Annual Report • Sep 26, 2024
Annual Report
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Supermarket Income UK FUTURE OF GROCERY INVESTING IN THE SUPERMARKET INCOME REIT | ANNUAL REPORT 2024 WE ARE SECTOR SPECIALISTS INVESTING FOR INCOME AND CAPITAL GROWTH WHO WE ARE Supermarket Income REIT plc (LSE:SUPR) is dedicated to investing in supermarket property forming a key part of the future model of grocery. Our supermarkets are let to leading supermarket operators in the UK and Europe, diversified by both tenant and geography. We are the largest landlord of omnichannel supermarkets in the UK. WHAT WE DO We focus on grocery stores which are omnichannel, fulfilling online and in-person sales. The Company’s assets earn long-dated, secure, inflation-linked, growing income. The Company targets a progressive dividend and the potential for capital appreciation over the longer term. SUPERMARKET INCOME REIT | ANNUAL REPORT 2024 ANNUAL REPORT 2024 1 HIGHLIGHTS FOR THE YEAR We aim to provide investors with a combination of sustainable, long-term and growing income with potential for long-term capital growth. CONTENTS STRATEGIC REPORT 01 Highlights for the year 02 Chair’s Statement 04 Financial Highlights 06 Strategy at work 08 Omnichannel at work 10 Sustainability at work 12 Q&A with Justin King CBE 14 Investment Adviser’s Report 23 The Company’s Portfolio 25 The Grocery Market 34 Key Performance Indicators 35 EPRA Performance Indicators 36 Financial Overview 39 TCFD Compliant Report 52 Our Principal Risks 55 Section 172(1) Statement 56 Our Key Stakeholder Relationships 60 Going Concern and Viability Assessment CORPORATE GOVERNANCE 63 Chair’s Letter on Corporate Governance 64 Board of Directors 66 The Investment Adviser 68 Leadership and Purpose 72 Board Activities during the year 73 Key Decisions of the Board during the year 74 Corporate Governance Statement 76 Nomination Committee Report 79 Audit and Risk Committee Report 83 Management Engagement Committee Report 85 ESG Committee Report 87 Remuneration Committee Report 91 Directors’ Report 93 Directors’ Responsibilities Statement 94 Alternative Investment Fund Manager’s Report FINANCIAL STATEMENTS 97 Independent Auditors’ Report to the members of Supermarket Income REIT PLC 104 Consolidated Financial Statements 108 Notes to the Consolidated Financial Statements 138 Company Financial Statements 140 Notes to the Company Financial Statements 142 Unaudited Supplementary Information 147 Glossary 148 Contacts Information FINANCIAL HIGHLIGHTS 8.4 % DIVIDEND YIELD 6.06p DIVIDEND PER SHARE 14.7 % EPRA COST RATIO 2 37 % LOAN TO VALUE OPERATING HIGHLIGHTS 5.9 % PORTFOLIO NIY 12yrs PORTFOLIO WAULT 75 % OF RENTAL INCOME FROM TESCO AND SAINSBURY’S 100 % OCCUPANCY AND RENT COLLECTION SINCE IPO 3 SUSTAINABILITY HIGHLIGHTS 87 % OF STORE EPC RATINGS AT C OR ABOVE NET ZERO BY 2050 TARGET VALIDATED AND APPROVED 30 % OF SITES HAVE EV CHARGING 4 20 % OF STORES HAVE SOLAR INSTALLED 4 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS SUPERMARKET INCOME REIT | HIGHLIGHTS FOR THE YEAR . Using share price of . pence as at June . Including direct vacancy costs . Subject to rounding . UK sites only 2 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | CHAIR’S STATEMENT CHAIR’S STATEMENT “We have a balance sheet and asset portfolio which will enable us to deliver sustainable, long-term earnings growth even at these new ‘normal’ interest rate levels.” Nick Hewson, Chair Dear Shareholder, I am pleased to report another resilient year for the Company. Occupancy on our portfolio of grocery stores was 100%, as was rent collection, and indeed annualised passing rent grew year on year by 12%, due to accretive acquisitions and inflation protection in over 80% of our leases. Our vigilance on our cost base was again notable and we have one of the lowest EPRA cost ratios of our peers. We expect our cost ratio to reduce over the next 12 months as we focus on further operational efficiencies across the business. Once again, we are benefitting from our interest rate hedging strategy and we expect the interest rate backdrop to be more supportive from this point in the cycle. All of this is permitting us to recommend a further, if modest, increase to our dividend for the coming year to 6.12 pence per share (2024: 6.06 pence per share). This is in the context of our stated aim to deliver sustainable, long-term, growing income from the grocery real estate industry. The last three years have seen some challenging macroeconomic headwinds but we have weathered the storm and increased the dividend every year. We believe we have now seen the worst of it. Our job is to maximise our earnings and continue to increase the dividend on a covered basis, and benefit from the inherent affordability of the rents our grocery tenants pay us. The background to the challenging nature of the last three years has been the fact that we have all had to get used to operating in a higher interest rate environment compared to that in the 2010s. Those higher interest rates seem to have peaked during the summer of 2023, with 5-year swap rates exceeding 5% in July 2023. At that time, the Company prudently paid down debt to run at a lower LTV of 33%. This strategically conservative approach to leverage has, however, meant that 2024 earnings growth has been modest. On the other hand, we believe that property valuations reached a floor in December 2023. Consequently, we have been confident in 2024 to increase leverage, including through our oversubscribed debut Private Placement debt issuance, to help drive earnings growth through acquisitions which will benefit future years. In growing through acquisitions, the Investment Adviser’s position as a sector specialist gives the Company unique access to off-market opportunities to acquire these assets at yields which are above the cost of our debt financing. We have been highly selective in our acquisitions and maintain our focus of investing in top trading omnichannel stores let to the strongest grocery operators. While continuing to pursue our core UK strategy, we have also sought to broaden our investible universe and enhance the diversity and covenant strength of our tenant base through a highly selective expansion into Europe. In April, we made our first investment into the €290 billion French grocery sector with an off-market, direct sale and leaseback of 17 omnichannel stores with Carrefour. The transaction was the culmination of over 12 months of discussions, leveraging the Investment Adviser’s deep grocery expertise and long-standing sector relationships. This was Carrefour’s first sale and leaseback in France in 12 years and underlines the Company’s credentials as a trusted and expert counterparty. The transaction highlights the attractive opportunities to acquire and finance omnichannel supermarkets let to high- quality covenants with highly affordable rents in Europe. The acquisition was made at a 6.3% net initial yield and financed at an accretive 4.4% fixed cost of funding in Euros. However, this was a tentative exploration into non-UK property assets, representing some 4% of the portfolio. We continue to see interesting opportunities such as this and if we decide to increase further our exposure to continental European grocery assets, we will first consult with shareholders and seek shareholder approval to revise our Investment Policy accordingly. Our thesis at IPO in 2017 was focussed on the mission critical nature of omnichannel stores as last mile fulfilment hubs and the long-term attractiveness of owning these infrastructure-like assets. This thesis is as valid as ever in 2024 in both the UK and France. The strong performance of the UK and French grocery sectors and our omnichannel stores within them means our stores benefit from higher sales densities. This ensures rents remain affordable for our tenants. Rent to Turnover (“RTO”) at store level is the key affordability measure in the sector. The Company’s UK portfolio is at an average 4% RTO which is in-line with the long-standing industry standard level for high-quality stores. The discount to EPRA NTA at which the Company’s shares have traded through the year is a frustration for the Board and closing this discount is a key focus for the Company. We continually review how best to allocate our shareholders’ capital. The Board believes that over the medium term, earnings growth and the sustainability of the dividend will serve to narrow the discount. We are also focused on capital recycling opportunities through the sale of individual stores or larger JV opportunities. We regularly assess the use of share buybacks and at a certain price and in sufficient quantity they make mathematical sense if one can achieve both at the same time. However, the Board has given the Investment Adviser a mandate to achieve growth, on the basis that growing earnings through a selective approach to acquisitions will generate a higher return than that offered by share buybacks over the medium to long term. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS This position has remained under continuous review over the past year and will continue to be debated while our shares trade at a discount to EPRA NTA. I am particularly pleased this year with the progress being made on the Company’s sustainability activities. A key milestone has been achieved with the validation and approval of the Company’s science-based targets by the Science Based Target initiative (“SBTi”). We have also seen the continued addition of EV charging and solar panels at a number of our stores. Our tenants have also made ambitious net zero commitments and a benefit of owning mission critical real estate is the continuing capital expenditure our tenants make into our stores to meet their own commitments particularly in the area of refrigeration. Our Task Force on Climate-Related Financial Disclosures (“TCFD”) compliant annual report is accompanied by our second standalone sustainability report published today. The Company has prepared EPRA Sustainability Best Practices Recommendations (“sBPR”) disclosures for the first time and is also currently preparing its first net zero transition plan. In the coming months we also expect to proceed with a secondary listing on the Johannesburg Stock Exchange (“JSE”). Based on positive investor feedback following a non-deal roadshow undertaken in February 2024, we believe that the secondary listing will help improve trading liquidity and the diversity of our shareholder base. Such listings require minimal additional reporting and have relatively low ongoing costs to maintain. I look forward to welcoming South African investors to the shareholder register and in time we hope that these investors will grow to represent a strong and supportive addition to the Company’s register. As part of the Board’s succession planning, we appointed Sapna Shah as head of the Nominations Committee and as Senior Independent Director (“SID”). She, along with the other members of the Nominations Committee, will be determining the process for identifying and recruiting three new NEDs over the coming two years including a new Audit Chair and a new Chair. We thank Vince Prior for his service as Chair of the Nominations Committee and SID. Outlook In the context of the recently challenging macro headwinds, we can now begin to consider the possibility of a more favourable interest rate environment. Market expectations of modest interest rate cuts over the coming months, albeit not returning to the levels of the 2010s, provide confidence that we have now seen the floor in this current cycle. We have a balance sheet and asset portfolio which will enable us to deliver sustainable, long-term, earnings growth even at these new ‘normal’ interest rate levels. I am hopeful that as the equity markets re-focus on the attractiveness of real estate, the quality of our assets and the secure nature of our growing income stream will once again be recognised. In the meantime, due to our sector specialism, we continue to be able to selectively add attractive assets to our portfolio to grow earnings and ultimately dividend. Due to the prudent steps taken to run lower leverage throughout 2023, the Company has had the balance sheet capacity during 2024 to take advantage as these opportunities arise. Earnings will also be enhanced through our programme of even stricter cost control delivering a low EPRA cost ratio of 14.7% which we expect to reduce further over the next 12 months, in search of our goal to be the company with the lowest EPRA cost ratio of our externally managed peers. Nick Hewson Chair September ANNUAL REPORT 2024 3 6.12p FY25 DIVIDEND TARGET 14.7 % EPRA COST RATIO 4 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS 12 months to 30 June 24 12 months to 30 June 23 Change Annualised passing rent .m .m +% Adjusted earnings per share . pence . pence +% IFRS earnings per share (.) pence (.) pence +% Dividend per share declared . pence . pence +% Dividend cover .x .x n/a EPRA cost ratio .% .% n/a 30 June 24 30 June 23 Change Portfolio valuation ,m ,m +% Portfolio net initial yield .% .% n/a EPRA NTA per share pence pence -% IFRS NAV per share pence pence -% Loan to value % % n/a . The alternative performance measures used by the Group have been defined and reconciled to the IFRS financial statements within the unaudited supplementary information . Calculated as Adjusted earnings divided by dividends paid during the year STABLE VALUATIONS AND STRONG BALANCE SHEET UNDERPIN CAPACITY TO PURSUE ACCRETIVE ACQUISITIONS AND DRIVE EARNINGS GROWTH The Board of Directors of Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust with secure, inflation-linked, long-dated income from grocery property, reports its audited consolidated results for the Group for the year ended June . . IGD UK Grocery Market Value forecasts . Kantar – UK Grocery Market Share Data ( weeks ending June ) . IGD France Grocery Market Value forecasts . Kantar – France Grocery Market Share Data ( weeks ending July ) . Carrefour “Digital Retail ” strategy . IGD Research, ““Strategic outlook for Carrefour” (April ) . Kantar – France Grocery Market Share Data (March ) Secure and growing income • 12% increase in annualised passing rent to £113.1 million, reflecting: – 4% average like-for-like rental uplift – Accretive acquisitions in the year • 100% occupancy and 100% rent collection since IPO – 75% of rental income from Tesco and Sainsbury’s • 4.4% increase in adjusted EPS to 6.08 pence driven by rental growth and accretive acquisitions • Fully covered FY24 dividend • FY25 target dividend increased to 6.12 pence per share Earnings accretive acquisitions • Acquired 20 assets in UK and France for £135.8 million before costs at an average NIY of 6.7% (UK: 7.0%, France: 6.3%) • Earnings growth further supported through maintaining tight control of costs, achieving an EPRA cost ratio of 14.7% with further cost efficiencies targeted in FY25 Strong grocery sector growth • UK grocery market sales forecast to increase by 5.8% to £251.6 billion in 2024 – Tesco and Sainsbury’s increased sales and market share in the year with a combined 43% market share – Online market share at 12% and growing following post pandemic reset • French grocery market sales forecast to increase by 2.1% to €290 billion in 2024 – Carrefour has a 19.6% market share in France – Carrefour is targeting 3x online sales growth to €10 billion by 2026 (base year: 2021) with its online grocery channel forecast to grow 8.25% in 2024 – Online market share is currently at 10% and is one of the fastest growing channels STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 5 Strategic transaction with Carrefour • One of the largest grocery operators in the world • Investment grade rated (BBB) • Acquisition of 17 omnichannel Carrefour stores in relationship led sale and leaseback transaction for a consideration of €75.3 million before costs • Acquired at a 6.3% NIY versus 4.4% funding cost • Carrefour’s second ever sale and leaseback transaction in France and first in 12 years • Carrefour now represents 4% of portfolio GAV • Highly affordable rents with uncapped inflation linked uplifts Supermarket property valuations stabilised • Portfolio independently valued at £1.78 billion, inclusive of acquisitions of £135.8 million • Net Initial Yield (“NIY”) of 5.9% (30 June 2023: 5.6%) • Following a decline in valuations in 2023, like-for-like valuations were broadly flat in H2, up 0.1% • Strong level of transactional activity across the sector with return of traditional institutional participants to the market • Operator store buybacks, particularly Tesco, demonstrating mission critical nature of large format stores Proactively managing balance sheet • LTV of 37% as at 30 June 2024 (30 June 2023: 37%) • Strong debt covenant headroom supporting acquisition led growth • 100% of drawn debt fixed or hedged at a weighted average finance cost of 3.8%, including post balance sheet events (30 June 2023: 3.1%) • Fitch BBB+ investment grade rating reaffirmed providing access to attractively priced long-dated debt • New £104.5 million unsecured facility with SMBC at a weighted average margin of 1.45% with a maturity of three-years and two one-year extension options • Post balance sheet: – New £100 million unsecured facility with ING at a margin of 1.55% over SONIA with a maturity of three years and two one-year extension options – Oversubscribed 7-year Euro private placement at 4.4% fixed all-in cost, providing natural currency hedge for Carrefour portfolio acquisition Further progress on key sustainability initiatives • EV charging operational at 30% of sites and solar arrays across 20% of stores • Science Based Targets validated and approved by the Science Based Targets initiative including a commitment to reach net zero by 2050 • Strong tenant net zero commitments driving significant tenant capital expenditure on stores • Prepared and submitted EPRA Sustainability Best Practices Recommendations disclosures for the first time . Standard & Poor’s . Annual ILC-linked rent reviews “ The Company’s operational performance has been resilient with 100% occupancy and 100% rent collection despite the broader market and macro-economic challenges of the past years. We have taken a disciplined approach to capital deployment and have recently begun to see opportunities to add accretive acquisitions in the UK and France. We continue to monitor opportunities to recycle capital via asset sales and joint ventures. Looking ahead, we remain optimistic that the improving interest rate environment should provide positive tailwinds for the Company. We are pleased to recommend another increased dividend of 6.12 pence per share for FY25 and remain focused on delivering a progressive dividend for shareholders.” Nick Hewson Chair of Supermarket Income REIT plc 6 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | STRATEGY AT WORK OUR STRATEGY We have handpicked a unique portfolio of supermarkets with attractive trading fundamentals, making us the largest landlord of omnichannel grocery stores in the UK. Our investment strategy is to capitalise on the long-term structural trend toward omnichannel operations. These stores integrate online and offline fulfilment, providing our tenants with economies of scale and operational efficiencies. OUR INVESTMENT MODEL We offer a combination of attractive, sustainable, long-term and growing income with potential for long term capital growth by acquiring top-performing omnichannel supermarkets. These stores not only support in-store shopping, but also operate as last-mile online grocery fulfilment centres for both home delivery and click and collect, providing our investors with exposure to leading future proofed stores in the growing UK and French grocery markets. DELIVERING OMNICHANNEL The omnichannel model integrates three key delivery methods to serve consumers: traditional in-store shopping, Click & Collect and home delivery. This combination of in-store and online fulfilment helps to deliver increased sales and customer satisfaction. OUR VISION We are dedicated to investing in supermarket property forming a key part of the future model of grocery. TRADITIONAL IN-STORE CLICK & COLLECT AT STORE HOME DELIVERY FROM STORE OUR STRATEGY FOR GROWTH ANNUAL REPORT 2024 7 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS OUR STRATEGY AT WORK Explore our key activities, tenant initiatives and research insights within the supermarket real estate sector. OPTIMISING OUR SECTOR SPECIALISM Supermarket rents Explore an analysis which highlights the importance of rent- to-turnover ratios and how recent supermarket regear agreements reflect true affordability, demonstrating that our UK portfolio’s average rent aligns closely with the key 4% rent to turnover benchmark. More information on page 30 to 32. EXPANDING INTO NEW MARKETS First acquisition in France: Carrefour sale & leaseback Read about our landmark acquisition of a portfolio of 17 Carrefour stores in France through a strategic off-market transaction, with a 6.3% net initial yield. With Carrefour’s commitment to online growth, this earnings accretive transaction diversifies our portfolio whilst retaining our investment strategy. Read more on pages 20 to 22. PROMOTING SUSTAINABILITY Tenant investment case study: Sainsbury’s, Cheltenham Owning mission-critical properties on Full Repairing and Insuring leases allows us to benefit from substantial tenant investments in store upgrades and energy efficiency. Read about the recent improvements made by Sainsbury’s at our Cheltenham site on pages 26 to 27. EXTENDING OUR LEADING POSITION Acquisition of Tesco, Stoke-on-Trent Acquired in March 2024, this Tesco store strengthens our portfolio with strong in-store and online demand and a 7.5% net initial yield. Discover how this acquisition enhances our portfolio and how we assess potential acquisitions on pages 16 to 17. 8 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | OMNICHANNEL AT WORK OMNICHANNEL THE FUTURE OF GROCERY We seek to own and actively manage a leading portfolio of handpicked, high-quality supermarkets which deliver low-risk and growing income returns that are resilient through economic cycles. This is achieved through a focus on omnichannel stores which are critical to the operations of leading supermarket operators in the UK and Europe. THE OMNICHANNEL VIRTUOUS CIRCLE The combination of in-store and online fulfilment help to deliver increased sales and customer satisfaction. INCREASED PRODUCT TURNOVER BIGGER BETTER RANGE MATERIAL JUMP IN STORE TURNOVER INCREASED IN-STORE SALES IMPROVED CUSTOMER EXPERIENCE FRESHER PRODUCT THE OMNICHANNEL VIRTUOUS CIRCLE THE OMNICHANNEL MODEL The seamless integration between online and offline fulfilment provides our tenants with economies of scale and operational efficiencies. CONSUMERSOMNICHANNEL SUPERMARKET TRADITIONAL IN-STORE HOME DELIVERY FROM STORE CLICK & COLLECT AT STORE OMNICHANNEL THE FUTURE MODEL OF GROCERY The grocery market is changing. The developing online market adds a new dimension to the long established, traditional grocery market. For the operator: The economies of scale resulting from a near doubling in online grocery penetration has halved delivery costs from omnichannel stores. For the customer: Adding online fulfilment to a store also creates a better in-store experience for the customer. This virtuous circle effect of an omnichannel supermarket is driving the global convergence towards omnichannel being the optimal future model of grocery. ANNUAL REPORT 2024 9 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS AN EXPANDING PORTFOLIO We have built a unique portfolio of supermarkets, diversified both by geography and tenant. Our properties are ‘mission critical’ to our grocery tenants, operating as key online fulfilment hubs as well as generating in-store physical sales. OUR PORTFOLIO IN NUMBERS 80% of the Portfolio benefits from upward only, index-linked rent reviews. 73 SUPERMARKETS 5.9 % NET INITIAL YIELD (“NIY”) 93 % OMNICHANNEL STORES 100 % OCCUPANCY SINCE IPO 16 100 % RENT COLLECTION SINCE IPO Exposure by valuation Tesco 48% Sainsbury’s 29% Morrisons 5% Waitrose 4% Carrefour 4% Asda 2% Aldi 1% M&S 1% Non-food 6% Portfolio weighted by value based on 30 June 2024 valuation. Indexation Income mix by rent review type RPI 70% CPI 6% ILC 4% Fixed 2% OMV 18% Total 100% . Subject to rounding 10 SUPERMARKET INCOME REIT PLC INVESTING IN A SUSTAINABLE FUTURE Environment, social and governance (ESG) is a key priority for the Company. The Board is committed to delivering the Company’s ambitious sustainability goals. 1. CLIMATE AND ENVIRONMENT Reduce our emissions to achieve a net zero carbon portfolio and mitigate the environmental impacts of our assets. 2. TENANT AND COMMUNITY ENGAGEMENT Partner with our tenants and stakeholders to ensure our assets enhance the communities in which they are located. 3. RESPONSIBLE BUSINESS Strengthen ESG performance and uphold responsible business practices to deliver long-term value. THE THREE PILLARS OF OUR SUSTAINABILITY STRATEGY Our sustainability strategy is underpinned by three core pillars that reflect the most material sustainability issues for our Company and the long-term nature of our investments. Our approach to sustainability is grounded in our commitment to responsible investment and good stewardship, with the aim to create and deliver long-term value for our stakeholders. RESPONSIBLE INVESTMENT FOR LONG-TERM VALUE PILLAR 1 CLIMATE AND ENVIRONMENT PILLAR 2 TENANT AND COMMUNITY ENGAGEMENT PILLAR 3 RESPONSIBLE BUSINESS STRATEGIC REPORT | SUSTAINABILITY AT WORK UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS (SDGS) ALIGNMENT Our Sustainability Strategy supports multiple UN Sustainable Development Goals (SDGs) and particularly focuses on those goals which we consider most material to our business – namely, goals 8 – Decent work and economic growth, 11 – Sustainable Cities and Communities, 12 – Responsible Consumption and Production, and 13 – Climate Action, all of which are underpinned by goal 17 – Partnerships for the goals. Refer to our standalone Sustainability Report for more information on our Sustainability Strategy ANNUAL REPORT 2024 11 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS SUSTAINABILITY STRATEGY IN ACTION The Company is committed to advancing our sustainability initiatives, supporting our tenants to improve their ESG performance and upholding our responsible investment commitments. EPC IMPROVEMENTS AT SAINSBURY’S, CHELTENHAM Tenant-led investments into building energy efficiency improvements, including LED lighting installation, refrigeration system upgrades and removal of fossil fuel heating and cooling systems, not only help to reduce energy consumption and associated emissions but also help to improve building EPC ratings. This was seen at the Company’s Sainsbury’s, Cheltenham site with a significant EPC improvement achieved following a multimillion-pound investment into the store by Sainsbury’s over 2023 – 2024. EPC RATING IMPROVED FROM D TO B MAKING A DIFFERENCE WITH THE ATRATO FOUNDATION The Company’s ability to have a positive impact in the communities in which it operates is further enhanced by charitable giving efforts. The Company approved a donation of £120,000 to the Atrato Foundation, a registered charity established by the Company’s Investment Adviser. This donation will support a variety of charitable causes, with a focus on charities that work in the areas in which the Company owns assets and which align with priority charitable themes including the alleviation of poverty and hunger, feeding the nation and the ability to positively impact on nature and biodiversity. £120,000 DONATION CONTINUING TO ENHANCE ESG REPORTING The Company recognises the importance of transparent, decision-useful sustainability reporting to improve its accountability to stakeholders. The Company published its first EPRA Sustainability Best Practices Recommendations (“sBPR”) Report in June 2024 and has included updated sBPR disclosures within its standalone Sustainability Report. The Company voluntarily reports against the TCFD recommendations within its Annual Report. In addition, the Company has for the first time undertaken independent limited assurance over its location- based Greenhouse Gas (“GHG”) inventory figures for FY24. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 12 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | Q&A WITH JUSTIN KING CBE A CONVERSATION WITH JUSTIN KING ABOUT THE FUTURE OF THE UK GROCERY SECTOR “I believe the affordability of rent is one of the reasons that supermarket property investment performance over the last 15 years has been a stand-out positive performer relative to other asset classes despite multiple periods of macro-economic uncertainty. Having said that, not all supermarket property is equal and specialists like the Atrato Capital team are essential to ensure the right asset selection for the long term.” Justin King CBE, Senior Adviser Justin King is a senior adviser to Atrato Capital, the Group’s Investment Adviser. Justin is recognised as one of the UK’s most successful grocery sector leaders, having served as CEO of Sainsbury’s for over a decade and previously held senior roles at Marks & Spencer, Asda, PepsiCo and Mars. He is currently Non-Executive Director of Marks & Spencer and Chairman of Allwyn Entertainment which operates the National Lottery licence, Ovo Energy and Dexters, London’s leading estate agent. Justin also advises a series of high- profile consumer-focused companies including Itsu Grocery and Snappy Shopper. Justin is an advocate for responsible business, has been instrumental in launching several charitable concerns including the charity Made by Sport, which champions the power of sport to change young lives. Justin brings an unrivalled wealth of grocery sector experience and a deep understanding of grocery property strategy. Q: The Carrefour sale and leaseback provided a unique entry point into the French grocery market. Do you consider this market to be very different to the UK market? A: It’s less different than many think! It’s a significant billion market , with supermarkets being the most dominant channel and the four top grocers holding over % of the market. Just like the UK, this operator concentration has been achieved through very well-located shops, great customer service, well-developed supply chains and an increasing focus on omnichannel business models. Carrefour is one of the largest grocers in the world, has a .% share of the French grocery market and provides an excellent addition to SUPR’s portfolio, further diversifying its tenant mix. So, taken all together, the transaction capitalises on the opportunity to leverage the Company’s grocery specialism in generating attractive investment prospects whilst also being highly complementary to the existing portfolio and strategy. Of course, entering any new market comes with risk. I believe an essential component to managing that risk is through developing strong partnerships with leading operators. It is noteworthy that Atrato has entered this market via a direct sale and leaseback with Carrefour, benefiting from the insights derived from this relationship-based model which has always been a core part of the Company’s strategy. Q: You mention the benefits of leveraging sector specialism. How important do you think Atrato’s deep knowledge of the omnichannel model will be when considering investing in grocery property markets like France? A: Firstly, it’s important to remember that the UK’s grocers were early pioneers in online grocery, resulting in one of the highest penetration rates for online grocery sales globally. This success was driven by an early transition to multi-channel stores which provide seamless integration between online and offline channels. I think it’s fair to say that operators across the world have long looked at the UK as a template and we are seeing a global convergence to the omnichannel model. SUPR is the largest landlord of omnichannel grocery stores in the UK. That makes the Company an attractive property partner for grocers looking to capitalise on the online opportunity through transitioning toward omnichannel trading strategies. It also provides a valuable pathway to source attractive future investment opportunities. Carrefour’s objective of growing its omnichannel customer base to % and online sales to billion annually by is a clear recognition of the additional value to be captured through leveraging its supermarket estate and I know this was a key consideration in Carrefour selecting SUPR as its partner in the sale and leaseback transaction. . IGD French Grocery Market ( forecast) . Kantar France Grocery Market Share ( weeks ending July ) . Carrefour “Digital Retail ” strategy STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 13 Q: How should the market think about affordability of rent on grocery property and how that impacts market rents in particular? A: For grocery operators, the key metric for determining the affordability of rent is the ratio of rent to store turnover, with c.% being the long-standing industry benchmark in the UK. This equates to roughly two weeks of store sales and is considered affordable by operators, comparing favourably to other asset classes such as retail parks at c.%, hotels at c.% and shopping centres at c.%. Whilst it’s important to note that the grocery sector has lower margins than some of these comparable retail or leisure sectors, it is also important to note that typical EBITDAR margins at the store level are around %. This provides approximately x cover of rent at the market standard rent to turnover, which makes rents highly sustainable at that level. Currently, SUPR’s portfolio sits at c.% rent to turnover and is therefore considered to be approximately rack rented from a UK grocery property perspective. I believe the affordability of rent is one of the reasons that supermarket property investment performance over the last years has been a stand-out positive performer relative to other asset classes despite multiple periods of macro-economic uncertainty. Having said that, not all supermarket property is equal and specialists like the Atrato Capital team are essential to ensure the right asset selection for the long term. Q: Like-for-like sales growth in is lower than with staffing costs rising, does this signal margin pressure for the multichannel grocers? A: A key point here is that disinflation rather than deflation is taking effect across the grocery sector - prices are rising more slowly, rather than falling. In the four weeks to July , the rate was .%, the lowest rate since September and far below the recent peak of .% seen in March last year. Against that backdrop, like-for-like sales growth will be naturally subdued verses the inflation-fuelled comparatives. However, living standards for the average customer are gradually improving, with wage growth outpacing price inflation for several quarters, which will in turn feed both enhanced sales volumes and improved product mix for the grocers. We are clearly seeing the benefits of that in the latest grocery market share data with Tesco and Sainsbury’s capturing a further bps combined market share over their rivals and reaffirming their profit targets. This is why traditional grocers carry an extensive range and mix in their supermarkets to cater for the changing needs and buying trends of the customers’ shopping basket and that customer focus has sustained the success of the grocers for the last years. Justin King CBE, Senior Adviser 14 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT INVESTMENT ADVISER’S REPORT “The Company’s operational performance remains strong. It has been another year in which SUPR has achieved 100% rent collection and 100% occupancy from its tenant base of leading supermarket operators.” Ben Green, Principal of Atrato Capital Robert Abraham, Fund Manager Atrato is the Company’s Investment Adviser. Ben Green (Principal) and Robert Abraham (Fund Manager) discuss SUPR’s performance and the long-term outlook for the business. SUPR’s performance remains strong at the operational level The Company’s operational performance remains strong. It has been another year in which SUPR has achieved 100% rent collection and 100% occupancy from its tenant base of leading supermarket operators. Coupled with this, the Company has achieved 4.0% like-for-like rental growth on leases that have been subject to review in the year, driven by inflation-linked contractual uplifts. Our key tenants continue to perform strongly with impressive revenue growth. This is particularly true of the types of the omnichannel stores that SUPR owns in the UK and France. Sainsbury’s and Tesco, which represent 77% of the portfolio by value have reported like-for-like sales growth of 10.3% 20 and 7.7% 21 respectively in their full year results. They reported even higher sales growth figures from their large format stores, like those owned by SUPR, up by 11.0% 20 and 8.2% 21 respectively. Importantly, such revenue growth remains ahead of rental increases, which ensures that rents remain affordable. Our newest tenant Carrefour has also performed strongly in its home market in France with ROI margins up 6.2% 22 , underpinned by accelerated price investments which have been more than offset by cost discipline. Proactively positioning SUPR for a higher interest rate world Our strong operational performance has been largely offset by higher financing costs due to the higher interest rate environment and our decision to reduce leverage. This has led to lower earnings growth and only a modest increase in dividend as we and the Board seek to position SUPR with a sustainable, long-term, progressive dividend. We took two key steps to position the Company for a higher interest rate world. First, we fixed SUPR’s cost of debt through the period of highest expected interest rates. Second, we recycled the proceeds from the final tranche of the Sainsbury’s Reversion Portfolio disposal in July 2023 into reducing debt. Through the second half of the year, as debt costs reduced, we had the opportunity to grow earnings through accretive acquisitions. As a result of the prudent actions taken to protect the balance sheet the Company has been in a strong position to take advantage of these opportunities. Taken together with our contracted rental growth and rigorous cost control, we have positioned SUPR to deliver a sustainable, progressive dividend in the new higher interest rate environment. In our view, valuations have bottomed out We saw a valuation decline as at the December balance sheet date due to the impact on the grocery property market of higher interest rate expectations. The sterling 5-year swap rate peaked in July 2023 and this negatively impacted the investment market in the first half of our financial year. Valuations held flat over the second half of the year with the market now having adjusted to expectations of a long-term UK base rate of around 3.5%. Investment returns at current market yields look attractive, particularly when considering the defensive characteristics of grocery. We have observed a similar dynamic in the French market with reducing interest rate pressure and valuations at the bottom of the cycle. . Tesco FY/ Results . Sainsbury’s FY/ Results . Carrefour Q/H Sales and Results KEY ACHIEVEMENTS • ACQUISITION OF 17 CARREFOUR SUPERMARKETS THROUGH AN OFF-MARKET SALE AND LEASEBACK TRANSACTION • OVERSUBSCRIBED 7-YEAR EURO PRIVATE PLACEMENT • 100% OCCUPANCY AND 100% RENT COLLECTION SINCE IPO IN 2017 KEY FIGURES • 5.9% NIY • GREW PORTFOLIO TO 73 STORES • £24 PER SQ.FT. PORTFOLIO AVERAGE RENT, WITH 4% RENT TO TURNOVER STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS We are of the view that the next movement in valuations, when it comes, should be positive. Supermarket rents, affordability and ERVs Within the UK supermarket sector, 4% rent to turnover is seen as the affordable rental level that operators are willing to pay to secure long-term occupation for strong trading stores. Increasing store turnover has improved the affordability of supermarket rents and has resulted in SUPR’s portfolio having a ratio of 4% RTO. Our view is that the valuers systematically underestimate the rents that UK grocers are willing to pay to secure trading from a site. This is important for two reasons. First, it provides us with value opportunities at the point of acquisition because vendors often underestimate rental potential. Second, we believe that there is significant embedded value in the Portfolio which is not reflected in the valuation or the NAV. A detailed case study on this topic is available on pages 30 to 32. Valuation yield metrics for the SUPR portfolio Measure June-23 Dec-23 June-24 Portfolio NIY .% .% .% UK supermarkets NIY .% .% .% NRY .% .% .% NEY .% .% .% The Net Reversionary Yield (“NRY”) provided by our valuer for our UK supermarkets applies an average ERV of £22 per square foot (“per sq.ft.”) to SUPR’s portfolio which is broadly in-line with the UK average. In practice we expect our leases to be extended (regeared) prior to expiry and at a level which would be higher than this average, due to the strong performing nature of the stores owned by SUPR. Assuming UK supermarket rents regeared to 4% of turnover it would produce an NRY closer to the 5.9% current NIY on the portfolio, demonstrating the potential reversionary upside that can be achieved on the portfolio. As an off-market sale and leaseback transaction, our Carrefour rents are set at 2.1% RTO, versus the average of 2.5% in France. Attractiveness of French grocery market and Carrefour The Company’s entry into the €290 billion French grocery market 23 was the most strategically significant development of the year. The European grocery property market provides the Company the opportunity to benefit from a diversification of the portfolio, an increased exposure to investment grade tenant covenants and lower cost of financing. Due to the size of the European market, we can be highly selective in assessing investment opportunities. The French market has attractive similarities to the UK. Supermarkets are the primary grocery sales channel and the French market is dominated by a small number of operators. France also has Europe’s largest online grocery market, which is primarily serviced by an omnichannel store network and is growing rapidly. ANNUAL REPORT 2024 15 Ben Green Principal of Atrato Capital Robert Abraham Fund Manager . IGD French Grocery Market Value ( forecast) 16 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | INVESTMENT ACTIVITY EXTENDING OUR LEADING POSITION ANNUAL REPORT 2024 17 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS MILLION ACQUISITION OF TESCO, STOKE-ON-TRENT The standalone Tesco supermarket was acquired in March . The , sq.ft. store was constructed in and is situated on a -acre, out of town site. At acquisition, the store had an unexpired lease term of years, subject to annual RPI linked rent reviews (%-%). The property has a -minute catchment population of over ,. Competition is low relative to this catchment population with . sq.ft. of total supermarket Net Sales Area per capita, which is below the Company’s portfolio average. The property’s location next to major road infrastructure is supportive of the purpose built home delivery operation with five vans and a Click & Collect operation in the car park. Over a -minute drive time the catchment population rises to over , due to its proximity to Stoke-on- Trent, providing additional demand for online grocery. Additionally, there are no alternative Tesco online operations to the north and east, increasing the store’s serviceable catchment through home delivery. The mission critical store increases the Group’s weighting towards annual, inflation-linked income and the acquisition is accretive to earnings with a yield of .% which provides an attractive spread to the Company’s cost of debt. Tesco LOCATION: Stoke-on-Trent ACQUISITION DATE: March 2024 GROSS AREA: 81,000 ft ACRE SITE . % NET INITIAL YIELD 18 SUPERMARKET INCOME REIT PLC A tale of two halves for the UK investment market, while operator activity across both sale and leaseback and store buybacks has been prominent Investment market volumes for the 12 months remained broadly in line with the £1.7 billion average since the Company’s IPO, as liquidity for the asset class remains strong. Unlike other sectors which have seen volumes fall away in a higher interest rate environment, through rapid repricing and continued investor demand, supermarket volumes have remained consistent. Supermarkets are a defensive asset class with investment appetite from a broad range of purchasers from institutions through to high net worth individuals. 0.0 0.5 1.0 1.5 2.0 2.5 20242023202220212020 £1.7bn Supermarket investment volumes £2.1bn £1.6bn £1.8bn £2.0bn 5 yearly supermarket investment volumes 27 We are however beginning to see more limited supply – particularly of stock in the UK which is suitable for SUPR in terms of being accretive to the cost of debt and therefore to earnings, whilst maintaining tenant quality. transactions breakdown Vendors Value £m Asda Morrisons Abrdn Lothbury IM Waitrose Other Total , Purchasers Value £m Realty Income Corporation Tesco Plc M&G ICG MDSR Other Total , Carrefour is one of the largest grocery operators in the world with forecast annual global sales of €100.4 billion in 2024 24 . In France, Carrefour holds a similar position to Sainsbury’s in the UK as the second largest operator with 19.6% of grocery sales 25 . As part of its 2026 strategic plan outlined in 2022, Carrefour has set ambitious online growth targets to increase online sales to 30% of total sales by 2026, and its online channel is forecast to grow by 8.25% in 2024 26 . Growing earnings through highly selective, accretive acquisitions ) First international acquisition via a sale and leaseback transaction with Carrefour In April 2024, SUPR acquired a sale and leaseback portfolio of 17 strong trading omnichannel stores in France through a direct transaction with Carrefour. The stores were selected based on a detailed analysis including trading performance, local demographics and competition. The stores have highly affordable rents and were acquired at an attractive 6.3% NIY. The transaction was financed through an existing revolving credit facility with HSBC, and post period end was refinanced via a Euro denominated private placement at a cost of 4.4%. The positive cash yield is accretive to the portfolio and supportive of earnings growth through long- term, index-linked leases. A case study on the transaction is provided on pages 20 to 22. We were able to leverage our deep sector relationships and reputation as a trusted counterparty to leading grocery operators, to work with Carrefour on this off-market transaction. This was only the second ever sale and leaseback transaction conducted by Carrefour in France, and the first in 12 years. ) The continued attractiveness of the UK, albeit a reduced addressable market With the UK grocery market continuing to perform strongly, we see attractive opportunities in the UK supermarket space, albeit now focused on Tesco and Sainsbury’s due to comparatively less attractive covenants of the more highly leveraged multichannel operators, Asda and Morrisons. In the UK we have focused on shorter lease assets, particularly those which we view as being mispriced by the market due to an underestimation of affordable market rent. The target assets are let to strong tenant covenants (i.e., Tesco or Sainsbury’s), with an attractive yield providing an accretive spread to the current cost of debt. These opportunities are currently more accretive to earnings than longer lease, rack rented assets, which are currently pricing more keenly. An example transaction is Tesco Stoke, acquired in March 2024 and on which there is a case study on pages 16 to 17. . IGD Research , Strategic outlook for Carrefour . Kantar France Grocery Market Share ( weeks to July ) . IGD Research . Years ending June Source: Knight Frank, Savills, MSCI, operator announcements Atrato Capital research STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 19 Defensive nature of supermarket real estate continues to prove attractive to debt markets During the year we agreed new debt facilities with SMBC of £104.5 million. Post balance sheet we agreed a new £100 million unsecured facility with ING and a private placement of €83 million loan notes at an all in fixed cost of 4.4% for seven years. Both of the bank facilities are attractively priced at an average margin of 1.5% over SONIA. We have fully fixed the cost of these financings through hedging. The cost of the private placement is fixed at 4.4% and is highly attractive when compared to the yield on our French supermarket assets. In addition, the Euro denomination provides a natural hedge for the Company’s investment in the Carrefour portfolio acquisition in France. These transactions, along with our BBB+ Fitch rating, underscore the Company’s strong balance sheet, high- quality assets and tenants and our ongoing ability to secure debt from financially strong international lenders. The ability to raise debt has allowed the Company to cautiously increase leverage up to 37% to enable it to take advantage of attractive acquisition opportunities, while maintaining significant headroom in debt covenants. Including post balance sheet events, the Company has 100% of drawn debt fixed or hedged at a weighted average finance cost of 3.8% (30 June 2023: 3.1%). Continued progress on sustainability reporting Investing responsibly for long-term value creation remains at the heart of the Company’s business model. The Company has continued to refine its approach this year improving ESG data processes and setting long-term targets for the Company. The Company’s refreshed sustainability strategy consists of three key pillars: 1. Climate and Environment 2. Tenant and Community Engagement 3. Responsible Business These pillars are underpinned by the UN Sustainable Development Goals the Company has identified as most material to the business, and by the Investment Adviser’s ongoing responsible investment commitments including in respect of the Net Zero Asset Managers initiative, UN Global Compact and UN Principles for Responsible Investment. The Company has published its second standalone Sustainability Report which details its sustainability performance and progress against the three pillars of the sustainability strategy and plans for the year ahead. Highlights from the Sustainability Report, beyond the Company’s science-based target setting, include the Company’s first donation to the Atrato Foundation, improvements in ESG data sharing with tenants and further environmental asset management initiatives to benefit occupiers and communities. For the first time the Company has also undertaken external assurance over its reported location-based Scope 1, 2 and 3 GHG figures for FY24. The Assurance Report is available on the Sustainability section of the Company’s website. In the UK, the two largest sellers of assets during the year were operators. Asda (£650 million) and Morrisons (£196 million) both sold stores to Realty Income, subject to 20-year inflation linked leases. Waitrose also undertook a £125 million sale & leaseback with M&G. Each of these transactions attracted a lot of institutional interest. Asda and Morrisons also separately sold off their petrol forecourts to reduce leverage. We believe that the capital raised in these processes makes further significant sale and leaseback activity from these operators unlikely. Tesco spent c. £127 million during the year buying back stores, including a 111,000 sq.ft. store in Sutton Coldfield for c.£40 million – a large format omnichannel store, highlighting the strategic importance of such assets. We continue to see Tesco selectively participate in the investment market, depending on capital made available to the property team at any given time. Our tenants’ competing demands for capital dictate their level of activity in the buyback market – this means that we continue to be able to buy some of Tesco’s best performing stores. However, we do have the risk of a shrinking opportunity, as each store bought back by an operator is unlikely to return to the leasehold market in the future. In addition to M&G, this year has also seen the return of other traditional institutional supermarket landlords as buyers in L&G (£46 million), Abrdn (£18 million), and DTZ Investors (£56 million). Investment volumes in France were below average in 2023 totalling €320 million. However, volumes in H1 2024 reached €306 million which is a 135% increase year-on- year and 13% ahead of average since H1 2014. New retail development is at a 20-year low, a trend which we think will continue due to the net artificialisation (ZAN) of land by 2050. We expect a shift towards redevelopment of existing assets into mixed-use spaces rather than new developments. This will therefore reduce the amount of retail space making existing assets more valuable. Tight control of costs delivering one of the lowest EPRA cost ratios in the sector In seeking to drive earnings growth we also maintain a tight control of costs. The Company’s cost base is already one of the lowest across FTSE 350-listed REITs, with an EPRA cost ratio of 14.7% and is targeting a lower EPRA cost ratio in the coming year, in line with our goal of having the lowest cost ratio amongst the externally managed FTSE 350-listed REITs. Peer 15Peer 14Peer 13Peer 12Peer 11Peer 10Peer 9Peer 8Peer 7Peer 6Peer 5SUPR current Peer 4Peer 3Peer 2Peer 1 14.7% Internally managed Externally managed EPRA cost ratios (including direct vacancy costs): FTSE 350-listed REITs 28 EPRA cost ratio . Based on most recent company accounts where disclosed 20 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | INVESTMENT ACTIVITY EXPANDING INTO NEW MARKETS ❝ This accretive transaction is complementary to our existing portfolio, providing further tenant diversification and continuing our strategy of investing in the future model of grocery. ❞ Ben Green Principal of Atrato Capital Limited ANNUAL REPORT 2024 21 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS FIRST ACQUISITION IN FRANCE: CARREFOUR SALE & LEASEBACK The billion French grocery market shares many characteristics with the UK, with a small number of dominant players, and supermarkets being the largest grocery fulfilment channel. Stringent planning and licensing regulations limit the opening of new large-format stores. Online grocery shopping is a rapidly growing segment in France and currently the largest online grocery market in continental Europe with expectations for continued growth. In April , the Company announced the acquisition of a handpicked portfolio of Carrefour supermarkets in France though an off-market sale and leaseback transaction. Having initially considered a portfolio of stores, the stores acquired as part of the transaction were carefully selected based on detailed analysis including trading performance, local demographics and competition. The Company sought to mitigate the risk of entering a new market through low rents, smaller lot sizes and identifying stores with a long and strong trading history. With a NIY of .% and financed at a cost of debt of .%, the transaction is immediately earnings accretive. The portfolio which benefits from uncapped, ILC-linked rent reviews, also has strong reversion potential. STORES . % NET INITIAL YIELD Carrefour LOCATION: France ACQUISITION DATE: Apr-24 22 SUPERMARKET INCOME REIT PLC The transaction was the culmination of around months of discussions between SUPR and Carrefour. Key to this transaction was the Company’s reputation as a respected and credible partner for major grocery operators due to its track record in the UK market. The Company’s expansion into France broadens its investable universe. While the Company continues to deliver on accretive pipeline opportunities in the UK, the pool of suitable assets is narrowing. Firstly, due to the weakening covenants of Asda and Morrisons, the Company is not seeking to materially increase its exposure to these names. Secondly, buybacks by the strongest covenants of Tesco and Sainsbury’s are reducing the availability of assets. These operators have been two of the largest buyers of supermarket real estate in recent years. We do not expect to see these assets again in the investment market once they have returned to the operators’ balance sheets. Investing in this portfolio of omnichannel stores in France continues the Company’s investment strategy of accretive acquisitions with investment-grade operators. The lower cost of financing in Euros enables the Company to generate earnings accretion from stores leased to strong operators on inflation- linked leases. Carrefour is a high-quality grocery operator, occupying a market position in Europe comparable to that of Sainsbury’s in the UK. As the seventh largest grocery operator globally and the third largest in Europe, Carrefour enhances the Group’s exposure to investment-grade tenants with a BBB rating . Operating across countries, Carrefour also holds a dominant position as the second- largest grocer in France, commanding a substantial .% market share. Carrefour’s strategic focus on online and omnichannel retailing, particularly through its “Drive” online grocery fulfilment network, is strongly aligned with the strategies pursued by the Company’s supermarket tenants in the UK. By , Carrefour is planning to invest billion into online capex with an objective for omnichannel customers to represent % of all Carrefour shoppers . 0 10 20 30 40 50 60 70 80 90 100 €bn HypermarketsSupermarkets Traditional Discount Convenience Online French grocery market by channel (sales, €bn) 29 2023 2024 Omnichannel supermarkets combine the largest and one of the fastest growing channels 80 86 73 78 64 70 36 44 22 25 14 18 . IGD France channel data ( and forecasts) . Standard & Poor’s . Kantar France Grocery Market Share ( weeks ending July ) . Carrefour “Digital Retail ” strategy . “Strategic outlook for Carrefour” IGD, STRATEGIC REPORT | INVESTMENT ACTIVITY EXPANDING INTO NEW MARKETS CONTINUED STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 23 STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT and JV opportunities which present capital recycling opportunities, the benefit of which comes both through proving the portfolio NAV in the open market and through opportunities to redeploy sales proceeds in the most earnings accretive manner for shareholders at that time. We currently consider that the Company’s debt finance capacity is best deployed into accretive acquisitions to grow earnings. However, the option of share buybacks is continuously under review by the Investment Adviser and the Board. In summary, we are focused on delivering earnings accretion through a rigorous approach to capital allocation. This, combined with tight cost controls in the business, as evidenced through the Company’s continually decreasing EPRA cost ratio, should deliver efficient earnings growth and increased returns to shareholders. THE COMPANY’S PORTFOLIO The Company has built a portfolio of strong trading, ‘mission critical’ omnichannel supermarkets backed by leading grocery operators. The central pillar of the Company’s investment policy is to acquire omnichannel supermarkets that form a key part of our tenants’ last mile fulfilment networks. These stores offer both an online provision and in-store shopping, helping to capture a greater share of the grocery market. Currently 93% of our supermarket assets are omnichannel, by value. The portfolio benefits from long unexpired lease terms with predominantly upwards only, index linked leases, helping to provide long-term income with contractional rental growth. Within the UK, operators typically look at the affordability of rent based on a benchmark of c.4% rent to turnover, simply seen as two weeks of trade. The Group’s UK supermarkets average rent to turnover is 4%, which equates to £24 per sq.ft. We have highly secure income with 100% rent collection during the year and Tesco and Sainsbury’s accounting for 75% of the Company’s rent roll. During the year, the Group acquired a hand-picked portfolio of Carrefour supermarkets in an off market, direct sale and leaseback with the operator. The assets form a key part of Carrefour’s omnichannel operation with 15 stores operating Drive “Click & Collect”. This channel accounts for 80% of online grocery in France. The standalone stores are subject to annual, uncapped inflation-linked rent reviews with 12 year unexpired lease terms (tenant only break at year 10) and are let on low and affordable rents of €7 per sq.ft. with an average RTO of 2.1%, below the RTO average of 2.5% in France. The rents produce a low capital value of €110 per sq.ft. The transaction helps to increase the Group’s exposure to strong tenant covenants, further diversifies the portfolio and promotes further income growth through index-linked rent reviews. As part of the Company’s investment strategy to acquire high-quality, strong trading supermarkets, it is sometimes necessary to acquire complementary non-grocery units that are co-located with the store. These units often create In addition to the Company’s Sustainability Report, disclosures in line with the TCFD recommended disclosures and the Company’s Streamlined Energy and Carbon Reporting (“SECR”), have been included within the Annual Report on pages 39 to 51. Secondary listing on the Johannesburg Stock Exchange (“JSE”) The Company is in the process of applying for a secondary inward listing on the Main Board of the Johannesburg Stock Exchange by introduction. The listing of the Company on the JSE is expected to become effective by the end of the calendar year, subject to various regulatory approvals in South Africa. The Company will not place or issue any new shares in connection with its application for a secondary listing on the JSE and will remain listed on the Closed-ended investment funds category of the FCA’s Official List and traded on the LSE’s Main Market. PSG Capital Proprietary Limited has been appointed as Corporate Advisor and Sponsor in South Africa. The Company believes that admission to trading of the shares on the JSE will be beneficial to the Company and its shareholders. The secondary listing should contribute to liquidity in the Group’s shares through its increased profile and improved accessibility in the South African market, where a number of investors have already shown strong interest in investing in the Company, driven by its high- quality portfolio of omnichannel supermarkets and secure income providing an attractive dividend. Outlook We remain resolutely focused on delivering sustainable earnings growth for the Company in our role as Investment Adviser. Whilst acknowledging the ongoing impact of macro factors such as interest rates which are ultimately outside of our control, we continue to drive strong performance at an operational level. We believe this will translate into positive momentum for the Company. In the Company’s core UK market we see accretive opportunities that meet our disciplined approach to capital deployment, albeit in a reduced addressable market. France offers an extension of this strategy and an attractive potential further source of earnings growth. Opportunities in geographies outside of the UK will only be considered where asset quality can be maintained and where we see attractive relative value. Should we look to further increase the Company’s exposure to this market, we would first consult with shareholders and revisit the Company’s Investment Policy. Following receipt of the final portion of the Sainsbury’s Reversion Portfolio disposal proceeds received at the beginning of the year, the most prudent decision was to pay down debt rather than deploy that capital into new assets and expose the Company to higher leverage and potential valuation decline. As valuations have stabilised and market sentiment has improved, we are more comfortable in gradually normalising leverage levels. We continue to consider all options for the Company to achieve earnings growth. We are also exploring disposal 24 SUPERMARKET INCOME REIT PLC The Portfolio’s weighting towards upwards only, inflation- linked rent reviews is 80% with 58% of the Portfolio being reviewed annually. Indexation Income mix by rent review type RPI % CPI % ILC % Fixed % OMV % Total % Rent review Income mix by rent review type Annual % yearly % yearly % Total % UK rental caps % of UK supermarket index-linked portfolio - % % - % % - % % - % % - % % Total % The rent profile of the supermarkets is broadly in line with the market at 4% RTO. The rental maturity profile is well dispersed with the first material regear in 2029. WAULT WAULT breakdown WAULT rental breakdown WAULT count breakdown - yrs .% - - yrs .% - - yrs .% . - yrs .% - - yrs .% - - yrs .% . - yrs .% . - yrs .% . - yrs .% . - yrs .% . + yrs .% . Total .% . a retail destination helping to drive further footfall into the supermarket. Non-grocery assets represent 6% of the Portfolio by value. During the year, the Company selectively strengthened its Portfolio with the addition of 20 supermarkets for a combined total of £135.8 million 34 . July 2023: A Sainsbury’s in Gloucester, for £17.4 million 34 . The store has a 15-year unexpired lease term 35 and is subject to 5-yearly upwards only, open market rent reviews. July 2023: A Sainsbury’s in Derby, for £19.0 million 34 . The store has a 15-year unexpired lease term 35 and is subject to 5-yearly upwards only, open market rent reviews. March 2024: A Tesco in Stoke-on-Trent, for £34.7 million 34 . The store has a 11-year unexpired lease term and is subject to annual upwards only RPI-linked rent reviews. April 2024: A portfolio of 17 Carrefour supermarkets located in north and north west France, for £64.7 million 34 . The portfolio was a direct sale and leaseback with Carrefour with 12-year unexpired lease terms 35 and subject to annual, uncapped inflation-linked, rent review. The acquisitions during the year were purchased at an average net initial yield of 6.7% (7.0% UK, 6.3% EUR) providing an attractive spread to the Group’s incremental cost of debt and were immediately accretive to earnings. The increased exposure to index-linked income also generates further contractual earnings growth underpinned by strong tenants. Acquisitions during the year were financed using existing headroom within our debt facilities and subsequently through the €83 million private placement which was announced in July 2024. For more information on financing arrangements refer to note 19 of the financial information. Tenant Exposure by rent roll Exposure by Valuation Tesco % % Sainsbury’s % % Morrisons % % Waitrose % % Carrefour % % Asda % % Aldi % % M&S % % Non-food % % Total % % The Portfolio’s weighting towards investment grade tenants provides secure long-term income with a weighted average unexpired lease term of 12 years. In addition, the portfolio is heavily weighted towards upwards only inflation-linked rent reviews. The average cap on our inflation-linked leases’ rental uplifts is 4%. . Excluding acquisition costs . With a break option at year STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 25 Portfolio valuation Cushman & Wakefield valued the Portfolio as at 30 June 2024, in accordance with the RICS Valuation – Global Standards which incorporate the International Valuation Standards and the RICS UK Valuation Standards edition current at the valuation date. The properties were valued individually without any premium/discount applying to the Portfolio as a whole. The Portfolio market value was £1,775.7 million, an increase of £82.8 million reflecting a valuation decline of £53.0 million (including currency exchange movements), which was offset by new acquisitions of £135.8 million pre acquisition costs. This valuation reflects a net initial yield of 5.9% and a like-for-like valuation decline of 3.2% since 30 June 2023. The benchmark MSCI All Property Capital Index during the same period was down 4.5%. The decline in valuation reflects the outward shift in property yields applied by valuers across the real estate sector as a result of higher interest rates and the macroeconomic environment. This was largely recognised in the first half of the year, with a like-for-like valuation decline of 3.2% reported in the Company’s valuation as at 31 December 2023. Valuations remained broadly flat in the second half of the year. The valuation decline in the year has however been partially mitigated by our contractual inflation-linked rental uplifts. The average annualised increase in rent from rent reviews performed during the year was 4.0%. 82% of the Company’s leases benefit from contractual rental uplifts, with 80% linked to inflation and 2% with fixed uplifts. THE GROCERY MARKET UK Non-discretionary grocery market continuing to experience strong growth The UK grocery market has highlighted its defensive, non- discretionary characteristics this year with sales growth of 5.8% against a very strong inflation-led comparator of 9.2% for 2023. Total grocery market sales are forecast to be £251.6 billion in 2024, an increase of £59.6 billion or 31% since pre- pandemic levels in 2019. While the sector growth will continue to ease as inflation moderates in 2025 in year-on-year percentage terms, IGD projects continued healthy absolute sales growth in the coming years. With forecast annual growth of around 3% to 2029, the UK grocery market is expected to reach £296 billion in the same year. The growth from 2019 out to IGD’s projected total sales figure would represent a 4.4% compound annual growth rate. The future projected growth is in line with long run RPI/CPI projections and underlines the grocers’ ability to efficiently pass through inflation to consumers. The increased sales revenue at the store level will support higher rents over the medium term. The environmental efficiency of our stores continues to be a key priority for our asset management initiatives, selective acquisitions and is supported by the ongoing investment by grocery tenants into respective store estates. A breakdown of our supermarket EPC ratings can be seen below: EPC rating % of UK supermarket Portfolio by value A % B % C % D % Total % Active asset management delivering additional value and improving sustainability of sites The Company continues to seek sustainability and value creation initiatives at our larger sites which are not fully demised to the core supermarket tenants and therefore benefit from greater landlord control. Alongside our tenants, we are looking at ways to increase the number of Electric Vehicle (“EV”) charging points at larger sites. We now have 58 EV charging bays across five sites, all completed at zero capex cost to the Company. Current EV sites: • Morrisons, Workington • Morrisons, Wisbech • Tesco, Bradley Stoke • Tesco, Chineham • Tesco, Beaumont Leys 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. Opportunities to add complementary discount grocery operators continue to progress. At Tesco, Chineham, the existing planning consent was successfully implemented and terms are agreed with a discount grocery retailer. We have had three additional offers for new discount food stores across the portfolio. 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. 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. 26 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | INVESTMENT ACTIVITY PROMOTING SUSTAINABILITY ANNUAL REPORT 2024 27 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS TENANT INVESTMENT CASE STUDY: SAINSBURY’S, CHELTENHAM A benefit of owning mission critical real estate is that our tenants make significant investments in maintaining and improving the store estate themselves. This investment is made regardless of whether a store is owned by the operator freehold or occupied as a tenant. Coupled with this are the ambitious net zero targets of Tesco and Sainsbury’s, which also drive improvements in energy consumption at the store level. We are therefore seeing an improvement in EPC scores across the SUPR portfolio as tenants undertake programmes of store maintenance and upgrades. Sainsbury’s has been operating at our Cheltenham site since the s, with the store acting as an omnichannel hub with eight home delivery vans. During -, Sainsbury’s made a multimillion-pound investment into the store. The works included upgrading the store’s refrigeration and removing the gas power source, reducing the store’s dependence on fossil fuels. The new electric refrigeration system will store residual heat output and use it to heat the store. As a result of these works, the EPC rating of the store has been upgraded from a D to a B, all at no cost to the Company. There are eight years remaining on the Sainsbury’s Cheltenham lease and this material level of investment is representative of our tenant’s long-term commitment to the site, providing confidence on lease renewal prospects ahead of expiry. Full repairing and insuring (or ‘triple net’) lease structures are standard across the Company’s UK portfolio and we therefore expect our tenants to invest in modernising and decarbonising our stores at their own expense. Sainsbury’s LOCATION: Cheltenham, Glos ACQUISITION DATE: Oct-19 GROSS AREA: 98,724 ft NET SALES AREA: 61,964 ft FY24/25FY23/24FY22/23FY24/25FY23/24FY22/23 Annual capital expenditure (£m) 36 717 814 920 Forecast Forecast 1235 1400 1314 . Sainsbury’s / full year results and Tesco / full year results. Excluding store buybacks. Sainsbury’s FY/ forecast includes a range from m to m (inclusive of m of EV charging investment) EPC UPGRADE FROM D TO B 28 SUPERMARKET INCOME REIT PLC 2026202520242023202220212020201920182017 9.8 10.6 12.5 22.3 20.9 22.0 23.1 24.4 25.2 26.4 Online grocery market spend (£bn) Pandemic peak Return to growth Online grocery spend (UK) (2017 to 2023 actual, 2024 to 2026 forecasted) Omnichannel stores capture the largest share of growth Large format omnichannel stores, such as those which the Company targets, have captured the largest share of sales growth in the sector since 2019 38 . In that time the total UK grocery sector has increased from £192 billion in 2019 to £252 billion, with omnichannel supermarkets accounting for £20 billion of that growth. Importantly, this growth is being generated from existing store estates meaning this is like-for-like sales growth, resulting in improved sales densities and enhanced profitability at the store level. From a landlord perspective, this ensures that rents remain affordable for tenants, particularly as sales growth has been running ahead of capped rental uplifts. It also provides a strong backdrop for higher rents in the future. Large format stores have the scale to offer the full product range giving customers the widest product choice, whilst also offering the best value to customers through in-store only and loyalty scheme product offers. In the current inflationary environment shoppers are looking to achieve best value on their purchases. Tesco and Sainsbury’s loyalty schemes which offer attractive discounts to members, have been very successful with Sainsbury’s reporting that nine out of ten £80+ weekly shopping baskets are sold to customers using their Nectar loyalty card. Tesco and Sainsbury’s maintained market share whilst discounter growth begins to slow The UK grocery market is highly consolidated with the six leading operators accounting for 83% of the market. These operators can be divided into two groups: the four multichannel (in-store and online) operators, Tesco, Sainsbury’s, Asda and Morrisons, and two limited range in-store only discounters, Aldi and Lidl. 0 50 100 150 200 250 300 350 20292028202720262025202420232022202120202019 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 192 208 210 217 238 252 259 270 278 287 296 Market value (£bn) YOY% Change Institute of Grocery Distribution (“IGD”) UK Grocery Market Value 2019-2029 (forecast) This track record of strong growth in the sector has attracted new institutional investors into the grocery real estate investment market and has also seen a continued programme of store buybacks by Tesco with four stores purchased by the grocery operator in the year. Online grocery channel returned to growth following a rebase post pandemic Online grocery now accounts for 12% of the total market. Online market share has fallen back from the pandemic peak of 15%, but having rebased to 12%, it is still one of the fastest growing channels according to Kantar. The online channel was permanently enlarged throughout the pandemic – over 50% of online grocery shoppers during 2020 were new to the channel 37 and much of this change in consumer behaviour has been sticky. Omnichannel stores are optimally placed to benefit from the combined growth of both in store sales and online. Operators are able to increase online capacity at low cost and benefit from shorter drive times due to their existing omnichannel stores’ proximity to customers. This results in a greater number of deliveries per hour and drives greater profitability than the centralised fulfilment (or ‘dark store’) model. Tesco recently announced that online sales participation is stable at 13% of UK sales with basket sizes up 4.2% and online sales up 10%. The return to growth of the online channel is evident in the latest IGD forecast which predicts growth of 27% (£6 billion) by 2029. . “Winning in Grocery during and after Covid”, OC&C, Nectar . IGD Grocery Market channel data ( actual, forecast) STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 29 The challenge for the discounters will be achieving further growth whilst maintaining profitability. 98% of the Company’s UK portfolio already has a discounter present within a 10-minute drivetime. We expect new store opening by the discounters to cannibalise existing discounter trade and therefore the marginal profit of new stores will be diluted. Lower inflation expected to drive grocery profitability Grocery price inflation has driven significantly higher revenues for supermarkets in recent years. Whilst the ability for supermarkets to pass through inflation to consumers highlights the non-discretionary nature of grocery, there has of course been an impact on consumers’ shopping habits. Cost of living pressures have decreased consumer purchasing power, which has resulted in a trading down to supermarkets’ own brand and value ranges. Through investment in cost reduction programmes and improved efficiency, coupled with product price increases, operators have largely been able to preserve squeezed margins. As food price inflation begins to moderate, we expect consumers to again adjust their behaviour, driving volume growth. However, the operators will continue to benefit from the cost efficiencies the high inflation rates of recent years have required and therefore we see volume growth in the coming years being a driver of increased profitability. The highly competitive and ultra-low margin nature of the Discount market has meant Aldi and Lidl have had to increase prices faster than other operators in order to protect thin margins of 1-2%. Whilst the Discount channel has seen increasing market share, this has primarily been driven by increasing prices with Lidl and Aldi inflating prices by 25.7% and 23.1% respectively over the three months to April 2023 40 . ONS food and non-alcoholic beverages inflation (%) -5% 0% 5% 10% 15% 20% 25% ONS: Grocery inflation (Jun 2020 - Jun 2024) Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 With inflation beginning to moderate, grocery volumes are expected to increase as household cost pressures reduce, encouraging higher spending and purchasing a broader range of products, including non-essentials and premium items. Tesco and Sainsbury’s have both recently announced a return to volume growth with increased basket sizes. 0 5 10 15 20 25 30 28% 15% 13% 10% 9% 8% 5% 27% 15% 15% 10% 8% 6% 5% June 2019 June 2020 June 2021 June 2022 June 2023 June 2024 5-year operator market share (UK) (June 2019 – June 2024) 39 Tesco Sainsbury’s Asda Morrisons Aldi Lidl Waitrose Tesco and Sainsbury’s, the Company’s key tenants, continue to be the leading players in the UK grocery space with 27.7% and 15.2% market share respectively. Both operators have increased market share in the last 12 months and are seeing the benefit of investments in their stores, product ranges and loyalty schemes. Asda and Morrisons (12.8% and 8.7% market share respectively) have continued to lose market share following their highly leveraged takeovers in 2020 and in the face of competition from the limited range discounters. 2017 1,521 1,662 1,713 1,818 1,902 1,993 2,022 2 018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 121 111 81 105 84 91 29 Aldi Lidl Discounter portfolio size (UK), 2017-2023 Discounters – Number of stores New store openings 0 500 1000 1500 2000 0 20 40 60 80 100 120 140 While Aldi and Lidl achieved impressive growth which accelerated in the period from 2020 to 2023, with Aldi’s market share growing from 7.5% to 10.2% and Lidl’s growing from 5.8% to 8.1% in the period, this growth appears to have slowed. In the case of Aldi, this growth reversed in 2024 with market share marginally declining to 10.0% while Lidl increased market share at a lower annual rate to 8.1%. This lower growth can be linked to several factors including a reduced rate of store openings which had previously been the key driver of market share growth. . Which? Supermarket food price inflation tracker, June . Kantar UK Grocery Market Share ( weeks ending June ) 30 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | INVESTMENT ACTIVITY OPTIMISING OUR SECTOR SPECIALISM ANNUAL REPORT 2024 31 UK SUPERMARKET RENTS Over the year, we have seen further dislocation between perceived market rents and levels that are affordable for UK operators, typically at the long-standing industry ratio of % rent to turnover. Rent to turnover is widely utilised by the operators to establish an acceptable level of affordable starting rent, with % RTO simply seen as two weeks of trade. A factor which is often misunderstood is that stores vary in size. As a result, rent per sq.ft. for two strong trading stores can be very different and can be misleading when viewed in isolation. Both stores within the example above are strong trading and would be strategically important for the operator taking annual turnover of million. However, the operator of the larger store would be unwilling to pay for additional space if it is not generating additional turnover. This results in the rent per sq.ft. being materially different between the two stores. Operators are typically willing to commit to new stores on long lease terms as long as the initial rent is set at an acceptable level of RTO. Adjustments: Another common error when assessing grocery rents is simply dividing the rental income by the GIA to produce a rent per sq.ft. figure. Within supermarket leases it is standard that there will be adjustments to store size to take into account additional rental income payable on fixtures and fittings (.%) and petrol filling stations (.%). These adjustments are usually defined within the lease. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS Worked example: Store weekly turnover ,, Annual turnover ,, Affordable rent (% RTO) ,, Store A Store B Gross Internal Area (sq.ft.) , , Rent per sq.ft. () . . Adjustments (%) .% .% Net rent per sq.ft. () . . 32 SUPERMARKET INCOME REIT PLC Market rents: Market rent is often linked to indexes from providers such as MSCI who publish an average rent per sq.ft. figure for the UK grocery market. Whilst these indexes can be a useful proxy for the total market, they also include weaker stores and smaller format discounters which naturally produce lower rent per sq.ft. Another key factor impacting market rent is the exclusion of bilaterally negotiated rents on regears as they are not deemed to be arm’s length transactions and are as such not treated as open market evidence. Given rents are a function of a store’s turnover, operators are more willing to pay higher rents for stronger performing stores. This has been confirmed by recent regear rents being agreed above the MSCI ERV but in line with 4% RTO. Additionally, we have seen a limited number of new large format store openings, further adding to the lack of open market rental evidence. We therefore view regears to be a highly important proxy for affordable rent as operators look to secure long-term occupation of strong trading stores. The Portfolio is broadly in line with market rent with a rent per sq.ft. of £24 per sq.ft. and a rent to turnover of 4%. OPTIMISING OUR SECTOR SPECIALISM CONTINUED STRATEGIC REPORT | INVESTMENT ACTIVITY Worked example: Store rent () ,, Gross Internal Area (sq.ft.) , Rent per sq.ft. () . Adjustments .% Adj. Gross Internal Area , Adj. rent per sq.ft. () . Store rent () ,, STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 33 0% 5% 10% 15% 20% 25% 30% OtherLidlAuchan Systéme UIntermarcheCarrefourE. Leclerc +0.3% increase 19.6% French grocery market share (July 2024) 42 The French grocery market is highly consolidated with 60% of total market share controlled by three grocery operators; E.Leclerc, Carrefour and Intermarche. Over the last 6 months Carrefour has increased market share by 0.3% to 19.6%. It has accelerated its price investment programme, the effect of which has been to increase market share in the face of competition from cheaper alternative grocers, while preserving profitability. Carrefour’s increase in market share was also driven by volume growth as consumers return to traditional shopping habits and the effects of inflation subside. 2026202520242023202220212020201920182017 6.8 7.4 8.5 11.9 13.3 12.9 14.0 14.3 15.1 16.0 French online grocery market spend (£bn) French Online grocery spend (2017 to 2023 actual, 2024 to 2026 forecasted) Online market share in France has been permanently enlarged due to an increase in take up throughout the pandemic. The channel has grown by 93% between 2018 and 2024. The channel has been further strengthened by investment programmes by operators such as Carrefour which, across the group, is planning to invest €3 billion in the online channel 43 and for omnichannel customers to represent 30% of all customers by 2026 44 . Due to geographic differences between the UK and France, 80% of online sales are fulfilled via Click & Collect vs 20% in the UK. Operators will use large fulfilment centres ‘hubs’ to pick and pack dry goods which are then delivered to stores which operate as ‘spokes’. These stores are responsible for picking fresh goods with the combined order collected by the customer in the car park. Whilst the French online model is different, it is built around mission critical omnichannel stores, in strong locations which provide last mile fulfilment to consumers. FRANCE FRANCE 0 50 100 150 200 250 300 350 2028202720262025202420232022202120202019 246 255 261 275 284 290 297 305 312 321 French grocery market size (£bn) France Grocery Market Value (2019-2023, 2024-2028 (forecast)) 41 The French grocery market, one of the largest in the world by total value, has shown consistent growth over a prolonged period. The defensive and non-discretionary sector has experienced YoY sales growth of 2.1% against a strong average inflation-led comparator of 5.6% for 2023. Total market sales are forecasted to be €290 billion in 2024, an increase of €44 billion or 18% since 2019. The French grocery sector is expected to reach €321 billion by 2028 representing an annual increase of c.3%. Insee: Grocery inflation (Jun 2020 - Jun 2024) -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Jun 20 Dec 20 Jun 21 Dec 21 Jun 22 Dec 22 Jun 23 Dec 23 Jun 24 Price index in large and predominantly food stores (%) Similar to the UK, France has seen significant inflation pressure in recent years, helping to drive revenue growth at the expense of volumes as consumers changed purchasing habits to manage budgets. Grocery inflation increased to an all-time high of over 15% in 2023, up from 0.8% in 2020. As inflationary pressures ease, we expect to see volumes increase and consumers return to more traditional shopping habits. . Kantar France Grocery Market Share ( weeks ending July ) . Carrefour “Digital Day - Digital Acceleration for Retail & Ecommerce” . “Carrefour ” Strategic Plan. IGD STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT 34 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | KEY PERFORMANCE INDICATORS 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 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 11 and 27 to the financial statements. 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 derivative hedges 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 year. We set out below our key performance indicators for the Company. KPI Definition Performance 1. Total Shareholder Return Shareholder return is one of the Group’s principal measures of performance. 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. 8% for the year to 30 June 2024 (Six months ended 31 December 2023: 23.2%, 30 June 2023: -34%) 2. WAULT WAULT measures the average unexpired lease term of the Property Portfolio, weighted by the Portfolio valuations. 12 years WAULT as at 30 June 2024 (31 December 2023: 13 years, 30 June 2023: 14 years) 3. EPRA NTA per share The value of our assets (based on an independent valuation) less the book value of our liabilities, attributable to Shareholders and calculated in accordance with EPRA guidelines. EPRA states three measures of NAV to be used; of which the Group deem EPRA NTA as the most meaningful measure. See Note 27 for more information. 87 pence per share as at 30 June 2024 (31 December 2023: 88p, 30 June 2023: 93p) 4. Net Loan to Value The proportion of our Portfolio gross asset value that is funded by borrowings calculated as balance sheet borrowings less cash balances divided by total investment properties valuation. 37% as at 30 June 2024 (31 December 2023: 33%, 30 June 2023: 37%) 5. Adjusted EPS EPRA earnings adjusted for company specific items to reflect the underlying profitability of the business. 6.1 pence per share for the year ended 30 June 2024 (31 December 2023: 2.9p, 30 June 2023: 5.8p) KEY PERFORMANCE INDICATORS STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 35 STRATEGIC REPORT | EPRA PERFORMANCE INDICATORS EPRA PERFORMANCE INDICATORS The table below shows additional performance measures, calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association. We provide these measures to aid comparison with other European real estate businesses. For a full reconciliation of all EPRA performance indicators, please see the Notes to EPRA measures within the supplementary section of the financial statements. Measure Definition Performance 1. EPRA EPS A measure of EPS designed by EPRA to present underlying earnings from core operating activities. 4.3 pence per share for the year ended 30 June 2024 (30 June 2023: 4.6p) 2. EPRA Net Reinstatement Value (NRV) per share An EPRA NAV per share metric which assumes that entities never sell assets and aims to represent the value required to rebuild the entity. 97 pence per share as at 30 June 2024 (30 June 2023: 103p) 3. EPRA Net Tangible Assets (NTA) per share An EPRA NAV per share metric which assumes entities buy and sell assets, thereby crystallising certain levels of unavoidable deferred tax. 87 pence per share as at 30 June 2024 (30 June 2023: 93p) 4. EPRA Net Disposal Value (NDV) per share An EPRA NAV per share metric which represents the Shareholders’ value under a disposal scenario, where deferred tax, financial instruments and certain other adjustments are calculated to the full extent of their liability, net of any resulting tax. 90 pence per share as at 30 June 2024 (30 June 2023: 98p) 5. EPRA Net Initial Yield (NIY) & EPRA “Topped- Up” Net Initial Yield 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. 5.9% as at 30 June 2024 (30 June 2023: 5.5%) 6. EPRA Vacancy Rate Estimated Market Rental Value (“ERV”) of vacant space divided by ERV of the whole portfolio. 0.5% as at 30 June 2024 (30 June 2023: 0.4%) 7. EPRA Cost Ratio (Including direct vacancy costs) Administrative & operating costs (including costs of direct vacancy) divided by gross rental income. 14.7% for the year ended 30 June 2024 (30 June 2023: 15.5%) 8. EPRA Cost Ratio (Excluding direct vacancy costs) Administrative & operating costs (excluding costs of direct vacancy) divided by gross rental income. 14.4% for the year ended 30 June 2024 (30 June 2023: 15.2%) 9. EPRA LTV Net debt divided by total property portfolio and other eligible assets. 38.8% as at 30 June 2024 (30 June 2023: 35.2%) 10. 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. Rental increase of 2.1% for the year ended 30 June 2024 (30 June 2023: 2.7%) 11. EPRA Capital Expenditure Amounts spent for the purchase and development of investment properties (including any capitalised transaction costs). £146.2 million for the year ended 30 June 2024 (30 June 2023: £377.3 million) 36 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | FINANCIAL OVERVIEW Administrative and other expenses and EPRA cost ratio Administrative and other expenses, which include all operational costs of running the business, decreased by £0.2 million to £15.2 million (30 June 2023: £15.4 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 80bps to 14.7%. 30 June 2024 30 June 2023 EPRA cost ratio including direct vacancy costs .% .% EPRA cost ratio excluding direct vacancy costs .% .% Net finance expenses During the year, the Group received £134.9 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, subsequent to which the Group increased its debt facilities with a new SMBC facility. Net finance expenses reduced by £3.0 million to £16.2 million compared to the prior year, primarily due to the short-term loan in relation to the Joint Venture in the prior year and a lower average debt cost. Adjusted earnings The Directors consider adjusted earnings a key measure of the Company’s underlying operating results, and a reference through which the Board measures dividend cover. Adjusted earnings 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 year to 30 June 2024 were £75.8 million (30 June 2023: £72.4 million). On a per share basis, adjusted earnings increased by 0.3 pence per share to 6.1 pence for the year to 30 June 2024, an increase of 4% (30 June 2023: 5.8 pence). A full reconciliation between IFRS and Adjusted earnings can be found in note 11 of the Financial Statements. Atrato Capital Limited, the Investment Adviser to the Group, is pleased to report the financial results of the Group for the 12 months ended 30 June 2024. Financial results 30 June 2024 £’000 30 June 2023 £’000 Net rental income , , Administrative expenses (,) (,) Net income from joint ventures – , Net finance expenses (,) (,) Adjusted earnings , , Net rental income In the year, the portfolio generated net rental income of £107.2 million (30 June 2023: £95.2 million), representing an increase of £12.0 million or 12.6% compared to the prior year. The growth in net rental income was driven by a full period of rental income from property acquisitions and the effect of contracted rent reviews. On a like-for-like basis, EPRA net rental income increased by 2.1%. During the year we successfully completed 22 rent reviews increasing annualised passing rent by £2.9 million, with the reviews being settled on average 4.8% ahead of previous passing rent (or 4.0% on an annualised basis). Net service charge expenditure remained broadly flat at £0.6 million (30 June 2023: £0.6 million), however our gross to net margin continues to be among the highest in the sector at 99.4% (30 June 2023: 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 year to 30 June 2024 (30 June 2023: 100%), as our focus on top trading stores and covenant quality provided exceptional income security. FINANCIAL OVERVIEW . Net finance expense is adjusted for finance income from derivatives held at fair value through profit and loss and non-recurring debt restructuring costs. Michael Perkins Finance Director STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 37 Portfolio Valuation The value of the portfolio at 30 June 2024, including the fair value of investment properties held at amortised cost, was £1,776 million (30 June 2023: £1,693 million). During the Year, the Group invested £135.8 million in 20 omnichannel supermarkets (excluding transaction costs). On a like-for-like basis, the portfolio recognised a revaluation deficit of £53.8 million, or 3.2%, which reflects the outward shift in property yields applied by valuers across the real estate sector as a result of higher interest rates and the macroeconomic environment. Cash Flow and Net Debt Cash flows from operating activities before changes in working capital increased by £12.6 million to £89.6 million, primarily due to increased rental income received from rent reviews and property acquisitions. During the year, the Group received £134.9 million following the disposal 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 £36.4 million (excluding transaction costs), providing earnings growth in line with the Group’s strategy, with the remaining proceeds used to reduce drawn debt. In the second half of the year, the Group drew down £106.8 million from facilities with existing lenders, to fund the acquisition of 18 supermarkets. Net debt increased by £25.5 million over the year to 30 June 2024, to £655.5 million, and represents a loan to value of 37% (30 June 2023: 37%). The Group continues to maintain a conservative leverage policy, with a medium-term target LTV of 30-40%. Financing 30 June 2024 30 June 2023 Undrawn facilities m m Loan to value % % Net debt / EBITDA ratio .x .x Weighted average cost of debt , .% .% Interest cover .x .x Average debt maturity , . years . years % of drawn debt which is fixed/hedged % % Dividend In the financial year ended 30 June 2024, the Company paid the following interim dividends: Declared Amount pence per share In respect of the financial year ended Paid/ to be paid July .p June August October .p June November January .p June February April .p June May Post period end, the Company declared an interim dividend in respect of the financial year ended 30 June 2024 of 1.515 pence per Ordinary Share (the “Fourth Quarterly Dividend”). The Fourth Quarterly Dividend was paid on 16 August 2024 as a Property Income Distribution (“PID”) to shareholders on the register as of 12 July 2024. The Company has now declared four quarterly dividends totalling 6.06 pence per Ordinary Share in respect of the financial year ended 30 June 2024. EPRA net tangible assets and IFRS net asset 30 June 2024 £’000 30 June 2023 £’000 Investment property ,, ,, Bank and other borrowings (,) (,) Cash , , Other net (liabilities)/assets (,) , EPRA net tangible assets ,, ,, Fair value of interest rate derivatives , , Fair value adjustment for financial assets held at amortised cost , , IFRS net assets ,, ,, EPRA net tangible assets (“EPRA NTA”) is considered to be the most relevant asset measure for the Group, and includes both income and capital returns, but excludes the fair value of interest rate derivatives and includes a revaluation to fair value of investment properties held at amortised cost. At 30 June 2024, EPRA NTA was £1,085 million (30 June 2023: £1,157 million), representing an EPRA NTA per share of 87 pence, a decrease of 6.3% since 30 June 2023 primarily due to the portfolio revaluation deficit of £65.8 million or 5 pence per share. . Undrawn facilities for June includes a million accordion option . Including post balance sheet events . Includes rates fixed through interest rate derivatives . Including extension options at lenders’ discretion 38 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | FINANCIAL OVERVIEW In addition, the Group also refinanced its existing £97 million secured debt facility with Deka through a new £100 million unsecured debt facility with ING Bank N.V., London Branch. The facility comprises a £75 million term loan and a £25 million revolving credit facility, which has a maturity of three years and has two one-year extension options. Following the refinancing, the Company has a weighted average debt maturity of 4 years, a weighted average debt cost of 3.8% and available undrawn facilities of £176 million (including £50 million accordion). The Group’s interest rate risk is mitigated through a combination of fixed debt and derivative interest rate swaps and caps. During the year, 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 through terminating existing derivatives and acquiring new instruments that aligned with the expiry of the Group’s debt portfolio. This exercise was performed at no additional cost to the Company. The Group maintains good long-term relationships with all lenders and is currently in discussions regarding refinancing requirements over the next financial year. The Group continues to monitor its banking covenants and maintains significant headroom on its LTV and ICR covenants. As at 30 June 2024, property values would need to fall by around 38% before breaching the unsecured gearing covenant. Similarly, net rental income would need to fall by 72% before breaching the unsecured interest cover covenant. Fitch Ratings, as part of its annual review, reaffirmed the Group’s BBB+ rating with a stable outlook. In the first half of the year, 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. In the second half of the year, the Group increased its unsecured facility with Sumitomo Mitsui Banking Corporation by £37.5 million to £104.5 million, to facilitate the acquisition of a Tesco omnichannel supermarket in Stoke-on-Trent. In April 2024, the Group drew down €81.7 million from its existing HSBC revolving credit facility, having also increased the total size of the facility by £25 million. The funds were used to acquire a portfolio of 17 supermarket stores from Carrefour. At 30 June 2024, the Group has gross borrowings of £698 million diversified across eight lenders, including £415 million of unsecured borrowings and £283 million of secured borrowings. In addition, the Group has available undrawn facilities of £104 million (which includes a £50 million accordion) and plenty of headroom under banking covenants, providing the capacity to execute opportunistic transactions as they arise. Post year end, the Group announced the completion of a £170 million refinancing through its first private placement issuance and a new unsecured bank facility. As part of the refinancing, the Company completed an agreement with a group of institutional investors for a private placement of €83 million new senior unsecured notes, which have a maturity of 7 years and a fixed rate coupon of 4.44%. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 39 STRATEGIC REPORT | TCFD COMPLIANT REPORT Due to this overall decrease in the Company’s Scope 1 and 2 emissions, emissions from Fuel and Energy related activities (“FERA”) (Scope 3 category 3) have also decreased from 37 to 32 tCO 2 e (14% reduction) for this reporting year. 50 Emissions from Purchased Goods and Services (Scope 3 category 1) have decreased from 3,132 to 2,215 tCO 2 e (30% reduction) for this reporting year, due to a decrease in total included spend as exclusions were more rigorous this year. This year exclusions from spend include service charge costs and costs that are recharged to tenants in full. This is due to a spend-based approach being used for the Scope 3 Purchased Goods and Services, which supports the Company in prioritising its suppliers for engagement on decarbonisation. This year no newly built properties have been added to the portfolio; therefore, no emissions are attributed to Capital Goods (Scope 3 category 2) this year. Two new supermarket sites have been acquired by the Company in this reporting year. Even with the two new sites acquired, Scope 3 energy consumption and resultant emissions from Downstream Leased Assets (Scope 3 category 13), which includes tenant Scope 1 and 2 emissions, have decreased from 83,794 to 81,931 tCO 2 e (1% decrease) for this reporting year due to improved estimation methods. Overall, total Scope 1, 2 and 3 emissions have decreased from 87,537 tCO 2 e in the previous reporting year to 84,281 tCO 2 e (4% reduction) in the current reporting year. An error in the supermarket refrigerant emission calculation was found for the previous reporting year (2022-2023), resulting in missing Scope 3 downstream leased asset emissions reported last year. This has now been rectified and restated figures are included in the table below. The correction has resulted in an 8% increase in total emissions for the reporting year 2022-2023. In April 2024, the Company acquired a portfolio of Carrefour omnichannel supermarkets in France through a sale and leaseback transaction. Given the timing of this transaction, full year energy and carbon data has not yet been collected for these French assets. Therefore, the disclosures in this SECR Report focus on the energy and carbon performance of the Company’s UK portfolio only. However, the Company intends to collect the required energy and carbon performance data from these French assets over the next reporting period to ensure the Company’s next SECR Report covers both UK and French assets. Energy and Carbon Foreword The Company recognises the urgent need to address climate change and is committed to supporting the required transition to a net zero economy. This year, the Company reached a significant milestone with the Climate and Environment pillar of its Sustainability Strategy, with the setting of a formalised 2050 net-zero commitment and associated GHG emissions reduction targets. These targets were approved by the SBTi in March 2024, and include a commitment by the Company to reduce Scope 1 and 2 emissions 42% by 2030 and to reduce Scope 1, 2 and 3 emissions 90% by 2050 (from a FY23 base year). The Company’s Board and the Investment Adviser recognise the importance of transparent, decision-useful sustainability reporting to improve our accountability to stakeholders. As such, the Company’s SECR and TCFD Report can be found below on pages 39 to 51. In addition, the Company has published a standalone Sustainability Report covering its wider ESG performance. The Company remains committed to further progressing its climate-related strategy and emissions reductions activities, as it continues to identify opportunities to reduce operational carbon and energy use and contribute towards a net zero future. Streamlined Energy and Carbon Reporting The below table and supporting narrative summarise the SECR disclosure. As a listed entity, Supermarket Income REIT plc is required to comply with the SECR regulations under the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. Data for the year 2022-2023 and 2023-2024 is included as this is the Company’s second year of SECR. Compared to the previous reporting year (2022-2023), there has been a slight increase in Scope 1 fuel consumption and a decrease in Scope 2 purchased electricity consumption. Overall, this has resulted in a decrease in total Scope 1 and 2 emissions from 111 tCO 2 e in the previous reporting year to 103 tCO 2 e (7% reduction) in the current reporting year. TCFD COMPLIANT REPORT . FERA emissions includes the well-to-tank (WTT) and transmission and distribution (T&D) upstream emissions from Scope and . 40 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED Report Previous reporting year: 1 July 2022 – 30 June 2023 As restated: 1 July 2022 – 30 June 2023 Current reporting year: 1 July 2023 – 30 June 2024 Location UK UK UK Emissions from the combustion of fuel and operation of facilities (tCO e) (Scope ) Emissions from purchase of electricity (location-based) (tCO e) (Scope ) Emissions from business travel in rental cars or employee-owned vehicles where company is responsible for purchasing the fuel (tCO e) (Scope 3) N/A N/A N/A Total mandatory emissions (tCO e) Voluntary: Emissions from Fuel and Energy related activity (location-based) (tCO e) (Scope ) Voluntary: Emissions from Purchased Goods and Services (tCO e) (Scope ) , , , Voluntary: Emissions from Capital Goods (tCOe) (Scope ) N/A Voluntary: Emissions from Downstream Leased Assets (tCO e) (Scope ) , , , Total gross emissions (tCO e) , , , Energy consumption used to calculate Scope emissions (kWh) , , , Energy consumption used to calculate Scope emissions (kWh) , , , Energy consumption used to calculate Scope emissions (kWh) ,, ,, ,, Total energy consumption (kWh) ,, ,, ,, Intensity ratio: tCO e (gross Scope + ) per m of floor area . . . Intensity ratio: tCO e (gross Scope , + ) per m of floor area . . . . Emissions not calculated due to lack of data and immateriality (<% of total emissions). SUPR does not have an office or employees. The only travel is quarterly travel by non-exec directors, the majority of which is local travel in London. . Values have been rounded. . Emissions in downstream leased assets includes emission from tenant electricity, fuel and refrigerant consumption. FERA emissions associated with leased assets are included in Scope : Downstream Leased Assets . Values have been rounded. . Tenant energy consumption from fuels and electricity only. . Normalised to Scope + floor area: , m FY . Normalised to Scope floor area: , m FY STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 41 Methodology The 2023/24 footprint within the scope of SECR reporting is equivalent to 84,281 tCO 2 e, including voluntary emissions, with the largest portion being made up of emissions from downstream leased assets at 81,931 tCO 2 e. Anthesis has calculated the above GHG emissions to cover all material sources of emissions for which the Company is responsible. The methodology used was that of the GHG Protocol: A Corporate Accounting and Reporting Standard (revised edition, 2015). Responsibility for emissions sources was determined using the operational control approach. All emissions sources required under The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 are included. Raw data captured in spreadsheets including energy spend and consumption data has been collected by the Company. Where actual consumption data was available for natural gas and electricity use, this was used. To address data gaps, the most appropriate proxy was applied by using either previous year’s data, actual data to calculate average monthly consumption, or by applying the average floor area intensity from sites with actual data. Fuel oil was estimated by applying the average 2023 UK fuel oil price to the budgeted spend for fuel oil. Energy was then converted to GHG emissions using the UK Government’s GHG Conversion Factors for Company Reporting 2023. Scope 3 emissions have been calculated for relevant material categories using consumption data, spend data, floor area and EPC data. Fuel and Energy related activities includes well-to-tank (“WTT”) and transmission and distribution (“T&D”) upstream emissions from Scope 1&2. For Purchased Goods and Services, Environmentally Extended Input Output (“EEIO”) has been used. Spend data was provided per supplier and mapped to 2023 DEFRA Input/Output (“IO”) categories. No newly built sites were acquired during this reporting year, therefore there were no Capital Goods this year. Where actual data was not available for Downstream Leased Assets, a combination of CIBSE benchmarks were used against EPC data on energy use and heating type. Publicly available air conditioning (“AC”) certificates were used to determine the type and amount of refrigerants. Where this was not available, other similar sites were used as proxies. As per EPA data, the size of the air conditioning equipment used was dependent on the amount of refrigerant used and the floor area. Supermarket refrigeration and non-food air conditioning was estimated using an intensity estimate from EPA data as no activity data was available. Refrigerant loss rate for refrigeration was taken from Direct Emissions from Use of Refrigeration, Air Conditioning Equipment and Heat Pumps from DEFRA. The Company continued its efforts to improve energy efficiency across landlord-controlled areas and to support tenant-led energy efficiency measures between 1 July 2023 and 30 June 2024. A number of sites have been identified for LED lighting upgrades across car park and communal areas which will have a positive impact on the Company’s Scope 2 emissions. Tenant-led investments in store upgrades have also focused on energy efficiency and resulted in EPC rating improvements, as discussed in the Sainsbury’s Cheltenham case study above. Approach to GHG emissions restatements To improve its GHG reporting, the Company may restate previously reported data to provide a more accurate representation of previous performance and its decarbonisation journey, should a significant change or error be identified, such as: • Significant changes in company structure and activities • Methodology changes such as improvements in emissions factors, data access and calculation methodologies • Discovery of significant error(s) in previously reported data The Company will restate the baseline used for its Scope 1, 2 and 3 emissions reductions targets if any of the changes above result in a change of 5% or more, in line with the requirements of the SBTi. The Company will review the impact of the Carrefour portfolio acquisition on its SBT baseline once full year energy and carbon data is collected for these French assets. Taskforce on Climate-Related Financial Disclosures (TCFD) Introduction The following report contains the Company’s voluntary climate-related financial disclosures for the reporting period 1 July 2023 - 30 June 2024 in relation to governance, strategy, risk management and metrics and targets. It addresses all four core elements and 11 Recommended Disclosures as detailed in “Recommendations of the Task Force on Climate-Related Financial Disclosures” 58 . Governance Describe how the board exercises oversight of climate-related risks and opportunities: The Board is responsible for setting the Company’s sustainability strategy and overseeing the Company’s approach to climate-related risks and opportunities affecting the business. Both the Board and JTC Global AIFM Solutions Limited, the Company’s Alternative Investment Fund Manager (the “AIFM”), are responsible for the investment decisions of the Company and directing the delivery of services by the Investment Adviser to ensure that climate-related priorities are incorporated into the execution of the investment strategy. In support of this objective, the Board established its ESG Committee in May 2022, whose role helps to ensure that sustainability issues, including climate change, are discussed in sufficient detail and given appropriate focus at the Board level. The ESG Committee, which is Chaired by Frances Davies and attended by all of the Company’s Directors, meets at least four times a year and has responsibility for overseeing the delivery of the Company’s Sustainability Strategy, including identification and management of climate- related risks. The Board is primarily informed of climate-related issues by the Investment Adviser through the meetings of the ESG Committee. The Board also considers climate-related issues when making decisions on acquisitions and this process is described below under the managing climate-related risks section of this report. See Figure 1 for an overview of the Company’s governance structure related to climate-related risks and opportunities. . Task Force on Climate-related Financial Disclosures, “Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures” (June ). https://assets.bbhub.io/company/sites//// FINAL--TCFD-Report.pdf 42 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED The Board reviewed and approved a refreshed Sustainability Strategy for the Company in March 2024, of which “Climate and Environment” is one of three key pillars. The ESG Committee receives a report and verbal update from the Investment Adviser at every quarterly meeting in relation to this aspect of the strategy, and the other two pillars (namely, Tenant and Community Engagement and Responsible Business). The ESG Committee update includes the Company’s quarterly performance against environmental measures outlined in the Company’s last TCFD Report (reporting period 1 July 2022 to 30 June 2023). The update also covers the broader delivery of the Company’s sustainability strategy, including activities such as the roll-out of rooftop solar photovoltaic (“PV”) and EV charging, improvement of Energy Performance Certificate (“EPC”) ratings, ESG-related investor engagement and climate transition planning. These updates allow the ESG Committee to oversee the Investment Adviser’s performance against the agreed deliverables under the sustainability strategy, as well as holding it to account for non-performance. In addition, at the annual Board strategy day event, sustainability strategy is included as a core agenda item. The ESG Committee is also involved in the review process and ultimate approval of the Company’s TCFD Report. The Investment Adviser’s Managing Director, ESG, is responsible for leading the delivery of these services to the ESG Committee on behalf of the Investment Adviser. The Board is committed to ongoing improvement of the Company’s climate-related disclosures. During the reporting year, sustainability consultancy Anthesis was again engaged to provide external support to help shape the Company’s response and alignment to the TCFD recommendations. As part of this support, Anthesis conducted an independent peer review. In addition, they provided analysis of and recommendations on the Company’s final disclosures to further advance its progress against best practice approaches and identify focus areas for the Company to address in upcoming disclosures. The Board is invested in enhancing the Company’s understanding of climate risks and opportunities and, as part of this, approved budget allocation for ongoing climate-related activities, for the next reporting year. This facilitates forward planning and preparation of ESG matters targeted for the next reporting year. The Board recognises that appropriate training and upskilling is a key enabler to ensure successful implementation of the Company’s sustainability strategy and, specifically, the integration of sustainability factors into the investment process. In 2023 and 2024, Climate Risk training was delivered to the Investment Adviser and the Board respectively, to improve understanding of climate- related risks and opportunities and their tracking and oversight in order to support the management of these issues in the Company’s activities. Describe management’s role in assessing and managing climate-related risks and opportunities: Investment Adviser The Investment Adviser is responsible for the day-to-day delivery of the sustainability strategy as approved by the Board on behalf of the Company, including the assessment, management and reporting of climate-related risks and opportunities. Steve Windsor, Principal and Sustainability Champion at the Investment Adviser, is responsible for oversight, monitoring and management of sustainability risks and opportunities including those related to climate change. Company Audit and Risk Committee Company ESG Committee Managing Director, ESG Atrato Capital Atrato Partners JTC Company Investment Committee Investment Committee Risk Commitee ESG Committee Audit and Risk Committee Develops and executes the sustainability strategy, risk indentification and oversight Ensures sustainability considerations and risk management are embedded in IA systems and controls Ensures sustainability risks and opportunities are reflected in investment advice Oversight of JTC sustainability and policies including as they apply to AIF clients Ensures sustainability risks and opportunities are reflected in investment proposals Oversees and executes the sustainability strategy. Develops and executes risk identification and oversight Climate risk monitoring strategy recommendations and oversight Climate risk monitoring and mitigation recommendations in the context of overall risk management Approval of sustainability strategy and joint responsibility for company risk management Board Figure 1 – Governance structure related to climate-related risks and opportunities Atrato Partners Board Atrato Partners Investment Committee Atrato Capital Investment Adviser JTC Investment Committee JTC Risk Committee JTC AIFMBoard AIFM Board STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 43 The Investment Adviser’s Managing Director, ESG, is responsible for the operational delivery of climate-related risks and opportunities measures within the Investment Adviser’s operations and leads the provision of climate risk advice to the Company. The Investment Adviser’s Managing Director, ESG, and Fund Management team meet fortnightly to discuss ESG issues impacting the Company, and climate risk is a standing agenda item as part of these meetings. The Managing Director, ESG is also a standing attendee at the Investment Adviser’s Investment Committee, assuming responsibility for implementation and alignment with the Investment Adviser’s sustainability systems and controls, co-ordination of third- party service providers, and management of the Company’s sustainability activities including climate-related reporting. Where the Company has appointed a third-party service provider, the Investment Adviser will require and hold regular project progress meetings with the service provider, where delivery is tracked against an agreed project timeline. The results of the progress will be communicated to the ESG Committee by the Investment Adviser in the context of its progress against the agreed sustainability strategy. In order to formalise oversight of the TCFD reporting process, the Investment Adviser plans to formally establish a dedicated Climate Risk and TCFD Working Group in the next reporting period. This Working Group will be led by the Investment Adviser’s Managing Director, ESG, and consist of members of the wider Investment Adviser team, including from fund management and finance, to ensure appropriate assignment of climate-related responsibilities and monitoring of climate-related issues. Strategy Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term. In accordance with TCFD recommended disclosures, the Company has identified climate-related risks and opportunities across two key categories: (1) physical risks related to the physical impacts of climate change (acute and chronic) and (2) transition risks related to the transition to a low carbon economy (policy, legal, technology, and market). The Company considered these risks over three key time periods: from now until 2030 (near-term), from 2030 to 2050 (medium-term) and 2050 to 2100 (long-term). Time Horizon Details Near-term (until 2030) The near-term time horizon (-) aligns to both the Company’s near-term Science Based Target () and the anticipated compliance deadline for the proposed Minimum Energy Efficiency Standards (“MEES”) regulation. The Investment Adviser anticipates as the target year for a minimum B EPC ratings. Due to the -year weighted average unexpired lease term (“WAULT”) of its portfolio, the Company expects that there will be a limited number of lease renewals and few changes to its existing leases during this time period. Medium-term (from 2030 to 2050) The medium-term time horizon (from ) aligns with a period of current lease renewals for the majority of the Company’s assets, during which physical and transition risks associated with the Company’s portfolio may have greater influence on lease agreements with existing and new tenants. Long-term (2050 to 2100) The long-term time horizon aligns with both the Company’s long-term / net-zero Science Based Target and with a potential increase in the likelihood and severity of physical climate risks impacting the Company’s portfolio. This allows for the creation of long-term strategies and planning regarding portfolio management in response to these risks. The Company considered two key temperature scenarios as part of its scenario analysis conducted this year: Scenario Details 1.5°C / REMIND / SSP2 / Orderly (“1.5°C Net Zero”) Net Zero is an ambitious scenario that limits global warming to .°C through stringent climate policies and innovation, reaching net zero CO₂ emissions around . 3°C / REMIND / SSP2 / “3°C: Current Policies” Current Policies Scenario. No additional climate policies are applied leading to significant global warming (exceeding °C) with severe physical risks and irreversible impacts like sea-level rise. 44 SUPERMARKET INCOME REIT PLC Further details on the hazard level model and data sets used as part of the Company’s scenario analysis is included in the appendix of this TCFD Report. The Company has utilised the MSCI Real Assets (Real Estate) Climate Risk Tool (the “MSCI tool”) and associated Climate Value at Risk (“Climate VaR”) outputs to quantify the physical risks across the post-2050 (long-term) time horizon. 59 The outputs provide a qualitative risk assessment using set Financial Risk Categories determined based on the asset’s Climate VaR. For each hazard and for the transition risk, the Climate VaR is classified into one of seven buckets as shown in Figure 2 below 60 : +. % % -.% -% -% Climate VaR Source: MSCI ESG Research Risk Reduction Negligible Risk Reduction No Identifiable Risk Severe Risk Significant Risk Moderate Risk Negligible Risk Figure 2 – Financial Risk Category Climate Value-at- Risk Assets Location Hazard Costs Physical Risk The Company recognises the MSCI tool is only one of many different scenario analysis tools currently available on the market. In addition, such tools and the underlying data models and inputs they utilise are constantly evolving as climate research and available data sets continue to advance. Therefore, the Company has adopted this method of scenario analysis as an efficient way to review its portfolio, but any findings will require further investigation to establish their accuracy. The Company’s plans in this respect are outlined in more detail under the 3°C (Current Policies) temperature scenario results shared below on page 45. The Company also intends to collaborate with MSCI, and other data providers that may be used in future, to provide feedback on the tools and data inputs and to challenge assumptions and outputs when necessary. In FY23 the sustainability consultancy, Anthesis, was engaged to conduct a preliminary climate risk assessment and qualitative scenario analysis as part of preparing the Company’s 2023 TCFD Report. During this assessment, the following risks were considered as potentially most material to the Company determined based on their relative likelihood and potential financial impact: 1. Physical Risk: a. Flooding (Acute & Chronic): Increased insurance premiums and increased capital expenditure required on adaptative or remediation measures. b. Extreme Heat (Acute): Increasing operating costs for tenants through increased energy demand required for cooling; supply chain disruption, stock damage and write off. This may increase capital expenditure, repairs and maintenance, and reduc tenant demand and/or rent premiums for less energy efficient buildings. 2. Transition Risk a. Policy and Legal Risk: Currently represented by the proposed MEES regulation, but could include new or additional regulations. Any properties not compliant with MEES could reduce tenant demand, reduce rent premiums or result in fines. b. Market: Energy costs may increase for tenants, shifting preferences for more energy efficient buildings and renewables. c. Reputation: Tenants demand preferences may shift to lower carbon, highly energy efficient buildings, due to Net Zero commitments and their customer demands, reducing tenant demand and/or rent premiums. This initial analysis has been expanded on in this reporting year with further qualitative and quantitative analysis undertaken over three potential risks, namely: • Physical risk of flooding (both coastal and pluvial); • Extreme heat; and • Transition risks related to MEES, as discussed in the Strategy section above These risks were selected due to their potential impact over different time horizons, with the proposed MEES regulations identified as a key near-term risk and flooding and extreme heat identified as potential longer-term risks, allowing a broader assessment of the Company’s strategic response and resilience. The Company will look to further explore market and reputation related transition risks (both longer term transition risks) in the next reporting period. In FY23, the Company also identified the following climate- related opportunity: 1. Climate-related opportunities: a. Market: By accelerating deployment of energy efficient measures, setting a Science Based Target (“SBT”) and better aligning with tenant preferences, the Company could gain a competitive advantage relative to other commercial landlords who are not as progressive in their climate and sustainability related ambitions. This could enable increased tenant demand and rent premiums. During the reporting period, the Company has acted on both the opportunity to set a SBT and continued deployment of energy efficient measures – including progressing roll out of rooftop solar PV and installation of EV across the portfolio. These measures and the Company’s targets in relation to climate-related opportunities are discussed in more detail under the Metrics and Targets section of this report, in Tables B and E. STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED . Physical Climate VaR is defined as the net present value of the future costs attached to physical risk (cost of damage due to extreme weather), expressed as a % of the asset’s Capital Value. Calculated for a given carbon emissions reduction scenario or climate change scenario, with a given scenario outcome (aggressive or average) in case of physical risk. Discount rate of .% rate (average long-term total return of MSCI Global Property Index). . Financial Risk Categories include: Severe Risk (VaR<-%), Significant Risk (VaR<-%), Moderate Risk (VaR<-.%), Negligible Risk (VaR<%), No Identifiable Risk (VaR=%), Negligible Risk Reduction (VaR>%), Risk Reduction (VaR>.%). STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 45 As identified above, a key progress milestone in the maturity of the Company’s climate risk processes achieved in this reporting period is the adoption of the MSCI tool. The Company has used this tool to assist with quantitative scenario analysis and an assessment of the portfolio’s exposure to climate-related physical risks and associated value at risk. The Physical Risk model integrated within the MSCI tool assesses the cost of physical risks on buildings, using climate data for the given locations of assets incorporating the hazards of extreme heat, extreme cold, fluvial and coastal flooding, tropical cyclones and wildfire (see Figure 3). A summary of the key climate data sets integrated into the MSCI Physical Risk model is included in the appendix of this TCFD Report. Source: MSCI ESG Research Extreme Heat (Climate Models) Number of days/year with temperature above C Coastal Flooding (Climate Models) Flood height in metres for a -yr return period Tropical Cyclones (Probabilistic Models) Wind speeds in metres/second for a -yr return period Fluvial Flooding (Climate Models) Flood height in metres for a -yr return period Wildfires (Climate Models) Fire probability in % for a -yr return period Extreme Cold (Climate Models) Number of days/year with temperature below C Chronic Risks operational cost Acute Risks asset damage Figure 3 | Physical Risk Hazards: In addition to other result outputs considered, the MSCI tool was also used to conduct a physical risk assessment, identifying the percentage of the Company’s assets at above negligible risk 61 . The assessment was undertaken against the two key physical risks that were qualitatively analysed in the Company’s 2023 TCFD analysis, namely flood risk and extreme heat. This is the first stage in the Company’s project to develop plans to mitigate any material climate risks at an asset level. The outputs of this assessment under the high emissions 3°C (Current Policies) temperature scenario (aggressive outcome) 62 highlighted the following results for the portfolio 63 : • When considering both flood and extreme heat independently, the majority of the Company’s portfolio properties are exposed to negligible (>0 to 0.5% VaR) or no identifiable risk. The same can be said when considering aggregate physical risk overall. • In terms of coastal flood risk, 89% of the portfolio properties has either no identifiable or negligible exposure to coastal flooding risk. • In terms of fluvial flood risk, 83% of the portfolio properties has either no identifiable or negligible exposure to fluvial flooding risk. • In terms of extreme heat risk, the results showed that no assets in the portfolio face more than negligible exposure to extreme heat under this scenario. Therefore, highlighting flood risk rather than extreme heat as a priority for further analysis. This is in line with the benchmark of MSCI UK Quarterly Supermarket Index which also identifies extreme heat as a negligible risk under this scenario. These risks reduce under an Average Outcome 3°C (Current Policies) temperature scenario, and further reduce under a 1.5°C (Orderly) temperature scenario (under both an Aggressive and Average Outcome). Over the next reporting cycle, the Company will undertake the next phase of its risk mitigation project and look to conduct further analysis over the outputs from this assessment. This will involve specific review into the assets identified from this assessment as being at above negligible exposure to flooding, including: • Further investigation into the results through review of any historic flood or extreme heat events; • Comparison against UK GOV flood risk scores and other publicly available research; and • Review of any existing tenant or local government adaptation plans. Through this ongoing work, the Company will aim to validate the results and to determine an appropriate strategic response and any planning required to address any identified risks, for example, the development of site- specific flood management plans or engagement of further environmental surveys. While the outputs from the MSCI tool in terms of heat risk showed that this risk is financially immaterial at a direct asset level, the Company recognises that extreme heat still poses a potential indirect risk to the Company through the potential impact on its tenants and their supply chains. In terms of transition risk, policy and legal risk related to the proposed MEES regulation was chosen as the key risk for the Company’s transition risk analysis. Over the next reporting period, the Company intends to conduct a high- level assessment of the cost to retrofit our current portfolio to achieve compliance with the proposed MEES regulations in lieu of expected tenant-led investment. The Company also has a project underway to develop its first Transition Plan which will further outline the Company’s actions and resources associated with its transition to net zero and . The exposure assessment adopted the Climate VaR financial risk thresholds of negligible, moderate, significant and severe risk, with severe the highest financial risk category. . °C | REMIND | Current Policies (default) by time horizon. The Aggressive Outcome reflects the severe downside physical risk of a given climate change scenario and is computed from the th percentile of the distribution of Discounted Costs reflecting uncertainty about the climate system and modelling assumptions. The Aggressive Outcome (or worst case/ th percentile) was selected to better stress test the Company’s strategy. . Percentages by count of total properties in the portfolio. Three assets were excluded from the MSCI tool to avoid distorting the results. This was due to their acquisition dates meaning no full year energy consumption data from prior year was available to upload into the tool and available proxy data within the tool was deemed inconsistent with the actual data results. 46 SUPERMARKET INCOME REIT PLC actions to reduce the Company’s GHG emissions in line with its science-based emissions reductions targets. Going forward, the Company intends to take an iterative approach to scenario analysis as a strategic planning tool over time, as external tools and analytical choices evolve and the Company’s analysis further matures. Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning. The Company has identified two material risks, one per transition and physical, from the outputs of the scenario analysis conducted over this reporting period. The impact of each risk is likely to vary in magnitude across different time horizons and climate scenarios (as listed in Table A), and so the Company will continue to monitor and analyse these risks to better understand how they may unfold. Table A below provides a description of each risk and the Company’s assessment of potential impact and risk management strategy (including mitigating actions). STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED Table A | Climate-related risks summary TCFD Risk Category Risk Description Time Horizon Potential Impact and Strategy (including mitigating actions) Transition Risk: Policy and Legal Proposed MEES regulation requiring portfolio assets to achieve a minimum of EPC B rating by 2030. Near-term (from now until 2030) 1.5°C scenario (Net Zero): higher risk 3°C (Current Policies) scenario: lower risk The proposed MEES regulation is expected to require all commercial property to be a minimum EPC B by 2030. 56% of the Company’s portfolio is currently rated B or above. This risk (and other policy and legal risks) is higher under a 1.5°C scenario which assumes the implementation of stringent climate policies required to reach net zero. The direct impact of the proposed regulation is reduced given the Full Repairing and Insuring (“FRI”) nature of the leases 64 , and the ambitious emissions reduction and associated energy efficiency targets of the Company’s major tenants. 75% of the UK portfolio is leased to Tesco and Sainsbury’s, with both these tenants having set net zero by 2050 science-based targets, supported by commitments to retrofit their stores to improve energy efficiency over the near and medium-term. This tenant-led investment in energy efficiency measures (including upgrades to heating and cooling systems and refrigeration units) not reduces energy consumption but has also led to EPC rating improvements at no cost to the Company. In addition, SUPR has introduced a policy under which no asset with an EPC below C can be acquired unless a demonstrable EPC improvement plan is developed, the cost of which is reflected in the investment case for the asset acquisition. Opportunities for the installation of energy efficiency and renewable technology in support of the Net Zero transition (such as rooftop solar PV and EV charging) are also considered as part of the investment case. Physical Risk: Flooding Impact of acute physical risk of fluvial and coastal flooding. Long-term (2050 to 2100) 1.5°C scenario (Net Zero): lower risk 3°C (Current Policies) scenario: higher risk The key potential impact of fluvial and coastal flooding is asset damage (building damage costs). This risk is higher under a 3°C scenario which assumes no additional climate policies are applied leading to significant global warming (exceeding 3°C) with severe physical risks including from sea-level rise, intense rainfall and associated flooding. The direct impact of flooding risk on the Company is reduced given the majority of the assets are on FRI leases, meaning the tenants have full insurance obligations. Flood risk is a key risk assessed as part of the Company’s acquisition due diligence process. The Company has expanded upon its assessment of flood risk from initial UK Government online Flood Risk tool assessments to also utilise the flood risk assessment within the MSCI tool. If flood risk is identified in an acquisition opportunity further due diligence will be undertaken, for example additional site surveys and analysis, and consideration of any adaptation measures. The Company has identified the assets exposed to above negligible risk of flooding under different scenarios. The Company will explore how further changes to its strategy and financial planning may be required in light of this information, over the next reporting period. The Company’s focus on investing in strong performing stores and the long-dated nature of the Company’s leases already creates an incentive for the Company’s tenants to build physical climate-resilience considerations into their own long-term management strategies for the stores they occupy. As the Company continues to enhance its climate- related engagement with tenants, it will also look to engage further on adaptation planning and tenants’ plans in this respect. . The nature of FRI leases means the tenants have responsibility for the maintenance and operation of the assets (including the heating and cooling of the building) during the term of the lease. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 47 Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a °C or lower scenario. The Company’s scenario analysis outputs have highlighted the following findings: • Overall, the current portfolio is not highly exposed to physical risks given the location of the assets. • Of the physical risks assessed, flood risk is the most material risk for the portfolio. • The impact of climate-related physical risks to the portfolio is expected to become more relevant in the long term under a high emissions scenario. • Transitional risks are expected to be higher in the short term under a 1.5°C scenario driven by policy and legal changes, such as minimum EPC rating requirements, whereas under a 3°C scenario transition risks remain low over the short to medium-term until the point whereby policy and legal changes (particularly adaptation measures) are required to address increasing physical impacts. The Company recognises that its strategy and financial planning regarding climate related risks and opportunities, will need to continue to evolve over the long term, particularly under a high emissions climate scenario. However, a benefit of owning mission critical real estate is that the Company’s tenants make significant investments in maintaining, upgrading and decarbonising the Company’s store estate. These investments are linked to the ambitious net zero targets and associated energy efficiency commitments of the Company’s largest tenants. Not only do these investments drive improvements in energy consumption at the store level, they have also helped the Company to see an improvement in EPC ratings, supporting the Company with progress against its EPC-related improvement targets. In addition to acting as a transition risk mitigant, these decarbonisation investments and the long-dated nature of the Company’s leases also create an incentive for the Company’s tenants to build physical climate-resilience considerations into their own long-term management strategies for the stores they occupy. During the reporting period, the Company has undertaken a range of initiatives aimed at enhancing its resilience to climate-related risks and capitalising on climate-related opportunities. This includes an ESG data sharing initiative, focused on gaining a better understanding of the energy consumption performance of the Company’s tenants. For the first time, as outlined above, the Company has also conducted quantitative climate scenario analysis as part of the Company’s efforts to better understand and manage the portfolio’s exposure to climate-related risks and opportunities. A key climate-related milestone for the Company has been the development of science-based emissions reduction targets. These targets were approved and validated by the SBTi at the beginning of 2024, they include a commitment to reduce our Scope 1 and 2 emissions by 42% by 2030 and to reduce Scope 1, 2 and 3 emissions 90% by 2050 (from a FY23 baseline). More details on the Company’s SBTs are provided under the Metrics & Targets section of this report on page 48. As part of the development of the targets, the Company engaged external consultants, Anthesis, to prepare a high-level decarbonisation plan. The Company is currently building upon this initial plan through the development of its first Transition Plan. During the reporting period, the Company continued to seek out other opportunities to enhance the environmental performance of its assets and contribute to the net zero transition. This includes the continued roll out of EV charging and rooftop solar across the portfolio and the Company’s efforts to encourage energy efficiency improvements by its tenants. Risk Management Describe the organisation’s processes for identifying and assessing climate-related risks. The Company’s approach to risk assessment is as set out in the Our Principal Risks Section on 52 to 54. The Board and the AIFM together have joint overall responsibility for the Company’s risk management and internal controls, with the Audit and Risk Committee reviewing the effectiveness of the Board’s risk management processes on its behalf. The ESG Committee is responsible under the delegated authority of the Board for the identification and monitoring of climate-related risks which are incorporated into the risk management process. The ESG Committee considers both physical and transition climate-related risks, including existing and emerging regulatory requirements related to climate change. The climate-related risks included in SUPR’s Risk Register have since been updated to reflect the findings from this climate risk assessment. Climate risk is also a standing agenda item at the fortnightly ESG meetings held between the Investment Adviser’s Managing Director, ESG, and its Fund Management team. Additionally, the Investment Adviser seeks to ensure climate-related issues are a standing item when engaging with the Company’s tenants. This includes discussion on topics such as any planned tenant-led investments in store refurbishments and energy efficiency upgrades, energy consumption data sharing and improvements to EPC ratings. Such engagement occurs multiple times per year and more frequently with larger site tenants. Describe the organisation’s processes for managing climate-related risks. As part of the acquisition due diligence process, the Investment Adviser undertakes an assessment of each asset against a set of sustainability criteria. This includes consideration of climate-related risk, such as flood risk (using both the UK Government online Flood Risk tool and the MSCI tool) and assessing the emissions reduction targets of tenants to assess alignment with SUPR’s own targets, as part of each transition review. The Company also obtains external environmental surveys on all acquisitions, which address the short-term risk of climate related damage to group properties. A summary of the climate-related risk assessments undertaken is included as part of each Investment Committee paper. The Company will not recommend the acquisition of assets with an EPC of below a C unless a deliverable EPC improvement plan is prepared to improve an asset to an 48 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED EPC rating of C or better. The cost of delivering the EPC Improvement plan forms part of the acquisition investment case. EPC rating assessments for existing assets in the portfolio are conducted on a rolling basis when there are known sustainable improvements to assets, on expiry or following a change to EPC calculation methodology. These ratings, as the Company’s responsibility, are undertaken by the Company’s consultants when required. Both physical and transition climate risks associated with the Company’s portfolio are assessed and included in the risk register. Materiality and prioritisation determinations are made through impact, likelihood, and risk scoring as a part of the risk register. Inherent and residual probabilities are assigned to each risk, from which a risk score is derived. Mitigating actions are described in detail in the risk register, laying out governance structure and processes in place aimed at mitigating each risk. Finally, actions taken to mitigate risks are tracked and recorded in the register. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management. The Company’s approach to risk assessment is as set out in the Our Principal Risks Section on pages 52 to 54. The Company manages its risk related to its emissions, and associated regulatory risk, by monitoring, measuring, and disclosing its Scope 1, 2, and 3 GHG emissions, and identifying available decarbonisation levers. This includes the preparation of the Company’s first Transition Plan, currently under development, which builds off the decarbonisation analysis completed to prepare the Company’s SBTs. Tenant engagement is a core pillar of the Company’s Sustainability Strategy and includes engagement on energy efficiency measures and support of tenants’ own decarbonisation efforts and targets. As part of Scope 3 emissions initiatives over the last reporting period the Company has undertaken increased engagement efforts with tenants on energy consumption and other ESG performance data. Should there be an incidence of flood, it is anticipated that a flooding report would be submitted by the tenants to the Investment Adviser. These can be consulted to inform the Company’s risk and investment strategy. Metrics and Targets Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process. To better understand and manage its climate-related risks and opportunities in line with its strategy and risk management process, the Company measures a number of climate-related metrics, see Table B below. Table B | Climate-related metrics Metric category Metric FY FY Transition risks % EPCs of UK supermarkets B or above (by valuations) 50% 65 56% % EPCs of UK ancillary units B or above (by valuations) 35% 65 53% % of actual energy consumption data from UK supermarket tenants used for GHG Inventory (vs estimated data) 14% 26% 66 Physical risks % of UK supermarket assets in the portfolio screened for physical climate hazards Screening only at acquisition 95% 67 Climate-related opportunities % of UK supermarket assets with on-site renewable energy generation 20% 65 20% % of UK supermarket assets with on-site EV charging 20% 30% . As at June including post balance sheet events . The majority of estimates are attributed to refrigerant gasses which were % estimated. % of purchased electricity emissions and % of natural gas emissions were calculated based on actual data in FY, an improvement from % and % actual data respectively in FY. . Three assets were excluded from the MSCI tool to avoid distorting the results. This was due to their acquisition dates meaning no full year energy consumption data from prior year was available to upload into the tool and available proxy data within the tool was deemed inconsistent with the actual data results. The Company has set ambitious climate-related targets, including both near-term and long-term/net zero emissions reduction targets. The Company is committed to ongoing reporting of progress against these targets as a means of transparency and accountability. A summary of the Company’s science based targets and other core climate- related targets is provided in Table D and E. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 49 Disclose Scope , Scope , and, if appropriate, Scope GHG emissions, and the related risks. The Company engaged external consultants, Anthesis, to prepare its GHG inventory for FY24, covering Scope 1, 2 and 3 emissions. The Company’s full GHG inventory, prepared in line with the GHG Protocol methodology is disclosed below in Table C (see Appendix A for further details of the methodology). Table C |GHG Inventory FY (as restated) FY Location-based tCO e Location-based tCO e Market-based tCO e Market-based (S& & DLA) tCO e Scope Total . . . . Scope Total . . . . 1: Purchased Goods and Services 3,131.50 2,214.70 2,214.70 2,214.70 2: Capital Goods 463.49 0 0 0 3: Fuel- and Energy-Related Activities 37.46 32.15 45.16 45.16 13: Downstream Leased Assets (“DLA”) 72,902.93 72,030.53 72,030.53 67,008.85 Scope Total ,. ,. ,. ,. Scope ,, Total ,. ,. ,. ,. Intensity ratio: tCO 2 e (gross Scope 1 & 2) per m 2 of floor area 0.00047 0.00037 0.00062 0.00062 Intensity ratio: tCO 2 e (gross Scope 1, 2 & 3) per m 2 of floor area 0.09201 0.08345 0.08355 0.07791 The Company’s scope 1, 2 and 3 emissions total 74,381 tCO 2 e (location-based) in its FY24 reporting year. Scope 3 accounts for the vast majority of the Company’s emissions at more than 99%, totalling 74,277 tCO 2 e (location-based). This is to be expected as the Company’s scope 1 and 2 emissions from the communal spaces of its assets is relatively immaterial, producing 103 tCO 2 e (location-based) collectively. The majority of the Company’s emissions come from their leased properties which sit under scope 3, category 13 downstream leased assets. The GHG Inventory figures have removed FERA emissions that are categorised under Scope 3 category 13: Downstream Leased Assets (“DLA”) to align with the SBTi minimum boundary alignment. These FERA emissions are associated with the tenants Scope 1 and 2 emissions that are also categorised under Scope 3 DLA. The figures reported in SECR Report above account for a fuller view of DLA emissions by including FERA emissions under Scope 3 DLA. Therefore, Scope 3 DLA and consequentially, total Scope 3 figures reported in the SECR Report are higher than figures reported for TCFD due to the exclusion of Scope 3 FERA under DLA in TCFD. The Company engaged Grant Thornton UK LLP to provide independent limited assurance over the Company’s location- based GHG emission data disclosed in the table above, using the assurance standard ISAE 3000 (Revised) and ISAE 3410, for the year ending 30 June 2024. Grant Thornton has issued an unqualified opinion over the selected data and the full assurance report is available on the Sustainability page of the Company’s website: Sustainability - Supermarket Income REIT. Improving the quantity of actual (vs. estimated) energy consumption data, has been a priority for the Company over the reporting period. As a result, the amount of estimated data has reduced, from 84% estimated in FY23 to 71% estimated data for this reporting period. The majority of the Company’s emissions from downstream leased assets come from assets leased out to supermarkets. Therefore, the Company has prioritised engagement on data sharing with its supermarket tenants. As a result of these engagement efforts with supermarket tenants specifically the following improvements have been made: • The amount of actual purchased electricity data in FY23 was 23%, improving to 52% actual data in FY24; • The amount of actual natural gas consumption data in FY23 was 27%, improving to 70% actual data in FY24. This has subsequently improved the overall accuracy of the Company’s emissions disclosures on prior year. This is a marked improvement from FY22 where 100% of emissions were estimated. This was achieved through a combination of measures including the development of new tenant data request template, aligned to the reporting requirements of EPRA sBPR and the Sustainability Accounting Standards Board (“SASB”) real estate standard. The Company has identified engagement with supermarket tenants on refrigeration gas data, which is currently 100% estimated, . FERA emissions associated with tenant activities under Scope downstream leased assets are not included in the figures reported. 50 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED as a key priority over the next reporting year. Details of the remaining assumptions and proxies used to complete the Company’s GHG inventory where actual data was not available, are outlined in the Appendix A. During the reporting period, the Company worked with external consultants, Anthesis, to prepare and submit science-based emissions reductions targets to the SBTi, see Table D below. These targets were validated and approved by the SBTi at the beginning of 2024. Table D | - Science Based Targets Target Description Near-term The Company commits to reduce Scope 1 and Scope 2 emissions 42% by 2030 from a FY23 baseline. Long-term The Company commits to reduce Scope 1, 2 and 3 emissions 90% by 2050 from a FY23 baseline. Net Zero The Company commits to reach net-zero by 2050. Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets. In addition to the Company’s science-based targets, a number of other climate-related targets are used by the Company to manage climate-related risks and opportunities, see Table E below. These targets have been developed to link to the transition and physical risks identified as part of the Company’s TCFD reporting. Table E | - Climate-related targets linked to metrics Metric category Metric Target Transition risks % EPCs of UK supermarkets B or above (by valuations) All UK supermarkets 69 B or above by 2030 % EPCs of UK ancillary units B or above (by valuations) All UK ancillary units 70 B or above by 2030 % of actual energy consumption data from UK supermarket tenants used for GHG Inventory (vs estimated data) YoY increase in % actual energy consumption data from UK supermarket tenants used for GHG Inventory Physical risks % of UK supermarket assets in the portfolio screened for physical climate hazards All assets included in annual portfolio climate risk analysis Climate- related opportunities % of UK supermarket assets with on-site renewable energy generation YoY increase in % of supermarket assets with on-site renewable energy generation % of UK supermarket assets with on-site EV charging YoY increase in % of supermarket assets with on-site EV charging Given the FRI nature of the majority of the Company’s lease arrangements and associated limitations to site control, the Company has not yet set further specific targets with regards to the percentage of on-site solar PV installed and on-site EV charging. However, the Company is committed to increasing the number of assets with both on-site solar PV installed and on-site EV charging and continues to actively engage with tenants on such opportunities and to support installations wherever feasible. During the reporting year, the Company achieved the following two climate-related targets that were included in its FY23 TCFD Report: Target Metric Status 100% of Investment Adviser staff receive training on climate risks and opportunities by end of 2023 Percentage of staff trained 100%. Target achieved. Five sites with Company-owned and managed car parks with electronic vehicle charging Number of EV charging stations 5 of 5. Target achieved. Additional climate-related training will continue be rolled out on an ad-hoc basis to the Investment Adviser team and to new joiners. Most recently, this has covered topics such as quantitative scenario analysis and transition planning fundamentals. The Company will review its selection of climate-related metrics and targets over the next reporting period to ensure that it continues to measure and manage its climate-related risks and evolve its approach to meet best practice guidance and stakeholder expectations. Appendix A: Methodology notes for GHG inventory Methodology and Assumptions The 2022 Conversion Factors published by the UK Department for Energy Security and Net Zero (“DESNZ”) and Department for Business, Energy, and Industrial Strategy (“BEIS”) was the main source used for emission factors. All relevant categories have been included and any exclusions are described below. Scope 1 & 2 For electricity and natural gas, some actual consumption data was provided for communal areas where energy consumption is controlled by SUPR. Where there were gaps, estimations were made using the data from previous year or floor area intensities (based on similar sites within the portfolio) as proxies. For fuel oil, spend was used as a proxy due to a lack of activity data. . Excludes supermarkets located in Scotland, due to differing EPC calculation methodology used, making the sites non-comparable. . Excludes ancillary units located in Scotland, due to differing EPC calculation methodology used, making the sites non-comparable. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 51 Scope 3 (1. Purchased Goods & Services) This category was estimated using spend as a proxy and applying Department for Environment, Food & Rural Affairs (“DEFRA”) input-output factors kgCO 2 /GBP) to expenditure. Scope 3 (13. Downstream Leased Assets) The majority of emissions relate to tenant energy use, particularly for supermarket branches. Some supermarket tenants, including Tesco, Sainsbury’s and M&S provided actual consumption data for electricity and heating. Where no consumption data was available, estimations were made using benchmark intensity data based on floor area. The majority of refrigerant consumption was estimated for all sites. A smaller amount of emissions arises from the communal areas of sites where the Company owns the land but is not responsible for paying for the energy. These emissions were estimated using the floor area intensities of similar sites with actual data. MSCI Physical Risk Model Data Inputs Hazard Level Main Models and Datasets: Hazard Type Severity Resolution Main Models and Datasets Extreme Cold Chronic Number of days <0°C and <-10°C 56km v 42km • CMIP6 climate models: GFDL-ESM4, IPSL-CM6A- LR, MPI-ESM1-2-HR, MRI-ESM2-0, UKESM1-0-LL • Climate projections are bias-adjusted Extreme Heat Chronic Number of days >30°C and >35°C 56km v 42km Coastal Flooding Acute Inundation depth (metres) Flood distribution from 1yr to >10,000yr event 90m x 70m • Regional sea level rise projections from Integrated Climate Data Center • Elevation data from Coastal DEM (upgraded Digital Elevation Model – Climate Central / NASA) Fluvial Flooding Acute Inundation depth (metres) Flood distribution from 1yr to >10,000yr event 90m x 70m • Dailing fluvial flooding timeseries provided by Potsdam Institute for Climate Impact Research • Elevation data from Coastal DEM from Climate Central which is complemented by data from SRTM Tropical Cyclones Acute Wind speed (metres/ second) Cyclone distribution from 1yr to >10,000yr event 11km x 9km • CLIMADA • International Best Track Archive for Climate Stewardship (IBTRaCS) Wildfire Acute Fire probability (% annual) 460m x 355m • 4 components: fire weather, fire ignition, fire spread and fire intensity • Fire weather & ignition: Canadian Forest Fire Weather Index (FWI) • Fire spread: Global Land Cover 2000 dataset; Elevation is derived from the GMTED2010 dataset • Fire intensity: Global Fire Atlas 52 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | OUR PRINCIPAL RISKS Principal Risks and Uncertainties The Board and JTC Global AIFM Solutions Limited, the Company’s Alternative Investment Fund Manager (the “AIFM”), together have joint overall responsibility for the Company’s risk management and internal controls, with the Audit and Risk Committee reviewing the effectiveness of the Board’s risk management process on its behalf. To ensure that risks are recognised and appropriately managed, the Board has agreed a formal risk management framework. This framework sets out the mechanisms through which the Board identifies, evaluates and monitors its principal risks and the effectiveness of the controls in place to mitigate them. The Board and the AIFM recognise that effective risk management is key to the Group’s success. Risk management ensures a defined approach to decision making that seeks to decrease the uncertainty surrounding anticipated outcomes, balanced against the objective of creating value for shareholders. The Board determines the level of risk it will accept in achieving its business objectives and this has not changed during the year. We have no appetite for risk in relation to regulatory compliance or the health, safety and welfare of our tenants, service providers and the wider community in which we work. We continue to have a moderate appetite for risk in relation to activities which drive revenues and increase financial returns for our investors. There are a number of potential risks and uncertainties which could have a material impact on the Company’s performance over the forthcoming financial year and could cause actual results to differ materially from expected and historical results. The risk management process includes the Board’s identification, consideration and assessment of those emerging risks which may impact the Group. Emerging risks are specifically covered in the risk framework, with assessments made both during the regular risk review and as potential significant risks arise. The assessment includes input from the Investment Adviser and review of information by the AIFM prior to consideration by the Audit and Risk Committee. During the year, the Audit and Risk Committee, together with the AIFM and Investment Adviser, undertook a review of the risk management reporting framework. As a result of this exercise, the Board reviewed all risks and decided to rationalise the principal risks from 17 risks, as set out in the 2023 Annual Report, to 10 risks. The matrix below illustrates our assessment of the impact and the probability of the principal risks identified. The rationale for the perceived increases and decreases in the risks identified is contained in the commentary for each risk category. Key There can be no guarantee that the dividend will grow in line with inflation. The lower-than-expected performance of the property portfolio leading to a significant fall in property valuations. 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. The default of one or more of our grocery tenants would reduce revenue and may affect our ability to pay dividends. Inflationary pressure on the valuation of the portfolio. Ability to source assets may be affected by competition for investment properties in the supermarket sector. The Company is reliant on the continuance of the Investment Adviser. Impact of geopolitical conflict / major events. Changes in regulatory policy could lead to our assets becoming unlettable. We operate as a UK REIT and have a tax-efficient corporate structure. Loss of REIT status could have adverse tax consequences for UK shareholders. OUR PRINCIPAL RISKS Probability Low High Low High Impact 10 9 8 6 5 3 1 2 4 7 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 53 Risk Impact Mitigation Change in Year 1. There can be no guarantee that the dividend will grow in line with inflation. The Company has a stated ambition to grow its dividend progressively and its prospectus refers to providing investors with inflation protection. Although the Company has received 100% of rent demanded, has increased rents in line with its contractual rent reviews and has one of the lowest EPRA cost ratios in the sector, it has been unable to increase its earnings and dividend in line with inflation. This has been caused primarily by the cap on rental uplifts in the majority of the Company’s leases and the increase in cost of debt due to higher interest rates. Increases in interest rates result in higher cost ofdebt and lower earnings. The Company has entered into interest rate swaps and caps to manage its exposure to further increases in interest rates. Interest rates have started to decline from their highs last year which, if continued, would be supportive of earnings and dividend growth over the long term beyond expiry of current interest rate hedges. The Company is proactively pursuing a number of measures to grow earnings, such as accretive acquisitions and cost reductions. 2. The lower-than- expected performance of the property portfolio leading to a significant fall in property valuations. An adverse change in our property valuations may lead to a breach of our banking covenants. Market conditions may also reduce the revenues we earn from our property assets, which affect our ability to pay dividends to shareholders. A severe fall in values may result in us selling assets to repay our loan commitments, resulting in a fall in our net asset value. Our portfolio is 99.5% let (100% of supermarket units are let) with long weighted unexpired lease terms and let to institutional-grade tenants. We own a portfolio of handpicked, high-quality supermarkets which deliver low-risk and growing income returns that are resilient through economic cycles. We manage our activities to operate within our banking covenants and constantly monitor our covenant headroom on loan to value and interest cover. 3. 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. The Company’s ordinary shares have continued to be traded at a discount to net tangible assets (“NTA”). This is largely a function of supply and demand for the ordinary shares in the market and cannot therefore be controlled by the Board. The Company may seek to address any significant discount to NTA at which its ordinary shares may be trading by purchasing its own ordinary shares in the market on an ad-hoc basis. Ordinary shares will be repurchased only at prices below the prevailing NTA per Ordinary share, which should have the effect of increasing the NTA per Ordinary share for remaining shareholders. Investors should note that the repurchase of Ordinary shares is entirely at the discretion of the Board and no expectation or reliance should be placed on such discretion being exercised on any one or more occasions or as to the proportion of Ordinary shares that may be repurchased. 4. The default of one or more of our grocery tenants would reduce revenue and may affect our ability to pay dividends. Our focus on supermarket property means we directly rely on the performance of supermarket operators. Insolvencies could affect our revenues earned and property valuations. Our investment policy requires the Group to derive at least 60% of its rental income from a portfolio let to the largest four supermarket operators in the UK by market share. Focusing our investments on assets let to tenants with strong financial covenants and limiting exposure to smaller operators in the sector decreases the probability of a tenant default. At 30 June 2024, 75% of SUPR’s income was from assets let to Tesco and Sainsbury’s who are deemed investment grade credit quality. The portfolio continues to be geographically diversified with no individual tenant operating within more than 10-15 minutes of one of the Group’s assets in any single geographical area. Our investment strategy is to acquire assets in strong trading grocery locations, which in many cases have been supermarkets for between 30 and 50 years. Our investment underwriting targets strong tenants with strong property fundamentals (good location, large sites with low site cover) and which should be attractive to other occupiers or have strong alternative use value should the current occupier fail. 5. Inflationary pressure on the valuation of the portfolio. Continued high inflation may cause rents to exceed market levels and result in the softening of valuation yields. Where leases have capped rental uplifts, high inflation may cause rent reviews to cap out at maximum values, causing rental uplifts to fall behind inflation. Inflation is monitored closely by the Investment Adviser. The Group’s portfolio rent reviews include a mixture of fixed, upward only capped as well as open market rent reviews, to hedge against a variety of inflationary outcomes. 54 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | OUR PRINCIPAL RISKS CONTINUED Risk Impact Mitigation Change in Year 6. Ability to source assets may be affected by competition for investment properties in the supermarket sector. The Company faces competition from other property investors. Competitors may have greater financial resources than the Company and a greater ability to borrow funds to acquire properties. The supermarket investment market continues to be considered a safe asset class for investors seeking long-term secure cash flows which is maintaining competition for quality assets. This has led to increased demand for supermarket assets without a comparable increase in supply, which potentially increases prices and makes it more difficult to deploy capital. The investment Adviser has extensive contacts in the sector and we often benefit from off-market transactions. They also maintain close relationships with a number of investors and agents in the sector, giving us the best possible opportunity to secure future acquisitions for the Group. The Company has acquired assets which are anchored by supermarket properties but which also have ancillary retail on site, and these acquisitions allow the Company to access quality supermarket assets whilst providing additional asset management opportunities. We are not exclusively reliant on acquisitions to grow the portfolio. Our leases contain upward-only rent review clauses, which mean we can generate additional income and value from the current portfolio. We also have the potential to add value through active asset management and we are actively exploring opportunities for all our sites. We maintain a disciplined approach to appraising and acquiring assets, engaging in detailed due diligence and do not engage in bidding wars which drive up prices in excess of underwriting. 7. The Company is reliant on the continuance of the Investment Adviser. We rely on the Investment Adviser’s services and reputation to execute our investment strategy. Our performance will depend to some extent on the Investment Adviser’s ability and the retention of its key staff. The interests of the Company and the Investment Adviser are aligned due to (a) key staff of the Investment Adviser having personal equity investments in the Company and (b) any fees paid to the Investment Adviser in shares of the Company are due to be held for a minimum period of 12 months. The Board can pay up to 25% of the Investment Adviser’s fee in shares of the Company. The Management Engagement Committee assesses the performance of the Investment Adviser and ensures the Company maintains a positive working relationship. The AIFM receives and reviews regular reporting from the Investment Adviser and reports to the Board on the Investment Adviser’s performance. The AIFM also reviews and makes recommendations to the Board on any investments or significant asset management initiatives proposed by the Investment Adviser. 8. Impact of geopolitical conflict / major events. Global, regional and national events, such as terrorism, pandemics, and geopolitical conflict could adversely impact the Company, and present challenges to our tenants resulting in impairment of asset values and/or a reduction in revenue. Supermarket operators have historically been able to successfully pass on inflationary increases through price increases to the end consumer. Whilst sales volumes may fall in a recessionary environment, the nature of food means that demand is relatively inelastic. Our tenants have strong balance sheets with robust and diversified supply chains. The tenants are therefore well positioned to deal with any disruption that may occur. 9. Changes in regulatory policy could lead to our assets becoming unlettable. Changes in regulations (currently represented by Minimum Energy Efficiency Standards (MEES)) could lead to the possibility of our assets becoming unlettable. Any properties not compliant with MEES could attract reduced tenant demand, reduced rental income and/or be subject to fines. The ESG committee stays informed about changes in legislation by working closely with the Investment Adviser and seeks input from specialist ESG experts where necessary. Proposed updates to MEES, together with updates on businesses to develop Net Zero transition plans are being closely monitored. 10. We operate as a UK REIT and have a tax-efficient corporate structure, with advantageous consequences for UK shareholders. If the Company fails to remain a REIT for UK tax purposes, our profits and gains will be subject to UK corporation tax. The Board takes direct responsibility for ensuring we adhere to the UK REIT regime by monitoring REIT compliance. The Board has also engaged third-party tax advisers to help monitor REIT compliance requirements and the AIFM monitors compliance by the Company with the REIT regime. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 55 SECTION 172(1) STATEMENT SECTION 172(1) STATEMENT The Directors consider that in conducting the business of the Company over the course of the year ended 30 June 2024, they have acted to promote the long-term success of the Company for the benefit of shareholders, whilst having regard to the matters set out in section 172(1)(a-f) of the Companies Act 2006 (the “Act”). Details of our key stakeholders and how the Board engages with them can be found on pages 56 to 59. Further details of the Board activities and principal decisions are set out on pages 72 to 73 providing insight into how the Board makes decisions and their link to strategy. Other disclosures relating to our consideration of the matters set out in s172(1)(a-f) of the Act have been noted as follows: s.172 Factor Our approach Relevant disclosures A The likely consequences of any decision in the long-term The Board has regard to its wider obligations under Section 172 of the Act. As such strategic discussions involve careful considerations of the longer-term consequences of any decisions and their implications on shareholders and other stakeholders and the risk to the longer-term success of the business. Any recommendation is supported by detailed cash flow projections based on various scenarios, which include: availability of funding; borrowing; as well as the wider economic conditions and market performance. Key decisions of the Board during the year on page 73. Our Key Stakeholder Relationships on pages 56 to 59. Board Activities during the year on pages 72. B The interests of the Company’s employees The Group does not have any employees as a result of its external management structure. The Board’s main working relationship is with the Investment Adviser. Consequently, the Directors have regard to the interests of the individuals who are responsible for delivery of the investment advisory services to the Company to the extent that they are able to do so. Our Key Stakeholder Relationships on pages 56 to 59. Culture on page 69. C The need to foster the Company’s business relationships with suppliers, customers and others The Company’s key service providers and customers include the Investment Adviser, professional firms such as lenders, property agents, accounting and law firms, tenants with which we have longstanding relationships and transaction counterparties which are generally large and sophisticated businesses or institutions. Our Key Stakeholder Relationships on pages 56 to 59. D The impact of the Company's operations on the community and the environment As an owner of assets located in communities across the UK and France, we aim to ensure that our buildings and their surroundings provide safe and comfortable environments for all users. The Board and the Investment Adviser have committed to limiting the impact of the business on the environment where possible and engage with tenants to seek to improve the ESG credentials of the properties owned by the Company. Our Key Stakeholder Relationships on pages 56 to 59. Details of the ESG policy and strategy are included on pages 39 to 51. The Board’s approach to sustainability is also explained in the Company’s standalone sustainability report available on the Company website. E The desirability of the Company maintaining a reputation for high standards of business conduct The Board is mindful that the ability of the Company to continue to conduct its investment business and to finance its activities depends in part on the reputation of the Board, the Investment Adviser and Investment Advisory Team. The risk of falling short of the high standards expected and thereby risking business reputation is included in the Audit and Risk Committee’s review of the Company’s risk register, which is conducted at least annually. Chair’s Letter on Corporate Governance on page 63. Our Principal Risks and Uncertainties on pages 52 to 54. Our Culture on page 69. F The need to act fairly as between members of the Company The Board recognises the importance of treating all members fairly and oversees investor relations initiatives to ensure that views and opinions of shareholders can be considered when setting strategy. Chair’s Letter on Corporate Governance on pages 63. Our Key Stakeholder Relationships on pages 56 to 59. 56 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | OUR KEY STAKEHOLDER RELATIONSHIPS OUR KEY STAKEHOLDER RELATIONSHIPS Building strong relationships with our key stakeholders is a critical element to our success. The Board recognises that the foundation underpinning effective corporate governance is determined on how it aligns the strategic decisions of the Company with the views of its various stakeholders. We aim to build long lasting relationships with all of our key stakeholders based on professionalism and integrity. The Board regularly consults with the Investment Adviser, who in turn manage and foster the relationships with our tenants, key partners and advisers. Stakeholder Shareholders Why is it important to engage? The Company’s shareholders are an incredibly important stakeholder group and the ultimate owners of the business. In order to deliver our strategy, it is vital that shareholders continue to understand and support the Company’s performance and investment thesis, as well as the wider market in which we operate. The Board aims to be open with shareholders and available to them, subject to compliance with relevant securities and laws. How did we engage? The way in which the Board engages with the Company’s shareholders is detailed on this page of the Corporate Governance Report. The Board oversees the Investment Adviser’s formal investor relations programme, which is designed to promote engagement with major investors (generally defined as those holding more than approximately 1% of the shares in the Company). Major investors are offered meetings after each results announcement or other significant announcements. All shareholders are encouraged to attend the AGM and engage with all Board members. Our website contains comprehensive information about our business, regulatory news and press releases alongside information about our approach to ESG issues. Additionally, recordings of our interim and annual results presentations are available on the website. What were the key topics discussed? The key topics of discussion included: the Company’s financial performance, macroeconomic themes, the acquisition of a portfolio of Carrefour supermarkets in France, capital allocation decisions, refinancing, the performance of the Investment Adviser and the Company’s ESG efforts. What was the feedback obtained and/or the outcome of the engagement? Feedback from investor meetings has played an important role in shaping Company disclosures at Interim Results, Full Year results and other regulatory disclosures. Following the Carrefour acquisition, the Company’s first international acquisition, the Company has provided additional information in this Annual Report on the French grocery sector, the acquired portfolio and strategic rationale for an acquisition outside the UK. The Company has also increased the detail of disclosure on tenant rent renewals following investor interest in long-term earnings. Capital allocation strategy is, understandably, important to investors and it is addressed in Full and Half Year reports and is monitored on an ongoing basis by the Board. Increasing investor interest in sustainability has informed the publication of the Company’s first TCFD compliant Annual Report and Accounts and accompanying Sustainability Report in the 2023 Full Year Results and the setting of net zero targets which have been ratified by SBTi. Further details on our sustainability strategy can be found on pages 39 to 51 and in the Company’s first standalone sustainability report available on the Company website. The use of virtual meetings has improved accessibility to our international and regional based shareholders. We anticipate that on-line engagement will continue to play an important part in engagement with our shareholders. In addition to this the Investment Adviser has visited a number of regional cities around the UK, Scotland, Ireland and South Africa to meet investors and potential investors face to face. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 57 Stakeholder Lenders Why is it important to engage? We have strong working relationships with our lender group who in turn help provide financing to facilitate our continued growth. As part of this, we are in regular dialogue with our banks to ensure they understand the Company’s strategy and long-term ambition. How did we engage? The Investment Adviser has regular meetings with both existing and prospective lenders to ensure that they are kept up to date with business strategy, developments and performance. Debt structure and future debt requirements are considered by the Board at a minimum on a quarterly basis as part of the Investment Adviser’s review. What were the key topics discussed? During the year, the Company, aided by the Investment Adviser, discussed with the lenders various refinancing options and future borrowing needs to ensure the appropriate financing for the Group was put in place. What was the feedback obtained and/or the outcome of the engagement? In September 2023, the Company announced it had completed a comprehensive debt refinancing exercise. This involved the cancellation of two shorter-dated debt facilities, the reduction and extension of an existing debt facility and the completion of a new unsecured debt facility with a new lender. In addition, the Company utilised its existing in-the-money interest rate hedges to extend the term of its hedging arrangements to match the maturity of its debt facilities at no additional cost. Stakeholder Investment Adviser Why is it important to engage? The Board’s main working relationship is with the Investment Adviser. The Investment Adviser brings a depth of experience in the Supermarket Property sector. This gives the Company a competitive advantage through its knowledge, specialist focus and network of industry and occupier contacts. The Investment Adviser has a crucial role in the performance and long-term success of the Company. How did we engage? It is important for the Board and Investment Adviser to maintain a positive and transparent relationship to ensure alignment of values and business objectives. The Board engage with the Investment Adviser at the scheduled quarterly Board meetings as a minimum. Ad-hoc Board meetings are held to approve matters including acquisitions and disposals, asset management opportunities, new financing arrangements and appointment of advisers. The Management Engagement Committee is responsible for reviewing the performance of the Investment Adviser. What were the key topics discussed? During the year the Management Engagement Committee discussed and agreed upon changes to the investment advisory agreement with Atrato. Key topics discussed between the Investment Adviser and the Board were strategic decisions which included the acquisition of a portfolio of Carrefour supermarkets in France, a comprehensive debt restructuring and operational efficiencies to achieve a reduction in EPRA cost ratio for FY25. What was the feedback obtained and/or the outcome of the engagement? The investment advisory agreement was amended and restated to provide clarification to all parties in the event of a takeover, delisting or liquidation and seek to reflect the original commercial intentions of the agreement. 58 SUPERMARKET INCOME REIT PLC STRATEGIC REPORT | OUR KEY STAKEHOLDER RELATIONSHIPS CONTINUED Stakeholder Tenants Why is it important to engage? We recognise that the success of the Company relies on the continued success of our operators, who in turn rely on quality stores in order to help them succeed. This is why we place particular onus on having a strong relationship with the grocery operators to better understand the challenges and opportunities facing their business. How did we engage? Regular meetings are held between the Investment Adviser and our key occupiers to understand their future needs, including views on market sentiment, performance and sustainability initiatives. Any potential opportunities or risks facing the Company are fed back to the Board to inform future strategy. The Investment Adviser will visit every site within the Portfolio at least once a year, with feedback reported to the Board of any material issues. We conduct a review of published operator data, such as annual accounts, trading updates and analysts’ reports to identify mutually beneficial opportunities. Engagement efforts from an ESG front also focused heavily on improving ESG data sharing. A new ESG data request template was developed to assist with this engagement, which outlines the ESG consumption data points needed for the purposes of the Company’s own GHG inventory. What were the key topics discussed? During the year, key topics included trading performance, site queries and asset performance enhancement. A number of ESG topics were also the focus of discussion with the tenants, aimed at improving the Company’s understanding of tenant ESG performance and ways in which the Company could further enhance the sustainability of its buildings and communal areas. This included topics such as improving ESG data sharing, EV charging roll-out and rooftop solar opportunities, energy efficiency improvement plans, updating EPC assessments, biodiversity and nature-related opportunities and charitable giving. What was the feedback obtained and/or the outcome of the engagement? The Company significantly improved the amount of actual data it was able to source from tenants, compared to prior years, as a result of engagement efforts on ESG data sharing. In addition, the Investment Adviser continued to roll out its green lease rider in all new lease negotiations and agreed the clauses in as many leases as possible. The riders, among other things, enable us to request that tenants provide environmental performance data. Stakeholder Service Providers Why is it important to engage? As an externally managed Company, we are reliant upon our service providers to conduct our core activities. We recognise the importance of partnering with service providers who share our values and ethos and work to secure the best people with an established track record and, where possible, retain key partners on successive transactions and workstreams. Having strong relationships with our service providers promotes the overall success of the Company. How did we engage? The Board maintains regular contact with the Company’s service providers, at its quarterly Board meetings, and otherwise as required. For example, the Company’s brokers and property agent attend the Board meetings to keep the Company informed of the current market within which we operate. The Management Engagement Committee met in the year to review the performance of the Company’s service providers. What were the key topics discussed? At the Management Engagement Committee, a review of the Company’s service providers was undertaken, considering the fees charged in the year and the quality of service received. What was the feedback obtained and/or the outcome of the engagement? The Management Engagement Committee were content with the quality of service received from the Company’s service providers and the fees were considered appropriate. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 59 Stakeholder Communities Why is it important to engage? As an owner of assets which provide essential services to local communities, we intend to support initiatives that enhance the lives of the people close to our assets and to be good neighbours to our communities. How did we engage? Ongoing tenant engagement provides the opportunity to discuss how the Company can support our tenants on community initiatives, as well as their own efforts to mitigate the impact of their operations. Supermarket anchor tenants are heavily involved in their local communities and many stores have a community champion with whom to engage. On schemes where we have communal area control (on assets we manage that are not solely occupied by one tenant), the Company is engaging with the communities it services in a number of ways through initiatives such as pop-up community events (often involving local schools and community groups), holiday-related celebrations, fundraisers and charity drives. What were the key topics discussed? During the year, the key topics of discussion regarded the way in which the Company could enhance its involvement within local communities and support local charities of significance to our sites, through the Company’s grant to the Atrato Foundation. This included seeking recommendations of charities from Centre Managers to put forward to the Atrato Foundation. What was the feedback obtained and/or the outcome of the engagement? Improving the Company’s understanding of the different types of community engagement initiatives occurring at its sites and gaining recommendations on local charities for the Atrato Foundation to consider supporting. 60 SUPERMARKET INCOME REIT PLC SUPERMARKET INCOME REIT | GOING CONCERN AND VIABILITY STATEMENT The Directors have considered on the appropriateness of adopting the going concern basis in preparing the Group’s and Company’s financial statements for the year ended 30 June 2024. In assessing the going concern basis of accounting, the Directors have considered the prospects of the Group over the period up to 30 September 2025. Liquidity At 30 June 2024, the Group generated net cash flow from operating activities of £92.1 million, held cash of £38.7 million and undrawn committed facilities totalling £104.2 million (including £50 million accordion) with no capital commitments or contingent liabilities. After the year end, the Group also increased its debt capacity from £752.0 million to £825.4 million (see Note 19 for more information), leaving undrawn committed facilities of £176.0 million available (including £50 million accordion). The Directors are of the belief that the Group continues to be well funded during the going concern period with no concerns over its liquidity. Refinancing events At the date of signing the financial statements, the Wells Fargo £39 million loan facility (of which £30 million is drawn) and £50 million of the syndicate unsecured term loan fall due for repayment during the going concern period. It is intended that the facilities will be refinanced prior to maturity, or if required, paid down in full utilising the Group’s available cash balances and undrawn committed facilities of over £117 million (including post balance sheet events). All lenders have been supportive during the year and have expressed commitment to the long-term relationship they wish to build with the Company. 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 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 Annual Report 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 are below and are all on top of the base case model which includes prudent assumptions on valuations and cost inflation. The Group is 100% fixed or hedged (including post period end refinancings). No sensitivity for movements in interest rates have been modelled for the hedged debt during the going concern assessment period. Scenario Rental Income Costs Base case scenario (Scenario ) % contractual rent received when due and rent reviews based on forward looking inflation curve, capped at the contractual rate of the individual leases. Investment adviser fee based on terms of the signed agreement (percentage of NAV as per note ), other costs in line with contractual terms. Scenario Rental income to fall by % Costs expected to remain the same as the base case. Scenario Rental Income expected to remain the same as the base case. % increases on base case costs to all administrative expenses 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. The lowest amount of ICR headroom experienced in the worst-case stress scenarios was 42%. Based on the latest bank commissioned valuations, property values would have to fall by more than 26% before LTV covenants are breached, and 19% against 30 June 2024 Company valuations. Similarly, the strictest interest cover covenant within each of the ring-fenced banking groups is 225%, where the portfolio is forecast to have an average interest cover ratio of 425% during the going concern period. Having reviewed and considered the 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 Annual Report. Assessment of viability The period over which the Directors consider it feasible and appropriate to report on the Group’s viability is the five-year period to 30 June 2029. This period has been selected because it is the period that is used for the Group’s medium-term business plans and individual asset performance forecasts. The assumptions underpinning these forecast cash flows and covenant compliance forecasts were sensitised to explore the resilience of the Group to the potential impact of the Group’s significant risks, or a combination of those risks. The principal risks on pages 52 to 54 summarise those matters that could prevent the Group from delivering on its strategy. GOING CONCERN AND VIABILITY STATEMENT STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 61 A number of these principal risks, because of their nature or potential impact, could also threaten the Group’s ability to continue in business in its current form if they were to occur. The Directors paid particular attention to the risk of a deterioration in economic outlook which could impact property fundamentals, including investor and occupier demand which would have a negative impact on valuations, and give rise to a reduction in the availability of finance. The sensitivities performed were designed to be severe but plausible; and to take full account of the availability of mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks. Viability Statement The Board has assessed the prospects of the Group over the five years from the balance sheet date to 30 June 2029, which is the period covered by the Group’s medium-term financial projections. The Board considers the resilience of projected liquidity, as well as compliance with secured debt covenants and UK REIT rules, under a range of inflation and property valuation assumptions. The principal risks and the key assumptions that were relevant to this assessment are as follows: Risk Assumption Borrowing risk The Group continues to comply with all relevant loan covenants. The Group is able to refinance all debt falling due within the viability assessment period on acceptable terms. Interest Rate risk The increase in variable interest rates are managed by reduction of variable debt from cash inflows and utilising interest rate derivatives to limit the exposure to variable debt. Liquidity risk The Group continues to generate sufficient cash to cover its costs while retaining the ability to make distributions. Tenant risk Tenants (or guarantors where relevant) comply with their rental obligations over the term of their leases and no key tenant suffers an insolvency event over the term of the review. Based on the work performed, the Board has a reasonable expectation that the Group will be able to continue in business over the five-year period of its assessment. Other disclosures Disclosures in relation to the Company’s business model and strategy have been included within the Investment Adviser’s Report on pages 14 to 22. Disclosures in relation to the main industry trends and factors that are likely to affect the future performance and position of the business have been included within The UK Grocery Market on pages 25 to 33. Disclosures in relation to environmental and social issues have been included within the TCFD Report on pages 39 to 51. Employee diversity disclosures have not been included as the Directors do not consider these to be relevant to the Company. Key Performance Indicators (KPIs) The KPIs and EPRA performance measures used by the Group in assessing its strategic progress have been included on pages 34 to 35. The Strategic Report was approved by the Board and signed on its behalf by: Nick Hewson Chair September 62 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE CONTENTS CORPORATE GOVERNANCE 63 Chair’s Letter on Corporate Governance 64 Board of Directors 66 The Investment Adviser 68 Leadership and Purpose 72 Board Activities during the year 73 Key Decisions of the Board during the year 74 Corporate Governance Statement 76 Nomination Committee Report 79 Audit and Risk Committee Report 83 Management Engagement Committee Report 85 ESG Committee Report 87 Remuneration Committee Report 91 Directors’ Report 93 Directors’ Responsibilities Statement 94 Alternative Investment Fund Manager’s Report CORPORATE GOVERNANCE REPORT STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 63 CORPORATE GOVERNANCE | CHAIR’S LETTER ON CORPORATE GOVERNANCE Nick Hewson Chair CHAIR’S LETTER ON CORPORATE GOVERNANCE Dear Shareholders I have pleasure in introducing this year’s Corporate Governance report for the financial year ended 30 June 2024. The Board recognises that the way in which we conduct our business is just as important as what we do. A strong governance framework with an appropriate tone from the Board, is a key factor in being able to deliver sustainable business performance, whilst at the same time being able to deliver value for our shareholders. Board priorities A key part of the Board’s focus during the year was to oversee the successful implementation of the Company’s strategy and ensure it is positioned for long-term success. In February 2024, the Board held its annual strategy day which provided the opportunity to focus in more detail on the strategic opportunities of the Company. The Board attended a site visit at Sainsbury’s, Ashford which we found insightful and we intend to plan further visits across the Portfolio in the future. The Company continued to grow throughout the year by making a first investment into the €290 billion French grocery sector with an off-market direct sale and leaseback of 17 omnichannel stores operated by Carrefour. In the first half of the year, the Company also successfully paid down debt to run at a lower LTV of 33%. The Company also intends to proceed with a secondary listing on the Johannesburg Stock Exchange with the intention to improve trading liquidity and diversify our shareholder base. At a time of considerable macroeconomic uncertainty, we believe our exposure to the defensive nature of grocery real estate will allow us to continue delivering stable and long-term income to our shareholders. Sustainability continues to remain an important focus for the Board, and with the support of the Investment Adviser, we continue to make good progress in implementing this within our overall strategy. During the year, the SBTi validated and approved the Company’s near-term and long-term science-based emissions reduction targets. Further information on our sustainability strategy can be found on pages 39 to 51 and in the Company’s sustainability report, available on the Company website. Succession planning The Board comprises six Non-Executive Directors with a breadth of experience and the externally facilitated Board evaluation concluded that the Board worked collegiately and collaboratively to achieve its outcomes. This year, developing a succession plan has been a key focus for the Nomination Committee, to ensure the progressive refreshment of the Board as Nick Hewson, Jon Austen and Vince Prior near their nine-year term. The Director skills matrix was refreshed during the year and has been utilised in forming the succession plan identifying the skills and experience which will need to be replaced. Further detail on succession planning can be found on page 77. AIC Code of Corporate Governance (2019) This report demonstrates how we have applied the principles and complied with the provisions of the AIC Code of Corporate Governance (February 2019) (“AIC Code”) during the year, as well as our approach to corporate governance in practice. The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code (July 2018) (the “UK Code”), as well as setting out additional Provisions on issues that are of specific relevance to the Company. The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council provides more relevant information to shareholders. Details of how the Board has discharged its duty under the AIC Code can be found on pages 74 to 75. The Board and Company Secretary note that the FRC published an updated version of the UK Code in January 2024 and the AIC published an updated version of the AIC Code in August 2024, which we will report against in the next annual report. Shareholder engagement We very much look forward to welcoming shareholders to our 2024 AGM due to be held on 3 December 2024. The Board attend the Company’s AGM to answer any shareholder questions and I and other Board members make ourselves available as necessary outside those meetings to speak with shareholders. The Board oversees the Investment Adviser’s formal investor relations programme, which is designed to promote engagement. Priorities for 2025 Looking ahead to 2025, the Board is focused on continuing to maintain the highest standards of corporate governance with a focus on progressing its succession plan, as well as continuing to progress the Company’s sustainability strategy, whilst ensuring the delivery of strong financial performance. Nick Hewson Chair September 64 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | THE BOARD OF DIRECTORS BOARD OF DIRECTORS NICK HEWSON N ESG ME Independent Non-Executive Chair Date of appointment: June 2017 Committee memberships: Nomination, ESG, Management Engagement Relevant skills and experience: • Over 35 years’ experience as a property developer and investor • Founded a UK retail warehousing business • Invested in businesses covering bio-tech, digital imaging, geo-thermal ground source energy and corporate finance and fund management • Experienced Non-Executive Director for both listed and private businesses • Fellow of the Institute of Chartered Accountants of England and Wales Career Highlights: • Co-Founder, CEO and then Chair of Grantchester Holdings plc, a specialist LSE listed developer of and investor in UK retail warehouse property assets, where he worked from 1990 until 2002 • Senior Independent Director at Redrow plc, a FTSE 250 company and one of the UK’s leading housebuilders until 2022 • Chair of the Executive Committee of Pradera AM plc, a European retail property fund management business, managing significant portfolios of retail properties located in Europe and the Near East • Co-Founder, Investor and Non-Executive Director of Going Green Limited for 10 years to 2012, a firm founded with the mission to minimise the effects of carbon emissions in cities by encouraging electric vehicle commuting, pioneering the G-Wiz electric vehicle • Founding partner of City Centre Partners LP, a business specialising in converting office properties to residential in Central London SAPNA SHAH N AR ME Senior Independent Non-Executive Director Date of appointment: March 2023 Committee memberships: Nomination (Chair), Audit and Risk, Management Engagement Relevant skills and experience • Over 20 years investment banking experience advising global companies, including REITs and investment companies • Extensive experience advising companies on mergers and acquisitions, IPOs, equity capital market transactions and corporate strategy • Previously served on the advisory committee for a private solar energy company Career Highlights • Deputy Chair of the Association of Investment Companies and Non-executive Director of Biopharma Credit plc and BlackRock Greater Europe Investment Trust plc • Senior Adviser at Panmure Liberum Limited • Previously held senior investment banking roles at UBS AG, Oriel Securities (now Stifel Nicolaus Europe) and Cenkos Securities JON AUSTEN AR R ME Independent Non-Executive Director Date of appointment: June 2017 Committee memberships: Audit and Risk (Chair), Remuneration, Management Engagement Relevant skills and experience: • Over 30 years’ experience in the UK property sector • Chair of privately owned business, which specialises in land development and promotion, and renewable energy • Fellow of the Institute of Chartered Accountants of England and Wales Career Highlights: • Chief Financial Officer at Audley Group Limited, which develops retirement villages in the UK • Senior Independent Director and Chair of the Audit Committee of McKay Securities plc, a listed REIT specialising in office and industrial property, until its takeover by Workspace plc in May 2022 • Group Finance Director at Urban&Civic plc, the UK’s leading Master Developer • Also held senior finance roles at London and Edinburgh Trust plc, Pricoa Property plc and Goodman Limited KEY TO COMMITTEES AR Audit and Risk Committee ESG Environmental, Social and Governance Committee ME Management Engagement N Nomination Committee R Remuneration Committee STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 65 FRANCES DAVIES ESG R ME Independent Non-Executive Director Date of appointment: June 2022 Committee memberships: ESG (Chair), Remuneration, Management Engagement Relevant skills and experience: • Over 30 years’ experience in corporate finance and asset management • Partner at Opus Corporate Finance since 2007 • Non-Executive Director at Aegon UK plc and HICL Infrastructure plc • Chair of the Appointments Committee of Federated Hermes Property Unit Trust Career Highlights • Head of Global Institutional Business at Gartmore Investment Management • Previously held directorships at SG Warburg, Morgan Grenfell Asset Management, Dalton Strategic Partnership and J.P Morgan UK Small Cap Growth & Income plc VINCE PRIOR ME AR N Independent Non-Executive Director Date of appointment: June 2017 Committee memberships: Management Engagement (Chair), Audit and Risk, Nomination Relevant skills and experience: • Over 35 years’ experience in the retail property sector; over 20 years as a senior adviser and consultant • Key areas of expertise include supermarket real estate, business strategy, investment property financing and real estate development • Experienced Executive and Non-Executive Director Career Highlights: • Head of Property Investment at Sainsbury’s. Over a five-year period to 2014, the property portfolio grew from £7.5 billion to £12 billion • Head of Retail Advisory Services at Jones Lang LaSalle (“JLL”) providing strategic advice to a range of high-profile supermarket and retail operators • COO of European Retail Group at Jones Lang LaSalle, overseeing growth and development of JLL’s retail business across Europe • Corporate Planning and Manager of Site Research Unit for Tesco Stores, involved in set up of the location planning team and developing the group’s first five-year strategic plan CATHRYN VANDERSPAR R ESG ME Independent Non-Executive Director Date of appointment: February 2020 Committee memberships: Remuneration (Chair), ESG, Management Engagement Relevant skills and experience: • Lawyer with over 30 years’ experience (over 20 of these as a tax partner), including active participation in HMRC and HMT working groups • Specialist in direct and indirect real estate structuring, including REITs • Author of the tax chapter on REITs in Tolleys Taxation of Collective Investment Career Highlights: • Head of Real Estate Tax at Travers Smith LLP • Non-Executive Director of CBRE Investment Management (UK Funds) Limited (formerly CBRE Global Investors (UK Funds) Limited) • Head of London Tax at Eversheds Sutherland • Tax Partner at Berwin Leighton Paisner (now BCLP) BOARD GENDER Male Female Sapna Shah Frances Davies Cathryn Vanderspar Jon Austen Vince Prior Nick Hewson BOARD TENURE – YEARS 66 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | THE INVESTMENT ADVISER THE INVESTMENT ADVISER BEN GREEN Principal Date of appointment: Nov 2016 Ben is a principal at Atrato and is responsible for leading the development and execution of the firm’s long-term strategy. Ben is a member of the Atrato Group Leadership Team and a member of the firm’s Investment Committee. Relevant skills and experience: • Over 20 years’ experience structuring and executing real estate transactions • Completed more than £3.5 billion of sale and leaseback transactions, with major occupiers including Tesco, Barclays and the BBC • Expert in executing transactions for grocery real estate and real estate corporate finance • Qualified Lawyer Career Highlights: • Co-founded Atrato and led the IPO of Supermarket Income REIT • Managing Director Lloyds Bank Commercial Banking, where he ran the team providing corporate finance services to corporates, infrastructure and real estate clients • Managing Director and Head of European Structured Finance at Goldman Sachs from 2007 to 2013 • Director Barclays Capital STEVE WINDSOR Principal Date of appointment: Jan 2017 Steve is a principal at Atrato and is responsible for leading the development and execution of the firm’s long-term strategy. Steve is a member of the Atrato Group Leadership Team and a member of the firm’s Investment Committee. Relevant skills and experience: • Over 20 years’ experience specialising in finance and risk management • Expert in capital markets, risk management and financing • Highly experienced in senior management positions Career Highlights: • Co-founded Atrato and led the IPO of Supermarket Income REIT • Partner and Head of EMEA Debt Capital Markets and Risk Solutions at Goldman Sachs • Held various roles across both Trading and Banking divisions at Goldman Sachs from 2000 to 2016 • Member of Goldman Sachs Investment Banking Risk Committee • Advised numerous FTSE 100 firms on managing risk and financing their business NATALIE MARKHAM Chief Financial Officer Date of appointment: Nov 2017 Natalie is responsible for the management of the finance function for Atrato Group, including the supermarkets investment fund. Natalie is a member of the Atrato Group Leadership Team and a member of the firm’s the Investment Committee. Relevant skills and experience: • Over 20 years’ experience in finance, specialising in real estate investment funds • Experienced in senior management positions and financial management positions of real estate investment companies • Leading the SUPR ESG project with the Atrato COO • Fellow of the Chartered Institute of Accountants Career Highlights: • European CFO Macquarie Global Property Advisors, member of MGPA European Management Team and Director of the MGPA European advisory business • Manager RSM Robson Rhodes, audit and assurance STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 67 ROBERT ABRAHAM Fund Manager Date of appointment: May 2019 Robert is responsible for managing the supermarkets investment fund for the Group. Relevant skills and experience: • Over 10 years of real estate investment and loan origination/syndication experience • Key areas of expertise include property investment, commercial banking, and loans • Chartered Financial Analyst Career Highlights: • Origination of over £1 billion of supermarket acquisitions • Execution of over £750 million of debt facilities for the group • Coordination and execution of debt facilities whilst in the Loan Markets team at Lloyds Bank MICHAEL PERKINS Finance Director Date of appointment: Nov 2023 Michael is the Finance Director at Atrato and is responsible for the finance, tax and operations of the supermarkets investment fund. Relevant skills and experience: • Over 13 years’ experience within the investment management industry with a sector focus on real estate • Fellow of the Association of Chartered Certified Accountants Career Highlights: • Chief Financial Officer, Logistics Asset Management, Investment Adviser to Urban Logistics REIT plc 68 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | LEADERSHIP AND PURPOSE Role of the Board The Board has a duty to promote the long-term sustainable success of the Company for its shareholders. The Board is responsible for the overall leadership of the Company, setting its values and standards, including approval of the Group’s strategic aims and objectives and oversight of its operations. The Board currently comprises the Chair and five independent Non-Executive Directors and is supported by Hanway Advisory Limited who act as the Company Secretary. Nick Hewson is the Chair of the Company and is responsible for leading the Board and for setting the tone in respect of the Company’s purpose, values and culture. As part of his role in leading the Board, he ensures that the Board provides constructive input into the development of strategy, understands the views of the Company’s key stakeholders and provides appropriate oversight, challenge and support. Sapna Shah was appointed the Senior Independent Director (“SID”) on 22 May 2024, succeeding Vince Prior. In this role, Sapna acts as a sounding board for the Chair as well as an intermediary to the other Directors and shareholders as required. In addition to her role as the SID, Sapna serves as Chair of the Nomination Committee. The Board is well balanced and possesses a sufficient breadth of skills, variety of backgrounds, relevant experience and knowledge to ensure it functions effectively and promotes the long-term sustainable success of the Company. All Directors have access to the advice and services of the Company Secretary, who are responsible to the Chair on matters of corporate governance. Further details of each Director’s experience can be found in the biographies on pages 64 to 65. How we operate The Company’s business model and strategy were established at the time of the IPO in July 2017. Whilst the business has grown materially since the Company’s listing, its strategy and operations have not changed. The business continues to generate long-term income with inflation protection from key operating real estate assets, with additional potential for capital growth over the medium to long term. Acquisition opportunities and any related debt finance are examined by the Board with a view to ensuring the long-term sustainability of the business. The security and longevity of returns is fundamental to the Company’s strategy, as summarised in the outline of the Group’s business model on page 6 and on the Company’s website: www.supermarketincomereit.com, and the Company’s investment strategy is described in the Strategic Report on page 6. The Company has an outsourced operating model. JTC Global AIFM Solutions Limited has been appointed by the Group, pursuant to the AIFM Agreement, to be the Group’s Alternative Investment Fund Manager (the AIFM or the “Investment Manager”), under which it is responsible for overall portfolio management and compliance with the Group’s investment policy, ensuring compliance with the requirements of the Alternative Investment Fund Managers Directive (“AIFMD”) that apply to the Group and undertaking risk management. The AIFM has delegated certain services in relation to the Group and its Portfolio, which include advising in relation to financing and asset management opportunities, to the Investment Adviser. The Investment Adviser advises the Group and the AIFM on the acquisition of its investment portfolio and on the development, management and disposal of UK commercial assets in its portfolio pursuant to the Investment Advisory Agreement. The Management Engagement Committee keeps the appropriateness of the Investment Adviser and AIFM’s appointment under review. In doing so the Committee considers the past investment performance of the Group and the capability and resources of the Investment Adviser to deliver satisfactory investment performance in the future. It also reviews the fees payable to the Investment Adviser and AIFM, together with the standard of services provided by key suppliers to the Company. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 69 Conflicts of interest All the Directors are considered by the Board to be independent of the AIFM and of the Investment Adviser. As such, they are considered to be free from any business or other relationships that could interfere with the exercise of their judgements. Each Director has a duty to avoid a situation in which he or she has a direct or indirect interest that may conflict with the interests of the Company. The Board may authorise any potential conflicts, where appropriate, in accordance with the Articles of Association. Where a potential conflict of interest arises, a Director will declare their interest at the relevant Board meeting and not participate in the decision making in respect of the relevant business. Culture The culture and ethos of the Company are integral to its success. The Board promotes open dialogue and frequent, honest and open communication between the Investment Adviser and other key advisers to the Company. Whilst the Company has no employees, the Board pays close attention to the culture of the Investment Adviser and its employees and believes that its forward thinking and entrepreneurial approach, combined with its rigour and discipline, is the right fit for delivering our strategy and purpose. The Board believes that its positive engagement and working relationship with the Investment Adviser helps the business achieve its objectives by creating an open and collaborative culture, whilst allowing for constructive challenge. The Non-Executive Directors speak regularly with members of the Investment Adviser outside of Board meetings to discuss various key issues relating to Company matters. The Company’s success is based upon the effective implementation of its strategy by the Investment Adviser and third-party providers under the leadership of the Board. The Board’s culture provides a forum for constructive and robust debate, and the Board believes that this has been fundamental to the success of the Company to date. Investment Advisory Agreement In March 2024, the Company entered into an amended and restated Investment Advisory Agreement (“IAA”) with the Investment Adviser. The principal amendments to the existing IAA relate to the termination provisions of the agreement and seek to reflect the original commercial intentions of the Board and Investment Adviser. The Board has agreed to make these amendments to provide clarification for all parties in the event of a takeover, delisting or liquidation (a “Relevant Event”). In particular, the Revised IAA: • clarifies that fees relating to the period following a Relevant Event are calculated on the basis of the last available net asset value prior to the Relevant Event; • gives the Company the right, in addition to its existing right to terminate on two years’ written notice (where notice would be required to be worked), to terminate the agreement following the announcement of a takeover, a possible takeover or a delisting. Such termination would take effect upon the Relevant Event becoming effective and the Investment Adviser would, on that date, receive a payment in lieu of written notice (such that notice would not be required to be worked) equal to fees for a period of two years less the time since the notice was given or (if earlier) since the date on which any earlier termination notice was given; and • clarifies that if there is a liquidation or similar event in relation to the Company, and the Investment Adviser terminates the agreement with immediate effect (as it has always been entitled to do), the Investment Adviser would immediately receive a payment in lieu of written notice (such that notice would not be required to be worked) equal to fees for a period of two years less (if applicable) the time since any earlier termination notice was given. 70 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | LEADERSHIP AND PURPOSE CONTINUED Oversee the development of the Company’s ESG strategy Monitor impact of current and emerging ESG trends on the Company Oversee engagement with the broader stakeholder community on ESG matters. Environmental, Social & Governance Committee Nominations Committee Audit and Risk Committee Management Engagement Committee Remuneration Committee Reviews Board composition Succession planning requirements of the Group Board and Committee evaluations. Monitors the effectiveness of the audit process Monitors Group’s risk management processes Reviews integrity of the Group’s financial statements. Overseeing new tenders and appointments Reviewing performance of key suppliers including the Investment Adviser. Implements remuneration policy of the Group Ensures Directors‘ remuneration is set so as to continue to attract, retain and motivate Agree the policy for authorising claims for expenses for the Directors. Atrato Capital (The “Investment Adviser”) The Investment Adviser’s activities comprise of sourcing opportunities, conducting due diligence, providing investment recommendations, assisting with carrying out transactions and reporting on the management of the investments. The Investment Adviser will also make recommendations on financing decisions and strategy which is approved by the Investment Manager and Board. Delegated responsibilities Acquisitions & Disposals Marketing Asset Management Funding JTC Global AIFM Solutions Limited (The “AIFM”) The AIFM, together with the Board, makes investment decisions following recommendations from the Investment Adviser. The AIFM is responsible for the oversight of the portfolio management activities and undertakes the risk management function of the Company. Responsibilities Portfolio Marketing Risk Management The Supermarket Income REIT PLC Board (The “Board”) The Board is responsible for promoting the long-term sustainable success of the Company, working towards strategic objectives and generating value for Shareholders and other stakeholders. Our operating model STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 71 The Board’s attendance in 2023/2024 All Directors are expected to devote sufficient time to the Company’s affairs to fulfil their duties as Directors and to attend all scheduled meetings of the Board and of the Committees on which they serve. Where Directors are unable to attend a meeting, they will provide their comments on the Board papers received in advance of the meeting to the Chair, who will share such input with the rest of the Board and the AIFM. The Nomination Committee is satisfied that all the Directors, including the Chair, have sufficient time to meet their commitments. Attendance at scheduled Board and Committee meetings during the year was as follows: Quarterly Board meetings Audit and Risk Committee Nominations Committee Remuneration Committee Management Engagement Committee ESG Committee Scheduled meetings Scheduled meetings Scheduled meetings Scheduled meetings Scheduled meeting Scheduled meetings % attendance % attendance % attendance % attendance % attendance % attendance Nick Hewson 4/4 2/2 1/1 4/4 Sapna Shah 4/4 3/3 2/2 1/1 Jon Austen 4/4 3/3 2/2 1/1 Frances Davies 4/4 2/2 1/1 4/4 Vince Prior 4/4 3/3 2/2 1/1 Cathryn Vanderspar 4/4 2/2 1/1 4/4 72 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | BOARD ACTIVITIES DURING THE YEAR The Board typically meets for scheduled Board meetings four times a year in addition to an annual strategy day. The Board will also have separate unscheduled Board meetings to approve matters including, but not limited to: • All potential acquisitions and disposals, including appointment of principal advisers and cost budgets • Asset management initiatives • New financing or refinancing arrangements • Hedging strategy • Equity raises Board meetings The quarterly Board meetings follow a formal agenda, which is approved by the Chair and circulated by the Company Secretary in advance of the meeting. The Chair leads the Board by presiding over Board meetings; agreeing the agendas, ensuring, among other matters, that appropriate weight is given to topics such as strategy, asset allocation and financial performance. The Chair ensures that Board debates are balanced, open and inclusive and promotes behaviours and attributes that make up the culture. The Chair ensures that the Board is provided with information of appropriate quality and form, in a timely manner. The Board is kept fully informed of potential investment opportunities, along with wider property market intelligence, through a comprehensive set of Board papers prepared by the Investment Adviser prior to each meeting. Representatives of the Investment Adviser are invited to attend the Board meetings, as are representatives of the Company’s other advisers as required, particularly representatives from the Company’s property agent, external legal counsel and brokers. A summary of typical matters discussed by the Board at each quarterly Board meeting are noted below: Discussion Strategy and operational • Update by the Company’s joint brokers on the public markets and capital market activity of the Company’s peers • Supermarket property sector update by the Company’s property agent • Review of movements within the Portfolio, including recent acquisitions and rent-reviews which have taken place during the year • Grocery sector overview, including financial update on key tenants • Leasing activity, major developments and longer-term pipeline • Future asset management initiatives • EPC summary of the Portfolio Finance and financing • Quarterly financial statements review • Actuals vs budgets analysis • Review of the Company’s key performance indicators • Analysis of current debt facilities, including any impending facility renewals • Review of current cost of capital • Approval of the financial budget (annual basis) Governance • Update by the Company’s external legal counsel on matters which have been actioned during the year • Committee chairs will report on items discussed at the Board Committees • Review and discussion of the quarterly AIFM report presented by the AIFM • The Company Secretary will report on corporate governance developments including any changes required to Company policies and Committee Terms of References • Stakeholder feedback from shareholders and research analysts • Review of significant shareholdings at the year end In addition to formal Board meetings, there is also an ongoing informal interaction between the Directors, the AIFM and the Investment Adviser. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 73 CORPORATE GOVERNANCE | KEY DECISIONS OF THE BOARD DURING THE YEAR Some examples of how the Board has considered stakeholder interests and s.172(1) matters in its decision making in 2023/24 are set out below and in “Board Activities during the year” on page 72. Further details on our stakeholder engagement, and our response, can also be found on pages 56 to 59. Decision Stakeholders Board rationale and considerations Impact Long-term effects of decision Acquisition of Carrefour portfolio in France Shareholders Investment Adviser An opportunity to diversify the portfolio both from a geographic and tenant perspective. Accretive transaction and complementary to the existing portfolio. €75.3 million (excluding acquisition costs) acquisition of a portfolio of Carrefour supermarkets in France through a sale and leaseback transaction. Diversification of the portfolio and furthers the strategy of investing in the future model of grocery. Debt refinancing and hedging Shareholders Investment Adviser Given the current macroeconomic environment the Board viewed it prudent to maintain a lower LTV and used hedging to protect the Company from earnings volatility risk. Debt refinancing exercise undertaken involving the cancellation of two shorter-dated debt facilities, the reduction and extension of an existing facility and the completion of a new unsecured debt facility with a new lender. The Company also extended the term of its hedging arrangements to match the maturity of its debt facilities at no addition cost to the Company. Building strong relationships with lenders allowing the Company to access debt financing at attractive margins and 100% of the Company’s drawn debt is either fixed rate or hedged to a fixed rate until January 2026. SBTi targets Shareholders Communities Demonstrates the Company’s commitment to ESG and provides clear targets to work towards. The SBTi validated the Company’s targets to: • being net zero by 2050. • reduce its Scope 1 and Scope 2 emissions by 42% by FY2030 • reduce its Scope 1, 2 and 3 emissions by 90% by FY2050 Provides measurable objectives which the Company can measure its progress against. . 74 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | CORPORATE GOVERNANCE STATEMENT KEY BOARD STATEMENTS Statement of Compliance The Board has considered the Principles and Provisions of the AIC Code of Corporate Governance (February 2019) and that these provide the most appropriate framework for the Company’s governance and reporting to shareholders. The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code (July 2018), as well as setting out additional Provisions on issues that are of specific relevance to the Company. The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council, provides more relevant information to shareholders. The Company has complied with all the Principles and Provisions of the AIC Code throughout the year. A copy of the AIC Code (2019) can be obtained via the AIC’s website, www.theaic.co.uk. It includes an explanation of how the AIC Code adapts the Principles and Provisions set out in the UK Code to make them relevant to investment companies. This Corporate Governance Statement forms part of the Directors’ Report. AIC Code Principle Evidence of compliance / explanation of departure from the AIC Code A A successful company is led by an effective board, whose role is to promote the long-term sustainable success of the Company, generating value for shareholders and contributing to wider society. Section 172(1) Statement on page 55. Leadership and Purpose on pages 68 to 71. Strategic Report on pages 1 to 61. B The Board should establish the Company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All Directors must act with integrity, lead by example and promote the desired culture. Strategic Report on pages 1 to 61. Leadership and Purpose on pages 68 to 71. C The Board should ensure that the necessary resources are in place for the Company to meet its objectives and measure performance against them. The Board should also establish a framework of prudent and effective controls, which enable risk to be assessed and managed. Our Principal Risks on pages 52 to 54. Audit and Risk Committee Report on pages 79 to 82. Nomination Committee Report on pages 76 to 78. Management Engagement Committee Report on pages 83 to 84. ESG Committee Report on pages 85 to 86. Directors’ Report on pages 91 to 92. D In order for the Company to meet its responsibilities to shareholders and stakeholders, the Board should ensure effective engagement with, and encourage participation from, these parties. Section 172 Statement on page 55. Our Key Stakeholder Relationships on pages 56 to 59. F The Chair leads the Board and is responsible for its overall effectiveness in directing the Company. They should demonstrate objective judgement throughout their tenure and promote a culture of openness and debate. In addition, the chair facilitates constructive board relations and the effective contribution of all Non-Executive Directors, and ensures that Directors receive accurate, timely and clear information. Board Activities during the year on page 72. G The Board should consist of an appropriate combination of directors (and, in particular, independent Non-Executive Directors) such that no one individual or small group of individuals dominates the Board’s decision making. Leadership and Purpose on pages 68 to 71. Nomination Committee Report on pages 76 to 78. H Non-Executive Directors should have sufficient time to meet their Board responsibilities. They should provide constructive challenge, strategic guidance, offer specialist advice and hold third party service providers to account. Leadership and Purpose on pages 68 to 71. Nomination Committee Report on pages 76 to 78. I The Board, supported by the Company Secretary, should ensure that it has the policies, processes, information, time and resources it needs in order to function effectively and efficiently. Nomination Committee Report on pages 76 to 78. Board Activities during the year on page 72. Leadership and Purpose on pages 68 to 71. J Appointments to the Board should be subject to a formal, rigorous and transparent procedure, and an effective succession plan should be maintained. Both appointments and succession plans should be based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths. Nomination Committee Report on pages 76 to 78. K The Board and its committees should have a combination of skills, experience and knowledge. Consideration should be given to the length of service of the Board as a whole and membership regularly refreshed. Board of Directors Biographies on pages 64 to 65. Nomination Committee Report on pages 76 to 78. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 75 AIC Code Principle Evidence of compliance / explanation of departure from the AIC Code L Annual evaluation of the Board should consider its composition, diversity and how effectively members work together to achieve objectives. Individual evaluation should demonstrate whether each Director continues to contribute effectively. Nomination Committee Report on pages 76 to 78. M The Board should establish formal and transparent policies and procedures to ensure the independence and effectiveness of external audit functions and satisfy itself on the integrity of financial and narrative statements. Audit and Risk Committee Report on pages 79 to 82. N The Board should present a fair, balanced and understandable assessment of the Company’s position and prospects. Audit and Risk Committee Report on pages 79 to 82. O The Board should establish procedures to manage risk, oversee the internal control framework, and determine the nature and extent of the principal risks the Company is willing to take in order to achieve its long-term strategic objectives. Audit and Risk Committee Report on pages 79 to 82. Alternative Investment Fund Manager’s Report on pages 94 to 95. P Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success. Remuneration Committee Report on pages 87 to 90. Q A formal and transparent procedure for developing a remuneration policy should be established. No Director should be involved in deciding their own remuneration outcome. Remuneration Committee Report on pages 87 to 90. R Directors should exercise independent judgement and discretion when authorising remuneration outcomes, taking account of company and individual performance, and wider circumstances. Remuneration Committee Report on pages 87 to 90. Requirement Board statement Where to find further information Going concern basis The Board is of the opinion that the going concern basis adopted in the preparation of the Annual Report is appropriate. Further details are set out on page 60 of the Strategic Report. Viability Statement The Board is of the opinion that the viability statement made in the Annual Report is appropriate. Further details are set out on page 61 of the Strategic Report. Annual review of systems of risk management and internal control A continuing process for identifying, evaluating and managing the risks the Company faces has been established and the Board has reviewed the effectiveness of the internal control systems. Further details are set out in the Audit and Risk Committee Report on pages 79 to 82 of this Governance Report. Robust assessment of the Company’s emerging and principal risks to the business model, future performance, solvency and liquidity of the Company. The Audit and Risk Committee and the Board undertake a full risk review annually where all the emerging, principal risks and uncertainties facing the Company and the Group are considered. Further details can be found in Our Principal Risks on pages 52 to 54 of the Strategic Report. Fair, balanced and understandable The Directors confirm that to the best of their knowledge the Annual Report and Accounts taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position, performance, business model and strategy. Further details of the fair, balanced and understandable statement can be found in the Audit and Risk Committee Report on page 79 to 82. Appointment of the Investment Adviser The Directors consider the continuing appointment of the Investment Adviser on the terms agreed in the Investment Advisory Agreement dated 14 September 2020, the subsequent renewal dated 14 July 2021 and the amendment and restatement dated 21 March 2024 to be in the best interests of the Company. Further details are set out in Note 28 to the Consolidated Financial Statements. s.172 The Directors have considered the requirements of s.172 when making strategic decisions. Section 172 Statement on page 55. 76 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | NOMINATION COMMITTEE REPORT Sapna Shah Nomination Committee Chair NOMINATION COMMITTEE REPORT Dear Shareholders I am pleased to present the Nomination Committee report for the year ended 30 June 2024. The main focus of the Committee over the past year has been on succession planning and the Board’s externally facilitated evaluation. How the Committee operates The Nomination Committee Terms of Reference are available on the Company’s website and on request from the Company’s registered office. During the period to 30 June 2024, the Committee comprised of three Independent Non-Executive Directors of the Company, none of which are connected to the AIFM or Investment Adviser. Committee Members Sapna Shah: Committee Chair Vince Prior Nick Hewson All the Committee members served for the full year, unless otherwise stated. On 22 May 2024 the Company announced that I had been appointed Chair of the Nomination Committee, replacing Vince Prior, who remains a member of the Committee. During the year the Nomination Committee held two formal meetings. The Company Secretary and I ensure that the meetings are of sufficient length to allow the Committee to consider all important matters and the Committee is satisfied that it receives full information in a timely manner to allow it to fulfil its obligations. The Committee held one additional ad-hoc meeting to discuss succession planning and the appointment of an external recruitment agency. Frances Davies, Cathryn Vanderspar and Jon Austen, and members of the Investment Adviser were invited to attend the Committee meetings. The Company Secretary, Hanway Advisory Limited, acts as secretary to the Committee. Committee Responsibilities The role of the Committee is to ensure that there is a formal, rigorous and transparent procedure for appointments to the Board, to lead the process for Board appointments and make recommendations to the Board; assist the Board in ensuring its composition is regularly reviewed and refreshed so that it is effective and able to operate in the best interests of shareholders; and ensure plans are in place for orderly succession to positions on the Board. Specifically, the Committee is required to review, discuss and make recommendations (where relevant) to the Board concerning: • Plans for succession for Non-Executive Directors, in particular for the key roles of Chair and the Senior Independent Director • Membership of the Audit and Risk, Remuneration, Management Engagement and ESG Committees, in consultation with the Chairs of those committees • The reappointment of any Director at the conclusion of their specified term of office, having given due regard to their performance and ability to continue to contribute to the Board in the light of knowledge, skills and experience as well as time commitment required • Any matters relating to the continuation in office of any Director at any time • Annual review of the Board’s diversity & inclusion policy and tenure policy • Recruitment process for appointments to the Board • The annual performance evaluation process, ensuring it is externally facilitated once every three years, and any actions to be taken from the results Board Independence and Tenure The Board currently comprises six Non-Executive Directors all of whom are deemed independent. In accordance with the provisions of the AIC Code, all Directors offer themselves for annual re-election by shareholders at the AGM. We considered whether this was appropriate having due regard to each Director’s performance and ability to continue to contribute to the Board in the light of the knowledge, skills and experience required. We also considered other external appointments held by Directors and the amount of time each Director has devoted to the Company. Directors are appointed for an initial term of three years with an expectation that they will serve at least two three-year terms, but they may be invited to serve for an additional period. The Board’s tenure policy does not require a Director to be mandatorily replaced after a fixed term, but recognised that a Director’s tenure exceeding nine years may impair their independence and recognises the importance of progressive Board refreshment and renewal and Compliance with UK Corporate Governance Standards. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 77 Director Re-election The Committee is wholly satisfied the Directors devoted sufficient time to their duties over the past year and that the Board comprised the necessary skills and experience to discharge its obligations to the Company’s shareholders and other stakeholders. Following the advice of the Committee, and in line with the AIC Code, the Board recommends the re-election of each Director at the forthcoming AGM. Activities during the year Succession planning The Committee is responsible for considering succession planning for the Directors, taking into account the challenges and opportunities facing the Company, and the skills and expertise expected to be needed in the future. The Committee evaluated the current skills, experience and tenure of the Directors and have developed a succession plan to ensure the orderly refreshing of the Board given that Nick Hewson, Jon Austen and Vince Prior were all appointed at IPO and in May 2023 the Committee approved a third three-year term for each of them, subject to annual re-election at the Company’s AGM. In August 2024, having met with four firms, the Board engaged with Sapphire Partners, the external search consultancy, to assist with succession planning in line with provision 25 of the AIC Code. Over the next two years the Committee will seek to progressively refresh the Board, looking to replace the skills and experience that may be lost by the Directors due to retire and allowing sufficient time to ensure an orderly handover can take place. Committee membership With effect from 1 July 2023, the composition of the Board’s committees were amended to improve efficiency. Additionally, with effect from 22 May 2024, I was appointed Chair of the Nomination Committee and Vince Prior was appointed Chair of the Management Engagement Committee. This decision was taken such that the Chair of the Nomination Committee was not the subject of the ongoing succession planning discussions. Details of Committee membership can be found on pages 64 to 65. Director training programme The Chair is responsible for ensuring that any ongoing training and development needs of the Directors that are relevant for their role in the Company are met. All Directors are provided with an appropriate induction at the time of appointment. The remit of the Nomination Committee includes monitoring the skills and knowledge of the Directors and, where necessary, training programmes are arranged as and when the need arises. In February 2024, the Board attended a site visit at Sainsbury’s, Ashford. The visit provided informative insights to the Board regarding the operation of the site, its role in fulfilment of online grocery orders and environmental considerations of the building. The Directors intend to conduct further site visits in the coming year. In March 2024, the Investment Adviser provided ESG training sessions to the Directors to keep them abreast of the latest ESG related issues. Further ESG training sessions have been scheduled for the coming year. In addition to the bespoke training sessions, each Director is expected to maintain their individual professional skills and is responsible for identifying any training needs to help them ensure that they maintain the requisite knowledge to be able to consider and understand the Company’s responsibilities, business and strategy. All Directors have access to the advice and services of the Investment Adviser, Company Secretary, corporate brokers and other service providers. The Directors are also entitled to take independent advice at the Company’s reasonable expense at any time. Performance Evaluation The Directors recognise that an evaluation process is a significant opportunity to review the practices and performance of the Board, its Committees and its individual Directors in order to implement actions to improve the Board’s effectiveness and contribute to its overall success. During the year the Committee, having considered four proposals, selected Trust Associates to conduct the Board’s externally facilitated evaluation. Trust Associates (then called Board Alpha) conducted the last external Board evaluation in 2021. Trust Associates does not have any connection with the Company apart from conducting the Board evaluation. The process was led by Richard Clarke and Victoria Clarke who conducted individual, structured, in-depth interviews with each of the Directors, as well as key staff at the Investment Adviser, Company Secretary, Brokers and five substantial shareholders. Trust Associates also observed meetings of the Board, Audit and Risk Committee and ESG Committee to further inform the assessment. As well as evaluating the Board as a whole, the process also considered the effectiveness of individual Directors and Trust Associates provided individual Director performance reports. The review concluded that the Board, its Committees and individual Directors continue to operate effectively. Some of the key strengths identified included: • The Board has a strong, respectful and collegiate relationship with the Investment Adviser whilst also appropriately challenging and scrutinising information provided by them • Efficient Board and Committee meetings with effective leadership from their respective Chairs and a focus on maintaining good governance • Directors have an appropriate mix of skills and experience and work well together as a Board, with a good level of interaction and debate 78 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | NOMINATION COMMITTEE REPORT CONTINUED The evaluation identified several recommendations for 2024/25, which are being progressed. Recommendation How this is being addressed 1 Strengthen risk management processes Following the year end, a wholesale in-depth review of the risk register was conducted, incorporating a new risk weighting analysis. The updated risk register and matrix will continue to be reviewed by the Audit and Risk Committee, at least annually, in conjunction with the Investment Adviser and AIFM. 2 Succession planning As described on page 77 the Nomination Committee is progressing a succession plan which will ensure the progressive renewal of the Board, allowing for orderly handovers and a smooth transition. 3 Board-only discussions A Board-only session has been added as a standing agenda item at quarterly Board meetings. In May 2024 the Directors held a Directors-only dinner and going forwards will arrange bi-annual dinners to discuss topics in an informal and more open-ended environment. Up to the date of this report, the Board have held Director only discussions specifically focused on the Company’s strategy. 4 Shareholder engagement The Chair will seek to engage more proactively with shareholders and the Company is seeking to arrange a Capital Markets Day early in the new calendar year. Board diversity and inclusion The Company does not have any employees. In respect of appointments to the Board, we consider that each candidate should be appointed on merit to make sure that the best candidate for the role is appointed every time. The Board supports diversity and inclusion and as such recruitment processes promote diversity of all kinds including gender, ethnicity, sexual orientation, disability or educational, professional and socioeconomic backgrounds and neurodiversity. This will ensure that any such appointment will develop and enhance the operation of the Board to best serve the Company’s strategy. The Company’s Diversity Policy is reviewed regularly and it is believed that the Board has a balance of skills, qualifications and experience which are relevant to the Company. The Board supports the recommendations set out in the Hampton-Alexander Review on gender diversity and the Parker Review on ethnic diversity and recognise the value and importance of cognitive diversity in the boardroom. As at the date of this report, the Board consisted of three male and three female members, meaning we have exceeded the 33% female Board representation target as set out by the Hampton-Alexander initiative, and the 40% female Board representation target as set out in the FCA listing rules on diversity. The Board is committed to maintaining that the Board, as a whole, will have at least 40% representation of either gender. The Board is also committed to maintaining at least one female member on each of its Committees. FCA Listing Rule requirements The following table sets out the gender and ethnic diversity of the Board as at 30 June 2024 in accordance with the FCA’s Listing Rules, the disclosure of which in this report having been approved by each of the Directors: Gender Diversity Number of Board Members Percentage of the Board Number of Senior Positions on the Board Men 3 50% 1 Women 3 50% 1 Prefer not to say - - - Ethnic Diversity White British or other White (including minority white groups) 5 83% 1 Mixed/Multiple Ethnic Groups - - - Asian/Asian British 1 17% 1 Black/African/Caribbean/ Black British - - - Other ethnic group, including Arab - - - In accordance with the Listing Rules, as an externally managed investment Company, we do not have any executive management, including the roles of CEO or CFO, who are Directors of the Company. The Company considers the SID and Chair to be the only applicable roles with the business and have reported against these. The Company has reported against the Listing Rules on diversity and has complied with all the targets. Committee effectiveness Details of the performance evaluation conducted during the year can be found on pages 77 to 78. Signed on behalf of the Nomination Committee by: Sapna Shah Nomination Committee Chair September STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 79 CORPORATE GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT Dear Shareholders, I am pleased to present the Audit and Risk Committee Report for the year ended 30 June 2024. The Audit and Risk Committee’s role is to oversee the Group’s financial reporting process, including the risk management and internal financial controls in place within the AIFM and the Investment Adviser, the valuation of the property portfolio, the Group’s compliance with accepted accounting standards and other regulatory requirements, as well as the activities of the Group’s Auditor. How the Committee operates The Audit and Risk Committee Terms of Reference are available on the Company’s website and on request from the Company’s registered office. During the period to 30 June 2024, the Committee comprised of three Independent Non-Executive Directors of the Company, none of which are connected to the AIFM or Investment Adviser. Committee Members Jon Austen: Committee Chair Vince Prior Sapna Shah All the Committee members served for the full year, unless otherwise stated. The Committee believes that its members have the right balance of skills and experience within the real estate sector to be able to function effectively. The Board considers that I have recent and relevant financial expertise to chair the Audit and Risk Committee. Further details of each Director’s experience can be found in the biographies on pages 64 to 65. During the year, the Audit and Risk Committee held three formal meetings following the Company’s corporate calendar, which ensures that the meetings are aligned to the Company’s financial reporting timetable. The Company Secretary and I ensure that the meetings are of sufficient length to allow the Committee to consider all important matters and the Committee is satisfied it receives full information in a timely manner to allow it to fulfil its obligations. Members of the Investment Adviser and the Group’s Auditor were invited to attend the Committee meetings. Hanway Advisory Limited, as Company Secretary, acts as secretary to the Committee. Nick Hewson, Frances Davies and Cathryn Vanderspar, whilst not members of the Audit and Risk Committee attend meetings during the year by invitation. As the Committee Chair, I have had regular communications with the Auditor and senior members of the Investment Adviser. In addition, the Committee has discussions throughout the year outside of the formal Committee meetings. The Committee is aware of the requirements of the Audit Committees and External Audit: Minimum Standards (the “Minimum Standards”) as published by the FRC in May 2023. The Committee have reviewed the Minimum Standards, amended its terms of reference accordingly and will seek to meet the requirements of the Minimum Standards as soon as practicable. Activities Relationship with the Auditor The Committee has primary responsibility for managing the relationship with the Auditor, including assessing their performance, effectiveness and independence annually as well as recommending to the Board their reappointment or removal. BDO LLP (“BDO”) were appointed as the Group’s Auditor in 2017 and we are recommending they are re-appointed at the forthcoming AGM. Under the Company’s interpretation of the transitional arrangements for mandatory audit rotation, the Company will be required to put the external audit out for tender no later than the financial year ended 30 June 2028. Charles Ellis is the audit partner and, in line with the policy on lead partner rotation, is expected to rotate off the audit ahead of the 2028 audit. The Committee has met with the key members of the audit team over the course of the year and BDO has formally confirmed its independence as part of the reporting process. As Chair of the Committee, I regularly speak with the external audit partner without the Investment Adviser present to ascertain if there are any concerns, to discuss the audit reports and to ensure that the Auditor has received the support and information requested from management. There have been no concerns identified to date. Jon Austen Audit and Risk Committee Chair AUDIT AND RISK COMMITTEE REPORT 80 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT CONTINUED The Company became a constituent of the FTSE 350 on 20 June 2022 and confirms that it has complied with the terms of The Statutory Audit Services for Large Companies Market Investigation (Mandatory User of Competitive Tender Processes and Audit and Risk Committee Responsibilities) Order 2014 (the “Order”) throughout the year. The Audit and Risk Committee noted that the FRC’s latest review of BDO’s audit performance, published in July 2024, was disappointing. I spoke to Charles Ellis, our audit partner, on the key findings raised in the FRC’s review of individual audits within section 2 of their report. The Audit and Risk Committee considered the impact of these areas on the audit of the Company and specifically discussed the areas related to these findings, being the challenge of management estimates and rental income. The Audit and Risk Committee understood BDO’s approach taken in both areas as well as the findings from the current year audit. I look forward to BDO achieving better results from their next FRC review. Effectiveness and independence We meet with the Auditor and the Investment Adviser before the preparation of the Annual Results, to plan and discuss the scope of the audit, and challenge where necessary to ensure its rigour. At these meetings, the Auditor prepares a detailed audit plan which is discussed and questioned by us and the Investment Adviser to ensure that all areas of the business are adequately reviewed, and the materiality thresholds are set at the appropriate level, which varies depending on the matter in question. We also discuss with the Auditor its views over significant risk areas and why it considers these to be risk areas. The Audit and Risk Committee, where appropriate, continues to challenge and seek comfort from the Auditor over those areas that drive audit quality. The timescale for the delivery of the audit or review is also set at these meetings. We meet with the Auditor again prior to the conclusion of the audit or review to consider, challenge and evaluate findings in depth. We have considered the objectivity and effectiveness of the Auditor and we consider that the audit team assigned to the Company by BDO has the necessary experience, qualifications and understanding of the business to enable it to produce a detailed, high-quality, in-depth audit and permits the team to scrutinise and challenge the Company’s financial procedures and significant judgements. We ask the Auditor to explain the key audit risks and how these have been addressed. We also considered BDO’s internal quality control procedures and transparency report and found them to be sufficient. Overall, the Committee is satisfied that the audit process is transparent and of good quality and the Auditor has met the agreed audit plan. Audit and non-audit fees We continue to believe that, in some circumstances, the external Auditor’s understanding of the Company’s business can be beneficial in improving the efficiency and effectiveness of advisory work. For this reason, we continue to engage BDO as reporting accountants on the Company’s issues of equity and debt capital in the normal course of the Company’s business. Other reputable firms have been engaged during the year to assist with financial and tax due diligence on corporate acquisitions as well as general tax compliance advice. The Non-Audit Services Policy requires approval by the Committee above a certain threshold before the external Auditor is engaged to provide any permitted non-audit services. The Company paid £42,000 in fees to the Auditor for non-audit services during the year ended 30 June 2024. These fees are set out below. Service Fee (£) Interim Review 42,000 Total 42,000 The ratio of non-audit fees to audit fees for the year ended 30 June 2024 was 9%. The Committee periodically monitors the ratio to ensure that any fees for permissible non-audit services do not exceed 70% of the average audit fees paid in the last three years. In addition to ensuring compliance with the Group’s policy in respect of non-audit services, the Committee also receives confirmation from BDO that it remains independent and has maintained internal safeguards to ensure its objectivity. Financial reporting and significant judgements During the year, the Financial Reporting Council (“FRC”) carried out a review of the Company’s annual report and accounts for the year ended 30 June 2023 in accordance with Part 2 of the FRC Corporate Reporting Review Operating Procedures. I am pleased to report that no substantive questions were raised as a result of this review, and any suggested improvements to the Company’s accounts have been incorporated into this annual report and accounts. We monitor the integrity of the financial information published in the Interim and Annual Reports and any other formal announcement relating to financial performance. We consider whether suitable and appropriate estimates and judgements have been made in respect of areas that could have a material impact on the financial statements. We review changes in accounting policies and other relevant matters related to the Consolidated and Company Financial Statements. The application of these accounting policies can be found in the Notes to the Consolidated Financial Statements and Notes to the Company Financial Statements on pages 108 to 138 and 140 to 141. A variety of financial information and reports were prepared by the Investment Adviser and provided to the Board and the Committee over the course of the year. These included budgets, periodic re-forecasting following acquisitions or corporate activity, papers to support the raising of additional finance and general compliance. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 81 Significant issue How the issue was addressed Valuation of property portfolio Cushman and Wakefield have been engaged to value, on a bi-annual basis, the Company’s Investment Property portfolio. The Group’s Portfolio value, inclusive of the acquired France assets, as at 30 June 2024 was £1.78 billion (30 June 2023: £1.69 billion) reflecting a valuation decline, net of costs, of 3.2% for the year on a like-for-like basis. The valuation of the Group’s property portfolio is a key determinant of the Group’s net asset value as well as directly impacting the fee payable to the Investment Adviser. The valuation is conducted externally by independent valuers, however, the nature of the valuation process is inherently subjective due to the assumptions made in determining market comparable yields and estimated rental values. The Audit and Risk Committee met with the valuer on two occasions, together with the Investment Adviser and external auditor in January and August to review the valuation included within the half-year and year-end financial statements. This review included the valuation process undertaken, changes in market conditions, recent transactions in the market and how these impacted our Portfolio and the valuer’s expectations in relation to future rental growth and yield movement. The Committee asked the valuer to highlight significant judgements or disagreements with the Investment Adviser during the valuation process to ensure a robust and independent valuation had taken place. The Auditor, BDO, reviewed the underlying assumptions using its real estate experts and provided the Audit and Risk Committee with a summary of its work as part of its report on the half-year and year-end results. As a result of these reviews, the Committee concluded that the valuation had been carried out appropriately and independently. The Board approved the valuations in February 2024 and September 2024 in respect of the interim and annual valuations. As a result of the work performed, we have concluded and reported to the Board that the Annual Report for the year ended 30 June 2024, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy. Risk management and internal controls The Board oversees the Group’s risk management and internal controls and determines the Group’s risk appetite. The Board has, however, delegated responsibility for review of the risk management methodology and the effectiveness of internal controls to the Audit and Risk Committee. The Group’s system of internal controls includes financial, operational and compliance controls and risk management. Policies and procedures, including clearly defined levels of delegated authority, have been communicated throughout the Group. Internal controls are implemented by the Investment Adviser in respect of the key operational and financial processes of the business. These policies are designed to ensure the accuracy and reliability of financial reporting and govern the preparation of financial statements. As part of the migration of the Company to the Closed-ended investment funds category of the LSE’s Main Market, a Board Memorandum was prepared that documented the financial position and prospects procedures (“FPPP”) of the Company. This Memorandum was independently reviewed by an external accountancy firm and no major deficiencies were identified, which provided the Committee with additional comfort that the Group’s system of internal controls remained fit for purpose and robust. We have confirmed with the Investment Adviser that there have been no changes to controls since those documented within that report. Internal audit function The Group does not have an internal audit function. The need for this is reviewed annually by the Committee. Due to the relative lack of complexity and the outsourcing of the majority of the day to-day operational functions, the Committee continues to be satisfied that there is no requirement for such a function. Fair, balanced and understandable financial statements The production and audit of the Group’s Annual Report is a comprehensive process, requiring input from a number of contributors. To reach a conclusion on whether the Annual Report is fair, balanced and understandable, as required under the AIC Code, the Board has requested that the Committee advise on whether it considers that the Annual Report fulfils these requirements. In outlining our advice, we have considered the following: • The comprehensive documentation that outlines the controls in place for the production of the Annual Report, including the verification processes to confirm the factual content • The detailed reviews undertaken at various stages of the production process by the Investment Adviser, AIFM, Company Secretary, Financial Advisers, Auditor and the Committee, which are intended to ensure consistency and overall balance • Controls enforced by the Investment Adviser, Company Secretary and other third-party service providers, to ensure complete and accurate financial records and security of the Company’s assets • The Investment Adviser has a highly experienced team who have a strong proficiency in producing financial statements We also regularly review the Company’s ability to continue to pay a progressive dividend. All financial information was fully reviewed and debated both at Committee and Board level across a number of meetings. The Investment Adviser and the Auditor update us on changes to accounting policies, legislation, best practice and areas of significant judgement by the Investment Adviser. They pay particular attention to transactions that they deem important due to size or complexity. The significant issues considered by the Committee in respect of the year ended 30 June 2024, which contained a significant degree of estimation uncertainty, are set out in the table below. 82 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT CONTINUED During the year, I also performed a review and walk-through of the key systems and controls in place at the Investment Adviser which I found to be suitable for a Company of our size. Risk register During the year, the Audit and Risk Committee, together with the AIFM and Investment Adviser, undertook a review of the risk management reporting framework. As a result of this exercise, the Board reviewed all risks and decided to rationalise the principal risks from 17 risks, as set out in the 2023 Annual Report, to 10 risks, which can be found on pages 52 to 54. The Board and JTC Global AIFM Solutions Limited, the Company’s Alternative Investment Fund Manager (the “AIFM”), together have joint overall responsibility for the Company’s risk management and internal controls, with the Audit and Risk Committee reviewing the effectiveness of the Board’s risk management process on its behalf. We have reviewed and approved all statements included in the Annual Report concerning internal controls and risk management taking into consideration the review of the risk register and our assessment of the Group’s internal controls and knowledge of the business. We have also reviewed the adequacy of the Company’s arrangements for any relevant party to raise concerns, in confidence, about possible wrongdoing in financial reporting, regulatory or other relevant matters and the procedures of both the Company’s AIFM and Investment Adviser for detecting fraud and preventing bribery. We consider that they are appropriate. Committee effectiveness I believe that the quality of discussion and level of challenge by the Committee with the Investment Adviser, the external audit teams and the valuer, together with the timeliness and quality of papers received by the Committee, ensures the Committee is able to perform its role effectively. Details of the performance evaluation conducted during the year can be found on page 77. Signed on behalf of the Audit and Risk Committee by: Jon Austen Audit and Risk Committee Chair September STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 83 CORPORATE GOVERNANCE | MANAGEMENT ENGAGEMENT COMMITTEE REPORT Dear Shareholders I am pleased to present the Management Engagement Committee report for the year ended 30 June 2024. How the Committee operates The Management Engagement Committee Terms of Reference are available on the Company’s website and on request from the Company’s registered office. During the period to 30 June 2024, the Committee comprised of six Independent Non-Executive Directors of the Company, none of which are connected to the AIFM or Investment Adviser. Committee Members Vince Prior: Committee Chair Jon Austen Frances Davies Nick Hewson Sapna Shah Cathryn Vanderspar I was appointed Committee Chair on 22 May 2024, replacing Sapna Shah, who remains a member of the Committee. All the Committee members served for the full year, unless otherwise stated. During the year, the Management Engagement Committee held one formal meeting and one ad-hoc meeting. The Company Secretary and I ensure that the meetings are of sufficient length to allow the Committee to consider all important matters and the Committee is satisfied that it receives full information in a timely manner to allow it to fulfil its obligations. Members of the Investment Adviser were invited to attend the Committee meetings. Hanway Advisory Limited as Company Secretary acts as secretary to the Committee. Responsibilities The main function of the Management Engagement Committee is to review the compliance, by the Investment Adviser and the AIFM, with the Company’s investment policy and their performance of the duties detailed in their agreements with the Company. The Committee will regularly review the composition of the key executives performing the services on behalf of the Investment Adviser and monitor and evaluate the performance of other key service providers to the Company. The Management Engagement Committee has been in operation throughout the period and operates within clearly defined terms of reference. Activities During the year the Committee reviewed the performance of the Investment Adviser and AIFM and recommended to the Board, the continued appointment of the Investment Adviser and AIFM. The Committee also considered the performance of key service providers to the Company. Where appropriate, feedback was provided to the Investment Adviser, AIFM and key service providers to enhance the level of service provided to the Company. Management Arrangements The Company operates an externally managed alternative investment fund for the purposes of the AIFMD. In its role as AIFM, JTC Global AIFM Solutions Limited is responsible for the portfolio management and risk management of the Company pursuant to the AIFMD, subject to the overall control and supervision of the Board. Atrato Capital Limited acts as the Company’s Investment Adviser. Under the Investment Advisory Agreement, the Investment Adviser is entitled to receive advisory fees on the following basis: 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 uninvested 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). Vince Prior Management Engagement Committee Chair MANAGEMENT ENGAGEMENT COMMITTEE REPORT 84 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | MANAGEMENT ENGAGEMENT COMMITTEE REPORT CONTINUED 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: 1/12 th of 0.7125% per calendar month of Adjusted Net Asset Value up to or equal to £500 million, 1/12 th of 0.5625% per calendar month of Adjusted Net Asset Value above £500 million and up to or equal to £1,000 million and 1/12 th of 0.4875% per calendar month of Adjusted Net Asset Value above £1,000 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. The annual fee paid to the Investment Adviser under the Investment Advisory Agreement for the year ended 30 June 2024 was £9.5 million (30 June 2023: £10.3 million). The Investment Advisory Agreement may be terminated by the Investment Adviser or the Company with no less than two years written notice. In March 2024, the Company entered into an amended and restated Investment Advisory Agreement (“IAA”) with the Investment Adviser. The principal amendments to the existing IAA relate to the termination provisions of the agreement and seek to reflect the original commercial intentions of the Board and Investment Adviser. The Board has agreed to make these amendments to provide clarification for all parties in the event of a takeover, delisting or liquidation (a “Relevant Event”). Further information regarding the changes can be found on page 69. During the year under review, the AIFM was paid a fee of 0.04% per annum of the net asset value of the Company up to £1 billion and 0.03% of the net asset value over £1 billion, subject to a minimum of £50,000 per annum, such fee being payable quarterly in arrears. The total fees paid to the AIFM during the year under review were £0.44m. During the financial year under review, no separate remuneration was paid by the AIFM to two of its executive directors, Graham Taylor and Kobus Cronje, because they were both employees of the JTC group of companies, of which the AIFM forms part. The third executive director, Matthew Tostevin, is paid a fixed fee of £10,000 for acting as a director. Mr Tostevin is paid additional remuneration on a time spent basis for services rendered to the AIFM and its clients. Other than the directors, the AIFM has no employees. The Company has now agreement to pay any carried interest to the AIFM. During the year under review, the AIFM paid £10,000 in fixed fees and £46,211 in variable remuneration to Mr Tostevin. Further information on the AIFM’s remuneration can be found in the Alternative Investment Fund Manager’s Report on pages 94 to 95. Continuing Appointment of the Investment Adviser and AIFM The Management Engagement Committee has reviewed the continuing appointment of the Investment Adviser and AIFM and are satisfied that their appointment remains in the best interests of shareholders as a whole. Committee effectiveness I believe that the quality of discussion and level of challenge by the Committee with the Investment Adviser and AIFM, together with the timeliness and quality of papers received by the Committee, ensures the Committee is able to perform its role effectively. Details of the performance evaluation conducted during the year can be found on page 77. Signed on behalf of the Management Engagement Committee by: Vince Prior Management Engagement Committee Chair September STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 85 CORPORATE GOVERNANCE | ENVIRONMENTAL SOCIAL GOVERNANCE (ESG) COMMITTEE REPORT Dear Shareholders I am pleased to present the ESG Committee report for the year ended 30 June 2024. How the Committee operates The ESG Committee Terms of Reference are available on the Company’s website and on request from the Company’s registered office. The Committee comprised three Independent Non-Executive Directors of the Company, none of which is connected to the AIFM, or Investment Adviser. Committee Members Frances Davies: Chair of the Committee Nick Hewson Cathryn Vanderspar All the Committee members served for the full year, unless otherwise stated. Jon Austen, Vince Prior, Sapna Shah and members of the Investment Adviser and AIFM were invited to attend the Committee meetings. Hanway Advisory Limited, as Company Secretary, acts as secretary to the Committee. During the year, the ESG Committee held its inaugural meeting. The Company Secretary and I ensure that the meetings are of sufficient length to allow the Committee to consider all important matters and the Committee is satisfied that it receives full information in a timely manner to allow it to fulfil its obligations. Responsibilities The Committee serves as an independent and objective party to monitor the integrity and quality of the Company’s ESG strategy, and to ensure that the Company’s ESG strategy is integrated into its business plan, corporate values and objectives. It also fosters a culture of responsibility and transparency in respect of managing the Company’s ESG impacts. The Committee’s key responsibilities include: • Overseeing the establishment and implementation of policies and codes of practice • Setting KPIs related to ESG matters and overseeing performance against those KPIs • Overseeing the Company’s due diligence and other processes to identify and manage the Company’s ESG risks and impacts, including with respect to climate-related risks • Identifying the required resourcing and funding of ESG-related activity • Overseeing the Company’s engagement with its broader stakeholder community • Ensuring that the Company monitors and reviews current and emerging ESG trends, relevant international standards and legislative requirements and analysing how those are likely to impact the Company • Reviewing and approving the Company’s sustainability reporting, including the Company’s annual Sustainability Report (which covers the Company’s material ESG topics) and TCFD Report. The Committee focuses on the following three areas: Environmental: The Company’s impact on the natural environment and its response to the challenge of climate change including: GHG emissions; energy consumption; generation and use of renewable energy; biodiversity and habitat; impact on water resources and deforestation; pollution; efficient use of resources; the reduction and management of waste; and the environmental impact of the Company’s supply chain. Social: The Company’s interaction with stakeholders and the communities in which it operates and the role of the Company in society including: board policies (e.g. stakeholder engagement, diversity, non-discrimination and equality of treatment, health, safety and well-being); ethical/responsible sourcing; labour standards of the supply chain (including child labour and modern slavery); and engagement with and contribution to the broader community through social projects and charitable donations. Frances Davies ESG Committee Chair ENVIRONMENTAL SOCIAL GOVERNANCE (ESG) COMMITTEE REPORT 86 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | ENVIRONMENTAL SOCIAL GOVERNANCE (ESG) COMMITTEE REPORT CONTINUED Corporate governance and behaviour: The ethical conduct of the Company’s business including its corporate governance framework, business ethics, policies, and codes of conduct (e.g. related to donations and political lobbying, bribery and corruption), and the transparency of non-financial reporting. The Investment Adviser has been delegated responsibility for the day-to-day delivery of the Company’s sustainability strategy which aligns to these three focus areas, and for managing the ESG impacts of the Company. The strategy is reviewed annually by the ESG Committee on behalf of the Company. The ESG Committee receives a report and verbal update from the Investment Adviser at every quarterly meeting in relation to the delivery of the sustainability strategy and the management of ESG risks and opportunities, including in relation to climate-related risks. Activities During the year there were four meetings at which we discussed, and where relevant recommended to the Board for approval, a variety of matters including: • The submission of targets, by the Company, for validation by the SBTi • The implementation of various policies including a charitable giving policy, environmental and biodiversity policy, modern slavery statement and supply chain human rights policy • Quarterly sustainability updates • The Company’s budget for ESG related matters • The Company’s refreshed Sustainability Strategy • The structure and content of the Company’s sustainability report for the year ended 30 June 2024 In addition, measures have also been undertaken to advance the collective knowledge and skills of the ESG Committee including through specific training on climate risks and TCFD reporting. Further details of the Company’s progress against its commitments can be found in the TCFD report on pages 39 to 51 and the Company’s Sustainability report. Committee effectiveness I believe that the quality of discussion and level of challenge by the Committee with the Investment Adviser, together with the timeliness and quality of papers received by the Committee, ensure that the Committee is able to perform its role effectively. Details of the performance evaluation conducted during the year can be found on page 77. Signed on behalf of the ESG Committee by: Frances Davies ESG Committee Chair September STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 87 CORPORATE GOVERNANCE | REMUNERATION COMMITTEE REPORT Dear Shareholders I am pleased to present the Remuneration Committee report for the year ended 30 June 2024. How the Committee operates The Remuneration Committee Terms of Reference are available on the Company’s website and on request from the Company’s registered office. Our Committee comprised of three Independent Non-Executive Directors of the Company, none of which are connected to the AIFM, or Investment Adviser. Committee Members Cathryn Vanderspar: Committee Chair Jon Austen Frances Davies All the Committee members served for the full year, unless otherwise stated. During the year, the Remuneration Committee held two formal meetings. The Company Secretary and I ensure that the meetings are of sufficient length to allow the Committee to consider all important matters and the Committee is satisfied that it receives full information in a timely manner to allow it to fulfil its obligations. Nick Hewson, Vince Prior, Sapna Shah and members of the Investment Adviser were invited to attend the Committee meetings. Hanway Advisory Limited, as Company Secretary, also attended as secretary to the Committee. The Committee determines the level of Non-Executive Directors’ remuneration. A benchmarking exercise was undertaken in the year. The Committee reviewed the benchmarking and also gave due consideration to other relevant factors, such as the wider market considerations, inflation and the time commitment required of Directors. In consultation with the Investment Adviser and the brokers, the Committee concluded that there would be a marginal increase to Directors’ remuneration, with effect from 1 July 2024, representing a 4.0% increase on total Director remuneration. Full details of the Group’s policy with regards to Directors’ remuneration paid during the year ended 30 June 2024 are shown below. Committee Responsibilities The main responsibilities of the Remuneration Committee, which apply as necessary to the Company, its subsidiary undertakings and the Group as a whole, are to: • Set the remuneration policy for the Board and the Company’s Chair • Review the ongoing appropriateness and relevance of the remuneration policy • Agree the policy for authorising claims for expenses for the Directors In determining Remuneration Policy, the Remuneration Committee takes into account all factors which it deems necessary, including the Company’s strategy and the risk environment in which it operates, relevant legal and regulatory requirements, the provisions and recommendations of the AIC Code considered to be relevant and associated guidance. In order to obtain reliable, up-to-date information about remuneration in other companies of comparable scale and complexity, the Remuneration Committee may appoint remuneration consultants and commission or purchase any reports, surveys or information which it deems necessary, at the expense of the Company, but within any budgetary constraints imposed by the Board. The Committee is responsible for appropriately managing Directors’ conflicts of interests. Directors' other interests have been disclosed. No conflicts have been identified during the year. If a conflict were to be identified, the Committee would take the appropriate steps to resolve and manage such conflicts appropriately. It is the Board’s policy that Directors do not have service contracts, but each new Director is provided with a letter of appointment, and these are available for inspection at the Company’s registered office. Each Director is appointed for an initial three-year term, subject to annual re-election at the Company’s AGM. Directors are typically expected to serve two three-year terms, but may be invited by the Board to serve for an additional period. The Directors appointments can be terminated at no notice, in accordance with the terms of the letters of appointment without compensation for loss of office. Committee effectiveness I believe that the quality of discussion and level of challenge by the Committee with the Investment Adviser, together with the timeliness and quality of papers received by the Committee, ensures the Committee is able to perform its role effectively. Details of the performance evaluation conducted during the year can be found on page 77. Cathryn Vanderspar Remuneration Committee Chair REMUNERATION COMMITTEE REPORT 88 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | REMUNERATION COMMITTEE REPORT CONTINUED DIRECTORS’ REMUNERATION POLICY The Company’s policy is to determine the level of Directors’ fixed annual fees in accordance with its Articles of Association. When setting the level of Directors’ fees, the Company will have due regard to the experience of the Board as a whole, the time commitment required, the responsibilities of the role and to be fair and comparable to non-executive directors of similar companies. Furthermore, the level of remuneration should be sufficient to attract and retain the Directors needed to oversee the Company properly and to reflect its specific circumstances. The Company may also periodically choose to benchmark Directors’ fees with an independent review, to ensure they remain fair and reasonable. Directors’ fees are reviewed annually and will be adjusted from time to time, as may be determined by the Board under the Articles of Association and this policy. In terms of the Company’s Articles of Association, the aggregate remuneration of all the Directors shall not exceed £500,000 per annum but this may be changed by way of ordinary resolution. The Directors are also entitled to be paid their reasonable expenses incurred in undertaking their duties. Additional Directors’ fees may be paid by the Company where Directors are involved in duties beyond those normally expected as part of the Directors’ appointment. In such instances, where additional remuneration is paid, the Board will provide details of the events, duties and responsibilities that gave rise to any additional directors’ fees in the Company’s annual report. No element of the Directors’ remuneration is performance related, nor does any director have any entitlement to pensions, share options or any long-term incentive plans from the Company. Directors’ fees are payable in cash, monthly in arrears. The Directors hold their office in accordance with the Articles of Association and their appointment letters. No Director has a service contract with the Company, nor are any such contracts proposed. The Directors’ appointments can be terminated in accordance with the Articles of Association and without compensation. In accordance with the Articles of Association, all Directors are required to retire and seek re-election at least every three years. Although not required by the Company’s Articles of Association, the Company is choosing to comply with Provision 23 of the AIC Code requiring all Directors to be subject to annual election. All Directors retire at each Annual General Meeting and those eligible and wishing to serve again offer themselves for election. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 89 ANNUAL REPORT ON DIRECTORS’ REMUNERATION Directors’ Fees The Committee considers the level of Directors’ fees at least annually. Reviews of Directors’ fees take place in each financial year, with any changes being applicable from the start of the next financial year. The remuneration of the Directors was benchmarked during the year ended 30 June 2024. Following consultation with the Investment Adviser and the brokers, the Committee concluded that: the Directors’ base fees be increased marginally; that the Audit and Risk Committee Chair fee be increased to £10,000 and that the Nomination Committee Chair fee be increased to £5,000 to align with the other Committee Chair fees. The increase to the fees is reflective of the time commitment required of the Directors. There are no further changes to the Directors’ remuneration for this year. In aggregate, total fees remain under the limit set out in the governing documents as set out below. Revised fee per annum from 1 July 2024 Fee per annum year ended 30 June 2024 Chair £78,000 £75,000 Non-Executive Directors (“NED”s) £54,500 £52,500 Senior Independent Director (“SID”) £5,000 £5,000 Audit and Risk Committee Chair £10,000 £9,000 Remuneration Committee Chair £5,000 £5,000 Nomination Committee Chair £5,000 £4,000 Management Engagement Committee Chair £5,000 £5,000 Environmental, Social, and Governance Committee Chair £5,000 £5,000 * No additional fee is payable for Committee Chair positions undertaken by the Chair of the Board Directors’ emoluments – single total figure table (audited) The Directors who served during the year received the following emoluments, all of which was in the form of fees. Nick Hewson received £626 and Sapna Shah received £126 of expenses during the year. Year ended 30 June 2024 £’000 Year ended 30 June 2023 £’000 Fixed Remuneration (both years) Annual percentage change since 30 June 2023 Nick Hewson 75 75 100% - Jon Austen 62 62 100% - Vince Prior 61 62 100% -2% Cathryn Vanderspar 58 58 100% - Frances Davies 58 58 100% - Sapna Shah 58 18 100% 222% * Appointed March Relative importance of spend on pay The table below sets out, in respect of the year ended 30 June 2024: a) The remuneration paid to the Directors b) The management fee and expenses which have been included to give shareholders a greater understanding of the relative importance of spend on pay c) Distributions to shareholders by way of dividend to provide a comparison of the shareholders’ returns against Directors’ remuneration Year ended 30 June 2024 £’000 Year ended 30 June 2023 £’000 Variance year on year % Directors’ fees 371 330 12% Management fee and expenses 9,472 10,292 -8% Dividends paid 75,335 74,328 1% Directors’ fees as a percentage of Year ended 30 June 2024 % Year ended 30 June 2023 % Management fee and expenses 3.9 3.2 Dividends paid 0.49 0.44 90 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | REMUNERATION COMMITTEE REPORT CONTINUED Directors’ shareholdings (audited) The Directors (and their PCA’s) had the following beneficial interests in the issued ordinary share capital of the Company as at 30 June 2024 and at the date of this report: Directors As at the date of this report As at 30 June 2024 Nick Hewson 1,330,609 1,330,609 Jon Austen 305,339 305,339 Vince Prior 213,432 213,432 Cathryn Vanderspar 125,802 125,802 Frances Davies 36,774 36,774 Sapna Shah 70,081 70,081 The Company does not oblige the Directors to hold shares in the Company, but this is encouraged to ensure the appropriate alignment of interests. Group performance – Total Shareholder Return The Board is responsible for the Group’s investment strategy and performance, whilst the management of the investment portfolio is delegated to the AIFM. The AIFM has, in turn, delegated certain services, including but not limited to advice on acquisitions and financing, to the Investment Adviser. The graph below compares, for the period from our IPO in June 2017 to 30 June 2024, the total return (assuming all dividends are reinvested) to ordinary shareholders compared to the FTSE All-Share Index. This index was chosen as it is considered an indicative measure of the expected return from an equity stock. An explanation of the performance of the Group for the year ended 30 June 2024 is given in the Strategic Report. It is a company law requirement to compare the performance of the Group’s share price to a single broad equity market index on a total return basis. However, it should be noted that certain constituents of the comparative index used above are larger in size than the Group. The Group does not have a benchmark index. Consideration of shareholder views The Company is committed to engagement with shareholders and will seek major shareholders’ views in advance of making significant changes to its remuneration policy and how it is implemented. The Chair of the Remuneration Committee attends the AGM to hear the views of shareholders on remuneration and to answer any questions. The Directors’ Remuneration Policy was approved by shareholders at the 2021 AGM with 99.98% of the votes cast being in favour of the resolution. The Directors’ remuneration report for the year ended 30 June 2023 was approved by the shareholders at the 2023 AGM with 99.81% of the votes cast being in favour. Voting at Annual General Meeting In accordance with section 439A of the Companies Act 2006, the Remuneration Policy is subject to a binding vote at the 2024 AGM, being three years since the last approval. There are no proposed changes to the Company’s Remuneration Policy. An Ordinary Resolution to approve the Director’s Remuneration Report will be put to shareholders at the Company’s 2024 AGM and shareholders will have the opportunity to express their views and raise any queries in respect of the Director’s Remuneration Report at this meeting. Signed on behalf of the Remuneration Committee by: Cathryn Vanderspar Remuneration Committee Chair September 60 80 100 120 140 160 180 Relative performance FTSE All Share vs The Company 2017 2018 2019 2020 2021 2022 20242023 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 91 CORPORATE GOVERNANCE | DIRECTORS’ REPORT The Directors present their report together with the audited financial statements for the year ended 30 June 2024. The Corporate Governance Statement on pages 74 to 75 forms part of this report. Principal activities and status The Company is registered as a UK public limited company under the Companies Act 2006. It is an Investment Company as defined by Section 833 of the Companies Act 2006 and has been established as a Closed-ended investment company with an indefinite life. The Company has a single class of shares in issue which were traded during the year on the Closed-ended investment funds category of the LSE’s Main Market. The Group has entered the Real Estate Investment Trust regime for the purposes of UK taxation. The Company is a member of the Association of Investment Companies (the “AIC”). Results and dividends The results for the year are set out in the attached financial statements. It is the policy of the Board to declare and pay dividends as quarterly interim dividends. In respect of the 30 June 2024 financial year, the Company has declared the following interim dividends amounting to 6.06 pence per share (2023: 6.00 pence per share). Relevant Period Dividend per share (pence) Ex-dividend date Record date Date paid Quarter ended 30 September 2023 1.515 12 Oct 2023 13 Oct 2023 16 Nov 2023 Quarter ended 31 December 2023 1.515 11 Jan 2024 12 Jan 2024 14 Feb 2024 Quarter ended 31 March 2024 1.515 11 Apr 2024 12 Apr 2024 16 May 2024 Quarter ended 30 June 2024 1.515 11 Jul 2024 12 Jul 2024 16 Aug 2024 Dividend policy Subject to market conditions and performance, financial position and outlook, it is the Directors’ intention to pay an attractive level of dividend income to shareholders on a quarterly basis. The Company intends to grow the dividend progressively through investment in supermarket properties with upward-only, predominantly inflation-protected, long-term lease agreements. Directors The names of the Directors who served in the year ended 30 June 2024 are set out in the Board of Directors section on pages 64 to 65 together with their biographical details and principal external appointments. Powers of Directors The Board will manage the Company’s business and may exercise all the Company’s powers, subject to the Articles, the Companies Act and in certain circumstances, are subject to the authority being given to the Directors by shareholders in the general meeting. The Board’s role is to provide entrepreneurial leadership of the Company within a framework of prudent and effective controls that enable risk to be assessed and managed. It also sets up the Group’s strategic aims, ensuring that the necessary resources are in place for the Group to meet its objectives and review investment performance. The Board also sets the Group’s values, standards and culture. Further details on the Board’s role can be found in the Corporate Governance Report on page 63. Appointment and replacement of Directors All Directors were elected or re-elected at the AGM on 7 December 2023. In accordance with the AIC Code, all the Directors will retire and those who wish to continue to serve will offer themselves for election or re-election at the forthcoming Annual General Meeting. Directors’ indemnity The Company maintains £35 million of Directors’ and Officers’ Liability Insurance cover for the benefit of the Directors, which was in place throughout the year. The level of cover was increased to £40 million on 4 July 2024 and continues in effect at the date of this report. Significant shareholdings The table below shows the interests in shares notified to the Company in accordance with Chapter 5 of the Disclosure Guidance and Transparency Rules issued by the Financial Conduct Authority who have a disclosable interest of 3% or more in the ordinary shares of the Company as at 30 June 2024. Number of shares Percentage of issued share capital Blackrock Inc. 68,196,517 5.46% Schroders Plc 63,131,941 5.08% Close Brothers Asset Management 62,147,569 4.99% Quilter Plc 62,058,617 4.99% Ameriprise Financial, Inc. 61,728,272 4.98% Nick Hewson Chair DIRECTORS' REPORT 92 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | DIRECTORS’ REPORT CONTINUED Since the year end, and up to 17 September 2024, the Company has not received any further notifications of changes of interest in its ordinary shares in accordance with DTR 5. The information provided is correct as at the date of notification. Donations and contributions The Group approved a donation of £120,000 to The Atrato Foundation during the year which was settled post year end. Branches outside the UK The Company has no branches outside the UK. Financial risk management The Group’s exposure to, and management of, capital risk, market risk and liquidity risk is set out in note 21 to the Group’s financial statements. Amendments to the Articles The Articles may only be amended with shareholders’ approval in accordance with the relevant legislation. Employees The Group has no employees and therefore no employee share scheme or policies for the employment of disabled persons or employee engagement. Anti-bribery policy The Company has a zero-tolerance policy towards bribery and is committed to carrying out its business fairly, honestly and openly. The anti-bribery policies and procedures apply to all its Directors and to those who represent the Company. Human Rights The Company has a zero-tolerance approach to modern slavery and human trafficking and is committed to ensuring its organisation and business partners operate with the same values. The Company’s modern slavery and human trafficking statement can be found on the Company’s website. Research and development No expenditure on research and development was made during the period. Related party transactions Related party transactions for the year ended 30 June 2024 can be found in note 28 of the financial statements. Annual General Meeting The Annual General Meeting of the Company will be held on 3 December 2024. Greenhouse gas emissions As a listed entity, the Company is required to comply with the SECR regulations under the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. Information regarding emissions arising from the Group's activities are included within the TCFD aligned report on pages 39 to 51. Disclosure of information to auditor All of the Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the auditor for the purposes of their audit and to establish that the Auditor is aware of that information. The Directors are not aware of any relevant audit information of which the auditor is unaware. Significant agreements There are no agreements with the Company or a subsidiary in which a Director is or was materially interested or to which a controlling shareholder was party. Share capital structure As at 30 June 2024, the Company’s issued share capital consisted of 1,246,239,185 ordinary shares of one penny each, all fully paid and listed on the Closed-ended investment funds category of the FCA’s Official List of the LSE’s Main Market. Further details of the share capital, including changes throughout the year are summarised in note 22 of the financial statements. Subject to authorisation by Shareholder resolution, the Company may purchase its own shares in accordance with the Companies Act 2006. At the Annual General Meeting held in 2023, shareholders authorised the Company to make market purchases of up to 186,811,253 Ordinary Shares. The Company has not repurchased any of its ordinary shares under this authority, which is due to expire at the AGM in 2024 and appropriate renewals will be sought. There are no restrictions on transfer or limitations on the holding of the ordinary shares. None of the shares carry any special rights with regard to the control of the Company. There are no known arrangements under which financial rights are held by a person other than the holder of the shares and no known agreements on restrictions on share transfers and voting rights. Post balance sheet events For details of events since the year end date, please refer to note 29 of the consolidated financial statements. Corporate Governance The Company’s statement on corporate governance can be found in the Corporate Governance Report on pages 74 to 75 of this Annual Report. The Corporate Governance Report forms part of this directors’ report and is incorporated into it by cross-reference. Information included in the strategic report The information that fulfils the reporting requirements relating to the Group’s business during the year and likely future developments can be found on pages 14 to 38. This Directors’ Report was approved by the Board and is signed on its behalf by: Nick Hewson Chair September STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 93 CORPORATE GOVERNANCE | DIRECTORS’ RESPONSIBILITIES STATEMENT DIRECTORS’ RESPONSIBILITIES STATEMENT The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and regulations. The UK Companies Act 2006 requires the Directors to prepare financial statements for each financial period. Under that law, the Directors have elected to prepare the Group financial statements in accordance with UK adopted international accounting standards and the Company financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”. 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 Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: • Select suitable accounting policies and then apply them consistently • Make judgements and accounting estimates that are reasonable and prudent • State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements • Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business • Prepare a Directors’ Report, a Strategic Report, Directors’ Remuneration Report and Corporate Governance Statement which comply with the requirements of the Companies Act 2006 The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and Accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy. The Company is required to make the Annual Report and Accounts available on a website. The Company’s website address is www.supermarketincomereit.com. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from such legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. Responsibility Statement The Directors confirm to the best of their knowledge: • The Group financial statements prepared in accordance with UK adopted international accounting standards and the Company financial statements prepared in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 “The Financial Reporting Standard” applicable in the UK and Republic of Ireland, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group • The Annual Report and Accounts include a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that they face • The Annual Report and Accounts taken as whole, is fair, balanced and understandable and the information provided to shareholders is sufficient to allow them to assess the Group’s performance, business model and strategy This Responsibility Statement was approved by the Board of Directors and is signed on its behalf by: Nick Hewson Chair September 94 SUPERMARKET INCOME REIT PLC CORPORATE GOVERNANCE | ALTERNATIVE INVESTMENT FUND MANAGER’S REPORT Background The Alternative Investment Fund Managers Directive (the “AIFMD”) came into force on 22 July 2013. The objective of the AIFMD was to ensure a common regulatory regime for funds marketed in or into the EU which are not regulated under the UCITS regime. This was primarily for investors’ protection and also to enable European regulators to obtain adequate information in relation to funds being marketed in or into the EU to assist their monitoring and control of systemic risk issues. The AIFM is a non-EU Alternative Investment Fund Manager (a “Non-EU AIFM”), the Company is a non-EU Alternative Investment Fund (a “Non-EU AIF”) and the Company is marketed primarily into the UK, but also into the EEA. Although the AIFM is a non-EU AIFM, so the depositary rules in Article 21 of the AIFMD do not apply, the transparency requirements of Articles 22 (Annual report) and 23 (Disclosure to investors) of the AIFMD do apply to the AIFM and therefore to the Company. In compliance with those articles, the following information is provided to the Company’s shareholders by the AIFM. 1. Material Changes in the Disclosures to Investors During the financial year under review, there were no material changes to the information required to be made available to investors before they invest in the Company under Article 23 of the AIFMD from that information set out in the Company’s prospectus dated 1 October, 2021, save as updated in the supplementary prospectus dated 7 April, 2022, as disclosed below and in certain sections of the Strategic Report, those being the Chair’s Statement, Investment Adviser’s Report, TCFD Compliant Report, Our Principal Risks and the Section 172(1) Statement, together with the Corporate Governance Report in this annual financial report.. 2. Risks and Risk Management Policy The current principal risks facing the Company and the main features of the risk management systems employed by AIFM and the Company to manage those risks are set out in the Strategic Report (Our Principal Risks and Risk and Going Concern), the Audit and Risk Committee Report and the Directors’ Report. 3. Leverage and borrowing The Company is entitled to employ leverage in accordance with its investment policy and as described in the Chair’s Statement, the sections entitled “Financial Highlights” and “Financial Overview” in the Strategic Report and the notes to the Financial Statements. Other than as disclosed therein, there were no changes in the Company’s borrowing powers and policies. 4. Environmental, Social and Governance (ESG) Issues and Regulation (EU) 2019/2099 on Sustainability-Related Disclosures in the Financial Services Sector (the “SFDR”) As a member of the JTC group of Companies, the AIFM’s ultimate beneficial owner and controlling party is JTC Plc, a Jersey-incorporated company whose shares have been admitted to the Official List of the UK’s Financial Conduct Authority and to trading on the London Stock Exchange’s Main Market for Listed Securities (mnemonic JTC LN, LEI 213800DVUG4KLF2ASK33). In the conduct of its own affairs, the AIFM is committed to best practice in relation to ESG matters and has therefore adopted JTC Plc’s ESG framework, which can be viewed online at https://www.jtcgroup.com/esg/. JTC Plc’s sustainability report can also be viewed online in its annual financial report located at https://www.jtcgroup. com/investor-relations/annual-review/. As at the date of this report, JTC Plc is a signatory of the U.N. Principles for Responsible Investment. The JTC group is also carbon neutral and works to support the achievement of ten of the U.N.’s Sustainable Development Goals. JTC Plc reports under TCFD and under the SASB framework. JTC Plc also reported publicly to the Carbon Disclosure Project in 2023 and selected the Science Based Targets initiative as its chosen net zero framework. From the perspective of the SFDR, although the AIFM is a non-EU AIFM, the Company is marketed into the EEA, so that the AIFM is required to comply with the SFDR in so far as it applies to the Company and the AIFM’s management of the Company, which the Company has classified as being within the scope of Article 6 of the SFDR. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 95 The AIFM and Atrato Capital Limited (“Atrato”) as the Company’s Alternative Investment Fund Manager and Investment Adviser respectively do consider ESG matters in their respective capacities, as explained in SUPR’s prospectus dated 1 October 2021, as updated by SUPR’s supplementary prospectus dated 7 April 2022. Copies of both of those documents can be viewed on the AIFM’s website at https://jtcglobalaifmsolutions. com/clients/supermarket-income-reit-plc/. Since the publication of those documents, the AIFM, Atrato and the Company have continued to enhance their collective approach to ESG matters and detailed reporting on (a) enhancements made to each party’s policies, procedures and operational practices and (b) our collective future intentions and aspirations is included in the TCFD Compliant Report included in the Strategic Report and the ESG Committee Report in this annual financial report. The Company is also publishing a separate Sustainability Report alongside this report which is available on the website. The AIFM also has a comprehensive risk matrix (the “Matrix”), which is used to identify, monitor and manage material risks to which the Company is exposed, including ESG and sustainability risks, the latter being an environmental, social or governance event or condition that, if it occurred, could cause an actual or a potential material negative impact on the value of an investment. We also consider sustainability factors, those being environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters. The AIFM is cognisant of the announcement published by H.M. Treasury in the UK of its intention to make mandatory by 2025 disclosures aligned with the recommendations of the Task Force on Climate-related Financial Disclosures, with a significant proportion of disclosures mandatory by 2023. The AIFM also notes the roadmap and interim report of the UK’s Joint Government-Regulator TCFD Taskforce published by H.M. Treasury on 9 November 2020. The AIFM continues to monitor developments and intends to comply with the UK’s regime to the extent either mandatory or desirable as a matter of best practice. 5. Remuneration of the AIFM’s Directors and Employees During the financial year under review, no separate remuneration was paid by the AIFM to two of its executive directors, Graham Taylor and Kobus Cronje, because they were both employees of the JTC group of companies, of which the AIFM forms part. The third executive director, Matthew Tostevin, is paid a fixed fee of £10,000 for acting as a director. Mr Tostevin is paid additional remuneration on a time spent basis for services rendered to the AIFM and its clients. Other than the directors, the AIFM has no employees. The Company has no agreement to pay any carried interest to the AIFM. During the year under review, the AIFM paid £10,000 in fixed fees and £46,211 in variable remuneration to Mr Tostevin. 6. Remuneration of the AIFM Payable by the Company The AIFM was during the year under review paid a fee of 0.04% per annum of the net asset value of the Company up to £1 billion and 0.03% of the Company’s net asset value in excess of £1 billion, subject to a minimum of £50,000 per annum, such fee being payable quarterly in arrears. The total fees paid to the AIFM during the year under review were £0.44 million. JTC Global AIFM Solutions Limited Alternative Investment Fund Manager September 96 SUPERMARKET INCOME REIT PLC FINANCIAL STATEMENTS CONTENTS FINANCIAL STATEMENTS 97 Independent Auditors’ Report to the members of Supermarket Income REIT PLC 104 Consolidated Financial Statements 108 Notes to the Consolidated Financial Statements 138 Company Financial Statements 140 Notes to the Company Financial Statements 142 Unaudited Supplementary Information 147 Glossary 148 Contacts Information FINANCIAL STATEMENTS STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 97 FINANCIAL STATEMENTS | INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SUPERMARKET INCOME REIT PLC Opinion on the financial statements In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June 2024 and of the Group’s loss for the year then ended; • the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; • the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Supermarket Income REIT Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 30 June 2024 which comprise the consolidated statement of comprehensive income, the consolidated and company statement of financial position, the consolidated and company statement of changes in equity, the consolidated cash flow statement and notes to the financial statements, including material and significant accounting policy information. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the audit committee. Independence Following the recommendation of the audit committee, we were appointed by the Directors on June 2017 to audit the financial statements for the 13-month period ended 30 June 2018 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 7 years, covering the years ended 2018 to 2024. We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Group or the Parent Company. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accounting included: • Using our knowledge of the Group and its market sector together with the current economic environment to assess the Directors’ identification of the inherent risks to the Group’s business and how these might impact the Group’s ability to remain a going concern for the going concern period, being the period to 30 September 2025, which is at least 12 months from when the financial statements are authorised for issue; • Obtaining an understanding of the Directors’ process for assessing going concern including an understanding of the key assumptions used; • We have reviewed the forecasts that support the Directors’ going concern assessment and: – challenged the Investment Adviser’s forecast assumptions in comparison to the current performance of the Group; – agreed the inputs into the forecasts to supporting documentation for consistency with contractual agreements, where available; – agreed the Group’s available borrowing facilities and the related covenants to supporting financing documentation and calculations; • Analysed the sensitivities applied by the Directors’ stress testing calculations and challenged the assumptions made using our knowledge of the business and of the current economic climate, to assess the reasonableness of the downside scenarios selected; • Obtained covenant calculations and forecast calculations to test for any potential future covenant breaches; • Considered the covenant compliance headroom for sensitivity to both future changes in property valuations and the Group’s future financial performance; • Reviewed the agreements for extensions or modifications of loan agreements since the year end up to the date of the signed financial statements; • Considered board minutes, and evidence obtained through the audit and challenged the Directors on the identification of any contradictory information in the forecasts and the resultant impact to the going concern assessment; • Reviewed the disclosures in the financial statements relating to going concern to check that the disclosure is consistent with the circumstances 98 SUPERMARKET INCOME REIT PLC FINANCIAL STATEMENTS | INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SUPERMARKET INCOME REIT PLC CONTINUED Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Overview Coverage 100% (2023: 100%) of Group profit before tax 100% (2023: 100%) of Group revenue 100% (2023: 100%) of Group total assets 100% (2023: 100%) of Group investment property 2024 2023 Key audit matters Valuation of investment property Acquisition and disposal of investments in joint ventures The acquisition and disposal of investments in joint ventures is no longer a KAM because the joint venture interest was disposed of in the prior year. Materiality Group financial statements as a whole £18.4 million (2023: £19.3 million) based on 1% (2023: 1%) of Group total assets An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. The Group operates in the United Kingdom and France in one segment, investment property, structured through a number of subsidiary entities. None of the subsidiaries were individually considered to be significant components and as such the audit approach included undertaking audit work on the key risks of material misstatements identified for the Group across the subsidiary entities. The Group audit engagement team performed full scope audits in order to issue the Group and Parent Company audit opinion, including undertaking all of the audit work on the risks of material misstatement identified in the key audit matters section below. As a result of our audit approach, we achieved coverage of 100% of rental income and 100% of investment property valuations. Climate change Our work on the assessment of potential impacts on climate-related risks on the Group’s operations and financial statements included: • Enquiries and challenge of the Investment Adviser and the Group’s independent property valuer to understand the actions they have taken to identify climate-related risks and their potential impacts on the financial statements and adequately disclose climate-related risks within the annual report; • Our own qualitative risk assessment taking into consideration the sector in which the Group operates and how climate change affects this particular sector and property asset class; • Review of the minutes of Board, Audit Committee and ESG Committee meetings and other papers related to climate change and performed a risk assessment as to how the impact of the Group’s risk assessment as set out in the Group’s Sustainability and TCFD Compliance Report may affect the financial statements and our audit; • We challenged the extent to which climate-related considerations, including the expected cash flows from the initiatives and commitments have been reflected, where appropriate, in the Investment Adviser’s going concern assessment and viability assessment; • We also assessed the consistency of management’s disclosures included as 'Statutory Other Information’ within the Strategic Report with our knowledge obtained from the audit. Based on our risk assessment procedures, we did not identify there to be any Key Audit Matters materially impacted by climate-related risks. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 99 Key audit matter How the scope of our audit addressed the key audit matter Valuation of investment properties As detailed in note 13, the Group owns a portfolio of investment properties which, as described in the accounting policy in note 2.10, are held at fair value in the Group financial statements. As described in the ‘significant accounting judgements, estimates and assumptions’ section of note 1, determination of the fair value of investment properties is a key area of estimation. IAS 40 Investment properties requires all investment properties to be recognised at fair value with any changes in the fair value in any period to be recognised in the income statement. The Group has engaged Cushman & Wakefield to undertake a full year end valuation of all the properties in accordance with RICS Red Book requirements. Property valuations are subject to a high degree of estimation and judgement as they are calculated from a number of different assumptions specific to each individual property. They have therefore been identified as an area of specific focus for our audit. A fraud risk also arises from the data supplied to Cushman & Wakefield, which could intentionally misstate property or lease details to obtain a misstated valuation. Our audit work included, but was not restricted to, the following: Group’s controls relating to the valuation of investment properties • We reviewed and evaluated the design, implementation and appropriateness of the Group’s controls relating to the valuation of investment properties, including the processes by which the Group ensures that accurate data is provided to the external valuer, Cushman & Wakefield (C&W). In doing so, we performed a walkthrough of the relevant controls by obtaining supports for the design and implementation of the controls. Experience of the valuer and relevance of its work • We assessed the competency, qualifications, independence and objectivity of the independent external valuer engaged by the Group and reviewed the terms of their engagement for any unusual arrangements, limitations in the scope of their work or evidence of management bias. • Real estate experts within our team read the valuation reports and confirmed that all valuations had been prepared in accordance with applicable valuation guidelines and were therefore appropriate for determining the carrying value in the Group’s financial statements. Data provided to the valuer • We validated the underlying data provided to the valuer by the Investment Adviser which included key observable inputs such as current rent and lease term by agreeing a sample to the executed lease agreements as part of our audit work. Assumptions and estimates used by the valuer • We developed yield expectations for each property using available independent industry data, reports and comparable transactions in the market around the period end. This was undertaken with assistance of our real estate experts • We evaluated the other key valuation assumptions, being the market rental values, taking into account the location and specifics of each property. • We then discussed both the assumptions used and the valuation movement in the period with the Investment Adviser, the Chair of the Audit Committee and the independent valuer. • Where the valuation yield was outside of our expected range we challenged the independent valuer on specific assumptions and reasoning for the yields and/or market rents applied and corroborated their explanations where relevant, including agreeing to third-party documentation and market comparisons. • While we consulted with internal RICS-qualified experts as part of setting our expectations, our expert also attended the meetings with the Group’s valuers to assist us in assessing that explanations provided were appropriate and in line with market knowledge. Related disclosures in the financial statements • We reviewed the appropriateness of the Group’s disclosures within the financial statements in relation to valuation methodology, key valuation assumptions and valuation sensitivity by checking that this adheres to the disclosure requirements of the reporting framework used. Key observations: Based on our work we have not noted any material instance which may indicate that the assumptions adopted by the Directors in the valuation were not reasonable or that the methodology applied was inappropriate. 100 SUPERMARKET INCOME REIT PLC FINANCIAL STATEMENTS | INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SUPERMARKET INCOME REIT PLC CONTINUED Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to Specific materiality We also determined that for other account balances and classes of transactions that impact the calculation of EPRA Earnings, a misstatement of less than materiality for the financial statements as a whole, specific materiality, could influence the economic decisions of users. As a result, we determined that specific materiality for these items should be £2.5 million (2023: £3.2 million), being 5% of EPRA Earnings (2023: 5% of Adjusted Earnings). EPRA Earnings excludes the impact of the net loss on revaluation of investment properties, changes in fair value of interest rate derivatives and finance income on interest rate derivatives held at fair value through profit and loss. We further applied a performance materiality level of 75% (2023: 75%) of specific materiality to ensure that the risk of errors exceeding specific materiality was appropriately mitigated. We consider that the EPRA Earnings benchmark is more comparable with other market participants. Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £125,000 (2023: £160,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Other information The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Group financial statements Parent company financial statements 2024 £m 2023 £m 2024 £m 2023 £m Materiality 18.4 19.3 16.6 16.2 Basis for determining materiality Materiality for the Group and Parent Company’s financial statements was set at 1% of total assets (2023: 1%). This provides a basis for determining the nature and extent of our risk assessment procedures, identifying and assessing the risk of material misstatement and determining the nature and extent of further audit procedures. Rationale for the benchmark applied We determined that total assets would be the most appropriate basis for determining overall materiality as we consider it to be the principal considerations for the users of the financial statements in assessing the financial performance of the Group. Performance materiality 13.8 14.5 12.5 12.2 Basis for determining performance materiality Performance materiality is set at an amount to reduce to an appropriate low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessment, together with our assessment of the Group’s overall control environment, our judgement was that overall performance materiality for the Group should be 75% (2023: 75%) of materiality. We determined that the same measure as the Group was appropriate for the Parent Company. Rationale for the percentage applied for performance materiality We determined that 75% of materiality would be appropriate based on our risk assessment, together with our assessment of the Group’s and Parent Company’s overall control environment, the low number of components, the low value of brought forward adjustments impacting the current year and low value of expected misstatements, based on past experience. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 101 Corporate governance statement The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit. Going concern and longer-term viability • The Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out in the “Going Concern” section of the Strategic Report; and • The Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate as set out in the “Assessment of viability” section of the Strategic Report. Other Code provisions • Directors' statement on fair, balanced and understandable as set out in the Audit and Risk Committee Report; • Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks as set out in the “Our Principal Risks” section of the Strategic Report; • The section of the annual report that describes the review of effectiveness of risk management and internal control systems as set out in the Audit and Risk Committee Report; and • The section describing the work of the audit committee as set out in the Audit and Risk Committee Report. Other Companies Act 2006 reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report. Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. Corporate governance statement In our opinion, based on the work undertaken in the course of the audit the information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance and Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in this information. In our opinion, based on the work undertaken in the course of the audit information about the Parent Company’s corporate governance code and practices and about its administrative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules. We have nothing to report arising from our responsibility to report if a corporate governance statement has not been prepared by the Parent Company. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. 102 SUPERMARKET INCOME REIT PLC FINANCIAL STATEMENTS | INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SUPERMARKET INCOME REIT PLC CONTINUED Responsibilities of Directors As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: Non-compliance with laws and regulations Based on: • our understanding of the Group and the industry in which it operates; • discussion with management and those charged with governance; • obtaining an understanding of the Group’s policies and procedures regarding compliance with laws and regulations, we considered the significant laws and regulations to be the applicable accounting framework, the Companies Act 2006, UK Listing Rules and the UK Real Estate Investment Trust (REIT) regime. The Group is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be UK VAT regulations. Our procedures in respect of the above included: • review of minutes of meetings of those charged with governance for any instances of non-compliance with laws and regulations; • review of correspondence with regulatory and tax authorities for any instances of non-compliance with laws and regulations; • review of financial statement disclosures and agreeing to supporting documentation; • involvement of tax experts in the audit; and • Review of legal expenditure accounts to understand the nature of expenditure incurred. STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS ANNUAL REPORT 2024 103 Fraud We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included: • enquiry with the Investment Adviser, AIFM and those charged with governance regarding any known or suspected instances of fraud; • obtaining an understanding of the Group’s policies and procedures relating to: – detecting and responding to the risks of fraud; and – internal controls established to mitigate risks related to fraud; • review of Board and Committee meeting minutes for any known or suspected instances of fraud; • Discussion amongst the engagement team as to how and where fraud might occur in the financial statements; and • Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud. Based on our risk assessment, we considered the areas most susceptible to fraud to be inputs to investment property valuations and management override of controls. Our procedures in respect of the above included: • to address the risk on the inputs to investment property valuation, we agree the key observable inputs provided by the Investment Adviser to the external valuer which consists of the current rent and lease term. We agreed these inputs to a sample of executed lease agreements as part of our audit work; and • we addressed the risk of management override of internal controls through the following procedures: – we tested a sample of journal entries throughout the year, which met a defined risk criteria, by agreeing to supporting documentation; – we tested a sample of journal entries throughout the year, which does not meet the pre-defined risk criteria, by agreeing to supporting documentation; – we agreed the bank and loan balances to direct bank confirmations and agreements; and – we evaluated whether there was evidence of bias by the Investment Adviser and the Directors that represented a risk of material misstatement due to fraud. This included evaluating any management bias within the valuation of investment property, as mentioned under the key audit matters subheading. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org. uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Charles Ellis (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, UK September BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2024 Year to Year to 30 June 2024 30 June 2023 Notes £’000 £’000 Gross rental income 4 107,851 95,823 Service charge income 4 6,822 5,939 Service charge expense 5 (7,441) (6,518) Net Rental Income 107,232 95,244 Administrative and other expenses 6 (15,218) (15,429) Operating profit before changes in fair value of investment properties and share of income and profit on disposal from joint venture 92,014 79,815 Changes in fair value of investment properties 13 (65,825) (256,066) Share of income from joint venture – 23,232 Profit on disposal of joint venture – 19,940 Operating profit/(loss) 26,189 (133,079) Finance income 9 23,781 14,626 Finance expense 9 (40,043) (39,315) Changes in fair value on interest rate derivatives 18 (31,251) 10,024 Profit on disposal of interest rate derivatives – 2,878 Loss before taxation (21,324) (144,866) Tax credit/(charge) for the year 10 140 – Loss for the year (21,184) (144,866) Items to be reclassified to profit or loss in subsequent periods Fair value movements in interest rate derivatives 18 (1,765) 1,068 Foreign exchange movement 32 – Total comprehensive expense for the year (22,917) (143,798) Total comprehensive expense for the year attributable to ordinary Shareholders (22,917) (143,798) Earnings per share – basic and diluted 11 (1.7) pence (11.7) pence 104 SUP ER M AR K E T IN C OME R EI T P L C CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2024 Notes As at 30 June 2024 £’000 As at 30 June 2023 £’000 Non -current assets Investment properties 13 1,768,216 1,685,690 Financial asset arising from sale and leaseback transactions 15 11,023 10,819 Interest rate derivatives 18 15,741 37,198 Total non-current assets 1,794,980 1,733,707 Current assets Interest rate derivatives 18 15,708 20,384 Trade and other receivables 16 11,900 142,155 Deferred tax asset 20 140 – Cash and cash equivalents 38,691 37,481 Total current assets 66,439 200,020 Total assets 1,861,419 1,933,727 Non-current liabilities Bank borrowings 19 597,652 605,609 Trade and other payables 1,045 – Total non-current liabilities 598,697 605,609 Current liabilities Bank borrowings due within one year 19 96,516 61,856 Deferred rental income 24,759 21,557 Trade and other payables 17 21,973 26,979 Total current liabilities 143,248 110,392 Total liabilities 741,945 716,001 Net assets 1,119,474 1,217,726 Equity Share capital 22 12,462 12,462 Share premium reserve 22 500,386 500,386 Capital reduction reserve 22 629,196 704,531 Retained earnings (24,141) (2,957) Cash flow hedge reserve 23 1,539 3,304 Other reserves 32 – Total equity 1,119,474 1,217,726 Net asset value per share – basic and diluted 27 90 pence 98 pence EPRA NTA per share 27 87 pence 93 pence The consolidated financial statements were approved and authorised for issue by the Board of Directors on 17 September 2024 and were signed on its behalf by: Nick Hewson Chair ANNU AL R EP OR T 2024 105 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 106 SUPERMARKET INCOME REIT PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2024 Share capital £’000 Share premium reserve £’000 Cash flow hedge reserve £’000 Other reserve £’000 Capital reduction reserve £’000 Retained earnings £’000 Total £’000 As at 1 July 2023 12,462 500,386 3,304 – 704,531 (2,957) 1,217,726 Comprehensive income for the year Loss for the year – – – – – (21,184) (21,184) Recycled from comprehensive loss to profit and loss – – (1,154) – – – (1,154) Other comprehensive loss – – (611) 32 – – (579) Total comprehensive loss for the year – – (1,765) 32 – (21,184) (22,917) Transactions with owners Interim dividends paid (note 12) – – – – (75,335) – (75,335) As at 30 June 2024 12,462 500,386 1,539 32 629,196 (24,141) 1,119,474 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2023 Share capital £’000 Share premium reserve £’000 Cash flow hedge reserve £’000 Capital reduction reserve £’000 Retained earnings £’000 Total £’000 As at 1 July 2022 12,399 494,174 5,114 778,859 141,909 1,432,455 Comprehensive income for the year Loss for the year – – – – (144,866) (144,866) Cash flow hedge reserve to profit for the year on disposal of interest rate derivatives – – (2,878) – – (2,878) Other comprehensive income – – 1,068 – – 1,068 Total comprehensive loss for the year – – (1,810) – (144,866) (146,676) Transactions with owners Ordinary shares issued at a premium during the year 63 6,301 – – – 6,364 Share issue costs – (89) – – – (89) Interim dividends paid (note 12) – – – (74,328) – (74,328) As at 30 June 2023 12,462 500,386 3,304 704,531 (2,957) 1,217,726 ANNUAL REPORT 2024 107 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2024 Notes Year to 30 June 2024 £’000 Year to 30 June 2023 £’000 Operating activities Loss for the year (attributable to ordinary Shareholders) (21,184) (144,866) Adjustments for: Tax credit (140) – Changes in fair value of interest rate derivatives measured at fair value through profit and loss 31,251 (10,024) Changes in fair value of investment properties and associated rent guarantees 13 65,825 256,066 Movement in rent smoothing and lease incentive adjustments 4 (2,434) (2,763) Amortisation of lease fees 18 – Finance income 9 (23,781) (14,626) Finance expense 9 40,043 39,281 Share of income from joint venture – (23,232) Profit on disposal of interest rate derivative – (2,878) Profit on disposal of Joint Venture – (19,941) Cash flows from operating activities before changes in working capital 89,598 77,017 (Increase) in trade and other receivables (2,996) (548) Decrease in rent guarantee receivables – 191 Increase in deferred rental income 3,202 5,198 Increase in trade and other payables 2,252 2,461 Net cash flows from operating activities 92,056 84,319 Investing activities Disposal of Property, Plant & Equipment – 222 Acquisition and development of investment properties 13 (136,184) (362,630) Capitalised acquisition costs (10,266) (14,681) Bank interest received 78 – Receipts from other financial assets 290 290 Investment in joint venture – (189,528) Settlement of Joint Venture carried interest (7,500) – Proceeds from disposal of Joint Venture 134,912 292,636 Net cash flows used in investing activities (18,670) (273,691) Financing activities Costs of share issues – (89) Bank borrowings drawn 19 217,560 912,114 Bank borrowings repaid 19 (191,077) (598,486) Loan arrangement fees paid (1,318) (5,010) Bank interest paid (35,275) (22,408) Settlement of interest rate derivatives 21,182 8,646 Settlement of Joint Venture Carried Interest – (8,066) Sale of interest rate derivatives 18 38,482 2,878 Purchase of interest rate derivative 18 (45,364) (44,255) Bank commitment fees paid (1,031) (1,708) Dividends paid to equity holders (75,335) (67,963) Net cash flows (used in) / from financing activities (72,176) 175,653 Net movement in cash and cash equivalents in the year 1,210 (13,719) Cash and cash equivalents at the beginning of the year 37,481 51,200 Cash and cash equivalents at the end of the year 38,691 37,481 108 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of preparation General information Supermarket Income REIT plc (the “Company”) is a company registered in England and Wales with its registered office at The Scalpel, 18 th Floor, 52 Lime Street, London, EC3M 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. At 30 June 2024 the Group comprised the Company and its wholly owned subsidiaries as set out in note 14. Basis of preparation These consolidated financial statements cover the year to 30 June 2024, including comparative figures relating to the year to 30 June 2023, and include the results and net assets of the Group. The consolidated financial statements have been prepared in accordance with: • UK-adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards, • The Disclosure and Transparency Rules of the Financial Conduct Authority The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, other than where new policies that were not previously relevant to the Group’s operations have been adopted. 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 and Company’s financial statements for the year ended 30 June 2024. In assessing the going concern basis of accounting, the Directors have considered the prospects of the Group over the period up to 30 September 2025. Liquidity At 30 June 2024, the Group generated net cash flow from operating activities of £92.1 million, held cash of £38.7 million and undrawn committed facilities totalling £54.2 million with no capital commitments or contingent liabilities. After the year end, the Group also increased its debt capacity from £752.0 million to £825.4 million (see note 19 for more information), leaving undrawn committed facilities of £176.0 million available (including £50.0 million accordion). The Directors are of the belief that the Group continues to be well funded during the going concern period with no concerns over its liquidity. Refinancing events At the date of signing the financial statements, the Wells Fargo facility and £50 million of the syndicate unsecured term loan fall due for repayment during the going concern period. It is intended that the facilities will be refinanced prior to maturity, or if required, paid down in full utilising the Group’s available cash balances and undrawn committed facilities of over £117 million (including post balance sheet events). All lenders have been supportive during the year and have expressed commitment to the long-term relationship they wish to build with the Company. 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 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 Annual Report 100% of contractual rent for the period has been collected. The Group benefits from a secure income stream from the majority of its property assets that are let to tenants with excellent covenant strength under long leases that are subject to upward only rent reviews. ANNUAL REPORT 2024 109 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 1. Basis of preparation continued The list of scenarios are below and are all on top of the base case model which includes prudent assumptions on valuations and cost inflation. The Group is 100% hedged (including post balance sheet events), no sensitivity for movements in interest rates have been modelled for the hedged debt during the going concern assessment period. Scenario Rental Income CostsBase case scenario (Scenario 1) 100% contractual rent received when due Investment adviser fee based on terms of and rent reviews based on forward looking the signed agreement (percentage of NAV inflation curve, capped at the contractual as per note 27), other costs in line with rate of the individual leases.contractual terms.Scenario 2 Rental income to fall by 20%. Costs expected to remain the same as the base case.Scenario 3 Rental Income expected to remain the 10% increases on base case costs to all same as the base case.administrative expenses. 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. The lowest amount of ICR headroom experienced in the worst-case stress scenarios was 42%. Based on the latest bank commissioned valuations, property values would have to fall by more than 26% before LTV covenants are breached, and 19% against 30 June 2024 Company valuations. Similarly, the strictest interest cover covenant within each of the ring-fenced banking groups is 225%, where the portfolio is forecast to have an average interest cover ratio of 425% 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 issue of this annual report and have therefore adopted the going concern basis of accounting in preparing the Annual Report. 110 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 1. Basis of preparation continued Accounting convention and currency The consolidated financial statements (the “financial statements”) have been prepared on a historical cost basis, except that investment properties, rental guarantees and interest rate derivatives 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 Company and the presentation currency of the Group. Euro denominated results of the French operation have been converted to Sterling at the average exchange rate for the period from acquisition to 30 June 2024 of €1:£0.85, which is considered not to produce materially different results from using the actual rates at the date of the transactions. Year end balances have been converted to sterling at the 30 June 2024 exchange rate of €1:£0.85. The accounting policy for foreign currency translation is in note 2. Adoption of new and revised standards There were a number of new standards and amendments to existing standards which are required for the Group’s accounting period beginning on 1 July 2023. The following amendments are effective for the period beginning 1 July 2023: – IFRS 17 Insurance Contracts – Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of accounting policies – Definition of Accounting Estimates (Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors) – Amendments to IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction – International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12 – International tax reform – Pillar Two model rules) There was no material effect from the adoption of the above-mentioned amendments to IFRS effective in the period. They have no significant impact to the Group as they are either not relevant to the Group’s activities or require accounting which is already consistent with the Group’s current accounting policies. In the current financial year, the Group has adopted a number of minor amendments to standards effective in the year issued by the IASB as adopted by the UK Endorsement Board, none of which have had a material impact on the Group. There was no material effect from the adoption of other amendments to IFRS effective in the year. They have no significant impact on the Group as they are either not relevant to the Group’s activities or require accounting which is consistent with the Group’s current accounting policies. Standards and interpretations in issue not yet adopted The following are new standards, interpretations and amendments, which are not yet effective, and have not been early adopted in this financial information, that will or may have an effect on the Group’s future financial statements: • Amendments to IAS 1 which are intended to clarify the requirements that an entity applies in determining whether a liability is classified as current or non-current. The amendments are intended to be narrow-scope in nature and are meant to clarify the requirements in IAS 1 rather than modify the underlying principles (effective for periods beginning on or after 1 January 2024). The amendments include clarifications relating to: – How events after the end of the reporting period affect liability classification – What the rights of an entity must be in order to classify a liability as non-current – How an entity assesses compliance with conditions of a liability (e.g. bank covenants) – How conversion features in liabilities affect their classification The amendment is not expected to have an impact on the presentation or classification of the liabilities in the Group based on rights that are in existence at the end of the reporting period. • IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. IFRS S1 sets out general requirements for the disclosure of material information about sustainability-related financial risks and opportunities and other general reporting requirements (periods beginning after 1 January 2024). • IFRS S2 Climate-related Disclosures. IFRS S2 sets out disclosure requirements that are specific to climate-related matters (periods beginning after 1 January 2024. • IFRS 18 - Presentation and Disclosure in Financial Statements. IFRS 18 sets out significant new requirements for how financial statements are presented, with particular focus on the statement of profit or loss, including requirements for mandatory sub-totals to be presented, aggregation and disaggregation of information, as well as disclosures related to management-defined performance measures. This new standard will first be effective for the Group for the period commencing 1 July 2027. ANNUAL REPORT 2024 111 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 1. Basis of preparation continued The Group expects to review and determine the impact of the new standard on the Group’s reporting and financial statements over the coming financial year. The Group acknowledges the issue of these new standards by the International Sustainability Standards Board’s (“ISSB”) will monitor the consultation and decision process being undertaken by the UK Government and FCA in determining how these standards are implemented by UK companies. There are other new standards and amendments to standards and interpretations which have been issued that are effective in future accounting periods, and which the Group has decided not to adopt early. None of these are expected to have a material impact on the condensed consolidated financial statements of the Group. Significant accounting judgements, estimates and assumptions The preparation of these financial statements in accordance with IFRS requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. Key estimate: Fair value of investment properties The fair value of the Group’s investment properties is determined by the Group’s independent valuer on the basis of market value in accordance with the RICS Valuation – Global Standards (the “Red Book”). Recognised valuation techniques are used by the independent valuer which are in accordance with those recommended by the International Valuation Standard Committee and compliant with IFRS 13 “Fair Value Measurement.” The independent valuer did not include any material valuation uncertainty clause in relation to the valuation of the Group’s investment property for 30 June 2024 or 30 June 2023. The independent valuer is considered to have sufficient current local and national knowledge of the supermarket property market and the requisite skills and understanding to undertake the valuation competently. In forming an opinion as to fair value, the independent valuer makes a series of assumptions, which are typically market-related, such as those in relation to net initial yields and expected rental values. These are based on the independent valuer’s professional judgement. Other factors taken into account by the independent valuer in arriving at the valuation of the Group’s investment properties include the length of property leases, the location of the properties and the strength of tenant covenants. The fair value of the Group’s investment properties as determined by the independent valuer, along with the significant methods and assumptions used in estimating this fair value, are set out in note 13. Key judgement: Acquisition of investment properties The Group has acquired and intends to acquire further investment properties. At the time of each purchase the Directors assess whether an acquisition represents the acquisition of an asset or the acquisition of a business. Under the Definition of a Business (Amendments to IFRS 3 “Business Combinations”), to be considered as a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The optional ‘concentration test’ is also applied, where if substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. During the year, the group completed four acquisitions; this includes the acquisition of 17 French properties in a single transaction. In four cases the concentration test was applied and met, resulting in the acquisitions being accounted for as asset purchases. All £135.8 million of acquisitions during the year were accounted for as asset purchases. Key judgement: Sale and leaseback transactions The Group acquires properties under a sale and leaseback arrangement. At the time of the purchase the Directors assess whether the acquisition represents a true sale to determine whether the assets can be accounted for as Investment Properties under IFRS 16. Under IFRS 15, for the transfer of an asset to be accounted for as a true sale, satisfying a performance obligation of transferring control of an asset must be met for this to be deemed a property transaction and accounted for under IFRS 16. During the year, the Group acquired 17 stores in France under sale and leaseback arrangements. The terms of the sale and underlying lease were reviewed for indicators of control and deemed that the significant risks and rewards to ownership were transferred to the Group and will therefore be accounted for as an investment property acquisition. 112 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 2. Summary of material accounting policies The material accounting policies applied in the preparation of the consolidated financial statements are set out below. 2.1 Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries drawn up to 30 June 2024. Subsidiaries are those entities including special purpose entities, directly or indirectly controlled by the Company. Control exists when the Company is exposed or has rights to variable returns from its investment with the investee and has the ability to affect those returns through its power over the investee. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. In preparing the consolidated financial statements, intra group balances, transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted for all entities within the Group. 2.2 Rental income Rental income arising on investment properties is accounted for in profit or loss on a straight-line basis over the lease term, as adjusted for the following: • Any rental income from fixed and minimum guaranteed rent review uplifts is recognised on a straight-line basis over the lease term, variable lease uplift calculations are not rebased when a rent review occurs and the variable payment becomes fixed; • Lease incentives and initial costs to arrange leases are spread evenly over the lease term, even if 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. Contingent rents, such as those arising from indexed-linked rent uplifts or market-based rent reviews, are recognised in the period in which they are earned. Where income is recognised in advance of the related cash flows due to fixed and minimum guaranteed rent review uplifts or lease incentives, an adjustment is made to ensure that the carrying value of the relevant property, including the accrued rent relating to such uplifts or lease incentives, does not exceed the external valuation. Rental income is invoiced in advance with that element of invoiced rental income that relates to a future period being included within deferred rental income in the consolidated statement of financial position. Surrender premiums received in the period are included in rental income. Leases classified under IFRS 9 as financial assets recognise income received from the tenant between finance income and a reduction of the asset value, based on the interest rate implicit in the lease. 2.3 Service charge income Service charge income represents amounts billed to tenants for services provided in conjunction with leased properties based on budgeted service charge expenditure for a given property over a given service charge year. The Company recognises service charge income on a straight-line basis over the service charge term. 2.4 Service charge expense Service charge expense represents a wide range of costs related to the operation and upkeep of the leased properties. These costs are allocated and charged to tenants based on agreed terms and calculations as outlined in the lease agreements with a portion being borne by the landlord where agreed. 2.5 Finance income Finance income consists principally of interest receivable from interest rate derivatives and income from financial assets held at amortised cost. An adjustment is applied to reclassify amounts received upon periodic settlement of interest rate derivatives assets from change in fair value to interest income. 2.6 Finance expense Finance expenses consist principally of interest payable and the amortisation of loan arrangement fees. Loan arrangement fees are expensed using the effective interest method over the term of the relevant loan. Interest payable and other finance costs, including commitment fees, which the Group incurs in connection with bank borrowings, are expensed in the period to which they relate. ANNUAL REPORT 2024 113 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 2. Summary of material accounting policies continued 2.7 Administrative and other expenses Administrative and other expenses, including the investment advisory fees payable to the Investment Adviser, are recognised as a profit or loss on an accruals basis. 2.8 Dividends payable to Shareholders Dividends to the Company’s Shareholders are recognised when they become legally payable, as a reduction in equity in the financial statements. Interim equity dividends are recognised when paid. Final equity dividends will be recognised when approved by Shareholders at an AGM. 2.9 Taxation Non-REIT taxable income Taxation on the Group’s profit or loss for the year that is not exempt from tax under the UK-REIT regulations comprises current and deferred tax, as applicable. Tax is recognised in profit or loss except to the extent that it relates to items recognised as direct movements in equity, in which case it is similarly recognised as a direct movement in equity. Deferred tax is provided in full using the Balance Sheet liability method on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the asset is realised or the liability is settled. Deferred tax assets are recognised to the extent that it is probable that suitable taxable profits will be available against which deductible temporary differences can be utilised. Current tax is tax payable on any non-REIT taxable income for the year, using tax rates enacted or substantively enacted at the end of the relevant period. Entry to the UK-REIT regime The Group obtained its UK-REIT status effective from 21 December 2017. Entry to the regime results in, subject to continuing relevant UK-REIT criteria being met, the profits of the Group’s property rental business, comprising both income and capital gains, being exempt from UK taxation. The Group intends to ensure that it complies with the UK-REIT regulations on an on-going basis and regularly monitors the conditions required to maintain REIT status. 2.10 Investment properties Investment properties consist of land and buildings which are held to earn income together with the potential for capital growth. Investment properties are recognised when the risks and rewards of ownership have been transferred and are measured initially at cost, being the fair value of the consideration given, including transaction costs. Where the purchase price (or proportion thereof) of an investment property is settled through the issue of new ordinary shares in the Company, the number of shares issued is such that the fair value of the share consideration is equal to the fair value of the asset being acquired. Transaction costs include transfer taxes and professional fees for legal services. Any subsequent capital expenditure incurred in improving investment properties is capitalised in the period incurred and included within the book cost of the property. All other property expenditure is written off in profit or loss as incurred. After initial recognition, investment properties are measured at fair value, with gains and losses recognised in profit or loss in the period in which they arise. Gains and losses on disposals of investment properties will be determined as the difference between the net disposal proceeds and the carrying value of the relevant asset. These will be recognised in profit or loss in the period in which they arise. Initially, rental guarantees are recognised at their fair value and separated from the purchase price on initial recognition of the property being purchased. They are subsequently measured at their fair value at each reporting date with any movements recognised in the profit or loss. 2.11 Foreign currency transactions Foreign currency transactions are translated to the respective functional currency of Group entities at the foreign exchange rate ruling on the transaction date. Foreign exchange gains and losses resulting from settling these, or from retranslating monetary assets and liabilities held in foreign currencies, are booked in the Income Statement. The exception is for foreign currency loans and derivatives that hedge investments in foreign subsidiaries, where exchange differences are booked in other reserves until the investment is realised. Assets and liabilities of foreign entities are translated into sterling at exchange rates ruling at the Balance Sheet date. Their income, expenses and cash flows are translated at the average rate for the period or at spot rate for significant items. Resultant exchange differences are booked in Other Comprehensive Income and recognised in the Group Income Statement when the operation is sold. 114 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Summary of material accounting policies continued Exchange difference on non-monetary items measured at fair value through profit or loss, being the value movement of the investment properties, are recognised as part of the total fair value movement for the portfolio. 2.12 Financial assets and liabilities Financial assets and liabilities are recognised when the relevant Group entity becomes a party to the unconditional contractual terms of an instrument. Unless otherwise indicated, the carrying amounts of financial assets and liabilities are considered by the Directors to be reasonable estimates of their fair values. Financial assets Financial assets are recognised initially at their fair value. All of the Group’s financial assets, except interest rate derivatives, are held at amortised cost using the effective interest method, less any impairment. For assets where changes in cash flows are linked to changes in an inflation index, the Group updates the effective interest rate at the end of each reporting period and this is reflected in the carrying amount of the asset in each reporting period until the asset is derecognised. Cash and cash equivalents Cash and cash equivalents consist of cash in hand and short-term deposits in banks with an original maturity of three months or less. Trade and other receivables Trade and other receivables, including rents receivable, are recognised and carried at the lower of their original invoiced value and recoverable amount. Provisions for impairment are calculated using an expected credit loss model. Balances will be written-off in profit or loss in circumstances where the probability of recovery is assessed as being remote. Trade and other payables Trade and other payables are recognised initially at their fair value and subsequently at amortised cost. Bank borrowings Bank borrowings are initially recognised at fair value net of attributable transaction costs. After initial recognition, bank borrowings are subsequently measured at amortised cost, using the effective interest method. The effective interest rate is calculated to include all associated transaction costs. In the event of a modification to the terms of a loan agreement, the Group considers both the quantitative and qualitative impact of the changes. Where a modification is considered substantial, the existing facility is treated as settled and the new facility is recognised. Where the modification is not considered substantial, the carrying value of the liability is restated to the present value of the cash flows of the modified arrangement, discounted using the effective interest rate of the original arrangement. The difference is recognised as a gain or loss on refinancing through the statement of comprehensive income. Derivative financial instruments and hedge accounting The Group’s derivative financial instruments currently comprise of interest rate swaps/caps. Derivatives designated as hedging instruments utilise hedge accounting under IAS 39. Derivatives not designated under hedge accounting are accounted for under IFRS 9. These instruments are used to manage the Group’s cash flow interest rate risk. The instruments are initially recognised at fair value on the date that the derivative contract is entered into, being the cost of any premium paid at inception, and are subsequently re-measured at their fair value at each reporting date. Fair value measurement of derivative financial instruments The fair value of derivative financial instruments is the estimated amount that the Group would receive or pay to terminate the agreement at the period end date, taking into account current interest rate expectations and the current credit rating of the relevant group entity and its counterparties. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair value measurement as a whole. A number of assumptions are used in determining the fair values including estimations over future interest rates and therefore future cash flows. The fair value represents the net present value of the difference between the cash flows produced by the contract rate and the valuation rate. Hedge accounting At the inception of a hedging transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking the hedging transaction. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. ANNUAL REPORT 2024 115 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS Summary of material accounting policies continued Assuming the criteria for applying hedge accounting continue to be met the effective portion of gains and losses on the revaluation of such instruments are recognised in other comprehensive income and accumulated in the cash flow hedging reserve. Any ineffective portion of such gains and losses will be recognised in profit or loss within finance income or expense as appropriate. The cumulative gain or loss recognised in other comprehensive income is reclassified from the cash flow hedge reserve to profit or loss (finance expense) at the same time as the related hedged interest expense is recognised. Interest rate derivatives that do not qualify under hedge accounting are carried in the Group Statement of Financial Position at fair value, with changes in fair value recognised in the Group Statement of Comprehensive Income, net of interest receivable/payable from the derivatives shown in the finance income or expense line. 2.13 Equity instruments Equity instruments issued by the Company are recorded at the amount of the proceeds received, net of directly attributable issue costs. Costs not directly attributable to the issue are immediately expensed in profit or loss. No shares were issued in the period. 2.14 Fair value measurements and hierarchy Fair value is the price that would be received on the sale of an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market. It is based on the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. A fair value measurement of a non-financial asset takes into account the best and highest value use for that asset. The fair value hierarchy to be applied under IFRS 13 is as follows: Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities. Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For assets and liabilities that are carried at fair value and which will be recorded in the financial information on a recurring basis, the Group will determine whether transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting period. 3. Operating Segments Operating segments are identified on the basis of internal financial reports about components of the Group that are regularly reviewed by the chief operating decision maker (which in the Group’s case is the Board, comprising the Non-Executive Directors, and the Investment Adviser) in order to allocate resources to the segments and to assess their performance. The internal financial reports contain financial information at a Group level as a whole and there are no reconciling items between the results contained in these reports and the amounts reported in the consolidated financial statements. These internal financial reports include the IFRS figures but also report the non-IFRS figures for the EPRA and alternative performance measures as disclosed in notes 11, 27 and the Additional Information. The Group’s property portfolio comprises investment property. The Board considers that all the properties have similar economic characteristics. Therefore, in the view of the Board, there is one reportable segment. The geographical split of revenue and material applicable non-current assets was: Year toYear to30 June 2024 30 June 2023 Revenue£’000£’000UK 107,063 95,823France 788 –107,851 95,823As atAs at30 June 202430 June 2023Investment Properties£’000£’000UK 1,704,280 1,685,690France 63,936 –1,768,216 1,685,690 116 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 4. Gross rental income Year toYear to30 June 2024 30 June 2023 £’000£’000Rental income – freehold property 58,345 53,119Rental income – long leasehold property 49,063 42,669Lease surrender income 443 35Gross rental income 107,851 95,823Year toYear to30 June 202430 June 2023£’000£’000Property insurance recoverable 621 585Service charge recoverable 6,201 5,354Total property insurance and service charge income 6,822 5,939Total property income 114,673 101,762 Included within rental income is a £2,197,000 (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 £237,000 (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 £54,258,000 (2023: £49,620,000) relating to the Group’s largest tenant and £30,790,000 (2023: £27,194,000) 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. 5. Service charge expense Year toYear to30 June 2024 30 June 2023 £’000£’000Property insurance expenses 714 715Service charge expenses 6,727 5,803Investment Adviser fees (note 28) 9,472 10,292Total property insurance and service charge expense Directors’ remuneration (note 8) 410 3647,4416. Administrative and other expensesCorporate administration fees 1,049 1,108 Year toLegal and professional fees 1,475 1,6266,518Year toOther administrative expenses 2,812 2,03930 June 2024 Total administrative and other expenses 30 June 2023 15,218£’000 £’00015,429 ANNUAL REPORT 2024 117 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 7. Operating profit/(loss) Operating profit/(loss) is stated after charging fees for: Year toYear to30 June 2024 30 June 2023 £’000£’000Audit of the Company’s consolidated and individual financial statements 292 260Audit of subsidiaries, pursuant to legislation 88 95Total audit services 380 355Audit-related services: interim review 42 38Total audit and audit-related services 422 393 Not included in the table above is £95,000 of additional audit fees paid to BDO relating to the year ended 30 June 2023. The Group’s auditor also provided the following services in relation to corporate finance services: Year to 30 June 2024 £’000 Year to 30 June 2023 £’000 Other non-audit services: corporate finance services – 65 Total other non-audit services – 65 Total fees charged by the Group’s auditor 422 458 8. Directors’ remuneration The Group had no employees in the current or prior year. The Directors, who are the key management personnel of the Company, are appointed under letters of appointment for services. Directors’ remuneration, all of which represents fees for services provided, was as follows: Year toYear to30 June 2024 30 June 2023 £’000£’000Directors’ fees 371 330Employer’s National Insurance Contribution 39 34Total Directors’ remuneration 410 364 The highest paid Director received £75,000 (2023: £75,000) for services during the year. 118 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 9. Finance income and expense Year toYear to30 June 2024 30 June 2023 Finance income£’000£’000Interest received on bank deposits 306 53Income from financial assets held at amortised cost (note 15) 494 483Finance income on unwinding of discounted receivable 203 2,376Finance income on settlement of interest rate derivatives (note 18) 22,778 11,714Total finance income 23,781 14,626Year toYear to30 June 2024 30 June 2023 Finance expense£’000£’000Interest payable on bank borrowings 36,823 29,707Commitment fees payable on bank borrowings 817 1,571Amortisation of loan arrangement fees 2,403 8,037Total finance expense 40,043 39,315 This includes a non-recurring exceptional charge of £70,000 (June 2023: £1.52 million), relating to the acceleration of unamortised arrangement fees in respect of the modification of loan facilities under IFRS 9. Prior year also included a one-off loan arrangement fee for the short-term J.P. Morgan loan of £4.0 million. The above finance expense includes the following in respect of liabilities not classified as fair value through profit and loss: Year toYear to30 June 2024 30 June 2023 £’000£’000Total interest expense on financial liabilities held at amortised cost 39,226 37,744Fee expense not part of effective interest rate for financial liabilities held at amortised cost 817 1,571Total finance expense 40,043 39,315 10. Taxation A) Tax charge in profit or loss Year toYear to30 June 2024 30 June 2023 £’000£’000UK Corporation tax – –France Corporation Tax – –UK deferred tax – –France deferred tax (note 20) (140) –(140) –B) Total tax expenseTax (credit)/charge in profit and loss as per the above (140) –Share of tax expense of equity accounted joint ventures – (400)Total tax (credit)/expense (140) (400) The Company and its subsidiaries operate as a UK Group REIT. Subject to continuing compliance with certain rules, the UK REIT regime exempts 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. ANNUAL REPORT 2024 119 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 10. Taxation continued The reconciliation of the loss before tax multiplied by the standard rate of corporation tax for the year of 25% (2023: 20.4%) to the total tax charge is as follows:Year toYear to30 June 2024 30 June 2023 C) Reconciliation of the total tax charge for the year£’000£’000Loss on ordinary activities before taxation (21,324) (144,866)Theoretical tax at UK standard corporation tax rate of 25% (2023: 20.4%) (5,331) (29,553)Effects of:Investment property and derivative revaluation not taxable 24,269 49,680Disposal of interest rate derivative – (587)Residual business losses 2,481 4,428French subsidiary allowable expenses (140) –Other non-taxable items – (8,807)REIT exempt income (21,419) (15,161)Share of tax expense of equity accounted joint ventures – (400)Total tax (credit)/expense for the year (140) (400) UK REIT exempt income includes property rental income that is exempt from UK corporation tax in accordance with Part 12 of CTA 2010. No deferred tax asset has been recognised in respect of the Group’s residual carried forward tax losses of £43.4 million (2023: £36.2 million) as, given the Group’s REIT status, it is considered unlikely that these losses will be utilised. The Group is subject to French Corporation tax on its French property rental business at a rate of 25%. 11. Earnings per share Earnings per share (“EPS”) amounts are calculated by dividing the profit or loss for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the period. As there are no dilutive instruments outstanding, basic and diluted earnings per share are identical. The European Public Real Estate Association (“EPRA”) publishes guidelines for calculating 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 and derivatives. The Company has also included an additional earnings measure called “Adjusted Earnings” and “Adjusted EPS”. Adjusted earnings 71 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 Joint Venture acquisition loan arrangement fee which are non-recurring in nature 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. 71 The Directors have identified certain measures that they believe will assist the understanding of the performance of the business. The measures are not defined under IFRS and they may not be directly comparable with other companies’ adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance, but they have been included as the Directors consider them to be important comparable and key measures used within the business for assessing performance. The key non-GAAP measures identified by the Group have been defined in the supplementary information and, where appropriate, reconciliation to the nearest IFRS measure has been given. 120 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 11. Earnings per share continued 1 The reconciliation of IFRS Earnings, EPRA Earnings and Adjusted Earnings is shown below:Year toYear to30 June 2024 30 June 2023 £’000£’000Net (loss)/profit attributable to ordinary shareholders (21,184) (144,866)EPRA adjustments:Changes in fair value of investment properties and rental guarantees 65,825 256,066Changes in fair value of interest rate derivatives measured at fair value through profit and loss 31,251 (10,024)Profit on disposal of interest rate derivatives – (2,878)Group share of changes in fair value of joint venture investment properties – (11,486)Gain on disposal of investments in joint venture – (19,940)Deferred tax credit (140) –Finance income received on interest rate derivatives held at fair value through profit and loss (22,469) (9,671)EPRA earnings 53,283 57,201Adjustments for:Finance income received on interest rate derivatives held at fair value through profit and loss 22,469 9,671Restructuring costs in relation to the acceleration of unamortised arrangement fees 70 1,518Joint Venture acquisition loan arrangement fee – 4,009Adjusted Earnings 75,822 72,3991NumberNumberWeighted average number of ordinary shares 1,246,239,185 1,242,574,505 1 Based on the weighted average number of ordinary shares in issue Year to Year to 30 June 202430 June 2023Pence per share Pence per share (‘p’)(‘p’)Basic and Diluted EPS (1.7) (11.7)EPRA adjustments:Changes in fair value of interest rate derivatives measured at FVTPL 2.5 (0.8)Changes in fair value of investment properties and rent guarantees 5.3 20.6Group share of changes in fair value of joint venture investment properties – (0.9)Profit on disposal of interest rate derivatives – (0.2)Group share of gain on disposal of joint venture investment properties – (1.6)Deferred tax credit – –Finance income received on interest rate derivatives held at fair value through profit and loss (1.8) (0.8)EPRA EPS 4.3 4.6Adjustments for:Finance income received on interest rate derivatives held at fair value through profit and loss 1.8 0.8One-off restructuring costs in relation to the acceleration of unamortised arrangement fees – 0.1Joint Venture acquisition loan arrangement fee – 0.3Adjusted EPRA EPS 6.1 5.8 ANNUAL REPORT 2024 121 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 12. Dividends Year toYear to30 June 2024 30 June 2023 £’000£’000Amounts recognised as a distribution to ordinary Shareholders in the year:Dividends 75,335 74,328 On 6 July 2023, the Board declared a fourth interim dividend for the year ended 30 June 2023 of 1.500 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. 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. On 4 April 2024 the Board declared a third interim dividend for the year ending 30 June 2024 of 1.515 pence per share, which was paid on 16 May 2024 to shareholders on the register on 12 April 2024. On 4 July 2024, the Board declared a fourth interim dividend for the year ending 30 June 2024 of 1.515 pence per share, which was paid on 16 August 2024 to shareholders on the register on 12 July 2024. This has not been included as a liability as at 30 June 2024. 13. 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 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. As explained in note 2, all the valuations of the Group’s investment property at 30 June 2024 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.Long Freehold Leasehold Total £’000£’000£’000At 1 July 2023 899,440 786,250 1,685,690Property additions 101,104 34,700 135,804Capitalised acquisition costs 8,093 2,317 10,410Currency exchange movement (874) – (874)Revaluation movement (35,747) (27,067) (62,814)Valuation at 30 June 2024 972,016 796,200 1,768,216At 1 July 2022 903,850 657,740 1,561,590Property additions 131,600 231,030 362,630Capitalised acquisition costs 4,132 10,549 14,681Revaluation movement (140,142) (113,069) (253,211)Valuation at 30 June 2023 899,440 786,250 1,685,690Year toYear to30 June 2024 30 June 2023Reconciliation of Investment Property to Independent Property Valuation£’000£’000Investment Property at fair value per Group Statement of Financial Position 1,768,216 1,685,690Market Value of Property classified as Financial Assets held at amortised cost (note 15) 7,530 7,210Total Independent Property Valuation 1,775,746 1,692,900 There were four property acquisitions during the year, all of which were direct purchases of the assets and not acquisition of a corporate structure. They are all treated as asset purchases. 122 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 13. Investment properties continued Included within the carrying value of investment properties at 30 June 2024 is £10,920,000 (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 actually 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 30 June 2024 is £1,033,000 (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 and capitalised letting fees. The effect of these adjustments on the revaluation movement during the year is as follows: Year toYear to30 June 2024 30 June 2023 £’000£'000Revaluation movement per above (62,814) (253,211)Rent smoothing adjustment (note 4) (2,197) (2,512)Movements in associated rent guarantees – (343)Movement in Lease incentives (564) –Movements in capitalised letting fees (218) –Foreign exchange movement through OCI (32) –Change in fair value recognised in profit or loss (65,825) (256,066) 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. The yield methodology approach is used when valuing the Group’s properties which uses market rental values capitalised with a market capitalisation rate. This is sense-checked against the market comparable method (or market comparable approach) where a property’s fair value is estimated based on comparable transactions in the market. Unobservable inputs Significant unobservable inputs include: the estimated rental value (“ERV”) based on market conditions prevailing at the valuation date and net initial 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 the fair value. A decrease in net initial yield would increase the fair value. Sensitivity of measurement of significant valuation inputs As described in note 2 the determination of the valuation of the Group’s investment property portfolio is open to judgement and is inherently subjective by nature. ANNUAL REPORT 2024 123 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 13. Investment properties continued Sensitivity analysis – impact of changes in net initial yields and rental values Year ended 30 June 2024 UK France TotalFair value £1,704.3m £63.9m £1,768.2mRange of Net Initial Yields 4.6% – 8.0% 4.2% – 6.8% 4.6% – 8.0%Range of Rental values (passing rents or ERV as relevant) of Group’s Investment Properties £0.3m – £5.1m £0.6m – £0.8m £0.3m – £5.1mWeighted average of Net Initial Yields 5.9% 6.3% 5.9%Weighted average of Rental values (passing rents or ERV as relevant) of Group’s Investment Properties £2.9m £0.7m £2.9mYear ended 30 June 2023 UK France TotalFair value £1,685.7m – £1,685.7mRange of Net Initial Yields 4.7% – 7.4% – 4.7% – 7.4%Range of Rental values (passing rents or ERV as relevant) of Group’s Investment Properties £0.3m – £5.1m – £0.3m – £5.1mWeighted average of Net Initial Yields 5.6% – 5.6%Weighted average of Rental values (passing rents or ERV as relevant) of Group’s Investment Properties £2.8m – £2.8m The table below analyses the sensitivity on the fair value of investment properties for changes in rental values and net initial yields: +0.5% -0.5% +2% -2% Net Initial Net Initial Rental valueRental value Yield Yield £m£m£m£m(Decrease)/increase in the fair value of investment properties as at 30 June 2024 35.4 (35.4) (138.1) 164.1(Decrease)/increase in the fair value of investment properties as at 30 June 2023 33.7 (33.7) (139.9) 168.1 124 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 14. Subsidiaries The entities listed in the following table were the subsidiary undertakings of the Company at 30 June 2024 all of which are wholly owned. All but those noted as Jersey or French entities below are subsidiary undertakings incorporated in England. Company name Holding type Nature of business Supermarket Income Investments UK Limited + Direct Intermediate parent company Supermarket Income Investments (Midco2) UK Limited + Direct Intermediate parent company Supermarket Income Investments (Midco3) UK Limited + Direct Intermediate parent company Supermarket Income Investments (Midco4) UK Limited + Direct Intermediate parent company SII UK Halliwell (MIDCO) LTD + Direct Intermediate parent company Supermarket Income Investments UK (Midco6) Limited + Direct Intermediate parent company Supermarket Income Investments UK (Midco7) Limited + Direct Intermediate parent company Supermarket Income Investments UK (Midco8) Limited + Direct Intermediate parent company SUPR Green Energy Limited + Direct Energy provision company SUPR Finco Limited + Direct Holding company Supermarket Income Investments UK (NO1) Limited + Indirect Property investment Supermarket Income Investments UK (NO2) Limited + Indirect Property investment Supermarket Income Investments UK (NO3) Limited + Indirect Property investment Supermarket Income Investments UK (NO4) Limited + Indirect Property investment Supermarket Income Investments UK (NO5) Limited + Indirect Property investment Supermarket Income Investments UK (NO6) Limited + Indirect Property investment Supermarket Income Investments UK (NO7) Limited + Indirect Property investment Supermarket Income Investments UK (NO8) Limited + Indirect Property investment Supermarket Income Investments UK (NO9) Limited + Indirect Property investment Supermarket Income Investments UK (NO10) Limited + Indirect Property investment Supermarket Income Investments UK (NO11) Limited + Indirect Property investment Supermarket Income Investments UK (NO12) Limited + Indirect Property investment Supermarket Income Investments UK (NO16) Limited + Indirect Property investment Supermarket Income Investments UK (NO16a) Limited + Indirect Property investment Supermarket Income Investments UK (NO16b) Limited + Indirect Property investment Supermarket Income Investments UK (NO16c) Limited + Indirect Property investment Supermarket Income Investments UK (NO17) Limited + Indirect Property investment TPP Investments Limited + Indirect Property investment T (Partnership) Limited + Indirect Property investment The TBL Property Partnership Indirect Property investment Supermarket Income Investments UK (NO19) Limited + Indirect Property investment Supermarket Income Investments UK (NO20) Limited + Indirect Property investment Supermarket Income Investments UK (NO21) Limited + Indirect Property investment Supermarket Income Investments UK (NO22) Limited + Indirect Property investment Supermarket Income Investments UK (NO23) Limited + Indirect Property investment Supermarket Income Investments UK (NO24) Limited + Indirect Property investment Supermarket Income Investments UK (NO25) Limited + Indirect Property investment Supermarket Income Investments UK (NO26) Limited + Indirect Property investment Supermarket Income Investments UK (NO27) Limited + Indirect Property investment Supermarket Income Investments UK (NO28) Limited + Indirect Property investment Supermarket Income Investments UK (NO29) Limited + Indirect Property investment Supermarket Income Investments UK (NO30) Limited + Indirect Property investment Supermarket Income Investments UK (NO31) Limited + Indirect Property investment Supermarket Income Investments UK (NO32) Limited + Indirect Property investment Supermarket Income Investments UK (NO33) Limited + Indirect Property investment Supermarket Income Investments UK (NO34) Limited + Indirect Property investment Supermarket Income Investments UK (NO35) Limited ^- Indirect Property investment Supermarket Income Investments UK (NO36) Limited + Indirect Property investment Supermarket Income Investments UK (NO37) Limited + Indirect Property investment Supermarket Income Investments UK (NO38) Limited + Indirect Property investment Supermarket Income Investments UK (NO39) Limited ^- Indirect Property investment ANNUAL REPORT 2024 125 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 14. Subsidiaries continued Company name Holding type Nature of business Supermarket Income Investments UK (NO40) Limited + Indirect Property investment Supermarket Income Investments UK (NO41) Limited + Indirect Property investment Supermarket Income Investments UK (NO42) Limited + Indirect Property investment Supermarket Income Investments UK (NO43) Limited + Indirect Property investment Supermarket Income Investments UK (NO44) Limited + Indirect Property investment Supermarket Income Investments UK (NO45) Limited + Indirect Property investment Supermarket Income Investments UK (NO47) Limited + Indirect Property investment Supermarket Income Investments UK (NO48) Limited + Indirect Property investment Supermarket Income Investments UK (NO49) Limited + Indirect Property investment The Brookmaker Unit Trust ^- Indirect Property investment Brookmaker Limited Partnership # Indirect Property investment Brookmaker (GP) Limited # Indirect Property investment Brookmaker (Nominee) Limited # Indirect Property investment Horner (GP) Limited ^- Indirect Property investment Horner (Jersey) Limited Partnership ^- Indirect Property investment Horner REIT ^- Indirect Property investment Supermarket Income Investments France 1 ”¨ Indirect Property investment Supermarket Income Investments France 2 ”¨ Indirect Property investment Supermarket Income Investments France 3 ”¨ Indirect Property investment Supermarket Income Investments France 4 ”¨ Indirect Property investment Supermarket Income Investments France 5 ”¨ Indirect Property investment Supermarket Income Investments France 6 ”¨ Indirect Property investment SII UK Halliwell (No1) LTD + Indirect Investment in Joint venture SII UK Halliwell (No2) LTD + Indirect Property investment SII UK Halliwell (No3) LTD + Indirect Investment in Joint venture SII UK Halliwell (No4) LTD + Indirect Investment in Joint venture SII UK Halliwell (No5) LTD + Indirect Investment in Joint venture SII UK Halliwell (No6) LTD + Indirect Investment in Joint venture * New subsidiaries incorporated during the year ended 30 June 2024 ** Subsidiaries acquired during the year ended 30 June 2024 ^ Jersey registered entity “ France registered entity + Registered office: The Scalpel 18 th Floor, 52 Lime Street, London, United Kingdom, EC3M 7AF - Registered office: 3 rd Floor, Gaspe House, 66-72 Esplanade, St Helier, Jersey, JE1 2LH # Registered office: 8 th Floor 1 Fleet Place, London, United Kingdom, EC4M 7RA ¨ Registered office: Tour Pacific, 11-13 Cours Valmy, 92977 Paris La Défense Cedex The following subsidiaries will be exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of Section 479A of that Act. Company name Companies House Registration Number SII UK Halliwell (MIDCO) LTD 12473355 SUPR Green Energy Limited 12892076 SII UK Halliwell (No1) LTD 12475261 SII UK Halliwell (No2) LTD 12475599 SII UK Halliwell (No3) LTD 12478141 SII UK Halliwell (No4) LTD 12604032 SII UK Halliwell (No5) LTD 12605175 SII UK Halliwell (No6) LTD 12606144 SUPR Finco Limited 14292760 126 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 15. Financial asset arising from sale and leaseback transactions Year toYear to30 June 2024 30 June 2023£’000£’000At start of year 10,819 10,626Additions – –Interest income recognised in profit and loss (note 9) 494 483Lease payments received during the period (290) (290)At end of period 11,023 10,819 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 30 June 2024 the market value of the property was estimated at £7.5 million (2023: £7.2 million). Assets held at amortised cost are assessed annually for impairment with any impairment recognised as an allowance for expected credit losses measured at an amount equal to the lifetime expected credit losses. The Group considers historic, current and forward-looking information to determine expected credit losses arising from either a change in the interest rate implicit in the lease or factors impacting the customer’s ability to make lease payments. Based on the information currently available the Group does not expect any credit losses and the asset has not been impaired in the period. 16. Trade and other receivables As atAs at30 June 2024 30 June 2023£’000£’000Interest receivable on settlement of derivatives 4,946 3,122Other receivables 6,077 1,601Receivable from joint venture disposal – 136,582Prepayments and accrued income 877 850Total trade and other receivables 11,900 142,155 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 30 June 2024. The historical loss rates are then adjusted for current and forward-looking information on macro-economic factors affecting the Group’s customers. 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. 17. Trade and other payables As atAs at30 June 2024 30 June 2023£’000£’000Accrued interest payable 8,072 6,524Other corporate accruals 9,516 15,945VAT payable 4,385 4,510Total trade and other payables 21,973 26,979 18. Interest rate derivatives As atAs at30 June 2024 30 June 2023£’000£’000Non-current asset: Interest rate swaps 12,499 35,601Non-current asset: Interest rate cap 3,242 1,597Current Asset: Interest rate swaps 13,456 16,800Current Asset: Interest rate cap 2,252 3,58431,449 57,583 ANNUAL REPORT 2024 127 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 18. Interest rate derivatives continued The rate swaps are remeasured to fair value by the counterparty bank on a quarterly basis. Year toYear to30 June 2024 30 June 2023The fair value at the end of year comprises:£’000£’000At start of year (net) 57,583 5,114Interest rate derivative premium paid on inception 47,494 44,255Disposal of interest rate derivatives (40,612) (2,878)Changes in fair value of interest rate derivative in the year (P&L) (8,782) 19,695Changes in fair value of interest rate derivative in the year (OCI) (1,456) 3,111(Credit)/Charge to the income statement (P&L) (note 9) (22,469) (9,671)(Credit)/Charge to the income statement (OCI) (note 9) (309) (2,043)Fair value at end of year (net) 31,449 57,583 To partially mitigate the interest rate risk that arises as a result of entering into the floating rate debt facilities referred to in note 19, the Group has entered into derivative interest rate swaps and caps. A summary of these derivatives as at 30 June 2024 are shown in the table below: Notional amount Premium Paid Mark to Market Average Issuer Derivative Type£m£m30 June 2024Strike Rate Effective Date Maturity DateBLB Interest Rate Swap £37.3 £1.7 £1.2 2.58% Mar-23 Mar-26BLB Interest Rate Swap £22.2 £1.0 £0.7 2.58% Mar-23 Mar-26BLB Interest Rate Swap £27.4 £1.2 £0.9 2.58% Mar-23 Mar-26Wells Fargo Interest Rate Swap £30.0 £2.3 £1.1 1.33% Sep-23 Jul-25SMBC Interest Rate Swap £50.0 £3.7 £1.7 1.33% Sep-23 Jul-25SMBC Interest Rate Swap £67.0 £6.5 £3.7 1.73% Sep-23 Sep-26Barclays Interest Rate Cap £96.6 £2.9 £2.8 1.40% Aug-24 Jul-25Wells Fargo Interest Rate Swap £204.3 £22.2 £12.9 1.96% Sep-23 Jul-27Wells Fargo Interest Rate Swap £50.0 £4.8 £2.7 1.66% Sep-23 Jul-26Wells Fargo Interest Rate Swap £3.2 £0.4 £0.4 0.00% Feb -24 Jul-27SMBC Interest Rate Cap £96.6 £1.4 £1.3 1.40% Jul-25 Jan-26SMBC Interest Rate Cap £30.0 £0.4 £0.4 1.40% Jul-25 Jan-26SMBC Interest Rate Cap £50.0 £0.8 £0.7 1.40% Jul-25 Jan-26SMBC Interest Rate Cap £3.0 £0.4 £0.3 1.21% Nov-23 Jun-27SMBC Interest Rate Swap £37.5 £0.6 £0.6 3.61% Mar-24 Sep-26Total £50.3 £31.4 – – – 90% of the Group’s outstanding debt as at 30 June 2024 was hedged through the use of fixed rate debt or financial instruments (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. The Group restructured its derivatives during the year to match the changes in its borrowings, the movements in the Group’s fair value derivatives are recognised in the profit and loss. There was one derivative terminated in the year that hedged the Wells facility and was accounted for under hedge accounting; 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. The derivatives have been valued in accordance with IFRS 13 by reference to interbank bid market rates as at the close of business on the last working day prior to each balance sheet date. The fair values are calculated using the present values of future cash flows, based on market forecasts of interest rates and adjusted for the credit risk of the counterparties. The amounts and timing of future cash flows are projected on the basis of the contractual terms. 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. 128 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 19. Bank borrowings As atAs at30 June 2024 30 June 2023Amounts falling due within one year:£’000£’000Secured debt 96,560 –Unsecured debt – 62,090Less: Unamortised finance costs (44) (234)Bank borrowings per the consolidated statement of financial position 96,516 61,856Amounts falling due after more than one year:Secured debt 186,225 291,551Unsecured debt 414,981 318,508Less: Unamortised finance costs (3,554) (4,450)Bank borrowings per the consolidated statement of financial position 597,652 605,609Total bank borrowings 694,168 667,465 A summary of the Group’s borrowing facilities as at 30 June 2024 are shown below: Loan Amount drawn Credit Variable/ commitment 30 June 2024 72Lender Facility Expiry Expirymarginhedged^£m£mEURIBOR – HSBC Revolving credit facility Sep 2026 Sep 2028 1.7%3.71% £75.0 £69.3Deka Term Loan Aug 2024 Aug 2024 1.35% 0.54% £47.6 £47.6Deka Term Loan Aug 2024 Aug 2024 1.35% 0.70% £29.0 £29.0Deka Term Loan Aug 2024 Aug 2024 1.40% 0.32% £20.0 £20.0BLB Term Loan Mar 2026 Mar 2026 1.65% SWAP – 2.58% £86.9 £86.9Wells Fargo Revolving credit facility Jul 2025 Jul 2025 2.00% SWAP – 1.33% £30.0 £30.0Wells Fargo Revolving credit facility Jul 2025 Jul 2025 2.00% SONIA – 5.20% £9.0 –Syndicate Revolving credit facility Jul 2027 Jul 2029 1.50% SWAP – 1.92% £250.0 £210.5Syndicate Term Loan Jul 2025 Jul 2026 1.50% SWAP – 1.33% £50.0 £50.0Syndicate Term Loan Jul 2026 Jul 2027 1.50% SWAP – 1.66% £50.0 £50.0SMBC Term Loan Sep 2026 Sept 2028 1.40% SWAP – 1.73% £67.0 £67.0SMBC Term Loan Sep 2026 Sept 2028 1.55% SWAP – 3.61% £37.5 £37.5Total £752.0 £697.8 * Includes extension options that can be utilised following approval from all parties. ^ Average rate from 1 July 2024 to expiry of the debt excluding extension options. The Group has been in compliance with all of the financial covenants across the Group’s bank facilities as applicable throughout the periods covered by these financial statements. Any associated fees in arranging the bank borrowings that are unamortised as at the end of the year are offset against amounts drawn under the facility 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 undertakings, not including the Company itself. There have been no defaults of breaches of any loan covenants during the current year or any prior period. The Group’s borrowings carried at amortised cost are considered to be approximate to their fair value. Post year end, the Deka facility matured in August 2024, the Group announced the arrangement of a new £100.0 million unsecured facility with ING Bank to replace the Deka facility. The Group also completed an agreement with a group of institutional investors for a private placement of €83.0 million of new senior unsecured notes. For more information see note 29. 72 Including uncommitted extension options ANNUAL REPORT 2024 129 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 20. Deferred tax The deferred tax asset relates entirely to unutilised trading losses on the Group’s French resident companies. Audited Audited Year toYear to30 June 202430 June 2023£’000£’000At the start of the year – –Deferred tax on unutilised French trading losses (140) –Net credit to income statement (note 10) (140) –At the end of the year (140) – Deferred tax has been calculated based on local rates applicable under local legislation substantively enacted at the balance sheet date. A deferred tax asset of £0.1 million has been recognised for unutilised trading losses arising on the French Companies in the period. It is the expectation that these losses will be offset against trading profits for the French companies to reduce French Corporation Tax charges in future years. Included in the investment property revaluation movement in the period is a £6.1 million decrease in the fair value of the French properties relating to capitalised acquisition costs. No deferred tax asset has been recognised in respect of unrealised capital losses that would be available on disposal of the properties at a loss at the current market value as it is considered there would not be additional French properties to benefit against the capital loss. 21. Categories of financial instruments As atAs at30 June 2024 30 June 2023£’000£’000Financial assetsFinancial assets at amortised cost:Financial asset arising from sale and leaseback transaction 11,023 10,819Cash and cash equivalents 38,691 37,481Trade and other receivables 11,023 141,305Financial assets at fair value:Interest rate derivative 31,449 54,278Derivatives in effective hedges:Interest rate derivative – 3,304Total financial assets 92,186 247,187Financial liabilitiesFinancial liabilities at amortised cost:Secured debt 281,635 289,736Unsecured debt 412,533 377,729Trade and other payables (note 17) 18,634 22,469Total financial liabilities 712,802 689,934 At the year end, all financial assets and liabilities were measured at amortised cost except for the interest rate derivatives which are measured at fair value. The interest rate derivative valuation is classified as ‘level 2’ in the fair value hierarchy as defined in IFRS 13 and its fair value was calculated using the present values of future cash flows, based on market forecasts of interest rates and adjusted for the credit risk of the counterparties. 130 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 21. Categories of financial instruments continued Financial risk management Through the Group’s operations and use of debt financing it is exposed to certain risks. The Group’s financial risk management objective is to minimise the effect of these risks, for example by using interest rate cap and interest rate swap derivatives to partially mitigate exposure to fluctuations in interest rates, as described in note 18. The exposure to each financial risk considered potentially material to the Group, how it arises and the policy for managing it is summarised below. Market risk - Interest rate risk Market risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group’s market risk arises from open positions in interest bearing assets and liabilities, to the extent that these are exposed to general and specific market movements. The Group’s interest-bearing financial instruments comprise cash and cash equivalents and bank borrowings. 90% of the borrowings are hedged and therefore at a fixed rate. Changes in market interest rates therefore effects the value of the derivatives for the hedged debt and for the unhedged portion it affects the Group’s finance income and costs. The Group’s sensitivity to changes in interest rates, calculated on the basis of a ten-basis point increase in the three-month SONIA daily rate/ EURIBOR, was as follows: Year toYear to30 June 202430 June 2023 £’000£’000Effect on profit 1,187 1,383Effect on other comprehensive income and equity – 58 Trade and other receivables and payables are interest free as long as they are paid in accordance with their terms, and have payment terms of less than one year, so it is assumed that there is no material market risk associated with these financial instruments. Market risk - currency risk The Group prepares its financial statements in Sterling. 4% of the Group’s Investment Properties are denominated in Euros and as a result the group is subject to foreign currency exchange risk. This risk is partially hedged because within the Group’s French operations, rental income, interest costs and the majority of both assets and liabilities are Euro denominated. An unhedged currency risk remains on the value of the Group’s net investment in, and net returns from, its French operations. The Group’s sensitivity to changes in foreign currency exchange rates, calculated on a 10% increase in average and closing Sterling rates against the Euro, was as follows, with a 10% decrease having the opposite effect: Year toYear to30 June 202430 June 2023 £’000£’000Increase/(decrease) in net assets (580) –Increase in profit/(loss) for the year (584) – Market risk - inflation Inflation risk arises from the impact of inflation on the Group’s income and expenditure. The majority of the Group’s passing rent at 30 June 2024 is subject to inflation-linked rent reviews. Consequently, the Group is exposed to movements in the Retail Prices Index (“RPI”), which is the relevant inflation benchmark. However, all RPI-linked rent review provisions provide those rents will only be subject to upwards review and never downwards. As a result, the Group is not exposed to a fall in rent in deflationary conditions. The Group does not expect inflation risk to have a material effect on the Group’s administrative expenses, with the exception of the investment advisory fee which is determined as a function of the reported net asset value of the Group. Credit risk Credit risk is the risk of financial loss to the Group if a counterparty fails to meet its contractual obligations. The principal counterparties are the Group’s tenants (in respect of rent receivables arising under operating leases) and banks (as holders of the Group’s cash deposits). The credit risk of rent receivables is considered low because the counterparties to the operating leases are considered by the Board to be high quality tenants and any lease guarantors are of appropriate financial strength. Rent collection dates and statistics are monitored to identify any problems at an early stage, and if necessary rigorous credit control procedures will be applied to facilitate the recovery of rent receivables. The credit risk on cash deposits is limited because the counterparties are banks with credit ratings which are acceptable to the Board and are kept under review each quarter. ANNUAL REPORT 2024 131 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 21. Categories of financial instruments continued Liquidity risk Liquidity risk arises from the Group’s management of working capital and the finance costs and principal repayments on its secured debt. It is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group seeks to manage its liquidity risk by ensuring that sufficient cash is available to meet its foreseeable needs. These liquidity needs are relatively modest and are capable of being satisfied by the surplus available after rental receipts have been applied in payment of interest as required by the credit agreement relating to the Group’s secured debt. Before entering into any financing arrangements, the Board assesses the resources that are expected to be available to the Group to meet its liabilities when they fall due. These assessments are made on the basis of both base case and downside scenarios. The Group prepares detailed management accounts which are reviewed by the Board at least quarterly to assess ongoing liquidity requirements and compliance with loan covenants. The Board also keeps under review the maturity profile of the Group’s cash deposits in order to have reasonable assurance that cash will be available for the settlement of liabilities when they fall due. The following table shows the maturity analysis for financial assets and liabilities. The table has been drawn up based on the undiscounted cash flows of non-derivative financial instruments, including future interest payments, based on the earliest date on which the Group can be required to pay and assuming that the SONIA daily and EURIBOR rate remains at the 30 June 2024 rate. Interest rate derivatives are shown at fair value and not at their gross undiscounted amounts. Less than One to Two to More than one year two years five years five years TotalAs at 30 June 2024£’000£'000£'000£'000£’000Financial assets:Cash and cash equivalents 38,691 – – – 38,691Trade and other receivables 11,023 – – – 11,023Amortised cost asset 290 290 946 74,602 76,128Interest rate derivatives 15,708 12,209 3,532 – 31,449Total financial assets 65,712 12,499 4,478 74,602 157,291Financial liabilities:Bank borrowings 119,810 186,374 443,364 – 749,548Trade and other payables 17,589 – – 1,045 18,634Total financial liabilities 137,399 186,374 443,364 1,045 768,182Less thanOne toTwo toMore thanone yeartwo yearsfive yearsfive yearsTotalAs at 30 June 2023£’000£'000£'000£'000£’000Financial assets:Cash and cash equivalents 37,481 – – – 37,481Trade and other receivables 141,305 – – – 141,305Amortised cost asset 290 290 908 74,930 76,418Interest rate derivatives 20,384 20,564 16,635 – 57,583Total financial assets 199,460 20,854 17,543 74,930 312,787Financial liabilities:Bank borrowings 81,545 94,080 549,575 – 725,200Trade and other payables 22,469 – – – 22,469Total financial liabilities 104,014 94,080 549,575 – 747,669 132 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 21. Categories of financial instruments continued Capital risk management The Board’s primary objective when monitoring capital is to preserve the Group’s ability to continue as a going concern, while ensuring it remains within its debt covenants so as to safeguard secured assets and avoid financial penalties. Bank borrowings on secured facilities are secured on the Group’s property portfolio by way of fixed charges over property assets and over the shares in the property-owning subsidiaries and any intermediary holding companies of those subsidiaries. At 30 June 2024, the capital structure of the Group consisted of bank borrowings (note 19), cash and cash equivalents, and equity attributable to the Shareholders of the Company (comprising share capital, retained earnings and the other reserves referred to in notes 22 to 24). In managing the Group’s capital structure, the Board considers the Group’s cost of capital. In order to maintain or adjust the capital structure, the Group keeps under review the amount of any dividends or other returns to Shareholders and monitors the extent to which the issue of new shares or the realisation of assets may be required. Reconciliation of financial liabilities relating to financing activities Interest and Total bankcommitment Interest rate borrowingsfees payable derivativesTotal£’000£’000£’000£’000As at 1 July 2023 667,465 6,837 (57,583) 616,719Cash flows:Debt drawdowns in the year 217,560 – – 217,560Debt repayments in the year (191,077) – – (191,077)Interest and commitment fees paid – (36,305) – (36,305)Loan arrangement fees paid (1,318) – – (1,318)Interest rate premium paid – – (45,364) (45,364)Interest rate derivative disposal – – 38,482 38,482Non-cash movements:Finance costs in the statement of comprehensive income 2,403 37,605 – 40,008Finance income in the statement of comprehensive income - - 22,778 22,778Fair value changes – – 10,238 10,238Foreign exchange movement (865) – – (865)As at 30 June 2024 694,168 8,137 (31,449) 670,856As at 1 July 2022 348,546 1,939 (5,114) 345,371Cash flows:Debt drawdowns in the year 912,114 – – 912,114Debt repayments in the year (598,486) – – (598,486)Interest and commitment fees paid – (24,116) – (24,116)Loan arrangement fees paid (5,010) – – (5,010)Interest rate premium paid – – (44,255) (44,255)Interest rate derivative disposal – – 2,878 2,878Non-cash movements:Finance costs in the statement of comprehensive income 10,301 29,014 (22,806) 16,509Fair value changes – – 11,714 11,714At 30 June 2023 667,465 6,837 (57,583) 616,719 Movements in respect to share capital are disclosed in note 22 below. The interest and commitment fees payable are included within the corporate accruals balance in note 17. Cash flow movements are included in the consolidated statement of cash flows and the non-cash movements are included in note 9. The movements in the interest rate derivative financial liabilities can be found in note 18. ANNUAL REPORT 2024 133 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 22. Share capital ShareCapitalOrdinary Sharespremiumreductionof 1 penceShare capital reservereserveTotalNumber£’000£’000£’000£’000As at 1 July 2023 1,246,239,185 12,462 500,386 704,531 1,217,379Dividend paid in the period (note 12) – – – (75,335) (75,335)As at 30 June 2024 1,246,239,185 12,462 500,386 629,196 1,142,044As at 1 July 2022 1,239,868,420 12,399 494,174 778,859 1,285,432Scrip Dividends issued and fully paid – 22 August 2022 1,898,161 19 2,316 – 2,335Scrip Dividends issued and fully paid – 16 November 2022 866,474 9 869 – 878Scrip Dividends issued and fully paid – 23 February 2023 729,198 7 721 – 728Scrip Dividends issued and fully paid – 26 May 2023 2,876,932 28 2,395 – 2,423Share issue costs – – (89) – (89)Dividend paid in the period (note 12) - - - (74,328) (74,328)As at 30 June 2023 1,246,239,185 12,462 500,386 704,531 1,217,379 23. Cash flow hedge reserve Year to Year to 30 June 202430 June 2023 £’000£’000At start of the period 3,304 5,114Recycled comprehensive loss to profit and loss (1,154) –Cash flow hedge reserve taken to profit or loss for the period on disposal of interest rate derivatives – (2,878)Fair value movement of interest rate derivatives in effective hedges (611) 1,068At the end of the period 1,539 3,304 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 facility to July 2025. 24. Reserves The nature and purpose of each of the reserves included within equity at 30 June 2024 are as follows: • Share premium reserve: represents the surplus of the gross proceeds of share issues over the nominal value of the shares, net of the direct costs of equity issues • Cash flow hedge reserve: represents cumulative gains or losses, net of tax, on effective cash flow hedging instruments • Capital reduction reserve: represents a distributable reserve created following a Court approved reduction in capital less dividends paid • Retained earnings represent cumulative net gains and losses recognised in the statement of comprehensive income. • Other reserves represents cumulative gains or losses, net of tax, of foreign currency exchange rate differences recognised in a period as other comprehensive income. The only movements in these reserves during the year are disclosed in the consolidated statement of changes in equity. 25. Capital commitments The Group had no capital commitments outstanding as at 30 June 2024 and 30 June 2023. 134 SUPERMARKET INCOME REIT PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 26. Operating leases The Group’s principal assets are investment properties which are leased to third parties under non-cancellable operating leases. The weighted average remaining lease term based on rental income at 30 June 2024 is 12.4 years (2023: 13.6 years). The leases contain predominately fixed or inflation-linked uplifts. The future minimum lease payments receivable under the Group’s leases, are as follows:As atAs at30 June 202430 June 2023£’000£’000Year 1 112,127 100,156Year 2 111,887 98,941Year 3 111,048 98,614Year 4 108,241 97,552Year 5 106,936 97,177Year 6-10 475,626 452,219Year 11-15 281,725 310,150Year 16-20 62,285 94,875Year 21-25 20,626 23,358More than 25 years 9,998 12,743Total 1,400,499 1,385,785 27. 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 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. NAV and EPRA NTA per share calculation are as follows:As atAs at30 June 202430 June 2023£’000£’000Net assets per the consolidated statement of financial position 1,119,474 1,217,726Fair value of financial assets at amortised cost (3,493) (3,609)Fair value of interest rate derivatives (31,449) (57,583)EPRA NTA 1,084,532 1,156,534Ordinary shares in issue at 30 June 1,246,239,185 1,246,239,185NAV per share – Basic and diluted (pence) 90p 98pEPRA NTA per share (pence) 87p 93p 28. Transactions with related parties Details of the related parties to the Group in the year and the transactions with these related parties were as follows: a. Directors Directors’ fees The table below shows the fees per annum for the roles performed by the Board for the year ended 30 June 2024: Cathryn RoleJon Austen Frances Davies Nick Hewson Vince Prior Sapna Shah Vanderspar Chair of Board of Directors – – £75,000 – – – Director£52,500 £52,500 – £52,500 £52,500 £52,500 Audit and Risk Committee Chair £9,000 – – – – – NominationCommitteeChair – – – £4,000 £4,000 – Senior Independent Director – – – £5,000 £5,000 – Remuneration Committee Chair – – – – – £5,000 ESG Committee Chair – £5,000 – – – – Management Engagement Committee Chair – – – £5,000 £5,000 – From 21 May 2024, Sapna Shah became Senior Independent Director and Nomination Committee Chair in place of Vince Prior. Vince Prior became Management Engagement Committee Chair in place of Sapna Shah. The table below shows the total fees received by each member of the Board for the year ended 30 June 2024: Year to Year to 30 June 2024 30 June 2023 £’000 £’000 NickHewson 75 75 Jon Austen 62 62 Vince Prior 61 62 Cathryn Vanderspar 58 58 Frances Davies 58 58 Sapna Shah 58 18 * Appointed 1 March 2023 The total remuneration payable to the Directors in respect of the current year and previous year are disclosed in note 8. 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 30 June 2024 and at the date of the signing of the accounts were as follows: • Nick Hewson: 1,330,609 shares (0.11% 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 shares (0.00% of issued share capital) • Sapna Shah: 70,081 shares (0.01% of issued share capital) ANNU AL R EP OR T 2024 135 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 28. Transactions with related parties continued b. Investment Adviser Investment advisory and accounting fees The investment adviser to the Group, Atrato Capital Limited (the “Investment Adviser”), is entitled to certain advisory fees under the terms of the Investment Advisory Agreement (the “Agreement”) dated 14 July 2021. 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 uninvested 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: 1/12 th of 0.7125% per calendar month of Adjusted Net Asset Value up to or equal to £500 million, 1/12 th of 0.5625% per calendar month of Adjusted Net Asset Value above £500 million and up to or equal to £1,000 million and 1/12 th of 0.4875% per calendar month of Adjusted Net Asset Value above £1,000 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 year to 30 June 2024 the total advisory fees payable to the Investment Adviser were £9,472,218 (2023: £10,292,302) of which £1,745,960 (2023: £1,845,144) is included in trade and other payables in the consolidated statement of financial position as at 30 June 2024. 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. A full list of the Company and its direct and indirect subsidiary undertakings is listed in note 14 of these financial statements. For the year to 30 June 2024 the total accounting and administration service fee payable to the Investment Adviser was £363,869 (2023: £297,475) of which £91,950 (2023: £83,614) is included in trade and other payables in the consolidated statement of financial position as at 30 June 2024. 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: 1% of total subscription in respect of ordinary shares subscribed for by any prospective investor introduced by Atrato Partners. 136 SUP ER M AR K E T IN C OME R EI T P L C 28. Transactions with related parties continued For the year to 30 June 2024 the total introducer fees payable to the affiliate of the Investment Adviser were £nil (2023: £nil). Interest in shares of the Company Details of the direct and indirect interests of the Directors of the Investment Adviser and their close families in the ordinary shares of one pence each in the Company at 30 June 2024 were as follows: • Ben Green: 2,337,286 shares (0.19% of issued share capital) • Steve Windsor: 1,764,679 shares (0.14% of issued share capital) • Steven Noble: 246,885 shares (0.02% of issued share capital) • Natalie Markham: 71,039 shares (0.01% of issued share capital) On 9 September 2024, the Company announced that Steven Noble stepped down as Chief Investment Officer of the Company’s Investment Adviser, Atrato Capital Limited. Charitable donations The Company approved a policy to make charitable donations of £150,000 per annum. During the year £120,000 was approved by the Board and paid post year end (2023: Nil). The donations will be made to the Atrato Foundation, a corporate charity registered with the Charity Commission and Companies House, whose Trustees are Lara Townsend (COO of the Investment Adviser) and Natalie Markham (CFO of the Investment Adviser). The donations will be made in the form of a restricted grant, the funds will be directed to charitable causes specified by the Board of the Company. For further information on the Company’s charitable activities, please refer to page 11. 29. Subsequent events Debt financing • In July 2024, the Group announced the arrangement of a new £100.0 million facility with ING bank at a margin of 1.55% over SONIA. The facility comprises a £75.0 million term loan and a £25.0 million revolving credit facility. The term of the loan is for three years with two further one-year extension options. • In July 2024, the Group announced the completion of an agreement with a group of institutional investors for a private placement of €83.0 million of new senior unsecured notes. The notes have a term of 7 years and a fixed rate coupon of 4.4%. • In August 2024, the Deka facility of £96.6 million matured and was settled with the proceeds of the new ING facility. ANNU AL R EP OR T 2024 137 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 138 SUPERMARKET INCOME REIT PLC Registered number: 10799126 Notes As at 30 June 2024 £’000 As at 30 June 2023 £’000 Non-current assets Investments in subsidiaries D 1,139,114 1,564,226 Intercompany receivables D 491,566 - Interest rate derivatives 14,312 29,318 Total non-current assets 1,644,992 1,593,544 Current assets Interest rate derivatives 13,258 13,397 Trade and other receivables E 4,013 11,412 Cash and cash equivalents 382 2,928 Total current assets 17,653 27,737 Total assets 1,662,645 1,621,281 Current liabilities Bank Borrowings G – 61,856 Trade and other payables F 227,194 127,027 Total current liabilities 227,194 188,883 Non-current liabilities Bank borrowings G 412,533 315,873 Total liabilities 639,727 504,756 Total net assets 1,022,918 1,116,525 Equity Share capital H 12,462 12,462 Share premium reserve 500,386 500,386 Capital reduction reserve 629,196 704,531 Retained earnings (119,126) (100,854) Total equity 1,022,918 1,116,525 The notes on pages 140 to 141 form part of these financial statements. The Company has taken advantage of the exemption within section 408 of the Companies Act 2006 not to present its own profit and loss account. The accumulated loss for the year dealt with by the financial statements of the Company was £18,272,000 (2023: loss £164,541,000). As at 30 June 2024 the Company has distributable reserves of £510.0 million (2023: £603.7 million). The Company financial statements were approved and authorised for issue by the Board of Directors on 17 September 2024 and were signed on its behalf by Nick Hewson Chair 17 September 2024 COMPANY STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2024 ANNUAL REPORT 2024 139 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS Share capital £’000 Share premium reserve £’000 Capital reduction reserve £’000 Retained earnings £’000 Total £’000 As at 1 July 2023 12,462 500,386 704,531 (100,854) 1,116,525 Loss and total comprehensive loss for the year – – – (18,272) (18,272) Transactions with owners Interim dividends paid – – (75,335) – (75,335) As at 30 June 2024 12,462 500,386 629,196 (119,126) 1,022,918 Share capital £’000 Share premium reserve £’000 Capital reduction reserve £’000 Retained earnings £’000 Total £’000 As at 1 July 2022 12,399 494,174 778,859 63,687 1,349,119 Loss and total comprehensive loss for the year – – – (164,541) (164,541) Transactions with owners Ordinary shares issued at a premium during the year 63 6,301 – – 6,364 Transfer to capital reduction reserve Share issue costs – (89) – – (89) Interim dividends paid – – (74,328) – (74,328) As at 30 June 2023 12,462 500,386 704,531 (100,854) 1,116,525 COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2024 140 SUPERMARKET INCOME REIT PLC NOTES TO THE COMPANY FINANCIAL STATEMENTS A. Basis of preparation The Company’s financial statements have been prepared in accordance with FRS 102, the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland. The principal accounting policies relevant to the Company are as follows: • Investments in subsidiaries are recognised at cost less provision for any impairment • Loans and receivables are recognised initially at fair value plus transaction costs less provision for impairment • Trade payables are recognised initially at fair value and subsequently at amortised cost • Equity instruments are recognised as the value of proceeds received net of direct issue costs • Dividends are recognised as a financial liability and deduction from equity in the period in which they are declared In preparing the Company’s financial statements, advantage has been taken of the following disclosure exemptions available in FRS 102: • No cash flow statement has been presented • Disclosures in respect of the Company’s financial instruments have not been presented as equivalent disclosures have been provided in respect of the Group • No reconciliation of the number of shares outstanding at the beginning and end of the year has been presented as it is identical to the reconciliation for the Group shown in note 22 to the Group financial statements • No disclosure has been given for the aggregate remuneration of the key management personnel of the Company as their remuneration is shown in note 8 to the Group financial statements In the year to 30 June 2024, the Company intends to continue to use these disclosure exemptions unless objections are received from Shareholders. B. Significant accounting judgements, estimates and assumptions In preparing the financial statements of the Company, the Directors have made the following judgements: • Determine whether there are any indicators of impairment of the investments in subsidiary undertakings. Factors taken into consideration in reaching such a decision include the financial position and expected future performance of the subsidiary entity. Where indicators of impairment are identified the carrying value of investments in subsidiaries will be compared to their recoverable amount and an impairment charge recognised where this is lower than carrying value. The net asset value of the individual subsidiary entities is considered to be a reasonable proxy for fair value less costs to sell as the underlying investment properties held within these entities is carried at fair value. C. Auditor’s remuneration The remuneration of the auditor in respect of the audit of the Company’s consolidated and individual financial statements for the year was £292,150 (2023: £260,000). Fees payable for audit and non-audit services provided to the Company and the rest of the Group are disclosed in note 7 to the Group financial statements. D. Investment in subsidiary undertakings The Company’s wholly owned direct subsidiaries are Supermarket Income Investments UK Limited, Supermarket Income Investments (Midco2) UK Limited, Supermarket Income Investments (Midco3) UK Limited, Supermarket Income Investments (Midco4) UK Limited, SII UK Halliwell (Midco) Limited, Supermarket Income Investments (Midco 6) UK Limited , Supermarket Income Investments (Midco7) UK Limited, Supermarket Income Investments (Midco 8), SUPR Finco Limited and SUPR Green Energy Limited all of which are incorporated and operating in England with a registered address of The Scalpel 18 th Floor, 52 Lime Street, London, United Kingdom, EC3M 7AF. The full list of subsidiary entities directly and indirectly owned by the Company is disclosed in note 14 to the Consolidated Financial Statements. The movement in the year was as follows: Year to 30 June 2024 £’000 Opening balance 1,564,226 Additions 1 Disposals (359,865) Closing balance 1,204,362 Impairments of investments in subsidiaries (65,248) As at 30 June 2024 1,139,114 Non-current loans receivable 491,566 Closing balance as at 30 June 2024 1,630,680 During the year a number of the Company’s subsidiaries undertook buybacks of their own shares. The proceeds of these buybacks were left outstanding as intercompany loans provided by the Company to the respective subsidiaries. These transactions are responsible for the increase in the Company’s intercompany loan receivable balance as at 30 June 2024. ANNUAL REPORT 2024 141 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS Year to 30 June 2023 £’000 Opening balance 1,329,108 Additions 1,066,634 Closing balance 2,395,742 Impairments of investments in subsidiaries (831,516) As at 30 June 2023 1,564,226 An impairment of investments in subsidiaries was recognised during both the current and previous year following the payment of upstream dividends to the Company. Following the payment of dividends, the net assets of certain dividend paying subsidiaries no longer support the carrying value of the Company’s investment in those entities and thus an impairment charge was recognised to bring the carrying value of the investments in line with the recoverable amount, which was also considered to be its value in use. E. Trade and other receivables As at 30 June 2024 £’000 As at 30 June 2023 £’000 Intercompany receivables 3,645 9,345 Prepayments and accrued income 209 223 VAT receivable 159 – Other receivables – 1,844 Total trade and other receivables 4,013 11,412 F. Trade and other payables Trade creditors 2,120 2,235 Corporate accruals 6,491 5,122 VAT payable – 114 Intercompany payables 218,583 119,556 Total trade and other payables 227,194 127,027 G. Bank Borrowings As at 30 June 2024 £’000 As at 30 June 2023 £’000 Amounts falling due within one year: Unsecured debt – 62,090 Less: Unamortised finance costs – (234) Bank borrowings per the Company’s statement of financial position – 61,856 Amounts falling due after more than one year: Unsecured debt 414,981 318,508 Less: Unamortised finance costs (2,448) (2,635) Bank borrowings per the Company’s statement of financial position 412,533 315,873 Total bank borrowings 412,533 377,729 Any associated fees in arranging the bank borrowings that are unamortised as at the end of the year are offset against amounts drawn under the facility as shown in the table above. Details of the bank borrowings of the Company are disclosed in note 19 to the Group financial statements. H. Share capital Details of the share capital of the Company are disclosed in note 22 to the Group financial statements. I. Related party transactions Details of related party transactions are disclosed in note 28 to the Group financial statements. 142 SUPERMARKET INCOME REIT PLC UNAUDITED SUPPLEMENTARY INFORMATION Notes to EPRA and other Key Performance Indicators 1. EPRA Earnings and Adjusted Earnings per Share For the period from 1 July 2023 to 30 June 2024 Net profit attributable to ordinary Shareholders £’000 Weighted average number of ordinary shares 1 Number Earnings/ per share Pence Net (loss)/profit attributable to ordinary Shareholders (21,184)1,246,239,185 (1.7) Adjustments to remove: Changes in fair value of investment properties and associated rent guarantees 65,825 5.3 Changes in fair value of interest rate derivatives measured at FVTPL 31,251 2.5 Deferred Tax (140) - Finance income received on interest rate derivatives held at fair value through profit and loss (22,469) (1.8) EPRA earnings 53,283 1,246,239,185 4.3 Add finance income received on interest rate derivatives held at fair value through profit and loss 22,469 1.8 Add accelerated finance costs 70 – Adjusted EPRA earnings 75,822 1,246,239,185 6.1 1 Based on the weighted average number of ordinary shares in issue in the year ended 30 June 2024. For the period from 1 July 2022 to 30 June 2023 Net profit attributable to ordinary Shareholders £’000 Weighted average number of ordinary shares 2 Number Earnings/ per share Pence Net profit attributable to ordinary Shareholders (144,866)1,242,574,505 (11.7) Adjustments to remove: Changes in fair value of investment properties and associated rent guarantees 256,066 – 20.6 Changes in fair value of interest rate derivatives measured at FVTPL (10,024) – (0.8) Profit on disposal of interest rate derivatives (2,878) – (0.2) Group share of changes in fair value of joint venture investment properties (11,486) – (0.9) Profit on disposal of groups interest in joint venture (19,940) – (1.6) Finance income received on interest rate derivatives held at fair value through profit and loss (9,671) – (0.8) EPRA earnings 57,201 1,242,574,505 4.6 Add finance income received on interest rate derivatives held at fair value through profit and loss 9,671 – 0.8 Add accelerated finance costs 1,518 – 0.1 Add Joint Venture acquisition loan arrangement fee 4,009 – 0.3 Adjusted EPRA earnings 72,399 1,242,574,505 5.8 2 Based on the weighted average number of ordinary shares in issue in the year ended 30 June 2023. 2. 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. ANNUAL REPORT 2024 143 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 30 June 2024 EPRA NTA £’000 EPRA NRV £’000 EPRA NDV £’000 IFRS NAV attributable to ordinary Shareholders 1,119,474 1,119,474 1,119,474 Fair value of Financial asset held at amortised cost (3,493) (3,493) (3,493) Fair value of interest rate derivatives (31,449) (31,449) – Purchasers’ costs – 120,239 – Fair value of debt – – 149 EPRA metric 1,084,532 1,204,771 1,116,130 EPRA metric per share 87p 97p 90p 30 June 2023 EPRA NTA £’000 EPRA NRV £’000 EPRA NDV £’000 IFRS NAV attributable to ordinary Shareholders 1,217,726 1,217,726 1,217,726 Fair value of interest rate derivatives (3,609) (3,609) (3,609) Fair value of Financial asset held at amortised cost (57,583) (57,583) – Intangibles – – – Purchasers’ costs – 122,990 – Fair value of debt – – 4,876 EPRA metric 1,156,534 1,279,524 1,218,993 EPRA metric per share 93p 103p 98p 3. EPRA Net Initial Yield (NIY) and EPRA “topped up” NIY As at 30 June 2024 £’000 As at 30 June 2023 £’000 Investment Property – wholly owned (note 13) 1,768,216 1,685,690 Investment Property – share of joint ventures – – Completed Property Portfolio 1,768,216 1,685,690 Allowance for estimated purchasers’ costs 120,239 122,990 Grossed up completed property portfolio valuation (B) 1,888,455 1,808,680 Annualised passing rental income – wholly owned 112,338 99,910 Annualised non-recoverable property outgoings (1,116) (1,117) Annualised net rents (A) 111,222 98,793 Rent expiration of rent-free periods and fixed uplifts 440 447 Topped up annualised net rents (C) 111,662 99,240 EPRA NIY (A/B) 5.89% 5.46% EPRA "topped up" NIY (C/B) 5.91% 5.49% All rent free periods expire within the year to 30 June 2024 4. EPRA Vacancy Rate EPRA Vacancy Rate As at 30 June 2024 £’000 As at 30 June 2023 £’000 Estimated rental value of vacant space 591 439 Estimated rental value of the whole portfolio 113,660 100,797 EPRA Vacancy Rate 0.5% 0.4% The EPRA vacancy rate is calculated as the ERV of the unrented, lettable space as a proportion of the total rental value of the 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. 144 SUPERMARKET INCOME REIT PLC UNAUDITED SUPPLEMENTARY INFORMATION CONTINUED 5. EPRA Cost Ratio As at 30 June 2024 £’000 As at 30 June 2023 £’000 Administration expenses per IFRS 15,218 15,429 Service charge income (6,822) (5,939) Service charge costs 7,441 6,518 Net Service charge costs 619 579 Share of joint venture expenses – 938 Total costs (including direct vacant property costs) (A) 15,837 16,946 Vacant property costs (331) (328) Total costs (excluding direct vacant property costs) (B) 15,506 16,618 Gross rental income per IFRS 107,851 95,823 Less: service charge components of gross rental income – – Add: Share of Gross rental income from Joint Ventures – 13,529 Gross rental income (C) 107,851 109,352 EPRA Cost ratio (including direct vacant property costs) (A/C) 14.7% 15.50% EPRA Cost ratio (excluding vacant property costs) (B/C) 14.4% 15.20% 1. The Company does not have any overhead costs capitalised as it has no assets under development. ANNUAL REPORT 2024 145 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS 6. EPRA LTV As at 30 June 2024 £’000 As at 30 June 2023 £’000 Group Net Debt Borrowings from financial institutions 694,168 667,465 Net payables 34,832 – Less: Cash and cash equivalents (38,691) (37,481) Group Net Debt Total (A) 690,309 629,984 Group Property Value Investment properties at fair value 1,768,216 1,685,690 Intangibles – – Net receivables – 93,620 Financial assets 11,023 10,819 Total Group Property Value (B) 1,779,239 1,790,129 Group LTV (A-B) 38.80% 35.19% Share of Joint Ventures Debt Bond loans – – Net payables – – JV Net Debt Total (A) – – Group Property Value Owner-occupied property Investment properties at fair value – – Total JV Property Value (B) – – JV LTV (A-B) 0.00% 0.00% Combined Net Debt (A) 690,309 629,984 Combined Property Value (B) 1,779,239 1,790,129 Combined LTV (A-B) 38.80% 35.19% 7. EPRA Like-for-Like Rental Growth Sector Year ended 30 June 2024 £’000 Year ended 30 June 2023 £’000 Like-for-Like rental growth % UK 82,003 80,329 2.1% 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 £1.30 billion (30 June 2023: £1.35 billion). 146 SUPERMARKET INCOME REIT PLC UNAUDITED SUPPLEMENTARY INFORMATION CONTINUED 8. EPRA Property Related Capital Expenditure Group As at 30 June 2024 £’000 As at 30 June 2023 £’000 Acquisitions 145,834 377,311 Development 380 – Investment properties – – Group Total CapEx 146,214 377,311 Joint Venture Acquisitions – – Development – – Investment properties – – Joint Venture CapEx – – Total CapEx 146,214 377,311 Acquisitions relate to purchase of investment properties in the year and includes capitalised acquisition costs. Development relates to capitalised costs in relation to development expenditure on the property portfolio. 9. Total Shareholder Return Total Shareholder Return Year to 30 June 2024 Pence per share (‘p’) Year to 30 June 2023 Pence per share (‘p’) Share price at the start of the year 73.00 119.50 Share price at the end of the year 72.50 73.00 Increase in share price (0.50) (46.50) Dividends declared for the year 6.06 6.00 Increase / (decrease) in share price plus dividends 5.56 (40.50) Share price at start of year 73.00 119.50 Total Shareholder Return 8% (34%) 10. Net loan to value ratio The proportion of our gross asset value that is funded by borrowings calculated as statement of financial position borrowings less cash balances divided by total investment properties valuation. Net loan to value As at 30 June 2024 £’000 As at 30 June 2023 £’000 Bank borrowings 694,168 667,465 Less cash and cash equivalents (38,691) (37,481) Net borrowings 655,477 629,984 Investment properties valuation 1,768,216 1,685,690 Net loan to value ratio 37% 37% 11. Annualised passing rent Annualised passing rent is the annualised cash rental income being received as at the stated date. ANNUAL REPORT 2024 147 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS GLOSSARY AGM Annual General Meeting AIFMD Alternative Investment Fund Managers Directive EPRA European Public Real Estate Association EPS Earnings per share, calculated as the profit for the period after tax attributable to members of the parent company divided by the weighted average number of shares in issue in the period FCA Financial Conduct Authority of the United Kingdom FRI A lease granted on an FRI basis means that all repairing and insuring obligations are imposed on the tenant, relieving the landlord from all liability for the cost of insurance and repairs IFRS UK adopted international accounting standards IPO An initial public offering (IPO) refers to the process of offering shares of a corporation to the public in a new stock issuance LSE London Stock Exchange LTV Loan to Value: the outstanding amount of a loan as a percentage of property value NAV Net Asset Value Net Initial Yield Annualised net rents on investment properties as a percentage of the investment property valuation, less assumed purchaser’s costs of 6.8% Net Loan to Value or Net LTV LTV calculated on the gross loan amount less cash balances Omnichannel Stores offering both instore picking and online fulfilment REIT Real Estate Investment Trust Running yield The anticipated Net Initial Yield at a future date, taking account of any rent reviews in the intervening period Sainsbury’s Reversion Portfolio (SRP) A portfolio consisting of the freehold interest in 26 geographically diverse high quality Sainsbury’s supermarkets Total Shareholder Return (TSR) The movement in share price over a period plus dividends declared for the same period expressed as a percentage of the share price at the start of the Period WAULT Weighted Average Unexpired Lease Term. It is used by property companies as an indicator of the average remaining life of the leases within their portfolios 148 SUPERMARKET INCOME REIT PLC Directors Nick Hewson (Non-Executive Chair) Vince Prior (Chair of Management Engagement Committee) Jon Austen (Chair of Audit and Risk Committee) Cathryn Vanderspar (Chair of Remuneration Committee) Frances Davies (Chair of ESG Committee) Sapna Shah (Chair of Nomination Committee & Senior Independent Director) Company Secretary Hanway Advisory Limited The Scalpel 18 th Floor, 52 Lime Street, London, United Kingdom, EC3M 7AF Registrar Link Asset Services The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU AIFM JTC Global AIFM Solutions Limited Ground floor, Dorey Court, Admiral Park, St Peter Port, Guernsey, Channel Islands, GY1 2HT Investment Adviser Atrato Capital Limited 3 rd Floor, 10 Bishops Square, London E1 6EG Financial adviser, Joint Corporate Broker and Placing Agent Stifel Nicolaus Europe Limited 150 Cheapside, London, EC2V 6ET Joint Corporate Broker Goldman Sachs International Plumtree Court, 25 Shoe Lane, London, EC4A 4AU Auditors BDO LLP 55 Baker Street, London, W1U 7EU Property Valuers Cushman & Wakefield 125 Old Broad Street, London, EC2N 1AR Financial PR Advisers FTI 200 Aldersgate Street, London, EC1A 4HD Website www.supermarketincomereit.com Registered Office The Scalpel 18 th Floor, 52 Lime Street, London, EC3M 7AF Stock exchange ticker ISIN SUPR GB00BF345X11 This report will be available on the Company’s website. CONTACTS INFORMATION ANNUAL REPORT 2024 149 STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS Supermarket Income REIT plc The Scalpel, 18th Floor, 52 Lime Street London, United Kingdom, EC3M 7AF www.supermarketincomereit.com 2138007FOINJKAM7L5372023-07-012024-06-302138007FOINJKAM7L5372022-07-012023-06-302138007FOINJKAM7L5372024-06-302138007FOINJKAM7L5372023-06-302138007FOINJKAM7L5372023-06-30ifrs-full:IssuedCapitalMember2138007FOINJKAM7L5372023-07-012024-06-30ifrs-full:IssuedCapitalMember2138007FOINJKAM7L5372024-06-30ifrs-full:IssuedCapitalMember2138007FOINJKAM7L5372023-06-30ifrs-full:SharePremiumMember2138007FOINJKAM7L5372023-07-012024-06-30ifrs-full:SharePremiumMember2138007FOINJKAM7L5372024-06-30ifrs-full:SharePremiumMember2138007FOINJKAM7L5372023-06-30ifrs-full:ReserveOfCashFlowHedgesMember2138007FOINJKAM7L5372023-07-012024-06-30ifrs-full:ReserveOfCashFlowHedgesMember2138007FOINJKAM7L5372024-06-30ifrs-full:ReserveOfCashFlowHedgesMember2138007FOINJKAM7L5372023-07-012024-06-30ifrs-full:MiscellaneousOtherReservesMember2138007FOINJKAM7L5372024-06-30ifrs-full:MiscellaneousOtherReservesMember2138007FOINJKAM7L5372023-06-30SUP:CapitalReductionReserveMember2138007FOINJKAM7L5372023-07-012024-06-30SUP:CapitalReductionReserveMember2138007FOINJKAM7L5372024-06-30SUP:CapitalReductionReserveMember2138007FOINJKAM7L5372023-06-30ifrs-full:RetainedEarningsMember2138007FOINJKAM7L5372023-07-012024-06-30ifrs-full:RetainedEarningsMember2138007FOINJKAM7L5372024-06-30ifrs-full:RetainedEarningsMember2138007FOINJKAM7L5372022-06-30ifrs-full:IssuedCapitalMember2138007FOINJKAM7L5372022-07-012023-06-30ifrs-full:IssuedCapitalMember2138007FOINJKAM7L5372022-06-30ifrs-full:SharePremiumMember2138007FOINJKAM7L5372022-07-012023-06-30ifrs-full:SharePremiumMember2138007FOINJKAM7L5372022-06-30ifrs-full:ReserveOfCashFlowHedgesMember2138007FOINJKAM7L5372022-07-012023-06-30ifrs-full:ReserveOfCashFlowHedgesMember2138007FOINJKAM7L5372022-06-30SUP:CapitalReductionReserveMember2138007FOINJKAM7L5372022-07-012023-06-30SUP:CapitalReductionReserveMember2138007FOINJKAM7L5372022-06-30ifrs-full:RetainedEarningsMember2138007FOINJKAM7L5372022-07-012023-06-30ifrs-full:RetainedEarningsMember2138007FOINJKAM7L5372022-06-30iso4217:GBPiso4217:GBPxbrli:shares
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