Residential Secure Income : Half-Year Results

18 May 2020

Residential Secure Income plc

HALF-YEAR RESULTS

DEFENSIVE PORTFOLIO BACKED BY SECURE INCOME STREAMS POSITIONED TO MITIGATE NEAR-TERM MARKET VOLATILITY

Residential Secure Income plc ('ReSI' or 'the Company') (LSE: RESI), which invests in affordable shared ownership, retirement and local authority housing, today announces its interim results for the six months to 31 March 2020.

Alex Pilato, Chief Executive of ReSI Capital Management Limited, the Fund Manager, commented: 'In the half-year to 31 March 2020, ReSI's focus has been on both growing and moving the shared ownership portfolio towards full income generation. We have been encouraged by continued interest in our shared ownership homes despite the countrywide lockdown, and, together with the continued strong momentum in sales we have seen since April, this provides a positive endorsement of our strategy to grow our exposure to this structurally supported sector.

'Understandably the COVID-19 pandemic has created uncertainty at both a macroeconomic and real estate level. While the situation is still ongoing, early signs are that our expectations about the Company's resilience are accurate. We have a defensive portfolio which has been positioned to survive through economic stress and generates rental income from sources that are largely decoupled from the wider economy. Nevertheless, we continue to work closely with property managers and lessees to ensure we are as well placed as possible to minimise the impact on the Company's business, while prioritising the safety and wellbeing of our staff and residents.'

Financial highlights

· IFRS Net Asset Value ('NAV') Total Return of 0.7 pence per share for the period; this comprises 2.8 pence recurring income, offset by 2.1 pence of one-off valuation reduction

· Earnings per share increased 8.3% to 1.3 pence (31 March 2019: 1.2 pence), reflecting continued progress in growing rental income from the shared ownership portfolio

· Marginal 0.4% decline in portfolio valuation since year end due primarily to a 1.5% (£3.3 million) reduction in the net present value of cashflows in the independent retirement rental portfolio caused by the onset of COVID-19 and an industry-wide clarification from HMRC that from 1 November 2018 VAT became chargeable on property managers' salaries. This was offset by a 10% (£2.7 million) valuation gain in the shared ownership portfolio as it progresses towards full income generation

· In light of COVID-19, valuations have been reported on the basis of 'material valuation uncertainty' in line with recent RICS guidance

· Small reduction in IFRS NAV to 106.9 pence per share (30 September 2019: 108.6 pence per share)

· Annualised net rental income increased 4.5% to £11.7 million (31 March 2019: £11.2 million), representing a 5% net yield on capital deployed to income producing assets

· 86.3% of rental income is subject to contractual inflation-linked rental uplifts

· £108.0 million of predominantly long term, low cost asset level drawn debt (30 September 2019: £108.2 million) reflecting a gearing ratio of 36.4%. Stress testing has shown a large amount of headroom on all covenants due to the long-term nature of the ReSI's assets and strong cash flows

Affirmation of full year dividend target

· Affirmation of full year dividend target of 5 pence per share with two quarterly dividends of 1.25 pence already paid

NAV movement for the six months to 31 March 2020

*Please note that values do not sum to total due to rounding differences

Progress on growing secure income streams and full income generation on shared ownership assets within a diverse portfolio delivering significant social benefit

· Completed the acquisition of 59 shared ownership units at Clapham Park. ReSI has now deployed £302 million since IPO, amassing a portfolio of 2,679 homes comprising: 166 shared ownership homes, 289 authority housing units and 2,224 Retirement Rental homes, across 656 unique locations

· 93 shared ownership homes completed, with 88% of these either occupied or reserved and 12 currently available, with continued and increasing sales momentum into the second half

· The portfolio continues to generate significant social impact which is calculated at £731 million over the next 25 years by the Social Profit Calculator, representing £4.27 per share, through subsidised rents, wellbeing improvements to tenants, fiscal savings and wider economic benefits

· Awarded Investment Partner status by Homes England, the UK government public body that funds new affordable housing in England, extending ReSI's access to government grant funding to include schemes outside London and bring forward much needed additional Affordable Housing at national level

· In April 2020, Elaine Bailey joined the board as an independent Non-Executive Director, with Mike Emmerich stepping down as a Non-Executive Director on the same date

Continued COVID-19 resilience

· 99% of April rent collected, following 99% in Q1 2020

· Sales momentum of shared ownership assets has continued into the second half, despite the COVID-19 backdrop, with three shared ownership completions and four reservations transacted since 31 March 2020

· 14% of the second 73 homes at Clapham Park, now due for completion in Q2 2020, are already reserved

· The main impact of COVID-19 continues to be a likely reduction in tenants starting new leases in the Company's retirement portfolio, which will be offset in part by a reduction in voluntary terminations of leases and those entering care homes

· Expectation remains that debt service payments will be unaffected. 90% of ReSI's debt is long term with a weighted average life of 19.3 years; only £14.5 million needs to be refinanced before 2043

· Strong liquidity and balance sheet position with £5 million of cash and positive cashflows in all operating units.

Acquisition of ReSI's Fund Manager, Residential Capital Management Limited ('RCM'), by Gresham House plc

· On 5 March, RCM and its parent company, TradeRisks Limited, were acquired by Gresham House plc, the specialist alternative asset management business, which is listed on the London Stock Exchange's Alternative Investment Market (AIM) and has £3.2 billion of assets under management

· RCM will benefit from Gresham House's robust central platform that includes distribution, investor relations, compliance, reporting and risk capabilities

· RCM's core management team will continue to run day-to-day operations, continuing to utilise TradeRisks' significant debt financing expertise to deliver superior returns

· ReSI will seek to leverage the buying power of Gresham House to reduce certain fund operating expenses and hence reduce the Company's total expense ratio

Robert Whiteman, Chairman of Residential Secure Income plc, commented:

'The wide-reaching consequences of COVID-19 are unprecedented in modern times and will likely impact the UK economy for the foreseeable future. The fact that ReSI's rental income is primarily supported by residents' pensions or housing welfare subsidy systems, including leases to local authorities, and our ongoing belief that increased unemployment is unlikely to have a material impact on performance were key factors in the Board's decision to reaffirm ReSI's divided target for the year. We continue to believe that the main impact of the COVID-19 crisis will be an increase in void levels within the retirement assets and a previously announced delay in expanding the Company's shared ownership portfolio.

'We are extremely proud of the Social Value our portfolio provides and believe that the role we have to play in the housing sector will be even more important, given that the country's significant supply demand gap will most likely become more acute as a result of COVID-19. Unfortunately, the economic impact of the countrywide lockdown will cause reductions in housing delivery, through construction sites closing and financial pressures on developers, which when coupled with a reduction in household earnings and increased unemployment, can only mean an increase the demand for social housing.

'Since the onset of the COVID-19 crisis, ReSI's overriding priority has been, and remains, the safety of its residents, staff and delivery partners.'

A copy of the interim results presentation slides are available to download on ReSI's website:https://www.resi-reit.com/company-documents

FOR FURTHER INFORMATION, PLEASE CONTACT:

Residential Secure Income plc - Interim Report

A full pdf version of this Interim Report is available to download on ReSI's website:https://www.resi-reit.com/company-documents. All page numbers referred to below relate to this PDF.

Key Highlights

as at 31 March 2020

Financial Highlights

Operational Highlights

Comparatives

Unless otherwise stated, Balance Sheet metrics are reported against 30 September 2019, Statement of Comprehensive Income metrics are reported against 31 March 2019.

Quantifying Social Impact

ReSI is committed to accelerating the development of socially and economically beneficial new housing to make a meaningful contribution to the UK housing shortage.

ReSI's homes deliver a social benefit through providing wellbeing improvements to tenants (e.g. by providing the security of a home for life), fiscal savings (e.g. lower costs for housing those at risk of homelessness and savings to the NHS), and wider economic benefits (e.g. by enabling people to live and find work in otherwise unaffordable parts of the country).

The social impact delivered by ReSI is readily quantifiable using methodologies accredited by Social Value UK and Social Value International.

ReSI's existing property portfolio delivers a total social benefit of £731m over 25 years, or £4.27 per share.

Social Benefits of Different Types of Ownership within ReSI's portfolio

Overall impact of ReSI's Investment in Affordable Social Housing

(Source: Social Profit Calculator September 2019)

Chairman's Statement

Rob Whiteman CBE

Chairman

Introduction

I am pleased to present the interim results of Residential Secure Income plc for the six months to 31 March 2020, which build on the significant progress made by the Company during 2019 and see ReSI continue to move towards full income generation and dividend cover. We have further expanded the Company's portfolio, completing on a development in the shared ownership sector, and achieved consistent operating results despite the backdrop of economic uncertainty, while at the same time building a secure rental income stream that will be capable of supporting the dividend in the future.

This report is released at a time of great uncertainty in the markets. The wide-reaching consequences of COVID-19 are unprecedented in modern times, and will likely impact the UK economy for the foreseeable future. Since the onset of the crisis, ReSI's overriding priority has been and remains the safety of its residents, staff and delivery partners. ReSI Capital Management's property team have worked closely with ReSI's property managers and lessees across the portfolio to ensure we continue to provide safe homes for our residents and shared owners.

Overall, ReSI has a defensive portfolio which has been positioned to survive through economic stress. Since ReSI's rental income is primarily supported by residents' pensions or housing welfare subsidy systems, including leases to local authorities, the Company believes that increased unemployment is unlikely to have a material impact on performance. ReSI anticipates that the main impact of the COVID-19 crisis will be a delay in further expanding its income generating portfolio and an increase in void levels within the retirement portfolio. The Fund Manager's report on page 18 provides further detail.

As a reminder, ReSI's objective is to deliver secure, long-dated, inflation-linked income and capital returns through investment in UK social housing. It aims to meet demand from housing developers (Housing Associations, Local Authorities and private developers) for long-term investment partners to accelerate the development of socially and economically beneficial new housing, so making a meaningful contribution to alleviating the UK housing shortage.

ReSI's acquisitions are selected to have sufficient cashflows, counterparty credit quality and property security to allow them to support long-term investment grade equivalent debt (at a target average leverage of 50%).

We are a long-term holder of our assets and seek to provide additional stock to the existing social housing sector, for example by using grant to deliver - as new shared ownership - properties that would otherwise be sold in the open market. The positive social impact of our investments, of which we are very proud, is highlighted in the previous section of this interim report.

Having completed on another shared ownership investment in January 2020, we are especially enthusiastic about the opportunities this sector presents. Shared ownership is increasingly being seen as an effective solution to lack of affordability across a range of value points, and is an efficient way for government grant funding to be used, as the grant translates directly into a subsidised level of rent. Shared ownership presents a very scalable investment opportunity, and we expect to focus our future deployment in this area.

The property portfolio

During 2020 we have primarily focused on accelerating the income generation of ReSI's portfolio, after substantially completing deployment of available capital from the IPO and borrowings in 2019. Our portfolio consists of 2,679 properties valued at £311m serving shared ownership tenants, Local Authority housing needs and the retirement sector.

ReSI's shared ownership portfolio continues to grow and move towards full income generation. In January 2020 ReSI completed the acquisition of the first block at Clapham Park (59 units) from Metropolitan Thames Valley Housing ('MTVH'), building on our first shared ownership transaction of 34 new build homes located in the London Borough of Barnet in October 2018. As of the date of this report 88% of our shared ownership homes are either occupied or reserved and moving to completion. The second block at Clapham Park was delayed due to the outbreak of COVID-19; ReSI intends to complete the acquisition in Q2 2020, however will continue to monitor market conditions to ensure maximum benefit to shareholders. We have continued to see sales progression and new reservations during this time, and 12% of the homes at the second block of Clapham Park are already reserved.

ReSI has utilised £4m of grant funding from the Greater London Authority's Homes for Londoners programme to deliver these as shared ownership providing much needed affordable homes in London. In March we were pleased to announce that ReSI had become an investment partner of Homes England, allowing it to access grant funding to support expansion of its shared ownership portfolio outside of London.

Our shared ownership portfolio is held by ReSI Housing, ReSI's Registered Provider of Social Housing. Having a Registered Provider enables the acquisition of properties that are designated as affordable accommodation under planning requirements and allows access to government grant programmes. This greatly expanding the range of opportunities available to ReSI and also providing all stakeholders with assurance that the properties will be kept within the social housing regulatory environment.

The shared ownership portfolios are managed by MTVH, continuing our successful relationship with one of the UK's largest Housing Associations who is a specialist in providing and managing shared ownership properties.

ReSI's independent retirement rental portfolio is largely unchanged from September 2019, however ReSI takes opportunities to actively manage its portfolio, selling poorly performing units and reinvesting in better opportunities. Three units have been sold (at 6% above book value, excluding costs) and 5 purchased as replacements since September 2019. As a result, the retirement portfolio consists of 2,224 residential units, including licensed house manager flats, located across England, Wales and Scotland, and is valued at £211m.

The retirement apartments are used to provide age-restricted independent retirement housing or are licensed for use by the scheme house managers.

They are managed on behalf of ReSI by Places for People, one of the largest UK housing groups. The vast majority of the units are long leasehold properties, with a weighted average unexpired lease term which has increased to around 132 years after ReSI extended the term in a value-enhancing transaction announced in September 2019.

The previously announced £97m of 25-year fixed rate debt at a weighted average cost of 3.46%, secured against ReSI's retirement home portfolio and £14.5m of debt secured on the Local Authority housing portfolio continues to improve ReSI's total return.

Financial results

ReSI's underlying financial results for the period reflect a consistent level of performance to that seen at the time of the annual results but with some further growth in the Company's annualised rental income, despite the disruption caused by COVID-19, reflecting that ReSI's initial capital is now substantially deployed and that the property portfolio is performing well, as further described in the Fund Manager's report.

The Company maintained its rigorous and highly disciplined approach to selecting investments and benefitted from past acquisitions at attractive levels, reflected in ReSI's relatively stable Net Asset Value, despite the impact of COVID-19. During the period, ReSI's portfolio produced £10.2m of gross rental income, up from £9.6m in same period in the prior year, and as at 31 March 2020 its valuation, assessed by Savills, experienced strong valuation gains of £2.7m (10%) on its shared ownership stock as it progressed towards full income generation. The impact of COVID-19 on the net present value of cashflows of the independent retirement rental portfolio combined with the industry-wide clarification from HMRC that from 1 November 2018 VAT became chargeable on property managers' salaries resulted in a £3.3m (1.5%) reduction in valuation.

We remain fully confident in our overall investment strategy and our ability to continue to make dividend payments in line with the target dividend of 5p per share.

In light of current market uncertainty created by COVID-19, valuations have been reported on the basis of 'material valuation uncertainty' in line with recent RICS guidance. Full wording can be found in note 4 of the accounts.

The Net Asset Value per share decreased by 1.6% from September 2019 to 106.9p at 31 March 2020, representing a 9.0% increase from the 98.0p Net Asset Value per share immediately after IPO. ReSI quotes Net Asset Value on a basis that is consistent with the IFRS valuation methodology used in its accounts.

*Please note that values do not sum to total due to rounding differences

For the period from 1 October 2019 to 31 March 2020 ReSI recorded a net income of £2.4m excluding revaluations. Total profit attributable to shareholders was £1.4m resulting in net earnings per share of 0.7p, comprising operating income of 1.3p and valuation reduction of 0.6p per share.

Dividends

In November 2019, ReSI declared its fourth dividend of 1.25p per Ordinary Share relating to the previous financial year ending 30 September 2019, thus meeting its IPO target of paying a total of 5.0p in dividends per Ordinary Share with respect to that year.

With the publication of its 30 September 2019 Annual Report, ReSI reaffirmed its target dividend of 5.0p for the year commencing 1 October 2019.

In March 2020 ReSI reiterated that, despite COVID-19, ReSI remained well placed to make dividend payments and intended to deliver on this year's target dividend of 5p per share.

In line with this target, ReSI has declared two equal quarterly dividends of 1.25p per Ordinary Share for the current half-year period (declared in January and April 2020).

ReSI is targeting a dividend increase in line with inflation over time, and a total return, including NAV growth, of in excess of 8% per annum. The Company intends to pay dividends to shareholders on a quarterly basis and in accordance with the REIT regime.

Board changes

We are delighted to welcome Elaine Bailey, former Chief Executive of Hyde Group, the G15 Housing Association with over 50,000 properties providing housing to 100,000 residents, who joined ReSI's Board as a Non-Executive Director on 24 April 2020. On the same date Mike Emmerich stepped down as Non-Executive Director. On behalf of the Board, I would like to thank Mike for his time and energy during his tenure.

Acquisition of ReSI Capital Management by Gresham House

The Board of ReSI supported the decision of its fund manager group to be acquired by Gresham House on 5 March 2020. We consider Gresham House an excellent partner and platform to enable ReSI Capital Management to continue delivering strong performance on behalf of ReSI plc.

Outlook

Regardless of the unfortunate implications of the COVID-19 outbreak, the country will still have a significant shortfall of housing and this supply demand gap will most likely become more acute through a countrywide lockdown causing reductions in earnings and housing delivery (caused by construction sites closing and financial pressures on housing developers), which will likely increase the demand for social housing.

ReSI has a defensive portfolio, which is positioned to weather economic stress, as illustrated by 99% of rent collected in April 2020.

ReSI has clearly demonstrated its ability, through ReSI Housing, our Registered Provider of social housing, to acquire properties designated as affordable accommodation, or those that are funded by government grant, including shared ownership. We continue to expect this route to be key to the future growth of our property portfolio.

ReSI is focused on delivering fully income-producing shared ownership homes and expects to shortly put in place debt on this portfolio and reinvest the proceeds in further shared ownership homes to complete our deployment.

The Fund Manager continues to have available, through its relationships and through contractual agreements, a pipeline of high quality investments that meet ReSI's investment criteria and return thresholds and which could support ReSI's further growth. This coupled with the quality of our existing portfolio and the underlying fundamentals supporting our rental income give me every confidence in the company's ability to continue to perform well throughout the current crisis.

The Board is grateful for the support of ReSI's shareholders and the contribution of its advisers.

Rob Whiteman

Chairman

Residential Secure Income plc

15 May 2020

Strategic Report

Fund Manager's Report

Alex Pilato

In the half-year to 31 March 2020, ReSI's focus has been on growing and moving towards full income generation on its shared ownership portfolio, and as of the date of this report 88% of our acquired portfolio of 93 shared ownership homes are either occupied or reserved and moving to completion following the acquisition of the first 59 units at Clapham Park for £27m in January 2020.

ReSI has now amassed a property portfolio valued at £311m (including £34m of committed acquisitions at Clapham Park), consisting of 2,679 properties serving the retirement sector, Local Authority housing needs and shared ownership tenants. Additionally, ReSI is in an advanced documentation stage with a large institutional lender to put in place further investment grade debt against its shared ownership portfolio, and expects to shortly close this debt. The proceeds will be reinvested in our pipeline of further shared ownership homes to complete our deployment.

From the onset of the COVID-19 pandemic we moved swiftly to protect our residents, staff and delivery partners, whilst safeguarding shareholder value. ReSI is well placed to handle this crisis, having a defensive portfolio that has been positioned to survive through economic stress. ReSI's rental income is primarily supported by residents' pensions or housing welfare subsidy systems, including leases to local authorities. While growth in unemployment and an economic slowdown caused by COVID-19 are unlikely to materially impact performance, the Company expects some increase in void levels within the retirement portfolio and a delay in further expanding its shared ownership portfolio.

While the situation is still ongoing, early signs are that our expectations are accurate and portfolio rent continues to be secure, with 99% of April rent collected. First tranche sales within ReSI's shared ownership portfolio progressed well throughout the second quarter with reservations and completions continuing to be transacted in April and May. As of the date of this report, ReSI has 93 completed shared ownership homes with 55 occupied, 24 reserved and moving to completion and 14 currently available. A summary of the impact so far and expected ongoing impact on the ReSI's individual portfolios by asset class is provided later in this report.

Social impact

The social impact of ReSI's investments is extremely important to us, particularly in relation to the delivery of new social and affordable housing which in turn makes ReSI an attractive partner to Housing Associations, Local Authorities and private developers. ReSI incorporates the social impact of investments into both our investment decision making and our continued performance management. We also focus on the impact cost of investment over the life of the asset and take this into account in addition to the impact benefits.

TradeRisks has been a long-standing promoter of the concept of 'social economic value', which quantifies the benefits that affordable housing provides, focusing on the value of below market rents and the social benefits of a long term, secure, fit-for purpose and well-maintained homes.

This can be through providing a lifetime home to shared owners with subsidised rents, or to those who are homeless or at risk of homelessness and the ability for elderly populations to live with peers supporting their independent living for longer.

We engaged the Social Profit Calculator to externally quantify this social impact in our 2019 Annual Report, in the same way that Savills do for our portfolio valuation. For our 2020 Annual Report we are committed to providing further transparency regarding this important metric, expanding on this work to provide transparent reporting of the calculations used to generate our impact.

Acquisition of ReSI Capital Management by Gresham House

The acquisition of TradeRisks Limited and ReSI Capital Management by Gresham House presents several opportunities for ReSI. ReSI Capital Management will continue as the alternative investment fund manager of ReSI, and while the day-to-day operations and strategic direction will remain unchanged under the current team, the Company will benefit from Gresham House's robust central platform that includes distribution, investor relations, compliance, reporting and risk capabilities. This will allow the team to focus on origination, delivering full occupancy on the shared ownership portfolio and putting low cost long term debt in place to support returns and reach full deployment, producing high-quality and sustainable income for ReSI's shareholders and delivering significant social value.

Jon Slater retired simultaneously with the acquisition and I formally took over his role as Chief Executive of ReSI Capital Management on 5 March 2020. As TradeRisks' founder and group Chief Executive, I have been closely involved in all aspects of ReSI's business since the IPO in 2017 and increasingly so since Jon's move overseas in 2018.

Longer-term, ReSI is expected to benefit from the strength of Gresham House's institutional relationships, bringing new investors into ReSI and shared ownership. At the same time, there is a clear alignment between the two businesses in terms of their focus on those sectors that are both supported by permanent societal shifts, and which can deliver financial and social impact.

In the short term ReSI is looking to leverage the buying power of Gresham House to reduce certain fund operating expenses and hence reduce the Company's total expense ratio.

Investment Partner Status and the benefits of being a Registered Provider

Our shared ownership acquisitions at Clapham Park and Totteridge have been supported by £6m of government grant and rely on the legal and regulatory structure put in place during the previous financial year when ReSI's subsidiary, ReSI Housing, became a Registered Provider. Registered Provider status allows access to otherwise restricted assets or grant funding opportunities, including becoming an investment partner of the Greater London Authority through its ''Homes for Londoners'' programme.

ReSI Housing was awarded Investment Partner status by Homes England in March 2020, building on its Investment Partner status provided by the Greater London Authority in January 2019. The status allows ReSI to access Homes England's £4.7bn shared ownership and Affordable Homes Programme 'SOAHP' 2016-21 and a further £13bn of grant funding to be allocated from 2021-22. Investment Partner status with Homes England extends ReSI Housing's ability to access grant funding to include schemes outside of London and bring forward much needed additional Affordable Housing at national level. Both the Homes England and the GLA programmes provide government grant funding as a capital contribution towards new sub-market rented housing such as shared ownership, affordable rent and social rent.

Our proven ability to purchase through ReSI Housing as a Registered Provider has been important in continuing to grow the pipeline of potential future investments, particularly by allowing engagement with private developers to acquire their stock and deliver it as shared ownership using government grant. The main limitation on developers in delivering new homes is absorption rates for developments, and because shared ownership widens the pool of people who can buy a home, selling to ReSI to deliver as shared ownership allows accelerated rates of development, and supports return on capital and housing volume for developers, while providing an attractive investment profile for ReSI shareholders.

As a result, we have continued to generate further strong pipeline of potential investments for ReSI. We have remained highly disciplined in selecting the transactions that we are prepared to undertake and believe that this is fundamental to delivering the long-term secure returns expected by ReSI's shareholders.

The Chairman has already covered the fact that the COVID-19 outbreak is likely to accentuate the supply demand gap for all forms of housing further, not least through the closure and subsequent restricted working practices on construction sites, the financial pressures on housing developers as well as, most unfortunately, the likelihood of an increase in the number of people requiring government assistance with their housing needs. We have already seen a dramatic increase in the appetite from housing associations, local authorities and private developers for new sources of capital to invest in housing, allowing us to be very selective on new opportunities.

Opportunities and investment focus

ReSI can invest across the range of types of residential housing typically owned by Housing Associations and Local Authorities. This allows the management team to optimise the portfolio amongst the available opportunities considering prospective returns, security of those returns and diversification within the portfolio. We can either buy existing social housing stock or, through our for-profit Registered Provider, ReSI Housing, unrestricted stock and use government grant to convert their use to affordable housing.

We have built a performing portfolio that can continue to perform well over the long term and that is focused on three areas, shared ownership, local authority housing and retirement rental housing, all of which are supported by strong underlying demographic trends and the lack of availability of affordable accommodation for first-time buyers, homeless and the elderly population. We expect ReSI's future investment capacity to be focussed predominantly on shared ownership.

The safety and wellbeing of our tenants is one of our highest priority and when making an investment we are rigorous in using the skills and expertise of our property team to provide high quality product and identify and mitigate all risks to tenants. Our lifecycle plans for accommodation take a conservative approach to the long-term costs of property ownership to ensure that the standard of quality is maintained or improved throughout the life of the property. At the same time, we only work with well-regarded partners to ensure all routine and other maintenance is undertaken promptly and properly.

Shared Ownership

For the full year 2019, shared ownership did not contribute materially to the Company's net leveraged rental income, however is increasing becoming a larger part of ReSI's net rental income due to continued sales at Totteridge and Clapham.

The case for raising equity-like capital within the social housing sector has increased since our IPO, with the main Housing Association developers responding to government calls to increase the supply of housing. Under current arrangements this leads to increasing indebtedness, with a number of Housing Associations nearing their debt capacity. The annual publication by the Regulator of Social Housing (2019 Global Accounts of Registered Providers, December 2019) continues to show a slow but steady growth in debt as a proportion of net book value of properties. A survey by Savills (The Savills Housing Sector Survey June 2018 in association with the Social Housing magazine) demonstrates that in terms of financing additional supply, the most quoted barrier within the business is gearing capacity. In order to increase supply, Housing Associations need to overcome several barriers, ranging from access to land, financial constraints and increases in planning obligations for affordable housing. The growing trend for equity-like capital to fund new social housing is becoming more prevalent and is the only way that long-term capacity to develop can be assured.

We continue to work with the leading Housing Associations and private developers to both invest in their existing stock and forward-fund new properties in order to accelerate their development programmes. These discussions are primarily around multi-year programmes to become the equity funding partner of developers (both private and Housing Associations) and facilitate acceleration of development plans without using the developer's capital. Examples include our purchases from Crest Nicolson and MTVH.

We were particularly excited by our Shared Ownership acquisition at Clapham Park, which has provided the opportunity to partner with a well-regarded Housing Association in a landmark redevelopment project. We completed our acquisition of 59 homes at Clapham for £26m in January 2020, delayed from September 2019 due to construction delays and clearing all legal documentation requirements. We are working toward completing the acquisition of the other 73 homes, for £34m in Q2 2020, despite some delays due to COVID-19.

MTVH's regeneration of the Clapham Park estate will deliver 2,500 new homes, a community hub, a new community centre and new shops - all of which are designed to underpin the long-term prospects for the area. The acquisition will directly enable MTVH to recycle their sales proceeds into the delivery of further new homes.

We have not seen an impact of COVID-19 on the occupied shared ownership portfolio to date and do not currently anticipate any major impact on rent collection as we have recently assessed our shared owners' affordability and financial security, each of whom has ownership interests in their home, and with rent underpinned by their mortgage providers. We anticipate limited staircasing in the current environment, which will reduce our need to recycle staircasing proceeds and therefore enhance our income stability.

All stages of the tenanting process continue to progress, with the sales team undertaking virtual viewings, mortgage banks utilising automated valuation models to continue to provide shared ownership mortgages with LTVs of up to 95% and completions continuing to occur. The government has continued to allow shared owners to move into vacant properties, such as ours, through the COVID-19 lockdown.

Virtual viewings of properties have proved very popular and sales have remained robust to date, with three shared ownership completions and four reservations transacting after the end of March. This follows an initial slowing of activity as the country began to prepare for and subsequently entered lockdown followed by a gradual reversal of this trend from mid-April. Moves to simplify the sales process and allow some physical viewings from the 13th May will continue to support and drive sales.

ReSI does not anticipate a long term impact on shared ownership returns from COVID-19 since, in addition to increasing supply demand pressure, as previously mentioned, the asset class becomes a more attractive product in an economic downturn given it is the most affordable method of home ownership (with lowest deposit requirements and ongoing costs).

Local Authority housing

The local authority housing portfolio accounted for 18% of the Company's net leveraged rental income in the year to September 2019.

In recent years, many Local Authorities, especially those in South East England, have experienced significant increases in households presenting as homeless. This is primarily a result of the critical shortage of both affordable and market housing, exacerbated by reforms to the Local Housing Allowance. Together these factors have left Local Authorities with a statutory duty to find housing for increasing numbers of households but without the permanent homes to do so. The recently enacted Homelessness Reduction Act has further added to the pressure on Local Authorities to find housing solutions in order to prevent homelessness building upon the Housing Act 1996, as amended by the Homelessness Act 2002, which places a duty on Local Authorities to secure accommodation for unintentionally homeless people who are in priority need. According to recently published ONS statistics, Englandhad87,410 households in temporary accommodation at the end of September 2019, with 68% of these households containing dependent children. Demand for temporary accommodation has grown by over 79% since December 2010.

As such, we are working with a number of Local Authorities to provide good quality buildings as accommodation for vulnerable single people and families without relying on expensive and short-tenure solutions such as hotels or hostels. ReSI provides Local Authorities with a long-term institutional landlord to replace the numerous individual landlords that Local Authorities currently rely upon and removes the difficulties that Local Authorities have with ensuring adequate standards across their rented estates.

This portfolio is fully leased to Luton Borough Council, which has as AA equivalent credit rating, and therefore no financial impact from COVID-19 has been experienced to date or is expected.

Independent Retirement rental housing

The independent retirement rental portfolio is ReSI's largest portfolio by asset class, comprising 82% of net leveraged rental income in the year to September 2019.

The UK population continues to age, with opportunities for downsizing for over 60's historically limited to renting sheltered accommodation owned by charities and Local Authorities, or buying into age-restricted accommodation blocks, which can expose the resident to significant transaction costs on entry and on departure. Surveys indicate that 25% of UK over 55's would like to buy or rent in a retirement village. However, the market is faced with a lack of supply of specialised retirement living options. We see significant opportunity to deliver an affordable good quality rental offering to provide accommodation that is fit for purpose without the burdens and transaction costs of ownership.

ReSI's retirement rental model provides retirees with an alternative to having to commit capital and costs to the purchase of a leasehold retirement flat and offers them lifetime security of tenure at a known, RPI-linked, rent.

We expect that while COVID-19 will lead to a reduction in tenants starting new leases, this will be offset by a reduction in voluntary terminations of leases and those entering care homes. Early indications from April 2020 show this to be substantiated, with tenant departures at 19 compared to a normal monthly average of 32, and new tenancies at 2 compared to a normal monthly average of 33, leading to a 0.8% increase in void rates, and a loss of £20,400 of monthly rent.

While retirement portfolio residents do not generally have material underlying health conditions, their age profile does present a risk that if COVID-19 accelerates it could cause voids to increase. Furthermore, the time taken to recover occupancy would also increase, given the anticipated difficulty in attracting new tenants during a countrywide lockdown. The longer the crisis continues, the higher the chance that empty units will impact on the performance of this portfolio; as soon as it is possible for new potential tenants to view properties, this risk will subside.

For 2020 any increase in voids is expected to be largely offset by a reduction in transaction costs associated with tenant turnover (e.g. letting fees for new tenants, cleaning and repair of flats between tenants). We broadly expect the time taken to return to pre-COVID performance to be equal to the time taken to return to normal from the start of social distancing in mid-March 2020.

Performance

The portfolio has generated net income slightly behind expectations due to the extended timeframe in progressing the acquisition of Clapham Park. The £26m acquisition of the first 59 homes was delayed from September 2019 to January 2020 due to delays with construction and clearing of legal documentation requirements, with the final £34m acquisition of 73 homes then further delayed by COVID-19.

Total return has been impacted by a 1.5% (£3.3m) downward valuation in the retirement portfolio, caused by lower net present value of cashflows due to COVID-19 and a previously announced reduction in net rents due to change of VAT treatment of parts of service charges. In the absence of changes to property valuation yields or other factors, increases in service charges offset the impact of rent increases, reducing the automatic capital accretion usually seen when the portfolio is revalued each quarter to take account of rental inflation. Despite this, total return has been supported by a 10% or £2.7m valuation gain in the shared ownership portfolio as it progresses towards full income generation.

We have also been active in optimising the characteristics of the retirement rentals portfolio, leading to the sale of three properties, which realised gross proceeds on average 6% above their book valuation (excluding costs of sale).

In light of current market uncertainty created by COVID-19, the valuations have been reported on the basis of 'material valuation uncertainty' in line with recent RICS guidance - although we understand from brokers and valuers that transactions of stock typically held by Registered Providers has continued and at previous levels.

Despite the impact of COVID-19 on valuations, the NAV Total Return (combining NAV growth and dividends) is 15.9p since IPO.

ReSI's completed income-producing acquisitions to 31 March 2020 deliver an unlevered yield of 5.0%. The retirement rental portfolio, with debt in place, delivers a leveraged yield of 6.9%. The Local Authority housing portfolio, which is also now leveraged, produces a leveraged yield of 7.2%. Both portfolios deliver the income performance required to support our 5% per annum dividend target after fund costs.

In the shared ownership portfolio, ReSI has, through its agent MTVH, marketed and completed first tranche sales, leading to shared owners moving into 55 of the 93 homes. In addition to this, a further 25 other homes have been reserved and are moving towards completion, resulting in 88% of this block's units now being tenanted or in progress. Marketing of the second block at Clapham Park that ReSI has exchanged on and is due to complete next quarter has begun with a 'soft launch', with 12% of units now reserved despite the lockdown and no physical viewings having occurred.

ReSI's on-going expense ratio (annualised and based on closing NAV) is in line with our revised expectation of 1.5%. With the assistance of Gresham House, we will be undertaking a review of all on-going expenses over the next quarter to reduce these expenses.

Borrowing

ReSI has in place £111m of fixed rate debt with a weighted average cost of 3.3%, the vast majority of which is long term partially amortising debt with £78m not due for repayment until 2043. The exception is £14.5m debt secured against our Local Authority portfolio, which matures in January 2022. This will be refinanced with long-term debt in combination with other assets or pending an extension of the term of the underlying leases.

These debt financings form part of the strategy to target an overall level of indebtedness of 50% loan to gross asset value and a low cost of long-term funding, which, together, enhance the returns to equity available to ReSI shareholders and minimise exposure to interest rate and refinancing risks. We regularly stress test debt covenants, with a recent focus on any impact from COVID-19, which has shown a large amount of headroom on all covenants due to the long-term nature of the ReSI's assets and strong cash flows.

ReSI is in advanced documentation stage with a large institutional lender to put in place further investment grade debt against our shared ownership portfolio, and expects to shortly close this debt to allow reinvesting of the proceeds in further shared ownership homes to complete our deployment.

Alex Pilato
Chief Executive

ReSI Capital Management Limited

15 May 2020

Independent Review Report

to Residential Secure Income plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2020 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Cash Flow Statement, the Condensed Consolidated Statement of Changes in Equity and related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Emphasis of Matter: Property valuations

We draw attention to note 4, which explains that as a result of the impact of the outbreak of the Novel Coronavirus (COVID-19) on the market, the Company's property valuer has advised that less certainty, and a higher degree of caution, should be attached to their valuation than would normally be the case. Our opinion is not modified in respect of this matter.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

BDO LLP

Chartered Accountants

London

15 May 2020

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Financials

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD 1 OCTOBER 2019 TO 31 MARCH 2020

All of the activities of the Group are classified as continuing.

The notes on pages 40 to 56 form part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2020

The condensed consolidated financial statements were approved by the Board of Directors on and signed on its behalf by:

Rob Whiteman

Chairman Date:

The notes on pages 40 to 56 form part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD 1 OCTOBER 2019 TO 31 MARCH 2020

The notes on pages 40 to 56 form part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD 1 OCTOBER 2019 TO 31 MARCH 2020

The notes on pages 40 to 56 form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD 1 OCTOBER 2019 TO 31 MARCH 2020

1. General information

The financial information set out in this report covers the six months to 31 March 2020 and includes the results and net assets of the Company and its subsidiaries. The comparatives presented for the Statement of Comprehensive Income and Statement of Cash Flows are for the six months to 31 March 2019. The comparatives presented for the Statement of Financial Position are as at 30 September 2019.

This consolidated interim financial information has not been audited by the Company's auditor.

Residential Secure Income plc ('the Company') was incorporated in England and Wales under the Companies Act 2006 as a public company limited by shares on 21 March 2017. The Company's registration number is 10683026. The registered office of the Company is located at Mermaid House, Puddle Dock, London EC4V 3DB.

The Company achieved admission to the premium listing segment of the main market of the London Stock Exchange on 12 July 2017.

The Company and its subsidiaries (the 'Group') invests in residential asset classes that comprise the stock of registered UK social housing providers, Housing Associations and Local Authorities.

2. Basis of preparation

These condensed financial statements for the period ended 31 March 2020 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The interim report should be read in conjunction with the annual Financial Statements for the period ended 30 September 2019, which have been prepared in accordance with IFRSs as adopted by the European Union.

The condensed financial statements have been prepared on a historical cost basis, except for investment properties and derivative financial instruments which have been measured at fair value.

The condensed financial statements have been rounded to the nearest thousand and are presented in Sterling, except when otherwise indicated.

The condensed financial statements for the period are unaudited and do not constitute statutory accounts for the purposes of the Companies Act 2006. The annual report and financial statements for the period ended 30 September 2019 have been filed at Companies House. The independent auditor's report on the annual report and financial statements for the period ended 30 September 2019 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under sections 498 (2) or 498 (3) of the Companies Act 2006.

a) Going concern

The Directors have made an assessment of the Group's ability to continue as a going concern and are satisfied that the Group has the resources to continue in business for the foreseeable future. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern. Therefore, the financial statements have been prepared on the going concern basis.

As of the date of signing of these interim financial statements, the UK Government has enacted emergency measures to reduce transmission of Coronavirus (COVID-19). The Directors continue to monitor the developing situation and enact additional controls to reduce the impact on operations and financial performance. The Fund Manager's report on page 18 provides further information on ReSI's response to COVID-19. ReSI is subject to covenants on debt secured on its retirement and Local Authority portfolios (see note 18 on page 49). Sensitivity analysis has been performed, showing a large amount of headroom on all covenants, including all debt servicing and valuation metrics. Due to the long-term nature of the company's assets and strong cash flows, the Directors do not forecast a breach of any debt covenants.

b) Changes to accounting standards and interpretations

New standards adopted during the period

The following new accounting standards, interpretations and amendments, endorsed by the EU were effective for the first time for the Group's 31 March 2020 period end and had no material impact on the financial statements:

· As of 1 October 2019, the Group adopted IFRS 16 Leases. As the Group already accounted for ground rent liabilities under head leases as finance leases, the adoption of IFRS 16 has had no material impact on the Group's financial statements. Accordingly, no transition note has been presented.

c) Restatement of prior year comparative

The comparative figures for the 6 months ended 31 March 2019 have been re-stated for an adjustment to the carrying value of prepaid service charges and ground rents at 31 March 2019. This adjustment has increased service charge expenses and finance costs for the period ended 31 March 2019 by £380,000 and £66,000 respectively and reduced net assets at 31 March 2019 by £446,000. There is no impact on net assets at 30 September 2019 or full year net income in the year to 30 September 2019 audited accounts.

3. Significant accounting policies

The significant accounting policies applied in the preparation of the financial statements are set out below. The policies have been consistently applied throughout the period.

a) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (its subsidiaries) at the period end date.

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group:

· is exposed to, or has rights to, variable returns from its involvement with the entity and;

· has the ability to affect those returns through its power to direct the activities of the entity.

All intra-group transactions, balances, income and expenses are eliminated on consolidation. The financial information of the subsidiaries is included in the financial statements from the date that control commences until the date that control ceases.

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

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

b) Acquisitions and business combinations

The Directors assess whether each acquisition is a business or asset acquisition. Under IFRS 3, a business is defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants. A business will usually consist of inputs, processes and outputs.

Business acquisitions are accounted for using the acquisition method. To date the group has not acquired any businesses. Acquisitions that do not meet the definition of a business are accounted for as asset acquisition. Asset acquisitions are accounted for by applying the Group's relevant accounting policy relating to the assets being acquired.

c) Investment properties

Investment properties, which are properties held to earn rentals and/or for capital appreciation, are initially measured at cost, being the fair value of the consideration given, including expenditure that is directly attributable to the acquisition of the investment property. After initial recognition, investment property is stated at its fair value at the Statement of Financial Position date adjusted for the carrying value of leasehold interests. Gains and losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise in the Statement of Comprehensive Income.

Investment property is recognised as an asset when it is probable that the economic benefits that are associated with the property will flow to the Group and it can measure the cost of the investment reliably. This is usually on legal completion.

Subsequent expenditure is capitalised only when it is probable that future economic benefits are associated with the expenditure.

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

Significant accounting judgements, estimates and assumptions made for the valuation of investment properties are discussed in note 13.

d) Inventories

Inventories relate to properties held for delivery as to shared ownership which provides an affordable home ownership through a part-buy, part-rent model where Shared Owners buy a stake in the home (with a lower deposit requirement as it is only required as a percentage of this stake) and pay a discounted rent on the portion of the property that the Shared Owner(s) does not own. In accordance with IAS 2 Inventories, the part that is expected to be sold to the Shared Owner under the First Tranche Sale are held at the lower of cost and net realisable value.

e) Shared ownership

Shared ownership is where initially a long lease on a property is granted through a sale to the occupier, in return for an initial payment (the First Tranche).

First Tranche sales are included within turnover and the related proportion of the cost of the asset recognised as cost of sales.

Shared ownership properties are split proportionately between Inventories and Investment properties based on the current element relating to First Tranche sales. The assumptions on which the First Tranche proportion has been based include, but are not limited to, matters such as the affordability of the shared ownership properties, local demand for shared ownership properties, and general experience of First Tranche shared ownership sales within ReSI Housing and the wider the social housing sector.

Shared Owners have the right to acquire further tranches and any surplus or deficit on such subsequent sales are recognised in the Statement of Comprehensive Income as a part disposal of Investment properties.

Where a grant is receivable from government and other bodies as a contribution towards the capital cost of shared ownership investment property, it is recognised as a deduction in arriving at the cost of the property. Prior to satisfying any performance obligations related to grant, such grants are held as a liability on the Statement of Financial Position.

In some circumstances, typically when a Shared Owner staircases, there arises an obligation to recycle the grant into the purchase of new affordable properties within three years or to repay the grant to the relevant government body. Where such an obligation exists the grant will be held as a liability on the Statement of Financial Position.

f) Share issue costs

The costs of issuing or reacquiring equity instruments (other than in a business combination) are accounted for as a reduction to share premium to the extent that share premium has arisen on the related share issue.

g) Revenue

The Group recognises revenue on an accruals basis, and when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the Group. Revenue comprises rental income and First Tranche sales of shared ownership properties.

Gross rental income - Gross rental income is rental income, recognised on a straight-line basis over the term of the underlying lease and is included in the Group Statement of Comprehensive Income. Lease incentives granted are recognised as an integral part of the net consideration for the use of the property and are therefore recognised on the same, straight-line basis over the term of the lease.

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

Gross ground rental income - Gross ground rental income is recognised on a straight-line basis over the term of the underlying lease.

Income from property sales is recognised when performance conditions are fulfilled which is usually at the point of legal completion.

h) Cost of sales

Included within First Tranches cost of sales are costs relating to the first tranche sale portion of newly acquired shared ownership properties. These costs include a share of expenditure incurred for acquisition of those properties in proportion to the First Tranche percentage sold, direct overheads and other incidental costs incurred during the course of the sale of those properties.

i) Expenses

The Group recognises all expenses on an accruals basis.

j) Finance income and expense

Finance income comprises interest receivable on funds invested. Financing expenses comprise interest payable, interest charged on head lease liabilities, amortisation of loan fees and the reclassification of amounts to profit or loss from the cash flow hedge.

Interest income and interest payable are recognised in profit and loss as they accrue, using the effective interest method.

k) Taxation

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

Deferred tax is provided in full using the balance sheet liability method on timing differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the asset is realised or the liability is settled.

No provision is made for timing differences (i) arising on the initial recognition of assets or liabilities, other than on a business combination, that affect neither accounting nor taxable profit and (ii) relating to investments in subsidiaries to the extent that they will not reverse in the foreseeable future.

l) Dividend payable to shareholders

Equity dividends are recognised when they become legally payable which for the final dividends is the date of approval by the members. Interim dividends are recognised when paid.

m) Financial instruments

Financial assets

Recognition of financial assets

All financial assets are recognised on a trade date which is the date when the Group becomes a party to the contractual provisions of the instrument.

Initial measurement and classification of financial assets

Financial assets are classified into the following categories: 'financial assets at fair value through profit or loss' and 'financial assets at amortised cost'. The classification depends on the business model in which the asset is managed and on the cashflows associated with that asset.

Financial assets are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Fair value through profit or loss

This category comprises in-the-money derivatives and out-of-money derivatives where the time value offsets the negative intrinsic value (see 'Financial liabilities' section for out-of-money derivatives classified as liabilities). They are carried in the Consolidated Statement of Financial Position at fair value with changes in fair value recognised in the Group Statement of Comprehensive Income in the finance income or expense line.

At 31 March 2020 the Group had the following non-derivative financial assets which are held at amortised cost:

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank (including investments in money-market funds) and short-term deposits with an original maturity of three months or less.

Trade and other receivables

Trade and other receivables are recognised at their original invoiced value. Where the time value of money is material, receivables are discounted and then held at amortised cost, less provision for expected credit loss.

Impairment of financial assets

The Group applies the IFRS 9 simplified approach to measuring the expected credit losses for trade and other receivables whereby the allowance or provision for all trade receivables are based on the lifetime expected credit losses ('ECLs').

The Group applies the general approach for initial recognition and subsequent measurement of expected credit loss provisions for the loan receivable and other receivables which have maturities of 12 months or more and have a significant finance component.

This approach comprises of a three-stage approach to evaluation expected credit losses. These stages are classified as follows:

Stage 1

Twelve-month expected credit losses are recognised in profit or loss at initial recognition and a loss allowance is established. For financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk at the reporting date, the loss allowance for 12-month expected credit losses is maintained and updated for changes in amount. Interest revenue is calculated on the gross carrying amount of the asset (i.e. without reduction for expected credit losses).

Stage 2

If the credit risk increases significantly and the resulting credit quality is not considered to be low credit risk, full lifetime expected losses are recognised and includes those financial instruments that do not have objective evidence of a credit loss event. Interest revenue is still calculated on the gross carrying amount of the asset.

Stage 3

If the credit risk of a financial asset increases to the point that it is considered credit impaired (there is objective evidence of impairment at the reporting date), lifetime expected credit losses continue to be recognised. For financial assets in this stage, lifetime expected credit losses will generally be individually assessed. Interest revenue is calculated on the amortised cost net carrying amount (amortised cost less impairment).

De-recognition of financial assets

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership to another entity. If any interest in a transferred asset is retained then the Group recognises its retained interest in the asset and associated liabilities.

Financial liabilities

Recognition of financial liabilities

All financial liabilities are recognised on the date when the Group becomes a party to the contractual provisions of the instrument.

Initial measurement and classification of financial liabilities

Financial liabilities are classified into the following categories: 'financial liabilities at fair value through profit or loss' and 'other financial liabilities'. The classification depends on the nature and purpose of the financial liabilities and is determined at the time of initial recognition.

Financial liabilities are initially measured at fair value, net of transaction costs, except for those financial liabilities classified as at fair value through profit or loss, which are initially measured at fair value.

Fair value through profit or loss

This category comprises out-of-the-money derivatives where the time value does not offset the negative intrinsic value (see 'Financial assets' section for in-the-money derivatives and out-of-money derivatives where the time value offsets the negative intrinsic value). They are carried in the Consolidated Statement of Financial Position at fair value with changes in fair value recognised in the Group Statement of Comprehensive Income in the finance income or expense line.

At 31 March 2020 the Group had the following non-derivative financial liabilities which are classified as other financial liabilities:

Trade and other payables

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

Borrowings

Borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, borrowing costs are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss in the Statement of Comprehensive Income over the period of the borrowings using the effective interest method.

De-recognition of financial liabilities

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

n) Derivative instrument and hedge accounting

Derivative financial instruments, comprising interest rate swaps held for hedging purposes, are initially recognised at fair value and are subsequently measured at fair value being the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date.

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.

At the time the hedged item affects profit or loss, any gain or loss previously recognised in other comprehensive income is recycled through Other Comprehensive Income.

o) Leases

The group as lessor

A lease is classified as a finance lease if substantially all of the risks and rewards of ownership transfer to the lessee. In the case of properties where the Group has a leasehold interest, this assessment is made by reference to the Group's right of use asset arising under the head lease rather than by reference to the underlying asset. If the Group substantially retains those risks, a lease is classified as an operating lease.

Rentals receivable under operating leases are recognised in the income statement on a straight-line basis over the term of the relevant lease. In the event that lease incentives are granted to a lessee, such incentives are recognised as an asset. The aggregate cost of the incentives is recognised as a reduction in rental income on a straight-line basis over the term of the relevant lease.

The group as lessee

Where an investment property is held under a head lease, the lease liability is capitalised at the lease commencement at the present value of the minimum lease payments. Each lease payment is allocated between repayment of the liability and a finance charge to achieve a constant rate on the outstanding liability. The corresponding rental obligations, net of finance charges, are included in liabilities. Investment properties held under head leases are subsequently carried at their fair value. The carrying value of lease liabilities are remeasured when the variable element of the future lease payments dependent on a rate or index is revised, using same the discount rate as at the lease commencement date.

p) Share based payments

The fair value of payments made to the Fund Manager that are to be settled by the issue of shares is determined on the basis of the Net Asset Value of the Group. The estimated number of shares to be issued in satisfaction of the services provided is calculated using the daily closing share price of the Company at the date of calculation.

4. Significant accounting judgements and estimates

The preparation of financial statements in accordance with the principles of IFRS required the Directors of the Group 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. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Estimates:

Investment properties

The Group uses the valuation carried out by its independent valuers as the fair value of its property portfolio. The assumptions on which the property valuation reports have been based include, but are not limited to, matters such as the tenure and tenancy details for the properties, ground conditions at the properties, the structural condition of the properties, prevailing market yields and comparable market transactions. Further information is provided in note 13.

The Group's properties have been independently valued by Savills (UK) Limited ('Savills' or the 'Valuer') in accordance with the definitions published by the Royal Institute of Chartered Surveyors' ('RICS') Valuation - Professional Standards, July 2017, Global and UK Editions (commonly known as the 'Red Book'). Savills in one of the most recognised professional firms within residential and social housing property valuation and has sufficient current local and national knowledge and has the skills and understanding to undertake the valuations competently. Please see the section below on the impact of COVID-19 on the valuation of investment property.

If the assumptions upon which the external valuer has based its valuations prove to be inaccurate, this may have an impact on the value of the Group's investment properties, which could in turn have an effect on the Group's financial position and results. Further information is provided in note 13.

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

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

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

Level 3 - Inputs not based on observable market data (that is, unobservable inputs).

The Group's investment properties are included in Level 3 as the inputs to the valuation are not based on observable market data.

Impact of COVID-19 on Investment Property Valuations

Due to COVID-19, March 2020 valuations have been issued by Savills subject to a material uncertainty disclosure, as follows:

The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health Organisation as a 'Global Pandemic' on the 11th March 2020, has impacted global financial markets. Travel restrictions have been implemented by many countries.

Market activity is being impacted in many sectors and at the valuation date we do not consider that we can rely upon previous market evidence to fully inform opinions of value. Indeed, the current response to COVID-19 means that we are faced with an unprecedented set of circumstances on which to base a judgement.

Our valuation(s) is / are therefore reported on the basis of 'material valuation uncertainty' as per VPS 3 and VPGA 10 of the RICS Red Book Global. Consequently, less certainty - and a higher degree of caution - should be attached to our valuation than would normally be the case. Given the unknown future impact that COVID-19 might have on the real estate market we recommend that you keep the valuation of this property under frequent review.

Shared Ownership Properties

First Tranche Sales

The Group estimates the proportion of shared ownership properties that will be sold as First Tranche sales and therefore classified as inventory rather than investment property, the assumptions on which the proportion has been based include, but are not limited to, matters such as the affordability of the shared ownership properties, local demand for shared ownership properties, and general experience of First Tranche shared ownership sales in the social housing sector. The first tranche sales percentage used is consistent with values used by the valuers. As at 31 March 2020 the average first tranche sales percentage assumed for vacant shared ownership properties is 25%. If there is a change in percentage used, this will affect the proportion of inventory and investment property recognised with a higher assumed first tranche sale percentage resulting in a higher inventory value and lower investment property value.

5. Operating segments

IFRS 8, Operating Segments, requires operating segments to be identified on the basis of internal financial reports about components of the Group that are regularly reviewed by the chief operating decision maker (which in the Group's case is the Board of Directors) in order to allocate resources to the segments and to assess their performance.

The Group's reporting to the chief operating decision maker does not differentiate by property type or location as the Group is considered to be operating in a single segment of business and in one geographical area.

No customers have revenue that is greater than 10% of the total Group revenue.

The internal financial reports received by the Board of Directors contain financial information at a Group level and there are no reconciling items between the results contained in these reports and the amounts reported in the Financial Statements.

6. Income less cost of sales

The gross profit after ground rents disclosed as lease interest are presented to provide what the Board believes is a more appropriate assessment of the Group's net property income. Ground rent costs are an inherent cost of holding certain leasehold properties and are taken into consideration by Savills when valuing the Group's properties.

7. Fund management fee

ReSI Capital Management Limited acts as alternative investment fund manager (the 'Fund Manager'), in compliance with the provisions of the AIFMD, pursuant to the Fund Management Agreement.

The Fund Manager is entitled to an annual management fee (the 'Fund Manager Fee') under the Fund Management Agreement with effect from the date of Admission, as follows:

a) On that part of the Net Asset Value up to and including £250 million, an amount equal to 1% p.a. of such part of the Net Asset Value;

b) on that part of the Net Asset Value over £250m and including £500m, an amount equal to 0.9% p.a. of such part of the Net Asset Value;

c) on that part of the Net Asset Value over £500m and up to and including £1,000m, an amount equal to 0.8% p.a. of such part of the Net Asset Value;

d) on that part of the Net Asset Value over £1,000m, an amount equal to 0.7% p.a. of such part of the Net Asset Value.

The Fund Management Fee is paid quarterly in advance. 75% of the total Fund Management Fee is payable in cash and 25% of the total Fund Management Fee (net of any applicable tax) is payable in the form of Ordinary Shares rather than cash.

8. Directors' fees and expenses

The Group had no employees during the period other than the Directors and Directors of subsidiaries.

The Chairman is entitled to receive a fee linked to the Net Asset Value of the Group as follows:

Each of the Directors, save the Chairman, is entitled to receive a fee linked to the Net Asset Value of the Group as follows:

None of the Directors received any advances or credits from any Group entity during the period.

9. Net finance costs

The Group's interest income during the period relates to cash invested in a money market fund, which is invested in short-term AAA rated Sterling instruments.

Ground rents paid in respect of leasehold properties have been recognised as a finance cost in accordance with IFRS 16 'Leases'.

Movement in fair value of derivative contracts arises from interest rate swaps entered into in February 2019 to partially fix the £14m of debt secured in the Local Authority portfolio.

10. Taxation

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

As a UK REIT the Group is exempt from corporation tax on the profits and gains from its property rental business provided it meets certain conditions set out in the UK REIT regulations.

The Government has announced that the corporation tax standard rate is to remain at 19% for the foreseeable future.

11. Earnings per share

Basic earnings per share ('EPS') is calculated as profit attributable to Ordinary Shareholders of the Company divided by the weighted average number of shares in issue throughout the relevant period.

The adjusted earnings are presented to provide what the Board believes is a more appropriate assessment of the underlying operational income accruing to the Group's activities. Hence, the Group adjusts basic earnings for income and costs which are not of a recurrent nature or which may be more of a capital nature.

12. Inventories - properties available for sale

13. Investment properties

The table below shows the total value of the Group's investment properties including committed properties with purchase contracts exchanged. Consistent with the valuation provided by Savills, the adjustment to fair value in respect of finance lease assets for ground rents receivable has been excluded to show the value of the asset net of all payments to be made (including ground rent payments). Committed properties with purchase contracts exchanged have been included to provide an indication of the value of all properties to which the Group is contractually committed.

The investment properties are divided into:

*Includes Feuhold properties, the Scottish equivalent of Freehold.

The historical cost of investment properties at 31 March 2020 was £254,332,954 (30 September 2019: £237,090,923).

In accordance with 'IAS 40: Investment Property', the Group's investment properties have been independently valued at fair value by Savills (UK) Limited ('Savills'), an accredited external valuer with recognised and relevant professional qualifications.

The carrying values of investment property as at 31 March 2020 agree to the valuations reported by external valuers, except that the valuations have been increased by the amount of lease liabilities recognised in respect of investment properties held under leases £29,583,997 (£29,532,243 at 30 September 2019), representing the present value of ground rents payable for the properties held by the Group under leasehold - further information is provided in note 27. This is because the independent valuations are shown net of all payments expected to be made. However, for financial reporting purposes in accordance with IAS 40, 'Investment Property', the carrying value of the investment properties includes the present value of the minimum lease payments in relation to these leases. The related lease liabilities are presented separately on the Statement of Financial Position.

The Group's investment objective is to provide shareholders with an attractive level of income, together with the potential for capital growth, from acquiring portfolios of homes across residential asset classes that comprise the stock of statutory registered providers.

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

The Group has pledged certain of its investment properties to secure loan facilities granted to the Group (see note 18).

In accordance with IFRS 13, the Group's investment property has been assigned a valuation level in the fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). The Group's investment property as at 31 March 2020 is categorised as Level 3.

ReSI's shared ownership properties are valued by Savills using a discounted cashflow methodology applying a discount rate to estimated future cashflows. The discount rate applied, house price growth and staircasing rates are considered to be unobservable inputs.

Everything else being equal, there is a negative relationship between the discount rate and the property valuation, such that an increase in the discount rate will decrease the valuation of a property and vice versa. Conversely there is a positive relationship between future house price growth and the property valuation, such that an increase in future house price growth will increase the valuation of a property and vice versa. The relationship between future staircasing rates and property valuation may be either positive or negative depending on the discount rate and house price growth assumptions used for a given property. If a zero rate of staircasing is assumed this would result in an increase in the valuation of ReSI's shared ownership properties as Savills apply a higher discount rate to staircasing cashflows as compared to rental cashflows. Equally, if it assumed that a property staircases immediately this would also result in increase in the valuation of ReSI's shared ownership properties as these properties are valued at a discount to their Open Market Value (the price at which Shared Owners staircase). The valuation movement is not materially sensitive to changes in each of these inputs.

ReSI's other investment properties are valued by Savills using a capitalisation methodology applying a yield to current and estimated rental income subject to certain adjustments for estimated vacant possession value and head lease length. Yields and rental values are considered to be unobservable inputs.

Everything else being equal, there is a positive relationship between rental values and the property valuation, such that an increase in rental values will increase the valuation of a property and vice versa. However, the relationship between capitalisation yields and the property valuation is negative; therefore an increase in capitalisation yields will reduce the valuation of a property and vice versa. There are interrelationships between these inputs as they are determined by market conditions, and the valuation movement in any one period depends on the balance between them. If these inputs move in opposite directions (i.e. rental values increase and yields decrease) valuation movements can be amplified, whereas if they move in the same direction they may be offset, reducing the overall net valuation movement. The valuation movement is materially sensitive to changes in yields and rental values however it is impractical to quantify these changes as the valuation is unique to each property and the outcome is dependent in interdependent factors including yields, recent market transactions, head lease length and other relevant information.

14. Trade and other receivables

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a 12-month expected loss provision for rent receivables. To measure expected credit losses on a collective basis, rent receivables are grouped based on similar credit risk and ageing.

The expected loss rates are based on the Group's historical credit losses experienced since inception to the period end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers. Both the expected credit loss provision and the incurred loss provision in the current and prior years are immaterial. No reasonably possible changes in the assumptions underpinning the expected credit loss provision would give rise to a material expected credit loss.

There is no significant difference between the fair value and carrying value of trade and other receivables at the Statement of Financial Position date.

15. Deposits paid for acquisitions

The deposit relates to the Clapham Park development in which ReSI exchanged contracts to acquire 132 new build apartments, in the London Borough of Lambeth, for a total acquisition cost of £60.6 million. The apartments are being purchased from Metropolitan Thames Valley Housing, one of the UK's largest Housing Associations, who will retain management of the apartments. £26.6 million of the acquisition completed in the period and ReSI expects to complete on the remaining £34.0 million acquisition in Q2 2020.

As of the date of signing, COVID-19 has delayed completion of the remaining 73 homes in Clapham Park. Whilst these are still expected to go ahead, the Fund Manager is prudently considering all possible options in light of current market conditions and expected first tranche sales rates against other opportunities that have arisen.

16. Cash and cash equivalents

Included within cash at the period end was an amount totalling £1,192,087 (£1,172,990 at 30 September 2019) held by the managing agent of the independent retirement rental portfolio in respect of tenancy rental deposits. The cash was placed in a separate bank account to which the Group has restricted access. Other funds were held by the management agent in an operating account to pay service charges in respect of the RHP Portfolio due on 1 April 2020.

Cash held as investment deposit relates to cash invested in a money market fund, which is invested in short-term AAA rated Sterling Investments. As the fund has a short maturity period, the investment has a high liquidity. The fund has £30.6 billion AUM, hence the Group's investment deposit represents an immaterial proportion of the fund.

17. Trade and other payables

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. For most suppliers interest is charged if payment is not made within the required terms. Thereafter, interest is chargeable on the outstanding balances at various rates. The Company has financial risk management policies in place to control that all payables are paid within the agreed credit timescale.

There is no significant difference between the fair value and carrying value of trade and other payables at the Statement of Financial Position date.

18. Borrowings

*£77.6m of this is due at the maturity date of the loan in 2043.

Movements in borrowings are analysed as follows:

The table below lists the Group's borrowings:

The Scottish Widows facility is secured by a first charge over retirement properties with a fair value of £210.8m.

The NatWest facility is secured by a first charge over Local Authority Housing properties with a fair value of £34.7m.

The fair value of borrowings held at amortised cost at 31 March 2020 was £125.5m (£124.9m at 30 September 2019).

19. Derivative financial instruments

The derivative contracts arise from interest rate swaps entered into in February 2019 to partially fix the £14.5m of debt secured on the Local Authority portfolio.

The notional principal amount of the interest rate swaps is £9,537,000 and the expiry date is 20 August 2021.

The contract rate the Group are paying for its interest rate swaps is 1.0580%.

The valuations of all derivatives held by the Group are classified as Level 2 in the IFRS 13 fair value hierarchy as they are based on observable inputs. There have been no transfers between levels of the fair value hierarchy during the year.

20. Share capital account

The share capital account relates to amounts subscribed for share capital.

Rights, preferences and restrictions on shares

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

Treasury shares do not hold any voting rights.

21. Share premium account

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

22. Own shares reserve

The own shares reserve relates to the value of shares purchased by the Company in excess of nominal value. As at 31 March 2020, 9,304,729 (30 September 2019: 9,304,729) 1p Ordinary Shares are held by the Company.

During the period ended 31 March 2020, the Company purchased 242,752 of its own 1p ordinary shares at a total gross cost of £233,008 (£231,494 cost of shares and £1,514 associated costs).

During the period, 242,752 1p Ordinary Shares were transferred from its own shares reserve to the Fund Manager, in lieu of the management fee in accordance with the Fund Management Agreement.

As at 31 March 2020, 9,304,729 (30 September 2019: 9,304,729) 1p Ordinary Shares are held by the Company.

23. Retained earnings

Retained earnings incorporate all gains and losses and transactions with shareholders (e.g. dividends) not recognised elsewhere.

24. Group entities

The group entities which are owned either directly by the Company or indirectly through a subsidiary undertaking are:

ReSi Retirement Rentals Limited is in the process of being struck off.

All group entities are UK tax resident.

25. Notes to the cash flow statement

26. Dividends

On 30 April 2020, the Company declared its second interim dividend of 1.25 pence per share for the period 1 January 2020 to 31 March 2020.

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

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

27. Lease arrangements

The Group as lessee

At 31 March 2020, the Group had outstanding commitments for future minimum lease payments under non-cancellable leases, which fall due as follows:

The above commitment is in respect of ground rents payable for properties held by the Group under leasehold. There are 2103 (30 September 2019: 2,101) properties held under leasehold with an average unexpired lease term of 130 years (30 September 2019: 130 years).

The majority of restrictions imposed are the covenants in place limiting tenancies to people of retirement age.

The Group as lessor

The Group leases some of its investment properties under operating leases. At the balance sheet date, the Group had contracted with tenants for the following future aggregate minimum rentals receivable under non-cancellable operating leases:

The total of contingent rents recognised as income during the period was £nil (31 March 2019: £nil).

The majority of leases are assured tenancy or assured shorthold tenancy agreements. The table above shows the minimum lease payments receivable under the assumption that all tenants terminate their leases at the earliest opportunity. However, assured tenancies are long-term agreements providing lifetime security of tenure to residents.

The leases in the licensed retirement homes portfolio are indefinite and would only be terminated in the event that the leaseholders of the relevant retirement development vote to no longer have a resident house manager living at their development.

The Group's shared ownership properties are let to Shared Owners on leases with an initial 130 year lease term.

Two of the Group's properties are let out on more traditional leases which account for approximately 10% of total rental income.

The table below shows our expected lease receivables, excluding future rent reviews, from existing leases based on historical turnover rates consistent with our assumptions for valuing the properties: