Results for the year ended 30 June 2024

RNS Number : 5246G

Alternative Income REIT PLC

02 October 2024

THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION IN THE UNITED STATES OF AMERICA, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA, CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA.

2 October 2024

ALTERNATIVE INCOME REIT PLC

(the "Company" or the "Group")

Annual Report and Financial Statements for the year ended 30 June 2024

The Board of Directors of Alternative Income REIT PLC (ticker: AIRE), the owner of a diversified portfolio of UK commercial property assets predominantly let on long leases with index-linked reviews, is pleased to announce its annual report and financial statements for the year ended 30 June 2024.

Financial Highlights

At 30 June

	2024	2023	Change
Net Asset Value ('NAV')	£65.1 million	£67.8 million	-3.9%
NAV per share	80.90p	84.16p	-3.9%
Share price	66.00p	64.70p	2.0%
Share price discount to NAV ^A	18.4%	23.1%	-4.7%
Investment property fair value (based on external valuation)	£102.7 million	£107.0 million	-4.0%
Loan to gross asset value ('GAV') ^A	37.7%	36.8%	-
Loan facility	£41.0 million	£41.0 million	-

For the year ended 30 June

	2024	2023	Change
EPRA earnings per share ('EPS') ^A	5.89p	6.75p	-12.7%
Adjusted EPS ^A	5.99p	6.43p	-6.8%
Total dividends per share	5.90p	6.045p	-2.4%
Dividend cover ^A	101.5%	106.4%	-4.9%
Dividend yield ^A	8.9%	9.3%	-0.4%
Operating profit (including gain on sale of investment property but excluding fair value changes)	£6.8 million	£6.9 million	-1.5%
Profit before tax	£2.4 million	loss £5.2 million	146.2%
Earnings per share	2.93p	loss 6.51p	145.0%
Share price total return ^A	11.6%	-14.2%	-
NAV total return ^A	3.5%	-6.7%	-
Gross passing rental income	£7.7 million	£7.6 million	1.3%
Ongoing charges	1.46%	1.39%	+7bps

Financial Highlights Overview

· The NAV decrease to 80.90 pence per share ("pps") was primarily due to the £4.3 million (-4.0%) reduction in the fair value of the investment properties, which were impacted by an upward yield movement across the wider UK real estate sector, driven primarily by rises in interest rates and inflation during the year.

· Dividends in respect of the year totalled 5.9pps, which was in line with the Board's 2024 target annual dividend, and are a 3.5% increase when compared to the previous year target dividend of 5.7pps.

· Dividend yield decreased by 0.4% despite an increase in the target dividend for the year. This was due to the total dividend being less that the preceding year. Based on target dividends only, the dividend yield increased marginally from 8.8% to 8.9%.

· Profit before tax of £2.4 million, equivalent to 2.93pps is after a £2.9 million valuation reduction in the property portfolio.

· Loan to GAV of 37.7% and interest cover ratio of 611.3% gives significant headroom on the lender's loan to value covenant of 60% and interest cover covenant of 250%, respectively. The loan matures on 20 October 2025 and is fixed at a weighted average interest cost of 3.19%.

Operational Overview

At the Group's year end of 30 June 2024:

· The Group's property portfolio had a fair value of £102.7 million across 19 properties (2023: £107.0 million across 19 properties).

· The EPRA Net Initial Yield ^A ('NIY') was 6.9% (2023: 6.6%).

· 95.8% of the Group's income is inflation linked to Retail Price Index ('RPI') or Consumer Price Index ('CPI').

· The assets were fully let at both the current and previous year end.

· The weighted average unexpired lease term ('WAULT') was:

- 16.5 years to the earlier of break and expiry (2023: 17.0 years) and

- 18.4 years to expiry (2023: 18.9 years).

Income and expense during the year

· Rent recognised was £7.4 million (2023: £8.1 million), of which £0.1 million was accrued debtors for the combination of rental smoothing of minimum uplifts and rent-free periods (2023: accrued debtors of £0.4 million).

· A total of 11 rent reviews took place during the year, which resulted in a combined rental uplift of £294,000, which represents a 4.3% increase on contracted rent across the portfolio.

Property transactions during the year

· In the year two property transactions were completed. The first was the sale of Mercure Hotel in Glasgow which was disposed of on 8 August 2023 for £7.5 million at a 7.9% premium to its fair value. Part of the net proceeds of sale, totalling £5.3 million, were reinvested in the Virgin Active in Streatham on 18 December 2023.

Events after the reporting period

· On 8 August 2024, the Board declared an interim dividend for the quarter ended 30 June 2024 of 1.625pps. As a result, the dividend target of 5.9pps for the year ended 30 June 2024 was met. This dividend was paid on 30 August 2024 to shareholders on the register at 16 August 2024. The ex-dividend date was 15 August 2024.

· By 30 September 2024, the Group had collected 100% of rent for the four rental quarters of the financial year being reported.

Proposed changes to the Company's Investment Policy

· The current Investment Policy originated in 2017 at the launch of the Company and contains detailed and, at time, highly restrictive requirements. In light of this, and following significant changes to property markets, the Board believes that changing the Investment Policy will better place the Company to deliver added value to shareholders. Further explanation of the proposed changes is included in the Chairman's Statement below.

^A Alternative Performance Measure, please see below for further details.

Simon Bennett, non-executive chairman of Alternative Income REIT plc, comments:

"The period under review was characterised by high inflation, low rental growth and rising interest rates. This has proved to be somewhat of a mixed blessing for the Group. From an income standpoint the economic environment has seen our portfolio continuing to perform well, benefitting from long dated and high yielding leases with index-linked rental increases. 96.0% of the portfolio's income stream is reviewed periodically. In the coming financial year, approximately 46.5% of the Group's income will be subject to rent reviews, 36.0% as annual index-linked rent reviews and the remaining 10.4% being periodic 5 yearly index-linked rent reviews. During the past financial year, a total of 11 rent reviews took place, which resulted in a combined rental uplift of £0.3 million, which represents a 4.3% increase on contracted rent across the portfolio on a like for like basis.

On the other hand, the portfolio suffered a relatively modest reduction of £4.3 million, when compared with the Group's peers (2023: £10.9 million reductions in value) and at 30 June 2024 was valued at £102.7 million (30 June 2023: £107.0 million).

I am pleased to report the sale of the Group's hotel in Glasgow was achieved at a 7.9% premium to its book value as at 30 June 2023 and the acquisition of Virgin Active, Streatham in December 2023 for £5.1 million.

During this financial year, the Company declared four interim dividends totalling 5.9pps (2023: 6.045pps, which included 0.345pps of non-rental income) which was in line with the previously announced dividend target of 5.9pps (2023: 5.7pps), representing a 3.5% increase on the previous year target. I am pleased to report that these dividends were covered by cash earnings.

The recent announcement by the Bank of England to reduce interest rates together with the recent fall in inflation, might mark the bottom of the property market. Accordingly, the Board remains confident that the Company is well-positioned for the future, with a resilient portfolio well-placed to continue to provide secure, index-linked income with the potential for capital growth."

ENQUIRIES

Alternative Income REIT PLC Simon Bennett - Chairman	via H/Advisors Maitland below

Martley Capital Real Estate Investment Management Ltd Richard Croft	020 4551 1240
Jane Blore

Panmure Liberum Limited	020 3100 2000
Alex Collins
Tom Scrivens

H/Advisors Maitland (Communications Adviser)	07747 113 930 / 020 7379 5151
James Benjamin Rachel Cohen Billy Moran	[email protected]

The Company's LEI is 213800MPBIJS12Q88F71.

Further information on Alternative Income REIT PLC is available at www.alternativeincomereit.com¹

1 Neither the content of the Company's website, nor the content of any website accessible from hyperlinks on its website or any other website, is incorporated into, or forms part of, this announcement nor, unless previously published on a Regulatory Information Service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

NOTES

Alternative Income REIT PLC aims to generate a sustainable, secure and attractive income return for shareholders from a diversified portfolio of UK property investments, predominately in alternative and specialist sectors. The majority of the assets in the Group's portfolio are let on long leases which contain index-linked rent review provisions.

The Company's Investment Adviser is Martley Capital Real Estate Investment Management Limited ("Martley Capital"). Martley Capital is a full-service real estate investment management platform whose activities cover real estate investing, lending, asset management and fund management. It has over 40 employees across five offices in the UK and Europe. The team manages assets with a value of circa £900 million across 19 mandates (at 30 June 2024).

Chairman's Statement

Overview

I am pleased to present the annual audited results of Alternative Income REIT plc (the 'Company') together with its subsidiaries (the 'Group') for the financial year ended 30 June 2024.

The wider market for the year under review was characterised by high inflation, low rental growth and rising interest rates. This has proved to be somewhat of a mixed blessing for the Group. From an income standpoint, the economic environment has seen our portfolio continuing to perform well, benefitting from its long dated and high yielding leases with index-linked rental increases. On the other hand, the portfolio suffered a relatively modest reduction of £4.3 million (2023: £10.9 million reduction), including the property transactions throughout the year, and at 30 June 2024 was valued at £102.7 million (2023: £107.0 million). On a like-for-like basis, the value of the Group's properties reduced from £100.1m to £97.6 million.

The portfolio should continue to perform relatively well during a period of higher inflation, as 95.8% of its rental income is subject to index-linked reviews and 32.3% of rental income is not subject to any cap on rental increases. During the financial year, a total of 11 rent reviews took place, which resulted in a combined rental uplift of £294,000, which represents a 4.3% increase on contracted rent across the portfolio.

During the year two property transactions were completed. The first was the sale of Mercure Hotel in Glasgow which was sold on 8 August 2023 for £7.5 million at a 7.9% premium to its fair value. The second was the purchase of Virgin Active in Streatham purchased on 18 December 2023 for £5.3 million. The Investment Advisor has been actively seeking a further property in order to invest the remaining proceeds.

The Board continues to keep costs under control and the Group also benefits from both a low overhead base and fixed borrowing costs until 20 October 2025. Together with the active asset management initiatives being undertaken, the Board considers that the portfolio will continue to deliver an attractive yield as a result of its secure and growing rental income. These factors, together with the recent fall in the rate of inflation and the resulting cut in UK interest rates will undoubtedly improve the sentiment towards the property market.

At the year end, the portfolio has a slightly increased net initial yield of 7.1% compared to the previous year end of 6.6% and a WAULT to the first break of 16.5 years and 18.4 years to expiry (2023: 17.0 and 18.9 years, respectively).

Financing

The Group has fully utilised its £41.0 million loan facility with Canada Life Investments throughout the year. The weighted average interest cost of the facility is 3.19% and it is repayable on 20 October 2025. There are currently no penalties projected for repaying the Group's loan facility, given the corresponding gilt rate is lower than the contracted rate of interest.

Whilst the refinancing is some time in the future, the Board have recently commenced an interview process to find a suitable debt adviser, with the relevant expertise and proven accessibility to potential lenders, to assist with the refinancing. The Board is confident that the requisite refinancing will be achieved prior to the loan's due date.

Dividends and Earnings

During this financial year, the Company declared four interim dividends totalling 5.9pps (2023: 5.7pps), with the total dividends declared for 2023 being 6.045pps, which included 0.345pps relating to monies received following the successful settlement of a historic legal case), which was in line with the previously announced dividend target of 5.9pps (2023: 5.7pps), representing a 3.5% increase on the previous year. I am pleased to report that these dividends were covered by cash earnings.

As set out in Note 8 to the consolidated financial statements, these dividends were covered by the Group's Adjusted EPS (representing cash) of 5.99pps (2023: 6.43pps). Furthermore, Note 9 sets out all dividends paid and payable in the year. All dividends were paid as Property Income Distributions ('PIDs').

Historically the Board has paid dividends in four instalments each financial year. The Board intends to continue with this practice by making dividend payments in November, February, May and August each year. In order to do this, all dividends need to be declared and paid as interim dividends. The Board, however, recognises that this precludes shareholders from having the opportunity to vote on a final dividend. Recognising this, and although not required to do so, Resolution 8 in the AGM notice gives shareholders the opportunity to vote on this dividend policy.

Discount

The discount of the share price to NAV at 30 June 2024 narrowed to 18.4% from 23.1% at the previous year end. The Board monitors the discount level throughout the year and has the authority to both issue and buy back shares. Although these powers have not been used to date, the Board believes these authorities are important powers for it to have available, if required, and therefore recommends that shareholders vote in favour of their continuance at the forthcoming AGM.

Change of Investment Adviser

During the year, the Board undertook a review of the Group's investment advisory arrangements. This review included proposals from a number of select third party investment managers with the relevant property expertise. Following this review, in February 2024 the Board approved the appointment of Martley Capital Real Estate Investment Management Ltd ('Martley Capital') as the Group's Investment Adviser, with the appointment effective on 15 March 2024. Martley Capital Group (of which Martley Capital is a subsidiary) launched in December 2023 as a new venture, whereby key members of the previous advisory team at M7 Real Estate continue to service the Group as part of the Martley Capital team. The appointment of Martley Capital was by way of a deed of novation of the Group's investment advisory agreement (and subsequent minor changes thereto) leaving the parties on substantially the same terms and at an unchanged fee.

Proposed Changes to the Company's Investment Policy

The current Investment Policy originated in 2017 at the launch of the Company, and contains detailed and, at times, highly restrictive requirements. Many of these restrictions were required to differentiate the Company's Investment Policy from that of other investment vehicles managed by the Company's former investment manager. The Board believes that in light of this, and following significant changes to the property markets since launch, that the Company will be better placed to deliver added value to shareholders with a changed Investment Policy which better serves the Company's Investment Objective of generating predictable income returns whilst maintaining capital values by means of investment in a diversified UK portfolio.

The principal changes to the Investment Policy include a reduction in the minimum WAULT of the portfolio from 18 to 10 years, a reduction in the percentage of leases required to be linked to inflation from 85% to 75% of gross passing rent, and a reduction in the requirement for properties to be in non-traditional sectors (and thus in alternative and specialist sectors) from 70% to at least 50%. At the same time, the Board has taken the opportunity to simplify the language used in the Investment Policy, to make it far easier to understand.

The proposed changes to modernise the Investment Policy should provide the Investment Adviser with additional flexibility to invest in attractive opportunities, without changing the Company's core nature and objective.

Therefore, the Company will be proposing an ordinary resolution at its AGM on 12 November 2024 to seek permission from shareholders to change the Company's Investment Policy. The proposed changes to the Company's Investment Policy are set out in more detail in the Notice of Meeting dated 1 October 2024 and sent to shareholders with the Annual Report and Financial Statements. An explanation of both the current and proposed Investment Policy is set out in the Notice of Meeting. The Board believes that the changes are in the best interests of the Company and shareholders as a whole and it is unanimous in recommending that shareholders should vote in favour of all resolutions, as the Directors will in respect of their own beneficial holdings.

AGM

The Company will hold its AGM at 10am on Tuesday 12 November 2024 at the offices of Panmure Liberum, Ropemaker Place, Level 12, 25 Ropemaker Street, London EC2Y 9LY. As usual, the Investment Adviser will give a presentation on the Group prior to proceeding with the business of the AGM.

I always welcome engagement with shareholders, and they should be aware that if they are unable to attend in person, they can submit questions to the Board by emailing the Company Secretary at [email protected] or by writing to me at the Group's registered office, namely, Alternative Income REIT plc, The Scalpel 18th Floor, 52 Lime Street, London EC3M 7AF.

Outlook

The recent announcement by the Bank of England to reduce interest rates together with the recent fall in the rate of inflation might mark the bottom of the property market and will undoubtedly improve investor sentiment towards the sector. The Group's index-linked portfolio, with its properties let on predominantly long dates and high yielding leases, has continued to perform relatively well, when compared with its peer group. In the coming financial year, approximately 46.5% of the Group's income will be subject to rent reviews (36.0% as annual index-linked rent reviews and the remaining 10.4% being periodic five yearly index-linked rent reviews). Together with the active asset management initiatives being undertaken, the Board considers that the portfolio will continue to deliver an attractive yield as a result of its secure and growing rental income.

I would like to take this opportunity to thank my colleagues on the Board, the Investment Adviser, the Company Secretary and our other advisers and service providers, who have provided professional support and services to the Group during this financial year. The Group has a good team, to whom a large proportion of the Company's success can be attributed.

Simon Bennett

Chairman

1 October 2024

Business Model and Strategy

Business Model

Alternative Income REIT plc is a real estate investment trust listed on the closed-ended investment funds category of the Official List of the Financial Conduct Authority ('FCA') and traded on the Main Market of the London Stock Exchange. As part of its business model and strategy, the Group has maintained and intends to maintain its UK REIT status.

The Company is governed by a Board of non-executive directors (the 'Board') and has no employees. The Board is responsible for determining the Company's investment objective and investment policy. Like many other REITs and investment companies, the day-to-day management and administration of the Company is outsourced by the Board to third party providers, including Martley Capital as investment adviser, Langham Hall Fund Management LLP as AIFM and Hanway Advisory Limited as Company Secretary.

Proposed changes to the Investment Policy and Investment Objective

Shareholder approval is being sought at the forthcoming Annual General Meeting, under ordinary Resolution 10, to change the Company's Investment Policy. The proposal is explained in the Notice of Meeting which is included within the Annual Report.

The current investment objective and policy is set out below. The minor change to the investment objective of "in" to "predominantly within the" alternative and specialist sectors, is shown below, and does not require shareholder approval.

Investment Objective

The investment objective of the Group is to generate a secure and predictable income return, sustainable in real terms, whilst at least maintaining capital values, in real terms, through investment in a diversified portfolio of UK properties, predominantly within the alternative and specialist sectors.

Investment Policy

In order to achieve the investment objective, the Group invests in freehold and long leasehold properties across the whole spectrum of the UK property sector, but with a focus on alternative and specialist real estate sectors. Examples of alternative and specialist real estate sectors include, but are not limited to, leisure, hotels, healthcare, education, logistics, automotive, supported living and student accommodation.

In the event of a breach of the investment policy or the investment restrictions set out below, the Alternative Investment Fund Manager ('AIFM'), as advised by the Investment Adviser, shall inform the Board upon becoming aware of the same and, if the Board considers the breach to be material, notification will be made to a Regulatory Information Service and the AIFM, as advised by the Investment Adviser, will look to resolve the breach.

Any material change to the investment policy or investment restrictions of the Group may only be made with the prior approval of shareholders.

Investment Strategy

The Group focuses on properties which can deliver a secure income and preserve capital value, with an attractive entry yield. The Group has an emphasis on alternative and specialist property sectors to access the attractive value and capital preservation qualities which such sectors currently offer.

The Group will supplement this core strategy with active asset management initiatives for certain properties.

Subject at all times to the AIFM's (as advised by the Investment Adviser) assessment of their appeal and specific asset investment opportunities, permitted sectors include, but are not limited to the following: Healthcare; Leisure; Hotels and serviced apartments; Education; Automotive; Car parks; Residential; Supported living; Student accommodation; Logistics; Storage; Communications; Supermarkets; and, subject to the limitations on traditional sector exposures below, Offices; Shopping centres; Retail and Retail Warehouses; and Industrial.

The Group is not permitted to invest in land assets, including development land which does not have a development agreement attached, agriculture or timber.

The focus will be to invest in properties to construct a portfolio with the following minimum targets:

· a WAULT, at the time of investment, in excess of 18 years;

· at least 85% of the gross passing rent will have leases with rent reviews linked to inflation (RPI or CPI) at the time of investment;

· investment in properties which typically have a value, at the time of investment, of between £2 million and £30 million;

· at least 70% of the properties will be in non-traditional sectors;

· less than 30% of the properties will be in the traditional sectors of Retail, Industrial and Offices; and

· over 90% of properties will be freehold or very long leasehold (over 100 years).

Once GAV is £250 million or greater, future investments will be made to target a portfolio with at least 80% of the properties in non-traditional sectors and less than 20% of the properties in traditional sectors.

Whilst each acquisition will be made on a case-by-case basis, it is expected that properties will typically offer the following characteristics:

· existing tenants with strong business fundamentals and profitable operations in those locations;

· depth of tenant/operator demand;

· alternative use value;

· current passing rent close to or below rental value; and

· long-term demand drivers, including demographics, use of technology or built-for-purpose real estate.

The Group may invest in commercial properties or portfolios of commercial property assets which, in addition, include ancillary or secondary utilisations.

The Group does not intend to spend any more than 5% of the NAV in any rolling 12-month period on (a) the refurbishment of previously occupied space within the existing Portfolio, or (b) the refurbishment of new properties acquired with vacant units.

The Group may invest in corporate and other entities that hold property and the Group may also invest in conjunction with third party investors.

Investment Restrictions

GAV of less than £250 million

GAV of £250 million or greater

Investment in a single property limited to 15% of GAV (measured at the time of investment).

Investment in a single property limited to 10% of GAV (measured at the time of investment).

The value of assets in any sub-sector in one geographical region, at the time of investment, shall not exceed 15% of GAV.

Investments will be made with a view to reducing the maximum exposure to any sub-sector in one geographical region to 10% of GAV.

The value of assets in any one sector and sub-sector, at the time of investment, shall not exceed 50% of GAV and 25% of GAV respectively.

Exposure to a single tenant covenant will be limited to 15% of GAV.

The Group may commit up to a maximum of 10% of its GAV (measured at the commencement of the project) in development activities.

Investment in unoccupied and non-income producing assets will, at the time of investment, not exceed 5% of Estimated Rental Value ('ERV').

The Group will not invest in other closed-ended investment companies.

If the Group invests in derivatives for the purposes of efficient portfolio and cash management, the total notional value of the derivatives at the time of investment will not exceed, in aggregate, 20% of GAV.

The Group will invest and manage its assets with the objective of spreading risk through the above investment restrictions.

When the measure of GAV is used to calculate the restrictions relating to (i) the value of a single property and (ii) the value of assets in any sub-sector in one geographical region, it will reflect an assumption that the Group has drawdown borrowings such that these borrowings are equal to 30% of GAV.

Borrowings

The Group has utilised borrowings to enhance returns over the medium term. Borrowings have been utilised on a limited recourse basis for each investment on all or part of the total portfolio and will not exceed 40% of GAV (measured at drawdown) of each relevant investment or of the portfolio.

Dividend Policy

It is the directors' intention to pay dividends in line with the Company's investment objective with interim dividends payable by four instalments quarterly in November, February, May and August in respect of each financial year to June. Additionally, the dividend policy allows for the payment of further interim dividends should compliance with the REIT rules require.

Key Performance Indicators

KPI AND DEFINITION	RELEVANCE TO STRATEGY	PERFORMANCE
Net Initial Yield ('NIY')		7.06%
Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with purchasers' costs estimated by the Group's External Valuers.	The NIY is an indicator of the ability of the Group to meet its target dividend after adjusting for the impacts of leverage and deducting operating costs.	At 30 June 2024 (2023: 6.58%)
Weighted Average Unexpired Lease Term ('WAULT') to break and expiry		16.5 years to break and 18.4 years to expiry
The average lease term remaining to expiry across the portfolio, weighted by contracted rent.	The WAULT is a key measure of the quality of the portfolio. Long leases underpin the security of our future income.	At 30 June 2024 (2023: 17.0 years to break and 18.9 years to expiry)
Net Asset Value ('NAV') per share		£65.12 million / 80.90pps
NAV is the value of an entity's assets minus the value of its liabilities.	Provides stakeholders with the most relevant information on the fair value of the assets and liabilities of the Group.	At 30 June 2024 (2023: £67.75 million / 84.16pps)
Dividend per share		5.90pps
Dividends declared in relation to the period are in line with the stated dividend target as set out in the Prospectus at IPO. Having achieved the target dividend of 5.70 pence per Ordinary Share per annum, the aim now is to ensure an increasing dividend in line with the Company's Investment Objective.	The Group seeks to deliver a sustainable income stream from its portfolio, which it distributes as dividends.	For the year ended 30 June 2024 (2023: 6.045pps)
Adjusted EPS		5.99pps
Adjusted EPS from core operational activities, as adjusted for non-cash items. A key measure of a company's underlying operating results from its property rental business and an indication of the extent to which current dividend payments are supported by earnings. See Note 8 to the financial statements.	This reflects the Group's ability to generate earnings from the portfolio which underpins dividends.	For the year ended 30 June 2024 (2023: 6.43pps)
Leverage (Loan-to-GAV)		37.67%
The proportion of the Group's assets that is funded by borrowings.	The Group utilises borrowings to enhance returns over the medium term. Borrowings will not exceed 40% of GAV (measured at drawdown).	At 30 June 2024 (2023: 36.76%)

EPRA Performance Measures

Detailed below is a summary table showing the EPRA performance measures (which are all alternative performance measures) in the Group.

MEASURE AND DEFINITION	PURPOSE	PERFORMANCE
EPRA NIY¹ - unaudited		6.94%
Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs.	A comparable measure for portfolio valuations. This measure should make it easier for investors to judge themselves, how the valuation of two portfolios compare.	At 30 June 2024 (2023: 6.58%)
EPRA 'Topped-up' NIY¹ - unaudited		7.29%
This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents).	A comparable measure for portfolio valuations. This measure should make it easier for investors to judge themselves, how the valuation of two portfolios compare.	At 30 June 2024 (2023: 7.08%)
EPRA NAV²		£65.12million /80.90pps
Net asset value adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long-term investment property business.	Makes adjustments to IFRS NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities within a real estate investment company with a long-term investment strategy.	At 30 June 2024 (2023: £67.75 million/84.16pps)
EPRA Net Reinstatement Value2		£71.79 million/ 89.18pps
The EPRA NRV adds back the purchasers' costs deducted from the EPRA NAV and deducts the break cost of bank borrowings.	A measure that highlights the value of net assets on a long-term basis.	At 30 June 2024 (2023: £74.71 million/ 92.80pps)
EPRA Net Tangible Assets2		£65.12 million /80.90pps
The EPRA NTA deducts the break cost of bank borrowings from the EPRA NAV.	A measure that assumes entities buy and sell assets, thereby crystallising certain levels of deferred tax liability. The Group has UK REIT status and as such no deferred tax is required to be recognised in the accounts.	At 30 June 2024 (2023: £67.75 million/ 84.16pps)
EPRA Net Disposal Value2		£65.12 million /80.90pps
The EPRA NDV deducts the break cost of bank borrowings from the EPRA NAV.	A measure that shows the shareholder value if assets and liabilities are not held until maturity.	At the year ended 30 June 2024 (2023: £67.75 million/ 84.16pps)
EPRA Earnings/EPS2		£4.74 million/ 5.89pps
Earnings from operational activities.	A key measure of a company's underlying operating results and an indication of the extent to which current dividend payments are supported by earnings.	For the year ended 30 June 2024 (2023: £5.43 million/ 6.75pps)
EPRA Vacancy1 - unaudited		0.00%
Estimated Rental Value ('ERV') of vacant space divided by ERV of the whole portfolio.	A 'pure' percentage measure of investment property space that is vacant, based on ERV.	At 30 June 2024 (2023: 0.00%)
EPRA Cost Ratio1 - unaudited		16.36%
Administrative and operating costs (including and excluding costs of direct vacancy) divided by gross rental income.	A key measure to enable meaningful measurement of the changes in a company's operating costs.	For the year ended 30 June 2024 (2023: 15.23%)

EPRA NNNAV (the EPRA NAV adjusted to include the fair value of hedging instruments, financial debt and deferred taxes) is equal to EPRA NAV as there are no adjusting items. As such this measure has not been presented.

1 The reconciliation of this APM is set out in the EPRA Performance Measures Calculations section following the Notes to the Consolidated Financial Statements.

2 The reconciliation of this APM is set out in Note 8 of the Notes to the Consolidated Financial Statements.

Investment Adviser's Report

Introduction

Both the UK and global real estate markets are showing signs of a much brighter 2024 after a tough year for the wider market in 2023, which was marked by persistent inflation, rising borrowing costs and shaky consumer confidence. Yields are stabilising, activity is picking up steadily and interest rates have started to fall.

Market Outlook

UK Economic Outlook

The UK economy is finding its footing in 2024 after a robust post-pandemic recovery. Though the initial surge has subsided, the short recession of late 2023 seems to be over and a more stable period is taking hold. The slowdown in GDP growth is expected to level off, with gradual improvement expected throughout the remainder of the year. Political stability in the UK could further bolster economic growth following the Labour Party's win of the General Election with a sizeable majority. Consequential changes to the Government's policies will likely have implications for the UK economy, and thus real estate. Additionally, inflation, while still relatively high, is projected to continue its decline and it is expected to settle at more manageable levels.

The cost-of-living crisis continues to cast a shadow, with consumers remaining cautious about spending despite some recent signs of improvement. This could lead to stagnant, or even slightly declining, retail sales in the coming months. To maintain profitability, businesses may still consider cost-cutting measures, potentially impacting employment levels and making unemployment a bigger concern in the latter half of 2024.

Curbing inflation remains a key priority, but there are positive developments in this regard. High inflation rates have subsided over the past year, falling to 2.0% (CPI, June 2024), bringing inflation in line with the Bank of England's long-term target. The Bank's aggressive interest rate hikes in 2023, culminating in the 14th consecutive increase to 5.25% in August 2023, are credited with helping to cool domestic demand and influence import prices, ultimately bringing inflation under control.

Financial markets were betting on a rate cut by the Bank of England, which materialised in August 2024 when rates were cut by 0.25% to 5%, with Capital Economics predicting a further drop to 3% by the end of 2025. However, the Bank faces a balancing act: to curb inflation without restraining economic growth. The modest 0.7% growth in the first four months of 2024 underscores the importance of finding the right balance. Stalling economic activity could lead to adverse long-term consequences, including a reduction in business investment, higher long-term unemployment and a decline in key sectors.

UK Real Estate Outlook

Despite a difficult global real estate market, with declining values for the past two years, prime yields have remained steady in the first half of 2024. This suggests most markets may be nearing the bottom of the cycle, prompting cautious investor re-entry.

Previous forecasts for steeper interest rate hikes (up to 5.75%) have been overshadowed by strong expectations for further rate cuts in 2024 and 2025. This shift in sentiment, along with a more optimistic outlook, could make real estate a highly attractive investment proposition. However, several risks remain unaddressed, including borrowers facing stricter lending conditions, and structural challenges persisting. An additional factor to consider is the growing availability of distressed assets. Banks are increasingly taking ownership of properties where long-term borrowers have defaulted. This presents a significant opportunity for global capital seeking to diversify through UK real estate.

Investors are seizing the moment to reposition assets to align with changing occupier demand. This comes as the gap between asking prices and offers narrows. UK Investment volume in Q2 2024 surged 11% compared to an already strong Q1, reaching £11.1bn. As market conditions strengthen, we can expect activity to pick up further. However, the focus for 2024 is likely to remain on generating and securing stable income, rather than chasing capital appreciation.

Tough economic conditions further emphasise the importance of sustainability, quality, location and flexibility for attracting tenants. These factors remain crucial for occupiers who are still focused on complying with regulations, retaining staff and minimising operational costs. This focus, coupled with limited supply due to rising construction and borrowing costs, is contributing to a rise in nominal rental prices across most sectors.

The MSCI UK Monthly Capital Value Index continued its downward trend in Q2 2024. While office values saw slight declines, retail and industrial sectors showed more resilience. As economic stability appears likely on the horizon, this decline could signal the beginning of a cyclical buying opportunity as new properties become available later this year.

Rising temperatures are driving renewed focus on physical climate risks from both investors and occupiers. This has led to a growing appreciation for the value of sustainable features in buildings. Investors and occupiers are increasingly interested in accurate measurement of these "green" features and how they translate to improved energy efficiency, ultimately impacting the corporate bottom line. As a result, we can expect stricter regulations, including mandatory disclosure of net zero transition plans.

Portfolio Activity During the Year

The following asset management initiatives were undertaken during the year:

· Rent Reviews: A total of 11 rent reviews took place during the year with a combined uplift of £294,000, representing 4.3% increase in contracted rent across the portfolio.

· Transactions: The sale of the Mercure Hotel in Glasgow completed on 8 August 2023 for £7.5 million at a 7.9% premium to its fair value. On 18 December 2023, the acquisition of Virgin Active, Ockley Road, Streatham was completed for a cost of £5.3 million.

NAV Movements

For the year ended 30 June	2024		2023
	Pence per share	£ million	Pence per share	£ million
NAV at beginning of year	84.16	67.75	96.40	77.60
Change in fair value of investment property	(3.71)	(2.98)	(13.26)	(10.67)
Income earned for the year	9.82	7.90	10.76	8.66
Gain on sale of property	0.74	0.60	-	-
Finance costs for the year	(1.75)	(1.41)	(1.77)	(1.43)
Other expenses for the year	(2.17)	(1.75)	(2.24)	(1.80)
Dividends paid during the year	(6.19)	(4.99)	(5.73)	(4.61)
NAV at the end of the year	80.90	65.12	84.16	67.75

Valuation

At 30 June 2024 the Group owned 19 assets (2023: 19 assets) and the portfolio was valued at £102.7 million (2023: £107.0 million).

Summary by Sector at 30 June 2024

						Gross
					WAULT	Passing
			Market	Occupancy	to	Rental
	Number of	Valuation	Value	by ERV	break	Income	ERV	ERV
Sector	Properties	(£m)	(%)	(%)	(years)	(£m)	(£m)	(%)
Industrial Warehouse	4	25.4	24.7	100.0	23.9	1.8	1.7	24.3
Automotive & Petroleum	3	14.8	14.4	100.0	12.0	1.1	1.0	14.2
Healthcare	3	16.9	16.5	100.0	24.5	1.2	1.1	16.4
Leisure	3	10.2	9.9	100.0	8.0	1.0	0.8	11.2
Hotel	2	12.9	12.6	100.0	13.0	0.9	0.8	12.1
Residential	1	10.9	10.6	100.0	17.1	0.8	0.7	9.6
Retail Warehouse	1	5.1	5.0	100.0	4.7	0.4	0.4	5.6
Power Station	1	4.6	4.5	100.0	7.7	0.3	0.3	4.7
Education	1	1.9	1.8	100.0	19.6	0.2	0.1	1.9
Total/Average	19	102.7	100.0	100.0	16.5	7.7	6.9	100.0

Summary by Geographical Area at 30 June 2024

						Gross
					WAULT	Passing
			Market	Occupancy	to	Rental
Geographical	Number of	Valuation	Value	by ERV	break	Income	ERV	ERV
Area	Properties	(£m)	(%)	(%)	(years)	(£m)	(£m)	(%)
West Midlands	4	25.7	25.0	100.0	10.8	2.0	1.9	27.6
The North West & Merseyside	2	22.4	21.8	100.0	34.7	1.6	1.2	17.7
Rest of South East	5	21.6	21.1	100.0	9.3	1.5	1.4	20.0
South West	2	12.2	11.9	100.0	22.0	0.9	0.9	12.4
London	3	10.2	9.9	100.0	8.0	0.9	0.8	11.2
Yorkshire and the Humber	2	6.0	5.8	100.0	17.6	0.5	0.4	6.4
Eastern	1	4.6	4.5	100.0	7.7	0.3	0.3	4.7
Total/Average	19	102.7	100.0	100.0	16.5	7.7	7.0	100.0

The table below illustrates the weighting of the Group's contracted rental income, based on the type of rent review associated with each lease.

Income Allocation by Type
Inflation linked - RPI Inflation linked - CPI Expiry or Open Market Value Reviews	69.0% (2023: 71.0%) 26.9% (2023: 26.0%) 4.1% (2023: 3.0%)

% of Passing Rent by Rent Review Type

% of Passing Rent by Review Frequency

% of Passing Rent by Cap Band

Property Portfolio at 30 June 2024

Property	Sector	Region	Market Value
1. Pocket Nook Industrial Estate, St Helens	Industrial	The North West & Merseyside	£11.55m
2. Bramall Court, Salford	Residential	The North West & Merseyside	£10.85m
3. Grazebrook Industrial Estate, Dudley	Industrial	West Midlands	£7.65m
4. Premier Inn, Camberley	Hotel	Rest of South East	£7.43m
5. Motorpoint, Birmingham	Automotive & Petroleum	West Midlands	£6.75m
6. Silver Trees, Bristol	Healthcare	South West	£6.68m
7. Prime Life Care Home, Solihull	Healthcare	West Midlands	£6.15m
8. Duke House, Swindon	Hotel	South West	£5.50m
9. Droitwich Spa Retail Park, Droitwich	Retail	West Midlands	£5.13m
10. Virgin Active, Streatham	Leisure	London	£5.10m
11. Hoddesdon Energy, Hoddesdon	Power Station	Eastern	£4.62m
12. Unit 2, Dolphin Park, Sittingbourne	Industrial	Rest of South East	£4.35m
13. Volvo Slough, Slough	Automotive & Petroleum	Rest of South East	£4.15m
14. Prime Life Care Home, Brough	Healthcare	Yorkshire and the Humber	£4.10m
15. Applegreen Petrol Station, Crawley	Automotive & Petroleum	Rest of South East	£3.85m
16. Pure Gym, London	Leisure	London	£3.37m
17. YMCA Nursery, Southampton	Education	Rest of South East	£1.87m
18. Unit 14, Provincial Park, Sheffield	Industrial	Yorkshire and the Humber	£1.85m
19. Snap Fitness, London	Leisure	London	£1.70m
Total			£102.65m

Top Ten Tenants at 30 June 2024

		Annual Contracted Rental Income (£'000)	% of Portfolio Total Passing Rental Income	WAULT to break (Years)
Tenants	Property	Annual Contracted Rental Income (£'000)	% of Portfolio Total Passing Rental Income	WAULT to break (Years)
Mears Group Plc	Bramall Court, Salford	793	10.2%	17.1
Meridian Steel Ltd	Grazebrook Industrial Estate, Dudley & Provincial Park, Sheffield	769	9.9%	2.9
Prime Life Ltd	Prime Life Care Home, Brough & Solihull	754	9.7%	24.4
Motorpoint Ltd	Motorpoint, Birmingham	568	7.3%	13.0
Virgin Active Health Clubs Ltd	Virgin Active, Streatham	536	6.9%	10.3
Premier Inn Hotels Ltd	Premier Inn, Camberley	504	6.5%	7.7
Handsale Ltd	Silver Trees, Bristol	474	6.1%	24.6
Travelodge Hotels Ltd	Duke House, Swindon	403	5.2%	19.9*
Biffa Waste Services Ltd	Pocket Nook Industrial Estate, St Helens	352	4.6%	109.2
Hoddesdon Energy Ltd	Hoddesdon Energy, Hoddesdon	333	4.3%	7.7
Total		5,486	70.7%	20.2**

*The WAULT calculations includes an additional 3 years reflecting a landlord's option to extend until 31 May 2044.

**This WAULT calculation, which considers income solely from the top 10 tenants, differs from the portfolio-wide WAULT of 16.5 years.

Tenancy Schedule

Tenant	Property	Annual Contracted Rental Income (£ '000)	Break Date	Expiry Date
Mears Group Plc	Bramall Court	793		16/08/2041
Motorpoint Ltd	Motorpoint	568		24/06/2037
Virgin Active Health Clubs Ltd	Virgin Active	536		28/09/2034
Premier Inn Hotels Ltd	Premier Inn	504	25/03/2032	24/03/2037
Handsale Ltd	Silver Trees	474		14/01/2049
Prime Life Ltd	Prime Life Care Home	441		21/11/2048
Travelodge Hotels Ltd	Duke House	403		31/05/2044
Meridian Steel Ltd	Grazebrook Industrial Estate, Works 1 & 2	373		21/05/2027
Hoddesdon Energy Ltd	Hoddesdon Energy	333	27/02/2032	26/02/2050
Prime Life Ltd	Prime Life Care Home	313		21/11/2048
Dore Metal Services Southern Ltd	Unit 2, Dolphin Park	307	13/09/2028	12/09/2033
Pure Gym Ltd	Pure Gym	287	11/12/2027	10/12/2032
Volvo Car UK Ltd	Volvo Slough	281		16/03/2037
B&M Bargains	Droitwich Spa Retail Park	272		31/08/2029
Petrogas Group UK Ltd	Applegreen Petrol Station	256		16/07/2033
Meridian Steel Ltd	Grazebrook Industrial Estate, Works 1 & 2	249		21/05/2027
Biffa Waste Services Ltd	Pocket Nook Industrial Estate	203		24/02/2133
Sec. of State for Communities & Local Gov'mt	Pocket Nook Industrial Estate	200	30/01/2033	29/01/2048
MSG Life Realty Ltd	Snap Fitness	158		28/03/2033
Biffa Waste Services Ltd	Pocket Nook Industrial Estate	150		31/03/2134
Meridian Steel Ltd	Unit 14, Provincial Park	146		21/05/2027
BGEN Ltd	Pocket Nook Industrial Estate	145	05/04/2025	04/04/2027
YMCA Fairthorne Group	YMCA Nursery	145		17/02/2044
Pets at Home	Droitwich Spa Retail Park	113		13/01/2028
BGEN Ltd	Pocket Nook Industrial Estate	64		04/04/2025
The Salvation Army Trustee Company	Duke House	27		17/07/2032
Kingscrown Land & Commercial Ltd*	Pocket Nook Industrial Estate	-		28/09/2045
Camberley Properties Ltd	Premier Inn	-		23/06/3010
Southern Electric Parcel Distribution Plc	Premier Inn	-		20/02/2111
Westlea Housing Association Ltd	Duke House	-		17/09/3006

*Ground rents less than £150 per annum.

Environmental, Social and Governance Report

The Group recognises that Environmental, Social and Governance ('ESG') matters are of utmost importance to sustainable investment and a focus for the business and investor community. The Group is committed to understanding how best to consider ESG factors in all facets of its business, from business strategy to investment decisions and company operations.

In order to meet investors' expectations, the Group and its advisers adopt both financial and non-financial strategies to drive long-term value with an innovative yet disciplined and conscientious approach to ESG in respect of the property portfolio management including but not limited to:

Environmental

· A proactive approach to procurement of Energy Performance Certificate ('EPC') reassessments ahead of Minimum Energy Efficiency Standards 2023, maintaining quarterly reviews of EPC schedules, identification of opportunities to improve energy efficiency, and working closely with tenants who occupy under full repairing and insuring leases.

· Ongoing environmental reviews and audits as part of regular due diligence, including regular asset inspections to avoid any breach in environmental legislation.

· Responsible refurbishment in respect of all works to assets with consideration of the best approach to improving the EPC rating against potential spend, liaising with tenants in respect of any fit-out or alterations to reuse existing materials where feasible to reduce waste.

· Leverage technology for data management being used to monitor and drive efficiency.

Social

· Commitment to occupier engagement.

· Encourage improvements to each asset such as installing defibrillators & electrical charging points.

· Provision of regular training and awareness to all managers on issues, such as wellbeing and mental health.

Governance

· Client checks being completed on all tenants as well as new suppliers and contractors.

· Regular tenant engagement and inspections to ensure assets are used as agreed within leases.

· Effective tracking of legislative requirements to assess and monitor risks and opportunities.

The Group is limited in its ability to influence ESG factors for the properties because the properties are fully let on commercial full repairing leases in accordance with the Group's strategy to hold long leases.

Diversity

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

Employees

The Group has no employees and accordingly no requirement to report separately in this area as the management of the portfolio has been delegated to the AIFM and Investment Adviser.

The AIFM and Investment Adviser are equal opportunities employers who respect and seek to empower each individual and the diverse cultures, perspectives, skills and experiences within their workforce.

Human Rights

The Group is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover threshold and therefore no further disclosure is required in this regard.

Business Relationships

As well as the critical day-to-day portfolio management, the Group has service providers that ensure the smooth running of the Group's activities. The Group's key service providers are listed in the Annual Report, and the Management Engagement Committee annually review the effectiveness and performance of these service providers, taking into account any feedback received.

The Group, AIFM and Investment Adviser and other third-party service providers maintain high standards of business conduct by acting in a collaborative and responsible manner with all business partners that protects the reputation of the Group as a whole.

Greenhouse Gas Emissions

As an investment company, the Group's own direct environmental impact is minimal and greenhouse gas ('GHG') emissions are negligible. The GHG emissions in relation to the Group's property portfolio is disclosed below.

The Group has followed UK Government environmental reporting guidelines and used the UK Government 2023 greenhouse gas reporting conversion factors for company reporting to identify and report relevant GHG emissions over which it has Operational Control (where data is available) for the 12-month period to 30 June 2024.

An independent consultancy specialising in the application of sustainability in commercial real estate was appointed to calculate the GHG statement and provide verification on the approach used.

Scopes

GHG emissions have been reported against the following 'Scopes', as defined by the GHG Protocol and where relevant:

Scope 1 (not relevant to AIRE): Direct emissions from owned vehicles, controlled boilers and fugitive emissions from air conditioning systems under landlord control.

Scope 2: Indirect emissions from electricity purchased by the Company and consumed within real estate assets owned by the Company.

Scope 3: Indirect emissions from electricity and gas purchased/consumed within AIRE assets, by tenants, where the tenant is counterparty to the energy supply.

Statement of GHG emissions

The table below sets out the emissions per sector and for the Group overall in the year ended 30 June 2024. The approach taken follows guidance provided by the GHG Reporting Guidelines (BEIS, 2019) and EPRA Best Practice Recommendations of Sustainability Reporting 2017.

Sector	Scope	Absolute tonnes of carbon dioxide equivalent (tCO₂e)		Like-for-like comparison of carbon dioxide equivalent (tCO₂e)*
Sector	Scope	2023/24	2022/23	Difference (tCO₂e)	% change
Retail park	Scope 2	0.43	0.13	0.30	225%
Industrial warehouse	Scope 3 - Elec.	84.43	93.71	-9.27	-10%
Total	Scope 2 & 3	84.86	93.84	--8.97	-10%

*Like-for-like requires 24 months of data for the current and previous reporting year (July 2022 - June 2024). Both assets provided 24 months of data there like-for-like calculations were possible.

Statement of Energy Usage

The table below sets out the energy use per sector and for the Group overall. The approach follows guidance provided by the GHG Reporting Guidelines (DESNZ, 2024) and the EPRA Best Practice Recommendations on Sustainability Reporting 2017.

Sector	Energy Source	Absolute energy usage (kWh)		Like-for-like energy usage (kWh)
Sector	Energy Source	2023/24	2022/23	Difference (kWh)	% change
Retail park	Electricity	2,100	646	1,455	225%
Industrial warehouse	Electricity	407,792	452,531	-44,740	-10%
Total	Electricity	409,892	453,177	-43,285	-10%

Intensity Ratios

In addition to reporting relevant absolute GHG emissions (per scope and per sector), the Group has chosen to report intensity ratios, where appropriate. An intensity measure is reported for assets within the like-for-like portfolio, where:

- No major renovation or refurbishment has taken place i.e. affecting more than 50% of the building by area or number of occupants

- Occupancy is at least 75%

- At least 24 months data is available

- Emissions reported relate to an indoor area

Whilst no landlord meters reflect the above criteria for an intensity metric, the Group has applied an intensity figure for one asset, Pocket Nook, where the landlord procures the energy and directly recharges this to the tenant. An intensity metric has not been produced for Droitwich Spa retail park on the basis that the landlord-controlled meter does not reflect the above criteria (emissions reported relate to an indoor area).

No normalisation factors have been considered for this annual report.

Assurance Statement

The Group's GHG emissions have been calculated and verified by an independent third-party in accordance with the principles of ISO 14064. A full copy of the methodology used, including scope, source or data and conversion factors, is available on request.

Property Portfolio ESG activity

During the year ended 30 June 2024, the Group has worked closely with its tenants to encourage improvements in ESG activities within the property portfolio.

Three new EPC's have been carried out; Premier Inn, Camberley fell from B34 to B38; Petrogas, Crawley improved from C56 to B32; Pure Gym, London improved from C54 to B43. The improvements are mainly as a result of tenant's internal refurbishment works.

Following inspections by EPC assessors, works have been identified at seven properties to improve EPC levels in the year to 30 June 2024 including new LED lighting, replacement of an oil-fired boiler, solar panels and installation of secondary glazing. The costs of these enhancements will be borne by the occupiers.

In the histogram above, the highest EPC rating of E applies to Unit 14 Provincial Park, Sheffield where the tenant is considering the cost efficiency of replacing their oil-fired boiler to electric. The G rating applied to the Mercure Hotel, Glasgow, which was sold in the year. The remaining properties in the portfolio have an EPC rating of D or above. More than half of the portfolio, at 55.6%, fall between A and B.

Section 172(1) statement

The following disclosure describes how the directors have had regard to the matters set out in section 172(1)(a) to (f) of the Companies Act 2006, in promoting the success of the Company for the benefit of members as a whole.

This section describes how the Board has regard to the likely consequences of any decision in the long term, the need to foster the Company's business relationships with suppliers, customers and others, the desirability of the Company maintaining a reputation for high standards of business conduct, and the need to act fairly as between members of the Company. The Company does not have any employees and therefore s172(1)(b) is not applicable to the Company. The impact of the Company's operations on the community and the environment is set out more fully in the Environmental, Social and Governance section above.

Stakeholder

Issues of importance

Engagement

Effect of engagement on key decisions

Shareholders

The Group's investment objective is to deliver an attractive total return to shareholders. Shareholders are directly impacted by changes to the Company's NAV and thus the share price and dividends.

· Attractive and sustainable level of income, earnings and dividends.

· Long-term income stream linked to inflationary growth.

· Robust corporate governance structure and well-performing service providers.

· Strategic direction of the Company.

· Execution of investment objective.

· Value for money - low ongoing charges.

· Shareholder engagement is set out in the Corporate Governance Report in the Annual Report.

· As a publicly listed Company, the Company is subject to Listing Rules and other regulatory disclosure requirements which the Board abides by with the assistance of the Company Secretary and Corporate Broker.

The effect of shareholder engagement has fed into each aspect of the Board's decision-making. The total aggregate dividends for the year have increased compared to the prior year and the Board has also worked to keep expenses under control.

Service Providers

As an externally managed REIT, the Company conducts all its business through its service providers, the key ones being the Investment Adviser, Property Manager, Company Secretary, AIFM, depositary and corporate broker.

· Reputation of the Company and maintaining high standards of business conduct.

· Productive working relationships with the Company.

· Fair and transparent service agreements.

· Collaboration.

· Effective and consistent engagement both through formal Board meetings and regularly outside the meetings.

· Annual evaluation of key service providers.

· Culture set by the Board and communicated to all providers.

Clear and effective strategic oversight and culture by the Board has been crucial to enhancing the effectiveness of the Company's key service providers. The Board has worked closely with its service providers to maintain and continually improve processes and to ensure that the Company's values are aligned with them.

Tenants

Tenants with strong business fundamentals and profitable operations are one of the key components to ensure a consistent income stream and ability to pay dividends to the Company's shareholders.

· Positive working relationship with the Board, Investment Advisor and Property Manager.

· Rent reviews.

· Fair lease terms.

· Long-term strategy and alignment with the tenant's business operations.

· Financial stability of tenants.

· To ensure the Investment Adviser and Property Manager generate and foster good relationships with our tenants.

· Focus on asset management initiatives to assist our tenants where applicable.

There is regular contact between the Property Manager and all the Group's tenants. Rent reviews have all been completed on time and collection of rent at 100% is indicative of good tenant relations.

Debt provider

The Group maintains a positive working relationship with its debt provider, Canada Life.

· Compliance with loan covenants.

· Responsible portfolio management.

· Ongoing engagement by the Investment Adviser throughout the year and by the Board if required.

In addition to the Investment Adviser regular contact, the chairman engaged directly with Canada Life during the year to ensure good communications are established and obtained helpful lender feedback prior to the maturing of the loan on 20 October 2025.

Subsequent to the year end the Board has undertaken an interview process with a number of debt advisers with the expertise, knowledge and potential lender accessibility to secure appropriate refinancing for the Group.

Society and the environment

As an investor in real estate, the Company's assets have an impact on the built environment. Environmental, Social and Governance ('ESG') factors increasingly apply alongside of financial returns.

· Responsible investing together with sustainability.

· Long-term strategy to take account of ESG considerations without negatively impacting financial returns.

· Starting regular engagement with tenants in respect of EPC requirements.

· Ensuring shareholder engagement covers ESG.

The Board has encouraged both the Investment Adviser and Property Manager to consider ESG on investment and on an ongoing basis.

Principal Decisions

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

Change of Investment Adviser

As detailed in the Chairman's Statement, during the year the Board undertook a review of the Group's investment advisory arrangements and appointed Martley Capital as the Group's Investment Adviser effective on 15 March 2024. Key members of the previous Investment Adviser transferred to Martley Capital and continue to service the Group. The impact for the Company, and thus for shareholders, was considered together with the impact on the staff of the investment adviser.

Dividend and Dividend Policy

Given the Company's Investment Objective, dividends are a key matter for the Board to consider and have a material impact on shareholders, as a key stakeholder. During the year the Company declared four interim dividends totalling 5.9pps (2023: 5.7pps, with the total dividends declared for 2023 being 6.045pps, which included 0.345pps relating to monies received following the successful settlement of a historic legal case), which was in line with the previously announced dividend target of 5.9pps (2023: 5.7pps), representing a 3.5% increase on the previous year.

As last year, the Board paid four interim dividends at quarterly intervals to ensure shareholders received a steady stream of income on a timely basis. However, this dividend policy prevents there being an opportunity for shareholders to vote on a final dividend. Consequently, the Board are again giving shareholders the opportunity to vote on the dividend policy of the Company.

Property Transactions

In the year two property transactions were completed. The first was the sale of Mercure Hotel in Glasgow which was disposed of on 8 August 2023 for £7.5 million and part of the net proceeds of sale, totalling £5.3 million, were re-invested in the Virgin Active in Streatham.

Principal Risks and Uncertainties

The Group's assets consist of UK commercial property. Its principal risks are therefore related to the commercial property market in general, but also to the particular circumstances of the individual properties and the tenants within the properties.

The Board has overall responsibility for reviewing the effectiveness of the system of risk management and internal control which is operated by the AIFM and, where appropriate, the Investment Adviser. The Group's ongoing risk management process is designed to identify, evaluate and mitigate the risks the Group faces.

Twice each year, the Board undertakes a risk review with the assistance of the Audit Committee, to assess the adequacy and effectiveness of the AIFM's, and where appropriate the Investment Adviser's, risk management and internal control systems.

The Board has carried out a robust assessment of the principal and emerging risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.

An analysis of the principal risks and uncertainties is set out in the table below. This does not purport to be exhaustive as some risks are not yet known and some risks are currently not deemed material but could turn out to be material in the future.

PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT

HOW RISK IS MANAGED

RISK ASSESSMENT

REAL ESTATE RISKS

1. Tenant default

Failure by tenants to comply with their rental obligations could affect the income that the properties earn and the ability of the Group to pay dividends to its shareholders.

Macroeconomic trends discussed through the report, including rising interest rates, higher inflation and the possibility of recession have the ability to materially impact on a tenant's business. This could result in tenants being unable to comply with their rental obligations.

Our investment policy limits our exposure to any one tenant to 15% of Gross Asset Value. Our maximum exposure to any one tenant (calculated by GAV) is 10.6% at 30 June 2024. The Group benefits from a balanced portfolio with a diversified tenant base and is therefore not reliant on a single tenant or sector.

In the due diligence process prior to acquiring a property, covenant checks are carried out on tenants which are repeated on a regular basis.

The Investment Adviser and Property Manager conduct ongoing monitoring and liaise with tenants to manage potential bad debt risk.

Probability: Moderate to high

Impact: High

Movement: No change

2. Portfolio concentration

Any downturn in the UK and its economy or regulatory changes in the UK could have a material adverse effect on the Group's operations or financial condition. Greater concentration of investments in any sector or exposure to the creditworthiness of any one tenant or tenants may lead to greater volatility in the value of the Group's investments, NAV and the Company's share price.

The Group has investment restrictions in place to invest and manage its assets with the objective of spreading and mitigating risk.

Having a diversified portfolio in respect of both sector and tenants provides reduced potential volatility in the portfolio and the impact rating for this risk is accordingly set at low to moderate.

Probability: Low to moderate

Impact: Low to moderate

Movement: No change

3. Property defects

Due diligence may not identify all the risks and liabilities in respect of an acquisition (including any environmental, structural or operational defects) that may lead to a material adverse effect on the Group's profitability, the NAV and the Company's share price.

The Group's due diligence relies on the work (such as legal reports on title, property valuations, environmental, building surveys) outsourced to third parties that have appropriate Professional Indemnity cover in place.

Probability: Low to Moderate

Impact: Moderate

Movement: No change

4. Rate of inflation

Rent review provisions may have contractual limits to the increases that may be made as a result of the rate of inflation. If inflation is in excess of such contractual limits, the Group may not be able to deliver targeted returns to shareholders.

The inflation linked (RPI/CPI) leases in the portfolio have contractual rent review collars, with the lowest floor being 0%, and caps that range from 3% to no cap. The majority of caps are in excess of RPI and CPI forecasts during the next five-year rent review cycle. Specifically:

- Majority of caps are 4.00% or above, including a number with no caps

- RPI forecast for next five years of 2.9%

- CPI forecast for next five years of 2.0%

The risk of inflation is somewhat mitigated by the leases that have no cap. In addition, a total of seven leases undergo reviews annually which will allow inflation changes to be reflected expeditiously.

Probability: Moderate

Impact: Moderate

Movement: Probability decreased as inflation has stabilised and long term forecasts reduced.

5. Property market

Any recession or future deterioration in the property market could, inter alia, (i) lead to an increase in tenant defaults, (ii) make it difficult to attract new tenants for its properties, (iii) lead to a lack of finance available to the Group, (iv) cause the Group to realise its investments at lower valuations; and (v) delay the timings of the Group's realisations.

Any of these factors could have a material adverse effect on the ability of the Group to achieve its investment objective.

The Group has investment restrictions in place to invest and manage its assets with the objective of spreading and mitigating risk.

Most of the leases provide a relatively long unexpired term and contain upward only rent reviews which are linked to either RPI or CPI. Because of these factors, the Group expects that the assets will show less volatile valuation movement over the long term.

Probability: Moderate to high

Impact: Moderate to high

Movement: No change.

6. Property valuation

Property is inherently difficult to value due to the individual nature of each property.

There may be an adverse effect on the Group's profitability, the NAV and the Company's share price in cases where properties are sold whose valuations have previously been materially overstated.

The Group uses an independent valuer (Knight Frank LLP) to value the properties on a quarterly basis at fair value in accordance with accepted RICS appraisal and valuation standards.

Probability: Low to moderate

Impact: Moderate to high

Movement: No change

7. Investments are illiquid

The Group invests in commercial properties. Such investments are illiquid; they may be difficult for the Group to sell and the price achieved on any realisation may be at a discount to the prevailing valuation of the relevant property.

The Group aims to hold the properties for long-term income and all property investment / disinvestment is managed carefully to ensure there is no undue pressure on cash flow that would require a quick sale of assets.

The Company's dividend is funded from net revenue and is not affected by the portfolio's (il)liquidity.

Probability: Low

Impact: Moderate

Movement: No change

8. Environment

The Group is subject to environmental regulations. In addition to regulatory risk, there is a growing importance being placed on ESG credentials by tenants, which could lead to difficulty in letting vacant space.

Properties could be impacted by extreme environment events such as flooding. Climate change could accelerate more quickly leading to adverse physical impacts as well as regulatory change.

Failure by the Group to meet current or future environmental targets could result in penalties, increased costs, a reduction in asset values and have an adverse effect on the Company's reputation, leading to loss of good quality tenants.

The current regulations require annual mandatory Green House Gas (GHG) reporting, which will be carried out as part of the annual report and will result in minimal expenditure for the Group.

Furthermore, the Investment Adviser has prepared an ESG strategy to ensure it meets legal requirements and remains attractive to current and future tenants. Please see the 'Environmental, Social and Governance' section for further information.

In depth research is undertaken on each property at acquisition. The Investment Adviser has adopted an environmental policy which it is in the process of applying to all properties with the portfolio.

Probability: Moderate

Impact: Moderate

Movement: No change

BORROWING RISKS

9. Breach of borrowing covenants

The Group has a fixed term loan facility, maturing 20 October 2025.

Material adverse changes in valuations and net income may lead to breaches in the LTV and interest cover ratio covenants.

If the Group is unable to operate within its debt covenants, this could lead to default and the loan facility being recalled. This could result in the Group being forced to sell properties to repay the loan facility, possibly resulting in a substantial fall in the NAV.

The Group monitors the borrowing covenants on a regular ongoing basis by cash flow forecasting, quarterly risk reports and a quarterly compliance certificate.

The Group's gearing at 30 June 2024 was 37.7%, materially below the covenant's default LTV of 60%. On the same date the Group's interest rate calculation (ICR) was 611.3%, materially above the covenant default ICR of 250%.

Borrowing is carefully monitored by the Group, and action will be taken to conserve cash where necessary to ensure that this risk is mitigated.

It is ensured that there is significant headroom in the LTV and interest cover covenants as part of the monitoring process.

Diversification of both the portfolio and tenants limit the risk to the Group of any one geographic or sector property event and any one tenant default.

Probability: Low to moderate

Impact: High

Movement: No change

10. Inability to refinance the current loan facility

The inability of the Group to obtain new borrowings - of the amount required at an aggregate finance cost and on acceptable terms - to refinance the current £41m loan facility on 20 October 2025 will have a significant impact on the ability of the Group to generate rental income and thus returns to shareholders.

The refinancing of the Company's current loan facility is a standing item on the Board agenda. Regular discussions are held with the Investment Adviser (and other advisers to the Board) concerning the makeup, amount, interest rate, maturity etc of any future borrowings, and the impact this could have on returns to shareholders.

Probability: Low to moderate

Impact: High

Movement:

New separate risk (previously combined with risk 13)

CORPORATE RISKS

11. Failure of service providers

The Group has no employees and is reliant upon the performance of third-party service providers.

Failure by any service provider to carry out its obligations to the Group in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Group.

Should the Group pursue litigation against service providers, there is a risk that the Company may incur costs that are irrecoverable if litigation is unsuccessful.

The Board meets regularly with, and monitors, all of its key service providers, including the Investment Adviser. The Management Engagement Committee (MEC) reviews annually the performance of key service providers in conjunction with their service level agreements, and makes use of Key Performance Indicators where relevant.

In addition, the Audit Committee's robust and ongoing review of risk management and internal controls covers key service providers.

Probability: Low

Impact: Moderate

Movement: No change

12. Dependence on the Investment Adviser

The future ability of the Group to successfully pursue its investment objective and investment policy may, among other things, depend on the ability of the service providers to retain its existing staff and/or to recruit individuals of similar experience and calibre, and effectively carry out its services.

The Group relies on the Investment Adviser to manage the assets and termination of the Investment Adviser agreement could severely affect the Group's ability to effectively manage its operations.

The MEC performs a formal annual review of the Investment Adviser which covers the performance of the portfolio (both capital and income returns) and the performance of and engagement with the Martley Capital fund manager and other supporting staff.

In addition, the Board meets regularly with Martley Capital and directors engage with them not only in Board meetings but also by email, telephone and ad hoc meetings. This helps to maintain a good working relationship.

The dependence on Martley Capital is managed through segregating the roles of AIFM and Investment Adviser.

The Board undertook significant work in the year with respect to the change of Investment Adviser. This included scoping the role, evaluation of various candidates for the role, interviews, due diligence work post interview and before appointment, and review of the transition- including operations, data and information security.

Probability: Moderate

Impact: Moderate

Movement: No change

13. Ability to meet objectives

The Group may not meet its investment objective to generate a secure and predictable income, that is sustainable in real terms, and at least maintain capital values in real terms, from investing predominantly in a portfolio of smaller commercial properties in the UK.

Poor relative total return performance may lead to an adverse reputational impact that affects the Group's ability to raise new capital and new funds.

An inability to refinance the Company's borrowings will impact the sustainability of rental returns as set out in the Company's investment objective.

The Group has an investment policy to achieve a balanced portfolio with a diversified tenant base. This is reviewed by the Board at each scheduled Board meeting.

The Group's property portfolio has a WAULT to break of 16.5 years and a WAULT to expiry of 18.4 years. Further, over 95.8% of leases have inflation-linked upwards only rent reviews, representing a secure income stream on which to deliver attractive total returns to shareholders.

The maturity of the loan facility and its refinancing is a standing item on the Board agenda. Risk 10 addresses this in more detail.

Probability: Moderate

Impact: High

Movement: No change

TAXATION RISK

14. Group REIT status

The Group has UK REIT status that provides a tax-efficient corporate structure.

If the Group fails to remain a REIT for UK tax purposes, its profits and gains will be subject to UK corporation tax.

The Company monitors REIT compliance through the Investment Adviser and Administrator on acquisitions and disposals and distribution levels; the Registrar and Broker on shareholdings; and third-party tax advisors to monitor REIT compliance requirements.

Processes are in place to ensure ongoing compliance with REIT regulations.

Probability: Low

Impact: High

Movement: No change

POLITICAL/ ECONOMIC RISK

15. Political and macroeconomic events.

Such events present risks to the real estate and financial markets that affect the Group and the business of our tenants.

The negative economic effects from the deterioration of the global economy, higher inflation and interest rates and the ongoing long-term effects of various armed conflicts could impact the portfolio, tenants and the ability of the Group to raise capital.

The Group only invests in UK properties with strong alternative use values and long leases, so the portfolio is well positioned to withstand an economic downturn. Tenant default risk arising from political and macroeconomic events is managed as described above.

The Investment Adviser monitors both the macro and micro economy with special attention to those factors potentially impacting the Group, and reports to the Board on a regular basis.

Probability: High

Impact: High

Movement: No change

REGULATORY RISK

16. Disclosure Risk

Failure to properly disclose information to investors or regulators in accordance with various disclosure rules and regulations. Examples include AIFMD investor disclosures, annual reporting requirements, marketing/promotion disclaimers, data protection regulations etc.

Service providers including AIFM, Investment Adviser, Company Secretary, auditor, and corporate broker monitor disclosure obligations and liaise with the Board to ensure requirements are met.

Probability: Low to moderate

Impact: Moderate

Movement: No change

17. Regulatory Change

New regulations or changes to existing regulations (particularly in relation to climate change) could result in sub-optimal performance of the Group or, in worst case, inability to continue as a viable business.

The Board receives regular updates on relevant regulatory changes (and prospective changes) from its professional advisers.

The Investment Adviser monitors the impact of emerging legislation across all aspects of property investment and ESG has a particularly high profile at this time. The Investment Adviser uses an ESG pre-acquisition checklist to review purchases and also to ensure that the current portfolio is monitored, and that works are carried out as appropriate, with tenant's agreement, to prevent asset depreciation.

Probability: Low

Impact: High

Movement: No change

Emerging Risks

The Board takes account of and considers emerging risks as part of its risk management assessment.

Going Concern

The Group has considered its cash flows, financial position, liquidity position and borrowing facilities.

The Group's unrestricted cash balance at the year end was £3.3 million (2023: £3.5 million). The Group had borrowings of £41 million under a loan facility repayable on 20 October 2025 (the 'Loan'), but no capital commitments or contingent liabilities.

The Group is permitted to utilise up to 40% of GAV measured at drawdown with a Loan to GAV of 37.7% at 30 June 2024. Therefore, the Group had headroom against its borrowing covenant. The lender's loan to value covenant of 60% is significantly higher than the Group's Loan to GAV. In addition, if agreed by the current lender, two properties not secured against the Loan and valued at £8.55 million are available as additional security for the Loan.

The Loan also has a lender's interest cover covenant of 250%. At 30 June 2024 the Group's interest cover ratio was 611.3%, giving significant headroom. A 'severe but plausible downside' scenario has been projected. While rent collections have been strong, this scenario projects rent deferrals and write-offs for tenants with difficulty paying rents from operational cash flows. In this scenario the Group still has adequate headroom against the interest cover covenant and positive cash balances. Further detail of the assumptions made in assessing the adoption of Group's going concern basis can be found in Note 2.4.

The Group benefits from a secure, diversified income stream from leases which are not overly reliant on any one tenant or sector, with the Group generating net cash flows from operating activities for the year being reported of £4.0 million. As a result, the directors believe that the Group is well placed to manage its financing and other business risks.

The going concern statement is based on the reporting requirement that the Group and the Company has adequate resources to continue in operational existence for the foreseeable future, being a period of at least twelve months from the date of these financial statements. In addition to looking ahead for the twelve months, the Board has undertaken steps to ensure that it can have a reasonable expectation that the Group will be able to refinance its borrowings which become repayable shortly after this twelve-month period, and this is explained both below and in the Viability Statement which follows.

The Board has commenced its debt refinancing plan. As part of this, the Board has undertaken an interview process with a number of debt advisers with the expertise, knowledge, and demonstrable potential lender accessibility to secure refinancing for the Group. Following this, the Board has a reasonable expectation to believe that the Group can refinance its debt by 20 October 2025 at an aggregate finance cost and on terms acceptable to the Board, taking into account the investment objective of the Company.

Consequently, the Board is satisfied that the Group and the Company has adequate resources to continue in operational existence for the foreseeable future, and is of the opinion that the going concern basis adopted in the preparation of the financial statements is appropriate.

Viability Statement

In accordance with provision 30 of the UK Code, the Board has assessed the prospects of the Group over a period longer than the twelve months required by the 'Going Concern' provisions.

The Board has considered the nature of the Group's assets and liabilities and associated cash flows and has determined that three years, from the balance sheet date up to 30 June 2027, is an appropriate and realistic timescale over which the performance of the Group can be forecast with a degree of accuracy. Even though the Group's contractual income extends beyond three years, the Board considers this period (the 'Period') to be appropriate, given:

· A major proportion of the leases contain an annual, three- or five-year rent review pattern and therefore three years allow for the forecasts to include the reversion arising from most rent reviews;

· It is the period over which the Group's medium-term business plan and cash flows are based; and

· It is often factors beyond the Board's control, such as market uncertainty, that reduce the reliability of forecasting over a longer period.

In performing its viability review, the Board considers the Group's cash flows (noting that the Group's property portfolio had a WAULT to break of 16.5 years and a WAULT to expiry of 18.4 years at 30 June 2024, representing a secure income stream for the Period), future dividends and dividend cover, REIT compliance and relevant key financial ratios over the Period. The Board carried out a thorough review of the Group's business model, including future performance, liquidity and banking covenant tests for the Period and with various debt finance cost scenarios based on refinancing the £41 million debt (see below) in full at its maturity. The Board has assessed the extent of any operational disruption; potential curtailment of rental receipts; potential liquidity and working capital shortfalls; and diminished demand for the Group's assets going forward, in adopting a going concern preparation basis and in assessing the Group's longer-term viability.

These assessments are subject to sensitivity analysis, which involves flexing a number of key assumptions and judgements included in the financial projections:

· Tenant default;

· Dividend payments;

· Financing and refinancing; and

· Property portfolio valuation movements.

Specifically with respect to the Group's borrowings:

· covenants - at 30 June 2024, the asset valuations and rental income of the properties secured to Canada Life would need to fall by 17.4% and 46.0%, respectively, before breaching the Loan to Value and Income Cover Cash Trap covenants; and

· the Board has commenced its debt refinancing plan given that the Group's borrowings are due to be repaid on 20 October 2025. As part of this, the Board has undertaken an interview process with a number of debt advisers with the expertise, knowledge and demonstrable potential lender accessibility to secure refinancing for the Group. Following these discussions, the Board has a reasonable expectation to believe that the Group can refinance its debt by 20 October 2025 at an aggregate finance cost and on terms acceptable to the Board, taking into account the investment objective of the Company.

Based on the prudent assumptions within the Group's forecasts including refinancing of the debt, rent deferrals, tenant default, void rates and property valuation movements, the Board has a reasonable expectation that for the Period:

· all current and future loan covenants will be complied with throughout the Period;

· REIT tests will similarly be complied with; and

· the Group and the Company will be able to continue in operation and meet its liabilities as they fall due over the Period.

Board Approval of the Strategic Report

The Strategic Report has been approved and signed on behalf of the Board by:

Simon Bennett

Chairman

1 October 2024

Statement of Directors' Responsibilities

in respect of the Annual Report and the Consolidated Financial Statements

The directors are responsible for preparing the Annual Report and the Group and parent Company Financial Statements in accordance with applicable law and regulations.

Company law requires the directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with the UK adopted international accounting standards. The directors have elected to prepare the parent Company financial statements in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework and applicable law.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable, relevant, reliable and prudent;

· for the Group financial statements, state whether they have been prepared in accordance with Companies Act 2006 and in accordance with UK adopted international accounting standards;

· for the parent Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the parent Company financial statements;

· assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

· use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company, or to cease operations, or have no realistic alternative but to do so.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and the parent Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge:

· the Consolidated Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

· the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· that the Annual Report and the Consolidated Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

On behalf of the Board

Simon Bennett

Chairman

1 October 2024




Consolidated Statement of Comprehensive Income
For the year ended 30 June 2024


		2024	2023
	Notes	£'000	£'000
Income
Rental and other income	3	7,900	8,660
Property operating expense	4	(680)	(755)
Net rental and other income		7,220	7,905

Other operating expenses	4	(1,066)	(1,049)
Operating profit before fair value changes and gain on sale		6,154	6,856

Change in fair value of investment properties	10	(2,983)	(10,671)
Gain on disposal of investment property	10	598	-
Operating profit/ (loss)		3,769	(3,815)

Finance expenses	6	(1,412)	(1,425)
Profit/ (loss) before tax		2,357	(5,240)

Taxation	7	-	-
Profit/ (loss) and total comprehensive income attributable to shareholders		2,357	(5,240)
Earnings/ (loss) per share (pence) (basic and diluted)	8	2.93p	(6.51p)
EPRA EPS (basic and diluted)	8	5.89p	6.75p
Adjusted EPS (basic and diluted)	8	5.99p	6.43p

All items in the above statement are derived from continuing and total operations. No operations were acquired or disposed of during the year.

The accompanying notes 1 to 20 form part of these consolidated financial statements.

Consolidated Statement of Financial Position
At 30 June 2024
		2024	2023
	Notes	£'000	£'000
Non-current Assets
Investment properties	10	99,083	103,847

Current Assets
Receivables and prepayments	11	6,464	4,193
Cash and cash equivalents		3,292	3,484
Total current assets		9,756	7,677
Total Assets		108,839	111,524

Current Liabilities
Payables and accrued expenses	12	(2,890)	(2,751)
Lease obligations	14	-	(33)
Total current liabilities		(2,890)	(2,784)

Non-current Liabilities
Interest bearing loans and borrowings	13	(40,828)	(40,724)
Lease obligations	14	-	(266)
Total non-current liabilities		(40,828)	(40,990)

Total Liabilities		(43,718)	(43,774)

Net Assets		65,121	67,750

Equity
Share capital	17	805	805
Capital reserve		70,431	75,417
Retained earnings		(6,115)	(8,472)
Total capital and reserves attributable to equity holders of the Company		65,121	67,750

Net Asset Value per share (basic and diluted)	8	80.90p	84.16p
EPRA Net Tangible Asset per share (basic and diluted)	8	80.90p	84.16p

The accompanying notes 1 to 20 form part of these Consolidated Financial Statements.

The Consolidated Financial Statements were approved by the Board of directors on 1 October 2024 and were signed on its behalf by:

Simon Bennett

Chairman

Company number: 10727886



Consolidated Statement of Changes in Equity
For the year ended 30 June 2024


		Share		Retained	Total
		capital	Capital reserve	earnings	equity
	Notes	£'000	£'000	£'000	£'000
For the year ended 30 June 2024
Balance at 30 June 2023		805	75,417	(8,472)	67,750

Total comprehensive income attributable to shareholders		-	-	2,357	2,357

Dividends paid	9	-	(4,986)		(4,986)
Balance at 30 June 2024		805	70,431	(6,115)	65,121

For the year ended 30 June 2023
Balance at 30 June 2022		805	75,417	1,377	77,599

Total comprehensive loss attributable to shareholders		-		(5,240)	(5,240)
Dividends paid	9	-		(4,609)	(4,609)
Balance at 30 June 2023		805	75,417	(8,472)	67,750



The accompanying notes 1 to 20 form part of these consolidated financial statements.

Consolidated Statement of Cash Flows
For the year ended 30 June 2024
	Notes	2024	2023
		£'000	£'000
Cash flows from operating activities
Profit/ (loss) before tax		2,357	(5,240)

Adjustment for:
Finance expenses	6	1,412	1,425
Gain on disposal of investment property	10	(598)	-
Change in fair value of investment properties	10	2,983	10,671
Operating results before working capital changes		6,154	6,856

Change in working capital
Increase in receivables and prepayments		(2,271)	(159)
Increase/ (decrease) in other payables and accrued expenses		139	(312)
Net cash flow generated from operating activities		4,022	6,385

Cash flows from investing activities
Purchase of investment property	10	(5,304)	-
Net proceeds from disposal of investment property	10	7,382	-
Reduction in acquisition costs	10	-	606
Net cash generated from investing activities		2,078	606

Cash flows from financing activities
Finance costs paid		(1,306)	(1,321)
Dividends paid	9	(4,986)	(4,692)
Payment of lease obligation		-	(36)
Net cash used in financing activities		(6,292)	(6,049)

Net (decrease)/ increase in cash and cash equivalents		(192)	942

Cash and cash equivalents at beginning of year		3,484	2,542

Cash and cash equivalents at end of year		3,292	3,484

The accompanying notes 1 to 20 form part of these consolidated financial statements.

Notes to the Consolidated Financial Statements

for the year ended 30 June 2024

1. Corporate Information Alternative Income REIT plc (the 'Company') is a public limited company and a closed ended Real Estate Investment Trust ('REIT') incorporated on 18 April 2017 and domiciled in the UK and registered in England and Wales. The registered office of the Company is The Scalpel, 18th Floor, 52 Lime Street, London, United Kingdom, EC3M 7AF.
The Company's Ordinary Shares are listed on the Closed-ended investment funds category of the Official List of the Financial Conduct Authority ('FCA') and have been traded on the Main Market of the London Stock Exchange since the Company's IPO on 6 June 2017.

The nature of the Group's operations and its principal activities are set out in the Strategic Report of the Annual Report.

2. Accounting policies

	2.1	Basis of preparation
		These consolidated financial statements (the 'financial statements') are prepared and approved by the directors in accordance with UK adopted International Financial Reporting Standards ('IFRS') and in accordance with the Companies Act 2006 as applicable to companies reporting under those standards and Article 4 of the UK adopted International Accounting Standards ('IAS') Regulations.

		These financial statements have been prepared under the historical cost convention, except for investment properties that have been measured at fair value.

		The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000), except where otherwise indicated.

		Basis of consolidation
		The financial statements incorporate the financial statements of the Company and its subsidiaries (the 'Group'). Subsidiaries are the entities controlled by the Company, being Alternative Income Limited and Alternative Income REIT Holdco Limited.

		New standards, amendments and interpretations, and forthcoming requirements

		The Group has applied the following new standards and amendments in this set of condensed consolidated financial statements: • Non-current liabilities with covenants - amendment to IAS 1 and classification of liabilities as current or non-current - amendment to IAS 1 (effective 1 January 2024) • Lease liability in a sale and leaseback - amendment to IFRS 16 (effective 1 January 2024) • Supplier finance arrangements - amendments to IAS 7 and IFRS 7 (effective 1 January 2024) The new standards and amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
		Certain new accounting standards and interpretations have been published that are not mandatory for annual periods beginning after 1 July 2023 and early application is permitted; however the Group has not early adopted the new or amended standards in preparing these condensed consolidated financial statements: • Lack of exchangeability - amendment to IAS 21 (effective 1 January 2025) • Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) (effective date deferred indefinitely) · Presentation and Disclosure in Financial Statements - IFRS 18 (effective 1 January 2027) · Subsidiaries without Public Accountability: Disclosures - IFRS 19 (effective 1 January 2027)

	2.2	Significant accounting judgements and estimates
		In the application of the Group's accounting policies the directors are required 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. The estimates and associated assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:

		Valuation of investment properties
		The fair value of investment properties is determined by external property valuation experts to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. The Group's properties have been valued on an individual basis. The valuation experts use recognised valuation techniques, applying the principles of both IAS 40 and IFRS13.

		The valuations have been prepared in accordance with the Royal Institution of Chartered Surveyors ('RICS') Valuation. Factors include current market conditions, annual rentals, the contractual terms of the leases and their lengths and location. The significant methods and assumptions used by valuers in estimating the fair value of investment properties are set out in note 10.

		Provision for expected credit losses ('ECL') of trade receivables
		Rent collection rates since the start of the Group are in the region of 100%. As a result, the Group does not have the data to establish historical loss rates for the expected credit loss analysis. In determining the provision on a tenant by tenant basis, the Group considers both recent payment history and future expectations of the tenant's ability to pay or possible default, in order to recognise an expected credit loss allowance. The Group also considers the risk factors associated by sector in which the tenant operates and the nature of the debt. Based on sector and rent receivable type a provision is provided in addition to full provision for maximum risk tenants or known issues.

		Principal versus agent considerations - services to tenants
		The Group arranges for certain services to be provided to tenants. These arrangements are included in the contract the Group enters into as a lessor. The Group has determined that it controls the services before they are transferred to tenants, because it has the ability to direct the use of these services and obtain the benefits from them. The Group has determined that it is primarily responsible for fulfilling these services as it directly deals with tenants' complaints and is primarily responsible for the quality or sustainability of the services. In addition, the Group has discretion in establishing the price that it charges to the tenants for the specified services. Therefore, the Group has concluded that it is the principal in these contracts. In addition, the Group has concluded that it transfers control of these services over time, as services are rendered by the third-party service providers, because this is when tenants receive and, at the same time, consume the benefits from these services.

		REIT status
		The Group is a REIT and does not pay tax on its property income or gains on property sales, provided that at least 90% of the Group's property income is distributed as a dividend to shareholders, which becomes taxable in their hands. In addition, the Group has to meet certain conditions such as ensuring the property rental business represents more than 75% of total profits and assets. Any potential or proposed changes to the REIT legislation are monitored and discussed with HMRC. It is the Board's intention that the Group will continue as a REIT for the foreseeable future.

		Classification of lease arrangements - the Group as lessor (Note 14)
		The Group has acquired investment properties that are leased to tenants. In considering the classification of lease arrangements, at inception of each lease the Group considers the economic life of the asset compared with the lease term and the present value of the minimum lease payments and any residual value compared with the fair value and associated costs of acquiring the asset as well as qualitative factors as indicators that may assert to the risks and rewards of ownership having been substantially retained or transferred. The Group has determined that it retains all the significant risks and rewards of ownership of its investment property and accounts for the lease arrangements as operating leases.

	2.3	Segmental information
		Each property held by the Group is reported to the chief operating decision maker. In the case of the Group, the chief operating decision maker is considered to be the Board of directors. The review process for segmental information includes the monitoring of key performance indicators applicable across all properties. These key performance indicators include Net Asset Value, Earnings per Share and valuation of properties. All asset cost and rental allocations are also reported by property. The internal financial reports received by the directors cover the Group and all its properties and do not differ from amounts reported in the financial statements. The directors have considered that each property has similar economic characteristics and have therefore aggregated the portfolio into one reportable segment under the provisions of IFRS 8.

	2.4	Going concern
		The financial statements have been prepared on a going concern basis.

		The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. The robust financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements and the accompanying notes. The financial statements also include the Group's objectives, policies and processes for managing its capital, its financial risk management objective and its exposures to market price risk, real estate risk, credit risk and liquidity risk.

		The Investment Adviser on behalf of the Board has projected the Group's cash flows for the period up to 30 September 2025, challenging and sensitising inputs and assumptions to ensure that the cash forecast reflects a realistic outcome given the uncertainties associated with the current economic environment. A longer-term projection had also been carried out up to 30 June 2027. The scenarios applied were designed to be severe but plausible, and to take account of the availability of mitigating actions that could be taken to avoid or reduce the impact or probability of the underlying risks.

		The Group's debt of £41 million matures on 20 October 2025 and the Group has reported full compliance with its loan covenants to date. Based on cash flow projections, the directors expect the Group to continue to remain compliant. The headroom of the loan to value covenant is significant and any reduction in property values that would cause a breach would be significantly more than any reduction currently envisaged. The Board has commenced its debt refinancing plan given that the Group's borrowings are due to be repaid on 20 October 2025. As part of this, the Board has undertaken an interview process with a number of debt advisers with the expertise, knowledge and demonstrable potential lender accessibility to secure refinancing for the Group. Following these discussions, the Board has a reasonable expectation to believe that the Group can refinance its debt by 20 October 2025 at an aggregate finance cost and on terms acceptable to the Board, taking into account the investment objective of the Company.

		Based on the above, the Board believes that the Group has the ability and adequate resources to continue in operational existence for the foreseeable future, being at least twelve months from the date of approval of the financial statements.
	2.5	Summary of significant accounting policies
		The principal accounting policies applied in the preparation of these financial statements are set out below.

		a) Functional and presentation currency
		These financial statements are presented in Sterling, which is the functional and presentational currency of the Group and its subsidiary undertakings. The functional currency of the Group and its subsidiaries is principally determined by the primary economic environment in which it operates. The Group did not enter into any transactions in foreign currencies during the period.

		b) Revenue recognition
		i) Rental income
		Rental income under operating leases is recognised on a straight-line basis over the term of the lease, except for contingent rental income, which is recognised when it arises. For leases, which contain fixed or minimum uplifts, the rental income arising from such uplifts is recognised on a straight-line basis over the lease term.

		Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if the payments are not made on such a basis. The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the directors are reasonably certain that the tenant will exercise that option.
		Lease modifications, such as lease extensions and rent reductions, are accounted for either as a separate lease or not a separate lease. A modification will only be treated as a separate lease if it involves the addition of one or more underlying assets at a price that is commensurate with the standalone price of the increase in scope. All other modifications are not treated as a separate lease. If a modification is a separate lease, a lessee applies the requirements of IFRS 16 to the newly added asset, due as a result of the modification, independently of the original lease. The accounting for the original lease continues unchanged. If a modification is not a separate lease, the accounting reflects that there is a linkage between the original lease and the modified lease. The existing lease liability is remeasured with a corresponding adjustment to the right-of-use asset on the effective date of the modification.

		ii) Service charges and direct recharges
		Revenue from service charges is recognised in the accounting period in which the service is rendered. For certain service contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously.

		iii) Deferred income
		Deferred income is rental income received in respect of future accounting periods.

		(iv) Dilapidation and lease surrender premium
		Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the Consolidated Statement of Comprehensive Income when the right to receive them arises.

		c) Financing income and expenses
		Financing income comprises interest receivable on funds invested. Financing expenses comprise interest and other costs incurred in connection with the borrowing of funds. Interest income and interest payable are recognised in profit or loss as they accrue, using the effective interest method which is significantly the same as the contracted interest.

		d) Investment property
		Property is classified as investment property when it is held to earn rentals or for capital appreciation or both. Investment property is measured initially at cost including transaction costs. Transaction costs include transfer taxes and professional fees to bring the property to the condition necessary for it to be capable of operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that cost is incurred if the replacement of that part will prolong or improve the life of the asset.

		Subsequent to initial recognition, investment property is stated at fair value. Gains or losses arising from changes in the fair values are included in profit or loss.

		Investment properties are valued by the external valuer. Any valuation of investment properties by the external valuer must be undertaken in accordance with the current issue of RICS Valuation - Professional Standards (the 'Red Book').

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

		For the purposes of the financial statements, the assessed fair value is: - reduced by the carrying amount of any accrued income resulting from the spreading of lease incentives; and - increased by the carrying amount of leasehold obligations.

		Investment property is derecognised when it has been disposed of or permanently withdrawn from use and no future economic benefit is expected after its disposal or withdrawal.

		The profit on disposal is determined as the difference between the net sales proceeds and the carrying amount of the asset at the commencement of the accounting period plus capital expenditure in the period. Any gains or losses on the retirement or disposal of investment property are recognised in profit or loss in the year of retirement or disposal.

		e) Cash and cash equivalents
		Cash and short-term deposits in the Consolidated Statement of Financial Position comprise cash at bank and short-term deposits with an original maturity of three months or less.

		f) Receivables and prepayments
		Rent and other receivables are initially recognised at fair value and subsequently at amortised cost. Impairment provisions are recognised based on the processed as described in note 2.2. Any adjustment is recognised in profit or loss as an impairment gain or loss.

		g) Other payables and accrued expenses
		Other payables and accrued expenses are initially recognised at fair value and subsequently held at amortised cost.

		h) Interest bearing loans and borrowings
		All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Borrowing costs are amortised over the lifetime of the facilities through profit or loss.

		i) Provisions
		A provision is recognised in the Consolidated Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event that can be reliably measured and is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

		j) Dividend payable to shareholders
		Dividends due to the Company's Shareholders are recognised when they become legally payable, as a reduction in the Consolidated Statement of Changes in Equity. Interim equity dividends are recognised when paid. Final equity dividends will be recognised when approved by Shareholders at an AGM. The Directors consider the aggregate of distributable reserves in considering the recommendation and payment of a dividend.

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

		l) Lease obligations
		Lease obligations relate to the head rent of investment property and are capitalised at the lease commencement, at the lower of fair value of the property and present value of the minimum lease payments and held as a liability within the Consolidated Statement of Financial Position. The lease payments are discounted using the interest rate implicit in the lease. Where the Group is exposed to potential future increases in variable lease payments based on an index or rate, these are not included in the lease liability until they take effect. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

		m) Taxes
		Corporation tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

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

		Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and deferred tax. Current tax is expected tax payable on any non-REIT taxable income for the year, using tax rates applicable in the year.

		Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax that is provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the period end date.

		n) Non-current assets held for sale
		Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. Investment properties classified as such are measured at fair value.

		o) European Public Real Estate Association
		The Group has adopted the European Public Real Estate Association ('EPRA') best practice recommendations, which it expects to broaden the range of potential institutional investors able to invest in the Company's Ordinary Shares. For the year ended 30 June 2024, audited EPS and NAV calculations under EPRA's methodology are included in note 8 and further unaudited measures are included following the financial statements.

		p) Capital and reserves
		Share capital
		Share capital is the nominal amount of the Company's ordinary shares in issue and is non-distributable.

		Capital reserve
		The capital reserve represents the cancelled share premium less dividends paid from this reserve'; it is a distributable reserve. The share premium account was cancelled in 2017 by Court Order and distributions can be made from this reserve in accordance with the Companies Act 2006, including by way of dividends or share buy backs.

		Retained earnings
		Retained earnings represent the cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income less dividends paid from this reserve. This reserve is distributable, except for any unrealised gains on investment properties

	2.6	Fair value measurement
		The Group measures financial and non-financial assets such as investment properties at fair value at each reporting date.

		A number of the Group's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair value is defined in IFRS 13 Fair Value Measurement as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair values have been determined for measurement and/or disclosure purposes based on methods described below. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

		The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to fair value measurement as a whole:

		Fair value hierarchy:
		Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
		Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
		Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

		For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

		There were no transfers between any of the levels during the year.

		Investment property
		The valuation of investment property by valuers engaged by the Group who are independently appointed and have the relevant professional qualifications and with recent experience in the location and category of the investment property being valued. Further information in relation to the valuers is provided in note 10.

		Property valuations are inherently subjective as they are made on the basis of assumptions made by the valuer which may not prove to be accurate. For these reasons, and consistent with EPRA's guidance, we have classified the valuations of our property portfolio as Level 3 as defined by IFRS 13. The inputs to the valuations are defined as 'unobservable' by IFRS 13 and these are analysed in note 10.

3. Rental and other income
	2024	2023
	£'000	£'000

Gross rental income	7,331	7,429
Spreading of minimum contracted future rent - indexation	74	423
Spreading of tenant incentives - rent free periods	(49)	(58)
Other property income	2	294
Gross rental income (adjusted)	7,358	8,088
Service charges and direct recharges (see note 4)	542	572
Total rental and other income	7,900	8,660

All rental, service charges, direct recharges and other income are derived from the United Kingdom.

Other property income for the year ended 30 June 2023 mainly relates to the allocation to revenue of £219,000 arising from a settlement of the litigation in respect of replacement of defective cladding for Travelodge, Swindon. Further detail is provided in note 15.3.

4. Expenses
	2024	2023
	£'000	£'000

Property operating expenses	138	177
Service charges and direct recharges (see note 3)	542	572
Movement on provision for impairment of trade receivables	-	6
Property operating expenses	680	755

Investment adviser fee	360	371
Auditor's remuneration	85	87
Operating costs*	508	481
Directors' remuneration (note 5)	113	110
Other operating expenses	1,066	1,049
Total operating expenses	1,746	1,804
Total operating expenses (excluding service charges and direct recharges)	1,204	1,232

* Included in the Operating Costs were abortive costs of £61,500.

	2024	2023
	£'000	£'000
Audit
Statutory audit of Annual Report and Accounts	73	76*
Statutory audit of Subsidiary Accounts	12	11
Total fees due to auditor	85	87

*Includes £6,000 fees relating to year ended 30 June 2022.

Moore Kingston Smith LLP has not provided any non-audit services to the Group.

5. Directors' remuneration
	2024	2023
	£'000	£'000

Directors' fees	102	99
Tax and social security	11	11
Total fees	113	110

A summary of the director's remuneration is set out in the Directors' Remuneration Report in the Annual Report.

The Group had no employees during the year.

6. Finance expenses
	2024	2023
	£'000	£'000

Interest payable on loan (note 13)	1,304	1,307
Amortisation of finance costs (note 13)	104	104
Other finance costs	4	14
Total	1,412	1,425

7. Taxation
	2024	2023
	£'000	£'000
Tax charge comprises:
Analysis of tax charge in the year
Profit/ (loss) before tax	2,357	(5,240)

Theoretical tax charge/ (refund) at UK corporation tax standard rate of 25.00% (2023: 20.50%)	589	(1,074)
Effects of tax-exempt items under the REIT regime	(589)	1,074
Total	-	-

The Group maintained its REIT status and as such, no deferred tax asset or liability has been recognised in the current year.

Factors that may affect future tax charges

Due to the Group's status as a REIT and the intention to continue meeting the conditions required to retain approval as a REIT in the foreseeable future, the Group has not provided deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

8. Earnings per share ('EPS')/ (loss per share) and Net Asset Value (NAV) per share

	2024	2023
EPS:
Total comprehensive income/ (loss) (£'000)	2,357	(5,240)
Weighted average number of shares (number)	80,500,000	80,500,000
EPS/ (loss per share) (basic and diluted)	2.93p	(6.51p)

EPRA EPS (£'000):
Total comprehensive income/ (loss)	2,357	(5,240)
Adjustment to total comprehensive income:
Change in fair value of investment properties	2,983	10,671
Gain on disposal of investment property	(598)	-
EPRA earnings (basic and diluted) (£'000)	4,742	5,431
EPRA EPS (basic and diluted)	5.89p	6.75p

Adjusted EPS:
EPRA earnings (basic and diluted) (£'000) - as above	4,742	5,431
Adjustments (£'000):
Rental income recognised in respect of guaranteed fixed rental uplifts (note 3)	(74)	(423)
Rental income recognised in respect of rent free periods (note 3)	49	58
Amortisation of loan finance costs (note 6)	104	104
Write-off of rent	-	16
Reversal of provision for impairment of trade receivables	-	(10)
Adjusted earnings (basic and diluted) (£'000)	4,821	5,176
Adjusted EPS (basic and diluted) *	5.99p	6.43p

* Adjusted EPS is a measure used by the Board to assess the level of the Group's dividend payments. This metric adjusts EPRA earnings for non-cash items in arriving at an adjusted EPS as supported by cash flows.

Earnings per share are calculated by dividing profit/(loss) for the year attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the year.

	2024	2023
NAV per share:
Net assets (£'000)	65,121	67,750
Ordinary Shares (Number)	80,500,000	80,500,000
NAV per share	80.90p	84.16p

EPRA Net Reinvestment Value ('NRV'), EPRA Net Tangible Assets ('NTA') and EPRA Net Disposal Value ('NDV')

	EPRA NRV	EPRA NTA and EPRA NDV
At 30 June 2024
Net assets value (£'000)	65,121	65,121
Estimated purchasers' cost (£'000)	6,672	-
Break cost on bank borrowings (£'000)	-	-
	71,793	65,121
Ordinary Shares (Number)	80,500,000	80,500,000
Per share measure	89.18p	80.90p

At 30 June 2023
Net assets value (£'000)	67,750	67,750
Estimated purchasers' cost (£'000)	6,957	-
Break cost on bank borrowings (£'000)	-	-
	74,707	67,750
Ordinary Shares (Number)	80,500,000	80,500,000
Per share measure	92.80p	84.16p

9. Dividends
All dividends were paid as PIDs	Quarter		2024	2023
	Ended	Rate	£'000	£'000
Dividends in respect of year ended 30 June 2022
4th dividend	30-Jun-22	1.600p	-	1,288
Dividends in respect of year ended 30 June 2023
1st dividend	30-Sep-22	1.375p	-	1,107
2nd dividend	31-Dec-22	1.375p	-	1,107
3rd dividend	31-Mar-23	1.375p	-	1,107
4th dividend	30-Jun-23	1.920p	1,545	-
Dividends in respect of year ended 30 June 2024
1st dividend	30-Sep-23	1.425p	1,147	-
2nd dividend	31-Dec-23	1.425p	1,147	-
3rd dividend	31-Mar-24	1.425p	1,147	-
Total dividends paid			4,986	4,609*
4th dividend**	30-Jun-22	1.600p	-	(1,288)
4th dividend**	30-Jun-23	1.920p	(1,545)	1,545
4th dividend**	30-Jun-24	1.625p	1,308	-
Total dividends payable in respect of the year			4,749	4,866
Total dividends payable in respect of the year			5.90p	6.045p

* Dividends paid per Consolidated Statement of Cash Flows amount to £4,692,000, the difference between the amount disclosed above is due to withholding tax.

** Dividends declared after the year end are not included in the financial statements as a liability.

10. Investment properties

	Freehold Investment properties	Leasehold Investment properties	2024 Total	2023 Total
	£'000	£'000	£'000	£'000
At the beginning of the year	73,825	33,200	107,025	117,905
Acquisition during the year	5,304	-	5,304	-
Reduction in acquisition costs (note 15.3)	-	-	-	(606)
Disposal during the year	(6,784)	-	(6,784)	-
Change in value of investment properties	(1,295)	(1,600)	(2,895)	(10,274)
Valuation provided by Knight Frank LLP	71,050	31,600	102,650	107,025
Adjustment to fair value for minimum rent indexation of lease income (note 11)			(3,567)	(3,542)
Adjustment for lease obligations			-	364
Total investment properties			99,083	103,847

Change in fair value of investment properties
Change in fair value before adjustments for lease incentives and lease obligations			(2,895)	(10,274)
Movement in lease obligations			(63)	(32)
Adjustment to spreading of contracted future rent indexation and tenant incentives			(25)	(365)
			(2,983)	(10,671)

Disposal and acquisition of investment property In the year, two property transactions were completed. The first was the sale of Mercure Hotel in Glasgow which was disposed of on 8 August 2023 for £7.5 million. The gain recognised on disposal is shown in the Consolidated Statement of Comprehensive Income; the gain on disposal includes changes in fair value of the investment property and minimum rent indexation spreading recognised in previous periods.
	2024	2023
	£'000	£'000

Gross proceeds on disposal	7,500	-
Selling costs	(118)	-
Net proceeds on disposal	7,382	-
Carrying value	(6,784)	-
Gain on disposal of investment property	598	-

On 18 December 2023, the Group acquired the Virgin Active in Streatham for £5.3 million.

Valuation of investment properties
Valuation of investment properties is performed by Knight Frank LLP, an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued. The valuation of the Group's investment properties at fair value is determined by the external valuer on the basis of market value in accordance with the internationally accepted RICS Valuation - Professional Standards (incorporating the International Valuation Standards).

The determination of the fair value of investment properties requires the use of estimates such as future cash flows from assets (such as lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and yield applicable to those cash flows. The right of use asset is valued at future lease payments discounted using the net equivalent yield on the relevant asset.
Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the fair value hierarchy
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the entity's portfolios of investment properties are: 1) Estimated Rental Value ('ERV') 2) Net Initial Yield

Increases/(decreases) in the ERV (per sq. ft per annum) in isolation would result in a higher/(lower) fair value measurement. Increases/(decreases) in the yield in isolation would result in a lower/(higher) fair value measurement. The significant unobservable inputs used in the fair value measurement, categorised within Level 3 of the fair value hierarchy of the portfolio of investment property and investments are:

Class	Fair value £'000	Valuation technique	Significant unobservable inputs	Range

30 June 2024
Investment Properties*	102,650	Income capitalisation	ERV Net Initial yield	£4.50 - £21.96 3.59% - 8.64%**

30 June 2023
Investment Properties*	107,025	Income capitalisation	ERV Net Initial yield	£4.39 - £21.97 4.70% - 10.25%**

* Valuation per Knight Frank LLP

**Hotels, petrol stations, residential & healthcare are excluded from this range

Sensitivity analysis below.

	2024
	Change in ERV		Change in net initial yield
	£'000	£'000	£'000	£'000
Sensitivity Analysis	+10%	-10%	+10%	-10%
Resulting fair value of investment properties	105,152	100,042	97,041	109,391

	2023
	Change in ERV		Change in net initial yield
	£'000	£'000	£'000	£'000
Sensitivity Analysis	+10%	-10%	+10%	-10%
Resulting fair value of investment properties	109,412	104,542	101,214	114,027

11. Receivables and prepayments
	2024	2023
	£'000	£'000
Receivables
Trade debtor	252	122
Less: Provision for impairment of trade receivables	(2)	(2)
Other debtors*	2,428	326
	2,678	446

Spreading of minimum contracted future rent indexation	3,205	3,132
Spreading of tenant incentives - rent free periods	362	410
	3,567	3,542
Tenant deposit asset (note 12)	118	118
Other prepayments	101	87
	219	205

Total receivables and prepayments	6,464	4,193

* Other debtors at 30 June 2024 includes £2,155,000 (2023: £112,000) of net proceeds from the sale of properties. This is held by the external lender, Canada Life Investments. The aged debtor analysis of receivables which are past due but not impaired is as follows:

	2024	2023
	£'000	£'000
Less than three months due	2,672	464
Between three and six months due	6	(18)

	2,678	446

12. Payables and accrued expenses
	2024	2023
	£'000	£'000

Deferred income	1,665	1,568
Trade creditors	21	24
Accruals	401	374
Tenant deposit liability (note 11)	118	118
Loan interest payable (note 13)	256	258
Other creditors	429	409
	2,890	2,751

13. Interest bearing loans and borrowings
	2024	2023
	£'000	£'000

Facility drawn	41,000	41,000

Unamortised finance costs brought forward	(276)	(380)
Amortisation of finance costs (note 6)	104	104
At end of year	40,828	40,724

Repayable between 1 and 2 years	-	-
Repayable between 2 and 5 years	41,000	41,000
Repayable in over 5 years	-	-
Total at end of the year	41,000	41,000

At 30 June 2024, the Group had utilised all of its £41 million fixed interest loan facility with Canada Life Investments and was geared at a loan to Gross Asset Value ('GAV') of 37.7% (2023: 36.8%). The weighted average interest cost of the Group's facility is 3.19% and the facility is repayable on 20 October 2025. Interest expense incurred during the year amounted to £1.31 million (2023: £1.31 million), £0.26 million of which is outstanding as at 30 June 2024 (2023: £0.26 million).

	2024	2023
	£'000	£'000
Reconciliation to cash flows from financing activities
At beginning of the year	40,724	40,620

Non-cash changes
Amortisation of loan issue costs	104	104
Total at end of the year	40,828	40,724

14. Lease obligations
At the commencement date, the lease liability is measured at the present value of the lease payments that are not paid on that date.

The following table analyses the minimum lease payments due under non-cancellable leases:

	2024	2023
	£'000	£'000
Within one year	-	50
After one year but not more than five years	-	150
More than five years	-	463
Total undiscounted lease liabilities	-	663
Less: Future finance charge on lease obligations	-	(364)
Present value of lease liabilities	-	299

Lease liabilities included in the Consolidated Statement of Financial Position
Current	-	33
Non-current	-	266
	-	299

15. Commitments
15.1. Operating lease commitments - as lessor
The Group has 19 commercial properties with 33 units in its investment property portfolio. These non-cancellable leases have a remaining term of between 10 months and 110 years (2023: 10 months to 111 years), excluding ground leases.

Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2024 are as follows:

	2024	2023
	£'000	£'000
Within one year	6,839	7,179
After one year, but not more than two years	6,528	6,804
After two years, but not more than three years	6,331	6,548
After three years, but not more than four years	5,746	7,034
After four years, but not more than five years	5,826	6,416
After five years, but not more than ten years	27,129	28,307
After ten years, but not more than fifteen years	20,398	24,085
More than fifteen years	47,712	50,689
	126,509	137,062

During the year ended 30 June 2024 there were no material contingent rents recognised as income (2023: £nil).

15.2. Capital commitments

There were no capital commitments at 30 June 2024 (2023: none).

15.3. Financial commitments

As disclosed in the Company's 2023 Annual Report (note 15.3), the Board engaged in mediation for the one item of litigation that it was involved in, which resulted in a full and final settlement of £825,000 being received.

As a result, the Group have no financial commitments other than those arising from its normal business operations, and in the year ended 30 June 2023, the settlement was proportionally allocated £606,000 to capital, as a reduction in acquisition costs (see note 10), and £219,000 to revenue, as other property income (see note 3).

There are no other commitments other than those shown above at the period end (2023: nil).

16. Investments in subsidiaries

The Company has two wholly owned subsidiaries as disclosed below:

Name and company number	Country of registration and incorporation	Date of incorporation	Principal activity	Ordinary Shares held

Alternative Income REIT Holdco Limited (Company number 11052186)	England and Wales	7 Nov 2017	Real Estate Company	73,158,502*

Alternative Income Limited (Company number 10754641)	England and Wales	4 May 2017	Real Estate Company	73,158,501*

* Ordinary shares of £1.00 each.

Alternative Income REIT Plc as at 30 June 2024 owns 100% of Alternative Income REIT Holdco Limited.

Alternative Income REIT Holdco Limited holds 100% of Alternative Income Limited.

Both Alternative Income REIT Holdco Limited and Alternative Income Limited are registered at The Scalpel, 18th Floor, 52 Lime Street, London, United Kingdom, EC3M 7AF.

17. Issued share capital and reserves
	2024		2023
	2024		2023
		Number of Ordinary Shares		Number of Ordinary Shares
	£'000	Number of Ordinary Shares	£'000	Number of Ordinary Shares
Ordinary Shares of £0.01 each issued and fully paid
At the beginning and end of the year	805	80,500,000	805	80,500,000

18. Financial risk management and policies

The Group's activities expose it to a variety of financial risks: market risk, credit risk, liquidity risk and further risks inherent to investing in investment property. The Group has limited exposure to foreign currency risk as most of its transaction is in Sterling. The Group's objective in managing risk is the creation and protection of shareholder value. Risk is inherent in the Group's activities, but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. The principal risks facing the Group in the management of its portfolio follows.

18.1 Market price risk

Market price risk is the risk that future values of investments in property will fluctuate due to changes in market prices. To manage market price risk, the Group diversifies its portfolio geographically in the UK and across property sectors.

The disciplined approach to the purchase, sale and asset management ensures that the value is maintained to its maximum potential. Prior to any property acquisition or sale, detailed research is undertaken to assess expected future cash flow. The Board and the Investment Adviser meet regularly and are responsible for recommending investment purchases or sales to the AIFM which makes the ultimate decision. In order to monitor property valuation fluctuations, the Investment Adviser meets with the independent external valuer on a regular basis. The valuer provides a property portfolio valuation quarterly, so any movements in the value can be accounted for in a timely manner and reflected in the NAV every quarter.

18.2 Real estate risk

Property investments are illiquid assets and can be difficult to sell, especially if local market conditions are poor. Illiquidity may also result from the absence of an established market for investments, as well as legal or contractual restrictions on resale of such investments.

There can be no certainty regarding the future performance of any of the properties acquired for the Group. The value of any property can go down as well as up.

Real property investments are subject to varying degrees of risk. The yields available from investments in real estate depend on the amount of income generated and expenses incurred from such investments.

There are additional risks in vacant, part vacant, redevelopment and refurbishment situations, although these are not prospective investments for the Group.

These aspects, and their effect on the Group from a going concern perspective are discussed in more detail in the Going Concern policy note.

18.3 Credit risk

Credit risk is the risk that the counterparty (to a financial instrument) or tenant (of a property) will cause a financial loss to the Group by failing to meet a commitment it has entered into with the Group.

It is the Group's policy to enter into financial instruments with reputable counterparties. All cash deposits are placed with an approved counterparty, Barclays International.

In respect of property investments, in the event of a default by a tenant, the Group will suffer a rental shortfall and additional costs concerning re-letting the property. The Investment Adviser monitors tenant arrears in order to anticipate and minimise the impact of defaults by occupational tenants.

The table below shows the Group's exposure to credit risk:

	2024	2023
	£'000	£'000
Debtors	2,680	448
Cash and cash equivalents	3,292	3,484
Total	5,972	3,932

18.4 Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its borrowings. It is the risk the Group will encounter difficulty in meeting its financial obligations as they fall due as the majority of the Group's assets are investment properties and therefore not readily realisable. The Group's objective is to ensure it has sufficient available funds for its operations and to fund its capital expenditure. This is achieved by quarterly review/ monitoring of forecast and actual cash flows by the Investment Adviser and Board.

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

2024	On demand £'000	< 3 months £'000	3-12 months £'000	1-5 years £'000	> 5 years £'000	Total £'000

Interest bearing loans and borrowings	-	-	-	41,000	-	41,000
Interest payable	-	327	980	652	-	1,959
Payables and accrued expenses	21	676	-	-	-	697
Lease obligations	-	-	-	-	-	-
Total	21	1,003	980	41,652	-	43,656

2023	On demand £'000	< 3 months £'000	3-12 months £'000	1-5 years £'000	> 5 years £'000	Total £'000

Interest bearing loans and borrowings	-	-	-	41,000	-	41,000
Interest payable	-	327	980	1,959	-	3,266
Payables and accrued expenses	24	651	-	-	-	675
Lease obligations	-	13	38	200	413	664
Total	24	991	1,018	43,159	413	45,605

18.5 Fair value of financial instruments

There is no material difference between the carrying amount and fair value of the Group's financial instruments.

18.6 Interest rate risk

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the risk of changes in market interest rates is minimal because the Group's loan is at a fixed rate of 3.19% (note 13).

19. Capital management

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

To enhance returns over the medium term, the Group utilises borrowings on a limited recourse basis for each investment or all or part of the total portfolio. The Group's policy is to borrow up to a maximum of 40% loan to GAV (measured at drawdown). Alongside the Group's borrowing policy, the directors intend, at all times, to conduct the affairs of the Group so as to enable the Group to qualify as a REIT for the purposes of Part 12 of the Corporation Tax Act 2010 (and the regulations made thereunder). The REIT status compliance requirements include 90% distribution test, interest cover ratio, 75% assets test and the substantial shareholder rule, all of which the Group remained compliant in both this and the prior year.

The monitoring of the Group's level of borrowing is performed primarily using a Loan to GAV ratio. The Loan to GAV ratio is an alternative performance measure and its calculation is shown below. The Group Loan to GAV ratio at the year-end was 37.7% (2023: 36.8%)

Breaches in meeting the financial covenants would permit the lender to immediately call loans and borrowings. During the year, the Group did not breach any of its loan covenants, nor did it default on any other of its obligations under its loan agreements.

20. Transactions with related parties and the Investment Adviser

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

Directors

Directors are considered to be related parties. Their fees and interests in shares are disclosed in the Remuneration Report in the Annual Report.

Investment Adviser

As reported in the Chairman's Statement, the Group's investment adviser was changed on 15 March 2024 from M7 Real Estate Limited ('M7') to Martley Capital Real Estate Investment Management Ltd ('Martley Capital'). The appointment of Martley Capital was by way of a deed of novation of the Group's Interim Investment Advisory agreement dated 14 March 2020 (as amended with Deed of Variation dated 21 February 2021) with minor changes thereto but leaving the parties on substantially the same terms and at an unchanged fee.

The annual management fee is calculated at a rate equivalent of 0.50% per annum of NAV (subject to a minimum fee of £90,000 per quarter), payable quarterly in advance. During the year ended 30 June 2024, the Group incurred £360,000 (2023: £371,000) in respect of investment advisory fees of which £253,000 was paid to M7 and £107,000 was paid to Martley Capital. No amounts were outstanding at 30 June 2024 (2023: Nil).

Company Statement of Financial Position
As at 30 June 2024
	Notes	2024	2023
		£'000	£'000

Assets
Non-current Assets
Investments in subsidiary companies	2	73,158	73,158
Investment property	2	1,803	1,814
Total non-current assets		74,961	74,972
Current Assets
Receivables and prepayments	3	132	169
Cash and cash equivalents		475	525
Total current assets		607	694

Total Assets		75,568	75,666

Current Liabilities
Payables and accrued expenses	4	(14,721)	(8,979)

Net Assets		60,847	66,687

Equity
Share capital	6	805	805
Capital reserve		70,431	75,417
Retained earnings		(10,389)	(9,535)
Total capital and reserves attributable to equity holders of the Company		60,847	66,687
Net Asset Value per share		75.59p	82.84p

As permitted by s408 Companies Act 2006, the Company's profit and loss account has not been presented in these financial statements.

The Company's loss for the year was £854,000 (2023: £8,795,000 profit).

The financial statements were approved by the Board on 1 October 2024 and were signed on its behalf by:

Simon Bennett

Chairman

Company number: 10727886

The accompanying notes 1 to 7 form an integral part of these financial statements.

Company Statement of Changes in Equity

For the year ended 30 June 2024

		Capital Reserve
	Share capital		Retained earnings	Total equity
	£'000	£'000	£'000	£'000
For the year ended 30 June 2024
Balance at 30 June 2023	805	75,417	(9,535)	66,687

Total comprehensive loss	-	-	(854)	(854)
Dividend reallocation			0
Dividends paid	-	(4,986)		(4,986)
Balance at 30 June 2024	805	70,431	(10,389)	60,847

For the year ended 30 June 2023
Balance at 30 June 2022	805	75,417	(13,721)	62,501

Total comprehensive income	-		8,795	8,795
				-
Dividends paid	-		(4,609)	(4,609)
Balance at 30 June 2023	805	75,417	(9,535)	66,687

The accompanying notes 1 to 7 form an integral part of these financial statements.

Notes to the Company Accounts

for the year ended 30 June 2024

1. Accounting policies
Basis of preparation
These financial statements are prepared and approved by the directors in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards. As permitted by FRS 101, the Company has taken advantage of the following disclosures exemptions which are permissible under FRS 101 as the equivalent disclosures are contained within the Group's consolidated financial statements. - a cash flow statement and related notes; - disclosures in respect of capital management; - the effects of new but not yet effective IFRSs; - the disclosures of the remuneration of key management personnel; - disclosure of related party transactions with other wholly owned members of the Ultimate Parent; - the disclosure of financial instruments and other fair value measurements.

The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000), except when otherwise indicated. They have been prepared on the historical cost basis.

The principal accounting policies adopted in the preparation of the Company's financial statements are consistent with the Group which are described in note 2.5 of the Consolidated Financial Statements but makes amendments where necessary in order to comply with the Companies Act 2006 and taking advantage of the FRS 101 exemptions mentioned above.

New standards effective for the current accounting period do not have a material impact on the financial statements of the Company.

The accounting policies used are otherwise consistent with those contained in the Company financial statements for the year ended 30 June 2024.

Going concern
The financial statements have been prepared on a going concern basis.

For an assessment of going concern refer to the accounting policy 2.4 of the Consolidated Financial Statements.

Investments in subsidiary companies
Investments in subsidiary companies which are all 100% owned by the Company are included in the statement of financial position at cost less provision for impairment.

Impairment of non-financial assets
The carrying amounts of the Company's investment in subsidiaries are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell.

An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Deferred income
Deferred income is rental income received in respect of future accounting periods.
2. Investments
2a. Investments in Subsidiary Companies
	2024	2023
	£'000	£'000
At the beginning and end of the year	73,158	73,158

A list of subsidiary undertakings at 30 June 2024 is included on note 16 of the Consolidated Financial Statements.

The directors have considered the recoverability of the investment in subsidiary companies by comparing the carrying value of the investment to the net asset value of the subsidiary. The directors consider the net asset value of the subsidiary to be a reliable proxy to the recoverable amount as the properties held by the Company are carried at fair value. The net asset value of the subsidiary company exceed the carrying amount of the investment in subsidiary and the directors have concluded that no impairment is necessary.

2b. Investment property
	2024	2023
	£'000	£'000

At the beginning of the year	1,814	2,153
Revaluation of investment property	-	(325)
Adjustment to fair value for minimum rent indexation of lease income	(11)	(14)
	1,803	1,814

3. Receivables and prepayments
	2024	2023
	£'000	£'000

Rent debtor	-	5
Spreading of contracted future - rent indexation	72	61
VAT receivable	23	72
	95	138
Other prepayments	37	31
	132	169

4. Payables and accrued expenses
	2024	2023
	£'000	£'000

Due to subsidiaries	14,357	8,644
Deferred income	34	30
Trade creditors	-	5
Accruals	328	300
Other creditors	2	-
	14,721	8,979

Amounts due to subsidiaries are unsecured, interest free and repayable on demand.

5. Dividends paid and payable

Details of dividends paid and payable in respect of the year are set out in note 9 of the consolidated financial statements.

6. Issued share capital
	2024		2023
	2024		2023
		Number of Ordinary Shares		Number of Ordinary Shares
	£'000	Number of Ordinary Shares	£'000	Number of Ordinary Shares
Ordinary Shares of £0.01 each issued and fully paid
At the beginning and end of the year	805	80,500,000	805	80,500,000

7. Contingent liabilities, capital commitments and related party transactions

As at 30 June 2024 the Company had £nil contingent liabilities or capital commitments (2023: £nil).

Related party transactions are the same for the Company as for the Group. For details refer to note 20 of the Consolidated Financial Statements.

EPRA Performance Measures (Unaudited)

EPRA Yield calculations		2024 £'000	2023 £'000
Investment properties wholly owned:
- by Company		1,875	1,875
- by Alternative Income Limited		100,775	105,150
Total - note 10		102,650	107,025
Allowance for estimated purchasers' costs - note 8		6,672	6,957
Gross up completed property portfolio valuation	B	109,322	113,982

Annualised cash passing rental income		7,596	7,560
Annualised property outgoings		(5)	(55)
Annualised net rents	A	7,591	7,505

Add: notional rent expiration of rent-free periods or other lease incentives		379	563
Topped-up net annualised rent	C	7,970	8,068

EPRA NIY	A/B	6.94%	6.58%
EPRA topped-up NIY	C/B	7.29%	7.08%

EPRA Cost Ratios		2024 £'000	2023 £'000
Include:
EPRA Costs (including direct vacancy costs) - note 4	A	1,204	1,232
Direct vacancy costs		-	-
EPRA Costs (excluding direct vacancy costs)	B	1,204	1,232
Gross rental income (adjusted) - note 3	C	7,358	8,088
EPRA Cost Ratio (including direct vacancy costs)	A/C	16.36%	15.23%
EPRA Cost Ratio (excluding direct vacancy costs)	B/C	16.36%	15.23%

EPRA Vacancy rate		2024 £'000	2024 £'000
Annualised potential rental value of vacant premises	A	-	-
Annualised potential rental value for the completed property portfolio	B	6,948	7,040

EPRA Vacancy rate	A/B	0.00%	0.00%

Alternative Performance Measures (APMs)

APMs are numerical measures of the Group's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Group's applicable financial framework is IFRS. The directors assess the Group's performance against a range of criteria which are reviewed as particularly relevant for a closed-end REIT.

Discount

The discount is the amount by which the share price is lower than the net asset value per share, expressed as a percentage of the net asset value per share.

		2024	2023
NAV per Ordinary Share	A	80.90p	84.16p
Share price	B	66.00p	64.70p
Discount	(A-B)/A	18.42%	23.12%

Dividend Cover The ratio of Group's Adjusted EPS divided by the Group's dividends payable for the relevant year.

		2024	2023
Adjusted EPS	A	5.99p	6.43p
Dividend per share	B	5.90p	6.045p
Dividend cover	A/B	101.53%	106.37%


Dividend Yield The ratio of Group's annual dividends per share divided by the Group's share price for the relevant year.

		2024	2023
Annual dividends paid	A	5.90p	6.045p
Share price	B	66.00	64.70
Dividend yield	A/B	8.94%	9.34%

Loan to GAV

Loan to GAV measures the value of loans and borrowings utilised (excluding amounts held as restricted cash and before adjustments for issue costs) expressed as a percentage of the combined valuation of the property portfolio (as provided by the valuer) and the fair value of other assets.

2024

2023

Borrowings (£'000)

41,000

Total assets (£'000)

108,839

111,524

Loan to GAV

A/B

37.67%

36.76%

Ongoing Charges

The ongoing charges ratio is the total for all operating costs expected to be regularly incurred expressed as a percentage of the average quarterly NAVs of the Group for the financial year.

2024

2023

Other operating expenses for the year (£'000)

1,066

1,049

One-off website costs (£'000) *

(16)

(40)

One-off legal fees (£'000) **

(20)

Abortive costs (£'000)***

(62)

E=A+B+C+D

968

1,009

Average net assets (£'000)

66,436

72,675

Ongoing charges ratio

E/F

1.46%

1.39%

* Non-recurring website set up costs have been excluded in the amount for the year presented.

**Non-recurring legal and professional costs have been excluded in the amount for the year presented.

*** Costs incurred on aborted property acquisition.

Share Price and Net Asset Value (NAV) Total Return Share price and NAV total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. Share price and NAV total returns are monitored against FTSE EPRA Nareit UK and FTSE Small Cap, respectively.

		Share price	NAV
Opening at 30 June 2023	A	64.70	84.16p
Closing at 30 June 2024	B	66.00	80.90p
Return	C=(B/A)-1	2.01%	(3.87%)
Dividend reinvestment *	D	9.58%	7.36%
Total return for the year ended 30 June 2024	C+D	11.59%	3.49%

Opening at 30 June 2022	A	82.10	96.40p
Closing at 30 June 2023	B	64.70	84.16p
Return	C=(B/A)-1	(21.19%)	(12.69%)
Dividend reinvestment*	D	6.97%	5.97%
Total return for the year ended 30 June 2023	C+D	(14.22%)	(6.72%)

* Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend. NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend.

Glossary

Alternative Investment Fund Manager or AIFM or Investment Manager	Langham Hall Fund Management LLP.
Company	Alternative Income REIT plc.
Contracted rent	The annualised rent adjusting for the inclusion of rent subject to rent-free periods.
Earnings Per Share ('EPS')	Profit for the period attributable to equity shareholders divided by the weighted average number of Ordinary Shares in issue during the period.
EPRA	European Public Real Estate Association, the industry body representing listed companies in the real estate sector.
Estimated Rental Value ('ERV')	The external valuer's opinion as to the open market rent which, on the date of the valuation, could reasonably be expected to be obtained on a new letting or rent review of a property.
External Valuer	An independent external valuer of a property. The Group's External Valuer is Knight Frank LLP.
Fair value	The estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where parties had each acted knowledgeably, prudently and without compulsion.
Fair value movement	An accounting adjustment to change the book value of an asset or liability to its fair value.
FCA	The Financial Conduct Authority.
Gross Asset Value ('GAV')	The aggregate value of the total assets of the Group as determined in accordance with IFRS.
Gross Passing Rental Income	The gross passing rent is the rent roll at the reporting date, taking account of any in-place rent free incentives or step rents on a straight-line basis over the following 12-month period.
IASB	International Accounting Standards Board.
IFRS	International financial reporting standards. On 31 December 2020 EU-adopted IFRS was brought into UK law and became UK-adopted international accounting standards, with future changes to IFRS being subject to endorsement by the UK Endorsement Board.
Investment Adviser or Martley Capital	Martley Capital Real Estate Investment Management Limited.
IPO	The admission to trading on the London Stock Exchange's Main Market of the share capital of the Company and admission of Ordinary Shares to the premium listing segment (now the Closed-ended investment funds category) of the Official List on 6 June 2017.
Lease incentives	Incentives offered to occupiers to enter into a lease. Typically, this will be an initial rent-free period, or a cash contribution to fit-out. Under accounting rules, the value of the lease incentive is amortised through the Consolidated Statement of Comprehensive Income on a straight-line basis until the lease expiry.
Loan to Value ('LTV')	The value of loans and borrowings utilised (excluding amounts held as restricted cash and before adjustments for issue costs) expressed as a percentage of the combined valuation of the property portfolio (as provided by the valuer) and the fair value of other investments.
Net Asset Value ('NAV')	Net Asset Value is the equity attributable to shareholders calculated under IFRS.
Net Asset Value per share	Equity shareholders' funds divided by the number of Ordinary Shares in issue.
Net equivalent yield	Calculated by the Group's External Valuers, net equivalent yield is the internal rate of return from an investment property, based on the gross outlays for the purchase of a property (including purchase costs), reflecting reversions to current market rent and items as voids and non-recoverable expenditure but ignoring future changes in capital value. The calculation assumes rent is received annually in arrears.
Net Initial Yield ('NIY')	The initial net rental income from a property at the date of purchase, expressed as a percentage of the gross purchase price including the costs of purchase. Initial yield does not include cost of purchase.
Net rental income	Rental income receivable in the period after payment of ground rents and net property outgoings.
Ordinary Shares	The main type of equity capital issued by conventional Investment Companies. Shareholders are entitled to their share of both income, in the form of dividends paid by the Company, and any capital growth.
REIT	A Real Estate Investment Trust. A company which complies with Part 12 of the Corporation Tax Act 2010. Subject to the continuing relevant UK REIT criteria being met, the profits from the property business of a REIT, arising from both income and capital gains, are exempt from corporation tax.
Reversion	Increase in rent estimated by the Company's External Valuers, where the passing rent is below the ERV.
Share price	The value of a share at a point in time as quoted on a stock exchange. The Company's Ordinary Shares are quoted on the Main Market of the London Stock Exchange.
Weighted Average Unexpired Lease Term ('WAULT')	The average lease term remaining for first break, or expiry, across the portfolio weighted by contracted rental income (including rent-frees).