Half-year Results

The Board of Directors of Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust providing secure, inflation-linked, long income from grocery property in the UK, reports its interim results for the Group for the six months ended 31 December 2023 (the "Period").

FINANCIAL HIGHLIGHTS

Resilient financial performance

• 18% growth in operating profit2 to £45.0 million, reflecting:

o 10% increase in annualised passing rent to £104.7 million through acquisitions and contractual rental uplifts

o Continuing 100% rent collection

o Lower EPRA cost ratio 15.1% (six months to 31 December 2022: 16.7%)

o Sainsbury's Reversion Portfolio ("SRP") JV earnings replaced via higher yielding acquisitions

• Adjusted EPS stable at 2.9 pence reflecting lower leverage
• On track to deliver full-year 2024 dividend target of 6.06p
• Significant debt capacity for future earnings growth, well positioned to capitalise on current yields

Performance underpinned by continued, structural growth in the grocery sector

• UK grocery market sales up 8%5 in the Period, forecast to be £250 billion in 20246
• Record £2.1 billion of investment activity in UK grocery real estate in 20237
• Our largest tenants Tesco & Sainsbury's gaining market share8

o Combined market share up by 2% to 44%

o 10% growth in sales from large format stores9

• Store sales growth continues to outpace rental growth - increasing affordability of rental values

Unique portfolio of 55 mission critical supermarkets

• Future-proofed portfolio of omnichannel stores
• 13 years weighted average unexpired lease term ("WAULT")
• 78% of rental income inflation-linked
• Strong performing tenant covenants with 77% of income from Sainsbury's and Tesco
• 93% of portfolio stores operate online fulfilment via home delivery and/or click and collect, capturing current and future growth in online sales

Supermarket property valuations reflect broader property market values

• Portfolio independently valued at £1.68 billion, inclusive of acquisitions of £36.4 million, reflecting Net initial yield ("NIY") of 5.8% (30 June 2023: 5.6%)
• Like-for-like valuation decline of 3.2% compares favourably versus MSCI All Property Capital Index decline of 4.0%
• The impact of higher yields has been partly mitigated by a 3.6% average rental uplift on rent reviews during the period

Strong balance sheet with 100% of drawn debt hedged to fixed rate

• LTV of 33% as at 31 December 2023 (30 June 2023: 37%)
• 100% of drawn debt fixed or hedged at a weighted average finance cost of 3.1% (30 June 2023: 3.1%)

o Interest rate hedging extended by 12 months in September 2023

o Existing in-the-money hedging restructured to extend hedge term at zero upfront cost

• Fitch Ratings Limited ("Fitch") reaffirmed the Company's Investment Grade Credit Rating of BBB+

Accretive acquisitions and active portfolio management

• Purchased two supermarket properties at a NIY of 6.5% for a total consideration of £36.4 million
• Given reduced LTV, the Company has capacity available for opportunistic acquisitions
• EV charging installations now operational at five stores
• Rooftop solar:

o Operational across 20% of the portfolio

o New solar installation at Tesco, Thetford generated an EPC upgrade from C to B

Continued progress on sustainability reporting

• Science Based Targets initiative ("SBTi") net zero targets submitted for validation
• Adopted a charitable giving policy focused on alleviating poverty and hunger as well as having a positive impact on biodiversity at and near our sites
• Post Period end, Atrato Group became an endorser of Spring - a new PRI stewardship initiative for nature

Nick Hewson, Chair of Supermarket Income REIT plc, commented:

"The UK grocery sector continues to demonstrate strong resilience to the challenging macroeconomic environment. Our tenants continue to grow, strengthening their financial and operational performance by putting omnichannel supermarkets at the heart of their operations.

We remain focused on our investment strategy of acquiring and managing a high-quality portfolio of omnichannel supermarkets, which are critical to our tenants, giving us exposure to the largest and fastest growing segment of the grocery market.

A record £2.1 billion was invested into UK supermarket property in 2023, highlighting the strong appeal of the asset class and the attractiveness of current asset values. UK property valuations continue to be impacted by the uncertain economic backdrop, however as interest rates normalise and with the limited supply of omnichannel supermarkets, we remain highly optimistic for the valuation outlook for the year.

Looking forward, the quality of our unique supermarket portfolio and the increasing affordability of grocery rents, together with our strong balance sheet means we are well positioned to deliver long-term value for our shareholders."

PRESENTATION FOR ANALYSTS

The Company will be holding an in-person presentation for analysts at 08.30am today at FTI Consulting's offices, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. To register to attend in-person, please contact FTI Consulting: SupermarketIncomeREIT@fticonsulting.com. There will also be a webcast available. To join the presentation via the webcast, please register using the following link:

The results presentation is available in the Investor Centre section of the Group's website.

CHAIR'S STATEMENT

Dear Shareholder,

The UK grocery sector continued to show strong growth in 2023 against a persistently uncertain economic backdrop. During the Period, Kantar reported an 8%10 increase in UK grocery sales building on the strong growth seen in the previous period. Tesco and Sainsbury's, the UK's largest grocery operators by revenue, and our two largest tenants, have performed particularly strongly, with both operators growing market share and sales, which is fuelling cash flow growth and profit margins.

In a tight market for new sites due to a lack of prime locations, planning restrictions and elevated construction costs, our large format stores provide the operators with the space to grow sales volumes and thus sales densities, which will further increase rental affordability and should feed through to higher rental income at lease expiry.

The importance of mission-critical supermarkets, the revenue hubs in this growing sector, together with long inflation-linked full repairing and insuring ("FRI") leases, has attracted a growing range of investors to this market. In 2023 we saw a record £2.1 billion of investment volumes. In addition, we continue to see our two biggest tenants, Tesco and Sainsbury's buying in their stores with over £2.0 billion of supermarkets purchased in the last five years, testament to the value that they see in owning their top trading, omnichannel stores.

Despite the strong grocery market backdrop, supermarket property yields continued to widen in line with the broader property market driven by the negative macro-economic environment. As a result, the Portfolio valuation declined 3.2% on a like-for-like basis, reflecting a Net Initial Yield of 5.8% as at 31 December 2023 (30 June 2023: 5.6%).

Given the uncertain economic and interest rate outlook for much of 2023, the Company took the prudent decision to use some of the proceeds from the sale of the Sainsbury's Reversion Portfolio to pay down debt, reducing LTV to 33%. Despite this lower leverage position, we have maintained the EPS level we achieved before the sale of the SRP. The undrawn debt capacity means we are ideally positioned to take advantage of some highly attractive pricing, and earnings accretive acquisition opportunities in the market.

The reduction in the 5 year interest swap rate from 5.0% in June 2023 to 3.4% in December 2023 has reduced borrowing costs, generating an attractive spread to current supermarket investment yields. Combined with the strong, growing operational market and improving lease reversion values, we remain highly optimistic on the longer-term valuation outlook and remain open to future earnings accretive investments.

The Company has continued to build on the progress that it has already made on sustainability. Following the publication of our first standalone sustainability report in September, along with our TCFD compliant Annual Report, we have now submitted our science-based emissions reduction targets to the Science Based Target initiative ("SBTi") for validation. We have also actively managed assets to deliver sustainability improvements and have now deployed EV charging at five sites and are continuing to support the roll out of solar PV with rooftop solar now installed at 20% of our stores. This is improving the environmental efficiency of our sites including our Tesco store in Thetford, which energised in the Period. The PV system provides clean energy directly to the store, helped to deliver an EPC upgrade from C to B and was completed with zero capex cost to the Company.

OUTLOOK

Once again, the grocery market has delivered a strong performance in a challenging, unpredictable economic environment. Whilst we have seen a decline in valuations based on transactions which completed late last year, constrained supply and falling debt cost conditions combined with evidence of increased competition for assets since the start of the year, suggest that we may see a more positive environment for valuations going forward.

With our current reduced leverage, we are now ideally placed to add earnings accretive assets. Meanwhile, our high-quality portfolio of mission-critical supermarkets continue to deliver stable, long-term inflation-linked income. Combined with our robust balance sheet, fixed borrowing costs and highly visible cashflows, the Board is confident of the Company's ability to provide secure income to our investors.

Nick Hewson

Chair

KEY PERFORMANCE INDICATORS

Our objective is to provide secure, inflation-linked, long income from grocery property in the UK. Set out below are the key performance indicators we use to track our progress.

Adjusted earnings is a performance measure used by the Board to assess the Group's financial performance and dividend payments. The metric adjusts EPRA earnings by deducting one-off items such as debt restructuring costs and the adding back finance income on derivatives held at fair value through profit and loss. Adjusted Earnings is considered a better reflection of the measure over which the Board assesses the Group's trading performance and dividend cover. Finance income received from derivatives held at fair value through profit and loss are added back to EPRA earnings as this reflects the cash received from the derivatives in the period and therefore gives a better reflection of the Group's net finance costs. Debt restructuring costs relate to the acceleration of unamortised arrangement fees following the refinancing of the Group's debt facilities during the Period.

Adjusted EPS reflects the adjusted earnings defined above attributable to each shareholder.

The Group uses alternative performance measures including the European Public Real Estate ("EPRA") Best Practice Recommendations ("BPR") to supplement its IFRS measures as the Board considers that these measures give users of the interim financial statements the best understanding of the underlying performance of the Group's property portfolio. The EPRA measures are widely recognised and used by public real estate companies and investors and seek to improve transparency, comparability and relevance of published results in the sector.

Reconciliations between EPRA measures and the IFRS financial statements can be found in Notes 10 and 22 to the financial statements.

EPRA PERFORMANCE INDICATORS

For a full reconciliation of all EPRA performance indicators, please see the Notes to EPRA measures within the supplementary section of the interim financial statements.

INVESTMENT ADVISER'S REPORT

Atrato Capital Limited, the Investment Adviser to the Group (the "Investment Adviser"), is pleased to report on the operations of the Group for the Period.

Overview

Continued strong growth of the grocery sector

We observed UK grocery sales growth of 8%12 in the Period. Annual sales in the UK grocery market are currently forecast to reach £250 billion in 202413; an increase of £65 billion since the Company's IPO in 2017. The sector's non-discretionary nature ensures that it is highly resilient relative to the volatility of the economic cycle and is strongly correlated to inflation. The recent peak of UK price inflation has now seemingly passed and operators are reporting volume growth both in-store and online.

In October 2023, Tesco reported 9.3%14 growth in grocery sales from its supermarket estate and Sainsbury's reported similar growth of 10.8%15, outpacing the wider UK grocery market. Core to the operator's growth are the omnichannel supermarkets that provide in-store shopping, but also operate as last mile, online grocery fulfilment centres for both home delivery and click and collect. Omnichannel stores provides the space, proximity to customers and flexibility to service customer demand in the growing physical and online markets. It is worth noting that approximately 80% of Tesco's 1.1 million weekly online orders are now fulfilled from omnichannel supermarkets and, similarly, the increased focus on omnichannel stores has propelled Sainsbury's to become the number one click and collect retailer in the UK.

Focused investment strategy targeting top trading, mission critical real estate

Our strategy is aligned with the future model of UK grocery, capitalising on the long-term structural trend toward growing omnichannel operations. We have handpicked the UK's leading portfolio of supermarket investment assets. We are the largest landlord of omnichannel grocery stores in the UK, offering a combination of attractive, secure and growing income with potential for long-term capital growth. Our stores facilitate in-store shopping, home delivery, click and collect, and increasingly, rapid ready to eat food delivery. 93% of the Group's portfolio by value are omnichannel stores, future proofing the portfolio and providing exposure to the fastest growing grocery market channel since the Company's IPO in 201716.

Omnichannel stores act as significant online fulfilment hubs. A typical omnichannel store will operate as many as 25 home delivery vans, with c.200 employees dedicated to online fulfilment, accounting for up to 30% of store turnover. These large sites, often exceeding 10 acres, have good road transport links in densely populated areas and thus would be very difficult to recreate today. The stores typically have long trading histories, many having been supermarkets for more than 30 or 40 years, underlining the strength of the site as a grocery location. The Company's strategy of targeting such stores ensures that its tenants are committed to the location beyond the contractual lease term and provides assurance of strong alternative occupier demand in the highly competitive grocery market. The scarcity of alternative locations combined with increased build costs, up c.30% since 2022, are driving up supermarket replacement values, making existing omnichannel supermarkets even more valuable.

Income generated from strong tenant covenants

The Company has continued to achieve 100% rent collection during the period, of which 77% is received from its key tenants, Tesco and Sainsbury's, the UK's largest retailers by revenue. The Company also benefits from its tenants' capital investment programmes, which are focused on enhancing existing stores, including those which are occupied leasehold, over new store openings. The limited new store openings and capital investment programmes mean that high sales growth is being achieved like-for-like, enhancing existing store trading performance and ensuring progressive ERV growth.

While the growth of the Discounters has gained attention, it is worth noting that much of their sales growth is achieved through new store openings and therefore at a lower margin. Tesco and Sainsbury's have competed particularly well with the Discounters, with Clubcard and Nectar customer loyalty programmes proving highly effective in customer retention.

2023 was a record year for supermarket real estate investment volumes

The investment market for supermarkets saw volumes of £2.1 billion in 202317, highlighting the attractiveness of the asset class at current yields. The volume of transactions demonstrated the significant value of supermarket real estate to both the traditional institutional investors and also to Tesco and Sainsbury's, as they continue to buy back leasehold stores. This operator buyback activity, given the knowledge of their own store estates, clearly demonstrates the value of their store networks.

The liquidity of the supermarket investment market means that valuers are able to base valuations on real world transactional evidence. This stands in contrast to other sectors of the real estate market where volumes were significantly reduced in 2023, reflecting the wide gap that still remains between buyer and seller price expectations in those sectors. The defensive characteristics of supermarkets, combined with the capex certainty provided by the Fully Repairing and Insuring lease structures are proving attractive for investors.

Challenging economic environment impacting property valuations

The high level of transactions in the grocery investment market provided clear market pricing guidance for the sector. For the majority of the year, supermarket valuations remained broadly flat following the valuation decline seen in Q4 of 2022. However, in December 2023, following an improvement in 5 year swap rates and forward financing expectations, some buyers opportunistically closed deals to purchase assets from some vendors who were under pressure. These transactions would have been priced earlier in the year when the interest rate outlook was less favourable. This short burst of transactions closing late in the year at wider yields resulted in a 3.2% like-for-like valuation decline of the Company's portfolio as at 31 December 2023.

Since the start of 2024 we have seen strong investor interest, including for those stores for which demand was weaker in Q4 2023. This includes assets on short leases or let to non-institutional grade tenants such as Asda, Morrisons and Waitrose, providing confidence that we have seen a bottoming out of valuations in the sector.

Whilst volatility remains, interest rate expectations have moderated somewhat and the 5 year swap rate has reduced from 5.0% in June to 3.4% in December, providing accretive opportunities to deploy capital. We expect that more constrained supply following very high transaction volumes in 2023 combined with falling interest rates will provide support for capital growth going forwards.

As sector specialists, we are able to identify value in often overlooked sub-sectors in a challenging real estate market. The prospective all-in fixed cost of debt for the Company is around 5.5% and we see accretive opportunities to deploy, whilst maintaining focus on high quality assets.

Strong balance sheet, well positioned to take advantage of opportunities in the market

The Company's balance sheet is in a robust position. During 2023, the Board and Investment Adviser took the prudent decision to maintain lower leverage given the challenging macro environment, resulting in an LTV of 33% as at 31 December 2023 (30 June 2023: 37%). This conservative approach, which saw the Company reduce debt and step back from the investment market to conserve cash during a period of continued volatility, now provides the Company with capacity for accretive deployment in an increasingly attractive investment environment.

The Company's cost of debt remains 100% fixed until FY26, through the peak of the interest rate cycle and we continue to see good access to refinancing liquidity from both new and existing lenders. We added Sumitomo Mitsui Banking Corporation to our group of relationship banks in the Period and we continue to maintain strong relationships with all lenders. Fitch ratings recently reaffirmed the Company's Investment Grade, long-term Issuer Default Rating ("IDR") of 'BBB+' with a stable outlook.

The Company has significant headroom on its bank facility covenants and given the attractiveness of current investment yields is currently assessing a number of earnings accretive acquisition opportunities.

Acquisitions in the period relate to the conclusion of the sale of the Sainsbury's Reversionary Portfolio to Sainsbury's plc

During the Period, the Group purchased two further supermarkets for £36.4 million18:

• July 2023: Two Sainsbury's superstores in Derby, for £19.0 million18 and Gloucester, for £17.4 million18, at a blended NIY of 6.5%. The stores had a 10-year unexpired lease term, subject to 5-yearly, upwards only open market rent reviews.

Valuation reflects transactions closing late Q4 which priced in higher long-run cost environment

Cushman & Wakefield valued the Portfolio as at 31 December 2023 in accordance with the RICS Valuation Global Standards. The properties were valued individually without any premium/discount applied to the Portfolio as a whole.

The Portfolio value was £1,675 million, with this valuation reflecting a net initial yield of 5.8% and a like-for-like valuation decline of 3.2% for the Period.

The decline in valuation reflects the outward shift in property yields applied by valuers as a result of transactions which completed in late 2023, having priced in Q3 amidst expectations of higher long-run costs. The valuation decline has been partially mitigated by our contractual inflation-linked rental uplifts. The average increase in rent from rent reviews performed during the six month period to 31 December 2023 was 5.1% (or 3.6% on an annualised basis). 80% of the Company's leases benefit from contractual rental uplifts, with 78% linked to inflation and 2% with fixed uplifts.

The benchmark MSCI All Property Capital Index during the same period was down 4.0%. Since the Period end we have seen signs of increasing investor interest as the forecast cost of debt begins to fall and with current supermarket yields producing attractive returns.

Active asset management delivering additional value and improving sustainability of sites

We continue to seek to deliver additional value for shareholders through active management of our larger sites which are not fully demised to the core supermarket tenants and therefore benefit from greater landlord control.

At Tesco, Chineham, McDonald's has commenced fit out works of a unit with a new 25-year lease. In addition to this, Pets Corner is upsizing into a new unit. At Tesco, Bradley Stoke, works are currently being undertaken to amalgamate two units, one of which was vacant at acquisition and the other let on a concessionary basis, with B&M committing to a new 10-year lease, rendering the site 100% let.

Opportunities to add complementary discount grocery operators have progressed. At Tesco, Chineham, the existing planning consent was successfully implemented and terms are agreed with a complementary discount grocery retailer. Other developments are being considered at Sainsbury's, Newcastle, Morrisons, Workington and Tesco, Bradley Stoke and various negotiations are ongoing with potential tenants for those sites.

Progress has also been made on sustainability initiatives at our sites. Electric Vehicle ("EV") charging has been completed at five sites. 58 EV charging bays have been installed at zero capex cost to the Company across:

• Morrisons, Workington
• Morrisons, Wisbech
• Tesco, Bradley Stoke
• Tesco, Chineham
• Tesco, Beaumont Leys

We continue to assess the portfolio for other EV charging installation opportunities with three immediate targets already identified.

Works were completed at Tesco, Thetford in partnership with Atrato Onsite Energy plc where Tesco entered into a 20-year Power Purchase Agreement ("PPA") for a new solar installation on the rooftop at the store. The EPC rating was re-assessed post installation and improved from a C to a B.

Delivering on our sustainability strategy

The Company has continued to deliver on its sustainability strategy and improve its ESG performance. The Company is pleased to have now progressed from a Net Zero ambition to submitting science-based emissions reduction targets to the SBTi and embarking on their delivery. The Company's targets, currently submitted to the SBTi for validation, include:

• Net-Zero: A commitment to reach net zero Greenhouse Gas ("GHG") emissions across the value chain by FY2050
• Near-term Target: A commitment to reduce absolute Scope 1 and 2 GHG emissions by 42% by FY2030 from a FY2023 base year
• Long-term Target: A commitment to reduce absolute Scope 1, 2 and 3 GHG emissions by 90% by FY2050 from a FY2023 base year

The Annual Report and Accounts for the year ended 30 June 2023 included the Company's Task Force on Climate-Related Financial Disclosures ("TCFD") report, with disclosures made across all 11 TCFD recommendations. Included within this report was the Company's GHG Inventory disclosures, across Scope 1, 2 and 3 emissions. As part of the Company's commitment to further developing its mechanisms to identify, manage and respond to climate-related risks, TCFD and climate risk training was rolled out to the Investment Adviser and completed by the full team in December 2023.

The Company's approach to sustainability is underpinned by the Board's commitment to good stewardship and creating long-term value for our stakeholders. The Company continues to support the commitments of its Investment Adviser as a signatory to both the United Nations Principles for Responsible Investment ("UNPRI") and Net Zero Asset Managers Initiative ("NZAM"). The Investment Adviser received the results of its first PRI Report submission in January 2024 and will be reporting on its responsible investment activities again in the next PRI reporting cycle. In January 2024, the Investment Adviser also became part of the first cohort of endorsers of Spring - a PRI stewardship initiative for nature.

The Company's Board and the Investment Adviser recognise the importance of transparent, decision-useful sustainability reporting to improve our accountability to stakeholders. The Company's next annual Sustainability Report will be published alongside the Company's Full Year Results. The Company remains committed to further development of its sustainability strategy and priority ESG activities, as it continues to integrate ESG best practice and contribute towards a net zero future.

Post Period end, the Company adopted a charitable giving policy focused on the themes of alleviating poverty and hunger, feeding the nation, and having a positive impact on biodiversity at and near our sites. The Investment Adviser has also formalised a volunteering programme and its employees have given their time to support these themes. The Company will report on progress with the implementation of the charitable giving policy and volunteering impact within its next annual Sustainability Report.

Financial results

Net rental income

In the Period, the portfolio generated net rental income of £52.6 million (six months to 31 December 2022: £45.9 million), representing an increase of £6.7 million or 14.5% compared to the prior period.

On a like-for-like basis, EPRA net rental income increased by 2.5%. During the Period we successfully completed 13 rent reviews generating £1.7 million of additional rental income, representing an increase of 5.1% (or 3.6% on an annualised basis).

The second half of the year will benefit both from a full period of rental income from properties acquired in the Period and contractual uplifts across 27% of the portfolio subject to a review in the six months to 30 June 2024.

Direct property expenditure increased marginally to £0.4 million (six months to 31 December 2022: £0.3 million), however our gross to net margin continues to be among the highest in the sector at 99.3% (six months to 31 December 2022: 99.4%), reflecting the strength of our core single-let strategy and further highlighting the covenant quality of our tenant base.

Rent collection rates were 100% for the six months to 31 December 2023 (six months to 31 December 2022: 100%), as our focus on top trading stores and covenant quality provided exceptional income security.

Administrative and other expenses and EPRA cost ratio

Administrative and other expenses, which include all operational costs of running the business, remained broadly flat period-on-period at £7.6 million (six months to 31 December 2022: £7.9 million). We continue to monitor the operational efficiency of the Group through its EPRA cost ratio, which is among the lowest in the sector, and improved by 160bps to 15.1%.

Net finance costs

During the Period, the Group received £135.1 million following the divestment of its interest in the Sainsbury's Reversion Portfolio Joint Venture. Part of the proceeds were utilised to pay down debt, reducing drawn debt by £84.4 million to £587.8 million at the period end. At the same time, the Group extended the term of its hedging by 12 months, fixing the weighted average cost of debt on drawn balances at 3.1%.

Net finance costs reduced by £1.5 million primarily due to one-off loan restructuring costs recognised in the prior period.

Adjusted earnings

The Directors consider Adjusted earnings a key measure of the Company's underlying operating results, and therefore excludes one-off items which are non-recurring in nature and includes finance income on derivatives held at fair value through profit on loss. Adjusted earnings for the six months to 31 December 2023 were £36.3 million (six months to 31 December 2022: £36.4 million). On a per share basis, adjusted earnings remained flat in the Period at 2.9 pence (six months to 31 December 2022: 2.9 pence) per share.

A full reconciliation between IFRS and Adjusted earnings can be found in note 10 of the Financial Statements.

Dividend

In August 2023, the Company paid a fourth interim dividend in respect of the period from 1 April 2023 to 30 June 2023 of 1.50 pence per share, taking total dividends paid and declared in respect of the financial year ended 30 June 2023 to 6.00 pence per share.

In November 2023, the Company paid a first interim dividend in respect of the period from 1 July 2023 to 30 September 2023 of 1.515 pence per share and in January 2024 approved a second interim dividend of 1.515 pence per share for the three months ended 31 December 2023.

The Company is continuing to target a dividend of 6.06 pence per share in respect of the year ended 30 June 2024.

EPRA net tangible assets and IFRS net asset

EPRA net tangible assets ("EPRA NTA") is considered to be the most relevant measure for the Group, and includes both income and capital returns, but excludes fair value of interest rate derivatives and revaluation to fair value of investment properties held at amortised cost.

At 31 December 2023, EPRA NTA was £1,094 million (30 June 2023: £1,157 million), representing an EPRA NTA per share of 88 pence, a decrease of 5.4% since 30 June 2023 primarily due to the portfolio revaluation deficit of £57.9 million or 5 pence per share.

Portfolio Valuation

The value of the portfolio at 31 December 2023, including the fair value of investment properties held at amortised cost, was £1,675 million (30 June 2023: £1,693 million). During the period, the Group invested £38.4 million in two omnichannel supermarkets (including transaction costs) and incurred capital expenditure of £0.1 million. On a like-for-like basis, the portfolio recognised a revaluation deficit of £54.4 million, or 3.2%, as a result of 20bps outward yield shift.

Cash Flow and Net Debt

Cash flows from operating activities before changes in working capital increased by £6.9 million to £43.6 million, primarily due to increased rental income received from rent reviews and property acquisitions.

During the Period, the Group received £135.1 million following the divestment of its interest in the Sainsbury's Reversion Portfolio Joint Venture. Part of the proceeds were used to acquire two omnichannel supermarkets with a combined acquisition cost of £38.4 million (including transaction costs), providing earnings growth in line with the Group's strategy.

Net debt decreased by £83.2 million over the six-months to 31 December 2023, to £546.8 million, and represents a loan to value of 33% (30 June 2023: 37%). The Group continues to maintain a conservative leverage policy, with a medium-term target LTV of 30-40%.

Financing

Includes extension options at lenders' discretion

During the Period, the Group completed a comprehensive debt refinancing exercise, completing a new £67 million unsecured facility with Sumitomo Mitsui Banking Corporation, at the same time reducing its HSBC facility from £150 million to £50 million and cancelling its Barclays/RBC facility of £77.5 million. This refinancing has allowed the Group to increase its weighted average debt maturity to 4.1 years (30 June 2023: 3.7 years).

At 31 December 2023, the Group has gross borrowings of £588 million diversified across eight lenders, including £374 million of unsecured borrowings and £214 million of secured borrowings. In addition, the Group has available undrawn facilities of £177 million (which includes a £75 million credit approved accordion) and plenty of headroom under banking covenants, providing the capacity to execute opportunistic transactions as they arise.

The Group has £97 million of debt maturing in the next twelve months, all of which is covered by undrawn facilities. The Group maintains good long-term relationships with all lenders and is currently in discussions regarding the refinancing requirement and expects to conclude the transaction on or around the current financial year end.

The Group's interest rate risk is mitigated through a combination of fixed debt and derivative interest rate swaps and caps. During the Period, the Group utilised the value of its existing in-the-money interest rate hedges to extend the term of its hedging arrangements by 12 months at no additional cost to the Company. As a result of these transactions, 100% of the Group's drawn debt is now either fixed or hedged for 2.7 years at a weighted average cost of 3.1%.

The Group continues to monitor its banking covenants and maintains significant headroom on its LTV and ICR covenants. As at 31 December 2023, property values would need to fall by around 42% before breaching the gearing covenant. Similarly, net rental income would need to fall by 56% before breaching the interest cover covenant.

Atrato Capital Limited

Investment Adviser

RINCIPAL RISKS AND UNCERTAINTIES

The Audit and Risk Committee, which assists the Board with its responsibilities for managing risk, regularly considers changes to the principal risk and uncertainties for the Group. The risk management process including the identification, consideration and assessment of those emerging risks which may impact the Group, remain as described in the 2023 Annual Report.

In the Period, the probability of Property Risk, 'our ability to source assets may be affected by competition for investment properties in the supermarket sector', was increased from low to moderate and the Macroeconomic Risk, 'impact of the war in Ukraine' was expanded to include the impact of all geopolitical conflicts.

The principal risks and uncertainties faced by the Company in the Period have otherwise not changed from what is detailed on pages 52 to 58 of the 2023 Annual Report and no further changes are expected in the remaining six-months of the financial year ending 30 June 2024. A summary of those principal risks and uncertainties is provided below:

Property risk

• The lower-than-expected performance of the Portfolio could reduce property valuations and/or revenue, thereby affecting our ability to pay dividends or lead to a breach of our banking covenants
• Our ability to source assets may be affected by competition for investment properties in the supermarket sector
• The default of one or more of our lessees would reduce revenue and may affect our ability to pay dividends
• The default of one of the supermarket operators would create an excess supply of supermarket real estate, thereby putting pressure on ERVs leading to a breach in our banking covenants

Financial risk

• Our use of floating rate debt will expose the business to underlying interest rate movements as interest rates continue to rise
• A lack of debt funding at appropriate rates may restrict our ability to grow
• We must be able to operate within our banking covenants

Corporate risk

• There can be no guarantee that we will achieve our investment objectives
• We are reliant on the continuance of the Investment Adviser

Taxation risk

• We operate as a UK REIT and have a tax-efficient corporate structure, with advantageous consequences for UK shareholders. Any changes to our tax status or in UK legislation could affect our ability to achieve our investment objectives and provide favourable returns to shareholders

Climate risk

• The assets within the Group's portfolio that are less energy efficient may be exposed to downward pressure on valuation or increased pressure to invest in the improvement of individual assets
• Changes in regulatory policy could lead to our assets becoming unlettable
• Volatile changes in the weather systems may deem the Group's properties no longer viable to tenants

Cyber risks

• The rise in attempted cyber crime and more recently cyber risks arising from recent geopolitical tensions has increased the risk for a listed company

Market price risk

• Shareholders may not be able to realise their shares at a price above or the same as they paid for the shares or at all

Macroeconomic risks

• Inflationary pressures on the valuation of the portfolio
• Impact of geopolitical conflict

ALTERNATIVE INVESTMENT FUND MANAGER (the "AIFM")

The AIFM was appointed with effect from 15 June 2017 as the Company's alternative investment fund manager under the terms of a Management Agreement between the Company and the AIFM, in accordance with the Alternative Investment Fund Manager's Directive and the Alternative Investment Fund Managers Regulations 2013. The AIFM is licensed and regulated by the Guernsey Financial Services Commission.

The AIFM is responsible for the day-to-day management of the Company's investments, subject to the investment objective and investment policy and the overall supervision of the Directors. The AIFM is also required to comply with on-going capital, reporting and transparency obligations and a range of organisational requirements and conduct of business rules. The AIFM must also, as the AIFM for the Company, adopt a range of policies and procedures addressing areas such as risk management, liquidity management, conflicts of interest, valuations, compliance, internal audit and remuneration.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that, to the best of their knowledge, this condensed set of consolidated financial statements has been prepared in accordance with IAS 34 as adopted by the United Kingdom and that the operating and financial review included herein provides a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority, namely:

• an indication of important events that have occurred during the Period and their impact on the condensed financial statements and a description of the principal risks and uncertainties for the remaining months of the Group's financial year; and
• disclosures of any material related party transactions in the Period. These are included in note 21.

full list of Directors of the Company can be found at the end of this interim report. Shareholder information is as disclosed on the Supermarket Income REIT plc website.

For and on behalf of the Board

Nick Hewson

Chair

INDEPENDENT REVIEW REPORT TO SUPERMARKET INCOME REIT PLC

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2023 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Cash Flow Statement and the related notes.

Basis for conclusion

Conclusions relating to going concern

Responsibilities of directors

Auditor's responsibilities for the review of the financial information

Use of our report

BDO LLP

Chartered Accountants

London, UK

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six month period ended 31 December 2023

Items to be classified to profit or loss in subsequent periods

These unaudited condensed consolidated financial statements were approved and authorised for issue by the Board of Directors on 12 March 2024 and were signed on its behalf by: Nick Hewson, Chairman.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six month period ended 31 December 2023 (unaudited)

For the year from 1 July 2022 to 30 June 2023 (audited)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six month period ended 31 December 2022 (unaudited)

Basis of preparation

General information

Supermarket Income REIT plc is a company registered in England & Wales with its registered office at 1 King William Street, London, United Kingdom, EC4N 7AF. The principal activity of the Company and its subsidiaries (the "Group") is to provide its shareholders with an attractive level of income together with the potential for capital growth by investing in a diversified portfolio of supermarket real estate assets in the UK.

The financial information set out in this report covers the six months to 31 December 2023, with comparative numbers amounts shown for the year to 30 June 2023 and the six months to 31 December 2022. These condensed financial statements are unaudited and the financial information for the year ended 2022 contained herein does not constitute statutory accounts for as defined in section 434 of the Companies Act 2006. The statutory accounts for the year ended 30 June 2023 have been delivered to the Registrar of Companies. The independent auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

At 31 December 2023 the Group comprised of the Company and its wholly-owned subsidiaries. All subsidiaries are incorporated in the England & Wales and Jersey.

The condensed consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the United Kingdom. The accounting policies adopted in this report are consistent with those applied in the Group's audited financial statements for the year ended 30 June 2023. The accounting policies applied in the preparation of this financial information are expected to be consistently applied in the financial statements for the year to 30 June 2024.

Accounting convention and currency

The condensed consolidated financial statements ("the financial statements") have been prepared on a historical cost basis, except that investment properties, rental guarantees and interest rate derivatives are measured at fair value.

The financial statements are presented in Pounds Sterling and all values are rounded to the nearest thousand (£'000), except where otherwise indicated. Pounds Sterling is the functional currency of the Group and the presentation currency of the Group.

The Directors are of the opinion that the Group is currently engaged in a single segment business, being investment in United Kingdom in supermarket property assets.

Going concern

In light of the current macroeconomic backdrop, the Directors have placed a particular focus on the appropriateness of adopting the going concern basis in preparing the Group's interim results for the six months ended 31 December 2023. In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council.

Liquidity

At 31 December 2023, the Group generated net cash flow from operating activities of £42.1 million and had cash and undrawn committed facilities totalling £138.8 million with no capital commitments or contingent liabilities.

Refinancing events

At the date of signing the financial statements, the Deka facility (£96.6 million) falls due for repayment during the going concern period (August 2024). It is intended that the facility will be refinanced prior to maturity, or if required, it will be paid down in full utilising the Group's available undrawn committed facilities of over £100 million. All lenders have been supportive during the year and have expressed commitment to the long-term relationship they wish to build with the Company.

Basis of preparation (continued)

Covenants

The Group's debt facilities include covenants in respect of LTV and interest cover, both projected and historic. All debt facilities, except for the unsecured facilities, are ring-fenced with each specific lender.

The Directors have evaluated a number of scenarios as part of the Group's going concern assessment and considered the impact of these scenarios on the Group's continued compliance with secured debt covenants. The key assumptions that have been sensitised within these scenarios are falls in rental income and increases in administrative cost inflation.

As at the date of issuance of this consolidated financial information 100% of contractual rent for the period has been collected. The Group benefits from a secure income stream from its property assets that are let to tenants with excellent covenant strength under long leases that are subject to upward only rent reviews.

The list of scenarios is below and are all on top of the base case model which includes prudent assumptions on valuations and cost inflation. No sensitivity for movements in interest rates have been modelled as the Group is fully hedged during the going concern assessment period.

The Group continues to maintain covenant compliance for its LTV and ICR thresholds throughout the going concern assessment period under each of the scenarios modelled. One of the secured facilities in the Group has a debt yield covenant, which is calculated as the passing rent divided by the loan balance for the properties secured against the lender. The debt yield covenant only would be breached for this facility if rental income is reduced by 11% during the going concern assessment period. The Board considers this scenario highly unlikely given the underlying covenant strength of the tenants. Furthermore, there are remedies available to the Group which include reducing a portion of the outstanding debt from available undrawn facilities or providing additional security over properties that are currently unencumbered.

The lowest amount of ICR headroom experienced in the worst-case stress scenarios was 38%. Based on the latest bank commissioned valuations, property values would have to fall by 21% before LTV covenants are breached, and 8% against the 31 December 2023 Group valuations. Similarly, the strictest interest cover covenant within each of the ring-fenced banking groups is 225%, where the portfolio as a whole is forecast to have an average interest cover ratio of 529% during the going concern period.

Having reviewed and considered three modelled scenarios, the Directors consider that the Group has adequate resources in place for at least 12 months from the date of these results and have therefore adopted the going concern basis of accounting in preparing the interim financial statements.

• Significant accounting judgements, estimates and assumptions

There have been no new or material revisions to the nature and amount of judgements and estimates reported in the Annual Report 2023, other than changes to certain assumptions applied in the valuation of properties. Details of the key assumptions applied at 31 December 2023 are set out in note 12.

Summary of material accounting policies

The principal accounting policies adopted in this report are consistent with those applied in the Group's audited financial statements for the year ended 30 June 2023 and are expected to be consistently applied during the year ending 30 June 2024.

3.1. New standards issued and effective

The following amendments are effective for the period beginning 1 July 2023:

• IFRS 17 Insurance Contracts;
• International Tax Reform - Pillar Two Model Rules (Amendment to IAS 12 Income Taxes)

3.2. New standards issued but not yet effective

Amendments to IAS 1 on Classification of liabilities as Current or Non-Current are effective for the financial years commencing on or after 1 January 2024 and are to be applied retrospectively. It is not expected that the amendments will have an impact on the presentation and classification of liabilities in the Group Statement of Financial Position based on rights that are in existence at the end of the reporting period.

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective for the current accounting period. None of these are expected to have a material impact on the consolidated financial statements of the Group.

Gross rental income

Included within rental income is a £1,099,000 (six months to 31 December 2022: £1,256,000; year to 30 June 2023: £2,512,000) rent smoothing adjustment that arises as a result of IFRS 16 'Leases' requiring that rental income in respect of leases with rents increasing by a fixed percentage be accounted for on straight-line basis over the lease term. During the year this resulted in an increase in rental income and an offsetting entry being recognised in profit or loss as an adjustment to the investment property revaluation.

Also included in rental income is a £216,000 (six months to 31 December 2022: £205,000; year to 30 June 2023 £499,000) adjustment for lease incentives. Tenant lease incentives are recognised on a straight line basis over the lease term as an adjustment to rental income. During the year this resulted in an increase in rental income and an offsetting entry being recognised in profit or loss as an adjustment to the investment property revaluation.

On an annualised basis, rental income comprises £50,460,000 relating to the Group's largest tenant and £30,681,000 relating to the Group's second largest tenant. There were no further tenants representing more than 10% of annualised gross rental income during either year.

Service charge expense

Directors' remuneration

The Group has no employees. The Directors, who are the key management personnel of the Group, are appointed under letters of appointment for services. Directors' remuneration, all of which represents fees for services provided, was as follows:

1 Directors' individual fee levels are unchanged in the period. In March 2023 the Board increased from five to six non-executive Directors, with an associated increase in Total Directors' remuneration.

Finance Income and expense

Finance income

*This includes a non-recurring exceptional charge of £281,000 (six months to 31 December 2022: £1.52m, year to 30 June 2023: £1.52m), relating to the acceleration of unamortised arrangement fees in respect of the modification of loan facilities under IFRS 9.

The above finance expense includes the following in respect of liabilities not classified as fair value through profit or loss:

The Company and its subsidiaries operate as a UK Group REIT. Subject to continuing compliance with certain rules, the UK REIT rules exempt the profits of the Group's property rental business from UK corporation tax. To operate as a UK Group REIT a number of conditions had to be satisfied in respect of the Company, the Group's qualifying activity and the Group's balance of business. Since 21 December 2017 the Group has met all such applicable conditions.

The reconciliation of the profit before tax multiplied by the standard rate of corporation tax for the period of 25% (30 June 2023: 20.4% 31 December 2022: 19%) to the total tax (credited) is as follows:

Earnings per share

The European Public Real Estate Association ("EPRA") publishes guidelines for calculating adjusted earnings on a comparable basis. EPRA EPS is a measure of EPS designed by EPRA to enable entities to present underlying earnings from core operating activities, which excludes fair value movements on investment properties.

The Company has also included an additional earnings measure called "Adjusted Earnings" and "Adjusted EPS". Adjusted earnings is a performance measure used by the Board to assess the Group's financial performance and dividend payments. The metric adjusts EPRA earnings by deducting one-off items such as debt restructuring costs and adding back finance income on derivatives held at fair value through profit and loss. Adjusted Earnings is considered a better reflection of the measure over which the Board assesses the Group's trading performance and dividend cover.

Finance income received from derivatives held at fair value through profit and loss are added back to EPRA earnings as this reflects the cash received from the derivatives in the period and therefore gives a better reflection of the Group's net finance costs.

Debt restructuring costs relate to the acceleration of unamortised arrangement fees following the restructuring of the Group's debt facilities during the period.

The reconciliation of IFRS Earnings, EPRA Earnings and Adjusted Earnings is shown below:

1 Based on the weighted average number of ordinary shares in issue

Earnings per share (continued)

Amounts recognised as a distribution to ordinary Shareholders in the period:

On 6 July 2023, the Board declared a fourth interim dividend for the year ending 30 June 2023 of 1.5 pence per share, which was paid on 4 August 2023 to shareholders on the register on 14 July 2023.

On 5 October 2023 the Board declared a first interim dividend for the year ending 30 June 2024 of 1.515 pence per share, which was paid on 16 November 2023 to shareholders on the register on 13 October 2023. The withholding tax element of the dividend of £2.3 million was settled in January 2024.

On 4 January 2024, the Board declared a second interim dividend for the year ending 30 June 2024 of 1.515 pence per share, which was paid on 14 February 2024 to shareholders on the register on 12 January 2024. This has not been included as a liability as at 31 December 2023.

Investment Properties

In accordance with IAS 40 'Investment Property', the Group's investment properties have been independently valued at fair value by Cushman & Wakefield, an accredited independent valuer with a recognised and relevant professional qualification and with recent experience in the locations and categories of the investment properties being valued. The valuations have been prepared in accordance with the RICS Valuation - Global Standards (the 'Red Book') and incorporate the recommendations of the International Valuation Standards Committee which are consistent with the principles set out in IFRS 13.

The independent valuer in forming its opinion on valuation makes a series of assumptions. All the valuations of the Group's investment property at 31 December 2023 are classified as 'level 3' in the fair value hierarchy defined in IFRS 13. The valuations are ultimately the responsibility of the Directors. Accordingly, the critical assumptions used in establishing the independent valuation are reviewed by the Board.

Of the seventeen properties held under long leaseholds, the years unexpired on the headleases are as follows: four properties with between 115 and 155 years, and thirteen properties with between 967 and 987 years. The Group has no material liabilities in respect of these headleases.

Investment Properties (continued)

Included within the carrying values of investment properties at 31 December 2023 is £9,822,000 (six months to 31 December 2022: £7,468,000, year to 30 June 2023: £8,724,000) in respect of the smoothing of fixed contractual rent uplifts as described in note 4. The difference between rents on a straight-line basis and rents receivable is included within the carrying value of the investment properties but does not increase that carrying value over fair value.

Included within the carrying values of investment properties at 31 December 2023 is £816,000 (six months to 31 December 2022: £nil, year to 30 June 2023: £251,000) in respect of the lease incentives with tenants in the form of rent free debtors as described in note 4.

The effect of these adjustments on the revaluation movement for the period is as follows:

Valuation techniques and key unobservable inputs

Valuation techniques used to derive fair values

The valuations have been prepared on the basis of market value which is defined in the RICS Valuation Standards as 'the estimated amount for which an asset or liability should exchange on the date of the valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion'. Market value as defined in the RICS Valuation Standards is the equivalent of fair value under IFRS.

Unobservable inputs

Significant unobservable inputs include: the estimated rental value ("ERV") based on market conditions prevailing at the valuation date and the equivalent yield (defined as the weighted average of the net initial yield and reversionary yield). Other unobservable inputs include but are not limited to the future rental growth - the estimated average increase in rent based on both market estimations and contractual situations and the physical condition of the individual properties determined by inspection.

A decrease in ERV would decrease fair value. A decrease in the equivalent yield would increase the fair value.

Sensitivity of measurement of significant unobservable inputs

The determination of the valuation of the Group's investment property portfolio is open to judgements and is inherently subjective by nature.

Investment Properties (continued)

Sensitivity analysis - impact of changes in net initial yields and rental values

*31 December 2022 figures were calculated on +/- 1% rental value.

Financial assets held at amortised cost

On 8 June 2022, the Group acquired an Asda store in Carcroft, via a sale and leaseback transaction for £10.6 million, this has been recognised in the Statement of Financial Position as a Financial asset in accordance with IFRS 9. The financial asset is measured using the amortised cost model, which recognises the rental payments as financial income and reductions of the asset value based on the implicit interest rate in the lease. As at 31 December 2023 the market value of the property was estimated at £7.3 million.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk and ageing. The expected loss rates are based on the Group's historical credit losses experienced over the period from incorporation to 31 December 2023. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers. Both the expected credit loss provision and the incurred loss provision in the current year is immaterial. No reasonable possible changes in the assumptions underpinning the expected credit loss provision would give rise to a material expected credit loss.

Trade and other receivables

The receivable from joint venture disposal is from March 2023 when the Group sold its interests in its Joint Venture to Sainsbury's for gross proceeds of £430.8 million, which was structured in three separate tranches:

• The first tranche of £279.3 million was paid in cash on 17 March 2023
• The second tranche of £116.9 million was paid in cash on 10 July 2023
• The third tranche of £34.7 million was conditional on the sale of the remaining five stores in the portfolio.

In March 2023 the Group purchased two of the five stores for a gross purchase price of £25.2 million and received total proceeds from Sainsbury's of £15.0 million.

During the period, the Group purchased two of the remaining three stores in the portfolio for a gross purchase price of £36.4 million and received proceeds from Sainsbury's of £18.2 million. It is expected that the one remaining store will be sold at vacant possession value of which the Group's portion is currently £1.5 million.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk and ageing. The expected loss rates are based on the Group's historical credit losses experienced over the period from incorporation to 31 December 2023. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's tenants. Both the expected credit loss provision and the incurred loss provision in the current and prior year are immaterial. No reasonable possible changes in the assumptions underpinning the expected credit loss provision would give rise to a material expected credit loss.

Trade and other payables

The interest rate cap and interest rate swap is remeasured to fair value by the counterparty bank on a quarterly basis.

Interest rate derivatives (continued)

A summary of these derivatives as at 31 December 2023 is shown in the table below:

100% of the Group's outstanding debt as at 31 December 2023 was hedged through the use of fixed rate debt or financial instruments as at 31 December 2023 (30 June 2023: 100%). It is the Group's target to hedge at least 50% of the Group's total debt at any time using fixed rate loans or interest rate derivatives.

Interest rate derivatives (continued)

During the period, the Group extended the maturity of the interest rate derivatives by 12 months. The weighted average interest rate following the derivative changes is 3.1% inclusive of the margin. The Group also entered into forward starting caps effective in August 2024 and July 2025 and terminating in July 2025 and January 2026 with a strike rate of 1.4% versus SONIA.

In accordance with the Group's treasury risk policy, the Group applies cash flow hedge accounting in partially hedging the interest rate risks arising on its Wells Fargo variable rate linked facility. Since the changes to the interest rate derivatives in the period the Group no longer applies hedge accounting to the newly acquired swaps including the derivative linked to the Wells Fargo variable facility. Changes in the fair values of derivatives that were designated as cash flow hedges and were effective, were recognised directly in the cash flow hedge reserve and included in other comprehensive income. On derecognition of hedge accounting, the cash flow hedge reserve is recycled to the profit and loss over the remaining term of the Wells Fargo facility.

All interest rate derivatives are classified as level 2 in the fair value hierarchy as defined under IFRS 13 and there were no transfers to or from other levels of the fair value hierarchy during the year.

Bank borrowings

Bank borrowings (continued)

A summary of the Group's borrowing facilities as at 31 December 2023 are shown below:

Any associated fees in arranging the bank borrowings that are unamortised as at the end of the period are offset against amounts drawn under the facilities as shown in the table above. The debt is secured by charges over the Group's investment properties and by charges over the shares of certain group companies, not including the Company itself. There have been no defaults of breaches of any loan covenants during the current or any prior period.

Share capital

Ordinary shareholders are entitled to all dividends declared by the Company and to all of the Company's assets after repayment of its borrowings and ordinary creditors. Ordinary shareholders have the right to vote at meetings of the Company. All ordinary shares carry equal voting rights. The aggregate ordinary shares in issue at 31 December 2023 total was 1.246 billion.

Cash flow hedge reserve

During the period, a previously hedge accounted derivative in relation to the Wells Fargo facility was terminated. The residual balance of the derivative is recycled to the income statement over the remaining period of the Wells Fargo loan.

Capital commitments

The Group had no capital commitments outstanding as at 31 December 2023 (30 June 2023: none; 31 December 2022: none).

Transactions with related parties

Details of the related parties to the Group in the period and the transactions with these related parties were as follows:

Directors

Directors' fees

Nick Hewson, Chairman of the Board of Directors of the Company, is paid fees of £75,000 per annum, with the other Directors each being paid fees of £52,500 per annum. Jon Austen is paid an additional £9,000 per annum for his role as chair of the Company's Audit Committee, Vince Prior is paid an additional £4,000 per annum for his role as chair of the Company's Nominations Committee and £5,000 for his role as Senior Independent Director. Cathryn Vanderspar is paid an additional £5,000 for her role as Chair of the Remuneration Committee. Frances Davies is paid an additional £5,000 for her role as Chair of the ESG Committee. Sapna Shah is paid an additional £5,000 for her role as Chair of Management Engagement Committee.

Directors' interests

Details of the direct and indirect interests of the Directors and their close families in the ordinary shares of one pence each in the Company at 31 December 2023 were as follows:

• Nick Hewson: 1,263,309 shares (0.1% of issued share capital)
• Jon Austen: 305,339 shares (0.02% of issued share capital)
• Vince Prior: 213,432 shares (0.02% of issued share capital)
• Cathryn Vanderspar: 125,802 shares (0.01% of issued share capital)
• Frances Davies: 36,774 (0.00% of issued share capital)
• Sapna Shah: 28,951 (0.00% of issued share capital)
• Investment Adviser

Investment advisory and accounting fees

The investment adviser to the Group, Atrato Capital Limited, is entitled to certain advisory fees under the terms of the Investment Advisory Agreement (the "Agreement") dated 14 July 2021.

Transactions with related parties (continued)

The entitlement of the Investment Adviser to advisory fees is by way of what are termed 'Monthly Management Fees' and 'Semi-Annual Management Fees' both of which are calculated by reference to the net asset value of the Group at particular dates, as adjusted for the financial impact of certain investment events and after deducting any un-invested proceeds from share issues up to the date of the calculation of the relevant fee (these adjusted amounts are referred to as 'Adjusted Net Asset Value' for the purpose of calculation of the fees in accordance with the Agreement).

Until the Adjusted Net Value of the Group exceeds £1,500 million, the entitlements to advisory fees can be summarised as follows:

• Monthly Management Fee payable monthly in arrears: 1/12th of 0.7125% per calendar month of Adjusted Net Asset Value up to or equal to £500 million, 1/12th of 0.5625% per calendar month of Adjusted Net Asset Value above £500 million and up to or equal to £1,000 million and 1/12th of 0.4875% per calendar month of Adjusted Net Asset Value above £1,000 million and up to or equal to £1,500 million.
• Semi-Annual Management Fee payable semi-annually in arrears: 0.11875% of Adjusted Net Asset Value up to or equal to £500 million, 0.09375% of Adjusted Net Asset Value above £500 million and up to or equal to £1,000 million and 0.08125% of Adjusted Net Asset Value above £1,000 million and up to or equal to £1,500 million.

For the period 31 December 2023 the total advisory fees payable to the Investment Adviser were £4,829,236

(six months to December 2022: £5,355,138; year to 30 June 2023: £10,292,302) of which £1,859,105 (30 June 2023: £1,845,144; 31 December 2022: £1,970,754) is included in trade and other payables in the consolidated statement of financial position.

The Investment Adviser is also entitled to an annual accounting and administration service fee equal to: £54,107; plus (i) £4,386 for any indirect subsidiary of the Company and (ii) £1,702 for each direct subsidiary of the Company.

For the period to 31 December 2023 the total accounting and administration service fee payable to the Investment Adviser was £160,124 (six months to 31 December 2022: £149,548, year to 30 June 2023: £297,475) of which £80,353 (six months to December 2022: £78,322; year to 30 June 2023: £83,614) is included in trade and other payables in the consolidated statement of financial position.

Introducer Services

Atrato Partners, an affiliate of the Investment Adviser, is entitled to fees in relation to the successful introduction of prospective investors in connection with subscriptions for ordinary share capital in the Company. The entitlement of the Investment Adviser to introducer fees is by fees and/or commission which can be summarised as follows:

• Commission basis: one per cent of total subscription in respect of ordinary shares subscribed for by any prospective investor introduced by Atrato Partners.

For the period to 31 December 2023 the total introducer fees payable to the affiliate of the Investment Adviser were £Nil (six months to 31 December 2022: £Nil; year to 30 June 2023: £Nil)

Interest in shares of the Company

Details of the direct and indirect interests of persons discharged with managerial responsibility of the Investment Adviser and their close families in the ordinary shares of one pence each in the Company at 31 December 2023 were as follows:

• Ben Green: 1,939,534 shares (0.15% of issued share capital)
• Steve Windsor: 1,698,928 shares (0.14% of issued share capital)
• Steven Noble: 232,255 shares (0.02% of issued share capital)
• Natalie Markham: 62,679 (0.01% of issued share capital)
• Net asset value per share

NAV per share is calculated by dividing the Group's net assets as shown in the consolidated statement of financial position, by the number of ordinary shares outstanding at the end of the year. As there are no dilutive instruments outstanding, basic and diluted NAV per share are identical.

The Group uses EPRA Net Tangible Assets ("EPRA NTA") as the most meaningful measure of long-term performance and the measure which is being adopted by the majority of UK REITs, establishing it as the industry standard benchmark. It excludes items that are considered to have no impact in the long term, such as the fair value of derivatives.

The EPRA NTA per share calculation are as follows:

Subsequent events

On 4 January 2024, the Board declared a second interim dividend for the year ending 30 June 2024 of 1.515 pence per share, which was paid on 14 February 2024 to shareholders on the register on 12 January 2024. This has not been included as a liability as at 31 December 2023.

Notes to EPRA and other Key Performance Indicators

This appendix does not form part of the notes to the condensed set of consolidated financial statements.

EPRA Earnings and Adjusted Earnings per Share

EPRA EPS is a measure of EPS designed by EPRA to present underlying earnings from core operating activities. Adjusted earnings is EPRA earnings adjusted for company specific items to reflect the underlying profitability of the business.

1 Based on the weighted average number of ordinary shares in issue for the six months to 31 December 2023.

Notes to EPRA and other Key Performance Indicators continued

EPRA NTA per share

EPRA NTA is considered to be the most relevant measure for the Group and is now the primary measure of net assets, replacing the previously reported EPRA Net Asset Value metric. For the current period EPRA NTA is calculated as net assets per the consolidated statement of financial position excluding the fair value of interest rate derivatives and financial assets held at amortised cost.

Notes to EPRA and other Key Performance Indicators continued

​

EPRA Net Initial Yield (NIY) and EPRA "topped up" NIY

Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs.

All rent free periods expire within the year to 31 December 2024

EPRA Vacancy Rate

The EPRA vacancy rate is calculated as the ERV of the unrented, lettable space as a proportion of the total rental value of the direct Investment Property portfolio. This is expected to continue to be a highly immaterial percentage as the majority of the portfolio is let to the largest supermarket operators in the UK.

Notes to EPRA and other Key Performance Indicators continued

EPRA Cost Ratio

Administrative & operating costs (both including and excluding costs of direct vacancy) divided by gross rental income.

• Property operating expenses are net of costs capitalised in accordance with IFRS of £0.1 million (2022: £nil). Capitalised costs relate to development expenditure on the property portfolio.

Notes to EPRA and other Key Performance Indicators continued

EPRA LTV

Net debt divided by total property portfolio and other eligible assets.

EPRA Like-for-Like Rental Growth

Changes in net rental income for those properties held for the duration of both the current and comparative reporting period.

The like-for-like rental growth is based on changes in net rental income for those properties which have been held for the duration of both the current and comparative reporting. This represents a portfolio valuation, as assessed by the valuer of £1.3 bn (31 December 2022: £1.4 bn).

Notes to EPRA and other Key Performance Indicators continued

EPRA Property Related Capital Expenditure

Amounts spent for the purchase and development of investment properties (including any capitalised transaction costs).

Total Shareholder Return

Total Shareholder Return ("TSR") is measured by reference to the growth in the Group's share price over a period, plus dividends declared for that period.

Annualised passing rent

Annualised passing rent is the annualised cash rental income being received as at the stated date.

COMPANY INFORMATION

Vince Prior (Chair of Nomination Committee & Senior Independent Director) Jon Austen (Chair of Audit Committee) Cathryn Vanderspar (Chair of Remuneration Committee) Frances Davies (Chair of ESG Committee) Sapna Shah (Chair of Management Engagement Committee)

This report will be available on the Company's website.

[1] The alternative performance measures used by the Group have been defined and reconciled to the IFRS financial statements within the unaudited supplementary information

[2] Operating profit before changes in fair value of properties and share of income and profit on disposal from joint venture

[3] Adjusted Earnings and Adjusted EPS are calculated as EPRA Earnings and EPRA EPS adjusted for finance income from derivatives held at fair value through profit and loss, loan arrangement fee for Joint Venture acquisition and non-recurring debt restructuring costs. For further information please see the Key Performance Indicators and EPRA Performance Indicators sections

[4] Calculated as Adjusted Earnings divided by dividends paid during the period

5 Kantar: 6 months year on year growth from June to December 2023

[6] IGD UK grocery market 2024 forecast

[7] Knight Frank, Savills, MSCI, Atrato Capital research. Year ended 31 December 2023

[8] 77% of the Group's income is from Tesco and Sainsbury's. Sale and market share based on Kantar for the period June 2023 to December 2023

[9] Sainsbury's Interim Results 2023/24 and Tesco Interim Results 2023/24. Calculated as an average of like-for-like sales growth from "Supermarkets" (Sainsbury's) and "Large" (Tesco) stores

[10] Kantar: 6 months year on year growth from June to December 2023

[11] Includes one off exceptional cost in relation to the unwind of the SRP totalling £0.9m. The EPRA cost ratio excluding this one off cost would be 15.1%.

[12] Kantar: 6 months year on year growth from June to December 2023

[13] IGD UK grocery market 2024 forecast

[14] Tesco Interim Results 2023/24

[15] Sainsbury's Interim Results 2023/24

[16] IGD channel data 2017 to 2022 actuals, 2023 forecast

[17] Knight Frank, Savills, MSCI, Atrato Capital research. Year ending 31 December 2023

[18] Excluding acquisition costs.

[19] Including uncommitted extension options.