's quarterly dividend until further notice.

As a REIT, the Company is required to pay PIDs equal to at least 90% of the property rental business profits of the Group.

Accounting policy

Dividends due to the Company's shareholders are recognised when they become payable. For interim dividends this is when they are paid.

Part 3. Asset management

This section includes information on the Company's investment portfolio, valuation methodology and its performance over the year. The Group's investment properties are valued at fair value as determined by the external valuer in accordance with the RICS Valuation Global Standards 2017 and IFRS 13.

9. Operating leases

Leases are typically direct let agreements with individual students or HEIs for an academic year or shorter period. The Group also has a small number of leases on commercial areas, teaching and retail spaces and a number of nomination agreements whereby multiple beds are let out for a set number of years. The Company additionally has granted a 21-year lease over its Circus Street asset.

On 15 February 2020, the Company announced that it had terminated its 15-year occupational lease with a WeWork subsidiary ("WeWork") in respect of commercial space at Scape Shoreditch. Ahead of termination, the Company collected a payment of c.£3.1 million (including VAT) covering all arrears and rent due to the end of June 2021.

In March 2020, in response to the Covid-19 pandemic and in agreement with the Company, Scape accepted requests to forgo rent on a case-by-case basis related to the final direct let instalment due in April 2020, for residents seeking to return home for the remainder of the current academic year.

Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2021 are as follows:

Accounting policy

When the Group acts as lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risk and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term.

10. UK investment property

1. Included in fair value gains on investment properties is a gain of £80,000 (30 June 2020: loss of £88,000) which relates to the right-of-use asset.

During the year, the Group completed construction of the student accommodation element of Scape Brighton, which opened to students in September 2020. The Group received £4.4 million from the owner of the residential development adjacent to Circus Street, Brighton as reimbursement for the cost of shared development works. On 15 February 2020, the Company announced that it had terminated its 15-year occupational lease with a WeWork subsidiary ("WeWork") in respect of commercial space at Scape Shoreditch.

Accounting policy

Investment property comprises property held to earn rental income or for capital appreciation, or both. Investment property is measured initially at cost including transaction costs. Transaction costs include transfer taxes and professional fees to bring the property to the condition necessary for it to be capable of operating. The carrying value also includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met.

Subsequent to initial recognition, investment property is stated at fair value in accordance with IFRS 13. Gains or losses arising from changes in the fair values are included in the income statement in the period in which they arise under IAS 40 Investment Property.

The determination of the fair value of investment property requires the use of estimates such as future cash flows from assets (from lettings and future revenue streams), capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property and discount rates applicable to those assets.

Gains or losses on the disposal of investment property are determined as the difference between net disposal proceeds and the carrying value of the asset.

Investment properties under construction are measured at fair value if the fair value is considered to be reliably determinable. Investment properties under construction for which the fair value cannot be determined reliably, but for which the Company expects that the fair value of the property will be reliably determinable when construction is completed, are measured at cost less any impairment until the fair value becomes reliably determinable or construction is completed, whichever is earlier. Refer to note 13 for further details.

Licence fees (where income is receivable from a developer in respect of a forward-funding agreement) are deducted from the cost of investment properties and shown as a receivable until settled.

A right-of-use asset has been recognised at fair value in relation to ground rent paid on one of the Group's investment properties. The right-of-use asset is included within investment property in the consolidated statement of financial position at fair value. There were no additions to the right-of-use asset during the year.

11. EPRA NIY1

Calculated as the value of investment properties divided by annualised net rents:

1. Alternative performance measure - see below for definitions and calculation methodology.

Property-related capital expenditure analysis

Methodology/notes

Acquisitions:

The cost of acquisition of land and capital expenditure in respect of development properties.

Subsequent capital expenditure:

Capital expenditure post acquisition includes the costs of refurbishment.

12. EPRA vacancy rate

The Company's buildings were 68% booked for the 2020/21 academic year. The Company's buildings were fully occupied for the prior 2019/20 academic year and remained the case until the restrictions on global mobility and closure of academic institutions resulting from the Covid-19 pandemic resulted in the majority of students vacating their rooms. Bookings for the 2021/22 academic year were 80% at 15 October 2021 and of these rooms 83% have been occupied by residents.

13. Fair value

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair values.

The fair value of cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate to their carrying amounts due to the short‑term maturities of these instruments.

Interest-bearing loans and borrowings are disclosed at amortised cost. The carrying value of the loans and borrowings approximate to their fair value due to the contractual terms and conditions of the loan.

Quarterly valuations of investment property are performed by Knight Frank LLP, an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued; however, the valuations are the ultimate responsibility of the Directors, who appraise these quarterly.

The Group's investment properties are held at fair value as determined by the external valuer in accordance with the RICS Valuation Global Standards 2017 and IFRS 13.

The determination of the fair value of investment property requires the use of estimates such as future cash flows from assets (such as lettings, tenants' profiles, future revenue streams), the capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property and discount rates applicable to those assets.

The Covid-19 pandemic continues to impact global financial markets. Travel restrictions are still in place in many countries. In the UK, market activity is being impacted in all sectors. Given the ongoing impact Covid-19 is having on the property market, the Directors are keeping the valuation of the portfolio under frequent review.

The following tables show an analysis of the fair values of assets and liabilities recognised in the statement of financial position by level of the fair value hierarchy1:

1. Explanation of the fair value hierarchy:

· Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

· Level 2 - use of a model with inputs (other than quoted prices included in Level 1) that are directly or indirectly observable market data; and

· Level 3 - use of a model with inputs that are not based on observable market data.

There have been no transfers between levels during the period.

Valuation techniques and significant inputs within the valuation of investment properties

The following table analyses:

· the fair value measurements at the end of the reporting period;

· a description of the valuation techniques applied;

· the inputs used in the fair value measurement, including the ranges of rent charged to different units within the same building; and

· for Level 3 fair value measurements, quantitative information about significant unobservable inputs used in the fair value measurement.

1. The Company's buildings are located in and around London where rental rates vary depending on location and size and specification of the accommodation.

All gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy are attributable to changes in unrealised gains or losses relating to investment property held at the end of the reporting period.

The carrying amount of the Company's other assets and liabilities is considered to approximate their fair value.

14. Events after the reporting period

On 26 July 2021, the Group revised its redrawable credit facility with Wells Fargo. The facility was extended to January 2023 and the interest rate was set at 2.1% above SONIA, reducing to 1.95% when the debt yield is 9.0% or higher. Further information is provided in note 17.

On 11 August 2021, the Company published a circular to shareholders containing the details of the Board recommended acquisition of the Company by the Consortium. On 6 September 2021, shareholders voted in favour of the above. If the transaction completes (subject to certain conditions being met, including clearance from the CMA) each shareholder in the Company will receive 213 pence per share in cash. If the conditions are met, the transaction is expected to occur in the coming months.

On 13 August 2021, the Group terminated its interest rate cap and amended its interest rate swap to a rate of 0.86%, linked to SONIA. Further information is provided in note 17.

Further, the Company suspended the payment of dividends until further notice, following the recommended cash offer for the Company.

Part 4. Borrowings and equity

This section includes information on the Company's interest-bearing loans and borrowings, leverage, capital position and exposure to financial risk. The Group manages its capital requirements through a combination of debt and equity.

15. Finance income

1. The Group has entered into an interest rate swap and cap in order to seek to mitigate the risk of interest rate increases as part of the Group's efficient portfolio management. Refer to note 17 for further details.

Accounting policy

Interest income is recognised on an effective interest rate basis and shown within the income statement as financial income.

16. Finance expenses

1. The Group has entered into an interest rate swap and cap in order to seek to mitigate the risk of interest rate increases as part of the Group's efficient portfolio management. Refer to note 17 for further details.

Accounting policy

Any finance costs that are separately identifiable and directly attributable to a liability are amortised as part of the cost of the liability. All other finance costs are expensed in the period in which they occur. Finance costs consist of interest and other costs that an entity incurs in connection with bank and other borrowings. Fair value movements on derivatives are recorded in finance expenses.

17. Interest‑bearing loans and borrowings

1. Includes commitment and other fees capitalised.

At 30 June 2021, the Group had debt facilities of £335 million, comprising the following:

Fixed-rate secured facilities totalling £235 million with PGIM:

Floating rate secured credit facilities totalling £100 million with Wells Fargo:

Post year end, on 26 July 2021, the Group revised its redrawable credit facility with Wells Fargo. The facility was extended to January 2023 and the interest rate revised to 2.1% above three‑month SONIA, reducing to 1.95% when the debt yield1 is 9.0% or higher. A further £9.1 million was drawn on the redrawable credit facility and £15.0 million of the development loan was repaid.

The Group also entered into interest rate hedging arrangements in relation to the Wells Fargo development loan. The arrangements expire in December 2021. Under the arrangements, the Group has entered into an interest rate cap of 1.75% and an interest rate swap of 0.676%, both with respect to LIBOR. The notional amounts of the cap and swap each follow a profile equal to 50% of the anticipated drawdown profile of the loan.

On 13 August 2021, the Group terminated the interest rate cap and amended the interest rate swap to a rate of 0.86%, linked to SONIA, on the full amount of the development loan outstanding at that date (£23.1 million).

The Group uses gearing to seek to enhance returns over the long term and for the purpose of funding acquisitions in line with the Company's investment policy. The level of gearing is governed by careful consideration of the cost of borrowing.

The debt facilities include covenants for the following metrics: loan‑to‑value of less than 60-65%, interest service cover ratio of 1.75 times and a debt yield greater than 7.5%, that are measured in accordance with the respective facility agreement. The Group was not in breach of its banking covenants at 30 June 2021.

1. Alternative performance measure - see below for definitions and calculation methodology.

Leverage

For the purposes of the AIFMD, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company's exposure and its NAV and is calculated under the gross and commitment methods, in accordance with AIFMD.

The Company is required to state its maximum and actual leverage levels, calculated as prescribed by AIFMD.

The leverage figures above represent leverage calculated under the AIFMD methodology as follows:

Accounting policy

Loans and borrowings are initially recognised as the proceeds received net of directly attributable transaction costs. Loans and borrowings are subsequently measured at amortised cost with interest charged to the income statement at the effective interest rate and shown within finance costs. Transaction costs are spread over the term of the loan.

18. Share capital

The share capital comprises one class of ordinary shares. At general meetings of the Company, ordinary shareholders are entitled to one vote on a show of hands and, on a poll, to one vote for every share held. There are no restrictions on the size of a shareholding or the transfer of shares, except for the UK REIT restrictions.

19. Share premium

20. Capital and reserves

Share capital

Share capital is the nominal amount of the Company's ordinary shares in issue.

Share premium

Share premium relates to amounts subscribed for share capital in excess of nominal value less associated issue costs of the subscriptions.

Share premium comprises the following cumulative amounts:

1. On 31 July 2013, the Company, by way of special resolution, cancelled the value of its share premium account, by an Order of the High Court of Justice, Chancery Division. As a result of this cancellation, £67.4 million was transferred from share premium to retained earnings in the financial period ended 30 June 2014.

Special reserve

The special reserve represents the cancelled share premium less dividends paid from this reserve.

The special reserve comprises the following cumulative amounts:

Retained earnings

Retained earnings represent the profits of the Group less dividends paid from revenue profits to date. Unrealised gains on the revaluation of investment properties contained within this reserve are not distributable until they crystallise upon sale of the investment property.

Retained earnings comprise the following cumulative amounts:

21. Capital management

The Group's capital is represented by share capital, reserves and borrowings.

The primary objective of the Group's capital management is to ensure that it remains within its quantitative banking covenants and maintains a strong credit rating. No changes were made in the objectives, policies or processes during the period.

The Group may use gearing to enhance returns over the long term. The level of gearing will be governed by careful consideration of the cost of borrowing and the Group may use hedging or otherwise seek to mitigate the risk of interest rate increases. At the year end, the Group was operating with a loan-to-value of 21% (30 June 2020: 22%).

The debt facilities include gearing and interest cover covenants that are measured in accordance with the respective facility agreement, refer to note 17. The Group was not in breach of its banking covenants at 30 June 2021.

22. Financial risk management objectives and policies

The Company's principal financial liabilities are long-term loans and borrowings. The main purpose of the Company's loans and borrowings is to finance the acquisition of the Company's property portfolio. The Company has trade and other receivables, trade and other payables, and cash and short-term deposits that arise directly from its operations.

The Company is exposed to market risk, interest rate risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Market risk

Market risk is the risk that the future values of investments in property and related investments will fluctuate due to changes in market prices. The total exposure at the statement of financial position date is £1,137,290,000 and, to manage this risk, the Group diversifies its portfolio across a number of assets.

The Covid-19 pandemic continues to impact global financial markets. Travel restrictions are still in place in many countries. In the UK, market activity is being impacted in all sectors. Given the ongoing impact Covid-19 is having on the property market, the Directors are keeping the valuation of the portfolio under frequent review.

The following sensitivity analysis has been prepared by the valuer:

The key assumptions for the investment properties are net initial yields, and rental income which is based on current rent and rental growth.

Sensitivity analysis to significant changes in unobservable inputs within the valuation of investment properties

Significant increases/decreases in the ERV (per sq ft p.a.) and rental growth p.a. in isolation would result in a significantly higher/lower fair value measurement. Significant increases/decreases in the long-term vacancy rate and discount rate (and exit yield) in isolation would result in a significantly lower/higher fair value measurement.

Generally, a change in the assumption made for the ERV (per sq ft p.a.) is accompanied by:

· a discretionary similar change in the rent growth p.a. and discount rate (and exit yield); and

· an opposite change in the long-term vacancy rate.

· Gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy amount to £112,877,000 (30 June 2020: £33,904,000) and are presented in the income statement in line item 'fair value gains on investment properties'.

Market risk is also the risk that the fair values of financial instruments will fluctuate because of changes in market prices. Refer to the principal risks above where market risk is discussed in more detail.

Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates is minimal as it has taken out the majority of the debt as fixed rate bank loans of £170,000,000 with a maturity of September 2024 and £65,000,000 with a maturity of April 2029.

The Company also has a variable rate facility of up to £100,000,000, of which £53,168,000 has been drawn down. The Group has entered into interest rate hedging arrangements in relation to this variable rate facility. The arrangements expire on the maturity of the loan in December 2021.

Liquidity risk

Liquidity risk is defined as the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Group could be required to pay its liabilities earlier than expected. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans.

The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments:

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its leasing activities and its 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 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. Further disclosures relating to impairment of financial assets are included in note 24.

The following table analyses the Group's exposure to credit risk:

2. 1. Excludes prepayments and lease incentives.

The retention account and cash and cash equivalents are held with Barclays Bank PLC, which holds an A1 credit rating, with the exception of £22.5 million held with Landesbank-Thüringen Girozentrale (Helaba) which holds an A2 credit rating. Ratings taken from S&P Global.

Part 5. Working capital

This section includes information on the Company's cash reserves and working capital management, including trade receivables and payables.

23. Cash and cash equivalents

Accounting policy

Cash and cash equivalents comprise cash at bank and short‑term deposits with banks and other financial institutions, with an initial maturity of three months or less.

24. Trade and other receivables

Accounting policy

Trade and other receivables are recognised initially at fair value and subsequently carried at amortised cost less provision for impairment. Where the time value of money is material, receivables are carried at amortised cost using the effective interest method. Impairment provisions are recognised based on the expected credit loss model detailed within IFRS 9.

The Group recognises a loss allowance for expected credit losses on trade and other receivables where necessary. The loss allowance is based on lifetime expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition. The expected credit losses on these financial assets are estimated based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date. Impaired balances are reported net, however impairment provisions are recorded within a separate provision account with the loss being recognised within administration costs within the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. The expected credit losses on rent receivables as well as other receivables for the year ended 30 June 2021 were £1.0 million (2020: £0.1 million).

Licence fees represent income receivable from a developer in respect of a forward-funding agreement which is deducted from the cost of investment and shown as a receivable until settled.

25. Payables and accrued expenses

Accounting policy

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

Deferred income is rental income received in advance during the accounting period. The income is deferred and is unwound to revenue on a straight‑line basis over the period in which it is earned.

Part 6. Staff and key management

The following notes detail wages and salaries of the employees of the Group.

26. Directors' remuneration

1. Retired as a Director of the Company on 4 November 2020.

2. Appointed as a Director of the Company on 1 February 2021.

A summary of the Directors' emoluments, including the disclosures required by the Companies Act 2006, is set out in the Directors' remuneration report in the full annual report.

27. Staff costs

With the exception of the Directors, whose remuneration is shown in the Directors' remuneration report and policy in the full annual report, the Group employed 129 (2020: 112) members of staff, with an average of 135 (2020: 123) employees during the year.

The Group operates a defined contributions pension scheme for 101 (2020: 79) of its employees. The costs for the year ended 30 June 2021 totalled £55,000 (30 June 2020: £49,000).

During the year, the Group recharged £379,000 (2020: £nil) to Scape and the owners of properties managed by Scape but not held by the Group for services provided by Group employees.

28. Related party transactions

Directors

The Directors (all non-executive) of the Company and subsidiaries are considered to be the key management personnel of the Group. Directors' remuneration for the year totalled £203,000 (30 June 2020: £212,000) and at 30 June 2021, a balance of £nil (30 June 2020: £nil) was outstanding. Further information is given in note 26.

The Directors, with the exception of Russell Chambers, are also the directors of all subsidiaries apart from GCP Operations Limited, where the directors are representatives from the Investment Manager and the Property Manager, Scape, who are not considered key management personnel of the Group.

Investment Management arrangements

Investment Manager

The Company is party to an investment management agreement with the Investment Manager, pursuant to which the Company has appointed the Investment Manager to provide investment management services relating to the respective assets on a day-to-day basis in accordance with the Company's investment objective and policy, subject to the overall supervision and direction of the Board of Directors. The contractual arrangements were revised during the prior year, with the new arrangements detailed below taking effect from 1 July 2020.

For its services to the Company, the Investment Manager receives an annual fee which is payable quarterly in arrears based on the prevailing NAV of the Group, as set out below.

The Group is responsible for the payment of all property management fees incurred. Further details of the Company's property management agreements are set out in note 5.

The investment management agreement between the Company and the Investment Manager can be terminated by the Company or the Investment Manager at any time with not less than 24 months' written notice to the other party. If the investment management agreement is terminated by the Company or the Investment Manager on 24 months' notice in the event of certain change of control events relating to the Company, the investment management fees payable in such circumstances will be based on the prevailing published NAV at the time immediately preceding the change of control. The Consortium has indicated that following its purchase of the Company it intends that the investment management arrangements with the Investment Manager will be terminated.

The Investment Manager is also appointed as the Company's AIFM and receives an annual fee of £25,000, subject to an annual RPI increase.

During the year, the Group incurred £6,132,000 (30 June 2020: £7,573,000) in respect of investment management fees and the AIFM fee. A total of £6,132,000 (30 June 2020: £7,492,000) is included within administration expenses in the consolidated statement of comprehensive income and £nil (30 June 2020: £81,000) is included within the share issue costs relating to shares issued during the year; at 30 June 2021, £1,670,000 (30 June 2020: £1,949,000) was outstanding and is unsecured and payable within 30 days.

Transactions with persons connected to the Investment Manager

The following transactions are disclosed for the purpose of transparency and are not related party transactions under IAS 24.

During the year, the Group recharged £616,000 to Scape and the owners of properties managed by Scape but not held by the Group for services provided by Group employees.

The Group is party to a contract with Scaperfield Limited to acquire and forward-fund the construction of Scape Brighton, which completed for the 2020/21 academic year. The directors of the Investment Manager and their family members, directly or indirectly, owned in aggregate approximately 25% of Scaperfield Limited during the year.

The above asset has been acquired, on the basis of an independent valuation and approval by the independent Board of Directors.

Part 7. Company subsidiaries

This section includes information on the subsidiaries of the Company and inter‑company transactions. All subsidiaries are consolidated from the date on which the Company obtained control of the entity.

29. Subsidiaries

The financial statements comprise the financial statements of the Company and its subsidiaries listed below.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtained control, and will continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and distributions are eliminated in full. The Company has a 100% beneficial interest (whether directly or indirectly) in the issued share capital of all subsidiaries.

1. Indirect subsidiaries.

2. Registered office: Beaufort House, 51 New North Road, Exeter EX4 4EP.

3. Registered office: 2nd Floor, Windsor House, Lower Pollet, St Peter Port, Guernsey GY1 1WF. On 1 July 2019, the Group's Guernsey-registered companies became UK tax resident by virtue of their central management and control being located in the UK.

Accounting policy

Where property is acquired, via corporate acquisition or otherwise, management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.

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

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree.

For each business combination, the acquirer measures the non-controlling interest in the acquiree at fair value of the proportionate share of the acquiree's identifiable net assets. Acquisition costs (except for costs of issue of debt or equity) are expensed in accordance with IFRS 3 Business Combinations.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

Contingent consideration is deemed to be equity or a liability in accordance with IAS 32. If the contingent consideration is classified as equity, it is not re‑measured and its subsequent settlement shall be accounted for within equity. If the contingent consideration is classified as a liability, subsequent changes to the fair value are recognised in profit or loss.

Business combinations are accounted for using the acquisition method.

30. Ultimate controlling party

It is the view of the Directors that there is no ultimate controlling party.

COMPANY STATEMENT OF FINANCIAL POSITION

As at 30 June 2021