Unite Group PLC — Capital/Financing Update 2014

Mar 6, 2014

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank, solicitor, accountant or other independent financial adviser duly authorised under the FSMA if you are in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

If you sell or have sold or otherwise transferred all of your Existing Ordinary Shares in certificated form before the date on which the Existing Ordinary Shares are marked as ex-entitlement to the Open Offer by the London Stock Exchange ("ex-entitlement date"), please send this document and (if applicable) the Non-CREST Application Form (and reply-paid envelope for use within the UK only), if and when received, immediately to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. However, such documents should not be forwarded or transmitted into any jurisdiction where to do so might constitute a violation of local securities laws or regulations. If you sell or have sold or otherwise transferred all or some of your Existing Ordinary Shares held in uncertificated form before the ex-entitlement date, a claim transaction will be automatically generated by Euroclear which, on settlement, will transfer the appropriate number of Basic Entitlements and Excess CREST Open Offer Entitlements to the purchaser or transferee. If you have sold or transferred part of your holding of Existing Ordinary Shares prior to the ex-entitlement date, you should immediately consult the stockbroker, bank or other agent through whom the sale or transfer was effected and, in the case of Qualifying Non-CREST Shareholders, refer to the instructions regarding split applications set out in the Non-CREST Application Form.

This document comprises a prospectus relating to the New Ordinary Shares and has been prepared in accordance with the Prospectus Rules made under section 73A of the FSMA and has been approved by the FCA in accordance with section 87A of the FSMA. This document has been filed with the FCA and has been made available to the public in accordance with Rule 3.2 of the Prospectus Rules.

UNITE and the Directors whose names appear on page 35 of this document accept responsibility for the information contained in this document. To the best of the knowledge and belief of UNITE and the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and contains no omission likely to affect the import of such information.

The Existing Ordinary Shares are currently listed on the premium segment of the Official List and admitted to trading on the London Stock Exchange's main market for listed securities. Application has been made to the FCA for the New Ordinary Shares to be admitted to the premium segment of the Official List and to the London Stock Exchange and for theNew Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and dealings in the New Ordinary Shares will commence at 8.00 a.m. on 27 March 2014. The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares. No application has been made for the New Ordinary Shares to be admitted to listing or dealt with on any other exchange.

The UNITE Group plc

(Incorporated in England and Wales under the Companies Act 1985 with registered number 03199160)

Firm Placing and Placing and Open Offer of 24,500,000 New Ordinary Shares at 410 pence per share

J.P. Morgan Cazenove and Numis

Joint Sponsors, Joint Bookrunners and Joint Brokers

Jefferies

Joint Bookrunner

The whole text of this document should be read prior to making any investment decision. Your attention is drawn to the letter from the Chairman of UNITE which is set out in Part I of this document and the section of this document entitled "Risk Factors'' for a discussion of certain factors that should be considered by investors in considering whether to make an investment in the Company.

The latest time and date for acceptance and payment in full for the Open Offer Shares under the Open Offer is expected to be 11.00 a.m. on 24 March 2014 and the procedures for application and payment are set out in Part II of this document and, where relevant, in the Non-CREST Application Form. Qualifying CREST Shareholders should refer to paragraph 4.2 of Part III of this document.

Investors should only rely on the information contained in this document. No person has been authorised to give any information or make any representations other than those contained in this document and, if given or made, such information or representation must not be relied upon as having been so authorised by UNITE, the Directors, J.P. Morgan Cazenove, Numis or Jefferies. None of the above takes any responsibility for, or can provide assurance as to the reliability of, other information that you may be given. No representation or warranty, express or implied, is made by any of J.P. Morgan Cazenove, Numis or Jefferies as to the accuracy or completeness of such information, and nothing contained in this document is, or shall be relied upon as, a promise or representation by any of J.P. Morgan Cazenove, Numis or Jefferies as to the past, present or future. In particular, the contents of UNITE's website do not form part of this document and investors should not rely on them. Without prejudice to any legal or regulatory obligation on UNITE to publish a supplementary prospectus pursuant to section 87G of the FSMA and Rule 3.4 of the Prospectus Rules, neither the delivery of this document nor Admission shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Group taken as a whole since the date of this document or that the information in it is correct as of any time after the date of this document.

Persons into whose possession this document comes should inform themselves about and observe any applicable restrictions and legal, exchange control or regulatory requirements in relation to the distribution of this document and the Issue. Any failure to comply with such restrictions or requirements may constitute a violation of the securities laws of any such jurisdiction. The contents of this document should not be construed as legal, business or tax advice. Each prospective investor and/or shareholder should consult their own legal advisor for legal, financial or tax advice.

J.P. Morgan Cazenove, which is authorised by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority, is acting solely for UNITE and no-one else in connection with the Issue and Admission or any other matter or arrangement referred to in this document and will not regard any other person (whether or not a recipient of this document) as its client in relation to the Issue and Admission and will not be acting for any other person or be otherwise responsible to anyone other than UNITE for providing the protections afforded to its clients nor for the giving of advice in relation to the Issue or Admission or any other matter or arrangement referred to in this document. Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan Cazenove by the FSMA or the regulatory regime established thereunder, J.P. Morgan Cazenove accepts no responsibility, or liability whatsoever and makes no warranty, express or implied, in relation to the contents of this document, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with UNITE, the Ordinary Shares or the Issue. J.P. Morgan Cazenove, its subsidiaries, branches and affiliates accordingly disclaim to the fullest extent permitted by law all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this document or any such statement.

Numis, which is authorised and regulated by the Financial Conduct Authority, is acting solely for UNITE and no-one else in connection with the Issue and Admission and will not regard any other person (whether or not a recipient of this document) as its client in relation to the Issue and Admission or any other matter or arrangement referred to in this document and will not be acting for any other person or be otherwise responsible to anyone other than UNITE for providing the protections afforded to its clients nor for the giving of advice in relation to the Issue or Admission or any other matter or arrangement referred to in this document. Apart from the responsibilities and liabilities, if any, which may be imposed on Numis by the FSMA or the regulatory regime established thereunder, Numis accepts no responsibility or liability whatsoever and makes no warranty, express or implied, in relation to the contents of this document, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with UNITE, the Ordinary Shares or the Issue. Numis, its subsidiaries, branches and affiliates accordingly disclaim to the fullest extent permitted by law all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this document or any such statement.

Jefferies, which is authorised and regulated by the Financial Conduct Authority, is acting solely for UNITE and no-one else in connection with the Issue and Admission and will not regard any other person (whether or not a recipient of this document) as its client in relation to the Issue and Admission or any other matter or arrangement reffered to in this document and will not be acting for any other person or be otherwise responsible to anyone other than UNITE for providing the protections afforded to its clients nor for the giving of advice in relation to the Issue or Admission or any other matter or arrangement referred to in this document. Apart from the responsibilities and liabilities, if any, which may be imposed on Jefferies by the FSMA or the regulatory regime established thereunder, Jefferies accepts no responsibility or liability whatsoever and makes no warranty, express or implied, in relation to the contents of this document, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with UNITE, the Ordinary Shares or the Issue. Jefferies, its subsidiaries, branches and affiliates accordingly disclaim to the fullest extent permitted by law all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this document or any such statement.

Notice to overseas shareholders

The New Ordinary Shares, Basic Entitlements, Excess CREST Open Offer Entitlements and the Non-CREST Application Form have not been, and will not be, registered under the Securities Act, or the relevant laws of any state, province or territory of the United States and may not be offered or sold within the United States, except that the New Ordinary Shares may be offered to persons reasonably believed to be QIBs in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A under the Securities Act or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Subject to certain exceptions, this document does not constitute an offer of New Ordinary Shares to any person with a registered address, or who is resident, in the United States. There will be no public offer in the United States. Outside the United States, the New Ordinary Shares are being offered in reliance on Regulation S under the US Securities Act.

The New Ordinary Shares, Basic Entitlements, Excess CREST Open Offer Entitlements and the Non-CREST Application Form have not been approved or disapproved by the US Securities and Exchange Commission, or any other securities commission or regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares nor have they approved this document or confirmed the accuracy or adequacy of the information contained in this document. Any representation to the contrary is a criminal offence in the United States.

The Ordinary Shares have not been and will not be registered under the applicable securities laws of Australia, Canada or Japan. Subject to certain exceptions, the Ordinary Shares may not be offered or sold in any jurisdiction, or to or for the account or benefit of any national, resident or citizen in Australia, Canada or Japan.

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to subscribe for or purchase, any securities other than the New Ordinary Shares or any offer or invitation to sell or issue, or any solicitation of any offer to purchase, such New Ordinary Shares by any person in any circumstances in which such offer or solicitation is unlawful.

The distribution of this document and the offer and sale of the Ordinary Shares in certain jurisdictions may be restricted by law. No action has been or will be taken by the Company, J.P. Morgan Cazenove, Numis or Jefferies to permit a public offering of the Ordinary Shares under the applicable securities laws of any jurisdiction. Other than in the United Kingdom, no action has been taken or will be taken to permit the possession or distribution of this document (or any other offering or publicity materials relating to the New Ordinary Shares) in any jurisdiction where action for that purpose may be required or where doing so is restricted by law. Accordingly, neither this document, nor any advertisement, nor any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this document comes should inform themselves about and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction.

The attention of Overseas Shareholders and other recipients of this document who are residents or citizens of territories other than the United Kingdom (including, without limitation, a nominee or trustee who has a contractual or legal obligation to forward this document or any other document if and when received, to a jurisdiction outside the United Kingdom) is drawn to paragraph 6 of Part II of this document.

NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES ("RSA421-B") WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

Table of Contents

SUMMARY		Page 5
RISK FACTORS		17
	IMPORTANT INFORMATION	27
STATISTICS		32
	EXPECTED TIMETABLE OF PRINCIPAL EVENTS	33
	DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS	34
PART I	LETTER FROM THE CHAIRMAN	35
PART II	TERMS AND CONDITIONS OF THE OPEN OFFER	46
PART III	QUESTIONS AND ANSWERS IN RESPECT OF THE FIRM PLACING AND THE PLACING AND OPEN OFFER	71
PART IV	INFORMATION ON UNITE	79
PART V	SUMMARY HISTORICAL FINANCIAL INFORMATION	95
PART VI	OPERATING AND FINANCIAL REVIEW OF UNITE	96
PART VII	CAPITALISATION AND INDEBTEDNESS	119
PART VIII	UNAUDITED PRO FORMA FINANCIAL INFORMATION	120
PART IX	PROPERTY VALUATION REPORTS	124
PART X	TAX CONSIDERATIONS	188
PART XI	DIRECTORS, RESPONSIBLE PERSONS, CORPORATE GOVERNANCE AND EMPLOYEES	196
PART XII	ADDITIONAL INFORMATION	215
PART XIII	DEFINITIONS	249
APPENDIX 1	THE UNITE GROUP PLC'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013	A1-52
APPENDIX 2	THE UNITE GROUP PLC'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012	A2-50
APPENDIX 3	THE UNITE GROUP PLC'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011	A3-47

SUMMARY

Summaries are made up of disclosure requirements known as "Elements". These Elements are numbered in Sections A – E (A.1 – E.7).

This summary contains all the Elements required to be included in a summary for this type of security and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.

Even though an Element may be required to be inserted in the summary because of the type of security and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of the words "not applicable".

	Section A – Introduction and warnings
Element
A.1	Warning to investors	This summary should be read as an introduction to this document.
		Any decision to invest in the Ordinary Shares should be based on consideration of this document as a whole by the investor.
		Where a claim relating to the information contained in this document is brought before a court, the plaintiff investor might, under the national legislation of the EEA States, have to bear the costs of translating the prospectus before the legal proceedings are initiated.
		Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of this document or it does not provide, when read together with the other parts of this document, key information in order to aid investors when considering whether to invest in the Ordinary Shares.
A.2	Subsequent resale or final placement of securities by financial intermediaries	Not applicable: The Company is not engaging any financial intermediaries for subsequent resale or final placement of the Ordinary Shares after publication of this document.

Section B – Issuer

Element
B.1	Legal and commercial name	The Company's legal and commercial name is The UNITE Group plc.
B.2	Domicile/legal form/ legislation/country of incorporation	The Company was incorporated and registered in England and Wales on 15 May 1996 as a private limited company under the name Tracklynx Limited and with number 3199160. The Company was re-registered as a public limited company on 24 June 1998 with the name The LDC Group plc and on 17 February 1999 it changed its name to its current name. The principal legislation under which the Company operates is the Act and regulations made thereunder.
B.3	Current operations and principal activities and markets	UNITE is the UK's leading developer and manager of student accommodation, operating approximately 41,000 beds in 124 well-located properties in 23 key university towns and cities across England and Scotland.

Since its establishment in 1991, the Group has grown through a combination of organic growth, acquisitions and joint ventures. In 1999, the Company's Ordinary Shares were admitted to trading on the AIM Market of the London Stock Exchange, and moved to the main market of the London Stock Exchange the following year.

The Group's initial period of rapid growth was followed by a period of financial and operational consolidation during which a number of joint co-investments vehicles were created allowing the Group to benefit from further capital investment. The Group is now focussed on delivering a more consistent, balanced return profile from recurring earnings, rental growth and development returns, whilst maintaining gearing at modest levels. The Group's sole focus is currently on the UK student accommodation market.

The Group generates income from the management and operation of properties (which are either owned by the Group or through co-investment vehicles in which it has a substantial minority interest). The Company also benefits from development returns and capital growth through its property portfolio.

The strong locations of the properties managed by the Group, together with a long period of growth in demand for university places and shortage of high quality accommodation, has driven high occupancy rates and solid rental growth over the long term and supported valuations of the properties held by the Group and its co-investment vehicles.

UNITE already has a strong reputation in the university sector, based on its national scale and long term presence as an accommodation provider. The Group's ambition is to build on this by consistently providing an accommodation experience that is truly a foundation for academic achievement and which competitors will struggle to match. This brand aspiration is called 'Home for Success' and this principle will shape the future development of the Group's product and service offering.

The Group's current operational portfolio is located in strong university locations across the UK, both in terms of the towns and cities in which the Group is invested and the particular locations its assets occupy within those towns and cities. 75 per cent. of the Group's operational portfolio (based on the total number of beds and value of the properties) is located in cities with a Russell Group University.

The Group's focused investment into its existing portfolio comprises a long term planned and preventative maintenance programme, properly integrated with in year maintenance activities and coupled with periodic upgrade investment to some assets. Long term maintenance activities are required to maintain rental growth prospects whereas upgrade investments are expected to increase rent levels further. Recent examples of upgrade activity include the installation of high speed wi-fi internet across all buildings in the portfolio, the re-furnishing of 2,500 bedrooms to include larger beds and the conversion of around 29,000 square feet of vacant commercial premises in three properties into

		approximately 100 new bedrooms and additional communal space for students.
		On a built out basis the Group's investment in its portfolio is split 52 per cent. in strong regional locations and 48 per cent. in London (by value, on a see-through basis). Following deployment of the proceeds of the Issue and construction of additional development properties this proportion is expected to shift to roughly 60:40 in favour of strong regional locations.
		The Group's development activity is focused on strong university locations, in towns and cities where it believes that the demand and supply dynamics are and will remain attractive, either because of existing market conditions or expected changes to current conditions. Following the Issue, the Board anticipates that annual capital expenditure on development activity will be approximately £150 million on a see-through basis for each of the next four years, of which around 65 per cent. will be in strong regional locations and the remainder in London.
		The Group currently has three London-focussed joint co-investment vehicles, each of which was originally set up to increase the amount of capital the Group had available for investment into London and to share development risk on larger projects.
		In addition, USAF is an established leading multi investor fund set up by UNITE in December 2006. It owns a geographically diverse portfolio of income generating student accommodation assets focused on key university towns and cities and was valued at £1.35 billion as at 31 December 2013. The majority of USAF's assets were developed by UNITE and benefit from high quality locations reflecting the Group's first mover advantage when developing in many of these towns and cities. 77 per cent. of USAF's portfolio is situated in cities with a Russell Group University and, as a result of its excellent locations, consistent high occupancy and rental growth, USAF has been one of the top performing funds in the IPD PPFI Specialist Fund Index over the past five years (as at 31 October 2013). UNITE currently holds 16.4 per cent. of USAF.
B.4a	Significant recent trends affecting the Group and its	A supply and demand imbalance persists in the student accommodation sector.
	industry	In the period since the early 1990s, during which full time student numbers in the UK have doubled, universities have generally been unable to fund the construction of a sufficient amount of their own new student accommodation. Consequently universities rely on the private sector to house a much greater proportion of the student population than was the case 20 years ago.
		Private sector accommodation comprises the typical private rented sector (individual houses or flats let to students) or corporate PBSA, larger blocks of professionally managed accommodation more akin to universities' own accommodation. Corporate PBSA tends to be appealing to universities because it can help meet their own housing shortfall and provide safe, secure, well managed

		accommodation. This is particularly important in the case of first year and overseas students for whom universities generally try to guarantee accommodation. According to HESA data, UK universities only own sufficient accommodation to house 40 per cent. of their first year and international students and rely on the private sector to house the remainder.
		The level of new supply of student accommodation being built across the UK is currently constrained for a number of reasons:
		• financial constraints persist for universities meaning that they are building very little new accommodation themselves and what they are building tends to be primarily replacement stock rather than new supply;
		• the traditional private rented sector is facing increased regulation and high demand Consequently it is increasingly difficult or unappealing for private landlords to let properties to students;	from	non-students.
		• access to capital and a strict planning environment have restricted the supply of new corporate PBSA, particularly outside London.
		UNITE focuses its investment and development activity on stronger universities (typically Russell Group Universities) which the Board believes are well placed to benefit from both the recent and potential further UK government policy changes. Consequently, the Board expects to see an overall increase in UK students over the next ten years in the cities and towns in which the Group operates.
B.5	Description of the Group	The Company is the ultimate holding company of the Group. The Group also holds interests in certain co-investment vehicles, namely USAF, the UNITE Capital Cities and London Student Accommodation joint ventures and the Oasis Capital Bank joint venture.
B.6	Major shareholders	As at 4 March 2014 (being the latest practicable date prior to the publication of this document), insofar as it is known to the Company, the following persons are interested directly or indirectly in 3 per cent. or more of the voting rights in respect of the issued ordinary share capital of the Company:
				Percentage
			Number of Ordinary	of issued Ordinary
		Name	Shares	Shares
		FIL Limited/ FMR LLC	15,982,915	9.05
		Old Mutual Asset Mangers (UK) Limited	10,595,968	6.00
		Lloyds Banking Group Plc	8,903,521	5.04
		BlackRock, Inc	8,888,323	5.03
		Royal London Asset Management
		Limited	8,122,726	4.60
		Franklin Resources Inc	7,756,799	4.39
		APG Algemene Pensioen Groep N.V	7,595,530	4.30
		Aberforth Partners	6,256,334	3.54

		Name	Number of Ordinary Shares	Percentage of issued Ordinary Shares
		Legal & General Investment Management Limited Norges Bank Investment Management Principal Financial Group	5,921,910 5,508,938 5,292,581	3.35 3.12 3.00
		None of the Company's major shareholders has different voting rights attached to the shares they hold in the Company.
		As at 4 March 2014 (being the latest practicable date prior to the publication of this document), the Company was not aware of any person or persons who, directly or indirectly, jointly or severally, exercise or could exercise control over the Company.
B.7	Selected historical financial information	The selected historical financial information set out below has been prepared on a see-through basis and has been extracted without material adjustment from the audited annual report and accounts for the Group for the years ended 31 December 2011, 31 December 2012 and from the audited financial results of the Group for the year ended 31 December 2013 as announced on 6 March 2014.
		2013	Year ended 31 December 2012	2011
		£m Rental income 113.4 Net operating income 81.0 EPRA earnings 30.6 EPRA NAV 682	£m 111.4 79.1 15.9 567	£m 95.6 66.2 (16.9)* 514
		*Note: This adjusted figure was restated in 2012 (see note 2.2 to the financial statements of UNITE for the year ended 31 December 2012 which are set out in Appendix II of this document).
		There has been no significant change in the financial or trading position of the Group during the three financial years ended 31 December 2013 or since 31 December 2013, being the end of the period for which the Group's last audited consolidated accounts were published.
B.8	Selected key pro forma financial information	The following unaudited pro forma statement of net assets has been prepared to illustrate the pro forma effects of the Issue as if it had occurred on 31 December 2013, presented on the basis of the accounting policies adopted by the Company in preparing its audited consolidated financial statements for the year ended 31 December 2013. The unaudited pro forma information has been prepared for illustrative purposes only. Due to its nature, the unaudited pro forma information addresses a hypothetical situation and does not, therefore, represent the actual financial position or results of the Group. The unaudited pro forma statement has been prepared on the basis set out in the notes below and in accordance with the requirements of items 1 to 6 of Annex II to the Prospectus Directive Regulation.

		31 December 2013 (£m)	Adjustment Issue (£m)	Notes	Pro forma for the continuing Group (£m)
	Assets Investment property Investment property under	(a) 767.6	–		767.6
	development Investment in joint ventures Joint venture investment loans Other non-current assets	95.5 237.2 10.2 7.3	– 48.0 – –	(b)	95.5 285.2 10.2 7.3
	Deferred tax asset Total non-current assets	0.6 ———— 1,118.4	– ———— 48.0		0.6 ———— 1,166.4
	Properties under development Inventories Trade and other receivables Cash and cash equivalents	———— 61.5 3.2 50.0 43.2	———— – – – 48.0	(c)	———— 61.5 3.2 50.0 91.2
		————	————		————
	Total current assets Total assets	157.9 ———— 1,276.3	48.0 ———— 96.0		205.9 ———— 1,372.3
	Liabilities Borrowings Interest rate swaps Trade and other payables	———— (29.7) (2.0) (85.2)	———— – – –		———— (29.7) (2.0) (85.2)
	Provisions Current tax creditor	– (0.3)	– –		– (0.3)
	Total current liabilities	———— (117.2) ————	———— – ————		———— (117.2) ————
	Borrowings Interest rate swaps Provisions	(483.7) (3.4) – ————	– – – ————		(483.7) (3.4) – ————
	Total non-current liabilities	(487.1)	–		(487.1)
	Total liabilities	———— (604.3) ————	———— – ————		———— (604.3) ————
	Net Assets	672.0 ————	96.0 ————		768.0 ————
	Net asset value per share
	Basic EPRA (fully diluted)	370p 382p	2p 1p	(d) (e)	372p 383p
	Adjusted LTV	49%	(4%)	(f)	45%
	Notes: (a) The financial information relating to the Group has been extracted without adjustment from the audited consolidated balance sheet of the Company as at 31 December 2013. The pro forma statement of net assets does not constitute statutory accounts within the meaning of section 434 of the Act. No account has been taken of trading, capital expenditure or other movements subsequent to 31 December 2013.
	(b) The movement in the Group's investment in joint ventures arises as a result of the Issue as UNITE uses £48 million of the proceeds of the Issue to purchase £48 million new units in USAF.
	(c) The movement in cash and cash equivalents reflects the receipt of £96 million from the issue of 24,500,000 New Ordinary Shares priced at £4.10 per share from the Issue less estimated cash costs of £4 million associated with the Issue and, the investment of £48 million in USAF.
	(d) The movement in the basic NAV per share as a result of the Issue can be analysed as follows:
			31 December 2013	Adjustment	Pro forma
	Net assets (exc MI) £m		653.3	96.0	749.3
	No. of shares (basic) m NAV per share (basic) £		176.7 3.70	24.5 0.02	201.2 3.72

		(e)	The movement in the EPRA (fully diluted) NAV per share as a result of the Issue can be analysed as follows:
					31 December
					2013	Adjustment	Pro forma
			EPRA NAV	£m	681.6	96.0	777.6
			No. of shares
			(fully diluted)	M	179.1	24.5	203.6
			EPRA NAV per share
			(fully diluted)	£	3.82	0.01	3.83
		(f) The movement in adjusted LTV is due to an increase in see through GAV as a result of the increased stake in USAF and a net increase in adjusted net debt as a result of an increased stake in USAF and the increase in cash and cash equivalents following the proposed transaction. The adjustment can be analysed as follows:
		31 December
					2013	Adjustment	Pro forma
			GAV	£m	1,370.1	80.5	1,450.6
			Adjusted net debt	£m	(666.1)	24.1	(642.0)
			LTV	%	49%	(4%)	45%
B.9	Profit forecast or estimate		Not applicable – there are no outstanding profit forecasts or estimates. No profit forecast or estimate is included in this document.
B.10	Audit report on the		Not applicable. There are no qualifications included in any audit
	historical financial		report on the historical financial information included in this
	information – qualifications		document.
B.11	Insufficient working capital		Not applicable. The Group has sufficient working capital for its
			present requirements.

	Section C – Securities
Element
C.1	Type and class of securities being offered	The Company intends to issue 24,500,000 New Ordinary Shares in connection with the Issue.
		When admitted to trading on the London Stock Exchange's market for listed securities, which is expected to take place on 27 March 2014, the New Ordinary Shares will be registered with ISIN GB0006928617 and SEDOL number 0692861.
C.2	Currency of the securities issue	The Ordinary Shares are denominated in sterling.
C.3	Number of issued and fully paid Ordinary Shares and	As at the date of this document there are 176,658,479 Ordinary Shares in issue (all of which are fully paid).
	par value	The Ordinary Shares have a par value of 25 pence each.
C.4	Rights attached to the Ordinary Shares	The Ordinary Shares rank equally for voting purposes. On a show of hands, each Shareholder has one vote and on a poll each Shareholder has one vote for every Ordinary Share held.
		Each Ordinary Share ranks equally for any dividend declared or any distributions made on a winding up of the Company.
		Each Ordinary Share ranks equally in the right to receive a relative proportion of shares in the case of a capitalisation of reserves.
C.5	Restrictions on transfer	The Ordinary Shares are freely transferable and there are no restrictions on transfer in the UK.

C.6	Application for admission to trading on regulated market	Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on its main market for listed securities.
C.7	Dividend policy	The London Stock Exchange's main market is a regulated market. The declaration and payment by the Group of any future dividends on the Ordinary Shares and the amount will depend on the results of the Group's operations, its financial condition, cash requirements, future prospects, profits available for distribution and other factors deemed to be relevant at the time.
		The Company's current policy is to pay 33 per cent. of its net portfolio contribution as dividends and the Company intends to maintain this policy, whilst it still sees opportunities to deploy equity into development activity that delivers returns in line with targets.

	Section D – Risks
Element
D.1	Key information on key risks relating to the Group or its industry	•	The Group's turnover and the value of its properties is dependent, to a significant degree, on the rental and occupancy rates that can be achieved from the properties the Group owns or manages. Any reduction in the number of students studying in the UK (domestic or international) could reduce the Group's occupancy rates and/or restrict the Group's ability to maintain or increase rental rates. The number of students and/or their disposable income may be affected by a number of factors including changes in government policy and general economic factors.
		•	The Group's revenue is dependent on the collection of rents from students. Defaults from customers may increase, particularly if the general UK economy suffers.
		•	Any increase in the Group's costs, particularly the costs of utilities, without a corresponding increase in turnover, may reduce the Group's profits.
		•	The valuation of the Group's properties may fall and there can be no guarantee that any sale of a property will necessarily realise the value at which such property is held in the Group's accounts. This may be as a result of a reduction in the rental rates achievable, or of other factors (including the performance of the UK economy). The Group's gearing magnifies the effect of falls in the value of the Group's properties.
		•	In the longer term, any failure to comply with the covenants in the Group's banking facilities or other indebtedness could restrict the ability of the Group to borrow and/or require repayment of loans. In addition, in the longer term the Group may not be able to refinance its existing banking facilities, or may only be able to do so on less favourable terms.
		•	Property acquisition and development involves certain risks, including risks relating to liabilities associated with the

			property (such as latent liabilities, hazardous substances or structural issues) and risks of cost inflation, cost overruns and delays to completion. There is also a risk that a contractor may fail.
D.3	Key information on key risks relating to the Ordinary Shares	•	A shareholder who does not take up his Basic Entitlement in full will suffer a dilution of approximately 12.2 per cent. in their proportionate ownership and voting interests in the Enlarged Share Capital. If a shareholder subscribes for his Basic Entitlement in full he will suffer a dilution of approximately 3.8 per cent. in his proportionate ownership and voting interests in the Enlarged Share Capital as a result of the Firm Placing.
		•	The price of the Ordinary Shares may be volatile and may be affected by a number of factors, some of which are beyond the Group's control, which could cause the value of an investment in the Ordinary Shares to decline.
		•	The Directors' ability to declare dividends will be a function of the Company's profitability and there is no guarantee the Company will be able to pay dividends in the future.
		•	Any change in current tax law or practice could adversely affect holders of Ordinary Shares.
		•	Overseas shareholders may not be eligible to participate in the Issue.
		•	There is no public market for Ordinary Shares in the United States or outside the United Kingdom.
		•	Future equity issues by UNITE could have an adverse effect on the market price of the Ordinary Shares and dilute ownership. Moreover, UNITE may issue new shares that have rights, preferences or privileges senior to those of the Ordinary Shares.

		Section E – Offer
Element
E.1	Total net proceeds and estimated total expenses	The net proceeds of the Issue receivable by the Company are expected to be approximately £96,450,000 net of expenses of the Issue.
E.2a	Reasons for the Issue, use of proceeds, estimated net amount of the proceeds	The purpose of the Issue is to invest further in strong university locations in two ways; (i) through highly selective development activity in strong regional university towns and cities and (ii) through the acquisition of further units in USAF, a fund managed by UNITE which has a high quality portfolio and excellent growth prospects. The transaction is a continuation of the Group's existing strategy and will allow it to take advantage of cyclically low development costs, a low cost of capital in USAF and a positive outlook for demand and rental growth for the student accommodation sector. The net proceeds are expected to be approximately £96 million, of which approximately £48 million will be applied to acquire future units in USAF and approximately £48 million will be used to fund additional selective development activity.

E.3	Terms and conditions of the Issue	Pursuant to the Issue, the Company intends to issue 24,500,000 New Ordinary Offer Shares at the Issue Price, raising proceeds of approximately £96 million (net of expenses). The New Ordinary Shares will represent approximately 12.2 per cent. of the enlarged issued ordinary share capital of the Company immediately following Admission. The Issue consists of (i) the Firm Placing and (ii) the Placing and Open Offer.
		Open Offer Shares will be allocated to Qualifying Shareholders under the Open Offer on a pre-emptive basis in accordance with the Articles. Qualifying Shareholders will not be able to participate in the Firm Placing.
		The Issue is being fully underwritten by the Joint Bookrunners. The Joint Bookrunners' obligations to underwrite the Issue are conditional upon the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms.
		The Firm Placing
		J.P. Morgan Cazenove, Numis and Jefferies have, as agents for the Company, made arrangements to conditionally place, in aggregate, 7,675,383 Firm Placed Shares at the Issue Price (representing gross proceeds of approximately £31,469,070) with the Firm Placees. The Firm Placed Shares are not subject to claw-back to satisfy valid applications by Qualifying Shareholders under the Open Offer and are not part of the Placing or the Open Offer.
		In the Firm Placing, Ordinary Shares have been offered (a) to certain institutional investors in the UK and certain other jurisdictions outside of the United States in reliance on Regulation S, and (b) in the United States only, to persons reasonably believed to be QIBs as defined in Rule 144A in reliance on an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
		The Placing
		J.P. Morgan Cazenove, Numis and Jefferies have, as agents of the Company, made arrangements to conditionally place the Open Offer Shares with institutional shareholders at the Issue Price (subject to a right of claw-back to satisfy valid applications by Qualifying Shareholders under the Open Offer).
		In the Placing, Ordinary Shares have been offered (a) to certain institutional investors in the UK and certain other jurisdictions outside of the United States in reliance on Regulation S, and (b) in the United States only, to persons reasonably believed to be QIBs as defined in Rule 144A in reliance on an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
		The Open Offer
		The Open Offer will be made to holders of Existing Ordinary Shares on the register of members of the Company at the Record Date (with the exclusion (subject to certain exemptions) of Overseas Shareholders) at the Issue Price, on the terms, and subject to the conditions, of the Open Offer on the basis of:

		2 Open Offer Shares for every 21 Existing Ordinary Shares
		Fractional entitlements under the Open Offer will be aggregated and sold for the benefit of the Company under the Excess Application facility and/or the Placing.
		Excess Applications Facility
		Qualifying Shareholders that take up all of their Basic Entitlements may also apply under the Excess Application Facility for additional Open Offer Shares that they would otherwise not be entitled to. The total number of Open Offer Shares is fixed and will not be increased in response to any applications under the Excess Application Facility. If there is an oversubscription resulting from excess applications, allocations in respect of such excess applications will be scaled down pro rata to the number of excess shares applied for under this excess application facility by Qualifying Shareholders and no assurances can be given that the applications by Qualifying Shareholders will be met in full, in part or at all.
		General
		The Issue is conditional, amongst other things, on:
		• the satisfaction of certain conditions contained in the Placing Agreement between the Company, J.P. Morgan Cazenove, Numis and Jefferies, which are typical for an agreement of this nature;
		• J.P. Morgan Cazenove, Numis and Jefferies not having terminated the Placing Agreement before Admission in accordance with its terms; and
		• Admission occurring on or before 8.00 a.m. on 27 March I 2014 (or such later date as the Company, J.P. Morgan Cazenove, Numis and Jefferies may agree jointly, not being later than the Longstop Date).
		It is expected that Admission will become effective and that unconditional dealings in the New Ordinary Shares will commence on the London Stock Exchange, at 8.00 a.m. on 27 March 2014.
		None of the Ordinary Shares may be offered for subscription, sale, purchase or delivery, and neither this document nor any other offering material in relation to the Ordinary Shares may be circulated, in any jurisdiction where to do so would breach any securities laws or regulations of any such jurisdiction or give rise to an obligation to obtain any consent, approval or permission, or to make any application, filing or registration.
E.4	Material interests	Not applicable – there are no conflicting interests that are material to the Issue.
E.5	Selling shareholders and lock-up agreements	Not applicable – no Shareholders are offering to sell Existing Ordinary Shares pursuant to the Issue.
E.6	Dilution	Following the issue of the New Ordinary Shares pursuant to the Issue, a Qualifying Shareholder who does not take up any of his Basic Entitlement (and does not take up any Excess Shares under

		the Excess Application Facility) will suffer a dilution of approximately 12.2 per cent to his economic interests in the Company. If a Qualifying Shareholder subscribes for his Basic Entitlement in full he will suffer a dilution of approximately 3.8 per cent., to his economic interests in the Company as a result of the Firm Placing.
E.7	Estimated expenses charged to investor	Not applicable. There are no commissions, fees or expenses to be charged to investors by the Company in connection with the Issue.

RISK FACTORS

Investing in and holding the Ordinary Shares involves a high degree of risk. Prior to investing in the Ordinary Shares, investors should carefully consider all of the information contained in this document, paying particular attention to the risk factors set out below. Investors should note that the risk factors set out below do not purport to be a complete list or explanation of all risk factors which may affect UNITE, the Ordinary Shares or the Issue. Additional risks and uncertainties not currently known to UNITE or which UNITE currently deems immaterial may arise or become material in the future. The occurrence of any of these risks may have a material adverse effect on the Group's business, results of operations, financial condition or prospects or the price of the Ordinary Shares to the detriment of UNITE or the Shareholders and investors could lose all of their investment. Investors should consider carefully whether an investment in the Ordinary Shares is suitable for them in light of the information contained in this document and their personal circumstances.

Prospective investors should note that the risks relating to the Group, its industry and the Ordinary Shares summarised in the section of this document headed "Summary" are the risks that the Company believes to be the most essential to an assessment by a prospective investor of whether to consider an investment in the Ordinary Shares. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the section of this document headed "Summary" but also, among other things, the risks and uncertainties described below, together with all other information contained in this document.

You should consult a legal adviser, an independent financial adviser duly authorised under the FSMA or a tax adviser for legal, financial or tax advice.

Risks relating to the Group

The Group is exposed to demand risk and a potential fall in occupancy

The Group is exposed to demand risk each year up to and until a student enters into a legally binding commitment to accept an offer of a room in the accommodation. Demand for accommodation is influenced by a number of external factors, including:

• sector-related factors that influence the overall numbers of students undertaking courses of study, including the funding of higher education, changes to tuition fees and the UK Government's policy to drive greater competition between institutions, particularly for high achieving students;
• factors that influence the number of students undertaking courses of study at the universities in the vicinity of the relevant student accommodation, including the relative attractiveness of that university compared to alternative higher education institutions;
• factors affecting the specific demand for the Group's accommodation, including the quality of the offerings available, the proximity of accommodation to the campus, the facilities it has to offer and the price of the accommodation relative to alternatives;
• changes in Government policy on higher education (such as tuition fee increases or changes to immigration rules) that may reduce the number of students and/or reduce the disposable income of students (and therefore the amount available to be spent on accommodation); and
• supply side factors, including overall supply of alternative accommodation and the risk of increased supply over time.

The Group's occupancy rates have been over 95 per cent. over at least the last five academic years, but there is no guarantee that occupancy rates will remain at the same levels. Any reduction in the demand for any of the Group's properties could reduce the occupancy levels and/or reduce the ability of the Group to maintain or increase the rent on such properties.

Change to current United Kingdom government policy on higher education could affect overall student numbers pursuing courses of study and demanding student accommodation

The amount that a university is able to charge its students is subject to any maximum amount that the UK Government (or the Scottish Government, in the case of universities in Scotland) specifies. Current or future administrations may increase or decrease this amount depending upon its higher education policies. There is no guarantee that the UK or Scottish Government's approach to tuition fees, and higher education funding generally, will remain consistent.

The Chancellor of the Exchequer announced in his Autumn Statement in 2013 that the UK Government plans to remove the cap on student numbers currently in force in the UK. There is no guarantee that the policy announced will be implemented in full or in the form currently announced or, if implemented, that future Government policy will not reintroduce caps on student numbers.

In addition, the number of students from overseas may vary in the event that government policy on visas changes or if any particular university loses its "Highly Trusted Sponsor" status.

In the event that Scotland ceases to be a part of the UK, there may be an impact on the number of Scottish students studying in England and Wales, and on the number of English and Welsh students studying in Scotland.

Any further increase in the level of tuition fees, uncertainty about limits on student numbers or the availability of visas for overseas students may affect the number of prospective students who choose to apply for a place on a course with a university and thereby decrease demand for residential accommodation. A decrease in the number of students seeking residential accommodation in the Group's properties may affect the occupancy rates of the Group's property portfolio or its ability to maintain or increase rents, which may adversely affect the Group's revenue and property valuations.

Increased competition between universities, including from non-UK universities may affect the demand for places at the UK universities served by the Group

The Government has introduced a more marketised approach to student recruitment. Approximately onefifth of all first year new entrant places are now open to competition and all institutions are able to recruit an uncapped number of students who achieve ABB+ in their A-levels (or vocational equivalent). This approach, along with changes in university funding and increases in tuition fee caps, has made the UK higher education sector increasingly competitive and may increase variability in enrolment.

There may also be increased competition from overseas universities, particularly those situated in the EU member states. Students may increasingly consider studying outside the UK, where the overall cost of a degree tends to be lower. An outflow of students to universities other than those in cities in which the Group manages properties, or to overseas universities, may have an effect on the numbers seeking accommodation at the universities in the cities in which the Group manages properties.

Demand for accommodation provided by the Group may be affected by increasing competition between operators and increasing levels of residential development

The corporate PBSA sector of the student accommodation market, in which the Group operates, comprises approximately 180,000 beds. In this sector, there are more than a dozen operators of more than 5,000 rooms, including the Group, UPP, CRM and Liberty Living. These operators, in addition to university partnership operators and small operators beginning to establish national scale, have increased supply as student enrolment has grown, increasing competition between operators for students.

The student accommodation market continues to attract development. According to CBRE1, a record £2.7 billion was transacted in 2012, representing a 125 per cent. increase on 2011. In 2013, CBRE estimate that £2.1 billion of investment was made. The sector continues to generate strong returns relative to other real estate asset classes, with yields generally ranging between 6 per cent. and 7 per cent., and exhibit anticyclical characteristics, particularly during periods of economic downturn.

^1. CBRE. UK Student Housing. Market View. Q4 2012.

Developers and operators may increase investment in the student accommodation market where other construction sectors have contracted. In particular, larger operators could enter the market with a greater capacity to deliver economies of scale, allowing them to develop significant numbers of bed spaces at lower rents. Any increase in the supply of student housing or decrease in rents would place greater pressure on the Group's rent and occupancy levels.

Rental income is dependent on the stability of tenants and other counterparties

The Group's revenue is dependent on the collection of rents from students. Although the Group focuses on higher-quality properties that are more likely to attract more affluent customers, and obtains tenancy guarantees, defaults by customers may increase, particularly if the general UK economy suffers.

In addition, the net revenue generated from the Group's properties may depend on the financial stability of university clients with which the Group has direct contractual relationships under leases or nomination agreements. Clients may default on contract terms, such as rental payment and pre-let agreements, or the advance bookings of student accommodation.

Any material university defaults or an increase in the level of defaults would impact the Group's revenue generated from operations as well as property valuations.

Operating costs may increase

The Group incurs operating expenses attributable to its operations business, pre-contract development costs, UMS operating expenses and fair value movements of share options. Factors that impact operating expenses include increases in:

• the rate of inflation;
• staff costs;
• energy costs (of which approximately 20 per cent. is unhedged at any given time);
• property taxes and other statutory charges;
• insurance premiums; and
• the costs of maintaining properties.

There can be no guarantee that in the future operating expenses will not increase without a corresponding increase in revenue or rents.

Real estate valuations may fall

The property portfolio of the Company is valued on a semi-annual basis, and the property portfolio of USAF and the Group's other co-investment vehicles is valued on a quarterly basis, by CBRE Limited, Jones Lang LaSalle Limited and Knight Frank LLP in accordance with the RICS Valuation Professional Standards (2012) (Red Book).

The valuations of the Group's properties, including the properties of USAF and the Group's other coinvestment vehicles, speak only as of their valuation date, and the value of the Group's property portfolio may fall. Any decrease in value may be as a result of a reduction in the occupancy or rental rates achievable in respect of the properties, increases in costs or interest rates or other factors. These factors may include general economic conditions, such as the availability of credit finance and the performance of the UK economy, or particular local factors such as competition. Further, the valuation of real estate is inherently subjective and based on assumptions that may prove to be inaccurate. There can be no guarantee that any sale of any properties will necessarily realise the value at which such property is held in the accounts of the Company, the Group, USAF or the Group's other co-investment vehicles.

Real estate illiquidity may restrict the Group's ability to sell properties

Real estate is illiquid and can be difficult to sell. In the event that the Group is unable to sell properties (whether to its own co-investment vehicles or other third parties), at the times and prices it seeks, the Group may be unable to realise cash from its investments portfolio or strategically adjust its property portfolio to the extent it seeks. The relative lack of liquidity in the student accommodation sector when compared to other sub sectors of the property market also means that yield revenues for the Group may lag the wider market to some extent.

Failure to comply with financial covenants governing indebtedness or failure to refinance such indebtedness on favourable terms, if at all, could restrict the Group's business or result in a disposal of properties

The Group has long term debt pursuant to debt facilities or bonds of £513.4 as at 31 December 2013. These facilities and bonds contain covenants that are tested on an annual or semi-annual basis and cover a number of financial metrics, such as interest cover ratio and loan to value ratio. These covenants limit the Group's ability to incur debt, including loans on purchased assets.

Whilst the Group has historically operated, and is currently operating, within its banking covenants, in the longer term a future failure by the Group to comply with any of its financial covenants could result in an inability to drawdown further funds or acceleration of the Group's obligation to repay existing borrowings.

Additionally, whilst the Group has historically been successful in recent years in refinancing its indebtedness, in the longer term there is no guarantee that the Group will be able to refinance its indebtedness or, if available, that such financing will be obtained on terms favourable to the Group.

In the longer term, any requirement to repay indebtedness, inability to draw down further amounts or inability to refinance existing debt on favourable terms, if at all, might require the disposal of properties, which might in turn impact the Group's returns from development and operations.

The Group's development strategy depends on the availability of debt finance

The Group currently plans to fund its development plans (including the use of the proceeds of the Issue) partially from equity and partially from debt. The Group's development plans and the return on those plans are therefore dependent on the ability to obtain debt finance on commercially acceptable terms to the Group. There is no guarantee that the Group will be able to obtain debt finance on commercially acceptable terms or at all. To the extent that the Group is unable to obtain debt finance, this will impact on the Group's development activity and may require it to scale back the development activity from that which is currently planned.

The Group's gearing magnifies the effect of falls in the value of the Group's properties

Like other businesses in the property investment and development sector, the Group continues to employ gearing in order to maximise returns. This gearing is provided through funding received from a number of different banks and other financial institutions pursuant to debt facility agreements and bond issuances. As at 31 December 2013, the gearing and LTV of the Group on a see-through basis was 98 per cent. and 49 per cent. respectively.

Whilst the use of borrowings is intended to enhance the returns on the Group's invested capital when the value of the Group's underlying assets is rising, it may have the opposite effect where the value of underlying assets is falling, increasing volatility in the Group's results of operations. Any fall in the value of the Group's properties may significantly reduce the value of the Group's equity investment in those properties, so the Group may not make a profit, or may incur a loss, on the sale of any such asset.

Changes in interest rates may have an adverse impact on the Group

It is the Group's current policy to hedge a significant proportion of its interest rate exposure on debt secured against investment assets. As at 31 December 2013, 86 per cent. of investment debt was hedged and/or held at fixed rates giving the Company security over the cost of its debts. This approach results in some volatility in the Group's net assets caused by marking these derivative contracts to market (revaluing them) at each balance sheet date. Additionally, an increase in interest rates would increase the financing cost of any unhedged portion of debt and may also impact the valuation of the Group's properties. Further, the Company may be exposed to market interest rate risk when the interest rate swaps that the Company entered into in connection with its financing arrangements expire, or if it has inaccurately or ineffectively hedged its market interest rate exposure.

In addition, there can be no guarantee that the Group will be able to continue borrowing on similar terms to its current facilities. If interest rates on new facilities entered into are higher than the rates applicable to existing facilities, then the Group's profitability may be affected.

Property acquisition involves certain risks, including risks relating to environmental liabilities associated with the property

The acquisition of properties involves a number of risks inherent in assessing the values, strengths, weaknesses and profitability of properties. Whilst the Group believes it undertakes sufficient and appropriate valuations and environmental and structural surveys in order to assess those risks, unexpected problems and latent liabilities or contingencies, such as the existence of hazardous substances or other environmental liabilities, may emerge.

In the ordinary course of business and in connection with future acquisitions, the Group may become responsible for certain environmental clean-up liabilities or costs. As the owner of real property, the Group is subject to environmental regulations that can impose liability for cleaning up contaminated land, watercourses or groundwater on the party causing or knowingly permitting the contamination. If the Group owns or acquires contaminated land, it could also be liable to third parties for harm caused to them or their property as a result of the contamination. If the Group is found to be in violation of environmental regulations, it could face reputational damage, regulatory compliance penalties, reduced letting income and reduced asset valuation.

Property development and management involves certain inherent risks

Property development and management involves certain risks, including construction cost inflation, cost overruns, delays to the completion of developments and reliance on third parties complying with their obligations. Any delays or cost overruns might impact on the Group's returns from development activities and its revenue generated from operations.

Additionally, there is a risk that a contractor engaged by the Group might fail, as a result of general economic conditions or specific factors. In the event that a contractor failed, the Group's development activities might be delayed or the costs of completing a development may increase.

The Group's development projects are also subject to other hazards and risks normally associated with the construction and development of commercial real estate, including personal injury and property damage. The occurrence of any of these events could result in increased operating costs, reputational damage, fines, legal fees, or criminal prosecution of the Group, and its directors or management.

Property investment may be affected by legal and regulatory changes

The risks incidental to the ownership of real estate include changes in relation to tax and landlord/tenant, environmental protection and safety and planning laws, as well as land use and building regulation standards.

If these laws and regulations are changed, or new obligations imposed, property development and investment may become more difficult or costly, and therefore have an adverse effect on the income from, and value of, any properties owned by the Group, including those in which it holds an interest through co-investment vehicles. Additionally, any new laws may be introduced which may be retrospective and affect existing planning consents.

In addition, the imminent adoption of the Community Infrastructure Levy may increase the costs of development.

Recent legal and regulatory changes have addressed the containment and management of asbestos in buildings, access for disabled persons, and provisions for the measurement and reporting of the energy efficiency of buildings.

Any of the Group's properties may be compulsorily purchased by a public authority

Any property in the United Kingdom may at any time be compulsorily acquired by a public authority possessing compulsory purchase powers, including local authorities and statutory undertakers (such as electricity, gas, water and railway undertakers) if it can demonstrate that the acquisition is necessary or desirable for the promoter's statutory functions or in the public interest.

If an order is made in respect of all or any part of a property, compensation is generally payable on a basis equivalent to the open market value of the owners' proprietary interests in the property to be purchased at the time of such purchase, taking account of diminution in value of any retained land and other adverse impacts of the compulsory purchase. There is often a delay between the compulsory purchase of a property and payment of compensation. However, there is no guarantee as to the amount or timing of the compensation received in connection with any compulsory purchase order.

If the Group suffers losses for which it is uninsured, it may be forced to obtain additional financing to repair or rebuild the damaged asset or it could lose the value of the damaged asset altogether

The Group does not have insurance coverage for certain types of catastrophic losses, which are not insurable or for which economically reasonable insurance is unavailable. In addition, there can be no guarantee that the Group's current insurance coverage is sufficient to fully cover the types of losses that are insured, or that such coverage will not be cancelled or become unavailable on economically reasonable terms in the future. If the Group were to suffer damage to an asset for which it was uninsured, it may be forced to obtain additional financing, repair or rebuild the damaged asset or lose the value of the damaged asset altogether.

The Group's co-investments carry risks

A significant proportion of the properties managed by the Group (approximately 30 per cent. of gross asset value as at 31 December 2013) are held through co-investment vehicles in which the Company holds a significant minority equity interest. These vehicles pose some risks to the Group, including risks relating to:

• the lack of strategic control and decision-making in relation to those vehicles, which can restrict the Group's ability to control strategy for the vehicles and for its own portfolio;
• the variability of the management fees paid by those vehicles to the Group, which is subject to factors outside the Group's control; and
• the limit on the liquidity of the Group's holdings in these vehicles.

Control and decision-making

The Group is a manager of USAF and of the London co-investment vehicles, which gives it day to day management and control of the properties held by those vehicles. However, significant decisions are decided by the joint venture partners equally, or, in the case of USAF, decided by an Advisor's Committee. As a result, at a strategic level, the Group does not exert control over the co-investment vehicles, which means that the Group's strategy and plans for a particular asset held by a co-investment vehicle may not be implemented. This may negatively impact the ability to take strategic decisions regarding the operation, management or sale of such assets, which may decrease the value of the assets held within the co-investment vehicle and the Group's results of operations. Disagreements with the London-based co-investment vehicles could lead to dead-lock and potential dissolution of the vehicles. In addition, certain of the Group's co-investment vehicles are for fixed terms. This structure requires that an active decision be made by joint venture partners to either continue or terminate the vehicle. There can, however, be no assurance that the joint venture partners will agree to a continuation or a liquidation of such vehicles, which could result in increased cost for the Group.

In addition, the co-investment vehicles can have a negative impact on the Group's strategy in relation to its own portfolio. Under the terms of the USAF Pipeline Agreement, the Group must offer to sell all of its recently completed direct let assets to USAF, which USAF is obliged to purchase under certain circumstances. As a result, USAF could, theoretically, purchase much of, or a significant percentage of, the development pipeline of the Group. Although the Group does not expect this to be the case, there can be no assurances that the USAF Pipeline Agreement may not end up transferring assets to USAF.

Management fees

Fees received by the Group as property and asset manager of USAF are calculated in part by reference to the value of the assets and cash held by USAF. As a result, these management fees are dependent upon a variety of factors outside the Group's control, including the value of the properties in USAF's portfolio, calls for cash or assets in the portfolio (for example, if a holder calls for a redemption and USAF is unable to find a buyer for the units and therefore must sell assets to return cash to the holder), and other variables outside the Group's control. In addition, if the Group was removed as asset manager or investment manager in USAF or another co-investment vehicle, it would cease to receive asset management or investment management fees. The Group received approximately £10.6 million in such fees in the year ended 31 December 2013.

Liquidity risk

The Group's holdings in co-investments vehicles is very illiquid. As a result, it will be difficult for the Group to exit these vehicles. In relation to USAF, although unit holders are entitled to require USAF to redeem units such process can take a significant amount of time, since USAF is required to find a buyer for the units before redeeming them. There is no guarantee that any such buyer exists or if it will be willing to pay the amount that the Group requires to sell the units. If no buyer is available, such redemptions can prove costly for USAF itself, since USAF may be required to sell property to fund the redemption request, which may have a negative impact on the value of the Group's remaining holding in USAF, and may also have a negative effect on the management fees paid by USAF to the Group.

Changes in the Group's tax status or to tax legislation may affect the Company's ability to fulfil its commitments

Tax rules and their interpretation may change. Any change to the tax status of any member of the Group or to the Group's co-investment vehicles or to taxation legislation or its interpretation may affect the Company's ability to realise income and a return on any disposal of investments. Reduced income and capital returns on investments may have an adverse effect on the Group's results of operations and financial position.

There is a risk of accidents causing personal injury at premises owned or managed by the Group, which could result in litigation against the Group

There is a risk of accidents at premises owned by the Group, which could result in personal injury to tenants, people visiting the premises, employees, contractors or members of the public. The Group has approved health and safety policies and procedures applicable to all its locations. In addition, the Group has public liability insurance in place, which the Directors consider provides an adequate level of protection against third party claims. Should an accident attract publicity or be of a size or nature that is not adequately covered by insurance, the Group could face significant costs, and the Group's ability to put in place public liability insurance cover in the future may also be adversely affected.

The Group's reputation could be damaged

The Group's reputation and brand is important to its business, both with students and their parents and with the Universities with which the Group has relationships. The Group's reputation could be damaged by a number of factors, including health and safety failings and misconduct or fraud of the Group's staff or third party contractors. Any damage to the Group's reputation could result in a reduction in occupancy level or the Group's ability to maintain and/or increase rents, which could have a negative impact on property valuations or have an adverse impact on operations.

If the Group does not succeed in attracting, developing and retaining skilled personnel, the ability of the Group to deliver its business strategy may be reduced

The Group is dependent on members of its senior management team and a flexible, highly skilled and wellmotivated workforce and believes its future success will depend in part on its ability to attract, retain and motivate highly skilled management and personnel. Although measures are in place to reward and retain key individuals and to protect the Group from the impact of excessive staff turnover, the Directors cannot give assurances that the Directors, senior managers and other key employees will remain with the Group. If the Group fails to staff its operations appropriately, or loses one or more of its key senior executives and fails to replace them in a satisfactory and timely manner, its business, financial condition and results of operations may be adversely affected. Likewise, if the Group does not succeed in attracting, developing and retaining skilled personnel, the ability of the Group to deliver its business strategy may be reduced.

Risks relating to the Ordinary Shares and the Issue

Tax risk

Any change in current tax law or practice could adversely affect holders of Ordinary Shares. Statements in this document concerning the taxation of holders of Ordinary Shares are based on current UK tax law, US tax law and published HMRC practice, as applicable, as at the date of this document, any of which is subject to change, possibly with retrospective effect.

Overseas Shareholders may not be eligible to participate in the Issue

Securities laws of certain jurisdictions may restrict the Company's ability to allow participation by Overseas Shareholders in the Firm Placing, the Placing and the Open Offer. In particular, holders of Ordinary Shares who are located in the United States may not be able to exercise their pre-emption rights unless an exemption from the registration requirements is available under the Securities Act. The New Ordinary Shares will not be registered under the Securities Act. Securities laws of certain other jurisdictions may restrict the Company's ability to allow participation by Shareholders in such jurisdictions in any future issue of shares carried out by the Company.

There is no public market for the Ordinary Shares in the United States or elsewhere outside the United Kingdom

There is currently no public market for the Ordinary Shares, including the New Ordinary Shares, in the United States or elsewhere outside the United Kingdom. None of the Ordinary Shares, Open Offer Entitlements or any other securities mentioned in this document have been, or will be, registered under the Securities Act, any state securities laws of the United States or the securities laws of any country other than the United Kingdom and will be subject to significant restrictions on resale in the United States. The Company does not intend to apply for the listing of the Ordinary Shares on a securities exchange in the United States or elsewhere outside the United Kingdom. As a consequence, an active trading market is not expected to develop for the Ordinary Shares outside the United Kingdom and investors outside the United Kingdom may not be able to sell them at an acceptable price or at all.

The price of Ordinary Shares may fluctuate

The Company's share price has fluctuated, and may continue to fluctuate. The factors which may affect the Company's share price include but are not limited to:

• the Group's expected and actual performance and the performance of the real estate and housing market and the student accommodation industry in general;
• the level of activity amongst its customers in the areas in which the Group operates;
• speculation regarding mergers or acquisitions involving the Group or major divestments by the Group;
• speculation regarding the intentions of the Company's major Shareholders or significant sales of shares by such Shareholders;
• the performance of the Group's competitors;
• Government policy in respect of planning and the higher education sector; and
• the status of the Group's financing or re-financing activities, including its compliance with any financial covenants in its facilities in the longer term.

Furthermore, the Company's share price may fall in response to market appraisal of its current strategy or if the Group's operating results or prospects from time to time are below the prior expectations of market analysts and investors. In addition, stock markets have, from time to time, experienced significant price and volume fluctuations that have affected the market price of securities and which may be unrelated to the Group's operating performance and prospects.

No guarantee can be made that dividends will be paid on the Ordinary Shares in the future or that, if paid, such dividend will be at a level comparable to dividends paid by UNITE in the past

The Company's current policy is to pay 33 per cent. of its net portfolio contribution as dividends. However, the Directors' ability to declare dividends in the future will be a function of the Company's profitability and the extent to which, as a matter of law, the Company has sufficient distributable reserves out of which any proposed dividend may be paid. Accordingly, no guarantee can be made that any dividend will be paid in the future or that, if paid, such dividend will be at a level comparable to dividends paid by UNITE in the past.

Future sales of Ordinary Shares may depress the market price of Ordinary Shares

Sales of a substantial number of Ordinary Shares in the public market after the Issue, whether from investors who acquired New Ordinary Shares in the Firm Placing, the Placing or Open Offer or from pre-existing Shareholders, or the perception that these sales might occur, could adversely depress the market price of the Ordinary Shares.

Possible issues of additional Ordinary Shares may depress the market price of Ordinary Shares

The Company may issue additional shares in the future, which may adversely affect the market price of the outstanding Ordinary Shares. The Company has no current plans for a subsequent offering of its shares or of rights or invitations to subscribe for shares. However, it is possible that the Company may decide to issue additional shares in the future. An additional offering of shares by the Company or the public perception that an offering may occur, could have an adverse effect on the market price of the Company's outstanding Ordinary Shares.

Ordinary Shares may not be a suitable investment for all recipients of this document

Ordinary Shares may not be a suitable investment for all the recipients of this document. Before making a final decision, investors are advised to consult an appropriate independent investment adviser authorised under the FSMA, or an equivalent authority, who specialises in advising on the acquisition of shares and other securities.

The value of the Ordinary Shares and the income received from them can go down as well as up and investors may get back less than their original investment.

In the event of a winding-up of the Company, the Ordinary Shares will rank behind any liabilities of the Company and therefore any return for Shareholders will depend on the Company's assets being sufficient to meet the prior entitlements of creditors.

The market price of the Ordinary Shares may not reflect the underlying value of the assets held by the Group

There is no guarantee that the market price of the Ordinary Shares will fully reflect the underlying value of the assets held by the Group. As well as being affected by the underlying value of the assets held, the market value of the Ordinary Shares will, amongst other factors, be influenced by their dividend yield and the supply and demand for the Ordinary Shares in the market. As such, the market value of the Ordinary Shares may vary considerably from the underlying value of the Group's assets. The market price of the Ordinary Shares may also fall, and remain below, the Issue Price.

The proportionate interests of Shareholders in the Company will be reduced by the Firm Placing, and will be further reduced to the extent that Shareholders do not take up the offer of Open Offer Shares under the Open Offer or the Company engages in future sales of Ordinary Shares

Following the issue of the New Ordinary Shares pursuant to the Issue, Qualifying Shareholders (including Shareholders in the United States and any other Restricted Jurisdiction and other jurisdictions where participation is restricted for legal, regulatory or other reasons) who do not take up any of their Basic Entitlement (and who do not take up any Excess Shares under the Excess Application Facility) will suffer a dilution of 12.2 per cent. to their respective economic interests in the Company. If a Qualifying Shareholder subscribes for his Basic Entitlement in full he will suffer a dilution of 3.8 per cent. as a result of the Firm Placing. Future equity issues by UNITE could have an adverse effect on the market price of the Ordinary Shares and may also reduce the percentage ownership and voting interests of the Shareholders. Moreover, UNITE may issue new shares that have rights, preferences or privileges senior to those of the Ordinary Shares.

Shareholders with a registered address outside the UK may not be able to participate in the Issue

Securities laws of certain jurisdictions may restrict the Company's ability to allow participation by Shareholders in the Issue. In particular, the exercise of Open Offer Entitlements may not be available to Shareholders with a registered address in any country outside the UK. Subject to certain limited exceptions, non-UK Shareholders are not able to exercise Open Offer Entitlements granted in respect of Open Offer Shares under the Open Offer and will not receive the economic benefit (if any) of such entitlements. Their proportionate ownership interests in the Company will therefore be diluted. Non-UK Shareholders, or Qualifying Shareholders who have registered addresses outside the UK, or who are citizens of or resident in counties other than the UK (including, without limitation, the United States or any other Restricted Jurisdiction) should consult their professional advisers as to whether they require any governmental or other consent or need to observe any other formalities to enable them to receive Open Offer Shares or to take up their entitlements under the Open Offer.

The Company's corporate disclosure may differ from the disclosure made by similar companies in the United States

The Company's corporate disclosure may differ from the disclosure made by similar companies in the United States. Publicly available information about the issuers of securities listed on the London Stock Exchange differs from and, in certain respects, is less detailed than the information that is regularly published by or about listed companies in the United States. In addition, regulations governing the London Stock Exchange may not be as extensive in all respects as those in effect on United States markets.

The Company's financial statements are not prepared in accordance with US GAAP

Financial Statements prepared under IFRS differ from those prepared under US GAAP in a number of respects including, but not limited to, revenue recognition, share option compensation, accounting for business combinations and acquisitions of intellectual property and accounting for capital instruments.

Potential investors are advised to consult their own professional advisers as to the significance of these differences. In making an investment decision, investors must rely upon their own examination of the Company, the terms of the offering and the financial information. Potential investors should consult their own professional advisors for an understanding of the differences between IFRS and US GAAP, and how those differences might affect the financial information herein.

The ability of Overseas Shareholders to bring actions or enforce judgments against UNITE or the Directors may be limited

The ability of an Overseas Shareholder to bring an action against UNITE may be limited under law.

UNITE is a public limited company incorporated in England and Wales. The rights of holders of Ordinary Shares are governed by English law and by UNITE's Articles. These rights differ from the rights of shareholders in typical US corporations and some other non-UK corporations. An Overseas Shareholder may not be able to enforce a judgment against some or all of the Directors and executive officers. The majority of the Directors and executive officers are residents of the UK. Consequently, it may not be possible for an Overseas Shareholder to effect service of process upon the Directors and executive officers within the Overseas Shareholder's country of residence or to enforce against the Directors and executive officers judgments of courts of the Overseas Shareholder's country of residence based on civil liabilities under that country's securities laws. There can be no assurance that an Overseas Shareholder will be able to enforce any judgments in civil and commercial matters or any judgments under the securities laws of countries other than the UK against the Directors or executive officers who are residents of the UK or countries other than those in which judgment is made. In addition, English or other courts may not impose civil liability on the Directors or executive officers in any original action based solely on foreign securities laws brought against UNITE or the Directors in a court of competent jurisdiction in England or other countries.

IMPORTANT INFORMATION

1. General

Investors should only rely on the information contained in this document. No person has been authorised to give any information or make any representations other than those contained in this document and, if given or made, such information or representation must not be relied upon as having been so authorised by UNITE, the Directors or J.P. Morgan Cazenove, Numis or Jefferies. No representation or warranty, express or implied, is made by J.P. Morgan Cazenove, Numis or Jefferies as to the accuracy or completeness of such information, and nothing contained in this document is, or shall be relied upon as, a promise or representation by J.P. Morgan Cazenove, Numis or Jefferies as to the past, present or future. Without prejudice to any legal or regulatory obligation on UNITE to publish a supplementary prospectus pursuant to section 87G of the FSMA and Prospectus Rule 3.4, neither the delivery of this document nor Admission shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Group taken as a whole since the date of this document or that the information in it is correct as of any time after the date of this document.

The Company will update the information provided in this document by means of a supplement hereto if a significant new factor, material mistake or inaccuracy arises or is noted relating to the information included in this document. Any supplementary prospectus will be subject to approval by the FCA and will be made public in accordance with the Prospectus Rules.

UNITE will comply with its obligation to publish supplementary prospectuses containing further updated information required by law or by any regulatory authority but assumes no further obligation to publish additional information.

The contents of this document are not to be construed as legal, financial or tax advice. Each prospective investor should consult a legal adviser, an independent financial adviser duly authorised under the FSMA or a tax adviser for legal, financial or tax advice in relation to any investment in or holding of Ordinary Shares. Each prospective investor should consult with such advisers as needed to make its investment decision and to determine whether it is legally permitted to hold shares under applicable legal investment or similar laws or regulations. Investors should be aware that they may be required to bear the financial risks of this investment for an indefinite period of time.

Investing in and holding the Ordinary Shares involves financial risk. Prior to investing in the Ordinary Shares, investors should carefully consider all of the information contained in this document, paying particular attention to the section entitled Risk Factors on pages 17 to 27 of this document. Investors should consider carefully whether an investment in the Ordinary Shares is suitable for them in light of the information contained in this document and their personal circumstances.

J.P. Morgan Cazenove, Numis or Jefferies and their respective affiliates may have engaged in transactions with, and provided various investment banking, financial advisory and other services to the Company and any of its affiliates, for which they would have received customary fees. J.P. Morgan Cazenove, Numis, or Jefferies and their respective affiliates may provide such services to the Company and any of its affiliates in the future.

2. US considerations

Available information

For so long as any of the Ordinary Shares are in issue and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, the Company will, during any period in which it is not subject to Section 13 or 15(d) under the US Securities Exchange Act of 1934 (the "Exchange Act"), nor exempt from reporting under the Exchange Act pursuant to Rule 12g3-2(b) thereunder, make available to any holder or beneficial owner of an Ordinary Share, or to any prospective purchaser of an Ordinary Share designated by such holder or beneficial owner, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act upon the written request of such holder or beneficial owner.

Service of process and enforcement of civil liabilities

The Company is incorporated under the laws of England and Wales. All of the Directors and officers of the Company and certain other persons named in this document reside outside of the United States, and all or a significant portion of the assets of the Directors and officers of the Company and certain other persons named in this document and substantially all of the Company's assets are located outside of the United States. As a result, it may not be possible to effect service of process within the United States upon such persons or to enforce against them or against such persons in US courts, judgments predicated upon the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability of certain civil liabilities under US federal securities laws in original actions in English courts, and, subject to certain exceptions and time limitations, English courts will treat a final and conclusive judgment of a US court for a liquidated amount as a debt enforceable by fresh proceedings in the English courts.

ERISA

The Company will use commercially reasonable efforts to restrict the ownership and holding of its Ordinary Shares to the extent necessary so that none of its assets will constitute "plan assets" under the US Employee Retirement Income Security Act of 1974, as amended ("ERISA").

If any Ordinary Shares are owned directly or beneficially by a person believed by the Company to be an investor that is subject to ERISA or US Internal Revenue Code Section 4975 (a "Plan Investor"), where the Company reasonably believes that the Company itself may be considered to hold "Plan Assets" under ERISA as a result of such Plan Investor owning such Ordinary Shares, the Company may give notice to such person requiring him either (i) to provide the Company within 30 days of receipt of such notice with sufficient satisfactory documentary evidence to satisfy the Company that such person is not a Plan Investor or (ii) to sell or transfer his Ordinary Shares to a person qualified to own the same and is not a Plan Investor within 30 days, and within such 30 days to provide the Company with satisfactory evidence of such sale or transfer.

3. Presentation of financial information

Unless otherwise stated, the historical consolidated financial information relating to the Group included in Appendices I, II and III of this document has been prepared in accordance with IFRS. The significant accounting policies are set out within note 1 of the Group's historical consolidated financial information in Appendix I of this document.

4. Presentation of Group and Wider Group information

UNITE operates its business through certain subsidiary undertakings. It also has interests in co-investment vehicles including USAF. Certain financial information is presented on a see-through basis.

5. Adjusted financial information

The Group's financial information presents the results of the Group on both an IFRS and an adjusted basis. The adjusted financial information has been prepared in accordance with the EPRA guidelines and is intended to give a better understanding of the Group's underlying performance. The minority interest that is excluded in the Group's adjusted financial information is related to the Group's investment in its holding in USAF Guernsey (Feeder) Limited. EPRA earnings, adjusted net assets, EPRA earnings per share, adjusted net asset value per share and other adjusted net asset based statistics are not measures of performance under IFRS, should not be considered as alternatives to measures based on IFRS and may not be computed in the same manner as similarly titled measures presented by other companies. The Directors have included those measures because they use them to measure business performance and because IFRS does not reflect the impact of items that the Directors have determined are significant or those items adjusted in accordance with EPRA.

The Group's EPRA earnings uses its IFRS reported profit after tax as its starting point and eliminates items in accordance with EPRA, which excludes the impact of property disposals, changes in value of investment property and interest rate derivatives, minority interests and costs associated with the setup of joint ventures and debt exit costs and any deferred tax on these items. Similarly, the Group's adjusted net asset value and other net asset based statistical disclosures exclude the change in fair value of financial derivatives and the deferred tax in respect of property revaluation and financial derivative valuations.

Further detail of the adjustment and presentation of financial information is set out in Part VI (Operating and financial review of UNITE).

6. Rounding

Percentages and certain amounts included in this document have been rounded for ease of presentation. Accordingly, figures shown as totals in certain tables may not be the precise sum of the figures that precede them.

7. Currencies

Unless otherwise indicated in this document, all references to:

• "sterling", "£" or "pence" are to the lawful currency of the UK;
• "US dollars", "dollars", "US\$" or "cents" are to the lawful currency of the United States; and
• "Euro" or "€" are to the lawful currency of the European Union (as adopted by certain Member States).

Unless otherwise indicated, the financial information contained in this document has been expressed in sterling. The Group presents its financial statements in sterling.

8. Forward-looking statements

Certain statements contained in this document, including those in the sections headed "Summary", "Risk Factors", "Letter from the Chairman", "Information on UNITE"; and "Operating and Financial Review of UNITE" constitute "forward-looking statements". In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "projects", "aims", "plans", "predicts", "prepares", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Investors should specifically consider the factors identified in this document, which could cause actual results to differ before making an investment decision. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of UNITE, and/or the Group, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which UNITE, and/or the Group will operate in the future. Such risks, uncertainties and other factors are set out more fully in the section of this document headed "Risk Factors". These forward-looking statements speak only as at the date of this document. Except as required by the FCA, the London Stock Exchange or applicable law (including as may be required by the UKLA Rules), UNITE expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this document to reflect any change in UNITE's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

The statements above relating to forward-looking statements should not be construed as a qualification on the opinion of UNITE as to working capital set out in paragraph 8 of Part XII (Additional Information) of this document.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future or are beyond the Group's control. Forward-looking statements are not guarantees of future performance. The Company's actual results of operations, financial condition and the development of the business sector in which the Group operates may differ materially from those suggested by the forward-looking statements contained in this document including, but not limited to, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, currency changes, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which the Group and its affiliates operate. In addition, even if the Company's actual results of operations, financial condition and the development of the business sector in which the Group operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods.

Prospective investors are advised to read, in particular, the following parts of this document for a more complete discussion of the factors that could affect the Group's future performance and the industry in which the Group operates: the section entitled Risk Factors on pages 17 to 27 of this document, Part I (Letter from the Chairman), Part IV (Information on UNITE), Part VI (Operating and Financial Review of UNITE) and Appendices 1, 2 and 3 (Historical Consolidated Financial Information relating to the Group). In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this document may not occur.

The forward-looking statements contained in this document speak only as of the date of this document. The Company, the Directors, J.P. Morgan Cazenove, Numis and Jefferies expressly disclaim any obligations or undertaking to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable law or regulation, the Prospectus Rules, the Listing Rules or the Disclosure and Transparency Rules.

9. Market, economic and industry data

This document contains information regarding the Group's business and the industry in which it operates and competes, which the Company has obtained from various third party sources. Where information contained in this document originates from a third party source, it is identified where it appears in this document together with the name of its source. Such third party information has been accurately reproduced and, so far as UNITE is aware and is able to ascertain from information published by the relevant third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. The Company has obtained the third party data in this document from industry studies, forecasts, reports, surveys and other publications published or conducted by:

• UCAS;
• HESA;
• Knight Frank;
• Jones Lang LaSalle; and
• CBRE.

10. No incorporation of website information

The contents of UNITE's website do not form part of this document and investors should not rely on them.

11. Definitions

Certain defined terms used in this document, including capitalised terms, have the meanings ascribed to them in Part XIII (Definitions) of this document.

12. Dates and times

All references to time are to London time unless stated otherwise.

References to the 2012/13 academic year (or simply 2012/13) or equivalent means a reference to the academic year running from September 2012 until May 2013 (or equivalent).

13. General notice

Nothing contained in this document is intended to constitute investment, legal, tax, accounting or other professional advice. You should consult with an appropriate professional adviser for specific advice rendered on the basis of your situation.

STATISTICS

Number of Existing Ordinary Shares	176,658,479
Aggregate number of New Ordinary Shares to be issued pursuant to the Issue	24,500,000
Enlarged Share Capital immediately following completion of the Issue	201,158,479
Percentage of the Enlarged Share Capital subject to the Issue	12.2%
Number of Firm Placed Shares to be issued pursuant to the Firm Placing	7,675,383
Number of Open Offer Shares to be issued pursuant to the Placing and Open Offer	16,824,617
Issue Price per New Ordinary Share	410 pence
Discount to the Closing Price on 5 March 2014	9.3%
Gross proceeds of the Issue	approximately £100 million
Estimated net proceeds of the Issue receivable by the Company	approximately £96 million
Estimated expenses of the Issue	approximately £4 million

Note:

1. These expenses comprise estimated underwriting commissions and other fees and expenses of the Issue including VAT, payable by the Company.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

	20141,2
Record Date for entitlements under the Open Offer	6.00 p.m. on 5 March
Announcement of the Issue, publication and posting of this document and the Non-CREST Application Forms	6 March
Ex-entitlement date for the Open Offer	6 March
Basic Entitlements and Excess CREST Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders in CREST	As soon as posible after 8.00 a.m. on 7 March
Recommended latest time for requesting withdrawal of Basic Entitlements and Excess CREST Open Offer Entitlements from CREST	4.30 p.m. on 18 March
Latest time and date for depositing Open Offer Entitlements into CREST	3.00 p.m. on 19 March
Latest time and date for splitting of Non-CREST Application Forms (to satisfy bona fide market claims)	3.00 p.m. on 20 March
Latest time and date for receipt of completed Non-CREST Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction	11.00 a.m. on 24 March
Admission and dealings commence in the New Ordinary Shares	8.00 a.m. on 27 March
CREST members' accounts credited in respect of New Ordinary Shares in uncertificated form by	8.00 a.m. on 27 March
Despatch of definitive share certificates for New Ordinary Shares in certificated form by	4 April
Notes:

1. All references in this document to times are to London time.

2. Each of the above dates is subject to change at the absolute discretion of the Company, J.P. Morgan Cazenove, Numis and Jefferies. Any changes will be announced via a Regulatory Information Service.

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS

Directors	Philip White CBE Mark Allan Joe Lister Richard Simpson Richard Smith	(Non-executive Chairman) (Chief Executive) (Chief Financial Officer) (Managing Director of Property) (Managing Director of
	Manjit Wolstenholme	Operations) (Senior Independent Director and Chair of Audit Committee)
	Sir Tim Wilson	(Non-executive Director and Chairman of the Nominations Committee)
	Richard Walker	(Non-executive Director and Chairman of the Remuneration and Health and Safety Committees)
	Andrew Jones	(Non-executive Director)
	Elizabeth McMeikan	(Non-executive Director)
Company Secretary	Christopher Szpojnarowicz
Registered and Head Office	The Core 40 St Thomas Street Bristol BS1 6JX
Joint Sponsors, Joint Bookrunners and Joint Brokers	J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP	Numis Securities Limited 10 Paternoster Square London EC4M 7LT
Joint Bookrunner	Jefferies International Limited Vintners Place 68 Upper Thames Street London EC4V 3BJ
Legal advisers to the Company as to English law	Osborne Clarke One London Wall London EC2Y 5EB
Legal advisers to the Company as to US law	Proskauer Rose LLP Ninth Floor Ten Bishops Square London E1 6EG
Legal advisers to the Joint Sponsors, Joint Brokers and Joint Bookrunners as to English and US law	Simmons & Simmons LLP CityPoint One Ropemaker Street London EC2Y 9SS
Auditors	KPMG Audit Plc 15 Canada Square London E14 5GL
Registrar	Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ

Receiving Agent Computershare Investor Services PLC Corporate Actions Projects Bristol BS99 6AH

PART I

LETTER FROM THE CHAIRMAN

THE UNITE GROUP PLC

(Registered in England and Wales under the Companies Act 1985 with registered number 03199160)

Philip White CBE	(Non-executive Chairman)	The Core
Mark Allan	(Chief Executive)	40 St Thomas Street
Joe Lister	(Chief Financial Officer)	Bristol
Richard Simpson	(Managing Director of Property)	BS1 6JX
Richard Smith	(Managing Director of Operations)
Manjit Wolstenholme	(Senior Independent Director and Chair of Audit
	Committee)
Sir Tim Wilson	(Non-executive Director and Chairman of the
	Nominations Committee)
Richard Walker	(Non-executive Director and Chairman of the
	Remuneration and Health and Safety Committees)
Andrew Jones	(Non-Executive Director)
Elizabeth McMeikan	(Non-executive Director)

6 March 2014

To Shareholders, optionholders and persons with information rights Dear Shareholder,

PROPOSED FIRM PLACING AND PLACING AND OPEN OFFER OF 24,500,000 NEW ORDINARY SHARES AT 410 PENCE EACH

1. Introduction

On 6 March 2014, UNITE announced a share issue to raise gross proceeds of £100 million (approximately £96 million net of expenses) by way of an underwritten Firm Placing and Placing and Open Offer. The Firm Placing and Placing and Open Offer will comprise a total of 24,500,000 New Ordinary Shares at a price of 410 pence per New Ordinary Share, representing a 9.3 per cent. discount to the Closing Price of 452 pence per Existing Ordinary Share on 5 March 2014 (being the last Business Day prior to the date of the announcement of the Issue).

The purpose of the Firm Placing and Placing and Open Offer is to invest further in strong university locations in two ways: (i) through highly selective development activity in strong regional university towns and cities, and (ii) through the acquisition of further units in the UNITE Student Accommodation Fund (USAF), a fund managed by UNITE which the Board believes has a high quality portfolio and excellent growth prospects. The transaction is a continuation of the Group's existing strategy and will allow it to take advantage of cyclically low development costs, a low cost of capital in USAF and a positive outlook for demand and rental growth for the student accommodation sector.

This letter sets out the background to, and the reasons for, the Firm Placing and Placing and Open Offer and explains why the Board believes the Firm Placing and Placing and Open Offer are in the best interests of the Company and its Shareholders as a whole.

Your attention is drawn to paragraph 4 of Part II (Terms and Conditions of the Open Offer) of this document, which sets out the actions to be taken by Shareholders.

2. Background to and reasons for the Firm Placing and Placing and Open Offer

The UNITE Group plc is the UK's leading developer and manager of student accommodation. It operates in 23 key university towns and cities across England and Scotland and for the 2013/14 academic year is operating approximately 41,000 beds.

Building on its market leading position, since early 2010 the Group has been pursuing a clear, consistent strategy with three main elements:

• to grow recurring profits and cashflow through a combination of rental growth, new openings and cost savings while building an increasingly strong brand;
• to enhance portfolio quality through a programme of highly selective developments, focusing on London and strong regional locations, together with the disposal of non-core assets; and
• to strengthen the Group's capital base.

This strategy has been successful. Recurring profits, measured as EPRA earnings per share, have increased from -2.8 pence for 2009 to 13.6 pence in 2013; since the beginning of 2010 on a see-through basis the Group has invested £360 million in new development activity in strong locations and realised £164 million from non-core asset sales; and the Group has strengthened its capital base significantly, reducing its seethrough loan-to-value ratio to 49 per cent. as at 31 December 2013 (from 56 per cent. as at 31 December 2009), extending its see-through average loan maturity to 7.1 years from 4.2 years over the same period and reducing its see-through cost of debt to 4.7 per cent. from 5.5 per cent.

Over this four year period, the Group has delivered an average total return on equity of 10.4 per cent. per annum and it aims to continue delivering low double digit total returns on NAV each year from a balance of rental growth, income and development profits. The Group remains particularly focused on growing recurring profits sustainably; its EPRA EPS Yield on NAV has increased from 0.7 per cent. in 2010 to 3.9 per cent. for 2013 and it continues to target EPRA EPS Yield on NAV of 4.5 per cent. by 2015.1

The Group intends to reduce its gearing towards 40 per cent. LTV over time, as capital growth and development profits increase the equity base of the business while, at the same time, continuing to invest selectively in development opportunities that meet the Group's criteria.

The fundamentals of the student accommodation market remain attractive. Demand for university places remains high, with approximately 181,000 unplaced applicants2 for the current academic year 2013/14, and accommodation supply remains constrained with universities only able to house approximately 40 per cent. of the students for whom they seek to guarantee accommodation. The market outlook could improve further following the Government's announcement in December 2013 that it intends to remove the cap on student numbers with effect from 2015, which the Group has yet to factor into its forecasts.

In a continuation of its existing balanced returns strategy, the Group is seeking to raise gross proceeds of £100 million (£96 million net of expenses) by way of the Firm Placing and Placing and Open Offer to invest further in strong UK university locations. Half of the capital raised will be used to fund targeted development activity in selective regional locations and half will be used to acquire further units in USAF. Following this acquisition, UNITE's share of USAF will increase from 16.4 per cent. to approximately 22 per cent.

The investment into selective regional development activity allows the Group to benefit from regional development costs being at or near to cyclical lows, thereby enhancing achievable returns. The investment in new USAF units will allow the Group to increase its exposure to an established, well positioned and strongly performing (and predominantly regional) portfolio that benefits from a low cost capital structure. It also affords the Group greater future flexibility to recycle capital into areas where the Board believes returns to be most attractive and improves optionality as regards potential future REIT conversion.

The Board expects the Issue to be accretive to both EPS and NAV per share within two years and significantly accretive within three to four years without near term dilution. Importantly, the deployment of proceeds will increase the Group's recurring profits further as a result of accretive income returns (both from USAF and new developments) and the Group's operational gearing.

¹ These statements of expected value and earnings enhancement relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the expected value and earnings enhancement referred to may not be achieved, or those achieved could be materially different from those targeted. The statements in this document should not be construed as a profit forecast or interpreted to mean that the Group's NAV and earnings in any future period would necessarily match or be greater than or be less than those for the year ended 31 December 2013 or any other period.

² UCAS. 2013 Application Cycle: End of Cycle report. UCAS Analysis and Research. December 2013.

Regional development

In June 2013, the Group raised £50.2 million through a placing of new Ordinary Shares to fund an acceleration of regional development activity in a highly targeted way at that time. The Board stated that attractive development opportunities were emerging in a highly select number of regional locations as a result of a significant demand/supply imbalance coupled with land and build costs being at historic lows. The Board's stated expectation was that the targeted regional development programme would comprise approximately 2,500 beds at an estimated total development cost of approximately £125 million and that Shareholders would benefit from NAV accretion from 2014 onwards and from EPS accretion from 2015 onwards as projects were completed and let. Achievable returns were estimated at 9.5–10 per cent. yield on cost.

Approximately 70 per cent. of the equity capital raised in June 2013 has now been committed to three new projects in Newcastle, Edinburgh and Aberdeen comprising 1,555 beds and the remainder allocated to a further project in respect of which the Group is in exclusive negotiations. The Group's experience with these projects is supportive of its target returns of 9.5–10 per cent. yield on cost and has reinforced the Board's positive view of the regional development opportunity.

Based on recent evidence, and in light of the Group's long track record developing student accommodation, the Board believes that development costs in the regions are at or close to cyclical lows and that this situation is unlikely to persist beyond the next 12 to 18 months. The Board is therefore keen to position the Group to benefit meaningfully from these favourable market conditions during that time.

The Board expects that the half of the net proceeds of the Issue which have been earmarked for regional development will be committed to projects during the remainder of 2014 and that those projects will be completed in 2017. The Group is monitoring a large number of prospective opportunities in approximately 10 different towns and cities and is actively exploring six to eight of these potential projects in strong regional locations which are supportive of its objectives and target returns. Leverage is typically applied to the Group's development projects at 60 per cent. loan to cost, which would equate to an estimated total development cost of approximately £130 million.

Once the additional capital has been committed, the Group is planning to commit a similar amount of internally generated funds to further development projects, provided that market conditions remain supportive. The Group retains a number of different options for providing this capital, including retained profits, proceeds from planned future disposals of non-core assets or sales of a small element of its USAF holding. Leverage on these additional development projects is likely to be applied at 60 per cent. loan to cost and, taken together, the Board believes that the half of the net proceeds of the Issue allocated to further development projects, combined with the Group's retained and subsequently generated capital will provide sufficient resources to capitalise on the opportunity it sees at this time.

The Group's regional development activity is undertaken on balance sheet and is in addition to its London development activity, which is undertaken by the Group's 50/50 LSAV joint venture with GIC. LSAV is planning to invest £330 million in developing new student accommodation properties in the capital between now and 2017 and its capital is currently 60 per cent. committed and this vehicle is fully funded.

Taken together, the Group's various development activities are forecast to add significantly to earnings and NAV over the next three to four years. If the expected returns are achieved, the Group's existing secured pipeline could add 39 pence to NAV per share and 13 pence to EPS once completed (which excludes any regional development projects to be funded from the net proceeds of the Firm Placing and Placing and Open Offer).1 The Board expects the fourth project subject to exclusive negotiations to add up to 6 pence to NAV and 1 pence to EPS.

¹ These statements of expected value and earnings enhancement relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the expected value and earnings enhancement referred to may not be achieved, or those achieved could be materially different from those targeted. The statements in this document should not be construed as a profit forecast or interpreted to mean that the Group's NAV and earnings in any future period would necessarily match or be greater than or be less than those for the year ended 31 December 2013 or any other period.

USAF

USAF is an established, leading multi-investor fund set up by UNITE in December 2006. It owns a geographically diverse portfolio of income generating student accommodation assets focused on key university towns and cities and valued at £1.35 billion as at 31 December 2013. The majority of USAF's assets were developed by UNITE and benefit from high quality locations reflecting the Group's first mover advantage when developing in many of these towns and cities. 77 per cent. of USAF's portfolio is situated in cities with a Russell Group University and, as a result of its excellent locations, consistent high occupancy and rental growth, USAF has been one of the top performing funds in the IPD PPFI Specialist Fund Index over the past five years.

USAF's strategy is to remain as the leading fund for indirect institutional investment in the UK student accommodation sector; to drive portfolio performance by generating superior rental growth whilst maintaining high occupancy and managing risk; and to maintain and enhance the quality of its portfolio through asset management. USAF distributes all of its profits by way of dividends and does not take development risk.

USAF's average net initial yield was 6.6 per cent. as at 31 December 2013 and USAF's portfolio is on track for 3 per cent. rental growth and 98 per cent. occupancy for the 2014/15 academic year.

The Board believes that USAF's portfolio remains well positioned for continued strong performance due to the excellent locations of its assets and the positive demand/supply dynamics of the markets in which it is present. In addition, the Board believes that USAF's prospects have been further enhanced by recent refinancing activity which has significantly reduced its average cost and extended the average maturity of its debt facilities.

Following two separate issues of senior secured bonds in June and November 2013, USAF's weighted average loan maturity has been extended to nine years (from two years) and its weighted average cost of debt reduced to 3.7 per cent. (from 5.0 per cent.) At this level, USAF's debt structure is expected to be significantly accretive to ungeared returns from its portfolio, which average 6.6 per cent. over the last three years. Taking account of the Group's expectations of rental growth of approximately three per cent. for USAF's portfolio in 2014, the Board expects the Group to achieve an annualised income return of seven per cent. on its USAF investment and a total return on NAV of 12 to 13 per cent. over the same period excluding UNITE's fees. USAF's LTV as at 31 December 2013 was 43 per cent.

Subject to completion of the Issue, the Group intends to subscribe for approximately £48 million of new units in USAF under a subscription window which is currently open. The new units will be priced at a 2.8 per cent. premium to USAF's reported NAV per unit at 31 December 2013 and the Group will not incur SDLT on the transaction. USAF's reported NAV does not include any adjustments to mark USAF's fixed rate debt to market. As USAF's average cost of debt is lower than could be secured today, if such adjustments were reflected the price at which UNITE is acquiring new units would represent a 0.7 per cent. discount to USAF NAV as at 31 December 2013.

The Group's increased stake in USAF also affords it greater options to generate balance sheet liquidity in future if required. This liquidity can be generated either through the sale of USAF units on the secondary market, which has reasonable liquidity, or through the sale of completed properties to USAF at open market value under the USAF Pipeline Agreement that exists between the parties. This improved liquidity is expected to increase the Group's future options to recycle capital into areas where it believes prospective returns to be most attractive.

UNITE acts as manager of USAF and currently owns a 16.4 per cent. stake. Following the investment of half of the net proceeds from the Issue in acquiring new units in the fund, UNITE's stake will increase to approximately 22 per cent. By increasing its stake above 20 per cent. the Group's USAF investment is expected to be treated as a qualifying asset for REIT purposes, giving it greater optionality in terms of potential future REIT conversion. USAF intends to use the proceeds to reduce its leverage slightly and increase resources for future acquisitions either from UNITE or third parties (in respect of individual properties or portfolios).

Attractive market fundamentals

The fundamentals of the UK student accommodation market remain strong and have underpinned a resilient performance during the challenging economic environment of the past few years. For the current academic year 2013/14 there were approximately 677,000 applicants for 496,000 undergraduate university places, meaning that there were approximately 181,000 unplaced applicants.1

The number of placed applicants for the 2013/14 academic year, at 496,000, is close to the highest ever levels achieved in 2011/12. Applications for the 2014/15 academic year are encouraging and show a 4 per cent. year on year increase. These latest statistics are the result of a long period of significant, almost uninterrupted, growth in student numbers. For the 2013/14 academic year there are now 1.7 million full time students in the UK compared to 600,000 in 1991. Taking these factors together, the Directors believe that demand for UK university places remains high.

In December 2013, the Government announced its intention to remove the cap on student places in the 2015/16 academic year and to increase it in the interim by 30,000 places for the 2014/15 academic year. The Government itself forecasts that the removal of the cap could lead to an increased intake of 60,000 students, equivalent to an increase of 12 per cent. This would apply to UK and EU students as non-EU students are not subject to a cap and continue to apply to UK universities in increasing numbers.

There is a structural shortage of purpose built student accommodation in the UK, largely because new supply over the past 20 years has not kept pace with the rapid growth in student numbers outlined above. There are approximately 500,000 purpose-built bed spaces across the UK, leaving approximately 1.2 million full-time students needing to find alternative places to live.

The rate of growth in the supply of new student accommodation has fallen sharply over the last two years. This is largely as a result of a lack of available funding, both for universities and private developers. These conditions are expected to persist for the time being and UNITE expects approximately only 31,700 net additional bed spaces to be added to supply in the next three years, of which 9,200 are expected in London. Given the existing shortfall and the projected growth in student numbers, the Board considers it likely that demand will continue to exceed supply in the long term.

The Group's current portfolio, comprising both wholly owned assets and those owned through co-investment vehicles, is well placed to cater for this strong demand; the Board has forecast rental growth of three per cent. for 2014 and consider the outlook to be positive thereafter. The Group's development plans, both in London and increasingly in the regions, also present an excellent opportunity to capitalise on these strong market conditions.

3. Use of proceeds

The net proceeds from the Issue of (£96 million) will be used to invest further in strong UK university locations as follows:

• Half will be used to fund an acceleration of the Group's highly targeted regional development programme in select key university towns and cities. The Board expects this capital to be committed to new projects by the end of 2014, fully invested by 2016 and for the projects to be completed in 2017.
• Half will be used to subscribe for new units in USAF, to be issued in March 2014 and taking the Group's stake in USAF to approximately 22 per cent., above the 20 per cent. level required for its stake to be a qualifying asset for REIT purposes.

4. Current trading and prospects

On 6 March 2014, the Company announced its results for the year ended 31 December 2013. The highlights from these results are as follows:

Continued strong performance built around high levels of service

• EPRA earnings per share (EPS) of 18.0 pence (2012: 9.9 pence);

• 1 UCAS. 2013 Application Cycle: End of Cycle report. UCAS Analysis and Research. December 2013.

• EPRA EPS (pre UCC performance fee) of 13.6 pence (2012: 9.9 pence), representing a yield on opening adjusted NAV of 3.9 per cent. (2012: 3.1 per cent.). The Group contines to target a 4.5 per cent. yield by 2015;1

• Adjusted NAV per share (fully diluted) up 9.1 per cent. to 382 pence (2012: 350 pence), equating to a total return on equity (NAV growth plus dividends) of 10.5 per cent. for the year;
• Net Portfolio Contribution up 34 per cent. to £25.6 million (2012: £19.1 million);
• Final dividend of 3.2 pence per share (2012: 3.0 pence), making 4.8 pence for the full year (2012: 4.0 pence), an increase of 20 per cent.;
• Service satisfaction levels again increased to highest ever levels.

Significant, fully funded, development programme secured, underpinning attractive growth prospects

• Three projects (comprising 1,555 beds) secured under contract in strong regional locations in line with target returns, accounting for approximately 70 per cent. of the proceeds of the Group's June 2013 placing. In exclusive negotiations on a fourth project which will account for the remainder;
• LSAV pipeline 60 per cent. committed across three London projects comprising 2,350 beds;
• Secured development pipeline on track to add 39 pence per share to NAV and 13 pence to EPS by 2017 if expected returns achieved.1 Further projects where the Group is in exclusive negotiations could add an additional 6 pence to NAV per share and 1 pence to EPS.

Positive market outlook supported by encouraging reservations performance

• Reservations for 2014/15 at 64 per cent. (2013: 62 per cent.) at pricing supportive of 3 per cent. rental growth for the full year;
• UCAS applications data shows an increase in university applications of 4 per cent. year on year;
• Government decision to remove the student number cap in 2015, and increase places by 30,000 (6 per cent.) in 2014, strengthens longer term prospects for the sector;
• Investor interest in sector broadening and deepening.

Capital structure strengthened further

• Average cost of debt reduced to 4.7 per cent. (2012: 5.5 per cent.), weighted average loan maturity extended to 7.1 years (2012: 4.1 years). 80 per cent. of debt from non-bank sources (2012: 43 per cent.) and 27 per cent. unsecured (2012: 15 per cent.) following completion of £124 million loan in January 2014.
• Adjusted loan-to-value ratio reduced to 49 per cent. on a see-through basis (2012: 52 per cent.). The Group intends to reduce LTV to 40 per cent. over time;
• Refinanced £565 million of USAF debt in the public bond markets, decreasing its average cost of borrowing from 5.0 per cent. to 3.7 per cent.

5. Property portfolio valuation

The gross asset value as at 31 December 2013 of the properties in UNITE's portfolio held as at 4 March 2014 (including the full value of properties held indirectly by UNITE through its various co-investment vehicles) was £2,736 million. UNITE's share of these assets was £1,175 million of which £768 million were wholly

¹ These statements of expected value and earnings enhancement relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the expected value and earnings enhancement referred to may not be achieved, or those achieved could be materially different from those targeted. The statements in this document should not be construed as a profit forecast or interpreted to mean that the Group's NAV and earnings in any future period would necessarily match or be greater than or be less than those for the year ended 31 December 2013 or any other period.

owned. The valuation reports are set out in Part IX (Property Valuation Reports) of this document. The figures in this paragraph have been extracted without material adjustment from the valuation reports.

6. Summary of the Principal terms of the Issue

6.1 Structure

The Directors have given careful consideration as to how to structure the proposed fundraising and have concluded that the Firm Placing and Placing and Open Offer is the most suitable option available to the Company and its Shareholders at this time.

In aggregate, 24,500,000 New Ordinary Shares will be issued pursuant to the Firm Placing and the Placing and Open Offer (7,675,383 such New Ordinary Shares being issued pursuant to the Firm Placing and 16,824,617 such New Ordinary Shares being issued pursuant to the Placing and Open Offer) at 410 pence per New Ordinary Share (to raise gross proceeds of £100 million). The Issue Price represents a discount of 9.3 per cent. to the Closing Price of 452 pence per Ordinary Share on 5 March 2014 (being the last Business Day prior to the announcement of the Issue). The Firm Placing and Placing and Open Offer are being fully underwritten by J.P. Morgan Cazenove, Numis and Jefferies subject to, and in accordance with, the terms of the Placing Agreement.

6.2 Firm Placing

The Firm Placees required the Firm Placing in order to give them certainty as to the size of their shareholding following the Issue. J.P. Morgan Cazenove, Numis and Jefferies, as agents of the Company, have made arrangements to conditionally place the Firm Placed Shares with institutional investors at the Issue Price. The Firm Placed Shares are not subject to clawback and are not part of the Placing and Open Offer.

6.3 Placing and Open Offer

The Directors recognise the importance of pre-emption rights to Shareholders and, consequently, 16,824,617 of the New Ordinary Shares proposed to be issued by the Company are being offered to existing Shareholders by way of the Open Offer (representing gross proceeds of approximately £69 million). The Open Offer provides an opportunity for all Qualifying Shareholders to participate in the fundraising by both subscribing for their respective Basic Entitlements and by subscribing for Excess Shares under the Excess Application Facility, subject to availability.

Qualifying Shareholders will have a Basic Entitlement of:

2 Open Offer Shares for every 21 Existing Ordinary Shares

registered in the name of the relevant Qualifying Shareholder on the Record Date and so in proportion to any other number of Existing Ordinary Shares held.

Qualifying Shareholders may also apply, under the Excess Application Facility, for any whole number of Excess Shares up to a maximum of 1.5 Excess Shares per every 21 Ordinary Shares held by them at the Record Date.

Applications under the Excess Application Facility may be allocated in such manner as the Directors determine, in their absolute discretion.

J.P. Morgan Cazenove, Numis and Jefferies, as agents of the Company, have made arrangements to conditionally place the Open Offer Shares with institutional investors at the Issue Price subject to a right of claw-back by Qualifying Shareholders pro rata to their current holdings to satisfy valid applications under the Open Offer.

Basic Entitlements under the Open Offer will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will not be allocated but will be aggregated and sold for the benefit of the Company under the Excess Application Facility and/or the Placing.

In the event that valid acceptances are not received in respect of any of the Open Offer Shares under the Open Offer, unallocated Open Offer Shares may be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility and, to the extent that there remain any unallocated Open Offer Shares, they will be placed under the Placing.

If you have sold or otherwise transferred all of your Existing Ordinary Shares before the exentitlement date, you are not entitled to participate in the Open Offer.

6.4 Excess Application Facility

Subject to availability, the Excess Application Facility enables Qualifying Shareholders who have taken up their Basic Entitlement in full to apply for additional Open Offer Shares in addition to their Basic Entitlements up to a maximum of 1.5 Excess Shares for every 21 Ordinary Shares held by them at the Record Date. Qualifying Non-CREST Shareholders who wish to apply to subscribe for more than their Basic Entitlement should complete the relevant sections on the Non-CREST Application Form. Qualifying CREST Shareholders will have Excess CREST Open Offer Entitlements credited to their stock account in CREST and should refer to paragraph 4.2 of Part 11 of this document for information on how to apply for Excess Shares pursuant to the Excess Application Facility. Applications under the Excess Application Facility may be allocated in such manner as the Directors determine, in their absolute discretion, and no assurance can be given that applications by Qualifying Shareholders under the Excess Application Facility will be met in full or in part or at all.

6.5 Application procedure under the Open Offer

Qualifying Shareholders may apply for any whole number of Open Offer Shares subject to the limit on applications under the Excess Application Facility referred to above. The Basic Entitlement, in the case of Qualifying Non-CREST Shareholders, is equal to the number of Basic Entitlements as shown in Box B on their Non-CREST Application Form or, in the case of Qualifying CREST Shareholders, is equal to the number of Basic Entitlements standing to the credit of their stock account in CREST.

Qualifying Shareholders with holdings of Existing Ordinary Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating their Basic Entitlements.

Qualifying CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Basic Entitlement and also in respect of their Excess CREST Open Offer Entitlement at 8.00 a.m. on 27 March 2014.

Application will be made for these Basic Entitlements and Excess CREST Open Offer Entitlements to be admitted to CREST. It is expected that these Basic Entitlements and Excess CREST Open Offer Entitlements will be admitted to CREST at 8.00 a.m. on 7 March 2014. These Basic Entitlements and Excess CREST Open Offer Entitlements will also be enabled for settlement in CREST at 8.00 a.m. on 7 March 2014. Applications through the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.

Qualifying CREST Shareholders should note that, although their Basic Entitlements and Excess CREST Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's Claims Processing Unit. Qualifying Non-CREST Shareholders should note that their Non-CREST Application Form is not a negotiable document and cannot be traded.

Further information on the Open Offer and the terms and conditions on which it is made, including the procedure for application and payment, are set out in Part II of this document and, where relevant, on the Non-CREST Application Form.

6.6 Conditionality

The Firm Placing and Placing and Open Offer are conditional, amongst other things, on:

• the satisfaction of certain conditions contained in the Placing Agreement between the Company, J.P. Morgan Cazenove, Numis and Jefferies, which are typical for an agreement of this nature;
• J.P. Morgan Cazenove, Numis and Jefferies not having terminated the Placing Agreement before Admission in accordance with its terms; and
• Admission occurring on or before 8.00 a.m. on 27 March 2014 (or such later date as the Company, J.P. Morgan Cazenove, Numis and Jefferies may agree jointly, not being later than the Longstop Date).

If Admission does not take place at 8.00 a.m. on 27 March 2014 (or such later time and/or date as J.P. Morgan Cazenove, Numis and Jefferies may determine, not being later than 8.00 a.m. on 3 April 2014), the Issue will lapse, any Basic Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will, after that time and date be disabled and application monies received under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest, as soon as practicable thereafter.

6.7 Application for Admission

Application will be made to the UK Listing Authority for the New Ordinary Shares to be listed on the premium segment of the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective at 8.00 a.m. on 27 March 2014 and that dealings for normal settlement in the New Ordinary Shares will commence at 8.00 a.m. on the same day. No temporary documents of title will be issued.

The New Ordinary Shares to be issued pursuant to the Issue will, following Admission, rank pari passu in all respects with the Ordinary Shares in issue at the date of this document and will carry the right to receive all dividends and distributions declared, made or paid on or in respect of the Ordinary Shares after Admission.

In connection with the applications for Admission and the Issue, the Company has entered into the Placing Agreement with J.P. Morgan Cazenove, Numis and Jefferies. For more information on the Placing Agreement, see paragraph 6.8 of Part XII (Additional Information).

6.8 Important notice

Shareholders should note that the Open Offer is not a rights issue. Qualifying Shareholders should be aware that in the Open Offer, unlike with a rights issue, any Open Offer Shares not applied for by Qualifying Shareholders under their Basic Entitlements will not be sold in the market on behalf of, or placed for the benefit of, Qualifying Shareholders who do not apply under the Open Offer, but may be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility or will be placed under the Placing and that the net proceeds will be retained for the benefit of the Company.

Any Qualifying Shareholder who has sold or transferred all or part of its or his registered holding(s) of Existing Ordinary Shares prior to the close of business on 5 March 2014 is advised to consult his stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for Open Offer Shares under the Open Offer may be a benefit which may be claimed from it or him under the rules of the London Stock Exchange by those who purchased its or his holding(s) (or part thereof).

7. Financial impact of the Issue

A pro forma statement of net assets illustrating the effect of the Firm Placing and Placing and Open Offer on the Group's net assets as at 31 December 2013 as if the Firm Placing and Placing and Open Offer had been undertaken at this date is set out in Part VIII (Unaudited Pro Forma Financial Information) of this document. This information is unaudited and has been prepared for illustrative purposes only.

The Board expects the Issue to be accretive to both EPS and NAV per share within two years and significantly accretive within three to four years without near term dilution. Importantly, the deployment of capital is expected to increase the Group's recurring profits further as a result of accretive income returns (both from USAF and new developments) and the Group's operational gearing.1

8. Dividend policy

The New Ordinary Shares, when issued and fully paid, will be identical to and rank in full for all dividends or other distributions declared, made or paid after Admission and in all respects will rank pari passu with the Existing Ordinary Shares.

The Company's current policy is to pay 33 per cent. of its net portfolio contribution as dividends and the Company intends to maintain this policy, which will allow cash to be retained within the Group.

9. Action to be taken

9.1 Qualifying Non-CREST Shareholders (i.e. holders of Ordinary Shares who hold their Ordinary Shares in certificated form)

If you are a Qualifying Non-CREST Shareholder you will receive a Non-CREST Application Form which gives details of your Basic Entitlement under the Open Offer (as shown by the number of Basic Entitlements set out in Box B of the Non-CREST Application Form). If you wish to apply for Open Offer Shares under the Open Offer, you should complete the Non-CREST Application Form in accordance with the procedure for application set out in paragraph 4.1 of Part II (Terms and Conditions of the Open Offer) of this document and on the Non-CREST Application Form itself. Qualifying Shareholders who wish to subscribe for more than their Basic Entitlement should complete Boxes E, F and G on the Non-CREST Application Form. Completed Non-CREST Application Forms, accompanied by full payment in accordance with the instructions in paragraph 4.1(d) of Part II (Terms and Conditions of the Open Offer) of this document, should be posted using the accompanying prepaid envelope (if posted from the UK) or returned by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH or by hand (during normal business hours only) to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE, in either case, as soon as possible and in any event so as to be received by no later than 11.00 a.m. on 24 March 2014. If you do not wish to apply for any Open Offer Shares under the Open Offer, you should not complete or return the Non-CREST Application Form.

9.2 Qualifying CREST Shareholders

If you are a Qualifying CREST Shareholder you will not be sent a Non-CREST Application Form. You will receive a credit to your appropriate stock account in CREST in respect of the Basic Entitlement under the Open Offer and also an Excess CREST Open Offer Entitlement for use in connection with the Excess Application Facility. You should refer to the procedure for application set out in paragraph 4.2 of Part II (Terms and Conditions of the Open Offer). The relevant CREST instructions must have settled in accordance with the instructions in paragraph 4.2 of Part II (Terms and Conditions of the Open Offer) of this document by no later than 11.00 a.m. on 24 March 2014.

Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with this document and the Open Offer.

¹ These statements of expected value and earnings enhancement relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the expected value and earnings enhancement referred to may not be achieved, or those achieved could be materially different from those targeted. The statements in this document should not be construed as a profit forecast or interpreted to mean that the Group's NAV and earnings in any future period would necessarily match or be greater than or be less than those for the year ended 31 December 2013 or any other period.

If you are in any doubt as to the action you should take, you should immediately seek your own personal financial advice from an appropriately qualified independent professional adviser.

10. Overseas Shareholders

The attention of Qualifying Shareholders who have registered addresses outside the United Kingdom, or who are citizens or residents of countries other than the United Kingdom, or who are holding Ordinary Shares for the benefit of such persons, (including, without limitation, custodians, nominees, trustees and agents) or who have a contractual or other legal obligation to forward this document or (if applicable) a Non-CREST Application Form to such persons, is drawn to the information which appears in paragraph 6 of Part II (Terms and Conditions of the Open Offer) of this document.

In particular, Qualifying Shareholders who have registered addresses in or who are resident in, or who are citizens of, countries other than the UK (including, without limitation, the United States or any other Restricted Jurisdiction) should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their entitlements to the Open Offer.

11. Employee share schemes

The outstanding share options under the UNITE Share Option Schemes will remain in existence following the Firm Placing and Placing and Open Offer. The Directors do not propose to make any adjustments to these options.

The rules of the UNITE Share Option Schemes permit the Committee to adjust rights granted under the UNITE Share Option Schemes as a result of the Open Offer. The Remuneration Committee will consider if an exercise of this discretion is required in due course.

12. Taxation

The taxation consequences of the Firm Placing and Placing and Open Offer will depend upon the jurisdiction in which the relevant Shareholders are resident for tax purposes. Summaries of the UK tax consequences of the Firm Placing and Placing and Open Offer for Shareholders resident for tax purposes in the UK and the US are set out in Part X (Tax Consideration) of this document.

This information is intended only as a general guide to the current UK and US tax position. Shareholders who are in any doubt as to their tax position, or who are subject to tax in a jurisdiction other than the UK or the US should consult an appropriate professional adviser immediately.

13. Further information

Your attention is drawn to the further information set out in Parts II to XIII of this document.

Shareholders should read the whole of this document and not rely solely on the information set out in this letter. In particular, you should consider the risk factors set out on pages 17 to 27 of this document.

14. Directors' intentions

The Directors currently beneficially own, in aggregate, 804,613 Existing Ordinary Shares representing approximately 0.5 per cent. of the issued ordinary share capital of the Company as at 5 March 2014 (the latest practicable date prior to the publication of this document). The Directors who hold Existing Ordinary Shares intend to apply for an aggregate of 30.1 per cent. of their combined Basic Entitlement under the Open Offer. In addition, certain Directors have agreed to subscribe for an aggregate of 29,432 New Ordinary Shares in the Firm Placing.

Yours faithfully,

Philip White CBE Chairman

PART II

TERMS AND CONDITIONS OF THE OPEN OFFER

1. Introduction

The Company proposes to issue 24,500,000 New Ordinary Shares in order to raise gross proceeds of £100 million (approximately £96 million net of expenses) by way of the Firm Placing and the Placing and Open Offer. 7,675,383 New Ordinary Shares will be issued pursuant to the Firm Placing and 16,824,617 New Ordinary Shares will be issued pursuant to the Placing and Open Offer.

Upon completion of the Issue, the New Ordinary Shares will represent 12.2 per cent. of the Enlarged Share Capital.

The New Ordinary Shares to be issued pursuant to the Issue will, following Admission, rank pari passu in all respects with the Existing Ordinary Shares and will carry the right to receive all dividends and distributions declared, made or paid on or in respect of the Ordinary Shares after Admission.

Each of the Directors who holds Existing Ordinary Shares intends to apply in full for their respective Basic Entitlements under the Open Offer.

The Joint Bookrunners, as agents of the Company, have made arrangements to conditionally place the Firm Placed Shares and the Open Offer Shares with institutional investors at the Issue Price (the Open Offer Shares being subject to a right of clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer).

The Firm Placing and the Placing and Open Offer are being fully underwritten by the Joint Bookrunners, subject to, and in accordance with, the terms of the Placing Agreement.

The Open Offer is an opportunity for Qualifying Shareholders to apply to subscribe for Open Offer Shares at the Issue Price in accordance with the terms of the Open Offer.

Any Qualifying Shareholder who has sold or transferred all or part of his registered holding of Ordinary Shares prior to the close of business on 5 March 2014 is advised to consult his stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for Open Offer Shares under the Open Offer may be a benefit which may be claimed from him by the purchasers under the rules of the London Stock Exchange.

A summary of the arrangements relating to the Open Offer is set out below. This document and, for Qualifying Non-CREST Shareholders, the Non-CREST Application Form contain the formal terms and conditions of the Open Offer. Your attention is drawn to paragraph 4 of this Part II which gives details of the procedure for application and payment for the Open Offer Shares.

2. The Open Offer

Subject to the terms and conditions set out below (and, in the case of Qualifying Non-CREST Shareholders, in the Non-CREST Application Form), Qualifying Shareholders are being given the opportunity to apply for any number of Open Offer Shares (subject to the limit on the number of Excess Shares that can be applied for using the Excess Application Facility) at the Issue Price (payable in full on application and free of all expenses) and will have a Basic Entitlement of:

2 Open Offer Shares for every 21 Existing Ordinary Shares

registered in the name of each Qualifying Shareholder on the Record Date and so in proportion for any other number of Ordinary Shares then registered. Applications by Qualifying Shareholders will be satisfied in full up to their Basic Entitlements.

Basic Entitlements will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will be disregarded in calculating Qualifying Shareholders' Basic Entitlements and will be aggregated and made available to Qualifying Shareholders under the Excess Application Facility. Accordingly, Qualifying Shareholders with fewer than 21 Existing Ordinary Shares will not receive a Basic Entitlement and will not be permitted to apply for Excess Shares under the Excess Application Facility.

Qualifying Shareholders may apply to acquire less than their Basic Entitlement should they so wish. In addition, Qualifying Shareholders may apply to acquire Excess Shares using the Excess Application Facility, up to a maximum of 1.5 Excess Shares for every 21 Ordinary Shares held by them at the Record Date. Please refer to paragraphs 4.1(c) and 4.2(c) of this Part II for further details of the Excess Application Facility.

Holdings of Existing Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating Basic Entitlements, as will holdings under different designations and in different accounts.

Qualifying CREST Shareholders will have their Open Offer Entitlements credited to their stock accounts in CREST and should refer to paragraphs 4.2(a) to 4.2(l) of this Part II and also to the CREST Manual for further information on the relevant CREST procedures.

Qualifying Shareholders may apply to acquire any number of Open Offer Shares subject to the limit on applications under the Excess Application Facility referred to below. The Basic Entitlement, in the case of Qualifying Non-CREST Shareholders, is equal to the number of Open Offer Shares shown in Box B on the Non-CREST Application Form or, in the case of Qualifying CREST Shareholders, is equal to the number of Basic Entitlements standing to the credit of their stock account in CREST.

The Excess Application Facility enables Qualifying Shareholders to apply for any whole number of Excess Shares in excess of their Basic Entitlement, up to a maximum of 1.5 Excess Shares for every 21 Ordinary Shares held by them at the Record Date. Qualifying Non-CREST Shareholders who wish to apply to subscribe for more than their Basic Entitlement should complete Boxes E, F and G on the Non-CREST Application Form. Applications under the Excess Application Facility may be allocated in such manner as the Directors may determine, in their absolute discretion, and no assurance can be given that applications by Qualifying Shareholders will be met in full or in part or at all.

The aggregate number of Open Offer Shares available for subscription pursuant to the Open Offer (including under the Excess Application Facility) is 16,824,617 New Ordinary Shares.

Following the issue of the New Ordinary Shares pursuant to the Firm Placing and Placing and Open Offer, a Qualifying Shareholder who does not take up any of his Basic Entitlement (and does not take up any Excess Shares under the Excess Application Facility) will suffer a dilution of 12.2 per cent. to his economic interests in the Company. If a Qualifying Shareholder subscribes for his Basic Entitlement in full he will suffer a dilution of 3.8 per cent. to his economic interests in the Company.

Qualifying Shareholders should be aware that the Open Offer is not a rights issue. Qualifying Non-CREST Shareholders should also note that their Non-CREST Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Basic Entitlements and Excess CREST Open Offer Entitlements will be credited to CREST and be enabled for settlement, they will not be tradeable or listed and applications in respect of Basic Entitlements and Excess CREST Open Offer Entitlements may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's Claims Processing Unit. Open Offer Shares not applied for under the Open Offer will not be sold in the market for the benefit of those who do not apply to take up their Basic Entitlements and Excess CREST Open Offer Entitlements, but may be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility or will be placed under the Placing and the net proceeds will be retained for the benefit of the Company. Qualifying Shareholders who do not apply to take up Open Offer Shares will have no rights under the Open Offer. If valid acceptances are not received in respect of all of the Open Offer Shares under the Open Offer, unallocated Open Offer Shares may be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility or will be subscribed by certain investors pursuant to the Placing and the net proceeds will be retained for the benefit of the Company.

The Existing Ordinary Shares are already admitted to CREST. No further application for admission to CREST is accordingly required for the New Ordinary Shares. All such New Ordinary Shares, when issued and fully paid, may be held and transferred by means of CREST.

Application will be made for the Basic Entitlements and Excess CREST Open Offer Entitlements to be admitted to CREST. The conditions for such admission having already been met, therefore the Basic Entitlements and Excess CREST Open Offer Entitlements are expected to be admitted to CREST with effect from 7 March 2014.

The New Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with the Existing Ordinary Shares. The New Ordinary Shares are not being made available in whole or in part to the public except under the terms of the Open Offer.

3. Conditions and further terms of the Open Offer

The Open Offer is conditional, inter alia, upon the following:

• (a) Admission of the New Ordinary Shares (including the Open Offer Shares) becoming effective by no later than 8.00 a.m. on 27 March 2014; and
• (b) the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms prior to Admission.

Accordingly, if any of these conditions are not satisfied or waived (where capable of waiver), the Firm Placing and Placing and Open Offer will not proceed and any applications made by Qualifying Shareholders will be rejected. In such circumstances, application monies will be returned (at the applicant's sole risk), without payment of interest, as soon as practicable thereafter. Revocation of applications for New Ordinary Shares cannot occur after dealings have begun.

No temporary documents of title will be issued in respect of New Ordinary Shares held in uncertificated form. Definitive certificates in respect of New Ordinary Shares taken up are expected to be posted to those Qualifying Shareholders who have validly elected to hold their New Ordinary Shares in certificated form within seven days of Admission. In respect of those Qualifying Shareholders who have validly elected to hold their New Ordinary Shares in uncertificated form, the New Ordinary Shares are expected to be credited to their stock accounts maintained in CREST on 27 March 2014.

Applications will be made for the New Ordinary Shares (including the Open Offer Shares) to be listed on the premium segment of the Official List and to be admitted to trading on the London Stock Exchange's main market for listed securities. Admission is expected to occur on 27 March 2014, when dealings in the New Ordinary Shares are expected to begin.

All monies received by the Registrar in respect of Open Offer Shares will be placed on deposit by the Registrar.

If for any reason it becomes necessary to adjust the expected timetable as set out in this document, the Company will make an appropriate announcement to a Regulatory Information Service giving details of the revised dates and/or times.

4. Procedure for application and payment

The action to be taken by Qualifying Shareholders in respect of the Open Offer depends on whether, at the relevant time, a Qualifying Shareholder has a Non-CREST Application Form in respect of his Open Offer Entitlement or a Qualifying Shareholder has Basic Entitlements and Excess CREST Open Offer Entitlements credited to his CREST stock account in respect of such entitlement.

Qualifying Shareholders who hold their Existing Ordinary Shares in certificated form will be allotted Open Offer Shares in certificated form. Qualifying Shareholders who hold all or part of their Existing Ordinary Shares in uncertificated form will be allotted Open Offer Shares in uncertificated form to the extent that their entitlement to Open Offer Shares arises as a result of holding Existing Ordinary Shares in uncertificated form. However, it will be possible for Qualifying Shareholders to deposit Open Offer Entitlements into, and withdraw them from, CREST. Further information on deposit and withdrawal from CREST is set out in paragraph 4.2(g) of this Part II.

CREST sponsored members should refer to their CREST sponsor, as only their CREST sponsor will be able to take the necessary action specified below to apply under the Open Offer in respect of the Basic Entitlements and Excess CREST Open Offer Entitlements of such members held in CREST. CREST members who wish to apply under the Open Offer in respect of their Basic Entitlements and Excess CREST Open Offer Entitlements in CREST should refer to the CREST Manual for further information on the CREST procedures referred to below.

Qualifying Shareholders who do not want to take up or apply for the Open Offer Shares under the Open Offer should take no action and should not complete or return the Non-CREST Application Form.

4.1 If you have a Non-CREST Application Form in respect of your entitlement under the Open Offer

(a) General

Subject as provided in paragraph 6 of this Part II in relation to Overseas Shareholders, Qualifying Non-CREST Shareholders will receive a Non-CREST Application Form. The Non-CREST Application Form shows the number of Existing Ordinary Shares registered in their name on the Record Date in Box A of the Non-Crest Application Form. It also shows the number of Open Offer Shares which represents their Basic Entitlement under the Open Offer, as shown by the total number of Basic Entitlements allocated to them set out in Box B of the Non-Crest Application Form. Box C of the Non-Crest Application Form shows how much they would need to pay if they wish to take up their Basic Entitlement in full. Any fractional entitlements to Open Offer Shares will be disregarded in calculating Qualifying Shareholders' Basic Entitlements and will be aggregated and made available to Qualifying Shareholders under the Excess Application Facility. Any Qualifying Non-CREST Shareholders with fewer than 21 Existing Ordinary Shares will not receive a Basic Entitlement and will not be permitted to apply for Excess Shares under the Excess Application Facility. Qualifying Non-CREST Shareholders may apply for less than their Basic Entitlement should they wish to do so. Qualifying Shareholders wishing to apply for Open Offer Shares representing less than their Basic Entitlement may do so by completing Boxes D, F and G of the Non-CREST Application Form. Qualifying Non-CREST Shareholders who have taken up their Basic Entitlement in full may also apply for Excess Shares under the Excess Application Facility, up to a maximum of 1.5 Excess Shares for every 21 Ordinary Shares held by them at the Record Date by completing Boxes D to G of the Non-CREST Application Form (see paragraph 4.1(c) of this Part II). Qualifying Non-CREST Shareholders may hold such a Non-CREST Application Form by virtue of a bona fide market claim (see paragraph 4.1(b) of this Part II).

The instructions and other terms set out in the Non-CREST Application Form form part of the terms of the Open Offer to Qualifying Non-CREST Shareholders.

(b) Bona fide market claims

Applications to acquire Open Offer Shares may only be made on the Non-CREST Application Form and may only be made by the Qualifying Non-CREST Shareholder named in it or by a person entitled by virtue of a bona fide market claim in relation to a purchase of Existing Ordinary Shares through the market prior to the date upon which the Existing Ordinary Shares were marked "ex" the entitlement to participate in the Open Offer. Non-CREST Application Forms may not be assigned, transferred or split, except to satisfy bona fide market claims up to 3.00 p.m. on 20 March 2014. The Non-CREST Application Form is not a negotiable document and cannot be separately traded. A Qualifying Non-CREST Shareholder who has sold or otherwise transferred all or part of his holding of Existing Ordinary Shares prior to the date upon which the Existing Ordinary Shares were marked "ex" the entitlement to participate in the Open Offer, should consult his broker or other professional adviser as soon as possible, as the invitation to acquire Open Offer Shares under the Open Offer may be a benefit which may be claimed by the transferee. Qualifying Non-CREST Shareholders who have sold all or part of their registered holdings should, if the market claim is to be settled outside CREST, complete Box J of the Non-CREST Application Form and immediately send it to either the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee or to the Registrar in accordance with the instructions set out in the accompanying Non-CREST Application Form. The Non-CREST Application Form should not (subject to certain exceptions) be forwarded to or transmitted in or into or from a Restricted Jurisdiction. If the market claim is to be settled outside CREST, the beneficiary of the claim should follow the procedures set out in the accompanying Non-CREST Application Form. If the market claim is to be settled in CREST, the beneficiary of the claim should follow the procedures set out in paragraph 4.2(b) of this Part II.

(c) Excess Application Facility

Qualifying Shareholders who have taken up their Basic Entitlement in full may apply to acquire Excess Shares using the Excess Application Facility, should they wish. Qualifying Non-CREST Shareholders wishing to apply for Excess Shares, up to a maximum of 1.5 Excess Shares for every 21 Ordinary Shares held by them at the Record Date, may do so by completing Boxes D to G of the Non-CREST Application Form. The total number of Open Offer Shares is fixed and will not be increased in response to any Excess Applications. Applications under the Excess Application Facility will therefore only be satisfied to the extent that other Qualifying Shareholders do not apply for their Basic Entitlements in full or where fractional entitlements have been aggregated and made available under the Excess Application Facility. Applications under the Excess Application Facility shall be allocated in such manner as the Directors may determine, in their absolute discretion, and no assurance can be given that the applications by Qualifying Shareholders will be met in full or in part or at all. Excess monies in respect of applications which are not met in full will be returned to the applicant (at the applicant's risk) without interest as soon as practicable thereafter by way of cheque or CREST payment, as appropriate.

(d) Application procedures

Qualifying Non-CREST Shareholders wishing to apply to acquire all or any of the Open Offer Shares to which they are entitled should complete the Non-CREST Application Form in accordance with the instructions printed on it. Completed Non-CREST Application Forms should be posted in the accompanying pre-paid envelope or returned by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH or by hand (during normal office hours only) to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE (who will act as Receiving Agent in relation to the Open Offer), so as to be received by the Registrar, in either case, by no later than 11.00 a.m. on 24 March 2014, after which time Non-CREST Application Forms will not be valid. Qualifying Non-CREST Shareholders should note that applications, once made, will be irrevocable and receipt thereof will not be acknowledged. If a Non-CREST Application Form is being sent by first-class post in the UK, Qualifying Shareholders are recommended to allow at least four working days for delivery.

Non-CREST Application Forms delivered by hand will not be checked upon delivery and no receipt will be provided.

Completed Non-CREST Application Forms should be returned with a cheque or banker's draft drawn in sterling on a bank or building society in the UK which is either a member of the Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques and banker's drafts to be cleared through facilities provided by any of those companies or committees. Such cheques or banker's drafts must bear the appropriate sort code in the top right-hand corner and must be for the full amount payable on application.

Cheques should be drawn on a personal account in respect of which the Qualifying Shareholder has sole or joint title to the funds and should be made payable to "Computershare Investor Services PLC, Acceptance Account re The UNITE Group plc Open Offer" and crossed "A/C Payee Only". Third party cheques (other than building society cheques or banker's drafts where the building society or bank has confirmed that the relevant Qualifying Shareholder has title to the underlying funds) will be subject to the Money Laundering Regulations which would delay Qualifying Shareholders receiving their Open Offer Shares (see paragraph 5 of this Part II). Payments via CHAPS, BACS or electronic transfer will not be accepted.

Cheques and banker's drafts will be presented for payment on receipt and it is a term of the Open Offer that cheques and banker's drafts will be honoured on first presentation. The Company may in its sole discretion elect to treat as valid or invalid any applications made by Qualifying Non-CREST Shareholders in respect of which cheques are not so honoured. If cheques or banker's drafts are presented for payment before the conditions of the Firm Placing and Placing and Open Offer are fulfilled, the application monies will be kept in a separate interest bearing bank account with any interest being retained for the Company until all conditions are met. If the Firm Placing and Placing and Open Offer does not become unconditional, no Open Offer Shares will be issued and all monies will be returned (at the applicant's sole risk), without payment of interest, to applicants as soon as practicable following the lapse of the Firm Placing and Placing and Open Offer.

Subject to the provisions of the Placing Agreement, the Company may in its sole discretion, but shall not be obliged to, treat a Non-CREST Application Form as valid and binding on the person by whom or on whose behalf it is lodged, even if not completed in accordance with the relevant instructions or not accompanied by a valid power of attorney where required, or if it otherwise does not strictly comply with the terms and conditions of the Open Offer. Subject to the provisions of the Placing Agreement, the Company further reserves the right (but shall not be obliged) to accept either:

• (i) Non-CREST Application Forms received after 11.00 a.m. on 24 March 2014; or
• (ii) applications in respect of which remittances are received before 11.00 a.m. on 24 March 2014 from authorised persons (as defined in the FSMA) specifying the Open Offer Shares applied for and undertaking to lodge the Non-CREST Application Form in due course but, in any event, within two Business Days.

Multiple applications will not be accepted. All documents and remittances sent by post by or to an applicant (or as the applicant may direct) will be sent at the applicant's own risk.

If Open Offer Shares have already been allotted to a Qualifying Non-CREST Shareholder and such Qualifying Non-CREST Shareholder's cheque or banker's draft is not honoured upon first presentation or such Qualifying Non-CREST Shareholder's application is subsequently otherwise deemed to be invalid, the Receiving Agent shall be authorised (in its absolute discretion as to manner, timing and terms) to make arrangements, on behalf of the Company, for the sale of such Qualifying Non-CREST Shareholder's Open Offer Shares and for the proceeds of sale (which for these purposes shall be deemed to be payments in respect of successful applications) to be paid to and retained by the Company. None of the Receiving Agent, the Joint Bookrunners or the Company, nor any other person, shall be responsible for, or have any liability for, any loss, expense or damage suffered by such Qualifying Non-CREST Shareholder as a result.

(e) Effect of application

By completing and delivering a Non-CREST Application Form the applicant:

• (i) represents and warrants to the Company, the Receiving Agent and the Joint Bookrunners that he has the right, power and authority, and has taken all action necessary, to make the application under the Open Offer and to execute, deliver and exercise his rights, and perform his obligations under any contracts resulting therefrom and that he is not a person otherwise prevented by legal or regulatory restrictions from applying for Open Offer Shares or acting on behalf of any such person on a non-discretionary basis;
• (ii) agrees with the Company and the Joint Bookrunners that all applications under the Open Offer and any contracts or non-contractual obligations resulting therefrom shall be governed by and construed in accordance with the laws of England and Wales;
• (iii) confirms to the Company and the Joint Bookrunners that in making the application he is not relying on any information or representation in relation to the Group other than those contained in this document, and the applicant accordingly agrees that no person responsible solely or jointly for this document, or involved in the preparation thereof, shall have any liability for any such information or representation not so contained and further agrees that, having had the opportunity to read this document, he will be deemed to have had notice of all information in relation to the Group contained in this document;
• (iv) confirms to the Company and the Joint Bookrunners that in making the application he is not relying and has not relied on the Joint Bookrunners or any other person affiliated with the Joint Bookrunners in connection with any investigation of the accuracy of any information contained in this document or his investment decision;
• (v) confirms to the Company and the Joint Bookrunners that no person has been authorised to give any information or to make any representation concerning the Company or the Group or the Open Offer Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company or the Joint Bookrunners;
• (vi) represents and warrants to the Company, the Receiving Agent and the Joint Bookrunners that he is the Qualifying Shareholder originally entitled to the Open Offer Entitlements or that he received such Open Offer Entitlements by virtue of a bona fide market claim;
• (vii) represents and warrants to the Company, the Receiving Agent and the Joint Bookrunners that if he has received some or all of his Open Offer Entitlements from a person other than the Company, he is entitled to apply under the Open Offer in relation to such Open Offer Entitlements by virtue of a bona fide market claim;
• (viii) requests that the Open Offer Shares to which he will become entitled be issued to him on the terms set out in this document and the Non-CREST Application Form, subject to the Articles;
• (ix) represents and warrants to the Company, the Receiving Agent and the Joint Bookrunners that he is not, nor is he applying on behalf of any person who is, a citizen or resident, or which is a corporation, partnership or other entity created or organised in or under any laws, of any Restricted Jurisdiction or any jurisdiction in which the application for Open Offer Shares is prevented by law and he is not applying with a view to re-offering, reselling, transferring or delivering any of the Open Offer Shares which are the subject of his application to, or for the benefit of, a person who is a citizen or resident or which is a corporation, partnership or other entity created or organised in or under any laws of any Restricted Jurisdiction or any jurisdiction in which the application for Open Offer Shares is prevented by law (except where proof satisfactory to the Company has been provided to the Company that he is able to accept the invitation by the Company free of any requirement which it (in its absolute discretion) regards as unduly burdensome), nor

acting on behalf of any such person on a non-discretionary basis nor (a) person(s) otherwise prevented by legal or regulatory restrictions from applying for Open Offer Shares under the Open Offer; and

(x) represents and warrants to the Company, the Receiving Agent and the Joint Bookrunners that he is not, nor is he applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in s67 (depository receipts), s70 (clearance services), s93 (depository receipts) or s96 (clearance services) of the Finance Act 1986.

All enquiries in connection with the procedure for application and completion of the Non-CREST Application Form should be made to the Registrar on the shareholder helpline on 0870 707 1376, or, if calling from overseas, +44 870 707 1376. Calls to this number are charged at 10 pence per minute from a BT landline, other telephone provider costs may vary. Please note that the Registrar cannot provide financial advice on the merits of the Open Offer or as to whether applicants should take up their Open Offer Entitlements.

Qualifying Shareholders who do not want to take up or apply for Open Offer Shares under the Open Offer should take no action and should not complete or return the Non-CREST Application Form.

4.2 If you have Basic Entitlements and Excess CREST Open Offer Entitlements credited to your stock account in CREST in respect of your entitlement under the Open Offer

(a) General

Subject as provided in paragraph 6 of this Part II in relation to certain Overseas Shareholders, each Qualifying CREST Shareholder will receive a credit to his stock account in CREST of his Open Offer Entitlements equal to the number of Open Offer Shares which represents his Basic Entitlement and his Excess CREST Open Offer Entitlement. Any fractional entitlements to Open Offer Shares will be disregarded in calculating Qualifying Shareholders' Basic Entitlement and will be aggregated and made available under the Excess Application Facility. Any Qualifying CREST Shareholders with fewer than 21 Existing Ordinary Shares will not receive a Basic Entitlement and will not be permitted to apply for Excess Shares under the Excess Application Facility.

The CREST stock account to be credited will be an account under the participant ID and member account ID that apply to the Existing Ordinary Shares held on the Record Date by the Qualifying CREST Shareholder in respect of which the Basic Entitlements and Excess CREST Open Offer Entitlements have been allocated.

If for any reason the Basic Entitlements and/or Excess CREST Open Offer Entitlements cannot be admitted to CREST, or the stock accounts of Qualifying CREST Shareholders cannot be credited, by 8.00 a.m. on 10 March 2014, or such later time and/or date as the Company may decide, a Non-CREST Application Form will be sent to each Qualifying CREST Shareholder in substitution for the Basic Entitlements and Excess CREST Open Offer Entitlements which should have been credited to his stock account in CREST. In these circumstances, the expected timetable as set out in this document will be adjusted as appropriate and the provisions of this document applicable to Qualifying Non-CREST Shareholders with Non-CREST Application Forms will apply to Qualifying CREST Shareholders who receive such Non-CREST Application Forms.

CREST members who wish to apply to acquire some or all of their entitlements to Open Offer Shares should refer to the CREST Manual for further information on the CREST procedures referred to below. Should you need advice with regard to these procedures, please contact the Registrar on the shareholder helpline on 0870 707 1376, or, if calling from overseas, +44 870 707 1376. Calls to this number are charged at 10 pence per minute from a BT landline, other telephone provider costs may vary. Please note that the Registrar cannot provide financial advice on the merits of the Open Offer or as to whether applicants should take up their Open Offer Entitlements. If you are a CREST sponsored member you should consult your CREST sponsor if you wish to apply for Open Offer Shares as only your CREST sponsor will be able to take the necessary action to make this application in CREST.

(b) Market claims

Each of the Basic Entitlements and the Excess CREST Open Offer Entitlements will constitute a separate security for the purposes of CREST and will have a separate ISIN. Although Basic Entitlements and the Excess CREST Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of Basic Entitlements and the Excess CREST Open Offer Entitlements may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim transaction. Transactions identified by the CREST Claims Processing Unit as "cum" the Basic Entitlement and the Excess CREST Open Offer Entitlement will generate an appropriate market claim transaction and the relevant Basic Entitlement(s) and Excess CREST Open Offer Entitlement(s) will thereafter be transferred accordingly.

(c) Excess Application Facility

Qualifying Shareholders who have taken up their Basic Entitlement in full may apply to acquire Excess Shares using the Excess Application Facility, should they wish. The Excess Application Facility enables Qualifying CREST Shareholders to apply for Excess Shares in excess of their Basic Entitlement up to a maximum of 1.5 Excess Shares for every 21 Ordinary Shares held by them at the Record Date.

An Excess CREST Open Offer Entitlement may not be sold or otherwise transferred. Subject as provided in paragraph 6 of this Part II in relation to Overseas Shareholders, the CREST accounts of Qualifying CREST Shareholders will be credited with an Excess CREST Open Offer Entitlement in order for any applications for Excess Shares to be settled through CREST.

Qualifying CREST Shareholders should note that, although the Basic Entitlements and the Excess CREST Open Offer Entitlements will be admitted to CREST, they will have limited settlement capabilities (for the purposes of market claims only). Neither the Basic Entitlements nor the Excess CREST Open Offer Entitlements will be tradable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholders originally entitled or by a person entitled by virtue of a bona fide market claim.

To apply for Excess Shares pursuant to the Open Offer, Qualifying CREST Shareholders should follow the instructions in paragraph 4.2(f) of this Part II below and must not return a paper form and cheque.

Should a transaction be identified by the CREST Claims Processing Unit as "cum" the Basic Entitlement and the relevant Basic Entitlement be transferred, the relevant Excess CREST Open Offer Entitlements will not transfer with the Basic Entitlement claim, but will be transferred as a separate claim. Should a Qualifying CREST Shareholder cease to hold all of his Existing Ordinary Shares as a result of one or more bona fide market claims, the Excess CREST Open Offer Entitlement credited to CREST and allocated to the relevant Qualifying Shareholder will be transferred to the relevant purchaser(s). Please note that a separate USE instruction must be sent in respect of any application under the Excess CREST Open Offer Entitlement.

Fractions of Excess Shares will not be issued under the Excess Application Facility and fractions of Excess Shares will be rounded down to the nearest whole number. Any fractional Excess Shares will be aggregated and sold for the benefit of the Company.

The total number of Open Offer Shares is fixed and will not be increased in response to any applications under the Excess Application Facility. Applications under the Excess Application Facility will therefore only be satisfied to the extent that other Qualifying Shareholders do not apply for their Basic Entitlements in full or where fractional entitlements have been aggregated and made available under the Excess Application Facility. Applications under the Excess Application Facility shall be allocated in such manner as the Directors may determine, in their absolute discretion, and no assurance can be given that the applications by Qualifying Shareholders will be met in full or in part or at all. Excess monies in respect of applications which are not met in full will be returned to the applicant (at the applicant's risk) without interest as soon as practicable thereafter by way of cheque or CREST payment, as appropriate.

All enquiries in connection with the procedure for application of Excess CREST Open Offer Entitlements should be made to the Registrar on the shareholder helpline 0870 707 1376 or, if calling from overseas, +44 870 707 1376. Calls to this number are charged at 10 pence per minute from a BT landline, other telephone provider costs may vary. Please note the Registrar cannot provide financial advice on the merits of the Open Offer or as to whether applicants should take up their entitlement or apply for Excess Shares.

(d) USE instructions

Qualifying CREST Shareholders who are CREST members and who want to apply for Open Offer Shares in respect of all or some of their Basic Entitlement and Excess CREST Open Offer Entitlements in CREST must send (or, if they are CREST sponsored members, procure that their CREST sponsor sends) a USE instruction to Euroclear which, on its settlement, will have the following effect:

• (i) the crediting of a stock account of the Registrar under the participant ID and member account ID specified below, with a number of Basic Entitlements and/or Excess CREST Open Offer Entitlements corresponding to the number of Open Offer Shares applied for; and
• (ii) the creation of a CREST payment, in accordance with the CREST payment arrangements, in favour of the payment bank of the Registrar in respect of the amount specified in the USE instruction which must be the full amount payable on application for the number of Open Offer Shares referred to in paragraph (d)(i) above.

(e) Content of USE instruction in respect of Basic Entitlements

The USE instruction must be properly authenticated in accordance with Euroclear's specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details:

• (i) the number of Open Offer Shares for which application is being made (and hence the number of the Basic Entitlement(s) being delivered to the Registrar);
• (ii) the ISIN of the Basic Entitlement. This is GB00BJVX5Y92;
• (iii) the CREST participant ID of the accepting CREST member;
• (iv) the CREST member account ID of the accepting CREST member from which the Basic Entitlements are to be debited;
• (v) the participant ID of the Registrar in its capacity as Receiving Agent. This is 3RA19;

• (vi) the member account ID of the Registrar in its capacity as Receiving Agent. This is UNITE;

• (vii) the amount payable by means of a CREST payment on settlement of the USE instruction. This must be the full amount payable on application for the number of Open Offer Shares referred to in paragraph (e)(i) above;

• (viii) the intended settlement date. This must be on or before 11.00 a.m. on 24 March 2014; and
• (ix) the Corporate Action Number for the Open Offer. This will be available by viewing the relevant corporate action details in CREST.

In order for an application under the Open Offer to be valid, the USE instruction must comply with the requirements as to authentication and contents set out above and must settle on or before 11.00 a.m. on 24 March 2014.

In order to assist prompt settlement of the USE instruction, CREST members (or their sponsors, where applicable) may consider adding the following non-mandatory fields to the USE instruction:

• (i) a contact name and telephone number (in the free format shared note field); and
• (ii) a priority of at least 80.

CREST members and, in the case of CREST sponsored members, their CREST sponsors, should note that the last time at which a USE instruction may settle on 24 March 2014 in order to be valid is 11.00 a.m. on that day.

In the event that the Firm Placing and Placing and Open Offer does not become unconditional by 8.00 a.m. on 27 March 2014 or such later time and date as its Joint Bookrunners determine (being no later than 3.00 p.m. on 3 April 2014), the Open Offer will lapse, the Basic Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will be disabled and the Registrar will refund the amount paid by a Qualifying CREST Shareholder by way of a CREST payment, without interest, as soon as practicable thereafter. The interest earned on such monies will be retained for the benefit of the Company.

(f) Content of USE instruction in respect of Excess CREST Open Offer Entitlements

The USE instruction must be properly authenticated in accordance with Euroclear specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details:

• (i) the number of Open Offer Shares for which the application is being made (and hence the number of the Excess CREST Open Offer Entitlement(s) being delivered to the Registrar);
• (ii) the ISIN of the Excess CREST Open Offer Entitlement. This is GB00BJVX5Z00;
• (iii) the CREST participant ID of the accepting CREST member;
• (iv) the CREST member account ID of the accepting CREST member from which the Excess CREST Open Offer Entitlements are to be debited;
• (v) the participant ID of the Registrar in its capacity as Receiving Agent. This is 3RA19;
• (vi) the member account ID of the Registrar in its capacity as Receiving Agent. This is UNITE;
• (vii) the amount payable by means of a CREST payment on settlement of the USE instruction. This must be the full amount payable on application for the number of Open Offer Shares referred to in paragraph (f)(i) above;
• (viii) the intended settlement date. This must be on or before 11.00 a.m. on 24 March 2014; and

(ix) the Corporate Action Number for the Open Offer. This will be available by viewing the relevant corporate action details in CREST.

In order for the application in respect of an Excess CREST Open Offer Entitlement under the Open Offer to be valid, the USE instruction must comply with the requirements as to authentication and contents set out above and must settle on or before 11.00 a.m. on 24 March 2014.

In order to assist prompt settlement of the USE instruction, CREST members (or their sponsors, where applicable) may consider adding the following non-mandatory fields to the USE instruction:

• (i) a contact name and telephone number (in the free format shared note field); and
• (ii) a priority of at least 80.

CREST members and, in the case of CREST sponsored members, their CREST sponsors, should note that the last time at which a USE instruction may settle on 24 March 2014 in order to be valid is 11.00 a.m. on that day. Please note that automated CREST generated claims and buyer protection will not be offered on the Excess CREST Open Offer Entitlement security.

In the event that the Firm Placing and Placing and Open Offer does not become unconditional by 8.00 a.m. on 27 March 2014 or such later time and date as the Joint Bookrunners determine (being no later than 3.00 p.m. on 3 April 2014), the Open Offer will lapse, the Basic Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will be disabled and the Registrar will refund the amount paid by a Qualifying CREST Shareholder by way of a CREST payment, without interest, as soon as practicable thereafter. The interest earned on such monies will be retained for the benefit of the Company.

(g) Deposit of Open Offer Entitlements into, and withdrawal from, CREST

A Qualifying Non-CREST Shareholder's entitlement under the Open Offer as shown by the number of Open Offer Entitlements set out in his Non-CREST Application Form may be deposited into CREST (either into the account of the Qualifying Shareholder named in the Non-CREST Application Form or into the name of a person entitled by virtue of a bona fide market claim). Similarly, Basic Entitlements and Excess CREST Open Offer Entitlements held in CREST may be withdrawn from CREST so that the entitlement under the Open Offer can be applied for through a Non-CREST Application Form. Normal CREST procedures (including timings) apply in relation to any such deposit or withdrawal, subject (in the case of a deposit into CREST) as set out in the Non-CREST Application Form.

A holder of a Non-CREST Application Form who is proposing to deposit the entitlement set out in such form into CREST is recommended to ensure that the deposit procedures are implemented in sufficient time to enable the person holding or acquiring the Basic Entitlements and the entitlement to apply under the Excess Application Facility following their deposit into CREST to take all necessary steps in connection with taking up the entitlement prior to 11.00 a.m. on 24 March 2014. After depositing their Basic Entitlement into their CREST account, CREST holders will, shortly after that, receive a credit for their Excess CREST Open Offer Entitlement, which will be managed by the Registrar.

In particular, having regard to normal processing times in CREST and on the part of the Registrar, the recommended latest time for depositing a Non-CREST Application Form with the CREST Courier and Sorting Service, where the person entitled wishes to hold the entitlement under the Open Offer set out in such Non-CREST Application Form as Basic Entitlements or Excess CREST Open Offer Entitlements in CREST, is 3.00 p.m. on 19 March 2014 and the recommended latest time for receipt by Euroclear of a dematerialised instruction requesting withdrawal of Basic Entitlements or Excess CREST Open Offer Entitlements from CREST is 4.30 p.m. on 18 March 2014, in either case so as to enable the person acquiring or (as appropriate) holding the Basic Entitlements and the Excess CREST Open Offer Entitlements following the deposit or withdrawal (whether as shown in a Non-CREST Application Form or held in CREST) to take all necessary steps in connection with applying in respect of the Basic Entitlements or in respect of the Excess CREST Open Offer Entitlements, as the case may be, prior to 11.00 a.m. on 27 March 2014. CREST holders inputting the withdrawal of their Open Offer Entitlement from their CREST account must ensure that they withdraw both their Basic Entitlement and the Excess CREST Open Offer Entitlement.

Delivery of a Non-CREST Application Form with the CREST deposit form duly completed whether in respect of a deposit into the account of the Qualifying Shareholder named in the Non-CREST Application Form or into the name of another person, shall constitute a representation and warranty to the Company and the Registrar by the relevant CREST member(s) that it is/they are not in breach of the provisions of the notes under the paragraph headed "Instructions for depositing entitlements under the Open Offer into CREST" on page 2 of the Non-CREST Application Form, and a declaration to the Company and the Registrar from the relevant CREST member(s) that it is/they are not citizen(s) or resident(s) of a Restricted Jurisdiction or any jurisdiction in which the application for Open Offer Shares is prevented by law and, where such deposit is made by a beneficiary of a bona fide market claim, a representation and warranty that the relevant CREST member(s) is/are entitled to apply under the Open Offer by virtue of a bona fide market claim.

(h) Validity of application

A USE instruction complying with the requirements as to authentication and contents set out above which settles by no later than 11.00 a.m. on 27 March 2014 will constitute a valid application under the Open Offer.

(i) CREST procedures and timings

CREST members and (where applicable) their CREST sponsors should note that Euroclear does not make available special procedures in CREST for any particular corporate action. Normal system timings and limitations will therefore apply in relation to the input of a USE instruction and its settlement in connection with the Open Offer. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST sponsored member, to procure that his CREST sponsor takes) such action as shall be necessary to ensure that a valid application is made as stated above by 11.00 a.m. on 27 March 2014. In this connection CREST members and (where applicable) their CREST sponsors are referred in particular to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

(j) Incorrect or incomplete applications

If a USE instruction includes a CREST payment for an incorrect sum, the Company, through the Registrar, reserves the right:

• (i) to reject the application in full and refund the payment to the CREST member in question, without payment of interest;
• (ii) in the case that an insufficient sum is paid, to treat the application as a valid application for such lesser whole number of Open Offer Shares as would be able to be applied for with that payment at the Issue Price, refunding any unutilised sum to the CREST member in question, without payment of interest; or
• (iii) in the case that an excess sum is paid, to treat the application as a valid application for all the Open Offer Shares referred to in the USE instruction, refunding any unutilised sum to the CREST member in question, without payment of interest.

(k) Effect of valid application

A CREST member who makes or is treated as making a valid application in accordance with the above procedures thereby:

• (i) represents and warrants to the Company, the Receiving Agent and the Joint Bookrunners that he has the right, power and authority, and has taken all action necessary, to make the application under the Open Offer and to execute, deliver and exercise his rights, and perform his obligations, under any contracts resulting therefrom and that he is not a person otherwise prevented by legal or regulatory restrictions from applying for Open Offer Shares or acting on behalf of any such person on a non-discretionary basis;
• (ii) agrees to pay the amount payable on application in accordance with the above procedures by means of a CREST payment in accordance with the CREST payment arrangements (it being acknowledged that the payment to the Registrar's payment bank in accordance with the CREST payment arrangements shall, to the extent of the payment, discharge in full the obligation of the CREST member to pay to the Company the amount payable on application);
• (iii) agrees with the Company and the Joint Bookrunners that all applications under the Open Offer and any contracts or non-contractual obligations resulting therefrom shall be governed by, and construed in accordance with, the laws of England and Wales;
• (iv) confirms to the Company and the Joint Bookrunners that in making the application he is not relying on any information or representation in relation to the Group other than those contained in this document, and the applicant accordingly agrees that no person responsible solely or jointly for this document, or involved in the preparation thereof, shall have any liability for any such information or representation not so contained and further agrees that, having had the opportunity to read this document, he will be deemed to have had notice of all the information in relation to the Group contained in this document;
• (v) confirms to the Company and the Joint Bookrunners that in making the application he is not relying and has not relied on the Joint Bookrunners or any other person affiliated with the Joint Bookrunners in connection with any investigation of the accuracy of any information contained in this document or his investment decision;
• (vi) confirms to the Company and the Joint Bookrunners that no person has been authorised to give any information or to make any representation concerning the Company or the Group or the Open Offer Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company or the Joint Bookrunners;
• (vii) represents and warrants to the Company, the Receiving Agent and the Joint Bookrunners that he is the Qualifying Shareholder originally entitled to the Basic Entitlements and Excess CREST Open Offer Entitlements or that he has received such Basic Entitlements and Excess CREST Open Offer Entitlements by virtue of a bona fide market claim;
• (viii) represents and warrants to the Company, the Receiving Agent and the Joint Bookrunners that if he has received some or all of his Basic Entitlements and Excess CREST Open Offer Entitlements from a person other than the Company, he is entitled to apply under the Basic Entitlements and Excess CREST Open Offer in relation to such Open Offer Entitlements by virtue of a bona fide market claim;
• (ix) requests that the Open Offer Shares to which he will become entitled be issued to him on the terms set out in this document and subject to the Articles;
• (x) represents and warrants to the Company, the Receiving Agent and the Joint Bookrunners that he is not, nor is he applying on behalf of any Shareholder who is, a citizen or

resident, or which is a corporation, partnership or other entity created or organised in or under any laws, of a Restricted Jurisdiction or any jurisdiction in which the application for Open Offer Shares is prevented by law and he is not applying with a view to reoffering, re-selling, transferring or delivering any of the Open Offer Shares which are the subject of his application to, or for the benefit of, a Shareholder who is a citizen or resident or which is a corporation, partnership or other entity created or organised in or under any laws of the Restricted Jurisdiction or any jurisdiction in which the application for Open Offer Shares is prevented by law (except where proof satisfactory to the Company has been provided to the Company that he is able to accept the invitation by the Company free of any requirement which it (in its absolute discretion) regards as unduly burdensome), nor acting on behalf of any such person on a non-discretionary basis nor (a) person(s) otherwise prevented by legal or regulatory restrictions from applying for Open Offer Shares under the Open Offer; and

(xi) represents and warrants to the Company, the Receiving Agent and the Joint Bookrunners that he is not, nor is he applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in s67 (depository receipts), s70 (clearance services), s93 (depository receipts) or s96 (clearance services) of the Finance Act 1986.

(l) Company's discretion as to the rejection and validity of applications

Subject to the provisions of the Placing Agreement, the Company may in its sole discretion:

• (i) treat as valid (and binding on the CREST member concerned) an application which does not comply in all respects with the requirements as to validity set out or referred to in this Part II;
• (ii) accept an alternative properly authenticated dematerialised instruction from a CREST member or (where applicable) a CREST sponsor as constituting a valid application in substitution for or in addition to a USE instruction and subject to such further terms and conditions as the Company may determine;
• (iii) treat a properly authenticated dematerialised instruction (in this sub-paragraph the "first instruction") as not constituting a valid application if, at the time at which the Registrar receives a properly authenticated dematerialised instruction giving details of the first instruction or thereafter, either the Company or the Registrar has received actual notice from Euroclear of any of the matters specified in Regulation 35(5)(a) of the CREST Regulations in relation to the first instruction. These matters include notice that any information contained in the first instruction was incorrect or notice of lack of authority to send the first instruction; and
• (iv) accept an alternative instruction or notification from a CREST member or CREST sponsored member or (where applicable) a CREST sponsor, or extend the time for settlement of a USE instruction or any alternative instruction or notification, in the event that, for reasons or due to circumstances outside the control of any CREST member or CREST sponsored member or (where applicable) CREST sponsor, the CREST member or CREST sponsored member is unable validly to apply for Open Offer Shares by means of the above procedures. In normal circumstances, this discretion is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or any part of CREST) or on the part of the facilities and/or systems operated by the Registrar in connection with CREST.

5. Money Laundering Regulations

5.1 Holders of Non-CREST Application Forms

To ensure compliance with the Money Laundering Regulations, the Registrar may require, at its absolute discretion, verification of the identity of the person by whom or on whose behalf the Non-CREST Application Form is lodged with payment (which requirements are referred to below as the "verification of identity requirements"). If the Non-CREST Application Form is submitted by a UK regulated broker or intermediary acting as agent and which is itself subject to the Money Laundering Regulations, any verification of identity requirements are the responsibility of such broker or intermediary and not of the Registrar. In such case, the lodging agent's stamp should be inserted on the Non-CREST Application Form.

The person lodging the Non-CREST Application Form with payment and in accordance with the other terms as described above ("acceptor"), including any person who appears to the Registrar to be acting on behalf of some other person, accepts the Open Offer in respect of such number of Open Offer Shares as is referred to therein (for the purposes of this paragraph 5, the "relevant Open Offer Shares") shall thereby be deemed to agree to provide the Registrar with such information and other evidence as the Registrar may require to satisfy the verification of identity requirements.

If the Registrar determines that the verification of identity requirements apply to any acceptor or application, the relevant Open Offer Shares (notwithstanding any other term of the Open Offer) will not be issued to the relevant acceptor unless and until the verification of identity requirements have been satisfied in respect of that acceptor or application. The Registrar is entitled, in its absolute discretion, to determine whether the verification of identity requirements apply to any acceptor or application and whether such requirements have been satisfied, and neither the Registrar nor the Company will be liable to any person for any loss or damage suffered or incurred (or alleged), directly or indirectly, as a result of the exercise of such discretion.

If the verification of identity requirements apply, failure to provide the necessary evidence of identity within a reasonable time may result in delays in the despatch of share certificates or in crediting CREST accounts. If, within a reasonable time following a request for verification of identity, the Registrar has not received evidence satisfactory to it as aforesaid, the Company may, in its absolute discretion, treat the relevant application as invalid, in which event the monies payable on acceptance of the Open Offer will be returned (at the acceptor's risk) without interest to the account of the bank or building society on which the relevant cheque or banker's draft was drawn.

Submission of a Non-CREST Application Form with the appropriate remittance will constitute a representation and warranty to each of the Receiving Agent, the Company, J.P. Morgan Cazenove, Numis and Jefferies from the applicant that the Money Laundering Regulations will not be breached by application of such remittance.

The verification of identity requirements will not usually apply:

• (a) if the applicant is an organisation required to comply with the Money Laundering Directive (2005160/EC of the European Parliament and of the EC Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing); or
• (b) if the acceptor is a regulated UK broker or intermediary acting as agent and is itself subject to the Money Laundering Regulations; or
• (c) if the applicant (not being an applicant who delivers his application in person) makes payment by way of a cheque drawn on an account in the applicant's name; or
• (d) if the aggregate subscription price for the Open Offer Shares is less than €15,000 (approximately £12,370 as at 4 March 2014).

In other cases the verification of identity requirements may apply. Satisfaction of these requirements may be facilitated in the following ways:

• (a) if payment is made by cheque or banker's draft in sterling drawn on a branch in the UK of a bank or building society which bears a UK bank sort code number in the top right hand corner the following applies. Cheques should be made payable to "Computershare Investor Services PLC, Acceptance Account re The UNITE Group plc Open Offer" in respect of an application by a Qualifying Shareholder and crossed "A/C Payee Only" in each case. Third party cheques may not be accepted with the exception of building society cheques or bankers' drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the cheque/bankers' draft to such effect. However, third party cheques will be subject to the Money Laundering Regulations which would delay Shareholders receiving their Open Offer Shares. The account name should be the same as that shown on the Non-CREST Application Form; or
• (b) if the Non-CREST Application Form is lodged with payment by an agent which is an organisation of the kind referred to in paragraph 5.1(i) above or which is subject to anti-money laundering regulation in a country which is a member of the Financial Action Task Force (the non-European Union members of which are Argentina, Australia, Brazil, Canada, China, Gibraltar, Hong Kong, Iceland, India, Japan, Mexico, New Zealand, Norway, Republic of Korea, Russian Federation, Singapore, South Africa, Switzerland, Turkey, UK Crown Dependencies and the US and, by virtue of their membership of the Gulf Cooperation Council, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), the agent should provide with the Non-CREST Application Form, written confirmation that it has that status and a written assurance that it has obtained and recorded evidence of the identity of the person for whom it acts and that it will on demand make such evidence available to the Registrar. If the agent is not such an organisation, it should contact the Registrar at the address set out in the section of this document headed "Directors, Company Secretary, Registered Office and Advisers".

To confirm the acceptability of any written assurance referred to in paragraph 5.1(b) above, or in any other case, the acceptor should contact the Registrar on the shareholder helpline on 0870 707 1376, or, if calling from overseas, +44 870 707 1376 (calls to this number are charged at 10 pence per minute from a BT landline, other telephone provider costs may vary).

If the Non-CREST Application Form(s) is/are in respect of Open Offer Shares with an aggregate subscription price of €15,000 (approximately £12,370 as at 4 March 2014) or more and is/are lodged by hand by the acceptor in person, or if the Non-CREST Application Form(s) in respect of Open Offer Shares is/are lodged by hand by the acceptor and the accompanying payment is not the acceptor's own cheque, he should ensure that he has with him evidence of identity bearing his photograph (for example, his passport) and separate evidence of his address.

If, within a reasonable period of time following a request for verification of identity, and in any case by no later than 11.00 a.m. on 24 March 2014, the Registrar has not received evidence satisfactory to it as aforesaid, the Registrar may, at its discretion, as agent of the Company, reject the relevant application, in which event the monies submitted in respect of that application will be returned without interest to the account at the drawee bank from which such monies were originally debited (without prejudice to the rights of the Company to undertake proceedings to recover monies in respect of the loss suffered by it as a result of the failure to produce satisfactory evidence as aforesaid).

5.2 Basic Entitlements and Excess CREST Open Offer Entitlements in CREST

If you hold your Basic Entitlements and Excess CREST Open Offer Entitlements in CREST and apply for Open Offer Shares in respect of all or some of your Basic Entitlements and Excess CREST Open Offer Entitlements as agent for one or more persons and you are not a UK or EU regulated person or institution (e.g. a UK financial institution), then, irrespective of the value of the application, the Registrar is obliged to take reasonable measures to establish the identity of the person or persons on whose behalf you are making the application. You must therefore contact the Registrar before sending any USE or other instruction so that appropriate measures may be taken.

Submission of a USE instruction which on its settlement constitutes a valid application as described above constitutes a warranty and undertaking by the applicant to provide promptly to the Registrar such information as may be specified by the Registrar as being required for the purposes of the Money Laundering Regulations. Pending the provision of evidence satisfactory to the Registrar as to identity, the Registrar may in its absolute discretion take, or omit to take, such action as it may determine to prevent or delay issue of the Open Offer Shares concerned. If satisfactory evidence of identity has not been provided within a reasonable time, then the application for the Open Offer Shares represented by the USE instruction will not be valid. This is without prejudice to the right of the Company to take proceedings to recover any loss suffered by it as a result of failure to provide satisfactory evidence.

6. Overseas Shareholders

This document has been approved by the FCA, being the competent authority in the UK for the purposes of the Prospectus Directive.

Accordingly, the making of the Open Offer to persons resident in, or who are citizens of, or who have a registered address in, countries other than the UK may be affected by the law or regulatory requirements of the relevant jurisdiction. The comments set out in this paragraph 6 are intended as a general guide only and any Overseas Shareholders who are in any doubt as to their position should consult their professional advisers without delay.

6.1 General

The distribution of this document and the Non-CREST Application Form and the making of the Open Offer to persons who have registered addresses in, or who are resident or ordinarily resident in, or citizens of, or which are corporations, partnerships or other entities created or organised under the laws of countries other than the UK or to persons who are nominees of or custodians, trustees or guardians for citizens, residents in or nationals of, countries other than the UK may be affected by the laws or regulatory requirements of the relevant jurisdictions. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any applicable legal requirement or other formalities to enable them to apply for Open Offer Shares under the Open Offer.

No action has been or will be taken by the Company, J.P. Morgan Cazenove, Numis or Jefferies or any other person to permit a public offering or distribution of this document (or any other offering or publicity materials or application form(s) relating to the Open Offer Shares) in any jurisdiction where action for that purpose may be required, other than in the UK.

Receipt of this document and/or a Non-CREST Application Form and/or a credit of Basic Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST will not constitute an invitation or offer of securities for subscription, sale or purchase in those jurisdictions in which it would be illegal to make such an invitation or offer and, in those circumstances, this document and/or the Non-CREST Application Form must be treated as sent for information only and should not be copied or redistributed.

Due to restrictions under the securities laws of the United States and the other Restricted Jurisdictions and certain commercial considerations, Non-CREST Application Forms will not be sent to, and neither Basic Entitlements nor Excess CREST Open Offer Entitlements will be credited to stock accounts in CREST of, Excluded Overseas Shareholders or their agents or intermediaries, except where the Company is satisfied, at its sole and absolute discretion, that such action would not result in the contravention of any registration or other legal requirement in the relevant jurisdiction.

No person receiving a copy of this document and/or a Non-CREST Application Form and/or a credit of Basic Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST in any territory other than the UK may treat the same as constituting an invitation or offer to him, nor should he in any event use any such Non-CREST Application Form and/or credit of Basic Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST unless, in the relevant territory, such an invitation or offer could lawfully be made to him and such Non-CREST Application Form and/or credit of Basic Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST could lawfully be used, and any transaction resulting from such use could be effected, without contravention of any registration or other legal or regulatory requirements. In circumstances where an invitation or offer would contravene any registration or other legal or regulatory requirements, this document and/or the Non-CREST Application Form must be treated as sent for information only and should not be copied or redistributed.

It is the responsibility of any person (including, without limitation, custodians, agents, nominees and trustees) outside the UK wishing to apply for Open Offer Shares under the Open Offer to satisfy himself as to the full observance of the laws of any relevant territory in connection therewith, including obtaining any governmental or other consents that may be required, observing any other formalities required to be observed in such territory and paying any issue, transfer or other taxes due in such territory.

None of the Company, J.P. Morgan Cazenove, Numis or Jefferies nor any of their respective representatives is making any representation to any offeree or purchaser of Open Offer Shares regarding the legality of an investment in the Open Offer Shares by such offeree or purchaser under the laws applicable to such offeree or purchaser.

Persons (including, without limitation, custodians, agents, nominees and trustees) receiving a copy of this document and/or a Non-CREST Application Form and/or a credit of Basic Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST, in connection with the Open Offer or otherwise, should not distribute or send either of those documents nor transfer Basic Entitlements or Excess CREST Open Offer Entitlements in or into or from any jurisdiction where to do so would or might contravene local securities laws or regulations. If a copy of this document and/or a Non-CREST Application Form and/or a credit of Basic Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST is received by any person in any such territory, or by his custodian, agent, nominee or trustee, he must not seek to apply for Open Offer Shares unless the Company and the Joint Bookrunners determine that such action would not violate applicable legal or regulatory requirements. Any person (including, without limitation, custodians, agents, nominees and trustees) who does forward a copy of this document and/or a Non-CREST Application Form and/or transfers Basic Entitlements or Excess CREST Open Offer Entitlements into any such territory, whether pursuant to a contractual or legal obligation or otherwise, should draw the attention of the recipient to the contents of this Part II and specifically the contents of this paragraph 6.

Subject to the terms of the Placing Agreement, the Company reserves the right to treat as invalid any application or purported application for Open Offer Shares that appears to the Company or its agents to have been executed, effected or dispatched by an Excluded Overseas Shareholder or on behalf of such a person by their agent or intermediary or in a manner that may involve a breach of the laws or regulations of any jurisdiction or if the Company or its agents believe that the same may violate applicable legal or regulatory requirements or if it provides an address for delivery of the share certificates of Open Offer Shares or, in the case of a credit of Basic Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST, to a CREST member whose registered address would be, in a Restricted Jurisdiction or any other jurisdiction outside the UK in which it would be unlawful to deliver such share certificates or make such a credit.

The attention of Overseas Shareholders is drawn to paragraphs 6.2 to 6.8 of this Part II below.

Notwithstanding any other provision of this document or the Non-CREST Application Form, the Company having notified J.P. Morgan Cazenove, Numis and Jefferies, reserves the right to permit any Qualifying Shareholder who is an Excluded Overseas Shareholder to apply for Open Offer Shares if the Company, in its sole and absolute discretion, is satisfied that the transaction in question is exempt from, or not subject to, the legislation or regulations giving rise to the restrictions in question.

Overseas Shareholders who wish, and are permitted, to apply for Open Offer Shares should note that payment must be made in sterling denominated cheques or bankers' drafts or where such an Overseas Shareholder is a Qualifying CREST Shareholder, through CREST.

Due to restrictions under the securities laws of the United States and the other Restricted Jurisdictions and subject to certain exceptions, Excluded Overseas Shareholders will not qualify to participate in the Open Offer and will not be sent a Non-CREST Application Form nor will their stock accounts in CREST be credited with Basic Entitlements or Excess CREST Open Offer Entitlements.

The New Ordinary Shares have not been and will not be registered under the relevant laws of any Restricted Jurisdiction or any state, province or territory thereof and may not be offered, sold, resold, transferred, delivered or distributed, directly or indirectly, in or into any or from Restricted Jurisdiction or to, or for the account or benefit of, any person with a registered address in, or who is resident or ordinarily resident in, or a citizen of, the United States or any other Restricted Jurisdiction except pursuant to an applicable exemption.

No public offer of Open Offer Shares is being made by virtue of this document or the Non-CREST Application Forms into the United States or any other Restricted Jurisdiction. Receipt of this document and/or a Non-CREST Application Form and/or a credit of a Basic Entitlement or an Excess CREST Open Offer Entitlement to a stock account in CREST will not constitute an invitation or offer of securities for subscription, sale or purchase in those jurisdictions in which it would be illegal to make such an invitation or offer and, in those circumstances, this document and/or the Non-CREST Application Form must be treated as sent for information only and should not be copied or redistributed.

6.2 United States

Subject to certain exceptions, this document is intended for use only in connection with offers and sales of New Ordinary Shares outside the United States and is not to be sent or given to any person within the United States. The New Ordinary Shares offered hereby have not been and will not be registered under the Securities Act or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States.

Accordingly, neither this document nor the Non-CREST Application Form constitutes, or will constitute, or forms part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or acquire any New Ordinary Shares to any Shareholder with a registered address in or located in the United States. Notwithstanding the foregoing, the Company reserves the right to offer the New Ordinary Shares in the United States in transactions exempt from, or not subject to, the registration requirements under the Securities Act.

Subject to certain exceptions, the New Ordinary Shares will be distributed, offered or sold, as the case may be, outside the United States in offshore transactions within the meaning of, and in accordance with, Regulation S under the Securities Act.

Each person to which the New Ordinary Shares are distributed, offered or sold outside the United States will be deemed by its subscription for, or purchase of, the New Ordinary Shares to have represented and agreed, on its behalf and on behalf of any investor accounts for which it is subscribing or purchasing the New Ordinary Shares, as the case may be, that:

• (a) it is acquiring the New Ordinary Shares from the Company in an "offshore transaction" as defined in Regulation S under the Securities Act; and
• (b) the New Ordinary Shares have not been offered to it by the Company or the Joint Bookrunners or by means of any "directed selling efforts" as defined in Regulation S under the Securities Act.

Each subscriber or purchaser acknowledges that the Company and the Joint Bookrunners and will rely upon the truth and accuracy of the foregoing representations and agreements, and agrees that if any of the representations and agreements deemed to have been made by such subscriber or purchaser by its subscription for, or purchase of, the New Ordinary Shares, as the case may be, are no longer accurate, it shall promptly notify the Company and the Joint Bookrunners. If such subscriber or purchaser is subscribing for, or purchasing, the New Ordinary Shares as a fiduciary or agent for one or more investor accounts, each subscriber or purchaser represents that it has sole investment discretion with respect to each such account and full power to make the foregoing representations and agreements on behalf of each such account.

Notwithstanding the foregoing, New Ordinary Shares may be offered to and acquired by a limited number of persons in the United States who are reasonably believed to be QIBs pursuant to an available exemption from registration under the Securities Act. Any person reasonably believed to be a QIB to whom New Ordinary Shares are offered and by whom New Ordinary Shares are acquired will be required to complete an appropriate investor letter and make certain representations and covenants in the Non-CREST Application Form or otherwise in which, among other things, it will warrant, undertake or acknowledge certain information and/or obligations, as the case may be, in order to participate in the Firm Placing and Placing and Open Offer. Such warranties will include, among others, warranties as to the fact that the purchaser (a) is a QIB and (b) is acquiring the New Ordinary Shares as principal for its own account and not with a view to or for distributing or reselling such New Ordinary Shares or any portion thereof, without prejudice, however, to its right at all times to sell or otherwise dispose of all or any part of such New Ordinary Shares in compliance with applicable United States federal and state securities laws.

Until 40 days after the commencement of the Firm Placing and Placing and Open Offer (being the date of this Prospectus), an offer, sale or transfer of the New Ordinary Shares within the United States by any dealer (whether or not participating in the Firm Placing and Placing and Open Offer) may violate the registration requirements of the Securities Act.

Each subscriber or purchaser acknowledges that it will not resell the New Ordinary Shares absent registration or an available exemption or safeharbour from registration under the Securities Act.

6.3 Canada

This document is not, and is not to be construed as, a prospectus, an advertisement or a public offering of these securities in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this document or the merits of the New Ordinary Shares, and any representation to the contrary is an offence.

In addition, the relevant exemptions are not being obtained from the appropriate provincial authorities in Canada. Accordingly, the New Ordinary Shares are not being offered for purchase by persons resident in Canada or any territory or possessions thereof. Applications from any Canadian Person who appears to be or whom the Company has reason to believe to be so resident or the agent of any person so resident will be deemed to be invalid. Neither this document nor a Non-CREST Application Form will be sent to, and no Basic Entitlements or Excess CREST Open Offer Entitlements will be credited to a stock account in CREST of, any shareholder in the Company whose registered address is in Canada. If any Non-CREST Application Form is received by any shareholder in the Company whose registered address is elsewhere but who is, in fact, a Canadian Person or the agent of a Canadian Person so resident, he should not apply under the Open Offer.

For the purposes of this paragraph 6.3, "Canadian Person" means a citizen or resident of Canada, including the estate of any such person or any corporation, partnership or other entity created or organised under the laws of Canada or any political sub-division thereof.

6.4 Australia

Neither this document nor the Non-CREST Application Form has been lodged with, or registered by, the Australian Securities and Investments Commission. A person may not: (i) directly or indirectly offer for subscription or purchase or issue an invitation to subscribe for or buy or sell, the New Ordinary Shares; or (ii) distribute any draft or definitive document in relation to any such offer, invitation or sale, in Australia or to any resident of Australia (including corporations and other entities organised under the laws of Australia but not including a permanent establishment of such a corporation or entity located outside Australia). Accordingly, neither this document nor any Non-CREST Application Form will be issued to, and no Basic Entitlements or Excess CREST Open Offer Entitlements will be credited to a CREST stock account of, shareholders in the Company with registered addresses in, or to residents of, Australia.

6.5 Switzerland

The New Ordinary Shares may not be publicly offered, sold or advertised, directly or indirectly, in or from Switzerland. Neither this Prospectus nor any other offering or marketing material relation to the New Ordinary Shares constitutes a prospectus as such term is understood pursuant to article 652a of the Swiss Federal Code of Obligations or a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange Ltd., and neither this Prospectus nor any other offering or marketing material relating to the New Ordinary Shares may be publicly distributed or otherwise made publicly available in Switzerland.

6.6 Other Restricted Jurisdictions

The New Ordinary Shares have not been and will not be registered under the relevant laws of any Restricted Jurisdiction or any state, province or territory thereof and may not be offered, sold, resold, delivered or distributed, directly or indirectly, in or into any Restricted Jurisdiction or to, or for the account or benefit of, any person with a registered address in, or who is resident or ordinarily resident in, or a citizen of, any Restricted Jurisdiction except pursuant to an applicable exemption.

No offer of New Ordinary Shares is being made by virtue of this document or the Non-CREST Application Forms into any Restricted Jurisdiction.

6.7 Representations and warranties relating to Overseas Shareholders

(a) Qualifying Non-CREST Shareholders

Any person completing and returning a Non-CREST Application Form or requesting registration of the New Ordinary Shares comprised therein represents and warrants to the Company and the Joint Bookrunners and the Registrar that, except where proof has been provided to the Company's satisfaction that such person's use of the Non-CREST Application Form will not result in the contravention of any applicable legal requirements in any jurisdiction: (i) such person is not requesting registration of the relevant New Ordinary Shares from within any Restricted Jurisdiction; (ii) such person is not in any territory in which it is unlawful to make or accept an offer to acquire New Ordinary Shares or to use the Non-CREST Application Form in any manner in which such person has used or will use it; (iii) such person is not acting on a non-discretionary basis for a person located within any Restricted Jurisdiction (except as agreed with the Company) or any territory referred to in (ii) above at the time the instruction to accept was given; and (iv) such person is not acquiring New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Ordinary Shares into any of the above territories. Subject to the terms of the Placing Agreement, the Company and/or the Registrar may treat as invalid any acceptance or purported acceptance of the allotment of New Ordinary Shares comprised in a Non-CREST Application Form if it: (i) appears to the Company or its agents to have been executed, effected or dispatched from the United States or any other Restricted Jurisdiction or in a manner that may involve a breach of the laws or regulations of any jurisdiction or if the Company or its agents believe that the same may violate applicable legal or regulatory requirements; or (ii) provides an address in the United States or any other Restricted Jurisdiction for delivery of the share certificates of New Ordinary Shares (or any other jurisdiction outside the UK in which it would be unlawful to deliver such share certificates); or (iii) purports to exclude the representation and warranty required by this paragraph (a).

(b) Qualifying CREST Shareholders

A CREST member or CREST sponsored member who makes a valid acceptance in accordance with the procedures set out in this Part II represents and warrants to the Company, and the Joint Bookrunners that, except where proof has been provided to the Company's satisfaction that such person's acceptance will not result in the contravention of any applicable legal requirement in any jurisdiction: (i) neither it nor its client is within any Restricted Jurisdiction; (ii) neither it nor its client is in any territory in which it is unlawful to make or accept an offer to acquire New Ordinary Shares; (iii) it is not accepting on a non-discretionary basis for a person located within any Restricted Jurisdiction or any territory referred to in (ii) above at the time the instruction to accept was given; and (iv) neither it nor its client is acquiring any New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Ordinary Shares into any of the above territories.

6.8 Waiver

The provisions of this paragraph 6 and of any other terms of the Open Offer relating to Overseas Shareholders may be waived, varied or modified as regards specific Shareholders or on a general basis by the Company, J.P. Morgan Cazenove, Numis and Jefferies in their absolute discretion. Subject to this, the provisions of this paragraph 6 supersede any terms of the Open Offer inconsistent herewith. References in this paragraph 6 to Shareholders shall include references to the person or persons executing a Non-CREST Application Form and, in the event of more than one person executing a Non-CREST Application Form, the provisions of this paragraph 6 shall apply to them jointly and to each of them.

7. Withdrawal rights

Persons wishing to exercise or direct the exercise of statutory withdrawal rights pursuant to section 87Q(4) of the FSMA after the issue by the Company of a prospectus supplementing this document must do so by lodging a written notice of withdrawal within two Business Days commencing on the Business Day after the date on which the supplementary prospectus is published. The withdrawal notice must include the full name and address of the person wishing to exercise statutory withdrawal rights and, if such person is a CREST member, the participant ID and the member account ID of such CREST member. The notice of withdrawal must be deposited by hand only (during normal business hours only) to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE or by facsimile to the Registrar (please call the Registrar on the shareholder helpline on 0870 707 1376, or, if calling from overseas, +44 807 707 1376 for further details) so as to be received within two Business Days commencing on the Business Day after the date on which the supplementary prospectus is published. Notice of withdrawal given by any other means or which is deposited with the Registrar after expiry of such period will not constitute a valid withdrawal, provided that the Company will not permit the exercise of withdrawal rights after payment by the relevant person for the New Ordinary Shares applied for in full and the allotment of such New Ordinary Shares to such person becoming unconditional save to the extent required by statute. In such event, Shareholders are advised to seek independent legal advice.

In this regard, reference is also made to paragraph 9 of this Part II.

8. Admission, settlement and dealings

The result of the Open Offer is expected to be announced on 25 March 2014. Applications will be made to the UK Listing Authority for the New Ordinary Shares (including the Open Offer Shares) to be listed on the premium segment of the Official List and to the London Stock Exchange for the New Ordinary Shares (including the Open Offer Shares) to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that dealings in the New Ordinary Shares (including the Open Offer Shares), fully paid, will commence at 8.00 a.m. on 27 March 2014.

The Existing Ordinary Shares are already admitted to CREST. No further application for admission to CREST is accordingly required for the New Ordinary Shares. All such shares, when issued and fully paid, may be held and transferred by means of CREST.

Basic Entitlements and Excess CREST Open Offer Entitlements held in CREST are expected to be disabled in all respects after 11.00 a.m. on 24 March 2014 (being the latest practicable time for applications under the Open Offer). If the conditions to the Open Offer described above are satisfied, New Ordinary Shares will be issued in uncertificated form to those persons who submitted a valid application for New Ordinary Shares by utilising the CREST application procedures and whose applications have been accepted by the Company. On 26 March 2014, the Registrar will instruct Euroclear to credit the appropriate stock accounts of such persons with such persons' entitlements to New Ordinary Shares with effect from Admission (expected to be on 27 March 2014). The stock accounts to be credited will be accounts under the same CREST participant IDs and CREST member account IDs in respect of which the USE instruction was given.

Notwithstanding any other provision of this document, the Company reserves the right to send Qualifying CREST Shareholders a Non-CREST Application Form instead of crediting the relevant stock account with Basic Entitlements and Excess CREST Open Offer Entitlements, and to allot and/or issue any New Ordinary Shares in certificated form, In normal circumstances, this right is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or of any part of CREST) or on the part of the facilities and/or systems operated by the Registrar in connection with CREST.

For Qualifying Non-CREST Shareholders who have applied by using a Non-CREST Application Form, share certificates in respect of the New Ordinary Shares validly applied for are expected to be despatched by post within seven days of Admission. No temporary documents of title will be issued and, pending the issue of definitive certificates, transfers will be certified against the UK share register of the Company. All documents or remittances sent by or to applicants, or as they may direct, will be sent through the post at their own risk. For more information as to the procedure for application, Qualifying Non-CREST Shareholders are referred to paragraph 4.1 of this Part II and the Non-CREST Application Form.

9. Times and dates

The Company shall, in its discretion in agreement with J.P. Morgan Cazenove, Numis and Jefferies, and after consultation with the Joint Bookrunners and its legal advisers, be entitled to amend the dates on which Non-CREST Application Forms are despatched or amend or extend the latest date for acceptance under the Open Offer and all related dates set out in this document and in such circumstances shall notify the UK Listing Authority and the London Stock Exchange, and make an announcement on a Regulatory Information Service approved by the FCA and, if appropriate, by Shareholders but Qualifying Shareholders may not receive any further written communication.

If a supplementary prospectus is published by the Company two or fewer Business Days prior to the latest time and date for acceptance and payment in full under the Open Offer specified in this document, the latest date for acceptance under the Open Offer shall be extended to the date that is at least three Business Days after the date of publication of the supplementary prospectus (and the dates and times of principal events due to take place following such date shall be extended accordingly).

10. Taxation

Certain statements regarding United Kingdom and United States taxation in respect of the New Ordinary Shares and the Open Offer are set out in Part X of this document. Shareholders who are in any doubt as to their tax position in relation to taking up their entitlements under the Open Offer, or who are subject to tax in any jurisdiction other than the United Kingdom or the United States, should immediately consult a suitable professional adviser.

11. Governing law and jurisdiction

The terms and conditions of the Open Offer as set out in this document, the Non-CREST Application Form and any non-contractual obligation related thereto shall be governed by, and construed in accordance with, the laws of England and Wales. The courts of England and Wales are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Open Offer, this document or the Non-CREST Application Form including, without limitation, disputes relating to any non-contractual obligations arising out of or in connection with the Open Offer, this document or the Non-CREST Application Form. By taking up New Ordinary Shares under the Open Offer in accordance with the instructions set out in this document and, where applicable, the Non-CREST Application Form, Qualifying Shareholders irrevocably submit to the jurisdiction of the courts of England and Wales and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.

12. Further information

Your attention is drawn to the further information set out in this document and also to the terms, conditions and other information printed on any Non-CREST Application Form.

PART III

QUESTIONS AND ANSWERS IN RESPECT OF THE FIRM PLACING AND PLACING AND OPEN OFFER

The questions and answers set out in this Part III are intended to be in general terms only and, as such, you should read Part II (Terms and Conditions of the Open Offer) of this document for full details of what action to take. If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other appropriate independent financial adviser, who is authorised under the FSMA if you are in the United Kingdom.

This Part III deals with general questions relating to the Firm Placing and Placing and Open Offer and more specific questions relating principally to persons resident in the United Kingdom who hold their Existing Ordinary Shares in certificated form only. If you are an Overseas Shareholder, you should read paragraph 6 of Part II (Terms and Conditions of the Open Offer) of this document. If you hold your Existing Ordinary Shares in uncertificated form (that is, through CREST) you should read paragraph 4.2 of Part II (Terms and Conditions of the Open Offer) of this document for full details of what action you should take. If you are a CREST sponsored member, you should also consult your CREST sponsor. If you do not know whether your Existing Ordinary Shares are held in certificated or uncertificated form, please call Computershare Investor Services PLC on the shareholder helpline on 0870 707 1376 or on +44 870 707 1376 if calling from overseas. Calls to this number are charged at 10 pence per minute from a BT landline, other provider costs may vary. Please note the Registrar cannot provide financial advice on the merits of the Issue or as to whether applicants should take up their Open Offer entitlements.

The contents of this document should not be construed as legal, business, accounting, tax, investment or other professional advice. Each prospective investor should consult their, his/her or its own appropriate professional advisers for advice. This document is for your information only and nothing in this document is intended to endorse or recommend a particular course of action.

1. What is a firm placing and a placing and open offer?

A firm placing and a placing and open offer is a way for companies to raise money. Companies usually do this by giving their existing shareholders a right to acquire further shares at a fixed price in proportion to their existing shareholdings (an open offer) and providing for new investors to acquire new shares in the company (a firm placing and a placing). The fixed price is normally at a discount to the market price of the existing ordinary shares prior to the announcement of the open offer.

2. Am I eligible to participate in the Firm Placing?

A firm placing or a placing is where specific investors procured by a company's advisers agree to subscribe for placed shares. The Firm Placed Shares do not form part of the Open Offer. Unless you are a Firm Placee, you will not participate in the Firm Placing.

3. What is the Company's Open Offer?

The Open Offer is an invitation by the Company to Qualifying Shareholders to apply to acquire an aggregate of up to 16,824,617 Open Offer Shares at a price of 410 pence per Open Offer Share. If you hold Existing Ordinary Shares on the Record Date or have a bona fide market claim, other than where you are a Shareholder with a registered address in or are located in any Restricted Jurisdiction, you will be entitled to subscribe for Open Offer Shares under the Open Offer.

The Open Offer is being made on the basis of 2 Open Offer Share for every 21 Existing Ordinary Shares held by Qualifying Shareholders on the Record Date. If your entitlement to Open Offer Shares is not a whole number, you will not be entitled to buy an Open Offer Share in respect of any fraction of an Open Offer Share and your entitlement will be rounded down to the nearest whole number. Open Offer Shares are being offered to Qualifying Shareholders in the Open Offer at a discount to the share price on the last Business Day before the announcement of the terms of the Issue. The Issue Price of 410 pence per Open Offer Share represents a 9.3 per cent. discount to the closing middle-market price of 452 pence per Existing Ordinary Share on 5 March 2014. This discount has been set by the Board following careful consideration. The Board considers that the level of discount is appropriate in order to secure the investment necessary in the Company, having regard to prevailing market conditions and transaction costs.

Qualifying Shareholders are also being given the opportunity, provided they take up their Basic Entitlement in full, to apply for Excess Shares through the Excess Application Facility.

The total number of Open Offer Shares is fixed and will not be increased in response to any applications under the Excess Application Facility. Such applications will therefore only be satisfied to the extent that other Qualifying Shareholders do not apply for their Basic Entitlement in full. Fractions of Excess Shares will not be issued under the Excess Application Facility and fractions of Excess Shares will be rounded down to the nearest whole number.

If applications under the Excess Application Facility are received for more than the total number of Open Offer Shares available following take up of Basic Entitlements, such applications will be scaled back pro rata to the number of Excess Shares applied for by Qualifying Shareholders under the Excess Application Facility in such manner as the Board may, in its absolute discretion, determine, and no assurance can be given that the applications by Qualifying Shareholders will be met in full or in part or at all.

Valid applications by Qualifying Shareholders will be satisfied in full up to the amount of their individual Basic Entitlement (excluding any Open Offer Shares applied for through the Excess Application Facility).

Qualifying Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Non-CREST Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Basic Entitlements and the Excess CREST Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, neither the Basic Entitlements nor the Excess CREST Open Offer Entitlements will be tradable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's Claims Processing Unit.

Open Offer Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up their entitlements will have no rights nor receive any benefit under the Open Offer. Any Open Offer Shares which are not applied for under the Open Offer may be allocated to other Qualifying Shareholders under the Excess Application Facility.

4. When will the Open Offer take place?

The Open Offer is subject to Admission becoming effective by not later than 8.00 a.m. on 27 March 2014 (or such later time and date as the Company, and the Joint Bookrunners may determine but in any event, not later than 3.00 p.m. on the 3 April 2014).

5. What is a Non-CREST Application Form?

It is a form sent to those Qualifying Shareholders who hold their Ordinary Shares in certificated form (that is not held in CREST). It sets out your entitlement to subscribe for the Open Offer Shares and contains a form for you to complete if you want to participate.

6. I hold my Existing Ordinary Shares in certificated form. How do I know I am eligible to participate in the Open Offer?

If you receive a Non-CREST Application Form and are not a holder with a registered address or located in any Restricted Jurisdiction, then you should be eligible to participate in the Open Offer as long as you have not sold all of your Existing Ordinary Shares before 6 March 2014 (the date when the Existing Ordinary Shares are expected to be marked "ex-entitlement" by the London Stock Exchange).

7. I hold my Existing Ordinary Shares in certificated form. How do I know how many Open Offer Shares I am entitled to take up?

If you hold your Existing Ordinary Shares in certificated form and do not have a registered address and are not located in any Restricted Jurisdiction, you will be sent a Non-CREST Application Form that shows:

• (a) how many Existing Ordinary Shares you held at the close of business on the Record Date;
• (b) how many Open Offer Shares are comprised in your Basic Entitlement;
• (c) how much you need to pay if you want to take up your right to buy all of your Basic Entitlement; and
• (d) how many Excess Shares you may apply for under the Excess Application Facility.

If you would like to apply for any of or all of the Open Offer Shares comprised in your Basic Entitlement, you should complete the Non-CREST Application Form in accordance with the instructions printed on it and the information provided in this document. Completed Non-CREST Application Forms should be posted, along with a cheque or bankers' draft drawn in the appropriate form, in the accompanying pre-paid envelope or returned by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH or by hand (during normal office hours only) to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE (who will act as Receiving Agent in relation to the Open Offer), so as to be received by the Registrar, in either case, by no later than 11.00 a.m. on 24 March 2014, after which time Non-CREST Application Forms will not be valid.

8. I hold my Existing Ordinary Shares in certificated form and am eligible to receive a non-CREST Application Form. What are my choices in relation to the Open Offer?

8.1 If you do not want to take up any of your Basic Entitlement

If you do not want to take up any of your Basic Entitlement, you do not need to do anything. In these circumstances, you will not receive any Open Offer Shares. You will also not receive any money when the Open Offer Shares you could have taken up are sold, as would happen under a rights issue. You cannot sell your Non-CREST Application Form or your Basic Entitlement to anyone else. If you do not take up your Basic Entitlement and do not subscribe for any other Open Offer Shares pursuant to the Issue, then following the issue of the New Ordinary Shares, your economic interest in the Company will be diluted by approximately 12.2 per cent.

8.2 If you want to take up some but not all of your Basic Entitlement

If you want to take up some but not all of the Open Offer Shares to which you are entitled pursuant to your Basic Entitlement, you should write the number of Open Offer Shares you want to take up in Box D of your Non-CREST Application Form; for example, if you are entitled to take up 100 shares pursuant to your Basic Entitlement but you only want to take up 50 shares, then you should write '50' in Box D. To work out how much you need to pay for the Open Offer Shares, you need to multiply the number of Open Offer Shares you want (in this example, '50') by 410 pence, which is the price in sterling of each Open Offer Share (giving you an amount of £205.00 in this example). You should write this amount in Box G, rounding down to the nearest whole pence and this should be the amount your cheque or bankers' draft is made out for. You should then sign the Non-CREST Application Form in the space provided at the bottom of the application letter on page 3 (ensuring that all joint holders sign (if applicable) and return the completed Non-CREST Application Form, together with a cheque or bankers' draft for the relevant amount, in the accompanying pre-paid envelope (for use within the UK only), by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH or by hand (during normal office hours only) to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE (who will act as Receiving Agent in relation to the Open Offer), so as to be received by the Registrar, in either case, by no later than 11.00 a.m. on 24 March 2014, after which time Non-CREST Application Forms will not be valid. If you post your Non-CREST Application Form by first-class post, you should allow at least four Business Days for delivery. Please do not send cash.

All payments must be in sterling and made by cheque or bankers' draft made payable to "Computershare Investor Services PLC, Acceptance Account re: The UNITE Group plc Open Offer" and crossed "A/C payee only". Cheques or bankers' drafts must be drawn on an account at a bank or building society or branch of a bank or building society in the United Kingdom which is either a member of the Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques and bankers' drafts to be cleared through the facilities provided by any of those companies or committees and must bear the appropriate sort code in the top right hand corner and must be for the full amount payable for the application. Third party cheques (other than building society cheques or banker's drafts where the building society or bank has confirmed that the relevant Qualifying Shareholder has title to the underlying funds) will be subject to the Money Laundering Regulations which would delay Qualifying Shareholders receiving their Open Offer Shares (see paragraph 5 of this Part II). The account name should be the same as that shown on the application. Post-dated cheques will not be accepted. Please do not send cash.

Cheques or bankers' drafts will be presented for payment upon receipt. The Company reserves the right to instruct the Registrar to seek special clearance of cheques and bankers' drafts to allow the Company to obtain value for remittances at the earliest opportunity. It is a term of the Open Offer that cheques and bankers' drafts shall be honoured on first presentation, and the Company may in its sole discretion elect to treat as valid or invalid any applications in respect of which cheques or bankers' drafts are not so honoured.

Application monies will be paid into a separate bank account pending the Open Offer becoming unconditional. In the event that it does not become unconditional by 8.00 a.m. on 27 March 2014 or such later time and date as the Company and the Joint Bookrunners shall agree (being no later than 3.00 p.m. on 3 April 2014), the Open Offer will lapse and application monies will be returned by post to applicants, at the applicants' risk and without payment of interest, to the address set out on the Non-CREST Application Form, as soon as practicable thereafter.

8.3 If you want to take up all of, but no more than, your Basic Entitlement

If you want to take up all of your Basic Entitlement, all you need to do is sign the Non-CREST Application Form in the space provided at the bottom of the application letter on page 3 (ensuring that all joint holders sign (if applicable)) and send the Non-CREST Application Form, together with your cheque or bankers' draft for the amount (as indicated in Box C of your Non-CREST Application Form), payable to "Computershare Investor Services PLC, Acceptance Account re: The UNITE Group plc Open Offer" and crossed "A/C payee only, in the accompanying pre-paid envelope by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH or by hand (during normal office hours only) to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE (who will act as Receiving Agent in relation to the Open Offer), so as to be received by the Registrar, in either case, by no later than 11.00 a.m. on 24 March 2014, after which time Non-CREST Application Forms will not be valid. If you post your Non-CREST Application Form by first-class post, you should allow at least four Business Days for delivery. Please do not send cash.

All payments must be made in accordance with the instructions contained in answer 7.2 above.

8.4 If you want to take up more than your Basic Entitlement

Provided that you have agreed to take up your Basic Entitlement in full, you can apply for further Open Offer Shares under the Excess Application Facility. You should write the number of Excess Shares that you wish to apply for under the Excess Application Facility in Box E and add that number to the number in Box B and insert that total in Box F.

If applications made under the Excess Application Facility are received for more than the total number of Open Offer Shares available following the take up of Basic Entitlements, such applications will be allocated as the Board may, in its absolute discretion, determine. Therefore, applications under the Excess Application Facility may not be satisfied in full. In this event, Qualifying Shareholders will receive a sterling amount equal to the number of Open Offer Shares applied and paid for by, but not allocated to, the relevant Qualifying Shareholder, multiplied by the Issue Price. Monies will be returned as soon as reasonably practicable thereafter, without payment of interest and at the applicant's sole risk.

9. I hold my Existing Ordinary Shares in uncertificated form in CREST. What do I need to do in relation to the Open Offer?

CREST members should follow the instructions set out in paragraph 4.2 of Part II of this document. Persons who hold Existing Ordinary Shares through a CREST member should be informed by the CREST member through whom they hold their Existing Ordinary Shares of the number of Open Offer Shares which they are entitled to acquire under the Open Offer and should contact them if they do not receive this information.

10. I acquired my Existing Ordinary Shares prior to the Record Date and hold my Existing Ordinary Shares in certificated form. What shall I do if I do not receive a Non-CREST Application Form or if I have lost my Non-CREST Application Form?

If you do not receive a Non-CREST Application Form, this probably means that you are not eligible to participate in the Open Offer. Some Qualifying Shareholders, however, will not receive a Non-CREST Application Form but may still be eligible to participate in the Open Offer, namely:

• (a) Qualifying CREST Shareholders who held their Existing Ordinary Shares in uncertificated form on 5 March 2014 at 6.00 p.m. (close of business) and who have subsequently converted them to certificated form; and
• (b) Qualifying Non-CREST Shareholders who bought Existing Ordinary Shares before 7.00 a.m. on 6 March 2014 but were not registered as the holders of those shares at the close of business on 6 March 2014.

If you do not receive a Non-CREST Application Form but think that you should have received one or you have lost your Non-CREST Application Form, please contact Computershare Investor Services PLC on the shareholder helpline on 0870 707 1376 or on +44 870 707 1376 if calling from overseas. Calls to this number are charged at 10 pence per minute from a BT landline, other provider costs may vary. Please note the Registrar cannot provide financial advice on the merits of the Placing and Open Offer or as to whether applicants should take up their Open Offer entitlements.

11. I am a Qualifying Non-CREST Shareholder, do I have to apply for all of my Basic Entitlement?

You can take up any number of the Open Offer Shares allocated to you under your Basic Entitlement. Your Basic Entitlement is shown on your Non-CREST Application Form. Any application by a Qualifying Non-CREST Shareholder for a number of Open Offer Shares which is equal to or less than that person's Basic Entitlement will be satisfied, subject to the Open Offer becoming unconditional. If you decide not to take up all of the Open Offer Shares comprised in your Basic Entitlement, then your proportion of the ownership and voting interest in the Company will be reduced over and above the amount it will be reduced as a result of the Firm Placing. Please refer to the answer to question 8 above for further information.

12. What if I change my mind?

If you are a Qualifying Non-CREST Shareholder, once you have sent your Non-CREST Application Form and payment to the Registrar, you cannot withdraw your application or change the number of Open Offer Shares for which you have applied, except in the very limited circumstances which are set out in Part II of this document.

13. What if the number of Open Offer Shares to which I am entitled is not a whole number: am I entitled to fractions of Open Offer Shares?

If the number is not a whole number, you will not receive a fraction of an Open Offer Share and your entitlement will be rounded down to the nearest whole number. Fractional entitlements under the Open Offer will be aggregated and sold for the benefit of the Company under the Excess Application Facility and/or the Placing.

14. I hold my Existing Ordinary Shares in certificated form. What should I do if I want to spend more or less than the amount set out in Box C of the Non-CREST Application Form?

If you want to spend less than the amount set out in Box C, you should divide the amount you want to spend by £4.10 (being the price, in pounds, of each Open Offer Share under the Open Offer). This will give you the number of Open Offer Shares you should apply for. You can only apply for a whole number of Open Offer Shares. For example, if you want to spend £1,000 you should divide £1,000 by £4.10. You should round that down to the nearest whole number, to give you the number of shares you want to take up. Write that number in Box D. To then get an accurate amount to put on your cheque or bankers' draft, you should multiply the whole number of Open Offer Shares you want to apply for by £4.10 and then fill in that amount (rounded down to the nearest whole pence) in Box G and on your cheque or bankers' draft accordingly.

Under the Excess Application Facility, provided that you are a Qualifying Non-CREST Shareholder and you have agreed to take up your Basic Entitlement in full, you may apply for more than the amount of your Basic Entitlement should you wish to do so. Application can be made for Excess Shares through the Excess Application Facility. Details of the action you should take are set out in paragraph 8.4 of this Part III.

You should note that the number of available Open Offer Shares under the Excess Application Facility is dependent on the level of take up of Basic Entitlements. If applications are received for more than the number of available Open Offer Shares, applications made under the Excess Application Facility will be allocated as the Board may, in its absolute discretion, determine. If every Qualifying Shareholder takes up their Basic Entitlements in full there will be no Open Offer Shares available under the Excess Application Facility. Qualifying Non-CREST Shareholders whose applications under the Excess Application Facility are scaled back at the discretion of the Board will receive a sterling amount equal to the number of Open Offer Shares applied and paid for by, but not allocated to, them, multiplied by the Issue Price. Monies will be returned as soon as reasonably practicable thereafter, without payment of interest and at the applicant's sole risk.

15. What if I hold options and awards under the UNITE Share Option Schemes?

Participants in the UNITE Share Option Schemes will be advised separately of any adjustments to their rights under the UNITE Share Option Schemes to take account of the Open Offer.

16. I hold my Existing Ordinary Shares in certificated form. What should I do if I have sold some or all of my Existing Ordinary Shares?

If you hold shares in the Company directly and you sell some or all of your Existing Ordinary Shares before 6 March 2014, you should contact the buyer or the person/company through whom you sell your shares. The buyer may be entitled to apply for Open Offer Shares under the Open Offer.

17. I hold my Existing Ordinary Shares in certificated form. How do I pay?

Completed Non-CREST Application Forms should be returned with a cheque or bankers' draft drawn in the appropriate form. All payments must be in sterling and made by cheque or bankers' draft made payable to "Computershare Investor Services PLC, Acceptance Account re: The UNITE Group plc Open Offer" and crossed "A/C payee only". Cheques or bankers' drafts must be drawn on an account at a bank or building society or branch of a bank or building society in the United Kingdom which is either a member of the Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques and bankers' drafts to be cleared through the facilities provided by any of those companies or committees and must bear the appropriate sort code in the top right hand corner and must be for the full amount payable for the application. Third party cheques (other than building society cheques or banker's drafts where the building society or bank has confirmed that the relevant Qualifying Shareholder has title to the underlying funds) will be subject to the Money Laundering Regulations which would delay Qualifying Shareholders receiving their Open Offer Shares (see paragraph 5 of this Part II). The account name should be the same as that shown on the application. Post-dated cheques will not be accepted. Please do not send cash.

18. Will the Existing Ordinary Shares that I hold now be affected by the Open Offer?

If you decide not to apply for any of the Open Offer Shares under your Basic Entitlement, or only apply for some of your entitlement, your proportionate ownership and voting interest in the Company will be reduced following completion of the Firm Placing and Placing and Open Offer.

19. I hold my Existing Ordinary Shares in certificated form. Where do I send my Non-CREST Application Form?

You should send your completed Non-CREST Application Form together with payment in the accompanying pre-paid envelope, by post or by hand (during normal office hours only), together with the payments by cheque or bankers' draft in the appropriate form to by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH or by hand (during normal office hours only) to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE. If you post your Non-CREST Application Form by first-class post, you should allow at least four Business Days for delivery.

If you do not want to take up or apply for Open Offer Shares then you need take no further action.

20. I hold my Existing Ordinary Shares in certificated form. When do I have to decide if I want to apply for Open Offer Shares?

The Registrars must receive the Non-CREST Application Form by no later than 11.00 a.m. on 24 March 2014, after which time Non-CREST Application Forms will not be valid. If a Non-CREST Application Form is being sent by first-class post in the UK, Qualifying Shareholders are recommended to allow at least four Business Days for delivery.

21. I hold my Existing Ordinary Shares in certificated form. When will I receive my new share certificate?

It is expected that the Registrar will post all new share certificates on or around 4 April 2014.

22. How do I transfer my entitlements into the CREST system?

If you are a Qualifying Non-CREST Shareholder, but are a CREST member and want your Open Offer Shares to be in uncertificated form, you should complete the CREST deposit form (contained in the Non-CREST Application Form), and ensure it is delivered to the CREST Courier and Sorting Service in accordance with the instructions in the Non-CREST Application Form. CREST sponsored members should arrange for their CREST sponsors to do this.

23. If I buy Ordinary Shares after the Record Date, will I be eligible to participate in the Open Offer?

If you bought your Ordinary Shares after the Record Date you are unlikely to be able to participate in the Open Offer in respect of such Ordinary Shares.

24. Will the Firm Placing and Placing and Open Offer affect dividends on the Ordinary Shares?

The New Ordinary Shares (including the Open Offer Shares) will, when issued and fully paid, rank equally in all respects with the Existing Ordinary Shares, including the right to receive all dividends or other distributions declared, if any, by reference to a record date after the date of their issue.

25. Will I be taxed if I take up my entitlements?

Information on taxation with regard to the Open Offer is set out in Part X (Tax Considerations) of this document. This information is intended as a general guide only and Shareholders who are in any doubt as to their tax position should consult an appropriate professional adviser immediately.

26. What should I do if I live outside the United Kingdom?

Your ability to apply to subscribe for Open Offer Shares may be affected by the laws of the jurisdiction in which you live and you should take professional advice as to whether you require any governmental or other consents or need to observe any other formalities to enable you to take up your Basic Entitlement.

Shareholders with registered addresses or who are located in any Restricted Jurisdiction are, subject to certain exceptions, not eligible to participate in the Open Offer. For the avoidance of doubt the Open Offer is not being made into any of the Restricted Jurisdictions. Your attention is drawn to the information in paragraph 6 of Part II (Terms and Conditions of the Open Offer) of this document.

27. Further assistance

All enquiries in relation to the procedure for application and completion of Non-CREST Application Forms should be addressed to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH, or made by telephone on 0870 707 1376 or on +44 870 707 1376 if calling from overseas. Calls to this number are charged at 10 pence per minute from a BT landline, other provider costs may vary. Please note the Registrar cannot provide financial advice on the merits of the Firm Placing and Placing and Open Offer or as to whether applicants should take up their Open Offer entitlements.

PART IV

INFORMATION ON UNITE

1. Overview of the Company and its business

The UNITE Group plc is the UK's leading developer and manager of modern, purpose-built student accommodation, managing approximately 41,000 beds in over 120 well-located properties in 23 key university towns and cities across England and Scotland.

Since its establishment in 1991, the Group has grown through a combination of organic growth, acquisitions and co-investment vehicles. In 1999, the Company's Ordinary Shares were admitted to trading on the AIM Market of the London Stock Exchange and moved to the main market of the London Stock Exchange the following year.

The Group's initial period of rapid growth was followed by a period of financial and operational consolidation during which a number of co-investment vehicles were created allowing the Group to benefit from further capital investment. The Group is now focussed on delivering a more consistent, balanced return profile from recurring earnings, rental growth and development returns, whilst maintaining gearing at modest levels. The Group's sole focus is currently on the UK student accommodation market.

The Group generates income from the management and operation of properties (which are either owned by the Group or through co-investment vehicles in which it has a substantial minority interest). The Company also benefits from development returns and capital growth through its property portfolio.

The strong locations of the properties managed by the Group, together with a long period of growth in demand for university places and shortage of high quality accommodation, has driven high occupancy rates and solid rental growth over the long term and supported valuations of the properties held by the Group and its co-investment vehicles.

Over the past four years, the Group has delivered an average total return on equity of 10.4 per cent. per annum and it aims to continue delivering low double digit total returns on NAV each year from a balance of rental growth, income and development profits. The Group remains particularly focused on growing recurring profits sustainably; its EPRA EPS Yield on NAV has increased from 0.7 per cent. in 2010 to 3.9 per cent. for 2013 and it continues to target 4.5 per cent. EPRA EPS Yield on NAV by 2015.1

2. Strategy

2.1 Overview

Over the past four years, the Group has pursued a clear, consistent strategy with three main elements:

• to grow recurring profits and cashflow through a combination of rental growth, new openings and cost savings, while building an increasingly strong brand;
• to enhance portfolio quality through a programme of highly selective developments, focusing on London and strong regional locations, together with the disposal of non-core assets; and
• to strengthen the Group's capital base.

This strategy has been successful. Recurring profits, measured as EPRA earnings per share, have increased from -2.8 pence in 2009 to 13.6 pence in 2013; since the beginning of 2010 on a see-through basis the Group has invested £360 million in new development activity in strong locations and released £210 million from non-core asset sales; and the Group has strengthened its capital base significantly, reducing its see-through loan-to-value ratio to 49 per cent. as at 31 December 2013

¹ These statements of expected value and earnings enhancement relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the expected value and earnings enhancement referred to may not be achieved, or those achieved could be materially different from those targeted. The statements in this document should not be construed as a profit forecast or interpreted to mean that the Group's NAV and earnings in any future period would necessarily match or be greater than or be less than those for the year ended 31 December 2013 or any other period.

(from 56 per cent. as at 31 December 2009), extending its see-through average loan maturity to 7.1 years from 4.2 years over the same period and reducing its see-through cost of debt to 4.7 per cent. from 5.5 per cent. The Group has also improved the balance of its returns, in particular by increasing the proportion represented by earnings to 37 per cent. for the year ended 31 December 2013 from 6 per cent. for the year ended 31 December 2010.

As a result of the successful delivery of this strategy, the Group has strengthened its market leading position and its strategy looking forward is intended to cement its position for the long term. It is built on two main pillars: to create the sector's dominant brand based on service quality and expertise; and to maintain and enhance the Group's high quality portfolio of properties.

The Group's objective remains to deliver low double digit total returns on NAV each year, derived from a balance of rental growth, income and development activity. The Group intends to reduce its gearing towards 40 per cent. LTV over time, as capital growth and development profits increase the equity base of the business while, at the same time, continuing to invest selectively in development opportunities that meet the Group's criteria.

The Group intends to retain a number of options to fund this investment from internal sources, including retained earnings, proceeds from asset sales or the sale of a small proportion of its USAF holding. Its dividend policy is to distribute 33 per cent. of NPC each year with the remainder reinvested into the business and the Board expects this to remain the case while attractive development opportunities remain available to the Group.

The Group's business has a high level of operational leverage meaning that NOI from new openings flows substantially to EPRA earnings. For this reason, the Group plans to increase the scale of its portfolio steadily over the next 3 to 4 years and the volume of new development completions are expected to significantly exceed the level of asset sales over that period.

2.2 Creating the sector's dominant brand

UNITE already has a strong reputation in the university sector, based on its national scale and long term presence as an accommodation provider. The Group's ambition is to build on this by consistently providing an accommodation experience that is truly a foundation for academic achievement and which competitors will struggle to match. This brand aspiration is called 'Home for Success' and this principle will shape the future development of the Group's product and service offering.

In order to implement the Home for Success aspiration, the Group is focussing on the following four areas:

• the physical environment of its properties;
• the extent and nature of service support;
• the Group's digital presence; and
• its culture.

In each area, the Group has established clear plans to build on the solid foundations in place today and intends to leverage its scale and experience to deliver them, for example through securing buying gains that can be partially reinvested into enhanced service levels or through fostering a culture of sharing experience and best practice across the UK. There will be an element of capital expenditure associated with this brand programme although the majority of this will simply be a re-prioritisation of existing capital expenditure plans.

The market fundamentals of the Group's sector are compelling, but the Board believes that a strong service based brand will be the key to long term sustainable growth.

2.3 Maintaining and enhancing the Group's high quality portfolio

As a result of its historic first mover advantage (which enabled UNITE to secure attractively located sites for development with limited competition), a highly targeted development strategy and the regular disposal of assets considered to be non-core, the Group's current operational portfolio is located in strong university locations across the UK, both in terms of the towns and cities in which the Group is invested and the particular locations its assets occupy within those towns and cities. 75 per cent. of the Group's operational portfolio (based on the total number of beds and the value of the properties) is located in towns and cities with a Russell Group University.

The Group is invested (either through outright ownership or a share of co-investment vehicles) in a portfolio valued as at 31 December 2013 at £2.7 billion and comprising 124 properties. The Group's share of this portfolio, after adjusting for the interests of its co-investors, is £1,175 million. The average age of the total portfolio (by value) is 7 years and 89 per cent. of properties have been newly built or substantially refurbished within the past 10 years. Further details of the Group's property portfolio is set out in paragraphs 2.4 and 5 below.

The Group's strategy is to maintain and enhance property portfolio quality in three ways; focused investment into existing properties, continued highly selective development activity and periodic recycling of capital out of assets which are no longer considered to meet the Group's brand and growth requirements.

2.4 Existing portfolio

On a built-out basis, the Group's investment in its portfolio is split 52 per cent. in strong regional locations and 48 per cent. in London (by value, on a see-through basis). Following deployment of the proceeds of the Firm Placing and Placing and Open Offer and construction of additional development properties this proportion is expected to shift to around 60:40 in favour of strong regional locations, reflecting the Board's view of the favourable development returns available in regional locations at the present time.

The Group aims to maintain a mix of price points within its portfolio in each town or city by offering a range of different room and tenancy types, both across and within properties. This helps the Group maintain as broad an appeal as possible to the Group's target customers and provides a strong foundation for sustainable rental growth.

The Group's focused investment into its existing portfolio comprises a long term planned and preventative maintenance programme, properly integrated with in-year maintenance activities and coupled with periodic upgrade investment to some assets. Long term maintenance activities are required to maintain rental growth prospects whereas upgrade investments are expected to increase rent levels further. Recent examples of upgrade activity include the installation of high speed Wi-fi internet across all buildings in the portfolio, the re-furnishing of 2,500 bedrooms to include larger beds and the conversion of 3,670 square metres of vacant commercial premises in three properties into 100 new bedrooms and additional communal space for students.

The Group's valuation yields have remained stable at approximately 6.6 per cent. over the last four years. The following graph shows UNITE yields over the longer term, illustrating the stability and resilience of the asset class compared to broader property.

UNITE vs IPD All Property NIY

Over the latter part of 2013, yields for student accommodation started to show some signs of modest compression. Across the Group's portfolio, net initial yields moved from 6.55 per cent. to 6.50 per cent. reflecting a change of 5 basis points. This was partly due to portfolio mix but also some movement in stronger regional locations, reflecting the increasing level of demand for good quality, well located purpose built student accommodation.

The table below sets out the indicative yields for the Group's property portfolio in 2012 and 2013:

		2013		2012
		University
	Direct Let	Guaranteed	Direct Let	Guaranteed
London	6.0-6.25%	5.35-5.6%	6.0-6.25%	5.35-5.6%
Major provincial	6.25-6.75%	5.85-6.1%	6.5-7.0%	5.85-6.1%
Provincial	6.75-7.25%	6.35-6.6%	7.1-7.35%	6.35-6.6%

2.5 Development activity

The Group's development activity is focused on strong university locations, in towns and cities where it believes that the demand and supply dynamics are and will remain attractive, either because of existing market conditions or expected changes to current conditions. Following the Firm Placing and Placing and Open Offer, the Board anticipates that the Group's annual capital expenditure on development activity will be approximately £150 million on a see-through basis for each of the next four years, of which around 65 per cent. will be in strong regional locations and the remainder in London.

The Group's London development activity is currently undertaken by LSAV, a joint venture with GIC of which UNITE is manager and in which it has a 50 per cent. stake. LSAV plans to invest £330 million in new developments in London over the period 2014 to 2017 and has now committed 60 per cent. of its planned capital investment to specific projects with the balance intended to be committed in the remainder of 2014. Regional development activity is undertaken by the Group on balance sheet.

Returns from development activity are attractive at the current time. In London, the Group's current secured pipeline is forecast to deliver an average yield on cost of 9.0 per cent. and in strong regional locations the Group is able to secure sites that are expected to deliver a yield on cost of between 9.5 per cent. and 10 per cent. upon opening. Achievable returns in London are beginning to decline as the general development market becomes more competitive, whereas regional returns remain elevated as a result of the low level of wider development activity regionally. As a result, the Group's development focus is shifting towards strong regional locations.

Further details of the Group's pipeline of development projects is set out in paragraph 5.3 below.

2.6 Asset sales

Over the past four years, the Group has sold £174 million of non-core assets into the open market, either on its own behalf or on behalf of co-investment vehicles. A further £177 million of assets have been sold to USAF under the USAF Pipeline Agreement and an additional £46 million sold to LSAV. The Group has now substantially completed its non-core asset disposal programme.

The Group is also keen to maximise its operational leverage through increasing the size of its operational portfolio meaningfully. The Board therefore expects that, although asset sales will continue, they will do so at a lower level over the next few years. The Group expects to continue to recycle capital out of assets where it is felt that growth prospects are limited but expect disposals, on a see-through basis, to be lower than in previous years.

USAF continues to have theoretical capacity to acquire further properties from the Group. There are no plans for assets to be transferred to USAF at present but sales may take place in the future.

2.7 London co-investment vehicles

The Group currently has an interest in the following three London-focused joint co-investment vehicles, each of which was originally set up to increase the amount of capital the Group had available for investment into London and to share development risk on larger projects:

• UNITE Capital Cities a joint venture with GIC which owns a portfolio of completed student accommodation properties and in which UNITE has a 30 per cent. stake. UNITE's share of the NAV of UCC was £59 million as at 31 December 2013;
• LSAV a second joint venture with GIC through which the Group is undertaking its current London development programme and in which the Group has a 50 per cent. stake. UNITE's share of the NAV of LSAV was at £28 million as at 31 December 2013; and
• OCB a joint venture with Oasis Capital Bank which owns three completed London student accommodation assets that OCB developed. The Group has a 25 per cent. stake in OCB and its share of NAV was £18 million as at 31 December 2013.

As two of the three London co-investment vehicles have now completed their development plans, the Group's strategy is to simplify and consolidate its holdings. The Group is planning to liquidate the OCB joint venture and use its share of the proceeds to increase its stake in UCC by acquiring further units at NAV under an existing option agreement. If the Group's stake in UCC reaches 50 per cent. by 31 December 2016, that vehicle is expected to merge with LSAV at NAV. The Group therefore has a clear plan to consolidate its London co-investments into a single vehicle.

2.8 USAF

USAF is an established leading multi-investor fund set up by UNITE in December 2006. It owns a geographically diverse portfolio of income generating student accommodation assets focused on key university towns and cities and valued at £1.35 billion as at 31 December 2013. The majority of USAF's assets were developed by UNITE and benefit from high quality locations reflecting the Group's first mover advantage when developing in many of these towns and cities. 77 per cent. of USAF's portfolio is situated in cities with a Russell Group University and, as a result of its excellent locations, consistent high occupancy and rental growth, USAF has been one of the top performing funds in the IPD PPFI Specialist Fund Index over the past five years.

USAF was originally established to acquire and hold direct let assets developed by UNITE once completed. UNITE then used proceeds from sales to USAF to fund further development. Now that USAF is substantially invested, sales to it by the Group are less frequent and at a lower level.

USAF's strategy is threefold:

• to remain as the leading fund for indirect institutional investment in the UK student accommodation sector;
• to drive portfolio performance by generating superior rental growth whilst maintaining high occupancy and managing risk; and
• to maintain and enhance the quality of its portfolio through asset management.

USAF distributes all of its profits by way of dividends and does not take development risk.

UNITE acts as the sole property, asset and fund manager to USAF and receives fees for its services. The Group also has a 16.4 per cent. stake which will increase to approximately 22 per cent. following the anticipated subscription for new units in March 2014, subject to completion of the Firm Placing and Placing and Open Offer. By increasing its stake to 22 per cent., the Group's USAF investment is expected to be treated as a qualifying asset for REIT purposes (which requires a minimum stake of 20 per cent. in such vehicles). This increases the Group's optionality regarding potential REIT conversion in the future while also retaining liquidity options in respect of its stake.

The Company has an ongoing contractual relationship with USAF as set out in the Property and Asset Management Agreement and the USAF Pipeline Agreement (each of which is summarised in paragraph 6 of Part XII (Additional Information)). The Property and Asset Management Agreement sets out the terms for the Company to provide management services such as strategic recommendations, acquisition and disposal advice, capital structure advice and execution services to USAF. UNITE receives an annual asset management fee calculated as 0.6 per cent. of the gross asset value of USAF (paid in cash). UNITE is also entitled to a performance fee which is calculated as 25 per cent. of any cumulative returns over a 9 per cent. internal rate of return (which is paid in new units in USAF). Following the decline in asset values in 2008, a performance fee has not been paid to date, although the Company anticipates that it will earn a performance fee in either 2015 or 2016 and beyond.

The USAF Pipeline Agreement formed part of the original legal agreement between UNITE and USAF to allow USAF to have certainty over its future growth and for UNITE to have certainty over its ongoing ability to sell assets to USAF. The USAF Pipeline Agreement requires UNITE to offer all of its recently completed direct let assets to USAF. USAF is obliged to purchase any offered assets provided that each asset is 85 per cent. occupied, has a minimum income return (5.5 per cent. for assets in London and 6 per cent. for regional assets) and USAF has sufficient capital. Conditionally USAF has an LTV target of 55 per cent. and therefore has theoretical capacity to acquire £130 million of assets under the USAF Pipeline Agreement. Since USAF was established in 2006, £1,159 million of assets have been sold/acquired under the USAF Pipeline Agreement. UNITE can receive payment in either cash or units at its discretion.

The Group considers its stake in USAF to be a strategic investment and intends to maintain it at or around the increased level of approximately 22 per cent. reached following the Firm Placing and Placing and Open Offer and acquisition of new units. However, this may fluctuate over time due to (i) performance fees receivable by the Group in respect of its asset management activities being paid in units, and (ii) the Group may choose to sell some units to provide capital for use elsewhere in the Group.

3. Key strengths

UNITE is the largest and longest established developer and manager of purpose built student accommodation in the UK. Building on its market leading position, the Group has a number of key strengths which the Board believes translate into competitive advantage:

• An experienced and knowledgeable management team. The Group has been operating in the student accommodation sector since 1991 and the four Executive Directors of the Group have a combined 35 years' service in leadership roles at UNITE. The knowledge and experience built up over this time can be used very effectively to inform key strategic and operational decisions in the business.
• An established portfolio in excellent locations in key university towns and cities. The Group's operational portfolio, including both its assets owned outright and those held in co-investment vehicles such as USAF, has been built up carefully over a long period of time with a particular focus on towns and cities where the Group believes demand/supply fundamentals to be strongest. Many of its properties also benefit from a 'first mover' advantage as they were developed at a time when competition for such sites for a similar use was limited and are therefore located in areas where it would be very difficult to develop student accommodation today.
• National presence and scale. The Group operates approximately 41,000 bed spaces in 23 towns and cities across the UK. This allows it to leverage economies of scale, such as through investment in systems or securing buying gains, in a way that is beneficial both to financial returns and customer service levels, while also offering a range of different products and price points across its portfolio. Being present in so many different locations also affords an opportunity to share experiences between city-based teams in a way that can accelerate the adoption of best practice.
• A strong brand and reputation in the university sector. The Group has established relationships with over 60 universities across the UK and has a long operational track record with many of these. The Group's experience and proven long term commitment to the sector leaves it well placed to build further on these relationships, and potentially others, for the long term.
• An efficient and scalable operating platform. The Board believes that the Group's operating platform, comprising its systems, processes and management infrastructure, would be capable of operating a portfolio of approximately 60,000 bed spaces, an increase of 45 per cent. on today's levels, with minimal further investment. This affords the Group a high level of operational leverage; as new properties are added to the portfolio the Group's cost base does not need to be increased such that a greater proportion of property level Net Operating Income flows through to EPRA earnings.
• A low cost of capital. The Group has accessed capital from a wide variety of sources in recent years and has steadily reduced its cost of capital as a result. Many of its competitors are smaller, private entities that do not have access to such a wide range of financing sources and whose cost of capital is consequently higher.
• A long track record of development. The Group has delivered over 100 development projects in the past 12 years and members of the current development team have been involved in the majority of these. As a result the Group benefits from considerable expertise in areas such as site feasibility and evaluation, planning and design, construction procurement, project management and development financing. This helps the Group mitigate effectively many of the risks inherent in property development.

4. The UK student accommodation market

4.1 Overview

The Group's area of industry is the student accommodation market.

There are 2.3 million students studying in the UK, of which 1.7 million are full-time students and 1.4 million live away from home. Numbers have grown steadily, doubling since the early 1990s.

For students living away from home, there are three main accommodation choices: university owned halls of residence (housing approximately 310,000 students); the traditional private rented sector (approximately 760,000); and privately owned PBSA (approximately 180,000). With approximately 41,000 beds UNITE is the largest owner and operator of corporate PBSA, accounting for approximately 23 per cent. of current supply.

4.2 Student numbers

Overview

Student numbers within the UK have grown for 20 years and have doubled since 1991, driven by factors including government policy, demographics and global mobility. Around 1.7 million students now study full-time in the UK, from the following geographies:

EU 0.11 million

Non-EU 0.27 million

Total 1.68 million

Over the last five years, applications for places at UK universities have consistently exceeded the number of placed applicants.

For the current academic year (2013/14) there were 677,000 applicants for 496,000 places, meaning that approximately 181,000 people applied to study but failed to secure a place.2 Typically, many of these will apply again in later years and this surplus of applicants over available places provides comfort that student numbers should be maintained at or above current levels in the future.

UK students

University participation rates amongst UK 18 year olds have increased steadily and now stand at 51 per cent., contributing to an increase in UK student numbers from 1.11 to 1.31 million over the past 10 years. Looking forward, demographics between now and 2020 are slightly negative but the Board expects participation rates to continue rising, leading to broadly flat numbers of UK students overall. However, recent changes to government policy have introduced greater market forces by reducing (and potentially removing) restrictions on the numbers of UK and EU students universities can offer a place. As a result, the Board expects certain universities to grow enrolment levels strongly while others may experience reductions.

² UCAS. 2013 Application Cycle: End of Cycle report. UCAS Analysis and Research. December 2013.

Since September 2012, students from England studying at UK universities have been subject to tuition fees set by individual universities within parameters stipulated by the Government and these fees currently average £8,500 per year. The cash cost of these fees is typically met by the Government in the form of a loan to the student which will subsequently be repaid through the tax system once the student graduates and is earning £21,000 per year or more. The Government estimates that it will recover 60 per cent. of these loans, making this system more financially sustainable than a grantsbased model. Scottish and Welsh students are generally not subject to fees due to differing policies at the Scottish Government and Welsh Assembly level.

At the same time that fees were introduced, the Government also made various changes to the way in which places are allocated to universities. Previously, the number of UK and EU students a university was permitted to recruit was stipulated by the Government through the Higher Education Funding Councils, a process known as the Student Number Control ("SNC"). With effect from 2012, universities were permitted to recruit as many high attainment students (achieving AAB grades at A level or equivalent, reduced to ABB for 2013/14) as they wished and an additional 20,000 places (5,000 in 2013/14) were also made available for universities charging £7,500 or less per year (known as core and margin places). These places were made available through a corresponding reduction in the total SNC for places not falling within one of these two categories.

For 2012/13, the introduction of these various changes caused disruption to enrolment levels. Deferral levels dropped sharply in the previous year as students sought to avoid the fee increase and certain universities struggled to adapt their enrolment strategies to the new environment. As a result, the overall student intake in 2012/13 dropped by approximately 57,000 year on year. In 2013/14 this drop was substantially reversed as deferral rates returned to normal levels and universities successfully adapted their enrolment strategies. There was a 37,000 increase in UK and EU student enrolment year on year.

Enrolment levels for the next academic year (2014/15) seem likely to increase further as a result of further government policy changes. In the Autumn Statement on 5 December 2013, the Chancellor announced that the Government intends to increase the cap on student places for 2014/15 by 30,000 places and to remove it entirely with effect from 2015/16, which the Government estimates could lead to an increase in enrolments of approximately 60,000 over current levels. If this policy is implemented as expected and the Government's forecasts prove accurate, then this could lead to a total increase in enrolments of 12.5 per cent. The Government plans to fund this increase through a sale of its student loan book and the first sale of a portion of the book took place in December 2013.

UNITE focuses its investment and development activity on key universities which the Board believes are well placed to benefit from both the recent and potential future policy changes. Consequently the Board expects to see an overall increase in UK students over the next ten years in the cities in which the Group operates.

When deciding where to operate accommodation, the Group carefully considers its view of universities within the town or city. It prefers to focus on universities that meet one of three internal definitions: Elite (institutions generally ranked towards the top of league tables); Rising Stars (those which are typically growing enrolment quickly and whose league table position is improving rapidly; or Firmly Established (generally institutions within a large and stable student population and a midleague table ranking). It prefers not to focus on towns and cities where local universities fall outside these definitions.

The Group's strategy for each location will vary accordingly to both this internal categorisation of the university but also other local market dynamics (such as the overall demand/supply position or land prices). Due to these other factors there are a number of universities that fall within the categories outlined in the paragraph above but where the Group does not operate, such as Oxford and Cambridge.

EU students

According to the latest available HESA data, there are currently 106,000 students from other EU countries studying in the UK and this has grown from 71,000 over the past 10 years, partly due to the enlargement of the EU. Under EU regulations, students from other EU countries receive the same treatment as UK students, although this is complicated by the differing policies of the Scottish Government and Welsh Assembly.

EU applications for 2014/15 were up 4.7 per cent. (as at January 2014) and the Board expects EU demand to remain healthy for the foreseeable future.

Non EU students

There are currently 268,000 non-EU students studying in the UK, representing 16 per cent. of the total full time student population and 19 per cent. of full time students requiring accommodation. Non-EU student levels vary significantly between different universities and it tends to be the stronger universities, where UNITE'S portfolio is focused, that recruit the highest levels. 31 UK universities feature in the top 200 of the Times Higher Education World University rankings and UNITE works with 20 of these. The UK is the second most popular destination for overseas students.

UNITE'S accommodation is particularly popular with overseas students (both EU and non-EU). For 2013/14, 41 per cent. of UNITE'S total customer base was international, compared to 22 per cent. of the UK full time student population overall.

Non-EU students require a tier 4 study visa to study in the UK and require a sponsor that is accredited by the UK Border Agency as 'highly trusted'; all UK Universities meet this status. In recent years study visa regulations have been tightened but non-EU student numbers have still grown meaningfully, up 12 per cent. since 2010.

The global trend for studying abroad looks set to continue with the OECD forecasting in 2011 that the number of students studying outside their home country would nearly double by 2025. The UK currently has a 13 per cent. share of this market and if this share is maintained the OECD forecast suggests an additional 250,000 non-EU students could be studying in the UK by 2025.

4.3 Supply and demand imbalance

A supply and demand imbalance persists in the student accommodation sector. In the period since the early 1990s, during which full time student numbers have doubled, universities have generally been unable to fund the construction of sufficient of their own new student accommodation. Consequently universities rely on the private sector to house a much greater proportion of the student population than was the case 20 years ago.

Private sector accommodation comprises the typical private rented sector (individual houses or flats let to students) or corporate PBSA, larger blocks of professionally managed accommodation more akin to universities' own accommodation. Corporate PBSA tends to be appealing to universities because it can help meet their own housing shortfall and provide safe, secure, well managed accommodation. This is particularly important in the case of first year and overseas students for whom universities generally try to guarantee accommodation. According to HESA data, UK universities only own sufficient accommodation to house 40 per cent. of their first year and international students and rely on the private sector to house the remainder.

The level of new supply of student accommodation being built across the UK is currently constrained for a number of reasons:

• financial constraints persist for universities meaning that they are building very little new accommodation themselves and what they are building tends to be primarily replacement stock rather than new supply;

• the traditional private rented sector is facing increased regulation and high demand from nonstudents. Consequently it is increasingly difficult or unappealing for private landlords to let properties to students; and
• access to capital and a strict planning environment have restricted the supply of new corporate PBSA, particularly outside London.

The extent of the existing supply and demand imbalance, combined with the above constraints on new supply and the Board's favourable view of student numbers in the future means that the Board expects a supply and demand imbalance to persist for some time.

4.4 Competition

Investment activity in the student accommodation sector increased significantly in 2012 and continued into 2013. According to CBRE, a record £2.7 billion was transacted in 2012, representing a 125 per cent. increase on 2011 and demonstrating the growing attraction of the student accommodation market to overseas investors. CBRE estimate that £2.1 billion of investment was made in 2013, of which 88 per cent. (£1.8 billion) was outside London. The sector continues to generate strong returns relative to other real estate asset classes with yields generally ranging between 6 per cent. and 7 per cent. and rental growth of approximately 3 per cent. per annum and has attracted investment from major global investors.

The corporate PBSA sector comprises approximately 180,000 bed spaces3, of which UNITE accounts for approximately 41,000 or 23 per cent. The Group's competitors fall broadly into the following four categories:

• longer standing but financially constrained operators. There are a number of privately owned operators which grew rapidly between 2000 and 2007, often employing high levels of borrowing to fund expansion. The largest of these, Opal Property Group, which owned and operated approximately 19,000 bed spaces, went in administration in February 2013 (and there is significant bidding interest in Opal's assets) while others continue to operate but with significant financial constraints that limit their ability to grow and invest in their businesses. For example, Liberty Living, which operates around 15,000 bed spaces on behalf of a fund managed by Brandeaux Fund Managers, has closed its fund to redemptions and is currently focused on improving liquidity. The Board estimates that approximately 39,000 bed spaces, representing 24 per cent. of the market, fall in this category;
• smaller operators and new entrants that lack national scale (fewer than 5,000 bed spaces and five cities). The Board estimates that approximately 32,000 bed spaces are owned and operated by smaller businesses including recent entrants, numbering more than 70 in total. These businesses are able to provide good quality accommodation in a range of locations but lack the benefits of national scale, such as an established and recognised brand, scalable and efficient systems, technology investment and access to capital. Smaller operators account for a meaningful proportion of new supply delivered in recent years (approximately 65 per cent.), particularly in London. Many use third party management companies (such as CRM) to operate properties;
• operators that are beginning to establish national scale (more than five cities and between 5,000 and 10,000 beds) but which may face challenges in funding further growth. This segment accounts for approximately 26,100 bed spaces; and
• university partnership operators. The largest university partnership operator is UPP with approximately 28,000 bed spaces and in total this segment of the market accounts for approximately 42,000 bed spaces. University partnership operators typically do not compete directly with UNITE as they provide on campus accommodation for universities, often providing the finance and development skills to upgrade or replace elements of a university's existing accommodation stock. Under partnership arrangements universities typically
• 3 CBRE. UK Student Housing. Market View. Q3 2013.

guarantee revenues and as a result operators in this segment have not needed to develop a student facing brand or the sales and marketing platform established by UNITE.

The Board believes that UNITE has a competitive advantage in a number of areas underpinned by its established national brand, scale and financial strength.

The top 10 operators in the sector, by portfolio size are as follows:

Operator brands	Beds	Pipeline
UNITE (including USAF and other co-investment vehicles)(1)	42,000	4,794
UPP	27,317	2,650
CRM (operator managing on behalf of multiple owners)	19,921	7,242
Liberty Living	16,827	0
Sanctuary Management Services	13,638	267
MSAF/Mansion	9,000	390
Victoria Halls (including third party)	7,291	0
Unipol (halls only)	6,431	0
IQ	5,172	0
Fresh Student Living	4,234	3,115

(Journal: CBRE Student Housing Q3 2013. CBRE's estimate of portfolio size differs slightly due to timing differences)

(1) UNITE has sold certain properties since the date of this table and now manages approximately 41,000 beds.

5. Product and service offering

5.1 Service offering

The properties within the Company's operational portfolio are purpose-built, professionally managed and branded, offering students high-quality accommodation. The Company provides an all inclusive product offering, including high-speed wi-fi provision throughout the buildings in the portfolio, 24 hour management presence, a choice of room size, full furnishing, code swipe card entry, CCTV, games rooms, vending machines, bike stores and laundry facilities. Rents are also an inclusive package of utilities and contents insurance cover. The Group maintains a leading web presence in the sector, enabling customers to view, book rooms and manage their accounts on-line, with a scalable platform to permit growth. The Company manages the maintenance of the Group's estate according to established operating standards, including those properties that are co-owned or managed by the Company on behalf of third parties. As a result, the Company's properties tend to attract students who are from more affluent backgrounds (approximately 47 per cent.), and therefore have more disposable income.

The Company has commercial arrangements with universities in respect of approximately 50 per cent. of the rooms managed by the Company, with accommodation either leased to the educational institutions which then let individual units to students, or under nomination agreements (lasting up to 25 years) under which the Company lets accommodation direct to students, but with an institution typically guaranteeing a minimum rental income at agreed room rates. The remaining 50 per cent. of accommodation is let directly to students. The Group's operational team has a strong track record of ensuring high levels of occupancy of rooms as follows:

Academic Year	Occupancy	Rental growth
2009/10	97%	9.7%
2010/11	97%	3.1%
2011/12	99%	3.1%
2012/13	96%	3.0%
2013/14	98%	3.0%

The Group manages its debt by obtaining parental guarantees, requiring rent to be paid by direct debit termly in advance and/or obtaining security and rent deposits, where possible. As a result, the Group's bad debt is less than 0.5 per cent. of its total rent.

5.2 Portfolio analysis

The Group has focused its activity in the major university cities in the UK. London is the dominant market in the Group's operating portfolio representing 18 per cent. of beds and 38 per cent. of the value of its managed portfolio and 41 per cent. on a see-through basis. The top 10 markets in which the Company manages beds, outlined below, represent 73 per cent. of the total managed portfolio. Each of the markets in the top 10 (excluding Portsmouth) has at least two major universities and there are 12 Russell Group universities located in those cities.

2013		Completed	FT Student	Market Share
Rank	City	Beds	Numbers	of PBSA
1	London	7,612	292,734	2.6%
2	Sheffield	3,731	48,632	7.7%
3	Liverpool	3,398	42,911	7.9%
4	Leeds	3,138	53,402	5.9%
5	Bristol	2,858	38,942	7.3%
6	Manchester	2,337	81,256	2.9%
7	Glasgow	2,149	60,990	3.5%
8	Birmingham	1,832	54,759	3.3%
9	Leicester	1,685	29,606	5.7%
10	Portsmouth	1,402	19,103	7.3%
	Top 10 markets	–––––––– 30,142	–––––––– 722,335	–––––––– 4.2%
	Total	–––––––– 41,072(1)	––––––––	––––––––
	Top 10 markets % of total	–––––––– 73%
		––––––––

(1) The Wider Group has 10,930 beds in other towns and cities (27 per cent. of its beds).

The following table provides further analysis of the Group's investment properties as at 31 December 2013 and the ownership structure by the co-investment vehicles:

					Wholly
	USAF	UCC	OCB	LSAV	owned	Lease	Total	UNITE
London Value (£m)	190	353	173	51	274	0	1,041	479
London Beds	1,425	2,268	1,128	528	1,910	324	7,583	41%
Major provincial Value (£m)	945	36	0	0	333	0	1,314	499
Major provincial Beds	16,551	333	–	–	5,773	2,147	24,804	42%
Provincial Value (£m)	220	0	0	0	161	0	381	197
Provincial Beds	3,732	–	–	–	3,168	1,785	8,685	17%
Total Value (£m)	1,355	389	173	51	768	–	2,736	1,175
Total Beds	21,708	2,601	1,128	528	10,851	4,256	41,072	100%
UNITE ownership share	16.4%	30%	25%	50%	100%	100%
	221	117	43	26	768	–	1,175

Major provincial markets are classified as towns or cities with more than one university and more than 20,000 students. Provincial markets do not meet this criteria.

The Group understands development activity and retains in house capability accordingly. It generally contracts to acquire development sites subject to obtaining the necessary planning consent and then manages the delivery of the completed property. The Group takes particular responsibility for design, planning and construction procurement and sub-contracts construction to specialist partners who take on the construction risk. Once completed, the Group's projects are generally held for long term operation.

5.3 Development pipeline

The Group's secured development pipeline is outlined in the following table:

				Total	Total			Forecast	Forecast
				Secured completed		develop- Capex in	Capex	NAV	yield
	Target		beds		value ment costs			period remaining remaining	on cost
	opening		No.	£m	£m	£m	£m	£m	%
Wholly-owned – London
Stratford	2014	London	1,001	102	64	33	12	4	11.2%
Camden	2014	London	571	85	59	19	9	3	9.8%
Total Wholly-owned London			1,572	187	—–—— —–—— —–—— —–—— —–—— —–—— —–—— 123	52	21	7	10.5%
Wholly-owned – Regional					—–—— —–—— —–—— —–—— —–—— —–—— —–——
Kingsmill Lane	2014	Huddersfield	378	19	14	8	6	1	10.1%
Trenchard Street	2015	Bristol	481	35	26	2	23	4	9.9%
Newgate Street	2016	Newcastle	606	42	31	0	31	11	9.6%
Causewayend School	2016	Aberdeen	399	26	20	0	20	6	9.7%
St. Leonard's	2016	Edinburgh	550	50	38	0	38	12	9.5%
Total Wholly-owned Regional			2,414	172	—–—— —–—— —–—— —–—— —–—— —–—— —–—— 129	11	118	34	9.7%
LSAV					—–—— —–—— —–—— —–—— —–—— —–—— —–——
Angel Lane	2015	London	759	84	54	18	36	19	9.3%
Stapleton	2016	London	901	117	93	1	92	24	8.8%
Wembley	2016	London	696	62	49	0	49	13	8.8%
Total LSAV			2,356	263	—–—— —–—— —–—— —–—— —–—— —–—— —–—— 197	19	177	55	9.0%
UNITE Share of LSAV			1,178	132	—–—— —–—— —–—— —–—— —–—— —–—— —–—— 98	10	88	28	9.0%
Total Pipeline (UNITE Share)			5,164	491	—–—— —–—— —–—— —–—— —–—— —–—— —–—— 350	72	227	69	9.8%
					—–—— —–—— —–—— —–—— —–—— —–—— —–——

Note: subject to planning. Capex may change depending on planning consents.

The Group is monitoring a large number of prospective opportunities in approximately 10 different towns and cities and is actively exploring 6-8 (some in exclusive negotiations) of these potential projects in strong regional locations which are supportive of its objectives and target returns.

6. Capital structure

6.1 Cash flows

The Company has achieved rental increases every year since it became a quoted company and a consistently high occupancy rate, resulting in resilient and stable cashflows. This stability of cashflow has also flowed through to property valuations that are more consistent than the wider commercial real estate sector. In the period between mid 2007 and the end of 2009, the Company's valuations fell by only 18 per cent. compared with the IPD real estate index that showed falls for that period of 54 per cent.

The Company's current policy is to pay 33 per cent. of its net portfolio contribution as dividends and the Company intends to maintain this policy, whilst it still sees opportunities to deploy equity into development activity that delivers returns in line with the targets that are set out above.

6.2 Indebtedness

As at 31 December 2013, the Group's adjusted net debt was £666 million, representing a see-through loan-to-value ratio of 49 per cent. (down from 59 per cent. as at 31 December 2009).

The Group's debt is provided by a number of different facilities with different lenders, a number of which are secured against specific assets in the Group's property portfolio. In addition, the Group has issued a number of bonds to institutional and retail investors which are unsecured. The indebtedness of USAF and the other co-investment vehicle is on a non-recourse basis as against the Group. Over the last 24 months, the Group has raised over £1.6 billion of debt finance for The Group's wholly owned balance sheet and for USAF and the other co-investment vehicles. The Group has made real progress on its stated objectives to reduce its see-through loan-to-value, extend debt maturities, diversify the source of funding partners and reducing the cost of finance. The following table shows key measures of the Group's debt facilities and bonds on a see-through basis:

	As at
	31 December	31 December	31 December
	2013(1)	2012	2011
Cost of debt	4.7 per cent.	5.5 per cent.	5.7 per cent.
Loan-to value	49 per cent.	52 per cent.	54 per cent.
Weighted Average Maturity (years)	7.1	4.1	2.6
Proportion non bank debt	80 per cent.	43 per cent.	26 per cent.
Proportion unsecured	27 per cent.	15 per cent.	3 per cent.

The Group's debt facilities and bonds include loan to value and interest cover covenants that are measured at either the Group or the individual portfolio level. To date the Company has not breached these banking covenants and, as at 31 December 2013, the Group had significant headroom against both measures with sufficient headroom for property values to fall by over 35 per cent. and rents to fall by over 35 per cent. without breaching existing covenants.

6.3 Interest rate hedging

The Group's policy is to hedge a significant proportion of its exposure to interest rate movements and, as at 31 December 2013, 86 per cent. of investment debt was hedged and/or held at fixed rates giving the Company security over the costs of its debt.

7. Co-investment vehicles

A number of the properties operated by the Company are owned by co-investment vehicles managed by the Group and in which the Group holds a significant minority equity interest.

These co-investment vehicles have separate senior debt facilities that are secured on the properties in those vehicles. These facilities are not guaranteed by the Group.

Of the 124 properties that the Group operates, 31 are owned by the Group, 13 are owned outright by third parties but managed by UNITE pursuant to occupational leases and 80 are owned by co-investment vehicles in which the Group has an equity interest, such as USAF.

7.1 UNITE UK Student Accommodation Fund

USAF is an open-ended non-listed real estate fund that focuses on acquiring and operating high quality student accommodation in the UK.

USAF is the largest specialist student accommodation fund. It currently holds a portfolio of 62 properties valued at over £1.35 billion (as at 31 December 2013) that are located in 19 markets across the UK providing over 21,000 bed spaces.

Established in December 2006, USAF initially raised equity capital totalling £370 million from UK and European institutional property investors. It was initially seeded with a £515 million portfolio comprising 32 properties acquired from the Company. USAF completed its most recent capital raising exercise in December 2009, raising £167 million of equity.

USAF has now grown to have over 100 investors. The Company is a major investor with a current coinvestment stake of 16.4 per cent. The Company also acts as manager of USAF and operates its properties.

USAF has performed strongly over the last five years, delivering an average total return on NAV of 12 per cent. per annum for each of the last five years. This performance has meant that USAF has been ranked as one of the top performing funds in the IPD PPFI Specialist Fund Index over the last five years.

^{(1) 2013} figures are shown on a proforma basis to take account of a new facility completed in February 2014.

During 2013, USAF refinanced £565 million of its debt finance on the secured bond market. As a result of this financing activity, USAF has reduced its cost of finance from an average of 5.0 per cent. to 3.7 per cent., resulting in an expected annual saving of £6.5 million. The lower cost of finance has resulted in the income yield on a proforma basis increasing from 5.5 per cent. in 2013 to 7.0 per cent. forecast in 2014.

The Board believes that USAF's portfolio remains well positioned for continued strong performance due to the excellent locations of its assets and the positive demand/supply dynamics of the markets in which it is present. In addition, the Board believes that USAF's prospects have been further enhanced by recent refinancing activity which has significantly reduced the average cost and extended the average maturity of its debt facilities.

UNITE acts as manager of USAF and currently owns a 16.4 per cent. stake. Following the investment of half of the proceeds net from the Firm Placing and Placing and Open Offer in acquiring new units in the fund, UNITE's stake will increase to 22 per cent. USAF intends to use the proceeds to reduce its leverage and may consider modest acquisitions over time. Proceeds will initially be used to reduce USAF's leverage from 43 per cent. to 40 per cent. LTV (using a 31 December 2013 balance sheet).

7.2 UNITE Capital Cities and London Student Accommodation joint venture

UNITE Capital Cities is a joint venture with GIC Real Estate, the real estate investment arm of the Government of Singapore Investment Corporation. Established in 2005 to develop new properties, UCC has fully invested its capital and currently holds a portfolio of 15 properties located in London and Edinburgh valued at approximately £390 million at 31 December 2013. In September 2012, the expected maturity date of UCC was extended by ten years to September 2022.

UCC will remain invested in quality student accommodation properties.

UCC re-financed its debt funding platform in December 2013, extending the maturity to September 2022 and reducing its cost of debt to 4.0 per cent. providing expected annual savings of approximately £2.5 million. This re-financing has triggered the payment of a performance fee by UCC to UNITE of £7.5 million.

In addition, in September 2012, the London Student Accommodation Joint Venture with GIC was announced. This 50:50 owned joint venture will seek to invest £330 million in development activity in London over the coming years. It will be the primary vehicle through which the Company will undertake development activity in London and will have a right of first refusal over the Company's London development projects until such time as its capital investment targets are met.

The Company has a 30 per cent. holding in UCC, with GIC holding the remaining 70 per cent. UNITE has an option to increase its holding in UCC from 30 to 50 per cent. by 31 December 2016. The payment of the performance fee will be used to start this process and will increase UNITE's share to 34 per cent. during 2014.

The Company's intends to increase its stake in UCC over the next three years and provided this reaches 50 per cent. by 31 December 2016, UCC will merge with LSAV.

7.3 Oasis Capital Bank joint venture

The joint venture between the Company and Oasis Capital Bank was established in 2009 to develop three student accommodation properties in London that are now complete with a value of £174 million (as at 31 December 2013). OCB holds a 75 per cent. stake in the joint venture, with the Company holding the remaining 25 per cent. The Group has announced that it is working with OCB to liquidate this investment. Due to the decision to sell the assets within the joint venture, the bank facilities are short-dated in nature, all of which mature in 2014. The joint venture is currently in discussion with its lenders to arrange short-term extensions to facilities. Once this joint venture has been sold, the capital realised will be used to invest in UCC.

PART V

SELECTED HISTORICAL FINANCIAL INFORMATION

The selected financial information set out below has been extracted without material adjustment from the audited financial statements of the Group for the years ended 31 December 2013, 31 December 2012 and 31 December 2011, which are set out in full in Appendices I, II and III of this document, respectively.

	As at, and for the year ended, 31 December
	2013 (£'m)	2012 (£'m)	2011 (£'m)
IFRS measures
Profit before tax	77.1	126.2	4.7
Net assets	672.0	533.7	404.7
Adjusted measures
Rental income	113.4	111.4	95.6
Property operating expenses	(32.4)	(32.3)	(29.4)
Net operating income	————– 81.0	————– 79.1	————– 66.2
Management fees	10.6	10.3	10.1
Operating expenses	(19.0)	(21.8)	(21.6)
Net financing costs	(47.0) ————–	(48.5) ————–	(43.7) ————–
Net portfolio contribution	25.6 ————–	19.1 ————–	11.0 ————–
EPRA earnings	30.6	15.9	(16.9)(
EPRA earnings (pre exceptional)(1)	23.1	15.9	4.1(3
Rental properties	1,175	1,162	1,017
Development properties	195	83	189
Total GAV	————– 1,370 ————–	————– 1,245 ————–	————– 1,206 ————–
Adjusted net debt	(666)	(648)	(646)
Adjusted net assets	682	567	514
Adjusted LTV	49%	52%	54%
EPRA earnings per share(2)	18.0p	9.9p	(10.5)p
EPRA earnings (pre exceptional) per share(1)(2)	13.6p	9.9p	2.6p
Adjusted NAV per share(2)	382p	350p	318p

Notes:

(1) EPRA earnings (pre exceptional) and EPRA earnings (pre exceptional) per share are shown after the removal of two exceptional items: the UMS loss of £21.0 million in 2011 and the UCC performance fee of £7.5 million in 2013.

(2) On a fully diluted basis.

(3) These adjusted figures were restated in 2012 (see note 2.2 to the financial statements of UNITE for the year ended 31 December 2012, which are set out in Appendix II of this document).

PART VI

OPERATING AND FINANCIAL REVIEW OF UNITE

The operating and financial review should be read in conjunction with (i) the Group's audited historical consolidated financial information and (ii) the notes explaining the financial statements contained in the annual report and accounts for the three years ended 31 December 2013, 31 December 2012 and 31 December 2011 which are contained in Appendices 1-3 of this document, respectively.

Unless otherwise indicated, the selected financial information included in this Part VI has been extracted without material adjustment from the Group's audited historical consolidated financial statements for the three years ended 31 December 2013.

1. Overview

UNITE is the UK's leading developer and manager of corporate purpose-built student accommodation by number of beds. UNITE has developed core competencies in site acquisition, planning, construction, sales and marketing, and property management which the Board believes gives the Group a competitive advantage in the development and management of student accommodation.

The Group operates approximately 41,000 beds in over 120 properties located in 23 key university towns and cities around the UK. These beds are either wholly-owned by UNITE or owned by one of its four coinvestment vehicles: USAF, OCB, UCC and LSAV.

The co-investment vehicles are an integral part of UNITE's business and are reflected in the Group's adjusted financial results, which are non-IFRS metrics, on a proportionally consolidated basis, so that these financial metrics include UNITE's wholly-owned assets and the relative impact from the different ownership stakes in each co-investment vehicle – this is referred to as the 'see-through' performance. The following table highlights certain adjusted financial metrics at 31 December 2013 on a see-through basis, which are further analysed below.

	UNITE	USAF	UCC	LSAV	OCB	Total
Ownership share	100%	16.4%	30%	50%	25%	–
Beds(1)	15,107(2)	21,708	2,601	528	1,128	41,072
Net operating income £m	55.9	13.6	7.4	1.7	2.4	81.0
NPC £m	14.3	7.3	2.6	0.8	0.6	25.6
GAV(3) £m	947	221	117	42	43	1,370
Adjusted NAV £m	453	125	58	28	18	682
Adjusted LTV	50%	43%	54%	31%	56%	49%

1. "Beds" is the number of bedrooms that the Group owns or manages, including all beds in the Wider Group. Each property is let and generates rental income on a per bed basis.

2. 1. Includes 4,256 beds that are leased from third parties, which are not included in GAV.
3. 1. GAV (Gross Asset Value) refers to the carrying value of the Group's property assets and the Group's share of co-investment property assets. Under IFRS, those property assets are included as investment property, investment property under development, properties under development and investments in joint ventures.

2. Key factors affecting the Group's results

UNITE considers the key measures of the Group's financial performance to be the adjusted net asset value per share and EPRA earnings per share. Adjustments made to the reported IFRS numbers are intended to provide a clearer understanding of the Group's financial performance and are consistent with the guidelines laid down by the Best Practices Committee of EPRA. The EPRA earnings figure for the year ended 31 December 2011 was restated in 2012 (see note 2.2 to the financial statements of UNITE for the year ended 31 December 2012, which are set out in Appendix II of this document).

Rental income and rental growth

The Group's primary source of revenue is rental income. The Group generates rental income from its customers by letting rooms, either through a nomination agreement with a university or on a direct let basis. Rooms are let on academic year contracts that are, principally, between 43 and 51 weeks in duration and supplementary income is earned on shorter tenancies. Rental income is recognised on an accruals basis and, as a result, revenues are booked when the properties are let rather than when payments are received. The Group has a strong track record of delivering rental income with high levels of occupancy. From 2011 through 2013, rental growth has averaged 3.1 per cent. per year and occupancy has averaged 97 per cent. on a see-through basis.

For the year ended 31 December 2013, approximately 50 per cent. of UNITE's income was direct let income and approximately 50 per cent. of UNITE's income was nominations and lease income.

Direct let rental income

UNITE earns rent from letting bedrooms to students on an academic year basis. Direct let students book directly with UNITE, primarily through the Group's on-line booking system. The Group resets rents on an annual basis, historically with rent increases year-over-year.

Nominations and lease income

UNITE also generates income through the portion of its managed portfolio that is subject to nomination or lease agreements with universities. These contractual agreements vary in length from one year up to 25 years. The agreements typically have an annual rental uplift mechanism, linked to the retail price index and provide relative stability and certainty over the income stream.

The Group's ability to grow rents is a key contributor to the growth in value of the Group's property portfolio. The Group has been able to grow rents by an average of 3.1 per cent. per annum over the last three years on a see-through basis. The principal factors that influence the Group's ability to generate rental income and rental growth from properties are outlined below.

Supply/demand for student accommodation in the cities in which UNITE operates

The Group's buildings are designed and let solely to students (and to a limited extent key workers in two buildings). The overall rental income performance is impacted by the supply and demand dynamics particular to each town or city. The demand for student accommodation is impacted by the overall number of students, and the growth thereof, who are enrolled at the universities in the towns and cities in which the Group's buildings are located. There are 2.5 million students studying in the UK, of which 1.7 million are full time students and 1.4 million live away from home. Numbers have grown steadily, doubling since the early 1990s.

There is a structural shortage of purpose built student accommodation in the UK, largely because new supply over the past 20 years has not kept pace with the rapid growth in student numbers outlined above. There are approximately 500,000 purpose-built bed spaces across the UK, leaving approximately 1.2 million full time students needing to find alternative places to live.

University relationships

Around half of the beds that the Group manages are let directly to or through universities on a nominations or referrals basis. These letting arrangements subject to nomination agreements range from long term (up to 25 years) nomination agreements to shorter (one year) referral agreements. Over the last 20 years, the Group has built up relationships with over 60 universities in the UK and these ongoing relationships are critical to the Group's results. UNITE operates a dedicated team focused on working in partnership with universities and the establishment and maintenance of commercial relationships.

Customer service

The quality of customer service is an important factor that determines whether students will choose to re-book accommodation and/or recommend UNITE's accommodation to friends or relatives. UNITE focuses on its customer service and measures its performance on a semi-annual basis. The latest survey, performed in November 2013, reported that UNITE's customer satisfaction levels are at its highest ever level.

The Group has invested in technology that enables its customer service teams to offer improved levels of service. This use of technology includes a purpose-built on-line search and booking system, payment systems and the investment in handheld devices that allow room inspections and maintenance management. The Group has also installed wi-fi throughout all of the buildings in the portfolio and is piloting the installation of LED lighting to improve the lighting and reduce utility costs. This investment in technology is expected to result in both improvements to customer satisfaction and efficiency improvements and cost savings.

Location of properties

The Group's ability to generate and grow rental income is affected by the location of its properties. Students typically chose to live in locations that are within easy reach of both university campuses and the amenities offered by the town or city. UNITE has used a research-led approach to determine where to acquire land and has built up a portfolio of well-located properties over the last 20 years and has data demonstrating how assets perform over a number of years.

Development profits

In addition to rental growth, development profits are a key contributor to the growth in Adjusted NAV per share. The majority of the Group's development assets are accounted for as 'investment property under development' on the basis that the Group intends to hold the buildings as investments once the development process has been completed. On completion, they transfer to investment property. Investment properties under development are valued by an external valuer and are held at fair value on the balance sheet with changes in fair value taken to the income statement. Development profits are typically recognised incrementally through the development cycle. Development assets that are constructed with the intention to sell upon completion are accounted for as 'Properties under development.' These assets are held at the lower of cost and net realisable value, while investment assets are held at fair value.

The level of development profits that are generated is a product of UNITE's ability to acquire well-located land and secure planning consents, manage build costs and maximise rental levels on newly opened buildings. These factors, together with valuation yield, drive the profitability of the development schemes which together with the level of equity committed to development will determine the development profit contribution to adjusted net asset value growth.

Property valuation yields

The Group's property portfolio is valued by professionally qualified, external valuers, with UNITE's properties valued at semi-annual intervals and assets owned by co-investment vehicles valued on a quarterly basis. The resulting valuations reflect the valuers opinions of the aggregate market values of the Group's property portfolio in accordance with RICS Valuation Standards. In addition to affecting the Group's balance sheet under IFRS, changes in property valuations also appear in the Group's consolidated income statements which significantly impacts the Group's operating profit or loss. These valuation surpluses or deficits reflect the difference between the fair value of the Group's portfolio at the reporting date and its carrying value prior to re-measurement at the applicable valuation date. Such valuation changes do not have an impact on the Group's cashflow. Historically, the property valuation yields for student accommodation assets have been more stable than the IPD benchmark for UK commercial property. The average valuation yield of the Group's assets has remained stable over the past three years at between 6.5 and 6.7 per cent.

Property valuations also affect the Group's IFRS net assets, adjusted net asset value and other net asset based statistics. However, as discussed more fully below in section 3 ('Adjusted financial information'), in accordance with guidance issued by EPRA, fair valuation movements are excluded from the calculation of EPRA earnings in order to provide a better indicator of the Group's underlying revenue performance.

Finance structure and financing costs

Over the last three years, the Group has successfully delivered its financing strategy to extend the average debt maturity on a see-through basis (from 2.6 years in 2011 to 7.1 years as at 31 December 2013), diversify sources of financing (with 80 per cent. of the Group's see-through debt now provided from non-bank sources, compared with 26 per cent. at 31 December 2011) and reduce the cost of finance (from 5.7 per cent. at 31 December 2011 to 4.7 per cent. at 31 December 2013).

Interest rate hedging and fixed rate borrowing

The Group's activities are financed to a significant extent by external debt and, as a result, a significant charge for interest payable arises in the Group's results of operations. Such interest charges are influenced by the rate of interest agreed with the financial institution (or other lender) and the floating rate of debt incurred by the Group and movements in interest rates. To protect against adverse interest rate movements, the Group uses a combination of long-term interest rate hedging and borrows at fixed rates, such that approximately 88 per cent. of the Wider Group's financing was subject to fixed interest rates as at 31 December 2013. The nominal value of these interest rate swaps and fixed rate debt at 31 December 2013 is £595 million, on a see through basis.

Pursuant to IFRS, the Group's long-term interest rate swaps are subject to semi-annual valuation, by comparing the fixed interest rates for which the Group has contracted against the interest rates that could have been obtained in the market at the date of the valuation. This results in a fair value deficit if current rates are lower than contracted rates and a surplus if current rates are higher than contracted rates. The long-term nature of these arrangements increases the volatility of these fair value arrangements.

The fair value surpluses and deficits are recorded as non-cash adjustments in the Group financial information as reported under IFRS. EPRA reporting guidelines recommend that these valuation movements are excluded from the adjusted results and therefore where presented on an adjusted basis, these movements are excluded. In 2011 this fair value adjustment was £nil, £0.8 million in 2012 and £1.3 million in 2013. The valuation at 31 December 2013 indicates that there is a deficit of £5.5 million. This deficit is included in the IFRS net assets and is excluded from adjusted net asset value.

In conjunction with the delivery of the financing strategy, the Group has cancelled interest rate swaps over the last three years with a notional value, on a see-through basis, of £469 million. This has resulted in swap break costs of £28.8 million.

Convertible bond

In October 2013, the Company issued £90 million of convertible bonds to contribute to the funding of its development pipeline. The convertible bonds have a coupon of 2.5 per cent. per annum and will, subject to certain conditions, be convertible into fully paid ordinary shares of the Company. The initial conversion price has been set at 509.73 pence per Ordinary Share, representing a premium of 35 per cent. above the volume weighted average price of an Ordinary Share from launch to pricing and a premium of 41 per cent. above the Group's last reported NAV per share at the date the bonds are issued. The convertible bonds rank pari passu to the Group's other unsecured debt and are an important factor in the increased level of the Group's unsecured debt.

The Group's proportion of unsecured debt on a see-through basis has increased from 3 per cent. to 27 per cent. from 31 December 2011 to 31 December 2013. For a description of the Group's debt, see section 7 (Liquidity and capital resources) below.

USAF financing

In 2013, USAF renewed the majority of its financing and reduced its weighted average cost of finance from 5.0 per cent. to 3.7 per cent. resulting in expected annual savings on a proforma basis of £6.5 million to USAF. Based on the Company's current 16.4 per cent. share of USAF, this represents an expected annual saving of around £1.8 million to the Group.

3. Adjusted financial information

The Group presents its financial information on both an IFRS and an adjusted basis. The adjusted financial information has been prepared in accordance with the EPRA guidelines and is intended to give a better understanding of the Group's underlying performance. The Group's EPRA earnings are adjusted in accordance with the recommendations of the best Practises Committee of EPRA. In particular, EPRA earnings are adjusted for valuation movements of property and interest rate derivatives and deferred tax.

EPRA earnings, adjusted net asset value, EPRA earnings per share, adjusted net asset value per share and other adjusted net asset based statistics are not measures of performance under IFRS, should not be considered as alternatives to measures based on IFRS and may not be computed in the same manner as similarly titled measures presented by other companies. The Directors have included those measures because they use them to measure business performance and because IFRS does not reflect the impact of items that the Directors have determined are significant or those items adjusted in accordance with EPRA.

The Group's EPRA earnings uses its IFRS reported profit after tax as its starting point and eliminates items in accordance with EPRA, which excludes the impact of property disposals, changes in value of investment property and interest rate derivatives, minority interests, costs associated with the setup of joint ventures and debt exit costs and any deferred tax on these items. Similarly, the Group's adjusted net asset value and other net asset based statistical disclosures exclude the change in fair value of financial derivatives and the deferred tax in respect of property revaluation and financial derivative valuations.

The performance of the co-investment vehicles is included as a single line item 'Share of joint venture profit' in the consolidated income statement. The performance of the Group is then further analysed within the segmental analysis to show the impact of the Group's share in each co-investment vehicle on a see-through basis.

In addition, the Company shows certain of its key performance indicators on a see-through basis. For a description of the Group's key performance indicators, see section 6 (Results of operations for the three years ended 31 December 2013) below.

		Audited results for
		the year ended 31 December
	2013	2012	2011
EPRA earnings	£30.6m	£15.9m	£(16.9)(
EPRA earnings (pre exceptional)(1)	£23.1m	£15.9m	£4.1(4
EPRA earnings per share	18.0p	9.9p	(10.5)p
EPRA earnings per share (pre exceptional)(1)	13.6p	9.9p	2.6p
Adjusted net asset value per share (fully diluted)	382p	350p	318p
	2013	2012	2011
	(£m)	(£m)	(£m)
IFRS profit attributable to owners of the parent company(2)	78.0	125.6	2.1
Valuation gains on investment property/property disposals
and write-downs	(46.9)	(59.7)	(19.7)
Valuation gains realised on transfer of completed property	–	(49.7)	–
Fair value movements in interest rate derivatives	(1.3)	(0.8)	–
JV set up and debt exit costs(3)	2.6	1.7	–
Tax and minority interest	(1.8)	(1.2)	0.7
EPRA earnings	–––––– 30.6	–––––– 15.9	–––––– (16.9)(
UCC performance fee	(7.5)	–	–
UMS closure costs	–	–	21.0
EPRA earnings (pre exceptional)(1)	–––––– 23.1	–––––– 15.9	–––––– 4.1(4
Development/UMS cost	3.3	3.7	3.3
Share options, restructuring and foundation cost	1.6	2.0	3.2
Landsbanki recoveries	(2.3)	(2.9)	–
Tax(5)	(0.1)	0.4	0.4
Net portfolio contribution	–––––– 25.6	–––––– 19.1	–––––– 11.0
IFRS net assets	653.3	515.8	387.6
Valuation gain not recognised on property held at cost	22.8	19.0	76.1
Fair value adjustment on interst rate swaps	5.5	31.7	50.5
Deferred tax	–	–	0.3
Adjusted net asset value	–––––– 681.6	–––––– 566.5	–––––– 514.5
Adjusted net asset value per share (diluted)	382p	350p	318p

(1) EPRA earnings (pre exceptional) and EPRA earnings per share (pre exceptional) are shown after the removal of two exceptional items: the UMS loss of £21.0 million in 2011 and the UCC performance fee of £7.5 million in 2013.

(2) IFRS profit attributable to owners of the parent company includes the results of a subsidiary in which the Group does not own 100 per cent. of the share capital. This minority interest is stripped out of EPRA earnings. The Group incurs non-resident landlord tax on dividends received from its joint ventures.

(3) In 2012, the Group incurred £1.7 million of costs relating to the set up of LSAV. In 2013, the Group incurred £2.6 million of costs associated with exiting debt facilities.

(4) These adjusted figures were restated in 2012 (see note 2.2 to the financial statements of UNITE for the year ended 31 December 2012, which are set out in Appendix II of this document).

(5) The tax credit in the IFRS income statement of £2.2 million (2012: £1.0 million credit; 2011: £0.8 million charge) consists a deferred tax credit of £2.7 million (2012: £1.6 million credit; 2011: £0.3 million charge) less a current tax charge of £0.5 million (2012: £0.6 million; 2011: £0.5 million). The tax credit of £0.1 million (2012: £0.4 million charge; 2011: £0.4 million charge) shown as a reconciling item in the table above includes part of the deferred tax credit, £0.6 million (nil in prior years), less the part of the current tax charge attributable to shareholders of the parent company, £0.4 million (2012: £0.4 million, 2011: £0.4 million). The remainder of the deferred tax credit is excluded from EPRA earnings as it relates to deferred tax on interest rate swap movements (which are also excluded from EPRA earnings).

4. Major acquisitions, disposals and financial events

Acquisition of development pipeline

The Group is involved in the development of purpose built student accommodation. The Group has a track record of securing land and then subsequently developing buildings on that land. The Group has delivered the following development pipeline over the course of the three year measurement period and as at 1 March 2014 has secured the pipeline for delivery over the next three years as outlined in the following table:

Delivered	London Develop- ments	Regional Develop- ments	Beds	GAV £m	Develop- ment profit(2) £m	Average yield on cost
2011	1	3	1,277	98	11	6%
2012	3	1	1,825	212	64	9.3%
2013	–	–	–	–	–	–
Secured(1)
2014	2	1	1,950	206	69	10.5%
2015	1	1	1,240	119	39	9.6%
2016	2	3	3,152	297	65	9.2%

(1) The table above refers to properties that are "secured" as of 1 March 2014. The number of beds, GAV, development profit and average yield on cost are forecast. These schemes may still be subject to planning.

(2) The development profit in the table above refers the total profit on the portfolio of developments delivered in each year. This development profit will be recognised in the Group's accounts over a number of financial years and therefore does not necessarily correspond with the timing of recognition in the Group's accounts

Disposal activity

The Wider Group has undertaken a programme of disposals over the last three years. Disposal properties are either non-core assets or core assets that are sold to co-investment vehicles.

					See-through
				See-through	EPRA
Financial year	Properties	Beds	GAV(2) £m	GAV(3) £m	earnings(4) £m
2011	2	136	14	9	0.8
2012	12	2,388	184	156	4.2
2013(1)	7	871	75	46	(1.0)
	21	3,395	273	211	4.0

(1) Includes £15 million of assets exchanged subject to satisfaction of a planning condition.

(2) GAV reflects property value at the time of sale, which is not necessarily indicative of cost.

(3) Based on the book value of the individual properties.

(4) Based on the sales price less the GAV of individual properties.

In addition, one of the Group's properties, Curzon Gateway, Birmingham, is subject to a compulsory purchase order. The Group expects to be reimbursed in line with the book value of the property.

UMS closure

In 2011, the Group decided to cease operations at its modular manufacturing facility, UMS, after a disappointing trading performance and a weak outlook for demand for its modular buildings. The provision and costs relating to UMS in 2011 were £21.0 million and were made up of a trading loss in the year of £5.5 million, a provision for onerous contracts of £5.6 million and a provision of £9.9 million for future property related costs and the write-down in value of assets, which were recognised as non-recurring charges. In 2012 and 2013, the charge for development and UMS costs were £1.0 million and £2.5 million, respectively and are included in development UMS costs. The UMS costs in 2011 are classified as an exceptional item in EPRA earnings.

Creation of LSAV

In 2012, the Group set up a 10 year, 50/50, London development joint venture with GIC known as LSAV. UNITE incurred costs of £1.7 million to set up LSAV. LSAV will seek to commit £330 million to new developments in London and as of 31 December 2013 has committed £197 million to three such development schemes, representing 60 per cent. of its capital. UNITE set up the joint venture in September 2012, selling a property for £45.2 million to LSAV in 2012. LSAV is committed to acquire a property from UNITE for £84.4 million in 2014, subject to the property meeting certain conditions.

UCC extension

At the time that LSAV was established, UNITE and GIC agreed to extend their UCC joint venture by nine years to 2022. It was also agreed that UNITE would become entitled to a performance fee on completion of the refinancing of UCC's debt facility. This refinancing was completed in December 2013 resulting in the Group earning a one-off performance fee of £7.5 million.

Delivery of efficiency savings

In 2011, the Group restructured part of its operations segment to drive efficiency savings and also to support improvements in the delivery of customer service. This resulted in a one-off charge of £1.6 million in 2011. As a result of these changes, the Group has reduced its operating expenses, reflected in EPRA earnings, from £21.6 million in 2011 to £19 million in 2013 and increased the net operating income margin from 69 per cent. in 2011 to 71 per cent. in 2013.

5. Subsequent events

Subsequent to the Group's financial year end at 31 December 2013, the Group has secured three new projects in Newcastle, Edinburgh and Aberdeen comprising 1,550 beds, which have been included in the analysis of secured beds in section 1 (Overview) above.

Additionally, the Group has completed a refinancing of four assets via a £124 million, 10-year debt facility with Massachusetts Mutual Life Insurance Company. The debt facility is secured against four wholly owned assets at 50 per cent. of the value of such assets and extends the Group's average weighted debt maturity to seven years. The debt statistics included with this document take this new facility into account.

6. Results of operations for the three years ended 31 December 2013

The results of operations are split into two sections. The first section describes the operating performance as set out on an IFRS basis. The second section describes the business of the Group on a segmental basis and the EPRA earnings and NAV measures prepared in accordance with EPRA guidelines.

Analysis of performance shown on an IFRS basis

The following table summarises the Group's results of operations for the years ended 31 December 2011, 2012 and 2013 as reported under IFRS:

Consolidated income statement
For the year ended 31 December
	2013	2012	2011
	(£m)	(£m)	(£m)
Revenue	101.6	214.6	94.9
Cost of sales	(41.8)	(145.2)	(62.7)
Operating expenses	(23.4) ––––––––	(28.0) ––––––––	(39.1) ––––––––
Results from operating activities	36.4	41.4	(6.9)
Loss on disposal of property	(1.0)	(2.4)	(0.2)
Net valuation gains on property	35.4	29.8	7.7
Valuation gains recognised on transfer	–	49.7	–
Profit before net financing costs	–––––––– 70.8 ––––––––	–––––––– 118.5 ––––––––	–––––––– 0.6 ––––––––
Loan interest and similar charges	(19.3)	(16.0)	(8.7)
Mark to market changes in interest rate swaps	0.7	(7.6)	(10.6)
Finance costs	–––––––– (18.6)	–––––––– (23.6)	–––––––– (19.3)
Finance income	15.7	1.0	0.8
Net financing costs	–––––––– (2.9)	–––––––– (22.6)	–––––––– (18.5)
Share of joint venture profit	9.2	30.3	22.6
Profit before tax	–––––––– 77.1	–––––––– 126.2	–––––––– 4.7
Tax	2.2	1.0	(0.8)
Profit for the year	–––––––– 79.3	–––––––– 127.2	–––––––– 3.9
Profit for the period attributable to	––––––––	––––––––	––––––––
Owners of the parent company	78.0	125.6	2.1
Minority interest	1.3	1.6	1.8
	–––––––– 79.3	–––––––– 127.2	–––––––– 3.9
Earnings per share	––––––––	––––––––	––––––––
Basic	46.0p	78.3p	1.3p
Diluted	–––––––– 46.0p ––––––––	–––––––– 78.3p ––––––––	–––––––– 1.3p ––––––––

Revenue

The Wider Group reports revenue in relation to two segments: the operations segment and the property segment. The Group generates revenue in relation to each of these segments from the following activities:

In the operations segment, the Group generates revenue from rental income and management fees:

• Rental income includes rental income from the Group's wholly-owned assets (rental income from the Group's share in joint ventures is included in share of joint venture profit).
• Management fees include management fees from co-investment vehicles for property and asset management activities and performance fees.

In the property segment, the Group generates revenue from development management fees, manufacturing and property sales:

• Property sales include sales proceeds from assets that are not treated as investment assets.
• Manufacturing revenue includes revenue from the sale of products from UMS, which ceased operations during 2011.
• Development revenue relates to development management fees from co-investment vehicles.

Each of these revenue segments has an associated cost of sales, which moves broadly in line with revenue and is impacted primarily by sales of properties.

	2013 (£m)	2012 (£m)	2011 (£m)
Rental income(1)	81.0	79.4	63.6
Management and performance fees(1)(3)	18.5	10.7	10.4
Development revenue(2)	2.1	–	1.3
Manufacturing revenue(2)	–	12.5	11.4
Property sales(2)	– ––––––––	112.0 ––––––––	8.2 ––––––––
Total revenue	101.6	214.6	94.9
Total cost of sales	–––––––– 41.8	–––––––– 145.2	–––––––– 62.7
	––––––––	––––––––	––––––––

Notes:

(1) Included in the operations segment.

(2) Included in the property segment.

(3) UCC performance fee is unallocated to a segment.

Total revenue increased from £94.9 million in 2011 to £214.6 million in 2012, primarily as the result of a much higher level of property sales in 2012 in line with the Group's strategy to sell a portfolio of non-core assets and as a result of the creation of the new LSAV joint venture into which an asset was sold. In 2013, the level of property sales was £nil as all of the Group's disposals in 2013 were of investment assets which are not included in revenue. The increase in rental income from the wholly-owned portfolio from £63.6 million in 2011 to £79.4 million in 2012 and £81.0 million in 2013 reflects the rental growth delivered and the Group's strategy to retain a higher proportion of assets on its balance sheet. Management and performance fees have remained relatively stable over 2011 and 2012. The increase in fees in 2013 being driven by a one off performance fee of £7.5 million earned from UCC in 2013. The reduction in manufacturing revenue in 2013 to £Nil reflects the Group's decision to cease operations at UMS in 2011.

Cost of sales

Cost of sales increased in 2012 to £145.2 million from £62.7 million in 2011, primarily due to the increase in property sales in 2012. In 2013, cost of sales decreased to £41.8 million, due to a reduction in property sales that year.

Operating expenses

The operating expenses under IFRS include the operating expenses that are incurred and attributable to the Group's operations segment, pre-contract development costs, UMS operating expenses and fair value movements of share options.

The total IFRS operating expenses decreased from £39.1 million in 2011 to £28.0 milllion in 2012 primarily as a result of the reduction in operating expenses at UMS, following the Group's decision to cease operations in 2011. In 2013, the reduction to £23.4 million was mainly the result of the Group's continuing focus on operational efficiency within the operating business.

Net valuation gains on property

Under IFRS reporting, the Group's recognises movements in the fair value of its wholly-owned assets in the consolidated income statement.

	2013	2012	2011
	(£m)	(£m)	(£m)
Net valuation gains on investment property	18.3	23.3	7.7
Net valuation gains on property under development	17.1	6.5	–
Net valuation gains	–––––––– 35.4	–––––––– 29.8	–––––––– 7.7
Valuation gains recognised on transfer	–	49.7	–
Total valuation movements	–––––––– 35.4	–––––––– 79.5	–––––––– 7.7
	––––––––	––––––––	––––––––

Investment property valuation movements are calculated by comparing the valuers opinions of the market value of the Group's investment properties with the amounts at which those properties were recorded in the Group's accounts prior to the previous revaluation, together with an adjustment for capital expenditure.

The net valuation gains on property increased from £7.7 million in 2011 to £29.8 million in 2012. The increase was the result of higher rental growth on the Group's wholly owned investment assets and the contribution of £6.5 million of uplift from investment property under development. In 2013, the net valuation gain on investment property was £18.3 million due to a lower level of rental growth. Net valuation gains on investment property under development increased to £17.1 million in 2013 in response to the greater level of capital committed to development, and the accounting policy change regarding assets under development referred to below.

In 2012, the Board decided to transfer the significant majority of properties held as current assets to investment property based on a change of use. All of these properties were being leased to customers and the Board concluded that the assets were no longer likely to be sold in the near term and will be held for rental income and capital growth. The decision to transfer properties was made following the Group's shift in strategy to hold more property longer term and the subsequent agreement of a facility with Legal & General and as a result, a one-off revaluation gain of £49.7 million was recognised in 2012.

Net financing costs

Net financing costs reflect the financing costs on the debt that is secured against the Group's wholly-owned property and financing held at the Group level. Under IFRS, net financing costs also include mark-to-market movements on interest rate swaps, loan break costs and the impact of unwinding discounting on interest-free loans made to joint ventures.

Net financing costs were £18.5 million in 2011. This increased to £22.6 million in 2012 and reduced to £2.9 million in 2013. The reduction in net financing costs in 2013 was driven by a £15.4 million benefit from unwinding a discounting on an interest-free loan made to co-investment vehicles, which was offset by an equal reduction in (share of joint venture) profit in that year.

Share of joint venture profit

The Directors have determined that the Group has joint control over the co-investment vehicles and applies joint venture accounting treatment. The performance of the co-investment vehicles is therefore included as a single line item, 'Share of joint venture profit,' in the consolidated income statement.

Among other items, share of joint venture profit reflects rental income from the Group's share of co-investment assets, movements in the fair value of co-investment assets and net financing costs related to co-investment vehicles.

Share of joint venture profit increased from £22.6 million in 2011 to £30.3 million in 2012, primarily driven by growth in the value of joint venture properties. In 2013, joint venture profit decreased to £9.2 million, primarily as a result of three investment loans made to USAF being reclassified as investments in joint ventures, as referred to as net finance costs above.

Analysis of performance shown under adjusted measures

The Group undertakes its operations and property activities directly and through joint ventures with third parties. The joint ventures are an integral part of each segment and are included in the analysis on a proportionally consolidated basis, so that the key financial metrics include UNITE's wholly owned assets and the relative impact from the different ownership stake from each co-investment vehicle – this is referred to as the 'see-through' basis.

The following analysis presents the performance of the Group using adjusted measures that are prepared in accordance with the EPRA guidelines.

Rental income and rental growth

The Group's income statement is impacted by the number of beds in its managed portfolio, the income delivered by the portfolio and the share of income that UNITE receives as a result of its ownership stake in the different co-investment vehicles.

	31 December
	2013	2012	2011
Beds	41,072	41,443	40,869
Academic year occupancy	98%	96%	99%
Income from portfolio under management(1)	240.7	240.2	219.5
UNITE income (%)(1)	47%	46%	44%
UNITE income (£m)(1)	113.4	111.4	95.6

(1) On a see-through basis.

The Group manages beds that are wholly-owned, those owned by the four co-investment vehicles that it has set up and assets leased from third parties. The number of beds has remained broadly stable over the three year period. The Group opened 1,825 new beds in 2012 and has sold 19 non-core buildings comprising 2,390 beds in 2011, 2012 and 2013. The total level of income from the portfolio under management grew from £219.5 million in 2011 to £240.2 million in 2012, representing an increase of 9.4 per cent. reflecting the growth in the number of beds, rental growth and the high level of occupancy for the last six months of the 2011/12 academic year as compared to the last 6 months of the 2010/11 academic year. In 2013, the rental income increased marginally to £240.7 million as the reduction in bed numbers was offset by rental growth and an increase occupancy level in the second half of the year.

This operational performance drives the rental income component of the Group's consolidated income statement that is outlined below.

	31 December
	(£m) 2013	(£m) 2012	(£m) 2011
Rental income	113.4	111.4	95.6
Property operating expenses	(32.4)	(32.3)	(29.4)
Net operating income	–––––––– 81.0	–––––––– 79.1	–––––––– 66.2
Management fees	10.6	10.3	10.1
Operating expenses in NPC	(19.0)	(21.8)	(21.6)
Financing costs1	(47.0)	(48.5)	(43.7)
Net portfolio contribution2	–––––––– (25.6)	–––––––– 19.1	–––––––– 11.0
	––––––––	––––––––	––––––––

Notes:

1. Operating lease rentals (2013: £13.7 million, 2012: £12.8 million and 2011: £12.6 million) relating to the Group's sale and leaseback portfolio are included in Financing costs.

2. For a reconciliation of net operating income and net portfolio contribution to IFRS profit attributable to owners of the parent company, see "Reconciliation of net portfolio contribution and EPRA earnings to IFRS profit" below.

The following is a discussion of the line items listed above, which contribute to Net Portfolio Contribution, which the Group believes is the key measure for assessing the performance of the operating business.

Property operating expenses

The Group's property operating expenses represent the costs that are incurred directly in operating the Group's share of the portfolio of properties that it manages. The costs of operating the remainder of the portfolio are recharged to the co-investment vehicles and are therefore not included in the Group's results. The key elements of these costs relate to: staff costs, utility costs and maintenance (including lifecycle) costs.

The Group has been focused on reducing the level of property operating expenses as a proportion of rental income over the last three years through a series of efficiency measures. In 2012, the property operating expenses increased from £29.4 million to £32.3 million as a result in the growth in the size of the portfolio, but overall efficiency improved with the NOI margin increasing from 69.2 per cent. to 71.0 per cent. In 2013, the delivery of efficiency savings has continued, with the property operating expenses increasing marginally to £32.4 million, net overheads falling to £8.4 million and the NOI margin increasing to 71.4 per cent.

Management fees

UNITE earns asset management fees from USAF, UCC, LSAV and OCB calculated as a percentage of gross asset value of assets under management. In addition, UNITE can earn performance fees from its funds and joint ventures which are dependent on meeting certain performance criteria which vary by fund.

	31 December
	2013	2012	2011
Management fees	(£m)	(£m)	(£m)
USAF	6.6	6.3	7.5
UCC/LSAV	4.4	3.3	3.1
OCB	0.9 ––––––––	1.0 ––––––––	1.0 ––––––––
Performance fees	11.9 7.5 ––––––––	10.6 – ––––––––	11.6 – ––––––––
	19.4	10.6	11.6
	––––––––	––––––––	––––––––

The level of asset management fees has remained relatively stable over the three year period, growing from £11.6 million in 2011 to £11.9 million in 2013. The basis for the fees has remained constant and the portfolios under management have grown marginally which has driven the £0.3 million overall increase in the fee level.

The Group generated a £7.5 million performance fee from the UCC joint venture in 2013. The UCC performance fee was originally structured such that it became payable, dependent on performance, at the end of the life of the joint venture. When UNITE and GIC agreed to extend the joint venture in 2012, it was agreed that this fee would become payable when UNITE had completed the refinancing of the debt that was used to finance the joint venture. This refinancing was completed in December 2013 and therefore the fee has become payable. As this fee is non-recurring, it will be excluded from net portfolio contribution, but included in EPRA earnings in accordance with those guidelines.

The Group has generated management fees from OCB and LSAV over the period. The level of fees is determined by activity.

Operating expenses in NPC

Operating expenses in NPC are made up of costs that are incurred by both the Company and the Group's share of costs from joint ventures (although the proportion of operating expenses in NPC associated with joint ventures is minimal). They include costs that are incurred to support the property portfolio, the fund structures and the corporate entities. The principal components of these expenses are staff costs, IT related costs, property costs and professional advisory costs, such as valuation, tax and audit fees.

The following table reconciles operating expenses in NPC to total IFRS operating expenses:

	2013	2012	2011
	(£m)	(£m)	(£m)
Operating expenses in NPC	19.0	21.8	21.6
Joint venture operating expenses(1)	(0.5)	(0.3)	(0.4)
Development pre-contract and UMS costs	3.3	3.7	15.2
Fair value share option costs	1.1	1.5	1.2
Other(2)	0.5	1.3	1.5
Total IFRS operating expenses	–––––––– 23.4	–––––––– 28.0	–––––––– 39.1
Note:	––––––––	––––––––	––––––––

(1) Joint venture operating expenses are included in share of joint venture profit in IFRS presentation.

(2) Other include UNITE Foundation costs, joint venture set up costs and restructuring costs.

The Group provides services to the funds and joint ventures that it manages and a proportion of these operating expenses in NPC relate to the provision of those services. As noted above, the Group charges management fees for the provision of these services. In addition to managing the total level of expenses, the Group also monitors the efficiency measure, calculated as operating expenses in NPC less asset management fees as a proportion of the Group's share of GAV.

The Group has been focused on reducing both the overall level of operating expenses in NPC and also the combination of expenses and fees as a proportion of gross asset value. In 2012, the operating expenses in NPC increased marginally to £21.8 million from £21.6 million in 2011. In 2013 there was a marked reduction in operating expenses in NPC, down to £19.0 million, representing a 13 per cent. reduction. This reduction was principally the result of activity undertaken in the latter stages of 2012 to significantly reduce the level of senior management within the business.

The efficiency measure has reduced over the three year period, from 95 basis points in 2011, to 61 basis points in 2013. This reduction reflects the reduction in operating expenses in NPC whilst at the same time the value of the Group's portfolio has increased from £1,206 million in 2011 to £1,370 million in 2013.

Financing costs

The Group's total finance costs include interest receivable, interest payable and operating lease costs both incurred by the Group and on a see-through basis, which is significant. The Group holds minimal cash balances because it is the Group's policy to apply surplus cash to the repayment of debt. Interest payable reflects prevailing interest rates, bank margins and the level of the Group's debt during the accounting period. Interest payable also includes amounts payable or receivable under interest rate hedging contracts.

	31 December
	2013	2012	2011
Net financing costs in EPRA earnings	33.3	35.7	31.1
Operating lease costs	13.7	12.8	12.6
Total financing costs	–––––––– 47.0	–––––––– 48.5	–––––––– 43.7
Adjusted net debt at 31 December	£666m	£648m	£646m
Average rate of interest	4.7%	5.5%	5.7%

The following table reconciles net financing costs in EPRA earnings to total IFRS net financing costs:

	31 December
	2013	2012	2011
Net financing costs in EPRA earnings	33.3	35.7	31.1
Joint venture net financing costs	(10.2)	(11.0)	(12.3)
Impact of discounting joint venture loans	(15.4)	(0.8)	(0.7)
Market to market charges and payments on swaps	(5.2)	(1.4)	0.4
Loan break costs	0.4	0.1	–
Total IFRS net financing costs	–––––––– 2.9	–––––––– 22.6	–––––––– 18.5
	––––––––	––––––––	––––––––

The Group's total financing costs increased from £43.7 million in 2011 to £48.5 million in 2012. Whilst the adjusted net debt at 31 December 2011 was £646 million, this balance had increased significantly from £547 million at December 2010 as a result of the increased debt on new completions during 2011. The increase in debt towards the end of 2011 resulted in a higher adjusted net debt balance whilst the interest payable in 2011 was much lower. Total financing costs fell to £47.0 million in 2013 as a result of the reduction in the average interest rate during the year.

Operating lease costs increased from £12.6 million in 2011 to £12.8 million in 2012 as a result of index linked increase on a portion of the operating leases. These costs increased to £13.7 million in 2013 as a result of a new operating lease.

Net portfolio contribution

The Group believes that Net Portfolio Contribution is the key measure for assessing the performance of the operating segment. NPC reflects the recurring, pre-tax profitability from the operational elements of the UNITE's property portfolio and includes all corporate overheads. It excludes costs relating to development related activities, non-cash valuation movements of property, interest rate derivatives and share options. NPC has historically represented a good proxy for the cash generation of the operations segment, and the Group believes it is an appropriate measure to use for setting dividends.

	2013 (£m)	2012 (£m)	2011 (£m)
IFRS profit attributable to owners of the parent company	78.0	125.6	2.1
Valuation gains on investment property/property disposals
and write-downs	(46.9)	(59.7)	(19.7)
Valuation gains realised on transfer of completed property	–	(49.7)	–
Fair value movements in interest rate derivatives	(1.3)	(0.8)	–
JV set up – costs and debt net rates	2.6	1.7	–
Tax and minority interest	(1.8)	(1.2)	0.7
EPRA earnings	–––––– 30.6	–––––– 15.9	–––––– (16.9)(
UCC performance fee	(7.5)	–	–
UMS closure costs	–	–	21.0
EPRA earnings (pre exceptional)(1)	–––––– 23.1	–––––– 15.9	–––––– 4.1(2)
Development and UMS cost	3.3	3.7	3.3
Share options, restructuring and foundation	1.6	2.0	3.2
Landsbanki recoveries	(2.3)	(2.9)	–
Tax	(0.1)	0.4	0.4
Net portfolio contribution	–––––– 25.6	–––––– 19.1	–––––– 11.0

Reconciliation of net portfolio contribution and EPRA earnings to IFRS profit

Note:

(1) EPRA earnings (pre exceptional) is shown after the removal of two exceptional items: the UMS loss of £21.0 million in 2011and the UCC performance fee of £7.5 million in 2013.

(2) These adjusted figures were restated in 2012 (see note 2.2 to the financial statements of UNITE for the year ended 31 December 2012, which are set out in Appendix II of this document).

The Group recorded an increase in the value of its properties and the share of properties held in its joint ventures of £19.7 million in 2011, £59.7 million in 2012 and £46.9 million in 2013. In 2012, properties with a carrying value of £263.6 million and a fair value of £313.3 million were transferred from completed property to investment property. This resulted in the recognition of £49.7 million of previously unrecognised valuation gains.

As noted above, under management fees, the Group can earn performance related fees from USAF and the co-investment vehicles. A fee of £7.5 million has been recognised in 2013 as a result of the historic performance of the UCC joint venture. Whilst the Group is eligible to earn further performance fees in the future, the lack of predictability and variability of returns and timings means that this has been classified as a non-recurring item.

Development and UMS costs were £24.3 million (£21.0 million relating to UMS closure shown separately) in 2011 following the Group's decision to cease operations at the UMS plant. Development costs relate to costs that are incurred to secure new sites before contracts are exchanged. Under IFRS accounting guidelines, these costs must be included in the income statement, rather than be included in the cost of the resultant scheme.

Share options, restructuring and UNITE Foundation costs were £3.2 million in 2011. £1.6 million of these costs related to a restructuring exercise that resulted in the number of senior managers at UNITE and a subsequent reduction in the operating costs of the business as set out above. No restructuring costs were incurred in 2012 or 2013. In 2012, the share options, restructuring and foundation costs were £1.7 million, with £1.5 million of these being share option valuation movement costs and the remainder costs relating to UNITE's Foundation which was set up 2011 to support widening access to higher education, to integrate students within local communities and promote employability. In 2013, the share options and Foundation costs were £1.6 million with £1.1 million of this made up from share options and the remainder Foundation costs.

Following the sale of assets by USAF in September 2008, £30 million of its cash resources were placed on deposit with Landsbanki for a period of two months. Following the extraordinary events in the global banking sector in late 2008, Landsbanki was placed into a form of administration on 7 October 2008 and as a result the funds were not repaid when due. The Resolution Committee of Landsbanki, which is responsible for running Landsbanki in administration, has classified USAF's deposit as a 'Priority Creditor'. As at 31 December 2013, £15.3 million representing 53 per cent. of the funds have been repaid to USAF with UNITE's share being £3.1 million. £2.9 million of this amount was received in 2012 and £0.2 million in 2013. There has been recent trading activity of deposits classified as Priority Creditors providing USAF with the option of making a recovery, at a reduced rate, within shorter time period. As a result of this trading activity, in 2013 UNITE released £2.3 million of its remaining £3.2 million provision on the basis that the Directors believe that this money is now recoverable. Subsequent to 31 December 2013 the deposit was sold. UNITE's share of this deposit is £2.7 million, representing a £0.4 million improvement of the amount held in the balance sheet at 31 December 2013.

The Group incurred tax charges included in EPRA earnings of £0.4 million in 2011 and 2012 respectively and £(0.1) million in 2013. The Group has built up a significant amount of brought forward tax losses and capital allowances, primarily as a result of the high volume of development activity it has undertaken over the last ten years. The tax charge noted above relates to charges on profits that can not be offset by historic losses. In 2013, the Group for the first time recognised a deferred tax asset of £0.6 million. The asset represents an estimate of the amount of tax that can be offset by brought forward losses over the next three years. This reduced the amount of the tax charge included in EPRA earnings to a credit of £(0.1) million.

Part of the Group's interest in USAF is held through a subsidiary, in which there is an external investor. On consolidation of the Group's results, there is a minority interest representing the external investor's share of profits and assets relating to its investment in USAF. Any further investment by UNITE into USAF will not impact the amount of this minority interest.

7. Liquidity and capital resources

Historically, the Group has financed its capital and working capital requirements through a combination of cashflow from operating activities, disposals, debt finance and equity. As at 31 January 2014, the Group had cash balances of £46.1 million. The Group's liabilities mainly consist of committed debt facilities. As at 31 December 2013, the Group had £602 million of available facilities and £509 million of debt, with available headroom of £93 million. At the end of January 2014, the total available facilities and drawn debt had each increased slightly leaving available headroom materially unchanged. The Group generally seeks to manage cash balances by using surplus cash to repay debt in the short term.

Cashflows

The cashflows discussed below are on an IFRS basis. As a result, cashflows include joint venture dividends but not on a see-through basis.

	31 December
	2013	2012	2011
	(£m)	(£m)	(£m)
Cashflows from operating activities	5.9	58.4	(74.0)
Cashflows from taxation	(0.7)	(0.9)	(0.6)
Cashflow from investing activities	(34.1)	(14.0)	(3.1)
Cashflow from financing activities	(3.3) ––––––	15.1 ––––––	70.7 ––––––
Cash generated in the year	(32.2)	58.6	(7.0)
Cash and cash equivalents at the start of the year	75.4	16.8	23.8
Cash and cash equivalents at the end of the year	43.2	75.4	16.8
Adjusted net debt	666.1	647.7	646.1

The Group's operating cashflows relate to operational activities and up until 2012, this includes the acquisition and development of property that was being developed for potential sale to USAF. Following the Group's renewed focus to develop and hold more assets on its own balance sheet, these activities are treated as investing activities in 2012 and 2013.

Cash generated from operating activities

In 2011, cashflow from operating activities was an outflow of £74.0 million. This outflow, was after an inflow of £13.8 million of cash from the operations segment. The majority of the outflow is therefore the result of the development activity being included as an operating activity. In 2012, cashflow from operating activities were an inflow of £58.4 million, of which £17.2 million was generated by the operations segment and £48.3 million was generated from the disposal of assets that were classified as trading assets. In 2013, cashflow from operating activities were £5.9 million of which £23.2 million was generated by the operations segment.

Cashflow from investing activities

In 2011, cashflow from investing activities were an outflow of £3.1 million. The main components of this movement were the acquisition of investment property of £18.3 million and an inflow from the disposal of investment property of £8.3 million. In 2012, cashflow from investing activities were an outflow of £14.0 million with the main components being the acquisition of property, including capital expenditure on the development of those properties, of £49.5 million offset by disposals of £27.5 million. In 2013, cashflow from investing activities were an outflow of £34.1 million with acquisition of property accounting for £38.4 million and disposals generating £11.8 million.

Cashflows from financing activities

Cashflows from financing activities were £70.7 million in 2011 and decreased to £15.1 million in 2012. In 2013, the Group raised £59.6 million of capital, reflecting a £50 million share placing in June and the equity component of the convertible bond issuance in October, and repaid £16.3 million of borrowings (net of proceeds from non-current borrowings), for net cash outflows from financing activities of £3.3 million.

Group debt

The following table summarises the Group, co-investment and Wider Group borrowings as at 31 December 2013:

	Group	Fund/JV	See-through
Cash and cash equivalents	(43.2)	(89.6)	(62.7)
Secured bank loans	344.7	456.6	468.4
Fixed rate bonds	–	562.9	91.7
Convertible bonds	79.7	–	79.7
Retail bonds	89.0	–	89.0
Adjusted net debt	————– 470.2	————– 929.9	————– 666.1

The following table summarises the maturity of the secured bank loans, the fixed rate bonds, working capital facilities and convertible and retail bonds on a see-through basis.

	Principal repayments due by period
		Less than
	Total	1 year	1-5 years	5-10 years	After 10 years
Bank and non-bank loans	476.2	53.6	226.3	196.2	–
Fixed rate bonds	92.7	–	–	62.3	30.4
Working capital loans	–	–	–	–	–
Convertible bonds	80.7	–	80.7	–	–
Retail bonds	90.0	–	–	90.0	–

Over the last two years, the Group has reduced the proportion of its see-through debt that is provided by traditional banking sources from £469 million in 2011, representing 74 per cent. of the Group's debt to £268 million in 2013, some 37 per cent. At the same time, it has increased the maturity profile, with the weighted average loan maturity increasing from 4 years to 7 years over the same period.

The debt that expires within one year includes £26.5 million relating to the Group's share of debt in the OCB joint nature. The overall level of the debt of £106 million is non-recourse to the Group. The Group is currently in the process of selling the OCB assets and believes that it will have completed the disposal before the debt becomes repayable.

Summary of borrowings

During the year ended 31 December 2013, UNITE secured £1.1 billion of new debt facilities either on behalf of co-investment vehicles or as the Group's balance sheet. The following table summarises the Wider Group's key debt facilities and bonds, as at 31 January 2014.

The table below reflects the full amount of all joint venture debt facilities, not just the amount proportional to UNITE's investment.

	Facility	Drawn	Maturity	% fixed
	(£m)
Group
Secured
Mass Mutual	124	124	2024	100%
L&G	120	120	2022	100%
HSBC 2	49	18	2016	100%
RBS	82	21	2015	100%
BNP Paribas	34	34	2015	95%
Unsecured
Retail bond	90	90	2020	100%
Convertible bond	81	81	2018	100%
Working capital facility	22	22	2018	0%
Total	–––––––– 602	–––––––– 509	–––––––– N/A	–––––––– 95%
USAF	––––––––	––––––––	––––––––	––––––––
Secured bond	565	565	2023/2025	100%
Lloyds 1	92	67	2016	100%
Lloyds 2	25	8	2018	–
	–––––––– 682	–––––––– 640	–––––––– N/A	–––––––– 96%
UCC	––––––––	––––––––	––––––––	––––––––
L&G	149	149	2022	100%
RBS	77	77	2019	29%
	–––––––– 226	–––––––– 226	–––––––– N/A	–––––––– 75%
LSAV	––––––––	––––––––	––––––––	––––––––
HSBC	135	10	2018	100%
Overseas United Bank	25	25	2017	100%
	–––––––– 160	–––––––– 35	–––––––– N/A	–––––––– 100%
	––––––––	––––––––	––––––––	––––––––
OCB
RBS	31	31	2014	–
Lloyds	44	44	2014	–
Nationwide	31 ––––––––	31 ––––––––	2014 ––––––––	– ––––––––
	106	106	N/A	–
	––––––––	––––––––	––––––––	––––––––

Covenants and gearing

The Group's key borrowing facilities contain similar financial covenants, which include limits on its interest cover ratio and loan-to-value ratios (both measured at the portfolio level). The Group is in full compliance with its financial covenants as at 31 December 2013 has not breached its covenants in the past. As set out in the Group's most recent financial statements, the performance against covenants was as follows:

Weighted	Weighted
actual covenant	covenant
position	allowance
25%	70%
2.5 times	1.45 times

The interest cover ratio is calculated on each facility on an annual basis both on a historic and projected basis. On a weighted average basis, the minimum level of interest cover ratio is 1.45. As at 31 December the actual interest coverage ratio on a weighted average basis was 2.5, providing headroom for net operating income to fall by 35 per cent. before covenants on a weighted basis would be breached.

The loan-to-value ratio is calculated on each facility. The Group has the ability to repay debts from surplus cash, thereby providing flexibility under its financial covenants. Under the Group's banking facilities, the minimum loan-to-value ratio on a weighted average basis is 70 per cent.

As at 31 December 2013, the actual loan-to-value ratio on a weighted average basis was 25 per cent. providing headroom for values to fall by 35 per cent. before the covenant would be breached.

The retail bond is the only debt facility with covenants at a Group level. The weighted covenant allowance is 150 per cent. on the ICR covenant and 75 per cent. on the LTV covenant. As at 31 December 2013, the actual covenant position was 243 per cent on the ICR covenant and 49 per cent. on the LTV covenant.

Capital commitments

The Group's commercial commitments as at 31 December 2013 are set out in the following table. The commitments relate to development projects that have been internally authorised or secured and that the Group intends to build out through 2016.

		Internally
		authorised
		but not
	Secured	secured
	(£m)	(£m)
Group
Saw Mill, Huddersfield	14	–
Stratford City, London	64	–
Trenchard Street, Bristol	26	–
LSAV
Angel Lane, London	54	–
Wembley Way, London	–	49
Stapleton House, London	– ––––––––	95 ––––––––
Total	158	144
	––––––––	––––––––

The Group finances its development and investment activities through a mixture of retained earnings, borrowings and equity. The Group has sufficient funds available from its existing retained earnings and available facilities to fund all of the above developments (both secured and internally authorised). See "Summary of borrowings" above for detail of the available headroom in the Wider Group's debt facilities.

Capital expenditure

The Group's main capital expenditure relates to the delivery of new developments. As outlined above, this results in development profits and rental income once the building is completed. In addition to this, the Group has a rolling programme of maintenance and improvements to its investment properties, which are part of its investment strategy of generating long-term rental revenue and property value growth. These improvements include securing planning consents and re-configuring buildings to introduce or increase uses which generate enhanced rental income.

	31 December
	2013	2012	2011
	(£m)	(£m)	(£m)
Capital expenditure on development activity	74	77	118
Maintenance capital expenditure	7	2	3
Improvement capital expenditure	4	1	3
	————– 85	————– 80	————– 124
	————–	————–	————–

The Directors believe that the Group's capital expenditures from 2011 through 2013 were spread relatively evenly across a large number of projects. For 2014, the Group's capital expenditure budget is £71.3 million. The Group anticipates that its major capital expenditures from 2014 through 2016 will be those capital commitments listed above. As referred to in "Capital commitments" above, the Group has sufficient funds available from its existing retained earnings and available facilities to fund all of the above developments (both secured and internally authorised). Additional maintenance and improvement capital expenditure are expected to be funded through the Group's retained earnings.

Contractual obligations

The following table summarises our contractual obligations as of 31 December 2013:

		Payments due by period
		Less than		More than
Contractual obligations	Total	1 year	1–5 years	5 years
Bank and other loans	542.6	47.9	254.5	240.2
Convertible bond	101.1	2.2	98.9	–
Operating Lease Obligations	254.4	14.7	56.5	183.2
Trade and other payables	85.2	85.2	–	–
Interest rate swaps	7.5	3.8	3.4	0.3
Total	–––––– 990.8 ––––––	–––––– 153.8 ––––––	–––––– 413.3 ––––––	–––––– 423.7 ––––––

Off balance sheet items

The Group has completed transactions whereby properties that the Group owns and operates have been sold to third parties and then the Group has entered into a leaseback of that property. Under IFRS, these leases are treated as operating leases and the properties are not included on the balance sheet. Operating leases are in place over 13 properties comprising 4,256 beds. In the year ended 31 December 2013, these properties generated net operating income of £13.3 million and incurred payments of £13.7 on the associated operating leases. Other than these sale-leaseback transactions, the Group has no significant off balance sheet items.

8. Quantitative and qualitative disclosures about market risk

Interest rate risk

Interest rate risk is the risk that the Group is impacted by significant changes in interest rates. Borrowings issued at floating rates expose the Group to interest rate risk. The Group's policy is to minimise interest rate risk by holding long term, fixed rate debt and through the use of interest rate swaps to effectively fix the interest rate on a large portion of its floating rate bank debt. The Board keeps under review the interest rate risk in light of market expectations of future interest rate movements and anticipated levels of borrowing.

At 31 December 2013 84 per cent. of the Group's debt had fixed rate debt or interest rate swaps in place. As a result of these fixed rate instruments, the Group's cost of debt was 4.1 per cent. at 31 December 2013. The weighted average maturity of the debt was 7.1 years. The Group had 14 per cent. of financial debt held at floating rates. As a result, each one percentage increase or decrease in interest rate would result in a corresponding decrease or increase of £1.3 million in the Group's interest payable as of 31 December 2013.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in a financial loss to the Group. As the Group has a large and diverse tenant base of approximately 41,000 students the Board believes its tenant credit risk is widely spread.

The Group enters into significant contracts with the main building contractors of the development schemes. Whilst the Group makes payments to these contractors based on work completed, as assessed by an independent third party monitoring surveyor. The Group undertakes credit worthiness checks on all of its main contractors prior to entering into contracts due to the fact that additional costs would be incurred if a main contractor defaulted on its contractual obligations.

The Group held £43.2 million in cash and cash equivalents at 31 December 2013. As part of the Group's treasury policy, the banks used to hold cash are assessed for credit worthiness using an assessment of publically available ratings, share price performance (where applicable) and credit default swap prices.

Liquidity risk

Liquidity risk is that the Group will not be able to meet its financial obligations as they fall due. For development activities, the Group has a policy to inject substantially the full amount of equity required for each development before drawing debt against the specific facility for the development. The funding requirements of each scheme are therefore effectively 'ring-fenced' and secured at the outset of the works.

The Group has £202 million of unsecured debt, part of which is to be repaid in 2018 and part of which is to be repaid in 2020. There is a risk that the Group will not have sufficient resources when the debt is due to repay those facilities.

The Group also monitors and reports the maturity profile on a regular basis. The Group has a policy to re-finance debt 12 months before the maturity date.

Inflation

The Group historically has not been affected materially by inflation.

Seasonality

The Group enters into tenancy and nomination agreements which typically cover the academic year, which runs from September to June. The profile of these arrangements results in a seasonal impact on the revenues and working capital with a higher level of revenue being generated during the first, second and fourth quarters of each year.

Accordingly, the Group's results of operations for any particular quarter are not indicative of the results the Group expects for the full year. The Group anticipates this seasonal impact on its revenues to continue.

Given the level of the Group's retained earnings the Group's borrowing requirements are not typically affected by the seasonality of the Group's revenues.

9. Critical accounting and treasury policies

The discussion and analysis of the Group's financial condition and results of operations are based on the Group's Report and Accounts for the years ended 31 December 2013, 2012 and 2011 which have been prepared in accordance with IFRS. The Group's reported financial condition and results of operations are sensitive to accounting policies, assumptions and estimates that underlie the preparation of its financial statements. The Group's critical accounting policy are outlined below. Details of the Group's treasury policies are set out in section 4 of the financial statements of UNITE for the financial year ended 31 December 2012 which are set out in Appendix 2 of this document.

Valuation of investment property and investment property under development

Investment property and investment property under development are held at fair value. The Group's portfolio is valued every six months and co-investment properties every three months by external independent valuers. The valuations are based on assumptions made by considering the aggregate of the net annual rents and associated costs. Valuations reflect the type of tenants actually in occupation and the length of leasing agreements and the remaining economic life of the building.

Joint ventures

The Group accounts for its investments in co-investment vehicles as joint ventures as the Directors consider that the agreements integral to its co-investment vehicles result in the Group having joint control; a significant degree of judgement is exercised in this assessment due to the complexity of the contractual arrangements.

The Group chooses to provide additional disclosure in relation to its co-investment vehicles and presents results on a see-through basis, which reflects the component parts of EPRA earnings and adjusted net asset value on a proportionally consolidated basis.

Interest rate swaps

Interest rate swaps are recognised at fair value, with mark to market movements recognised in the income statement unless cashflow hedging is applied. When a hedging relationship is terminated, the cumulative unrealised gain or loss recognised in equity is recognised in the income statement immediately. The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current credit worthiness of the swap counterparties.

PART VII

CAPITALISATION AND INDEBTEDNESS

The following tables show the capitalisation of UNITE as at 31 December 2013 and the audited consolidated indebtedness of the Group as at 31 December 2013. The figures exclude balances between entities that comprise the Group. The figures for capitalisation have been extracted without material adjustment from UNITE's consolidated, audited financial information which are set out in Appendix I of this document.

Capitalisation and indebtedness

	31 December
	2013
	(£m)
Total current debt
Guaranteed	–
Secured	29.7
Unguaranteed/unsecured	–
Total non-current debt (excluding current portion of long-term debt)
Guaranteed	–
Secured	316.1
Unguaranteed/unsecured	167.6 ————
Total gross indebtedness	513.4 ————
Shareholders' equity
Share capital	44.2
Legal reserve	–
Other reserves	627.8 ————
Total	672.0
	————
Net liquidity
	31 December
	2013
	(£m)
Cash	(43.2)
Cash equivalent Trading securities	– –
	————
Liquidity	(43.2) ————
Current bank debt	27.1
Current portion of non-current debt	1.6
Other current financial debt	1.0 ————
Current financial debt	29.7
Net current financial indebtedness	———— (13.5)
Non-current bank loans	———— 162.0
Bonds issued	167.6
Other non-current loans	154.1 ————
Non-current financial indebtedness	483.7
Net financial indebtedness	———— 470.2
	————

The Group had no indirect or contingent indebtedness as at 31 December 2013.

The secured loans are secured against property assets and part of the Group's interests in USAF.

PART VIII

UNAUDITED PRO FORMA FINANCIAL INFORMATION

SECTION A: UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma statement of net assets has been prepared to illustrate the pro forma effects of the Issue as if it had occurred on 31 December 2013, presented on the basis of the accounting policies adopted by the Company in preparing its audited consolidated financial statements for the year ended 31 December 2013. The unaudited pro forma information has been prepared for illustrative purposes only. Due to its nature, the unaudited pro forma information addresses a hypothetical situation and does not, therefore, represent the actual financial position or results of the Group. The unaudited pro forma statement has been prepared on the basis set out in the notes below and in accordance with the requirements of items 1 to 6 of Annex II to the Prospectus Directive Regulation.

				Pro forma
	31 December	Adjustment		for the continuing
	2013	Issue	Notes	Group
	(£m)	(£m)		(£m)
Assets	(a)
Investment property	767.6	–		767.6
Investment property under development	95.5	–		95.5
Investment in joint ventures	237.2	48.0	(b)	285.2
Joint venture investment loans	10.2	–		10.2
Other non-current assets	7.3	–		7.3
Deferred tax asset	0.6	–		0.6
Total non-current assets	———— 1,118.4 ————	———— 48.0 ————		———— 1,166.4 ————
Properties under development	61.5	–		61.5
Inventories	3.2	–		3.2
Trade and other receivables	50.0	–		50.0
Cash and cash equivalents	43.2	48.0	(c)	91.2
Total current assets	———— 157.9	———— 48.0		———— 205.9
Total assets	———— 1,276.3	———— 96.0		———— 1,372.3
	————	————		————

				Pro forma
				for the
	31 December	Adjustment		continuing
	2013	Issue	Notes	Group
	(£m)	(£m)		(£m)
Liabilities
Borrowings	(29.7)	–		(29.7)
Interest rate swaps	(2.0)	–		(2.0)
Trade and other payables	(85.2)	–		(85.2)
Provisions	–	–		–
Current tax creditor	(0.3) ————	– ————		(0.3) ————
Total current liabilities	(117.2)	–		(117.2)
Borrowings	———— (483.7)	———— –		———— (483.7)
Interest rate swaps	(3.4)	–		(3.4)
Provisions	–	–		–
Total non-current liabilities	———— (487.1)	———— –		———— (487.1)
Total liabilities	(604.3)	–		(604.3)
Net Assets	———— 672.0	———— 96.0		———— 768.0
Net asset value per share	————	————		————
Basic	370p	2p	(d)	372p
EPRA (fully diluted)	382p	1p	(e)	383p
Adjusted LTV	49%	(4%)	(f)	45%

Notes:

(a) The financial information relating to the Group has been extracted without adjustment from the audited consolidated balance sheet of the Company as at 31 December 2013. The pro forma statement of net assets does not constitute statutory accounts within the meaning of section 434 of the Act. No account has been taken of trading, capital expenditure or other movements subsequent to 31 December 2013.

(b) The movement in the Group's investment in joint ventures arises as a result of the Issue as UNITE uses £48 million of the proceeds of the Issue to purchase £48 million of new units in USAF.

(c) The movement in cash and cash equivalents reflects the receipt of £96 million from the issue of 24,500,000 New Ordinary Shares from the Issue priced at £4.10 per share less estimated cash costs of £4 million associated with the Issue and the investment of £48 million in USAF.

(d) The movement in the basic NAV per share as a result of the Issue can be analysed as follows:

		31 December 2013	Adjustment	Pro forma
Net assets (excluding minority interest)	£m	653.3	96.0	749.3
No. of shares (basic)	m	176.7	24.5	201.2
NAV per share (basic)	£	3.70	0.02	3.72

(e) The movement in the EPRA (fully diluted) NAV per share as a result of the Issue can be analysed as follows:

		31 December 2013	Adjustment	Pro forma
EPRA NAV	£m	681.6	96.0	777.6
No. of shares (fully diluted)	M	179.1	24.5	203.6
EPRA NAV per share (fully diluted)	£	3.82	0.01	3.83

(f) The movement in adjusted LTV is due to an increase in see through GAV as a result of the increased stake in USAF and a net increase in Adjusted net debt as a result of an increased stake in USAF and the increase in cash and cash equivalents following the proposed transaction. The adjustment can be analysed as follows:

		31 December 2013	Adjustment	Pro forma
GAV	£m	1,370.1	80.5	1,450.6
Adjusted net debt	£m	(666.1)	24.1	(642.0)
LTV	%	49%	(4%)	45%

SECTION B: REPORTING ACCOUNTANTS' REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

KPMG Audit Plc Transaction Services 15 Canada Square Canary Wharf London E14 5GL United Kingdom

Tel +44 (0) 20 7311 6499 Fax +44 (0) 20 7311 3311 DX 157460 Canary Wharf 5

The Directors The UNITE Group plc The Core 40 St Thomas Street Bristol BS1 6JX

6 March 2014

Dear Sirs

The UNITE Group plc

We report on the pro forma financial information (the "Pro forma financial information") set out in Part VIII of the prospectus dated 6 March 2014, which has been prepared on the basis described in notes (a) to (f), for illustrative purposes only, to provide information about how the Firm Placing, Placing and Open Offer might have affected the financial information presented on the basis of the accounting policies adopted by The UNITE Group plc in preparing the financial statements for the period ended 31 December 2013. This report is required by paragraph 7 of Annex II of the Prospectus Directive Regulation and is given for the purpose of complying with that paragraph and for no other purpose.

Responsibilities

It is the responsibility of the directors of The UNITE Group plc to prepare the Pro forma financial information in accordance with Annex II of the Prospectus Directive Regulation.

It is our responsibility to form an opinion, as required by paragraph 7 of Annex II of the Prospectus Directive Regulation, as to the proper compilation of the Pro forma financial information and to report that opinion to you.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with paragraph 23.1 of Annex I of the Prospectus Directive Regulation, consenting to its inclusion in the prospectus.

Basis of Opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report,

KPMG Audit Plc, a UK public limited company, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity.

Registered in England No 30110745 Registered office: 15 Canada Square, London, E14 5GL which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro forma financial information with the directors of The UNITE Group plc.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of The UNITE Group plc.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in the United States of America or other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion:

• the Pro forma financial information has been properly compiled on the basis stated; and
• such basis is consistent with the accounting policies of The UNITE Group plc.

Declaration

For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the prospectus in compliance with paragraph 1.2 of Annex I of the Prospectus Directive Regulation.

Yours faithfully

KPMG Audit Plc

PART IX

PROPERTY VALUATION REPORTS

This Part IX sets out the following valuation reports in respect of the Wider Group's property portfolio:

• Part A: Report from Jones Lang LaSalle Limited including properties wholly owned by the Group and properties within UCC and OCB co-investment vehicles;
• Part B: report from CBRE Limited in respect of Waverley House, Bristol, a property wholly owned by the Group;
• Part C: Report from CBRE Limited in respect of properties held by USAF;
• Part D: Report from CBRE Limited in respect of properties held by the LSAV co-investment vehicle; and
• Part E: Report by Knight Frank LLP in respect of properties held by the Group.

There has been no material change since 31 December 2013, the effective date of the valuations of the Wider Group's property portfolio set out in this Part IX.

The Directors of The UNITE Group plc The Core Our ref AV 40 St Thomas Street Direct line 0117 930 5638 Bristol Direct fax 0117 929 9669 BS1 6JX

J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP

Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT

Jefferies International Limited Vintners Place 68 Upper Thames Street London EC4V 3BJ

6 March 2014

Dear Sirs

PROPERTY VALUATION – THE UNITE GROUP PLC (THE "COMPANY") PROPERTY PORTFOLIO

1 INSTRUCTIONS

In accordance with the instructions of the Company, we have valued the property assets of The UNITE Group plc, held as at 6 March 2014, for a regulated purpose valuation as at 31 December 2013 ("the Valuation"). The properties valued for the purpose of this Valuation are identified within Appendix 1 attached to this letter ("the Properties"). This Valuation has been prepared for inclusion in the Prospectus to be published by the Company in connection with the Firm Placing and Placing and Open Offer and admission of the new ordinary shares to the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange's main market for listed securities (the "Prospectus").

We have carried out an inspection of each property between 1 July 2012 and 31 December 2013 in connection with our Valuation of the Company's assets as at the effective date of 31 December 2013. We have been advised by the Company that no material changes have occurred to the building structures in the intervening period.

andrew.vaughan@eu.jll.com

The Valuation has been co-ordinated by Andrew Vaughan MRICS and overseen by Philip Hillman FRICS and all the individual properties have been valued by valuers qualified for the purpose of the valuation.

2 BASIS OF VALUATION

We confirm that we regard ourselves as external for the purposes of t Our Valuation has been made in accordance with the RICS Valuations – Professional Standards, January 2014 published by the Royal Institution of Chartered Surveyors and in accordance with the Prospectus Rules of the Financial Conduct Authority. We have acted as External Valuers as defined in the RICS Valuation - Professional Standards and as independent experts for the purposes of paragraph 130(i) of ESMA's recommendations for the consistent implementation of the European Commission's Regulation on Prospectuses No. 809/2004 (the "ESMA Recommendations"). We confirm that we regard ourselves as external for the purposes of the valuation and, whilst we do provide other professional services to the Company, we can confirm that the overall fees received from the Company, for all services and valuation (including this valuation), are very considerably less than 5% of our annual turnover. We have been carrying out valuation instructions for the Company's property portfolio since prior to 1999. We confirm that we do not have any material interest in the Company or any of the Properties.

Our valuation has been prepared on the basis of Market Value as defined in the RICS Valuation - Professional Standards:

"The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms' length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion."

As the RICS Valuation – Professional Standards are fully compliant with the International Valuation Standards, our valuation can be regarded as compliant with the International Valuation Standards and have also been prepared in accordance with Rule 5.6.5G of the Prospectus Rules of the Financial Conduct Authority and requirements of Paragraphs 128 to 130 of the ESMA Recommendations.

3 ASSUMPTIONS

In undertaking this valuation we have had to make certain assumptions:

We have, however, w No allowances have been made for expenses of realisation or for taxation which might arise and our valuations are expressed exclusive of any VAT which might become chargeable. We have, however, where appropriate, taken account of purchaser's costs at an appropriate rate as is customary in investment valuations. Each property has been valued as an individual property and not as part of a portfolio.

We have been supplied with information regarding tenure, tenancies, occupancy and income for 2013/14 and proposed budgets where available for 2014/15 in respect of each of the properties by the Company, as we have been in respect of previous valuations for financial statements purposes. The provision and veracity of this information has been the subject of routine and ongoing audit checks by the Company's auditors. Unless otherwise disclosed to us, we have assumed that each property is free from

encumbrances, restrictions or other outgoings of an onerous nature which would materially affect the value.

The Company has confirmed that the facilities management costs adopted within our valuation are in line with the actual running costs and sinking fund provisions incurred by the Company. We confirm that the facilities management costs adopted are in line with those generally adopted by the market when considering investment acquisitions. As valuers we comment that our approach is based on a market approach, rather than the detailed costings.

We have valued on the basis that full planning permission for the current use and the development of each property is in place, except where we have been advised to the contrary (in which case we have reflected this in our valuation). We have also relied upon the Company to provide us with information regarding current and any applicable future planning proposals in respect of each property.

We have not carried out a structural survey of the properties, nor have we tested the services that we have had regard to, the general condition of each property, as observed in the course of our inspection for valuation purposes. In the absence of information to the contrary, we have assumed the properties are in a good structural repair, that a planned maintenance property is in place and that no known deleterious materials or techniques have been used in the original construction of, or subsequent alteration of, any buildings and that the sites are unaffected by adverse ground conditions.

With regard to potential environmental liabilities, we have been advised by the Company where liabilities are known and quantified, and these have been explicitly reflected in our valuations, otherwise, we have assumed that the properties are free from adverse environmental liabilities.

No allowance has been made in respect of rights, obligations or liabilities under the Defective Premises Act 1972. We have also assumed that each property complies in all respects with all relevant statutory regulations, including fire regulations and Disability Discrimination Legislations and that there are no outstanding notices against any property.

4 VALUATION

Having regard to the above, we are of the opinion that the Aggregate Market Value of the Properties as at 31 December 2013 of the freehold and leasehold interests in the properties is as follows:

£1,188,380,000

(One Billion, One Hundred and Eighty Eight Million, Three Hundred and Eighty Thousand Pounds)

This can be apportioned between different interests in the properties as follows:

Classification	TOTAL
Wholly Owned - Investment	£441,010,000
Wholly Owned - Held for Development	£7,300,000
Wholly Owned - In the Course of Construction	£176,500,000
UCC - Held For Investment	£388,900,000
UCC - Held For Development	£1,000,000
OCB - Held For Investment	£173,670,000 –––––––––––––––––
TOTAL	£1,188,380,000 ––––––––––––––––– –––––––––––––––––

This can be apportioned between different property tenures as follows:

Tenure	Number of properties	TOTAL
Freehold	37	£828,390,000
Leasehold	11	£359,990,000 –––––––––––––––––
TOTAL	48	£1,188,380,000 ––––––––––––––––– –––––––––––––––––

5 APPLICATION OF VALUATION FIGURES AND FINANCIAL STATEMENT

We understand that the Company directly incorporates our assessment of Fair Value or Market Value into their financial statements in respect of all of the properties except those held in a joint venture. Eighteen properties within the Jones Lang LaSalle valuation were held within joint ventures as at 31 December 2013. We understand from the Company that their interest in these joint ventures as at 31 December 2013 is as follows:

• l Unite Capital Cities Joint Venture: 30%
• l Oasis Capital Bank Joint Venture: 25%

6 RELIANCE AND RESPONSIBILITY This valuation has been prepared for inclusion i

Other than the Prospectus, neither the whole nor any part of this valuation may be included in any document, circular or statement without our written approval of the form and context on which it may appear. For the avoidance of doubt, we have given and not withdrawn our consent to the inclusion of and references to, this report in this Prospectus in the form and content in which they appear. This valuation has been prepared for inclusion in the Prospectus.

We accept responsibility for this information contained in this valuation for the purpose of Rule 5.5.3 (R)(2)(f) of the Prospectus Rules of the Financial Conduct Authority. We declare to the best of our knowledge (having taken all reasonable care to ensure that such is the case), the information contained in this valuation is in accordance with the facts and contains no omissions likely to affect its import.

Yours faithfully Yours faithfully

Andrew Vaughan MRICS Rose Denbee MRICS Director Director Student Housing Student Housing

Yours faithfully

Philip Hillman FRICS Director Student Housing

Appendix 1 – Property Schedule – Jones Lang LaSalle Limited

Property Number	Property & City	Description, age and tenure	Terms of existing tenancies
	Wholly Owned - Investment
1	Archways, The property comprises a four-storey purposebuilt student accommodation Sheffield property comprising 218 en-suite cluster flat bedrooms. A large vacant commercial unit of circa 2,323 sq m (25,000 sq ft) is incorporated at ground floor. Freehold		Part of the student accommodation is subject to two nomination agreements with Kaplan US Ltd for 124 bed spaces on a 32 week tenancy from 11 January 2014 and 18 bed spaces for a tenancy of 38 weeks from 14 September 2013. The agreements expire on 22 August 2014 and 7 June 2014 respectively.
			The agreements are short term and our valuation assumes a fully directly let scenario.
2	Bartholomew Road, London	Purpose built student accommodation property completed for the 2009/10 academic	The accommodation is directly let to students on AST's.
		year comprising 54 studio flats. Commercial accommodation of circa 4,000 sq ft is incorporated at ground floor comprising Class B1 and B8.	The commercial element is currently vacant.
		Freehold.
3	Bloomfield Court, London	A former office building converted to student use and completed for the 2011/2012 academic year comprising 149 en-suite bed spaces in cluster flats and studios. A commercial unit of circa 700 sq ft is incorporated at ground floor and is currently vacant.	The accommodation is directly let to students on AST's. The commercial element is currently vacant.
		Freehold
4	Cavendish Place Manchester	Purpose built student accommodation property completed for the 2011/12 academic year and comprising 119 en-suite bed spaces in cluster flats and studios. Freehold	The accommodation is directly let to students on AST's.
5	Central Quay, Sheffield	Purpose built student accommodation property completed for the 2006/07 academic	The accommodation is directly let to students on AST's.
		year comprising 767 en-suite bed spaces in cluster flats and studio flats. A single commercial unit of circa 3,500 sq ft is incorporated at ground floor.	There is a short term nomination agreement on part of the student accommodation for 545 beds in 2013/2014 to Sheffield Hallam
		Freehold.	University. We have had regard to this agreement but have assumed directly let long-term.
			The commercial unit is let to Tesco Stores Plc for 15 years from 2008, expiring 2023.

6	Chantry Court,	The property comprises a vacant shell	Vacant possession.
	Bristol	commercial unit over basement and ground floor of circa 7,100 sq ft and 7,900 sq ft respectively.	Leasehold interest has circa 15 years remaining.
7	Concept House, Leeds	Leasehold Purpose built student accommodation property completed for the 2008/09 academic year comprising 391 en-suite bedrooms in cluster flats, studios and one bed flats. Freehold.	The accommodation is directly let to students on AST's.
8	Corfe House, Poole	Purpose built student accommodation property completed for the 2006/07 academic year and comprising 308 en-suite bed spaces in cluster flats and studio flats. A commercial unit of circa 589 sq m (6,340 sq ft) is incorporated at ground floor level comprising Class D1 use for a health centre. Freehold	The student accommodation is subject to a 20 year Nomination Agreement with Bournemouth University, expiring 31 August 2027, whereby the University provides a minimum occupancy level/guaranteed rental income for the property. There is a mutual break option should the minimum occupancy levels not be met for three consecutive years. The guarantee under the agreement reduces on a five yearly basis. The commercial unit is currently vacant and in shell condition.
9	Culver House, Bristol	A 1970's office building converted in 1996 to provide 97 non en-suite bed spaces in cluster flats and 23 car parking spaces. Freehold	The accommodation is directly let to students on AST's. Twenty car parking spaces are let to Gaming International Plc for 25 years expiring August 2022, with landlord break options in 2011 and 2016.
10	Curzon Gateway, Birmingham	Purpose built student accommodation property completed for the 2008/9 academic year comprising 742 en-suite bed spaces in cluster flats and studios. A minor element of the property comprises a staff training centre which can be reinstated at cost to a five-bed cluster flat and one studio. Income and reinstatement allowance has been made within our valuation. The property is subject to a potential purchase by agreement under the Compulsory Purchase Act 1965. We have valued as per the RICS Professional Standards on the basis of a 'no scheme, world under Rule 2 of the Land and Compensation Act 1961. Long leasehold.	The accommodation is directly let to students on AST's.
11	Donald Hunter House London	A 1960's office building redeveloped in 2000 to provide 284 key-worker bed spaces in the upper parts with three commercial units below. Car parking spaces on site. Freehold.	The property is currently let to students on AST's. We have made a Special Assumption that the property has a full valid planning consent to let under a student use. Retail Unit A is subject to a lease to Iceland (via an assignment from Peacocks), expiring 5 November 2015. Retail Units B and C are subject to a 35 year lease to Newham Borough Council for use as a public library, expiring 1 July 2036 with a break option at year 25.

12	Downsview House, Swindon	The property is part of a PFI scheme and is within the grounds of the Great Western Hospital in Swindon. The scheme opened in 2002 and provides 141 bed spaces arranged as 118 en-suite and eight on-call rooms. Leasehold	Subject to a lease and occupancy agreement with Swindon & Marlborough NHS Trust for a 27 year term, with circa 16 years remaining.
13	Elizabeth Croll House, London	Purpose built student accommodation property located on the School of Oriental and African Studies (SOAS) Campus and completed for the 2009/10 academic year. The property comprises 102 en-suite bed spaces in two-bed micro flats and studios. Long leasehold	The property is held on a 99 year long leasehold interest from 2009 from SOAS at a peppercorn rent. The lease includes an option for the freeholder, SOAS to acquire the lease for Market Value exercisable six months prior to 18 September 2039.
14	Harry French Halls, Loughborough	Comprises a number of buildings providing halls of residence with a mix of non en-suite and en-suite accommodation, effectively located opposite Loughborough University campus. Long leasehold.	The property is subject to Nomination Agreements with Loughborough University.
15	Margaret Rule Hall, Portsmouth	A 1960's office building converted in 2001 to provide 348 en-suite cluster flat bed spaces on the upper floors and car parking at ground floor. Freehold	The student accommodation is let on landlord repairing and insuring terms to the University of Portsmouth on a 28 year lease expiring 16 September 2029. The lease incorporates mutual break options at the end of years 15, 20 and 25 excluding the holiday period. The rent has annual fixed increases of 2%.
			We are informed that the car parking element is subject to two separate short-term leases to Rossborough Insurance and Portsmouth City Council.
16	Nelson Drake and Trafalgar House, Bristol	The property comprises three 1960's office blocks redeveloped by the Company. The property provides student accommodation (303 bed spaces) on the upper floors within cluster flats. Part ground, part first and part second floor provides commercial accommodation comprising four units, of which only Unit C is occupied, with the other units currently	The student accommodation is subject to two short term Nomination Agreements for 2013/14 as follows: the University of Bristol has a 43 week agreement for 182 non en-suite rooms; the University of the West of England has a 39 week agreement for 93 non en-suite rooms and 26 premium en-suite rooms.
		vacant. Freehold	Unit C is let to Stolmede trading as Shanghai Nights (on assignment from New World Fushia) on a 22 year lease expiring August 2035.
17	Northernhay House, Exeter	A former office building converted to provide 218 non en-suite and en-suite student bed spaces in cluster flats and studio flats.	The accommodation is directly let to students on AST's.
18	Parkway Gate, Manchester	Freehold. Purpose built student accommodation property completed for the 2008/09 academic	The accommodation is directly let to students on AST's.
		year comprising 729 en-suite bed spaces in

		cluster flats. A single commercial unit of circa 5,000 sq ft is incorporated at ground floor.	The commercial unit is vacant and in shell condition.
		Freehold.
19	Forge 2, Forge Student Village,	Purpose built student accommodation property completed for the 2007/8 academic	The accommodation is directly let to students on AST's.
	Sheffield	year comprising 224 en-suite bed spaces in cluster flats and studios. Eight commercial units are incorporated at ground floor, only one of which is currently vacant. Freehold	The commercial units are let to a variety of national and local covenants, including Sainsbury's and Wilkinson who secure circa 55% of the commercial income. Lease expiries are between May 2018 and October 2023, with break options/expiries between March 2015 and February 2023.
20	Forge 1, Forge Student Village, Sheffield	Large purpose-built student accommodation property completed for the 2002/03 academic year comprising 1,157 en-suite bed spaces in cluster flats and studios. Two commercial units are incorporated at ground floor, both of which are vacant. Freehold.	The accommodation is mainly let on a short term one-year nomination agreement to Sheffield Hallam University for 2013/2014. The remainder is direct let.
21	The Railyard, Liverpool	Purpose built student accommodation property developed in September 2000 and comprising 271 en-suite cluster flat bed spaces. Freehold.	Directly let to students on AST's. The property also benefits from a ground rent from a freehold interest in an adjacent property known as The Sidings. The lease is for 150 years from January 2004 and the ground rent receivable as part of the interest owned is £9,000 per annum reviewable in 2034.
22	Wellington Lodge, London	Purpose built student accommodation property completed for the 2012/13 academic year and comprising 146 en-suite bed spaces in cluster flats and studios. Two retail units	The property is subject to a two year Nomination Agreement with the London School of Economics and Political Science.
		are incorporated at ground floor. Freehold	The commercial units are currently vacant and in shell/core condition.
23	William Morris Halls, Loughborough	The property comprises three elements of part new build, part refurbishment and part purchase at William Morris Halls in partnership with Loughborough University. The construction completed for the 2007/08 academic year and comprises 469 non en suite and en-suite bed spaces in cluster flats and studios. The property is located opposite Loughborough University campus.	The property is subject to a rolling Nomination Agreement with Loughborough University.
		Long leasehold
24	William Morris Villas, Loughborough	The property is located opposite Loughborough University's campus and comprises four converted/refurnished Victorian Villas providing a combined total of 38 bedrooms including premium rooms, standard rooms and staff en-suite rooms. A number of car parking spaces are located	The property is subject to a 20 year Nomination Agreement and Rent Guarantee Agreement with Loughborough University.

		adjacent to the accommodation.
		Long leasehold
	Wholly Owned - held for development
25	Shrubhill, Edinburgh	The property comprises a redevelopment site, with an 1950s/1960s vacant former office building in shell condition that would be demolished under the planning consent. Planning consent was granted in 2008 for a redevelopment to provide circa 260 student bed spaces and circa 18,800 sq ft of commercial space. We understand that this consent is yet to be implemented but the Company has confirmed the student use consent has been extended to 2014.	Vacant possession.
		Our valuation of the development site has a Special Assumption that a full valid planning consent is implemented for the student accommodation use proposed and that the Company has vacant possession.
		Heritable.
26	Murano Place, Edinburgh	The property comprises a development site, which we understand is currently occupied by a single storey Plumb centre. Planning consent has been achieved for a redevelopment to provide student accommodation, subject to a Section 69 legal agreement. We understand that this consent is yet to be implemented. Our valuation of the development site has a	The Company has confirmed the property is available with Vacant Possession.
		Special Assumption that a full valid planning consent is implemented for the student accommodation use proposed and that the Company has achieved vacant possession.
		Heritable.
	Wholly Owned - In the Course of Construction
27	Travis Perkins Site, St Pancras Way, London	Redevelopment of a former Travis Perkins depot in Camden. Planning consent has been granted for the redevelopment of the entire site including a replacement Travis Perkins building at ground floor with student accommodation to the upper floors. The planning consent permits 571 en-suite bed spaces and delivery is scheduled for the commencement of the 2014/15 academic year.	We understand the completed student accommodation will be directly let to students on AST's. The Company has confirmed on track performance for delivery prior to the 2014/2015 academic year.
		Long leasehold (999 years)
28	Stratford One, London	Development site in Stratford which forms part of the wider Stratford regeneration area. Planning consent has been granted for the construction of a total of 1,001 en-suite bed spaces, in cluster flats and studios, with provision of ancillary communal and office areas at ground and first floor levels. Delivery is scheduled for the commencement	We understand the completed student accommodation will be directly let to students on AST's. The Company has confirmed on track performance for delivery prior to the 2014/2015 academic year.

		of the 2014/15 academic year.
		Long leasehold (proposed 250 years on completion).
29	Kingsmill Lane, Huddersfield	The Company are purchasing a turnkey property from Watkin Jones Group, with delivery scheduled for the commencement of	We understand the completed student accommodation will be directly let to students on AST's.
		the 2014/15 academic year. Under the planning consent, the completed property will provide 378 en-suite bed spaces in cluster flats and studios.	The Company has confirmed on track performance for delivery prior to the 2015/2016 academic year.
		Freehold (assumed)
30	Trenchard Street, Bristol	The property comprises the former lower ground and ground floor accommodation leased to Bristol Beat (trading as the O2 Academy nightclub).	We understand the completed student accommodation will be directly let to students on AST's.
		Planning consent has been granted for partial demolition and re-development above the O2 Academy (to be retained) to provide 442 student bed spaces in cluster flats and studios, internal courtyard, extension at the ground floor to accommodation a café (use Class A3), change of use of the existing car park to leisure use (use Class D2), external alterations to the existing O2 Academy and improvements to the adjoining public footpath including landscaping.	The existing O2 night club is let to Bristol Beat Limited on a 25 year lease from 25 December 1998 expiring 2023, with five yearly open market rent reviews and no break options.
		We understand that delivery is scheduled for the commencement of the 2015/16 academic year.
		Freehold
	UCC - Held For Investment
31	Beaumont Court, London	Purpose built student accommodation property completed for the 2006/7 academic year and comprising 232 en-suite bed spaces in cluster flats and studios. Two commercial units are incorporated at ground floor comprising various Class B uses. Freehold.	Part of the student accommodation is subject to two Nomination Agreements as follows: Britannia Student Services Limited have taken 30 rooms from 30 August 2013 expiring at the end of the 2014/15 academic year; Accent Language Limited have taken 40 rooms from 13 September 2013 expiring at the end of the 2017/18 academic year.
			The agreements are short term and our valuation assumes a fully directly let scenario.
			The Doctors Laboratory Limited occupy a part lower ground and ground floor rear unit expiring 25 March 2018. Mansell Construction Services Limited occupy a part lower ground, ground and first floor unit expiring 31 August 2014.
32	Bernard Myers House, London	Purpose-built student accommodation property comprising 123 en-suite bed spaces in cluster flats and studio flats.	The entire student accommodation is subject to a 25 year Nomination Agreement with the University of the

		Freehold.	Arts expiring 2031, with a mutual break option in September 2016.
33	Canto Court, London	Purpose built student accommodation property completed for the 2008/09 academic year comprising 164 studio flats and a single ground floor commercial unit, which is currently vacant. Freehold.	Part of the student accommodation is subject to a two year nomination agreement with The City University who have nominated 91 studios for the 2013/14 academic year. The agreement is short term and our valuation assumes a fully directly let scenario.
34	Charles Morton Court, London	Purpose built student accommodation comprising 92 en-suite bed spaces in cluster flats and studios. A tenanted commercial unit	The student accommodation is directly let to students on Assured Shorthold Tenancies.
		is situated at ground floor. Freehold	The retail unit is let to Tesco Stores Limited for 18 years from 20 September 2013, expiring 2023, with tenant only break options in September 2023 and September 2028.
35	Julian Markham Court, London	Purpose built student accommodation property comprising 232 en-suite bed spaces in cluster flats and studios. A single commercial unit is incorporated at ground floor comprising Class A3 use.	The entire student accommodation is subject to a 5 year Nomination Agreement with Kings College London from the 2013/14 academic year.
		Freehold	The agreements are short term and our valuation has regard to the agreement and assumes a fully directly let scenario at expiry.
			The ground floor commercial unit is let to P&Q Plc, a Chinese restaurant operator for a 20 year term from 2004, expiring 2024 with no break options.
36	Lady Nicholson Court, Edinburgh	Purpose built student accommodation property comprising 43 studio flats. A	The accommodation is directly let to students on AST's.
		tenanted commercial unit is situated at ground floor fronting Potterow. Heritable	The ground floor commercial unit comprises a Class 1 supermarket use, let on institutional effective FRI terms to a local independent retailer for a 25-year term from December 2008 expiring 26 June 2033.
37	Mary Brancker House, London	Purpose built student accommodation property comprising 182 en-suite bed spaces in cluster flats and studios. Two commercial units are incorporated at ground floor comprising Class B1 use. Freehold.	The student accommodation is subject to a 25 year Nomination Agreement with the Royal Veterinary College from September 2005 with a mutual break option at year 15. The income guaranteed under the agreement is considered highly reversionary.
			Commercial Unit A is let to the Camden Society on a 20 year lease from December 2006, with a mutual break option in 2016.
			Commercial Unit B is occupied by ARHAG Housing Association on a 3 year lease from February 2013,

			subject to a break option in February 2015.
38	Panmure Court Edinburgh	Purpose built student accommodation property completed for the 2007/8 academic	The student accommodation is directly let to students on AST's.
		year and comprising 59 studio flats. Two commercial units are incorporated at ground floor comprising Class 2 office use, with one unit tenanted and the other. Heritable	Commercial unit A is let to Shaw Marketing & Design Ltd for 10 years from 6 July 2008, expiring July 2018. The tenant only break option has now passed.
			Commercial Unit B is vacant
39	Piccadilly Court, London	Purpose built student accommodation property comprising 209 bed spaces in cluster flats and studios. Two commercial units are incorporated at ground floor	The student accommodation is subject to a 5 year lease to Cambridge Education Group Limited expiring 31 August 2017.
		comprising Class A1 use. Freehold.	Retail Unit A is subject to a 15 year lease to Foodlink, expiring October 2021.
			Retail Unit B is subject to a 13 year lease to EMEI, expiring October 2021.
40	Portsburgh Court, Edinburgh	Purpose built student accommodation property completed for the 2006/7 academic year and comprising 229 en-suite bed spaces in cluster flats and studios. A single commercial unit is incorporated at ground	Part of the student accommodation is subject to a one year Nomination Agreement for 2013/14 with the University of Edinburgh for 125 classic en-suite bedrooms.
		floor which has been vacant since completion of the property.	The agreement is short term and our valuation also assumes a fully directly
		Heritable.	let scenario long term.
41	Rahere Court, London	Purpose-built student accommodation property completed for the 2007/08 academic year and comprising 186 en-suite bed spaces in cluster flats and studios.	The accommodation is directly let to students on AST's.
		Freehold.
42	Somerset Court, London	Purpose built student accommodation property comprising 168 en-suite bed spaces	The accommodation is directly let to students on AST's.
		in cluster flats and studios. The property comprises a primary school on the ground floor, with further academic use on the first floor. Our valuation relates to the student accommodation on the upper floors only.	Long leasehold for 125 years from 2006 at a peppercorn rent with the London Diocesan Board for Schools, with a small fixed ground rent.
		Long Leasehold.
43	Station Court, London	Purpose built student accommodation property completed for the 2004/05 academic year and comprising 227 en-suite bed spaces in cluster flats.	The accommodation is directly let to students on AST's.
		Freehold.
44	Woburn Place, London	Former office building constructed in the late 1930's. Converted internally for use as student accommodation, completing for the 2009/10 academic year. The property provides 455 bed spaces in a mixture of high quality room types, ranging from non en-suite	There are two short term nomination agreements at the property for 40 bed spaces to the Central University of Iowa until 2016/17, and a licence to New York University for 58 bed spaces until May 2014. We have had

		twin rooms, studios of varying sizes, to large premium one-bed apartments. Freehold.	regard to the agreements but have assumed a fully direct let operation long term.
	UCC - Held For Development
45	Havil Street, Phase 2, London	Comprises a small development site adjacent to the Company's operational property known as Bernard Myers House.	Vacant possession.
		We have made a Special Assumption of a full valid Planning Consent for student use is in place.
		Freehold.
	OCB - Held For Investment
46	Great Suffolk Street, London	Purpose built student accommodation property completed for the 2010/11 academic	The accommodation is directly let to students on AST's.
		year and comprising 233 en-suite bed spaces in cluster flats and studios. A single commercial unit is incorporated at ground floor comprising Class A1 use, with ancillary uses including A2, A3 and A5.	The commercial unit is let to Tesco Stores Limited for a 20 year term from November 2011, with a tenant only break option in 2021.
		Freehold.
47	Wedgwood Court, London	Purpose built student accommodation property completed for the 2010/11 academic	The accommodation is directly let to students on AST's.
		year and comprising 323 en-suite bed spaces in cluster flats and studios. Two commercial units are incorporated at ground floor comprising Class A1 use.	The commercial units are let to Sainsbury's Supermarkets Limited under one lease for a 15 year term from January 2011, with a tenant only
		Freehold.	break option in 2021. The smaller unit has been sub-let to Costa Coffee
48	Woodland Court, London	Purpose built student accommodation property completed for the 2010/11 academic year and comprising 573 en-suite bed spaces in cluster flats and studios. A single commercial unit is incorporated at ground floor comprising retail/cafe use and is currently vacant.	The property is subject to a part nomination agreement to the University of the Arts until 2015 for up to 238 beds. The remainder is direct let to students on ASTs.
		Long leasehold.

CBRE Limited Henrietta House Henrietta Place London W1G 0NB

Fax +44 (0)20 7182 2001 Switchboard +44 (0)20 7182 2000

Valuation Report Report Date 6 March 2014 Addressee The Directors of The UNITE Group plc The Core 40 St Thomas Street Bristol BS1 6JX J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT Jefferies International Limited Vintners Place 68 Upper Thames Street London EC4V 3BJ The Property Waverley House, Queen Charlotte Street, Bristol ("the Property") We understand that The UNITE Group plc ("the Company") owns 100% of the Property. Property Description Student accommodation. Instruction To value on the basis of Market Value the property as at the valuation date in accordance with the instructions of the Company dated 8 January 2014 confirmed in our Terms of Business dated 5 March

2014.

Valuation Date 31 December 2013.

• Capacity of Valuer External and an independent expert for the purposes of paragraph 130(i) of ESMA's recommendations for the consistent implementation of the European Commission's Regulation on Prospectuses No.809/2004 ("the ESMA Recommendations").
• Purpose of Valuation It is understood that our Valuation Report and Schedule (the "Valuation Report") is required for inclusion in an approved prospectus (the "Approved Prospectus") which is to be published by the Company in connection with the Firm Placing and Placing and Open Offer and Admission of the New Ordinary Shares to the Official List of the Financial Conduct Authority (the "FCA") and to trading on the London Stock Exchange's main market for listed securities (the "Purpose of this Report").
• Market Value £20,430,000 (TWENTY MILLION, FOUR HUNDRED AND THIRTY THOUSAND POUNDS) exclusive of VAT.

Our opinion of Market Value is based upon the Scope of Work and Valuation Assumptions attached, and has been primarily derived using comparable recent market transactions on arm's length terms.

We confirm that the valuation has been prepared in accordance with The RICS Valuation – Professional Standards (2012) ("the Red Book") together with the Listing Rules and Prospectus Rules published by the FCA and the ESMA Recommendations. Compliance with Valuation Standards and Applicable Law

We confirm that we have sufficient current local and national knowledge of the particular property market involved, and have the skills and understanding to undertake the valuation competently.

Where the knowledge and skill requirements of the Red Book have been met in aggregate by more than one valuer within CBRE Ltd, we confirm that a list of those valuers has been retained within the working papers, together with confirmation that each named valuer complies with the requirements of the Red Book.

Assumptions The property details on which the valuation is based are as set out in this report. We have made various assumptions as to tenure, letting, taxation, town planning, and the condition and repair of buildings and sites – including ground and groundwater contamination – as set out below.

If any of the information or assumptions on which the valuation is based are subsequently found to be incorrect, the valuation figure may also be incorrect and should be reconsidered.

None. Variation from Standard Assumptions

Valuer	The Property has been valued by a valuer, acting as an External Valuer, who is qualified for the purpose of the valuation in accordance with the Red Book.
Independence	The total fees, including the fee for this assignment, earned by CBRE Ltd (or other companies forming part of the same group of companies within the UK) from the Addressee (or other companies forming part of the same group of companies) is less than 5.0% of the total UK revenues. It is not anticipated that the situation will vary in the financial year to 31 December 2014.
Disclosure	CBRE Ltd has continuously been carrying out valuation instructions for the Company since 2004.
	CBRE Ltd has carried out Valuation, Agency and Professional services on behalf of the Company for 9 years.
Conflicts of Interest	It is confirmed that CBRE Limited ("CBRE") has previously valued the Company's properties including the Property. We do not consider that any conflict of interest arises for us in preparing the advice requested by the Company and the Company has confirmed this to us. We confirm that we do not have any material interest in the Company or any of the Properties.
Reliance	For the purposes of Prospectus Rule 5.5.3(R)(2)(f), we are responsible for our Valuation Report and we accept responsibility for the information contained in our Valuation Report and confirm that to the best of our knowledge (having taken all reasonable care to ensure that such is the case), the information contained in our Valuation Report is in accordance with the facts and contains no omissions likely to affect its import. Our Valuation Report complies with Rule 5.6.5G of the Prospectus Rules and paragraphs 128 to 130 of the ESMA Recommendations.
	We confirm that this Valuation Report may not be relied upon by any

party other than for the specific purpose to which if refers.

Publication We understand that this report is to be included within the Approved Prospectus. Other than this purpose neither the whole nor any part of our report nor any references thereto may be included in any published document, circular or statement nor published in any way without our prior written approval of the form and context in which it will appear.

Yours faithfully

Michael Brodtman Jane Asquith Executive Director Director RICS Registered Valuer RICS Registered Valuer For and on behalf of CBRE Ltd For and on behalf of CBRE Ltd

T: 020 7182 2674 T: 020 7182 2242 E: michael.brodtman@cbre.com E: jane.asquith@cbre.com

Valuation & Advisory Services T: 020 7182 2000 F: 020 7182 2273 W: www.cbre.co.uk Project Reference: Project George Report Version: 2013 GROUP CERT r3.dotm

Scope of Work & Sources of Information

Sources of Information	We have carried out our work based upon information supplied to us by The UNITE Group plc, as set out within this report, which we have assumed to be correct and comprehensive.
The Property	Our report contains a brief summary of the property details on which our valuation has been based.
Inspections	The Property was inspected on acquisition by the 'Company'. We have a three-yearly rolling programme of inspections and the most recent inspection of the Property took place on 2 December 2013. As instructed, we have not re-inspected the Property for the purpose of this valuation. The Company has confirmed that it is not aware of any material changes, including without limitation to the physical attributes of the Property, or the nature of its location, since the last inspection. We have assumed this advice to be correct. A schedule of most recent inspection dates is contained within our working papers and can be made available if required.
Areas	We have not measured the Property but have relied upon the floor areas provided.
Environmental Matters	We have not undertaken, nor are we aware of the content of, any environmental audit or other environmental investigation or soil survey which may have been carried out on the Property and which may draw attention to any contamination or the possibility of any such contamination.
	We have not carried out any investigations into the past or present uses of the Property, nor of any neighbouring land, in order to establish whether there is any potential for contamination and have therefore assumed that none exists.
Repair and Condition	We have not carried out building surveys, tested services, made independent site investigations, inspected woodwork, exposed parts of the structure which were covered, unexposed or inaccessible, nor arranged for any investigations to be carried out to determine whether or not any deleterious or hazardous materials or techniques have been used, or are present, in any part of the Property. We are unable, therefore, to give any assurance that the Property is free from defect.
Town Planning	We have not undertaken planning enquiries.
Titles, Tenures and Lettings	Details of title/tenure under which the Property is held and of lettings to which it is subject are as supplied to us. We have not generally examined nor had access to all the deeds, leases or other

documents relating thereto. Where information from deeds, leases or other documents is recorded in this report, it represents our understanding of the relevant documents. We should emphasise, however, that the interpretation of the documents of title (including relevant deeds, leases and planning consents) is the responsibility of your legal adviser.

We have not conducted credit enquiries on the financial status of any tenants. We have, however, reflected our general understanding of purchasers' likely perceptions of the financial status of tenants.

Valuation Assumptions

Capital Values	The valuation has been prepared on the basis of "Market Value", which is defined in the Red Book as:
	"The estimated amount for which an asset or liability should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion."
	The valuation represents the figure that would appear in a hypothetical contract of sale at the valuation date. No adjustment has been made to this figure for any expenses of acquisition or realisation - nor for taxation which might arise in the event of a disposal.
	No account has been taken of any inter-company leases or arrangements, nor of any mortgages, debentures or other charge.
	No account has been taken of the availability or otherwise of capital based Government or European Community grants.
Rental Values	Rental values indicated in our report are those which have been adopted by us as appropriate in assessing the capital value and are not necessarily appropriate for other purposes, nor do they necessarily accord with the definition of Market Rent.
The Property	Where appropriate we have regarded the shop fronts of retail and showroom accommodation as forming an integral part of the building.
	Landlord's fixtures such as lifts, escalators, central heating and other normal service installations have been treated as an integral part of the building and are included within our valuations.
	Process plant and machinery, tenants' fixtures and specialist trade fittings have been excluded from our valuations.
	All measurements, areas and ages quoted in our report are approximate.
Environmental Matters	In the absence of any information to the contrary, we have assumed that:
	(a) the Property is not contaminated and is not adversely affected by any existing or proposed environmental law;
	(b) any processes which are carried out on the Property which are regulated by environmental legislation are properly licensed by the appropriate authorities.

(c) the property possesses current Energy Performance Certificates (EPCs) as required under the Government's Energy Performance of Buildings Directive, and that they have an energy efficient standard of 'E', or better. We would draw your attention to the fact that the Energy Act 2011 is due to come into force in England and Wales no later than 1 April 2018 (although it may be earlier), and in Scotland, no earlier than 1 April 2015. From such date, it will be unlawful for landlords to rent out a residential or business premise unless they have reached a minimum energy efficient standard – most likely, 'E' – or carried out the maximum package of measures funded under the 'Green Deal' or the Energy Company Obligation (ECO). (d) the properties are either not subject to flooding risk or, if they are, that sufficient flood defences are in place and that appropriate building insurance could be obtained at a cost that would not materially affect the capital value. High voltage electrical supply equipment may exist within, or in close proximity of, the Property. The National Radiological Protection Board (NRPB) has advised that there may be a risk, in specified circumstances, to the health of certain categories of people. Public perception may, therefore, affect marketability and future value of the Property. Our valuation reflects our current understanding of the market and we have not made a discount to reflect the presence of this equipment. Repair and Condition In the absence of any information to the contrary, we have assumed that: (a) there are no abnormal ground conditions, nor archaeological remains, present which might adversely affect the current or future occupation, development or value of the Property; (b) the Property is free from rot, infestation, structural or latent defect; (c) no currently known deleterious or hazardous materials or suspect techniques have been used in the construction of, or subsequent alterations or additions to, the Property; and (d) the services, and any associated controls or software, are in working order and free from defect.

We have otherwise had regard to the age and apparent general condition of the Property. Comments made in the property details do not purport to express an opinion about, or advise upon, the condition of uninspected parts and should not be taken as making an implied representation or statement about such parts.

Title, Tenure, Lettings, Planning, Taxation, and Statutory & Local Authority requirements

Unless stated otherwise within this report, and in the absence of any information to the contrary, we have assumed that:

• (a) the Property possesses a good and marketable title free from any onerous or hampering restrictions or conditions;
• (b) the building has been erected either prior to planning control, or in accordance with planning permissions, and has the benefit of permanent planning consents or existing use rights for their current use;
• (c) the Property is not adversely affected by town planning or road proposals;
• (d) the building complies with all statutory and local authority requirements including building, fire and health and safety regulations;
• (e) only minor or inconsequential costs will be incurred if any modifications or alterations are necessary in order for occupiers of the Property to comply with the provisions of the Disability Discrimination Act 1995;
• (f) all rent reviews are upward only and are to be assessed by reference to full current market rents;
• (g) there are no tenant's improvements that will materially affect our opinion of the rent that would be obtained on review or renewal;
• (h) tenants will meet their obligations under their leases, and are responsible for insurance, payment of business rates, and all repairs, whether directly or by means of a service charge;
• (i) there are no user restrictions or other restrictive covenants in leases which would adversely affect value;
• (j) where more than 50% of the floorspace of the property is in residential use, the Landlord and Tenant Act 1987 (the "Act") gives certain rights to defined residential tenants to acquire the freehold/head leasehold interest in the property. Where this is applicable, we have assumed that necessary notices have been given to the residential tenants under the provisions of the Act, and that such tenants have elected not to acquire the freehold/head leasehold interest. Disposal on the open market is therefore unrestricted;
• (k) where appropriate, permission to assign the interest being valued herein would not be withheld by the landlord where required; and
• (l) vacant possession can be given of all accommodation which is unlet or is let on a service occupancy.

(m) Stamp Duty Land Tax (SDLT) will apply at the rate currently applicable in the UK. However, we would draw your attention to the fact that in Scotland, SDLT will be replaced by a Land and Buildings Transaction Tax (LABTT) with effect from 1 April 2015. In advance of the rates and tax bands being set for LABTT, we have assumed that they will be the same as for SDLT.

Property	Description	Tenure	Market Value
Waverley House, Queen Charlotte Street, Bristol	Waverley House comprises a multi-storey car park and student accommodation building. The car park is arranged over 6 storeys from ground floor level accessed from Queen Charlotte Street and provides 421 car parking spaces. The student accommodation is also accessed from the ground floor but is arranged over 8 floors above the southern part of the roof of the car park. UNITE carried out a comprehensive internal refurbishment of the student accommodation during summer 2011 and also added 9 studios from former vacant space to the existing 208 non en-suite rooms. The bedrooms are arranged into 5 - 8 bed cluster flats. The car park is let to National Car Parks Ltd until 24 March 2022. The student accommodation is subject to a nomination agreement to the University of Bristol for the 2013/2014 academic year.	Freehold	£20,430,000
			£20,430,000

CBRE Limited Henrietta House Henrietta Place London W1G 0NB

Fax +44 (0)20 7182 2001 Switchboard +44 (0)20 7182 2000

Valuation Report Report Date 6 March 2014 Addressee The Directors of The UNITE Group plc The Core 40 St Thomas Street Bristol BS1 6JX J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT Jefferies International Limited Vintners Place 68 Upper Thames Street London EC4V 3BJ The Properties The Properties comprising the UNITE UK Student Accommodation Fund, as listed in the Schedule of Capital Values set out below ("the Properties"). We understand that The UNITE Group plc ("the Company") owns a 16.3945% share of the Fund. Instruction To value on the basis of Market Value the Properties as at the valuation date in accordance with the instructions of the Company dated 8 January 2014 confirmed in our Terms of Business dated 5 March 2014. Valuation Date 31 December 2013

• Capacity of Valuer External and an independent expert for the purposes of paragraph 130(i) of ESMA's recommendations for the consistent implementation of the European Commission's Regulation on Prospectuses No.809/2004 ("the ESMA Recommendations").
• Purpose of Valuation It is understood that our Valuation Report and Schedule (the "Valuation Report") is required for inclusion in an approved prospectus (the "Approved Prospectus") which is to be published by the Company in connection with the Firm Placing and Placing and Open Offer and Admission of the New Ordinary Shares to the Official List of the Financial Conduct Authority (the "FCA") and to trading on the London Stock Exchange's main market for listed securities (the "Purpose of this Report").
• Market Value £1,354,480,000 (ONE BILLION, THREE HUNDRED AND FIFTY FOUR MILLION, FOUR HUNDRED AND EIGHTY THOUSAND POUNDS) exclusive of VAT, as shown in the Schedule of Capital Values set out below.

We have valued the Properties individually and no account has been taken of any discount or premium that may be negotiated in the market if all or part of the portfolio was to be marketed simultaneously, either in lots or as a whole.

Our opinion of Market Value is based upon the Scope of Work and Valuation Assumptions attached, and has been primarily derived using comparable recent market transactions on arm's length terms.

We confirm that the valuations have been prepared in accordance with The RICS Valuation – Professional Standards (2012) ("the Red Book") together with the Listing Rules and Prospectus Rules published by the FCA and the ESMA Recommendations. Compliance with Valuation Standards and Applicable Law

We confirm that we have sufficient current local and national knowledge of the particular property market involved, and have the skills and understanding to undertake the valuation competently.

We confirm that we have sufficient current local and national knowledge of the particular property market involved, and have the skills and understanding to undertake the valuations competently.

Where the knowledge and skill requirements of the Red Book have been met in aggregate by more than one valuer within CBRE Ltd, we confirm that a list of those valuers has been retained within the working papers, together with confirmation that each named valuer complies with the requirements of the Red Book.

Assumptions	The property details on which each valuation is based are as set out in this report. We have made various assumptions as to tenure, letting, taxation, town planning, and the condition and repair of buildings and sites – including ground and groundwater contamination – as set out below.
	If any of the information or assumptions on which the valuation is based are subsequently found to be incorrect, the valuation figures may also be incorrect and should be reconsidered.
Variation from Standard Assumptions	None.
Valuer	The Properties have been valued by a valuer, acting as an External Valuer, who is qualified for the purpose of the valuation in accordance with the Red Book.
Independence	The total fees, including the fee for this assignment, earned by CBRE Ltd (or other companies forming part of the same group of companies within the UK) from the Addressee (or other companies forming part of the same group of companies) is less than 5.0% of the total UK revenues. It is not anticipated that the situation will vary in the financial year to 31 December 2014.
Disclosure	CBRE Ltd has continuously been carrying out valuation instructions for the Company since 2004.
	CBRE Ltd has carried out Valuation, Agency and Professional services on behalf of the Company for 9 years.
Conflicts of Interest	It is confirmed that CBRE Limited ("CBRE") has previously valued the Company's properties including the Properties. We do not consider that any conflict of interest arises for us in preparing the advice requested by the Company and the Company has confirmed this to us. We confirm that we do not have any material interest in the Company or any of the Properties.

• Reliance For the purposes of Prospectus Rule 5.5.3(R)(2)(f), we are responsible for our Valuation Report and we accept responsibility for the information contained in our Valuation Report and confirm that to the best of our knowledge (having taken all reasonable care to ensure that such is the case), the information contained in our Valuation Report is in accordance with the facts and contains no omissions likely to affect its import. Our Valuation Report complies with Rule 5.6.5G of the Prospectus Rules and paragraphs 128 to 130 of the ESMA Recommendations. We confirm that this Valuation Report may not be relied upon by any party other than for the specific purpose to which if refers. Publication We understand that this report is to be included within the Approved
• Prospectus. Other than this purpose neither the whole nor any part of our report nor any references thereto may be included in any published document, circular or statement nor published in any way without our prior written approval of the form and context in which it will appear. W

Yours faithfully

Michael Brodtman Jane Asquith Executive Director Director RICS Registered Valuer RICS Registered Valuer

T: 020 7182 2674 T: 020 7182 2242 E: michael.brodtman@cbre.com E: jane.asquith@cbre.com

For and on behalf of CBRE Ltd For and on behalf of CBRE Ltd

Valuation & Advisory Services T: 020 7182 2000 F: 020 7182 2273 W: www.cbre.co.uk Project Reference: Project George Report Version: 2013 GROUP CERT r3.dotm

Schedule of Capital Values

Summary by Region
Address	Number of Properties	Tenure	Number of Beds	Market Value (£)
South East	7	These properties are held on Freehold titles	1,525	201.080,000
South West	14	Twelve properties are held on Freehold titles, one is held on a Long Leasehold title and one is held on a part Feehold/part Long Leasehold title.	3,278	223,050,000
East Midlands	7	Five properties are held on Freehold titles and two are held on Long Leasehold titles.	3,243	161,030,000
West Midlands	2	These properties are held on Long Leasehold titles.	1,084	54,000,000
North	9	Four properties are held on Freehold titles, two properties are held on Long Leasehold titles and three properties are held on part Freehold/part Long Leasehold titles.	3,991	204,170,000
North East	1	This property is held on a Freehold title.	527	31,530,000
North West	12	Eight properties are held on Freehold titles and four properties are held on Long Leasehold titles.	4,616	268,080,000
Scotland	10	Nine properties are held on Heritable or Freehold titles and one property is held on a Long Leasehold title.	3,460	211,540,000
Total	62		21,724	1,354,480,000

Summary by Tenure	Number of properties	Market Value (£)
Freehold/Feuhold	46	1,101,010,000
Leasehold	12	172,990,000
Freehold/Leasehold	4	80,480,000
TOTAL	62	1,354,480,000

Scope of Work & Sources of Information

Sources of Information	We have carried out our work based upon information supplied to us by The UNITE Group plc, as set out within this report, which we have assumed to be correct and comprehensive.
The Properties	Our report contains a brief summary of the property details on which our valuation has been based.
Inspections	The Properties were inspected on acquisition by The UNITE Student Accommodation Fund. We have a three-yearly rolling programme of inspections, with all of the Properties having been inspected during the last year. As instructed, we have not re-inspected all the Properties for the purpose of this valuation. With regard to those Properties which have not been subject to re-inspection, unless otherwise advised the Company has confirmed that it is not aware of any material changes to the Properties, including without limitation the physical attributes of the Properties, or the nature of their location, since the last inspection. We have assumed this advice to be correct. A schedule of most recent inspection dates is contained within our working papers and can be made available if required. We have carried out an inspection of each of the Properties between 4 March 2013 and 2 December 2013 in connection with this report.
Areas	We have measured many, but not all, of the commercial units at the Properties. For those Properties we have not measured we have relied upon areas provided by The UNITE Group Plc.
Environmental Matters	We have not undertaken, nor are we aware of the content of, any environmental audit or other environmental investigation or soil survey which may have been carried out on the Properties and which may draw attention to any contamination or the possibility of any such contamination.
	We have not carried out any investigations into the past or present uses of the Properties, nor of any neighbouring land, in order to establish whether there is any potential for contamination and have therefore assumed that none exists.
Repair and Condition	We have not carried out building surveys, tested services, made independent site investigations, inspected woodwork, exposed parts of the structure which were covered, unexposed or inaccessible, nor arranged for any investigations to be carried out to determine whether or not any deleterious or hazardous materials or techniques have been used, or are present, in any part of the Properties for the purpose of this Engagement. We are unable, therefore, to give any assurance that the Properties are free from defect.
Town Planning	We have not undertaken planning enquiries.

Titles, Tenures and Lettings Details of title/tenure under which the Properties are held and of lettings to which they are subject are as supplied to us. We have not generally examined nor had access to all the deeds, leases or other documents relating thereto. Where information from deeds, leases or other documents is recorded in this report, it represents our understanding of the relevant documents. We should emphasise, however, that the interpretation of the documents of title (including relevant deeds, leases and planning consents) is the responsibility of your legal adviser.

We have not conducted credit enquiries on the financial status of any tenants. We have, however, reflected our general understanding of purchasers' likely perceptions of the financial status of tenants.

Valuation Assumptions

Capital Values	Each valuation has been prepared on the basis of "Market Value", which is defined in the Red Book as:
	"The estimated amount for which an asset or liability should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion."
	The valuation represents the figure that would appear in a hypothetical contract of sale at the valuation date. No adjustment has been made to this figure for any expenses of acquisition or realisation - nor for taxation which might arise in the event of a disposal.
	No account has been taken of any inter-company leases or arrangements, nor of any mortgages, debentures or other charge.
	No account has been taken of the availability or otherwise of capital based Government or European Community grants.
Rental Values	Rental values indicated in our report are those which have been adopted by us as appropriate in assessing the capital value and are not necessarily appropriate for other purposes, nor do they necessarily accord with the definition of Market Rent.
The Property	Where appropriate we have regarded the shop fronts of retail and showroom accommodation as forming an integral part of the building.
	Landlord's fixtures such as lifts, escalators, central heating and other normal service installations have been treated as an integral part of the building and are included within our valuations.
	Process plant and machinery, tenants' fixtures and specialist trade fittings have been excluded from our valuations.
	All measurements, areas and ages quoted in our report are approximate.
Environmental Matters	In the absence of any information to the contrary, we have assumed that:
	(a) the Properties are not contaminated and are not adversely affected by any existing or proposed environmental law;

• (b) any processes which are carried out on the Properties which are regulated by environmental legislation are properly licensed by the appropriate authorities. (c) the properties possess current Energy Performance Certificates (EPCs) as required under the Government's Energy Performance of Buildings Directive, and that they have an energy efficient standard of 'E', or better. We would draw your attention to the fact that the Energy Act 2011 is due to come into force in England and Wales no later than 1 April 2018 (although it may be earlier), and in Scotland, no earlier than April 2015. From such date, it will be unlawful for landlords to rent out a residential or business premise unless they have reached a minimum energy efficient standard – most likely, 'E' – or carried out the maximum package of measures funded under the 'Green Deal' or the Energy Company Obligation (ECO). High voltage electrical supply equipment may exist within, or in close proximity of, the Properties. The National Radiological Protection Board (NRPB) has advised that there may be a risk, in specified circumstances, to the health of certain categories of people. Public perception may, therefore, affect marketability and future value of the property. Our valuation reflects our current understanding of the market and we have not made a discount to reflect the presence of this equipment. Repair and Condition In the absence of any information to the contrary, we have assumed that: (a) there are no abnormal ground conditions, nor archaeological
• remains, present which might adversely affect the current or future occupation, development or value of the Properties;
• (b) the Properties are free from rot, infestation, structural or latent defect;
• (c) no currently known deleterious or hazardous materials or suspect techniques have been used in the construction of, or subsequent alterations or additions to, the Properties; and
• (d) the services, and any associated controls or software, are in working order and free from defect.

We have otherwise had regard to the age and apparent general condition of the Properties. Comments made in the property details do not purport to express an opinion about, or advise upon, the condition of uninspected parts and should not be taken as making an implied representation or statement about such parts.

Title, Tenure, Lettings, Planning, Taxation and Statutory & Local Authority requirements

Unless stated otherwise within this report, and in the absence of - any information to the contrary, we have assumed that:

• (a) the Properties possess a good and marketable title free from any onerous or hampering restrictions or conditions;
• (b) all buildings have been erected either prior to planning control, or in accordance with planning permissions, and have the benefit of permanent planning consents or existing use rights for their current use;
• (c) the Properties are not adversely affected by town planning or road proposals;
• (d) all buildings comply with all statutory and local authority requirements including building, fire and health and safety regulations;
• (e) only minor or inconsequential costs will be incurred if any modifications or alterations are necessary in order for occupiers of each Property to comply with the provisions of the Disability Discrimination Act 1995;
• (f) all rent reviews are upward only and are to be assessed by reference to full current market rents;
• (g) there are no tenant's improvements that will materially affect our opinion of the rent that would be obtained on review or renewal;
• (h) tenants will meet their obligations under their leases, and are responsible for insurance, payment of business rates, and all repairs, whether directly or by means of a service charge;
• (i) there are no user restrictions or other restrictive covenants in leases which would adversely affect value;

• (j) where more than 50% of the floorspace of a property is in residential use, the Landlord and Tenant Act 1987 (the "Act") gives certain rights to defined residential tenants to acquire the freehold/head leasehold interest in the property. Where this is applicable, we have assumed that necessary notices have been given to the residential tenants under the provisions of the Act, and that such tenants have elected not to acquire the freehold/head leasehold interest. Disposal on the open market is therefore unrestricted;
• (k) where appropriate, permission to assign the interest being valued herein would not be withheld by the landlord where required; and
• (l) vacant possession can be given of all accommodation which is unlet or is let on a service occupancy.
• (m) Stamp Duty Land Tax (SDLT) will apply at the rate currently applicable in the UK. However, we would draw your attention to the fact that in Scotland, SDLT will be replaced by a Land and Buildings Transaction Tax (LABTT) with effect from 1 April 2015. In advance of the rates and tax bands being set for LABTT, we have assumed that they will be the same as for SDLT.

Part II Property Details

Property	Description	Interest Held
King Street Exchange, 600-604 King Street, Aberdeen	The property was purpose built in 2003 and provides 178 student bedrooms in ensuite cluster flats and studios. All of the rooms are let directly to students on AST's.	Freehold
Mealmarket Exchange, Mealmarket Street, Aberdeen	The property was purpose built in 2003 and provides 360 student bedrooms in ensuite cluster flats and studios. All of the rooms are let directly to students on AST's.	Freehold
The Old Fire Station, 256 King Street, Aberdeen	Part of the property comprises a converted former fire station and part of it was purpose built in 2002. It provides 273 student bedrooms in ensuite cluster flats and studios which are let directly to students on AST's.	Freehold
Spring Gardens, Spring Garden, Aberdeen	The property was purpose built in 1994 and internally refurbished in 2001. An additional new block with 20 bedrooms was built in 2011. There are a total of 512 student bedrooms in cluster flats and studios. The majority of rooms have shared bathrooms. All of the rooms are let directly to students on AST's.	Freehold
Charlton Court, Lower Bristol Road, Bath	The property was purpose built in 2009 and provides 330 student bedrooms in ensuite cluster flats and studios. 295 bedrooms are subject to a Nominations Agreement with Bath Spa University, 25 bedrooms are subject to a Nominations Agreement to the University of Bath and 10 are let directly to students on AST's.	Freehold
Londonderry House, 2 Newton Street, Birmingham	The property was completed in 2002 and comprises a converted 1970s office building providing 175 student bedrooms in ensuite cluster flats and studios. The student accommodation is located on the 9th-16th floors above a car park which is under separate ownership. The property is held on a lease expiring in September 2098.	Long Leasehold
The Heights, Staniforth Street, Birmingham	The property was built in two phases in 2004 and 2005. Phase I is a part converted period building and part purpose built, the later adjoining Phase II which is also purpose built. There are a total of 909 student bedrooms in ensuite cluster flats and studios. Part of the sub-basement is let to BT PLC on a lease expiring in March 2029. The property is held on three leases expiring in 2128 and 2129.	Long Leasehold

Property	Description	Interest Held
Blenheim Court, Marlborough Street, Bristol	The property was purpose built in 2005 and provides 231 student bedrooms in ensuite cluster flats and studios. The student accommodation is subject to a short term Nominations Agreement to the University of Bristol. A ground floor commercial unit is let to Tesco Stores Ltd for a term of 15 years from September 2005.	Freehold
Cherry Court, Barton Street, Bristol	The property was purpose built in 2004 and provides 176 student bedrooms in ensuite cluster flats. All of the bedrooms are subject to a short term Nominations Agreement to the University of Bristol.	Freehold
Favell House, Crow Lane, Bristol	The property comprises a converted former office building which was completed in 1997. There are a total of 234 student bedrooms with shared bathrooms in cluster flats. All of the bedrooms are subject to a short term Nominations Agreement to the University of Bristol. A ground floor commercial unit is let to One Stop Stores Ltd for a term of 25 years from September 1997. There is a mutual break option in September 2017. A second commercial unit is let to George Smythe and Rona Hellings with Bristol Primary Care Trust as Guarantor for a term of 10 years from August 2007. A third commercial unit is let to Aqua Italia Ltd for a term of 25 years from July 1998.	Freehold
Marketgate, Bond Street, Bristol	The property comprises a converted former office building which was completed in 2003. There are 490 student bedrooms in ensuite cluster flats and studios. All of the bedrooms are subject to a Nominations Agreement to the University of the West of England expiring at the end of the 2017/2018 academic year.	Freehold
Phoenix Court, Bond Street, Bristol	The property was purpose built in 2007 and provides 277 student bedrooms within ensuite cluster flats and studios. 92 bedrooms are let on a short term Nominations Agreement to the University of the West of England and 185 bedrooms are let directly to students on AST's. A ground floor commercial unit is let to the City Council of Bristol on a lease expiring in November 2018.	Freehold/Long Leasehold

Property	Description	Interest Held
The Rackhay, Queen Charlotte Street, Bristol	The property comprises a converted former office building which was completed in 1995 and refurbished in 2008. There are 115 student bedrooms within cluster flats with shared bathrooms. The bedrooms are subject to a short term Nominations Agreement to the University of Bristol. The tenant of the ground floor commercial unit is 'holding over' following expiry of its lease in September 2013.	Freehold
Chalmers Street, 36 Chalmers Street, Bristol	The property was purpose built in 2009 and provides 252 student bedrooms in cluster flats and studios. The bedrooms are either ensuite or are provided with one bathroom between two bedrooms. 102 bedrooms are subject to a short term Nominations Agreement to the University of Edinburgh. 12 bedrooms are subject to a short term Nominations Agreement to Edinburgh International College Ltd. 138 bedrooms are let directly to students on AST's.	Heritable (Freehold)
McDonald Road, 6 McDonald Road, Edinburgh	The property was purpose built in 2008 and provides 135 student bedrooms within ensuite cluster flats and studios. It is situated above a commercial unit which is under separate ownership. 8 bedrooms are subject to a short term Nominations Agreement to ELC Edinburgh and 91 bedrooms are subject to a Nominations Agreement to the University of Edinburgh. 36 bedrooms are let directly to students on AST's.	Long Leasehold
Exeter Trust House, Blackboy Road, Exeter	The property was purpose built in 2009 and provides 124 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are let directly to students on AST's.	Freehold
Northfields, New North Road, Exeter	The property was purpose built in 2008 and provides 190 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are let directly to students on AST's.	Freehold
Blackfriars I & II, Blackfriars, Glasgow	Blackfriars I was purpose built in 2005 and provides 298 student bedrooms within ensuite cluster flats and studios. Blackfriars II was purpose built in 2007 and provides 222 ensuite bedrooms. All of the bedrooms are let directly to students on AST's.	Freehold
Buchanan View, 35 Calgary Street, Glasgow	The property was purpose built in 2003 and provides 660 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are let directly to students on AST's.	Freehold

Property	Description	Interest Held
Gibson Street, Glasgow	The property was purpose built in 2009 and provides 93 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are let directly to students on AST's. A ground floor commercial unit is let to Greggs plc on a lease expiring in August 2024 and a tenant only break option in August 2019.	Freehold
Kelvin Court, 30 Yorkhill Street, Glasgow	The property was purpose built in 2012 and provides a total of 477 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are let directly to students on AST's.	Freehold
Firth Point, Firth Street, Huddersfield	The property was purpose built in 2002 and provides 200 student bedrooms within ensuite cluster flats. All of the bedrooms are let directly to students on AST's.	Freehold
Snow Island, Kingsmill Lane, Huddersfield	The property was purpose built in 2001 and provides 427 student bedrooms within ensuite cluster flats. All of the bedrooms are let directly to students on AST's. Part of the property is held on a lease expiring in May 2918.	Freehold/Long Leasehold
The Plaza, Claypit Lane, Leeds	The property was purpose built in 2006 and provides 964 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are let directly to students on AST's.	Freehold
Sky Plaza, Claypit Lane, Leeds	The property was purpose built in 2009 and provides 533 student bedrooms within ensuite cluster flats, studios and one bed flats. All of the bedrooms are let directly to students on AST's. A ground floor commercial unit is let on a lease for a term of 20 years from October 2009.	Freehold
The Tannery, Cavendish Street, Leeds	The property was purpose built in 2004 and provides 502 student bedrooms within ensuite cluster flats and studios. 439 bedrooms are subject to a Nominations Agreement to the University of Leeds for a term of 6 years from September 2011 with a break option after 4 years. 63 bedrooms are let directly to students on AST's. A ground floor commercial unit is let on a lease expiring in April 2020.	Freehold
Filbert Village, Lineker Road, Leicester	The property was purpose built in 2004 and provides 664 student bedrooms within ensuite cluster flats and studios. Part of the property is subject to a short term Nominations Agreement to De Montfort University and part of the property is let directly to students on AST's.	Freehold

Property	Description	Interest Held
Newarke Point, Newarke Close, Leicester	The property was purpose built in 2002 and provides a total of 658 student bedrooms within ensuite cluster flats and studios. There is a 25 year Nominations Agreement in place to De Montfort University over a minimum of 300 rooms from August 2002 with a mutual break option in year 15.	Freehold
St Martins House, King Street, Leicester	The property was purpose built in 2003 and provides 148 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are directly let to students on AST's. The property is held on a lease expiring in April 3001.	Long Leasehold
The Grange, Grange Lane, Leicester	The property was completed in 2003 and provides 220 student bedrooms within ensuite cluster flats and studios. 194 bedrooms are subject to a short term Nominations Agreement to De Montfort University. A ground floor commercial unit is let to Rileys on a lease expiring in February 2019.	Freehold
Apollo Court, Greek Street, Liverpool	The property was purpose built in 2003 and provides 221 student bedrooms within ensuite cluster flats and studios. The property is subject to a short term Nominations Agreement to Liverpool John Moores University. The property is held on a lease expiring in November 2129.	Long Leasehold
Arrad House, Cambridge Court, Liverpool	The property was purpose built in 2001 and provides 75 student bedrooms within ensuite cluster flats. All of the bedrooms are subject to a short term Nominations Agreement to Kaplan language school. A ground floor commercial unit is let to Mr Abdulwhab Shajirah for a term of 13.5 years from August 2009. A second commercial unit is let to Landmark Inns Ltd for a term of 25 years from July 2000. A third commercial unit is occupied by UNITE.	Freehold
Cambridge Court, Liverpool	The property was purpose built in 1999 and provides 474 student bedrooms within ensuite cluster flats. 209 bedrooms are let on a short term Nominations Agreement to Liverpool John Moores University. 265 bedrooms are let directly to students on AST's.	Freehold
Capital Gate, Daulby Street, Liverpool	The property was purpose built in 2004 and provides 430 student bedrooms in ensuite cluster flats and studios. All of the bedrooms are let directly to students on AST's. A ground floor commercial unit is let to DP Reality Ltd for a term of 19 years from August 2005. The property is held on a lease expiring in September 2153.	Long Leasehold

Property	Description	Interest Held
Cedar Court, Cambridge Court, Liverpool	The property was purpose built in 1999 and provides a total of 102 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are subject to a Nominations Agreement to Kaplan language school until the end of the 2018/2019 academic year.	Freehold
Grand Central, Skelhorne Street, Liverpool	The property was purpose built in 2004 and provides 1,236 student bedrooms within ensuite cluster flats and studios. 600 beds are subject to a short term Nominations Agreement to Liverpool John Moores University. 636 bedrooms are directly let to students on AST's. A ground floor commercial unit is let to Alfred Jones t/a Spar for a term of 15 years from September 2004. A second unit is let to Rileys Clubs Ltd for a term expiring in October 2021 with a tenant break in July 2017. A third unit is vacant.	Freehold
Larch House, Cambridge Court, Liverpool	The property was constructed in the 1970s and refurbished in 2000. There are a total of 104 student bedrooms. 99 of the bedrooms are provided with shared bathrooms and the remaining bedrooms are one bedroom flats. 56 bedrooms are subject to a short term Nominations Agreement to Liverpool John Moores University. 48 bedrooms are directly let to students on AST's. The property is held on a lease expiring in August 2074.	Long Leasehold
Lennon Studios, Cambridge Court, Liverpool	The property was converted from a former hospital building in 2001. There are a total of 248 student bedrooms within cluster flats and studios. Part of the property is subject to a short term Nominations Agreement to Liverpool John Moores University.	Freehold
Myrtle Court, Crown Street, Liverpool	Myrtle Court was purpose built in 2001 and provides 237 student bedrooms within ensuite cluster flats and studios. Part of the property is subject to a short term Nominations Agreement to Kaplan language school and part of the property is let directly to students on AST's.	Freehold

Property	Description	Interest Held
Blithehale Court, Witan Street, London	The property was purpose built in 2009 and provides 306 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are let directly to students on AST's. There are four commercial units. The first is let to Account 3 Women's Consultancy Service Limited for 25 years from May 2009. The second is let to Mr Kamran Butt for 25 years from March 2012. The third is let to Pizza Hut (UK) Ltd for a term of 20 years from October 2010. There is a break option in October 2020. A fourth small commercial unit is vacant.	Freehold
Emily Bowes Court, Lebus Street, Tottenham Hale, London	The property was purpose built in 2009 and provides 693 student bedrooms within ensuite cluster flats and studios. The bedrooms are let directly to students on AST's. We have included an end deduction of £330,000 to reflect 80% occupancy for the 2013/2014 academic year.	Freehold
Kirby Street, London	The property was purpose built in 2008 and provides 128 student studios. All of the studios are let directly to students on AST's. The ground and lower ground floors are let to Camden Enterprise Limited for a term of 15 years from October 2009.	Freehold
Pacific Court, Assembly Passage, London	The property was purpose built in 2008 and provides 142 student bedrooms within ensuite cluster flats and studios. 40 bedrooms are subject to short term Nominations Agreements to INTO. 102 bedrooms are directly let to students on AST's.	Freehold
Quantum Court, King David Lane, London	The property was purpose built in 2009 and provides 133 student bedrooms within ensuite cluster flats and studios. The bedrooms are directly let to students on AST's.	Freehold
Sunlight Apartments, Sunlight Square, London	The property provides 24 student bedrooms with shared bathrooms within cluster flats. It is situated within a gated residential development. The entire property is subject to a reservations agreement with EC English London Limited until September 2015.	Freehold
The Holt, Holt Drive, Loughborough	The property opened to students in 2004. The majority of the accommodation is purpose built but some is within a converted period residential building. There are a total of 262 student bedrooms within ensuite cluster flats and studios. There is an informal reservations agreement in place with the University of Loughborough. The property is held on a lease expiring in August 2103.	Long Leasehold

Property	Description	Interest Held
Kincardine Court, Kincardine Road, Manchester	The property was purpose built in 2001 and provides 229 student rooms within ensuite cluster flats. All of the bedrooms are directly let to students on AST's. The property is held on a lease expiring in 2125.	Long Leasehold
New Medlock House, Chester Street, Manchester	The property was purpose built in 2002 and provides 672 student bedrooms within ensuite cluster flats, cluster flats with shared bathrooms and studios. Two ground floor commercial units are let to a local covenant with leases expiring in 2022.	Freehold
Piccadilly Point, Berry Street, Manchester	The property was purpose built in 2007 and provides 588 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are directly let to students on AST's.	Freehold
Manor Bank, Pandon Bank, Newcastle-upon-Tyne	The property was purpose built in 2010 and provides 527 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are subject to a short term Nominations Agreement to the University of Northumbria.	Freehold
Riverside Point, Radmarsh Road, Nottingham	The property was purpose built in 2006 and provides 484 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are directly let to students on AST's.	Freehold
St Peters Court, Midland Way, Nottingham	The property was purpose built in two phases in 2002 and 2005. There are 808 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are directly let to students on AST's.	Freehold
Alexandra Works, Alexandra Road, Plymouth	The property was purpose built in 2004 and provides 246 student bedrooms within ensuite cluster flats. All of the bedrooms are subject to a short term Nominations Agreement to Plymouth University.	Freehold
Central Point, Royal Parade, Plymouth	The property consists of a former office building which was converted to student accommodation in 2002. There are a total of 235 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are directly let to students on AST's. The property is held on a lease expiring in June 2124.	Long Leasehold
Discovery House, Cobourg Street, Plymouth	The property was purpose built in 2004 and provides 281 student bedrooms within ensuite cluster flats and studios. All of the bedrooms are directly let to students on AST's. A ground floor commercial unit is let to Tesco Stores Ltd for a term of 20 years from July 2010 with a break option in July 2020. A second small commercial unit is vacant.	Freehold

Property	Description	Interest Held
St Teresa House, Beaumont Street, Plymouth	The property was converted to student accommodation in 2001 and provides 112 bedrooms within cluster flats and studios. The majority of rooms are provided with shared bathrooms. The property is subject to a short term Nominations Agreement to Plymouth University. A commercial unit is let to Tesco Stores Ltd for a term of 15 years from September 2008. A second small commercial unit is vacant.	Freehold
St Thomas Court, Exeter Street, Plymouth	The property was purpose built in 2004 and provides 237 student bedrooms within ensuite cluster flats and studios. The property is subject to a short term Nominations Agreement to Plymouth University.	Freehold
Crown House, Crown Street, Reading	The property was converted to student accommodation in 2008 and provides 99 bedrooms within ensuite cluster flats and studios. All of the bedrooms are directly let to students on AST's. A ground floor commercial unit is let to Tesco Stores Ltd for a term of 15 years from August 2008.	Freehold
Sheffield, Devonshire Courtyard	The property was purpose built in 2001 and provides 319 student bedrooms within ensuite cluster flats and studios. Part of the property is subject to a short term Nominations Agreement to Sheffield Hallam University and part is directly let to students on AST's. There is a ground floor public house which is under separate ownership. The property is held on a lease expiring in 2098 at a ground rent of £500 per annum.	Long Leasehold
Exchange Works, Arundel Street, Sheffield	The property was purpose built in 2002 and provides 437 student bedrooms within ensuite cluster flats and a studio. All of the bedrooms are directly let to students on AST's. A ground floor commercial unit is let to Turning Point (Services) Ltd. The Leasehold parts of the property are held on leases expiring in 2201 and 2638.	Freehold/Long Leasehold
Leadmill Point, Shoreham Street, Sheffield	The property was purpose built in 2002 and provides 446 student bedrooms within cluster flats with ensuite and shared bathrooms. The bedrooms are directly let to students on AST's. The Leasehold part of the property is held on a lease expiring in 2146.	Freehold/Long Leasehold
The Anvil, Clough Road, Sheffield	The property was purpose built in 2007 and provides 163 student bedrooms within ensuite cluster flats and studios. The bedrooms are directly let to students on AST's. The property is held on a lease expiring in November 2145.	Long Leasehold

CBRE Limited Henrietta House Henrietta Place London W1G 0NB

Fax +44 (0)20 7182 2001 Switchboard +44 (0)20 7182 2000

Valuation Report

Report Date	6 March 2014
Addressee	The Directors of The UNITE Group plc The Core 40 St Thomas Street Bristol BS1 6JX
	J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP
	Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT
	Jefferies International Limited Vintners Place 68 Upper Thames Street London EC4V 3BJ
The Properties	The Properties comprising the London Student Accommodation Vehicle (LSAV), as listed in the Schedule of Capital Values set out below ("the properties").
	We understand that The UNITE Group plc ("the Company") owns a 50% share of the Vehicle.
Instruction	To value on the basis of Market Value the Properties as at the valuation date in accordance with the instructions of the Company dated 8 January 2014 confirmed in our Terms of Business dated 5 March 2014.

Valuation Date 31 December 2013

• Capacity of Valuer External and an independent expert for the purposes of paragraph 130(i) of ESMA's recommendations for the consistent implementation of the European Commission's Regulation on Prospectuses No.809/2004 ("the ESMA Recommendations").
• Purpose of Valuation It is understood that our Valuation Report and Schedule (the "Valuation Report") is required for inclusion in an approved prospectus (the "Approved Prospectus") which is to be published by the Company in connection with the Firm Placing and Placing and Open Offer and Admission of the New Ordinary Shares to the Official List of the Financial Conduct Authority (the "FCA") and to trading on the London Stock Exchange's main market for listed securities (the "Purpose of this Report").
• Market Value £80,360,000 (EIGHTY MILLION, THREE HUNDRED AND SIXTY THOUSAND POUNDS) exclusive of VAT, as shown in the Schedule of Capital Values set out below.

We have valued the Properties individually and no account has been taken of any discount or premium that may be negotiated in the market if all or part of the portfolio was to be marketed simultaneously, either in lots or as a whole.

Our opinion of Market Value is based upon the Scope of Work and Valuation Assumptions attached, and has been primarily derived using comparable recent market transactions on arm's length terms.

We confirm that the valuations have been prepared in accordance with The RICS Valuation – Professional Standards (2012) ("the Red Book") together with the Listing Rules and Prospectus Rules published by the FCA and the ESMA Recommendations. Compliance with Valuation Standards and Applicable Law

We confirm that we have sufficient current local and national knowledge of the particular property market involved, and have the skills and understanding to undertake the valuations competently.

Where the knowledge and skill requirements of the Red Book have been met in aggregate by more than one valuer within CBRE Ltd, we confirm that a list of those valuers has been retained within the working papers, together with confirmation that each named valuer complies with the requirements of the Red Book.

Assumptions	The property details on which each valuation is based are as set out in this report. We have made various assumptions as to tenure, letting, taxation, town planning, and the condition and repair of buildings and sites – including ground and groundwater contamination – as set out below.
	If any of the information or assumptions on which the valuation is based are subsequently found to be incorrect, the valuation figures may also be incorrect and should be reconsidered.
Variation from Standard Assumptions	None.
Valuer	The Properties have been valued by a valuer, acting as an External Valuer who is qualified for the purpose of the valuation in accordance with the Red Book
Independence	The total fees, including the fee for this assignment, earned by CBRE Ltd (or other companies forming part of the same group of companies within the UK) from the Addressee (or other companies forming part of the same group of companies) is less than 5.0% of the total UK revenues. It is not anticipated that the situation will vary in the financial year to 31 December 2014.
Disclosure	CBRE Ltd has continuously been carrying out valuation instructions for the Company since 2004.
	CBRE Ltd has carried out Valuation, Agency and Professional services on behalf of the Company for 9 years.
Conflicts of Interest	It is confirmed that CBRE Limited ("CBRE") has previously valued the Company's properties including the Properties. We do not consider that any conflict of interest arises for us in preparing the advice requested by the Company and the Company has confirmed this to us. We confirm that we do not have any material interest in the Company or any of the Properties.

Reliance For the purposes of Prospectus Rule 5.5.3(R)(2)(f), we are responsible for our Valuation Report and we accept responsibility for the information contained in our Valuation Report and confirm that to the best of our knowledge (having taken all reasonable care to ensure that such is the case), the information contained in our Valuation Report is in accordance with the facts and contains no omissions likely to affect its import. Our Valuation Report complies with Rule 5.6.5G of the Prospectus Rules and paragraphs 128 to 130 of the ESMA Recommendations.

We confirm that this Valuation Report may not be relied upon by any party other than for the specific purpose to which if refers.

Publication We understand that this report is to be included within the Approved Prospectus. Other than this purpose neither the whole nor any part of our report nor any references thereto may be included in any published document, circular or statement nor published in any way without our prior written approval of the form and context in which it will appear. W

Yours faithfully

Michael Brodtman Jane Asquith Executive Director Director RICS Registered Valuer RICS Registered Valuer

T: 020 7182 2674 T: 020 7182 2242 E: michael.brodtman@cbre.com E: jane.asquith@cbre.com

For and on behalf of CBRE Ltd For and on behalf of CBRE Ltd

Valuation & Advisory Services T: 020 7182 2000 F: 020 7182 2273 W: www.cbre.co.uk Project Reference: Project George Report Version: 2013 GROUP CERT r3.dotm

Schedule of Capital Values

Investments
Address	Number of Properties	Tenure	Number of Beds	Market Value (£)
North Lodge Lebus Street, London	1	This property is held on a Freehold title.	528	50,760,000
Total	1		528	50,760,000

Developments
Address	Number of Properties	Tenure	Number of Beds	Market Value (£)
Land at Angel Lane Bridge, Stratford, London	1	This property is held on a Leasehold title.	759	29,600,000
Total	1		759	29,600,000

Summary by Tenure
Address	Freehold/ Feuhold/ Heritable £	Long Leasehold £	Freehold/ Long Leasehold £	Market Value (£)
North Lodge, Lebus Street, London	50,760,000			50,760,000
Land at Angel Lane Bridge, Stratford, London		29,600,000		29,600,000
Total				80,360,000

Scope of Work & Sources of Information

Sources of Information	We have carried out our work based upon information supplied to us by The UNITE Group plc, as set out within this report, which we have assumed to be correct and comprehensive.
The Properties	Our report contains a brief summary of the property details on which our valuation has been based.
Inspections	The Properties were inspected on acquisition by the London Student Accommodation Vehicle. We have a three-yearly rolling programme of inspections, with all of the Properties having been inspected during the last year. As instructed, we have not re-inspected all the Properties for the purpose of this valuation. With regard to those Properties which have not been subject to re-inspection, unless otherwise advised the Company has confirmed that it is not aware of any material changes to the Properties, including without limitation the physical attributes of the Properties, or the nature of their location, since the last inspection. We have assumed this advice to be correct. A schedule of most recent inspection dates is contained within our working papers and can be made available if required. We have carried out an inspection of each of the Properties between 17 September 2013 and 7 November 2013 in connection with this report.
Areas	We have not measured the Properties but have relied upon the floor areas provided.
Environmental Matters	We have not undertaken, nor are we aware of the content of, any environmental audit or other environmental investigation or soil survey which may have been carried out on the Properties and which may draw attention to any contamination or the possibility of any such contamination.
	We have not carried out any investigations into the past or present uses of the Properties, nor of any neighbouring land, in order to establish whether there is any potential for contamination and have therefore assumed that none exists.
Repair and Condition	We have not carried out building surveys, tested services, made independent site investigations, inspected woodwork, exposed parts of the structure which were covered, unexposed or inaccessible, nor arranged for any investigations to be carried out to determine whether or not any deleterious or hazardous materials or techniques have been used, or are present, in any part of the Properties for the purpose of this Engagement. We are unable, therefore, to give any assurance that the Properties are free from defect.
Town Planning	We have not undertaken planning enquiries.

Titles, Tenures and Lettings Details of title/tenure under which the Properties are held and of lettings to which they are subject are as supplied to us. We have not generally examined nor had access to all the deeds, leases or other documents relating thereto. Where information from deeds, leases or other documents is recorded in this report, it represents our understanding of the relevant documents. We should emphasise, however, that the interpretation of the documents of title (including relevant deeds, leases and planning consents) is the responsibility of your legal adviser.

We have not conducted credit enquiries on the financial status of any tenants. We have, however, reflected our general understanding of purchasers' likely perceptions of the financial status of tenants.

Valuation Assumptions

Capital Values	Each valuation has been prepared on the basis of "Market Value", which is defined in the Red Book as:
	"The estimated amount for which an asset or liability should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion."
	The valuation represents the figure that would appear in a hypothetical contract of sale at the valuation date. No adjustment has been made to this figure for any expenses of acquisition or realisation - nor for taxation which might arise in the event of a disposal.
	No account has been taken of any inter-company leases or arrangements, nor of any mortgages, debentures or other charge.
	No account has been taken of the availability or otherwise of capital based Government or European Community grants.
Rental Values	Rental values indicated in our report are those which have been adopted by us as appropriate in assessing the capital value and are not necessarily appropriate for other purposes, nor do they necessarily accord with the definition of Market Rent.
The Property	Where appropriate we have regarded the shop fronts of retail and showroom accommodation as forming an integral part of the building.
	Landlord's fixtures such as lifts, escalators, central heating and other normal service installations have been treated as an integral part of the building and are included within our valuations.
	Process plant and machinery, tenants' fixtures and specialist trade fittings have been excluded from our valuations.
	All measurements, areas and ages quoted in our report are approximate.
Environmental Matters	In the absence of any information to the contrary, we have assumed that:
	(a) the Properties are not contaminated and are not adversely affected by any existing or proposed environmental law;
	(b) any processes which are carried out on the Properties which

are regulated by environmental legislation are properly licensed by the appropriate authorities.

(c) the properties possess current Energy Performance Certificates (EPCs) as required under the Government's Energy Performance of Buildings Directive, and that they have an energy efficient standard of 'E', or better. We would draw your attention to the fact that the Energy Act 2011 is due to come into force in England and Wales no later than 1 April 2018 (although it may be earlier), and in Scotland, no earlier than April 2015. From such date, it will be unlawful for landlords to rent out a residential or business premise unless they have reached a minimum energy efficient standard – most likely, 'E' – or carried out the maximum package of measures funded under the 'Green Deal' or the Energy Company Obligation (ECO).

High voltage electrical supply equipment may exist within, or in close proximity of, the Properties. The National Radiological Protection Board (NRPB) has advised that there may be a risk, in specified circumstances, to the health of certain categories of people. Public perception may, therefore, affect marketability and future value of the property. Our valuation reflects our current understanding of the market and we have not made a discount to reflect the presence of this equipment.

Repair and Condition In the absence of any information to the contrary, we have assumed that:

• (a) there are no abnormal ground conditions, nor archaeological remains, present which might adversely affect the current or future occupation, development or value of the Properties;
• (b) the Properties are free from rot, infestation, structural or latent defect;
• (c) no currently known deleterious or hazardous materials or suspect techniques have been used in the construction of, or subsequent alterations or additions to, the Properties; and
• (d) the services, and any associated controls or software, are in working order and free from defect.

We have otherwise had regard to the age and apparent general

condition of the Properties. Comments made in the property details do not purport to express an opinion about, or advise upon, the condition of uninspected parts and should not be taken as making an implied representation or statement about such parts.

Title, Tenure, Lettings, Planning, Taxation and Statutory & Local Authority requirements

Unless stated otherwise within this report, and in the absence of any information to the contrary, we have assumed that:

• (a) the Properties possess a good and marketable title free from requirements any onerous or hampering restrictions or conditions;
• (b) all buildings have been erected either prior to planning control, or in accordance with planning permissions, and have the benefit of permanent planning consents or existing use rights for their current use;
• (c) the Properties are not adversely affected by town planning or road proposals;
• (d) all buildings comply with all statutory and local authority requirements including building, fire and health and safety regulations;
• (e) only minor or inconsequential costs will be incurred if any modifications or alterations are necessary in order for occupiers of each Property to comply with the provisions of the Disability Discrimination Act 1995;
• (f) all rent reviews are upward only and are to be assessed by reference to full current market rents;
• (g) there are no tenant's improvements that will materially affect our opinion of the rent that would be obtained on review or renewal;
• (h) tenants will meet their obligations under their leases, and are responsible for insurance, payment of business rates, and all repairs, whether directly or by means of a service charge;
• (i) there are no user restrictions or other restrictive covenants in leases which would adversely affect value;

• (j) where more than 50% of the floorspace of a property is in residential use, the Landlord and Tenant Act 1987 (the "Act") gives certain rights to defined residential tenants to acquire the freehold/head leasehold interest in the property. Where this is applicable, we have assumed that necessary notices have been given to the residential tenants under the provisions of the Act, and that such tenants have elected not to acquire the freehold/head leasehold interest. Disposal on the open market is therefore unrestricted;
• (k) where appropriate, permission to assign the interest being valued herein would not be withheld by the landlord where required; and
• (l) vacant possession can be given of all accommodation which is unlet or is let on a service occupancy.
• (m) Stamp Duty Land Tax (SDLT) will apply at the rate currently applicable in the UK. However, we would draw your attention to the fact that in Scotland, SDLT will be replaced by a Land and Buildings Transaction Tax (LABTT) with effect from 1 April 2015. In advance of the rates and tax bands being set for LABTT, we have assumed that they will be the same as for SDLT.

Part II Property Details

LSAV

Property	Description	Interest Held
North Lodge, Lebus Street, Tottenham Hale, London	The property was completed in 2012 and provides 528 student bedrooms within ensuite cluster flats. The bedrooms are directly let to students on AST's	Freehold
Land at Angel Lane Bridge, Stratford, London	The site is located approximately 6 miles east of Central London in Stratford, within the London Borough of Newham. Full planning permission has been granted for a student accommodation led scheme comprising 759 single en-suite bedspaces and 903 m2 of commercial space within use classes B1, A1, A3, D1 and D2. A restrictive covenant in the lease prevents the commercial unit from retail use within Class A1. Construction has started and the development is scheduled to be completed in time for the start of the 2015/2016 academic year. The property is held on a 250 year lease.	Long Leasehold

T The Directors of The UNITE Group plc The Core 40 St. Thomas Street Bristol BS1 6JX

J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP

Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT

Jefferies International Limited Vintners Place 68 Upper Thames Street London EC4V 3BJ

6 March 2014

Dear Sirs

Properties comprising part of The UNITE Group plc's ("the Company") investment portfolio

Instructions	1.1	In accordance with the instructions of the Company, we report our opinion of the Mark Value of the freehold, feuhold and leasehold interests of the properties listed in th Schedule (the "Properties") being properties held as at 6 March 2014.
Purpose of valuation	1.2	It is understood that our Valuation Report and Schedule (the "Valuation Report") required for inclusion in an approved prospectus (the "Approved Prospectus") which to be published by the Company in connection with the Firm Placing and Placing an Open Offer and Admission of new Ordinary Shares to the Official List of the Financi Conduct Authority (the "FCA") and to trading on the London Stock Exchange's ma market for listed securities (the "Purpose of this Report").
Client	1.3	Our client for this instruction is The Company, J.P. Morgan Securities plc, Num Securities Limited and Jefferies International Limited.
Valuation standards V	1.4	We confirm that these valuations have been undertaken in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation - Professional Standard 2014 Global & UK edition ("the Red Book") including the International Valuatio Standards issued by the Royal Institution of Chartered Surveyors (the "RICS").

55 Baker Street London W1U 8AN T 020 7629 8171 F 020 7493 4114 www.knightfrank.com

1.5 It is confirmed that we have previously valued the Company's properties. We do n consider that any conflict of interest arises for us in preparing the advice requested b the Company and the Company has confirmed this to us. We confirm that we do n have any material interest in the Company or any of the Properties. Conflict of interest

The proportion of total fees payable by the Company to the total fee income of Knig Frank LLP was less than 5 per cent. It is not anticipated the at this situation will vary the year to 31 December 2014.

• If our 1.6 We are acting as an External Valuer, as defined in the Red Book and an independe expert for the purposes of paragraph 130(i) of ESMA's recommendations for th consistent implementation of the European Commission's Regulation on Prospectuse No.809/2004 ("the ESMA Recommendations").
• V 1.7 Other than the Approved Prospectus, neither the whole nor any part of this valuatio nor any reference thereto may be included in any published document, circular statement nor published in any way without our prior written approval of the form context in which it may appear. If our opinion of value is disclosed to persons other tha the addressee of this report, the basis of valuation should be stated. Disclosure & publication
• 1.8 For the purposes of Prospectus Rule 5.5.3(R)(2)(f), we are responsible for o Valuation Report and we accept responsibility for the information contained in o Valuation Report and confirm that to the best of our knowledge (having taken a reasonable care to ensure that such is the case), the information contained in o Valuation Report is in accordance with the facts and contains no omissions likely affect its import.\

Our Valuation Report complies with Rule 5.6.5G of the Prospectus Rules an paragraphs 128 to 130 of the ESMA Recommendations.

• Expertise 1.9 The valuer, on behalf of Knight Frank LLP, with the responsibility for this report is Ne Armstrong MRICS, RICS Registered Valuer. We confirm that the valuer meets th requirements of RICS Valuation – Professional Standards VS 1.6, having sufficie current knowledge of the particular market and the skills and understanding undertake the valuation competently.
• Vetting 1.10 This report has been vetted as part of Knight Frank LLP's quality assuranc procedures.

Scope of enquiries & investigations

• Inspection 1.11 We are instructed to carry out internal and external inspections of the properties. O inspections of the properties took place over the last two years and we confirm th we inspect on an annual rolling basis, the properties have not been re-inspected the year end. Our most recent inspections of the properties took place betwee October 2013 and December 2013.
• Investigations 1.12 The extent of enquiries/investigations made is set out in our General Terms Business. In carrying out this instruction we have undertaken verbal / web base enquiries referred to in the relevant sections of this report. We have relied upon th information as being accurate and complete.

Information	1.13	In this report we have been provided with information by The UNITE Group plc, i provided advisors and other third parties. We have relied upon this information as bein materially correct in all aspects.
	1.14	In the absence of any documents or information provided, we have had to rely sole upon our own enquiries. Any assumptions resulting from the lack of information a also set out in the relevant section of this report.
Valuation bases
Market Value	1.15	In accordance with your instructions the properties have been valued on the basis Market Value defined in the Standards as:-
		"The estimated amount for which an asset or liability should exchange on th valuation date between a willing buyer and a willing seller in an arm's-leng transaction after proper marketing and where the parties had each acte knowledgeably, prudently and without compulsion".
Date of valuation	1 1.16	The effective date of valuation is 31 December 2013.
Market Value
Market Value	1.17	We are of the opinion that the Aggregate Market Value of the freehold, feuhold an leasehold interests in the properties, as at (Valuation Date) is:
		Three Hundred and Six Million, One Hundred and Seventy Thousand Pounds)	(£306,170,000)
		This can be apportioned between different property tenures as follows:
		TENURE Freehold Leasehold Total	NUMBER OF PROPERTIES 6 1 7	MARKET VALUE £297,130,000 £9,040,000 £306,170,000
Portfolio valuation	1.18	In a valuation of a property portfolio, we have valued the individual properties valuatio separately and we have assumed that the individual properties have been markete in an orderly way.
Valuation Procedures and	1.19	Our General Terms of Business set out the scope of our onsite inspection an investigations.

Assumptions

Our valuations assume that the properties have good and marketable titles and a free of any undisclosed onerous burdens, outgoings or restrictions. We have n seen planning consents and, except where advised to the contrary, have assume that the properties have been erected and are being occupied and used accordance with all requisite consents and that there are no outstanding statuto notices.

As stated in our General Terms of Business for Valuations, we do not undertak searches or inspections of any kind (including web based searches) for title or pric paid information in any publicly available land registers, including the Land Regist for England & Wales, Registers of Scotland and Land & Property Services Northern Ireland.

We have not read documents of title or leases and, for the purpose of our valuation have accepted the details of tenure and all other relevant information with which w have been supplied by the Company.

In accordance with the General Terms of Business, no tests have been undertake on any of the services. We have assumed for the purposes of this valuation th mains, water, electricity, drainage and telecommunications are all available to th subject properties. Where applicable, some properties are also connected to main gas supplies.

During our limited inspection we did not i We have assumed that it i At the date of inspection, the b As stated in the General Terms of Business attached, we have not undertaken building or site survey of the property. During our limited inspection we did n inspect any inaccessible areas. We are unable to confirm whether the property free from urgent or significant defects or items of disrepair. We have assumed that is in sound order and free from structural faults, rot, infestation or other defects, an that the services are in a satisfactory condition. At the date of inspection, th building appeared to be in a generally reasonable state of repair commensurate wi its age and use. No urgent or significant defects or items of disrepair were note which would be likely to give rise to substantial expenditure in the foreseeable futu or which fall outside the scope of the normal annual maintenance programme.

No urgent or significant defects or items of disrepair were noted w Our valuations assume the buildings contain no deleterious materials and that th sites are unaffected by adverse soil conditions, except where we have been notifie to the contrary.

We have not carried out any investigation into past or present uses of either th properties or any neighbouring land to establish whether there is any potential f contamination from these uses or sites to the subject properties. Unless we hav been provided with information to the contrary, we have assumed that the propertie are not, nor are likely to be, affected by land contamination and that there are n ground conditions which would affect the present or future uses of the properties.

Our valuations assume that the properties would, in all respects, be insurable again all usual risks including terrorism, flooding and rising water table at norma commercially acceptable premiums.

Yours faithfully,

Neil Armstrong MRICS Luke Kemp MRICS Partner, Student Property Associate, Student Property For and on behalf of Knight Frank LLP For and on behalf of Knight Frank LLP

Schedule of Investment Properties

Property Sherren House, S Nicholas Road, London, E1 4AF	Description The property provides 256 student bedspaces. Freehold The student accommodation is let on Assured Shorthold Tenancies.
East Central House, 115 Lever Street, London, EC1V 3RH	The property provides 245 student bed spaces. Freehold There are 100 bed spaces that are subject to a one year nominations agreement with City University which expires in September 2014. The remaining bed spaces are let on Assured Shorthold Tenancies.
Transom House, Victoria Street, Bristol, BS1 6AH	The property comprises a converted office property to provide 137 bedrooms of student accommodation and eight ground floor retail units. The property is held leasehold on a 125 year lease from the Bristol Corporation from November 2012 with a geared ground rent. The bed spaces are let on Assured Shorthold Tenancies. The retail units are multi let.
Callice Court, 155 Far Gosford Street, Coventry CV1 5DJ	The property provides 666 student bed spaces. An additional 69 are being developed within the boundary of the property to be ready for the 2014/15 academic year. Freehold The bed spaces are let on Assured Shorthold Tenancies.
Kendrick Hall, 4 Crown Place, Reading, RG1 5AE	The property provides 604 student bed spaces. Freehold The bed spaces are let on Assured Shorthold Tenancies.
Thurso Street, 1-3 Thurso Street, Glasgow, G11 6PE	The property provides 405 student bed spaces. F Feuhold The bed spaces are let on Assured Shorthold Tenancies.
Moonraker Point, Pocock Street, 1 London SE1 0FN	The property provides 674 student bed spaces and nine commercial units. F Freehold The student bed spaces are occupied by students from Kings College London under a nominations agreement. Four of the commercial units are let on leases to a total of two tenants and the remainder are vacant.

PART X

TAX CONSIDERATIONS

PART A: UNITED KINGDOM

General

The following comments do not constitute tax advice and are intended only as a guide to current United Kingdom law and HMRC's published practice (which are both subject to change at any time, possibly with retrospective effect). They relate only to certain limited aspects of the United Kingdom taxation treatment of Shareholders and are intended to apply only to Shareholders who are resident in the United Kingdom for United Kingdom tax purposes and who are and will be the absolute beneficial owners of their Ordinary Shares and who hold, and will hold, them as investments (and not as securities to be realised in the course of a trade). They may not apply to certain Shareholders, such as dealers in securities, insurance companies and collective investment schemes, Shareholders who are exempt from taxation and Shareholders who have (or are deemed to have) acquired their Ordinary Shares by virtue of an office or employment. Such persons may be subject to special rules. The position may be different for future transactions and may alter between the date of this document and the implementation of the Issue.

Shareholders who are in any doubt as to their tax position or who are subject to tax in a jurisdiction other than the United Kingdom should consult an appropriate professional adviser.

Dividend income

General

There is no United Kingdom withholding tax on dividend paid by the Company.

Individual Shareholders within the charge to United Kingdom income tax

When the Company pays a dividend to a Shareholder who is an individual resident (for tax purposes) in the United Kingdom, the Shareholder will be entitled to a tax credit equal to one-ninth of the dividend received. The dividend received plus the related tax credit (the "gross dividend") will be part of the Shareholder's total income for United Kingdom income tax purposes and will, generally, be regarded as the top slice of that income. However, in calculating the Shareholder's liability to income tax in respect of the gross dividend, the tax credit (which equates to 10 per cent. of the gross dividend) is set off against the tax chargeable on the gross dividend.

Basic rate taxpayers

In the case of a Shareholder who is liable to income tax at the basic rate only, the Shareholder will be subject to tax on the gross dividend at the rate of 10 per cent. The tax credit will, in consequence, satisfy in full the Shareholder's liability to income tax on the gross dividend.

Higher rate taxpayers

To the extent that, after taking into account the Shareholder's other taxable income, the gross dividend falls above the threshold for the higher rate of income tax but below the threshold for the additional rate of income tax, the Shareholder will be subject to tax on the gross dividend at the rate of 32.5 per cent. This means that the tax credit will satisfy only part of the Shareholder's liability to income tax on the gross dividend, so that to that extent the Shareholder will have to account for income tax equal to 22.5 per cent. of the gross dividend (which equates to 25 per cent. of the dividend received). For example, assuming the entire gross dividend falls above the higher rate threshold and below the additional rate threshold, a dividend of £90 from the Company would represent a gross dividend of £100 (after the addition of the tax credit of £10) and the Shareholder would be required to account for income tax of £22.50 on the dividend, being £32.50 (i.e. 32.5 per cent. of £100) less £10 (the amount of the tax credit).

Additional rate taxpayers

To the extent that, after taking into account the Shareholder's other taxable income, the gross dividend falls above the threshold for the additional rate of income tax, the Shareholder will be subject to tax on the gross dividend at the rate of 37.5 per cent. This means that the tax credit will satisfy only part of the Shareholder's liability to income tax on the gross dividend, so that to that extent the Shareholder will have to account for income tax equal to 27.5 per cent. of the gross dividend (which equates to approximately 30.6 per cent. of the dividend received). For example, assuming the entire gross dividend falls above the additional rate threshold, a dividend of £90 from the Company would represent a gross dividend of £100 (after the addition of the tax credit of £10) and the Shareholder would be required to account for income tax of £27.50 on the dividend, being £37.50 (i.e. 37.5 per cent. of £100) less £10 (the amount of the tax credit).

Corporate Shareholders within the charge to United Kingdom corporation tax

Shareholders within the charge to United Kingdom corporation tax which are "small companies" (for the purposes of United Kingdom taxation of dividends) should not generally expect to be subject to tax on dividends from the Company.

Other Shareholders within the charge to United Kingdom corporation tax will not be subject to tax on dividends from the Company so long as the dividends fall within an exempt class and certain conditions are met. In general, dividends paid to a United Kingdom corporate shareholder holding less than 10 per cent. of the issued share capital of the payer (or any class of that share capital in respect of which the dividend is paid) is an example of a dividend that falls within an exempt class. Shareholders will need to ensure that they satisfy the requirements of any exempt class before treating any dividend as exempt, and seek appropriate professional advice where necessary.

No payment of tax credit

A Shareholder (whether an individual or a company) who is not liable to tax on dividends from the Company will not be entitled to claim payment of the tax credit in respect of those dividends.

Non-residents

The right of a Shareholder who is not resident (for tax purposes) in the United Kingdom to a tax credit in respect of a dividend and to claim payment from HMRC of any part of that tax credit will depend on the existence and terms of any double tax treaty between the United Kingdom and the country in which the Shareholder is resident for tax purposes. A Shareholder resident outside the United Kingdom (for tax purposes) may also be subject to foreign taxation on dividend income under local law. Shareholders who are not resident in the United Kingdom (for tax purposes) should consult their own tax adviser concerning their tax liabilities on dividends received from the Company.

Taxation of chargeable gains

Any future disposal of the Ordinary Shares should be treated as a disposal of those shares for United Kingdom tax purposes. This may, subject to the Shareholder's individual circumstances and any available exemption or relief, give rise to a chargeable gain (or allowable loss) for the purposes of capital gains tax.

The amount of capital gains tax, if any, payable by a Shareholder (on any disposal of Ordinary Shares) who is an individual will depend on his or her own personal tax position. No tax will be payable on any gain realised if the amount of the net chargeable gains realised by a Shareholder, when aggregated with other net gains realised by that Shareholder in the year of assessment (and after taking account of allowable losses), does not exceed the annual exemption (£10,900 for 2013/ 2014). Broadly, any gains in excess of this amount will be taxed at a rate of 18 per cent. for a taxpayer paying tax at the basic rate and 28 per cent. for a taxpayer paying tax at a rate above the basic rate of income tax. Where the gains of a basic rate taxpayer subject to capital gains tax exceed the unused part of his or her basic rate band, that excess is subject to tax at the 28 per cent. rate.

Individual Shareholders who are not resident in the United Kingdom will not be subject to United Kingdom capital gains tax in respect of gains arising on disposals of Ordinary Shares. However, a Shareholder who has previously been resident or ordinarily resident in the United Kingdom may in some cases be subject to United Kingdom tax on capital gains in respect of a disposal of Ordinary Shares in the event that they reestablish residence in the United Kingdom.

A corporate shareholder is normally taxable on all of its chargeable gains, subject to any reliefs and exemptions. Corporate Shareholders should be entitled to indexation allowance up to the date the chargeable gain is realised.

A Shareholder which is a company not resident in the United Kingdom for tax purposes will have no liability to United Kingdom tax on chargeable gains in respect of a disposal of Ordinary Shares, though may be subject to foreign tax on the capital gain under local law.

Stamp duty and SDRT

The statements below are intended as a general guide to the current position. They do not apply to certain intermediaries who are not liable to stamp duty or SDRT or to persons connected with depositary arrangements or clearance services who may be liable at higher rates.

The Directors have been advised that no liability to stamp duty or SDRT arises on the allotment of the New Ordinary Shares by the Company. The registration of and the issue of definitive share certificates to Shareholders or the first registration of New Ordinary Shares in the name of a member of CREST will not give rise to any liability to stamp duty or SDRT.

Any agreement to sell Ordinary Shares will normally give rise to a liability on the purchaser to SDRT, at the rate of 0.5 per cent. of the actual consideration paid. If an instrument of transfer of the Ordinary Shares is subsequently produced it will generally be subject to stamp duty at the rate of 0.5 per cent. of the actual consideration paid (rounded up to the nearest £5). When such stamp duty is paid, the SDRT charge will be cancelled and any SDRT already paid will be refunded. Stamp duty and SDRT are generally the liability of the purchaser.

Where Ordinary Shares are held in uncertificated form within CREST, a transfer of shares through CREST will generally be subject to SDRT at the rate of 0.5 per cent. of the value of the consideration given. Special rules apply in connection with clearance services.

The statements above are general in character and are intended only as a general guide to certain aspects of current law and HMRC. They apply to the beneficial owners of Ordinary Shares who are resident in the United Kingdom for tax purposes and who hold shares as investments and may not apply to certain classes of tax payers (such as dealers in securities). Prospective subscribers for or purchasers of Ordinary Shares, and, in particular, those who are subject to taxation in a jurisdiction other than in the United Kingdom, are strongly advised to consult their own professional advisers.

PART B: UNITED STATES

United States Federal Income Taxation

This section describes certain material United States federal income tax consequences of owning Ordinary Shares. It applies to you only if you acquire your Ordinary Shares in this offering and you hold your Ordinary Shares as capital assets for U.S. federal income tax purposes. This section does not apply to you if you are a member of a special class of holders subject to special U.S. federal income tax rules, including:

• a dealer in securities,
• a trader in securities that elects to use a mark-to-market method of accounting for securities holdings,
• a U.S. tax-exempt organization,
• a life insurance company,
• a person liable for U.S. federal alternative minimum tax,
• a person that actually or constructively owns 10 per cent. or more of the Company's voting stock,
• a person that holds Ordinary Shares as part of a straddle or a hedging or conversion transaction, or
• a U.S. Holder (as defined below) whose functional currency is not the U.S. dollar.

This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect, as well as on the Convention Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains (the "Treaty"). These laws are subject to change, possibly on a retroactive basis.

You are a "U.S. Holder" if you are a beneficial owner of Ordinary Shares and you are:

• a citizen or resident of the United States,
• a U.S. domestic corporation,
• an estate whose income is subject to United States federal income tax regardless of its source,
• a trust if a United States court can exercise primary supervision over the trust's administration and one or more United States persons are authorized to control all substantial decisions of the trust; or
• a trust that has made a valid election under applicable U.S. treasury regulations to be taxed as a U.S. person.

In addition, if a partnership (including any entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of Ordinary Shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A beneficial owner of Ordinary Shares that is a partnership, and partners in such partnership, should consult their own tax advisors regarding the tax consequences of owning the Ordinary Shares.

This discussion addresses only United States federal income taxation, and is only addressed to U.S. Holders (as defined above). Holders who are not U.S. Holders and who are or may be subject to U.S. federal income taxation should consult their own advisors as to the U.S. federal income tax consequences of owning Ordinary Shares.

Taxation of Dividends

Under the United States federal income tax laws, and subject to the passive foreign investment company ("PFIC") rules discussed below, if you are a U.S. Holder, the gross amount of any dividend the Company pays out of current or accumulated earnings and profits (as determined for United States federal income tax purposes) is subject to United States federal income taxation. If you are a noncorporate U.S. Holder, dividends paid to you that constitute qualified dividend income will be taxable to you at a maximum tax rate of 20 per cent. provided that you hold the Ordinary Shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meet other holding period requirements. Dividends paid by the Company will be treated as qualified dividend income if the dividend otherwise meets the requirements applicable to dividends paid by domestic corporations and the Company is eligible for the benefits of a comprehensive income tax treaty with the United States which the Secretary determines to be satisfactory for purposes of this provision, and which includes an exchange of information program. The Company expects to be eligible for the benefits of the Treaty, and therefore, provided that the Company remains so eligible, the Company expects that dividends paid with respect to the Ordinary Shares generally will be qualified dividend income.

Dividends are taxable to a U.S. Holder when received, actually or constructively. Such dividends will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. Dividends will be income from sources outside the United States, and dividends paid will, depending on your circumstances, be "passive" or "general" income which, in either case, is treated separately from other types of income for purposes of computing the U.S. foreign tax credit allowable to you.

The amount of a dividend distribution that must be included in a U.S. Holder's income will be the U.S. dollar value of the sterling payments made, determined at the spot sterling/U.S. dollar rate on the date the dividend distribution is includible in income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date a dividend payment is included in income to the date such payment is converted into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes.

Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the Ordinary Shares and thereafter as capital gain.

Taxation of Capital Gains

Subject to the PFIC rules discussed below, a U.S. Holder who sells or otherwise disposes of Ordinary Shares generally will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your Ordinary Shares. Capital gain of a noncorporate U.S. Holder is generally taxed at lower rates where the holder has a holding period greater than one year. Such gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

Passive Foreign Investment Company Considerations

The Company believes that the Ordinary Shares should not be treated as stock of a PFIC for United States federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. In general, if you are a U.S. Holder, the Company will be a PFIC with respect to you if for any taxable year in which you held Ordinary Shares:

• at least 75 per cent. of the Company's gross income for the taxable year is passive income; or
• at least 50 per cent. of the value, determined on the basis of a quarterly average, of the Company's assets are attributable to assets that produce or are held for the production of passive income.

Passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25 per cent. by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation's income.

If the Company is treated as a PFIC, and you are a U.S. Holder that did not make a mark-to-market election, as described below, you will be subject to special rules with respect to:

• any gain you realize on the sale or other disposition of your Ordinary Shares; and
• any excess distribution that the Company makes to you (generally, any distributions to you during a single taxable year that are greater than 125 per cent. of the average annual distributions received by you in respect of the Ordinary Shares during the three preceding taxable years or, if shorter, your holding period for the Ordinary Shares).

Under these rules, the gain or excess distribution will be allocated ratably over your holding period for the Ordinary Shares; the amount allocated to the taxable year in which you realized the gain or excess distribution will be taxed as ordinary income; the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year; and the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year.

Special rules apply for calculating the amount of the foreign tax credit with respect to excess distributions by a PFIC.

If you own Ordinary Shares in a PFIC that are treated as traded on a qualified exchange or other market and otherwise treated as "marketable stock," you may make a mark-to-market election. There is currently no guidance as to whether a particular foreign exchange should be treated as a qualified exchange or other market, and as a result no assurance can be given as to whether the Ordinary Shares should be treated as marketable stock for purposes of making the mark-to-market election. If the Ordinary Shares did constitute marketable stock and a U.S. Holder made a mark-to-market election, such a U.S. Holder would not be subject to the PFIC rules described above in respect of the Ordinary Shares. Instead, in general, such a U.S. Holder would include as ordinary income each year the excess, if any, of the fair market value of the Ordinary Shares owned at the end of the taxable year over the U.S. Holder's adjusted basis in such Ordinary Shares. These amounts of ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains. A U.S. Holder making the mark-to-market election will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of the Ordinary Shares owned over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). A U.S. Holder's basis in the Ordinary Shares will be adjusted to reflect any such income or loss amounts.

In addition, notwithstanding any election you make with regard to the Ordinary Shares, dividends that you receive from the Company will not constitute qualified dividend income to you if the Company is a PFIC either in the taxable year of the distribution or the preceding taxable year. Moreover, your Ordinary Shares will be treated as stock in a PFIC if the Company was a PFIC at any time during your holding period in your Ordinary Shares, even if the Company is not currently a PFIC. For purposes of this rule, if you make a markto-market election with respect to your Ordinary Shares, you will be treated as having a new holding period in your Ordinary Shares beginning on the first day of the first taxable year beginning after the last taxable year for which the mark-to-market election applies. Dividends that you receive that do not constitute qualified dividend income are not eligible for taxation at the lower maximum rate applicable to qualified dividend income. Instead, you must include the gross amount of any such dividend paid by the Company out of the Company's accumulated earnings and profits (as determined for United States federal income tax purposes) in your gross income, and it will be subject to tax at rates applicable to ordinary income.

A U.S. Holder must file United States Internal Revenue Service ("IRS") Form 8621 for any year in which the Company is treated as a PFIC with respect to such U.S. Holder for first year in which such U.S. Holder holds Ordinary Shares and the Company is treated as a PFIC and all future taxable years during which the Company is treated as a PFIC. You are urged to consult your own tax advisor concerning the filing of IRS Form 8621.

Medicare Contribution Tax on Unearned Income

Certain U.S. Holders who are individuals, estates or trusts are required to pay an additional 3.8 per cent. tax on amounts of "net investment income," which generally would include dividends on and capital gains from the sale, retirement or other taxable disposition of the Company's Ordinary Shares. You should consult your own tax advisor concerning the effect, if any, of this legislation on holding your Ordinary Shares in your particular circumstances.

Backup Withholding and Information Reporting.

If you are a noncorporate U.S. Holder, information reporting requirements, on IRS Form 1099, generally will apply to:

• dividend payments or other taxable distributions made to you within the United States or by a U.S. payor; and
• the payment of proceeds to you from the sale of Ordinary Shares effected at a United States office of a broker.

Additionally, backup withholding may apply to such payments if you are a noncorporate U.S. Holder that:

• fails to provide an accurate taxpayer identification number;
• is notified by the IRS that you have failed to report all interest and dividends required to be shown on your federal income tax returns; or
• in certain circumstances, fails to comply with applicable certification requirements.

Payment of the proceeds from the sale of Ordinary Shares effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale of Ordinary Shares that is effected at a foreign office of a broker will be subject to information reporting and backup withholding if:

• the proceeds are transferred to an account maintained by you in the United States;
• the payment of proceeds or the confirmation of the sale is mailed to you at a United States address; or
• the sale has some other specified connection with the United States as provided in U.S. Treasury regulations,

unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption.

In addition, a sale of Ordinary Shares effected at a foreign office of a broker will be subject to information reporting if the broker is:

• a United States person;
• a controlled foreign corporation for United States tax purposes;
• a foreign person 50 per cent. or more of whose gross income is effectively connected with the conduct of a United States trade or business for a specified three-year period; or
• a foreign partnership, if at any time during its tax year:
• one or more of its partners are "U.S. persons," as defined in U.S. Treasury regulations, who in the aggregate hold more than 50 per cent. of the income or capital interest in the partnership, or
• such foreign partnership is engaged in the conduct of a United States trade or business,

unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption. Backup withholding will apply if the sale is subject to information reporting and the broker has actual knowledge that you are a United States person.

Backup withholding is not an additional tax. You generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed your income tax liability by timely filing a refund claim with the United States Internal Revenue Service.

Disclosure of Information with respect to Foreign Financial Assets

Certain U.S. individuals who hold any interest in "specified foreign financial assets," including the Company's Ordinary Shares, during such holder's taxable year must attach to their U.S. tax return for such year certain information with respect to each such asset if the aggregate value of all of such assets exceeds \$50,000 (or a higher dollar amount prescribed by the IRS), unless such Ordinary Shares are held in an account maintained by a U.S. payor, such as a U.S. financial institution or the U.S. branch of a foreign bank or insurer. For this purpose, a "specified foreign financial asset" includes any depositary, custodial or other financial account maintained by a foreign financial institution, and certain assets that are not held in an account maintained by a financial institution, including any stock or security issued by a person other than a U.S. person. A taxpayer subject to these rules who fails to furnish the required information may be subject to a penalties, unless the taxpayer demonstrates a reasonable cause for such failure to comply. You should consult your own tax advisor concerning any obligation you may have to furnish information to the IRS as a result of holding the Company's Ordinary Shares.

PART XI

DIRECTORS, CORPORATE GOVERNANCE AND EMPLOYEES

1. Directors and senior management

1.1 The following table sets out information relating to each of the Directors as at the date of this document:

Name	Position	Date of Birth
Philip White CBE	Non-executive Chairman	29 September 1949
Mark Allan	Chief Executive	26 April 1972
Joe Lister	Chief Financial Officer	8 December 1971
Richard Simpson	Managing Director of Property	16 October 1975
Richard Smith	Managing Director of Operations	21 April 1974
Manjit Wolstenhome	Senior Independent Director and Chair	4 July 1964
	of Audit Committee
Sir Tim Wilson	Non-executive Director and	2 April 1949
	Chairman of the Nominations
	Committee
Richard Walker	Non-executive Director and	22 February 1966
	Chairman of the Remuneration and
	Health and Safety Committees
Andrew Jones	Non-executive Director	25 July 1968
Elizabeth McMeikan	Non-executive Director	15 March 1962

• 1.2 The business address of the Directors is The Core, 40 St Thomas Street, Bristol BS1 6JX.
• 1.3 Set out below are the business experience and principal business activities performed outside of UNITE by the Directors, as well as the dates of their initial appointment as directors of the Company.

(a) Philip White CBE (Non-executive Chairman)

Phil was appointed Non-Executive Director in January 2009 and became Chairman in May 2009. The majority of Phil's executive career was spent in the public transport sector, during a period of deregulation and privatisation. He was Chief Executive of National Express Group plc from 1997 to 2006, leading the business through a period of considerable growth both in the UK and overseas. Phil is currently Non-Executive Chairman of Kier Group plc, Non-Executive Chairman of Lookers plc and a Non-Executive Director of Stagecoach Group plc.

(b) Mark Allan (Chief Executive)

Mark was appointed Chief Executive in 2006 having previously served as Chief Financial Officer for three years. He joined the Group in 1999 and held a variety of roles in the business. Prior to that he worked at KPMG where he qualified as a Chartered Accountant and spent five years specialising in corporate finance. Mark is also a fellow of the Royal Institute of Chartered Surveyors.

(c) Joe Lister (Chief Financial Officer)

Joe joined UNITE in 2002. He was appointed as Chief Financial Officer in January 2008 having held a variety of roles within the Company prior to that, including Investment Director. Joe is responsible for the Group's finances and investment strategy. Prior to joining UNITE, Joe qualified as a chartered accountant with PricewaterhouseCoopers.

(d) Richard Simpson (Managing Director of Property)

Richard is managing director of property for UNITE. He sets the strategic direction for all aspects of the property portfolio, oversees the fund management of UNITE's co-investment vehicles and leads the property development activities. Richard joined UNITE in 2005 and has held a variety of senior roles within the Group. He is chair of the British Property Federation's cross sector Student Accommodation Committee and is a qualified chartered surveyor and a fellow of the Royal Institute of Chartered Surveyors. Prior to this, Richard had a six year career in the British Army.

(e) Richard Smith (Managing Director of Operations)

Richard was appointed as Managing Director of Operations for the Company in 2011. His role involves leading on the customer service provided to 41,000 customers, and managing the maintenance and facilities management across the Group's property portfolio. He joined Company as Deputy Chief Financial Officer in 2010. This role had a broad Finance and Operations remit, including overall responsibility for the Group's London operations. Prior to joining UNITE Richard spent a total of 18 years in the transport industry; 13 of which were at National Express Group, where he held a range of senior finance, strategy and operations roles in the UK and overseas, including Group Development Director and Chief Financial Officer North America.

(f) Manjit Wolstenholme (Senior Independent Director and Chair of Audit Committee)

Manjit qualified as a Chartered Accountant with Coopers & Lybrand and her background includes roles as Director and Co-Head of Investment Banking at Dresdner Kleinwort Wasserstein, and Partner at Gleacher Shacklock. She is Chair of Albany Investment Trust and Senior Independent Director and Chair of the Remuneration Committee of Future plc. Manjit is the Senior Independent Director and Chair of Audit Committee for Provident Financial, as well as Governor of Manchester Academic Health Science Centre. Manjit was appointed to the Board at the end of 2011.

(g) Sir Tim Wilson (Non-executive Director and Chairman of the Nominations Committee)

Tim was Vice-Chancellor of the University of Hertfordshire until 2010, preceded by an academic career with Leeds Metropolitan, Cranfield and De Montfort Universities. As well as serving on the Board of the Higher Education Funding Council for England (HEFCE), Tim was a Board member of East of England Development Agency for six years and Deputy Chair of the CBI Innovation, Science and Technology Committee. He published the Wilson Review, a government-commissioned review of UK University-industry collaboration, in February 2012. Tim was appointed to the Board in 2010.

(h) Richard Walker (Non-executive Director and Chairman of the Remuneration Committee and Health and Safety Committee)

Richard was Senior Director at TalkTalk, responsible for the customer experience change programme. Prior to this, he was Chief Operating Officer of Carphone Warehouse UK, with responsibility for 750 stores, websites, direct sales and insurance services. Richard was previously Managing Director of Carphone Warehouse's European retail business and UK Sales Director. He holds a law degree from Nottingham University and trained as an Accountant with Coopers & Lybrand. Richard was appointed to the Board in 2005.

(i) Andrew Jones (Non-executive Director)

Andrew Jones is Chief Executive Officer of LondonMetric Property, following the recent merger of London & Stamford and Metric. Andrew was a co-founder of Metric and has been Chief Executive Officer since its inception in March 2010. Andrew's previous roles include Executive Director and Head of Retail at British Land. Andrew joined British Land in 2005 following the acquisition of Pillar Property where he was on the main board with responsibilities for their retail portfolio and the Hercules Unit Trust. Andrew was appointed to the Board in 2013.

(j) Elizabeth McMeikan (Non-executive Director)

Elizabeth is currently Senior Independent Director at FTSE 250 pub group JD Wetherspoon and family-owned wine merchants Direct Wines. She is a Non-Executive Director at import/export fruit and vegetable company, Fresca Group Limited, and CH & Co Catering Limited, a privately-owned catering company. Elizabeth was also appointed as Chair of Moat Homes Limited in November 2013. Elizabeth has experience in customer-focused businesses, Tesco and Colgate Palmolive. Her roles have included Stores Board Human Resources Director for Tesco, Tesco Express Managing Director and Tesco France Development Director. Elizabeth was appointed to the Board in February 2014.

2. Directors' interests

2.1 The direct and indirect interests (all of which are beneficial) of the Directors in Ordinary Shares as at 4 March 2014 (being the latest practicable date prior to the publication of this document) and as expected to be immediately following Admission are set out in the following table:

		Interests in Ordinary	Interests in Ordinary Shares immediately following
		Shares as at 4 March 2014	Admission
	Number of		Number of
	voting rights		voting rights
	in respect of	Percentage of	in respect of	Percentage of
	Ordinary	issued share	Ordinary	issued share
Director	Shares	capital	Shares	capital
Mark Allan	429,397	0.243	441,592	0.22
Joe Lister	269,862	0.153	274,740	0.14
Richard Simpson	67,639	0.038	70,078	0.03
Richard Smith	4,685	0.003	9,563	0.00
Philip White	10,000	0.006	10,952	0.01
Richard Walker	10,000	0.006	15,952	0.01
Manjit Wolstenholme	7,300	0.004	7,995	0.00
Sir Tim Wilson	5,730	0.003	6,275	0.00
Andrew Jones	–	–	15,000	0.01
Elizabeth McMeikan	–	–	5,000	0.00

• 2.2 Taken together, the combined percentage interest of the Directors in voting rights in respect of the issued ordinary share capital of UNITE as at 4 March 2014 (being the latest practicable date prior to the publication of this document) was approximately 0.456 per cent.
• 2.3 Taken together, the combined percentage interest of the Directors in voting rights in respect of the issued ordinary share capital of UNITE immediately following Admission will be approximately 0.426 per cent.
• 2.4 The Directors have no interests in the shares of the Company's subsidiaries.
• 2.5 Details of options over the Ordinary Shares held by the Directors as at 4 March 2014 (being the latest practicable date prior to publication of this document) are set out below. They are not included in the interests of the Directors shown in the table in paragraph 2.1 above.

LTIP (current 2011 scheme)
Option holder		Exercise
	Number of	price per	Period of
	Ordinary	Ordinary	qualifying	Expiry
	Shares	Share (pence)	conditions	date
Mark Allan	275,725 (PSP)	Nil	22.06.11- 22.06.14	July 2021
Mark Allan	324,557 (PSP)	Nil	10.04.12-	April 2022
	5,390 (ESOS)	185.5	1.04.15
Mark Allan	193,680 (PSP)	Nil	10.04.13-	April 2023
	3,134 (ESOS)	319	10.04.16
Joe Lister	161,366 (PSP)	Nil	22.06.11- 22.06.14	July 2021
Joe Lister	204,886 (PSP)	Nil	10.04.12-	April 2022
	5,390 (ESOS)	185.5	1.04.15
Joe Lister	122,348 (PSP)	Nil	10.04.13-	April 2023
	3,134 (ESOS)	319	10.04.16
Richard Simpson	62,885 (PSP)	Nil	05.10.11-	October 2021
	6,377 (ESOS)	156.8	05.10.14
Richard Simpson	153,667 (PSP)	Nil	10.04.12-	April 2022
	5,390 (ESOS)	185.5	1.04.15
Richard Simpson	110,298 (PSP)	Nil	10.04.13-	April 2023
	3,134 (ESOS)	319	10.04.16
Richard Smith	67,936 (PSP)	Nil	05.10.11-	October 2021
	6,377 (ESOS)	156.8	05.10.14
Richard Smith	153,677 (PSP)	Nil	10.04.12-	April 2022
	5,390 (ESOS)	185.5	1.04.15
Richard Smith	110,298 (PSP)	Nil	10.04.13-	April 2023
	3,134 (ESOS)	319	10.04.16

Note: Options granted under the ESOS have an exercise price equal to their market value at the date of grant.

Unapproved Scheme:

	Number of	Exercise price	Date from
	Ordinary	per Ordinary	which
Option holder	Shares	Share (pence)	exercisable	Expiry date
Joe Lister	58,662	232.5	16.09.07	15.09.14

• 2.6 Save as disclosed in this paragraph 2, no Director nor their immediate families, nor any person connected with any Director within the meaning of section 252 of the Act, has any interests (beneficial or non-beneficial) in the share capital of UNITE or any of its subsidiaries.
• 2.7 Save as disclosed above, no other person involved in the Firm Placing and Placing and Open Offer or Admission has an interest which is material to the Firm Placing and Placing and Open Offer or Admission.

3. Directors' remuneration and pensions

3.1 Remuneration

The remuneration (excluding pension contributions) of the Directors for the year ended 31 December 2013 is set out in the table below:

	Basic		Options over	Benefits
Director	salary/fees	Bonus	Ordinary	in kind	Total
	£'s	£'s	shares	£'s	£'s
Mark Allan	411,396	499,950	196,814	31,084	1,139,244
Joe Lister	260,313	316,650	125,482	15,045	717,490
Richard Simpson	234,791	285,330	113,432	13,000	646,553
Richard Smith	234,791	285,330	113,432	13,787	647,340
Philip White	118,000	–	–	–	118,000
Richard Walker	51,567	–	–	–	51,567
Manjit Wolstenholme	52,667	–	–	–	52,667
Sir Tim Wilson	47,000	–	–	–	47,000
Andrew Jones	37,583	–	–	–	37,583
Elizabeth McMeikan	–	–	–	–	–

There is no deferred or contingent remuneration accrued by the Company for the year ended 31 December 2013.

3.2 Pensions

The payments made by the Group to pension schemes on behalf of Directors (in their capacity as directors and employees) for the financial year ended 31 December 2013 are set out in the table below:

	Pension contribution for
Director	year ended 31 December 2013
Mark Allan	£72,303
Joe Lister	£47,308
Richard Simpson	£46,958
Richard Smith	£46,005

Joe Lister, Richard Simpson and Richard Smith each participated in the UNITE Group personal pension scheme, which is a money purchase scheme, in relation to whom the Company has contributed respectively the sums stated above. The Company has paid Mark Allan a cash pension allowance, as set out in the above table.

4. Directors' terms of appointment and remuneration

4.1 Executive Directors' service agreements

The Company has entered into the following service agreements with the Executive Directors:

Mark Allan is employed as Chief Executive pursuant to the terms of a service agreement with the Company dated 31 October 1999. The agreement is terminable by either party on not less than six months' written notice. Mr Allan is paid a basic annual salary of £423,400 (as at 1 March 2014) and is entitled to receive a bonus calculated in accordance with the Company's annual performance related bonus scheme (which takes into consideration a number of performance criteria). His basic salary and bonus are subject to annual review by the Remuneration Committee. In addition, he is entitled to membership of the Group health and death in service schemes and receives a contribution of his basic salary to a personal pension plan of his choice. Mr Allan is also entitled to a company car up to a value of £31,901 or of a type, status, quality and age which the Company considers appropriate. Mr Allan is subject to certain non-competition and non-solicitation covenants for a period of 12 months' following the termination of his employment. The agreement is governed by English law.

Joe Lister is employed as Chief Financial Officer pursuant to the terms of a service agreement with the Company dated 28 March 2002. The agreement is terminable by either party on not less than one months' written notice which increases after five years of service to one week per year of service, up to a maximum of 12 weeks. Mr Lister is paid a basic annual salary of £267,900 (as at 1 March 2014) and is entitled to receive a bonus calculated in accordance with the Company's annual performance related bonus scheme (which takes into consideration a number of performance criteria). His basic salary and bonus are subject to annual review by the Remuneration Committee. In addition, he is entitled to membership of the Group life assurance scheme and receives a contribution of his basic salary to The UNITE Group plc Personal Pension. Mr Lister is also entitled to receive a company car allowance of £14,000. Mr Lister is subject to certain non-competition and non-solicitation covenants for a period of 12 months' following the termination of his employment. The agreement is governed by English law.

Richard Smith is employed as an Executive Director pursuant to the terms of a service agreement with the Company dated 28 September 2011. The agreement is terminable by either party on not less than 12 months' written notice. Mr Smith is paid a basic annual salary of £241,650 (as at 1 March 2014) and is entitled to receive a bonus calculated in accordance with the Company's annual performance related bonus scheme (which takes into consideration a number of performance criteria). His basic salary and bonus are subject to annual review by the Remuneration Committee. In addition, he is entitled to membership of the Group health and death in service schemes and receives a contribution of his basic salary to the Group's personal pension scheme. Mr Smith is also entitled to a company car up to a maximum monthly lease payment of £1,100 or a car allowance of £13,000. Mr Smith is subject to certain non-competition and non-solicitation covenants for a period of 12 months' following the termination of his employment. The agreement is governed by English law.

Richard Simpson is employed as an Executive Director pursuant to the terms of a service agreement with the Company dated 28 September 2011. The agreement is terminable by either party on not less than 12 months' written notice. Mr Simpson is paid a basic annual salary of £241,650 (as at 1 March 2014) and is entitled to receive a bonus calculated in accordance with the Company's annual performance related bonus scheme (which takes into consideration a number of performance criteria). His basic salary and bonus are subject to annual review by the Remuneration Committee. In addition, he is entitled to membership of the Group health and death in service schemes and receives a contribution of his basic salary to the Group's personal pension scheme. Mr Simpson is also entitled to a company car up to a maximum monthly lease payment of £1,100 or a car allowance of £13,000. Mr Simpson is subject to certain non-competition and non-solicitation covenants for a period of 12 months' following the termination of his employment. The agreement is governed by English law.

4.2 Non-executive Directors' letters of appointment

Pursuant to the terms of a letter of engagement with the Company dated 3 December 2008, Philip White has agreed to serve as a Non-executive Director for an annual fee of £124,000 per annum (from 1 January 2014). The initial term of this appointment expired at the Company' annual general meeting in 2012 but his appointment has been extended. The policy of the Company is for a Non-Executive Chairman to serve two terms of approximately three years each, although the Board may invite a Nonexecutive Chairman to serve for longer.

Pursuant to the terms of a letter of engagement with the Company dated 19 October 2010, Sir Tim Wilson has agreed to serve as a Non-executive Director for an annual fee of £49,300 (from 1 January 2014). The initial term of this appointment expired at the Company's annual general meeting in 2011 but his appointment has been extended. The policy of the Company is for Non-executive Directors to serve two terms of approximately three years each, although it is possible that the Board may invite a Non-executive Director to serve for longer.

Pursuant to the terms of a letter of engagement with the Company dated 15 November 2011, Manjit Wolstenholme has agreed to serve as a Non-executive Director for an annual fee of £56,925 (from 1 January 2014). This appointment is to run until the Company's annual general meeting in 2015 but will terminate automatically if Mrs Wolstenholme is removed from office by a resolution of the Shareholders or is not re-elected to office.

Pursuant to the terms of a letter of engagement with the Company dated 17 October 2005, Richard Walker has agreed to serve as a Non-executive Director for an annual fee of £58,225 (from 1 January 2014). This appointment was for a fixed term of three years but his appointment has been extended. As Mr Walker has been a director of the Company over nine years, it has been agreed that he will step down from the Board at the annual general meeting of the Company in May 2014.

Pursuant to the terms of a letter of engagement with the Company dated 16 October 2012, Andrew Jones has agreed to serve as a Non-executive Director for an annual fee of £43,000 (from 1 January 2014). This appointment is to run until the Company's annual general meeting in 2016 but will terminate automatically if Mr Jones is removed from office by a resolution of the Shareholders or is not re-elected to office.

Pursuant to the terms of a letter of engagement with the Company dated 13 November 2013, Elizabeth McMeikan has agreed to serve as a Non-executive Director for an annual fee of £43,000 (from 1 January 2014). This appointment is to run until the Company's annual general meeting in 2017 but will terminate automatically if Ms McMeikan is removed from office by a resolution of the Shareholders or is not re-elected to office.

5. Corporate Governance

• 5.1 UNITE is committed to, and recognises the value and importance of, high standards of corporate governance. UNITE complies and, with effect from Admission, will continue to comply with the Corporate Governance Code.
• 5.2 The Audit Committee's role is to assist the Board with the discharge of its responsibilities in relation to internal and external audits and controls, including reviewing the Group's annual financial statements, considering the scope of the annual audit and the extent of the non audit work undertaken by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the internal control systems in place within the Group.
• 5.3 The Audit Committee is chaired by Manjit Wolstenholme. Its other members are Richard Walker, Sir Tim Wilson, Andrew Jones and Elizabeth McMeikan. The Audit Committee meets at least twice a year and has unrestricted access to the Company's auditors.
• 5.4 The Remuneration Committee makes recommendations to the Board in respect of executive remuneration policy, determines the levels of remuneration for each of the Executive Directors and recommends and monitors the remuneration of members of senior management. The Remuneration Committee also generates the annual remuneration report to be approved by Shareholders at UNITE's annual general meeting.
• 5.5 The Remuneration Committee is chaired by Richard Walker. Its other members are Philip White, Sir Tim Wilson, Manjit Wolstenholme, Andrew Jones and Elizabeth McMeikan. The Remuneration Committee meets at least twice a year.
• 5.6 The Nomination Committee assists the Board in determining the composition and make up of the Board. It is also responsible for periodically reviewing the Board's structure and identifying potential candidates to be appointed as Directors, as the need may arise. The Nomination Committee also determines succession plans for the chairman and chief executive.
• 5.7 The Nomination Committee is chaired by Sir Tim Wilson. Its other members are Philip White, Richard Walker, Manjit Wolstenholme, Andrew Jones and Elizabeth McMeikan. The Nomination Committee meets, as necessary, to review appointments to the Board.
• 5.8 The Health and Safety Committee assists the Board to ensure the Group's policies, procedures and working practices, in relation to health and safety meet or exceed legal obligations.

5.9 The Health and Safety Committee is chaired by Richard Walker. Its other members are Sir Tim Wilson, Mark Allan, Richard Simpson and Richard Smith.

6. Directors' confirmations

None of the Directors has, during the five years prior to the date of this document, been:

• (a) convicted in relation to a fraudulent offence;
• (b) associated with any bankruptcy, receivership or liquidation while acting in the capacity of a member of the administrative, management or supervisory body or of senior manager of any company;
• (c) subject to any official public incrimination and/or sanction by statutory or regulatory authorities (including designated professional bodies); or
• (d) disqualified by a court from acting as a member of the administrative, management or supervisory bodies of any issuer or from acting in the management or conduct of the affairs of any company.

7. Conflicts of interest

• 7.1 There are no actual or potential conflicts of interests between any Director's duties to UNITE and the private interests and/or other duties he/she may also have.
• 7.2 No Director was selected to be a director of UNITE pursuant to any arrangement or understanding with any major customer, supplier or other person having a business connection with the Group.
• 7.3 No restrictions have been agreed by any Director on the disposal within a certain period of time of his/her holding in UNITE securities.
• 7.4 There are no family relationships between any of the Directors.

8. Directorships and partnerships

Save as set out below, the Directors have not held any directorships of any company, other than those companies in the Group which are subsidiaries, or been a partner in a partnership at any time in the five years prior to the date of this document:

Current Directorships Previous Directorships (last 5 years)

Philip White

Kier Group Plc Lookers Plc Meridian Motor Group Limited Vantage Garages (Blackburn) Limited Mark Robinson Automotive Limited Mark Robinson Holdings Limited Stagecoach Group Plc Vp Plc Vibroplant Trustees Limited Lookers Motor Group Limited

Mark Allan

Stagescale Limited USAF Holdings Limited USAF Finance Limited USAF RCC Limited USAF Holdings C Limited LDC (James Leicester Hall) GP1 Limited LDC (James Leicester Hall) GP2 Limited LDC (Ferry Lane 2) GP1 Limited LDC (Ferry Lane 2) GP2 Limited LSAV Rent Collection Limited

Joe Lister

LSAV (Wembley) Gp1 Limited LSAV Rent Collection Limited USAF Finance II Limited Gwyneth Enterprises Limited Stagescale Limited USAF Holdings Limited USAF Finance Limited USAF RCC Limited Filbert Village GP Limited USAF Holdings B Limited USAF Holdings C Limited USAF Holdings F Limited USAF GP No.11 Limited LDC (Ferry Lane 2) GP1 Limited LDC (Ferry Lane 2) GP2 Limited USAF Holdings G Limited USAF GP No.12 Limited LDC (Nairn Street) GP1 Limited LDC (Nairn Street) GP2 Limited LSAV (Angel Lane) GP1 Limited LSAV (Angel Lane) GP2 Limited LSAV (Stapleton) GP1 Limited LSAV (Stapleton) GP2 Limited LSAV (Wembley) GP2 Limited

Richard Simpson

Richard Smith

Andrew Jones

Metric Property Investments Plc Hercules Property Uk Limited Diomedes Property No.8 Limited Metric Property Launceston Limited Pillar Retail Parks Limited 35 Basinghall Street First Limited

Metric Property Finance 1 Limited Dinwell Limited Metric Property Bedford Limited Pillar Glasgow 1 Limited British Land Offices Limited Wick Retail Limited Pillar Glasgow 2 Limited British Land Offices No.1 Limited Metric Property Loughborough Limited Metric Property Finance (Holdings) Limited

Current Directorships Previous Directorships (last 5 years)

Brunswick Cambridge Propco Limited LDC (James Leicester Hall) GP1 Limited LDC (James Leicester Hall) GP2 Limited USAF General Partner No.1 Limited USAF General Partner No.4 Limited USAF General Partner No.5 Limited USAF General Partner No.6 Limited USAF Holdings E Limited

LSAV (Gp) Limited LSAV Rent Collection Limited Nicola Fowler Property Finding Limited

LDC (Angel Lane) Limited LSAV Rent Collection Limited LDC (Ferry Lane 2) GP2 Limited

Metric Property Newry Limited 35 Basinghall Street Limited Metric Property Coventry Limited Bl European Holdings Limited Metric Property Mansfield Limited British Land Hercules Limited Metric Property Congleton Limited British Land Hercules No.3 Limited Pillar Hercules No.2 Limited British Land Hif Limited Grantchester Nominees (Wren Torquay 2) Limited Grantchester Nominees (Torbay1) Limited Grantchester Nominees (Torbay 2) Limited Grantchester Nominees (Wren Torquay 1) Limited British Land Fund Management Limited

35 Basinghall Street Second Limited

Metric Retail Property Limited British Land Hercules No.1 Limited British Land Hercules No.4 Limited

Metric Property Kirkstall Limited Pillar Glasgow 3 Limited Diomedes Property No.1 Limited British Land Investment Management Limited

Metric Property Milford Haven Ltd

Metric Property Finance 2 Limited Diomedes Property No.4 Limited Ivoryhill Limited Metric Property Inverness Limited Diomedes Property No.5 Limited Jetbloom Limited Metric Property Cannock Limited Diomedes Property No.7 Limited Pardev (Broadway) Limited Metric Property Sheffield Limited Pillarstore Limited Parinv Northern Limited Metric Property Rochdale Limited Pillarstore No.3 Limited Pillar (Beckton) Limited Metric Property Kings Lynn Limited Vintners' Place Limited Pillar (Birstall) Limited Metric Property St Albans Limited Wates City Point First Limited Pillar (Dartford) Limited Metric Property St. Austell Limited Wates City Point Limited Pillar (Fulham) Limited Metric Lp Income Plus Limited Wates City Point Second Limited Pillar (Kirkcaldy) Limited Metric Property Bedford 2 Limited Pillar (Preston) Limited Metric Property Bishop Auckland Limited Metric Property Launceston 3 Limited Metric Property Rochdale Development Limited Metric Mipp Asset Management

Limited Metric Property Berkhamsted Limited

Londonmetric Property Plc Wk Holdings Limited Pillar Cheetham Hill Limited Londonmetric Saturn Ii Limited Ivorydell Subsidiary Limited Pillar Dartford No.1 Limited Londonmetric Thrapston Limited British Land Properties Limited Pillar Denton Limited Londonmetric Bell Farm Limtied Blt Finance Limited Pillar Estates No.2 Limited Londonmetric Retail Distribution Limited Londonmetric Retail Finance Limited Londonmetric Retail Distribution Ii Limited Londonmetric Retail Distribution Iii Limited

Current Directorships Previous Directorships (last 5 years) Metric Property Hove Limited Edgecool Limited Metric Property Bristol Limited Diomedes Property No.3 Limited Ivorydell Limited Diomedes Property No.6 Limited Number 80 Cheapside Limited Cortonwood (Management) Company Limited British Land Superstores (Non-Securitised)

Pillarman Limited Pardev (Luton) Limited

Wk (Austral House) First Limited Pillar (York) Limited Wk (Austral House) Limited Pillar Auchinlea Limited Londonmetric Saturn Limited Pillar Broadway Limited Blt Barnstaple Limited Pillar Estates Limited Wk (Austral House) Second Limited Hercules Property Uk Holdings Limited The British Land Corporation Limited Wates City Of London Properties Limited Wates City Property Management Limited

Blt Pontypridd Limited Pillar Fort Limited Tbl (Bromley) Limited Pillar Kinnaird Limited Tbl (Bursledon) Limited Pillar Nugent Limited Tbl (Bury) Limited Pillar Parks Limited Tbl (Ferndown) Limited Pillar Projects Limited Tbl (Lisnagelvin) Limited

Tbl (Maidstone) Limited Pillar Property Group Limited Tbl (Milton Keynes) Limited Pillar Speke Limited Tbl (Peterborough) Limited Pillar Wimbledon Limited Tesco Bl Holdings Limited Bl Guaranteeco Limited Tesco Bl Properties Limited Bl Meadowhall Holdings Limited Project Sunrise Investments Limited Bl Meadowhall Limited Project Sunrise Limited Bl Meadowhall No 4 Limited Project Sunrise Properties Limited Bl Universal Limited

Diomedes Property No.2 Limited

Pillar (Cricklewood) Limited

Pillar City Plc

Pillar Developments Limited

Blt Newport Limited Pillar Europe Management Limited

Blt Nottingham Limited Pillar Farnborough Limited Blt Properties Limited Pillar Fulham No 2 Limited Tbl (Brent Park) Limited Pillar Gallions Reach Limited Pillar Property Developments Limited

Current Directorships Previous Directorships (last 5 years) 122 Leadenhall Street Limited Bl West (Watling House) Limited 201 Bishopsgate Limited Blackglen Limited 338 Euston Road Limited Blaxmill (Thirty) Limited Apartpower Limited Blu Estates Limited B.L. Holdings Limited Blu Property Management Limited Balsenia Limited Blu Securities Limited Barstep Limited Boldswitch (No 1) Limited Bayeast Property Co Limited Boldswitch Limited Bexile Limited Bf Propco (No.1) Limited British Land Acquisitions Limited Bf Propco (No.10) Limited Bf Propco (No.12) Limited British Land City Bf Propco (No.13) Limited British Land City 2005 Limited Bf Propco (No.19) Limited British Land City Offices Limited Bf Propco (No.3) Limited Bf Propco (No.4) Limited British Land Construction Limited Bf Propco (No.5) Limited Bl (Sop) Investment (1) Limited British Land In Town Retail Limited Bl (Sp) Investment (2) Limited British Land Industrial Limited Bl (Sp) Investment (3) Limited British Land Leisure Limited Bl (Sp) Investment (4) Limited Bl Crawley Glenway Limited Hyfleet Limited Industrial Real Estate Limited Insistmetal 2 Limited Broadgate City Limited Kinsgmere Productions Limited L&H Developments Limited Linestair Limited Broadgate Properties Limited Ludgate Investment Holdings Limited Brunswick Park Limited Ludgate West Limited Bustoni Limited Plantation House Limited Cavendish Geared Ii Limited Rackhams Birmingham Limited Cavendish Geared Limited Meadowbank Retail Park Edinburgh Limited Orbital Shopping Park Swindon Limited Liverpool Exchange Company Limited(The) Giltbrook Retail Park Nottingham Limited Adamant Investment Corporation Limited

Regis Property Holdings Limited Caymall Limited

Reboline Limited

Blaxmill (Twenty-Nine) Limited

British Land Regeneration Limited British Land Superstores (Non-British Land Offices (Non-City) Limited British Land Property Management Limited British Land Retail Warehouses Limited British Land (Joint Ventures) Limited British Land Broadgate 2005 Limited British Land Company Public Limited Company(The) British Land Department Stores Limited

Securitised) Broadgate Circle Management Limited Broadgate Court Investments Limited Broadgate Investment Holdings Limited

Broadgate Square Ltd

Bvp Holdings Limited

Caseplane Limited

Cavendish-Woodhouse (Holdings) Limited

Rigphone Limited Cheshine Properties Limited Six Broadgate Limited Chrisilu Nominees Limited St. Stephens Shopping Centre Limited Stockton Retail Park Limited Tailress Limited Derby Investment Holdings Limited Tpp Investments Limited Elementvirtue Limited Tweed Premier 1 Limited Exchange House Holdings Limited Tweed Premier 2 Limited Finsbury Avenue Estates Limited Tweed Premier 4 Limited Four Broadgate Limited Union Property Corporation Limited Frp Group Limited Urban States Management Limited Stockton Retail Park Limited York House W1 Limited The Beehive Centre Cambridge Limited Union Property Holdings (London) Limited United Kingdom Property Company Limited Westgate Retail Park Wakefield Limited St James Retail Park Northampton Limited

Sprint 1118 Limited Tpp Investments Limited Osnaburgh Street Limited Tweed Premier 1 Limited 8/10 Throgmorton Avenue Limited Tweed Premier 2 Limited Adshilta Limited Tweed Premier 4 Limited Bld (Ebury Gate) Limited

Bld Land Limited

Bld Property Holdings Limited

Lonebridge Uk Limited York House W1 Limited Mercari Holdings Limited Sprint 1118 Limited Minhill Investments Limited Osnaburgh Street Limited Rohawk Properties Limited 8/10 Throgmorton Avenue Limited Plantation House Limited Bl Davidson Limited Rackhams Birmingham Limited Bld (A) Limited Reboline Limited Bld (Edbury Gate) Limited Regis Property Holdings Limited Bld Land Limited Rigphone Limited Bld Properties Limited Six Broadgate Limited Bld Property Holdings Limited Bl Intermediate Holding Company Minhill Investments Limited Limited St James Retail Park Northampton Limited The Retail & Warehouse Company Limited Orbital Shopping Park Swindon Limited

City Wall (Holdings) Limited

Garamead Properties Limited Eastgate Shopping Centre Basildon Limited Cornish Residential Property Investments Cornish Residential Properties Trading Limited

Tailress Limited St. Stephens Shopping Centre Limited

Bl Davidson Limited Union Property Corporation Limited Bld (A) Limited Union Property Corporation Limited Bld Properties Limited Uban Estates Management Limited Adshilta Limited United Kingdom Property Company Limited Westgate Retail Park Wakefield Limited Union Property Holdings (London) Limited The Beehive Centre Cambridge Limited

Lonebridge Uk Limited

Mercari Holdings Limited

Current Directorships Previous Directorships (last 5 years) Rohawk Properties Limited Bl Office Holding Company Limited The Mary Street Estate Limited Blssp (Lending) Limited Bl Retail Holding Company Limited Blssp (Phc 1) Limited Blssp (Phc 10) Limited Blssp (Phc 11) Limited Blssp (Phc 12) Limited Blssp (Phc 14) Limited Blssp (Phc 16) Limited Blssp (Phc 17) Limited Gibraltar General Partnership Limited Blssp (Phc 18) Limited Gibraltar Nominees Limited Blssp (Phc 19) Limited 1 & 4 & 7 Triton Limited Blssp (Phc 2) Limited 2 & 3 Triton Limited Blssp (Phc 20) Limited Blssp (Phc 21) Limited British Land Aqua Partnership Limited Blssp (Phc 22) Limited Euston Tower Limited Blssp (Phc 23) Limited Blssp (Phc 24) Limited Nugent Shopping Park Limited Blssp (Phc 25) Limited Meadowhall Nominee 1 Limited Blssp (Phc 26) Limited Meadowhall Nominee 2 Limited Blssp (Phc 27) Limited Blssp (Phc 28) Limited Blssp (Phc 3) Limited Bl Crawley Blssp (Phc 30) Limited Bl Superstores (Funding) Ltd Blssp (Phc 32) Limited Bl Superstores Finance Plc Blssp (Phc 33) Limited Bls Non Securitised 2012 1 Limited Blssp (Phc 34) Limited Bls Non Securitised 2012 2 Limited Blssp (Phc 35) Limited Blssp (Cash Management) Limited Blssp (Phc 4) Limited Blssp (Phc 6) Limited Blssp (Phc 5) Limited Blssp (Phc 7) Limited Metric Gp Income Plus Limited Blssp (Phc 9) Limited Blssp Property Holdings Limited Yankgold Limited Clarendon Property Company Gallions Reach Limited Selected Land And Property Company Ten Fleet Place Gallions Reach Trustee Limited Vyson BuyUNITE Limited Priory Park Merton Limited Fibbings Limited Pillar Retail No.1 Limited Pencilscreen Limited Pillarcaisse (Banbury) Limited Great Western General Partner (Holdings) Limited British Land Superstores (Non Securitised) Number 2 Limited Moorage (Property Developments) Limited Tartan Holding Company (No.1) Limited Tartan Holding Company (No.2) Limited Metric Income Plus Nominee Limited British Land Aqua Partnership (2) Limited Bl High Street And Shopping Centres Holding Company Limited Bl Office (Non-City) Holding Company Limited Bl Retail Warehousing Holding Company Limited Bl Superstores Holding Company Limited Bl City Offices Holding Company Limited Bl Department Stores Holding Company Limited Bl Leisure And Industrial Holding Company Limited Bl Residual Holding Company Limited

Current Directorships Previous Directorships (last 5 years)

Bl Sainsbury Superstores Limited

Meadowhall (Mlp) Limited Shandwick Square Limited Meadowhall Centre (1999) Limited 175 Bishopsgate Limited Meadowhall Centre Limited 2 Planation Place Limited Meadowhall Contracts Limited Bf Propco (No.11) Limited Meadowhall Finance Plc Bf Propco (No.14) Limited Meadowhall Holdco Limited Bf Propco (No.15) Limited Meadowhall Holdings Limited Bf Propco (No.16) Limited Meadowhall Shopping Centre Limited Bf Propco (No.2) Limited Meadowhall Subco Limited Bf Propco (No.21) Limited Msc (Cash Management) Limited Bf Propco (No.22) Limited Bld (Sj) Investments Limited Bf Propco (No.7) Limited Bld (Sj) Limited Bf Propco (No.8) Limited Bl Osnaburgh St Residential Ltd Bf Propco (No.9) Limited Finsbury Avenue (Phase 3) Limited British Land Silver Moon Limited Jason Estates Rathmines Properties Limited Ludgate Services Limited BLSSP (PHC 13) Limited Sentmodel Company BLSSP (PHC 31) Limited Soluland Limited Meadowhall Oasis Limited Tweed Premier 3 Limited Msc (Funding) Limited Vanuden (General Partner) Limited BL West (1 Fleet Place) Limited West London Leaseholds Limited BL West (10 Fleet Place) Limited Whiteapple Developments Limited Leamouth Construction Company Limited Real Property And Finance Corporation Limited Meadowhall Opportunities Nominee 2 Limited Meadowhall Shopping Centre Property Holdings Limited Msc Property Intermediate Holdings Limited British Land Offices (Non-City) No.2 Limited Meadowhall Opportunities Nominee 1 Limited

BLD UK Limited BLU Holdings Limited Focusjust Limited British Land Broadgate BLD (Standard House) Limited Broadgate Phase 12 Limited Alipore BVP Financing Limited British Land Arch Properties Limited BVP Investments Limited British Land Firmount Limited BVP Plot G Limited Cavat II Limited BVP Properties Limited Clivara Limited

Manjit Wolstenholme

Private Banking Training Limited Ingenious Film Partners 2 LLP Provident Financial Plc Capital & Regional Plc Future Plc

Aviva Investors Holdings Limited Albany Investment Trust Plc The Gala Film Partners, LLP

Manchester Academic Health Science Centre

Bf Propco (No.17) Limited Bf Propco (No.18) Limited Bf Propco (No.20) Limited Bf Propco (No.23) Limited Bf Propco (No.6) Limited 51 Lime Street BLSSP (PHC 15) Limited Shandwick Square Developments Limited

BL West (100 New Bridge Street) Limited

Current Directorships Previous Directorships (last 5 years)

Sir Tim Wilson

Tim Wilson Associates Limited Polyfield Property Limited The University of Law Limited North Herts Hospice Care Association Garden House Hospice Trading Limited

Letchworth Golf Trust Limited The Fit Corporation Limited

UH Holdings Limited

UH Ventures Limited U H Health Limited Hertfordshire Prosperity Limited The Council For Industry And Higher Education Association of Universities of the East of England

Richard Walker

Wapiri Ltd Lookers plc

Elizabeth McMeikan

S. G. Property Investments Ltd. J D Wetherspoon Plc Direct Wines Limited Direct Wines Holdings Limited Fresca Group Limited The Fresca Esop Limited CH & Co Catering Limited St. Rhadegund Properties Limited Moat Homes Limited

9. Employees

9.1 The average number of staff employed by the Group for the three years ended 31 December 2011, 31 December 2012, and 31 December 2013 is set out below:

Financial year ended	Average number of employees
31 December 2011	977
31 December 2012	966
31 December 2013	962

• 9.2 As at 31 December 2013, (being the latest practicable date prior to the date of this document), the Group had 962 employees.
• 9.3 As at 31 December 2013, (being the latest practicable date prior to the date of this document), the employees of the Group were employed as follows:

Head offices (London and Bristol)	333
Regional offices/buildings	629
Total	–––––––– 962
	––––––––

9.4 The Group's employees are not represented by labour unions. The Board considers the Group's relations with its employees to be good.

10. Share Schemes

10.1 UNITE Group Long Term Incentive Plan ("The LTIP")

The LTIP was approved by the Company on 19 May 2011 and replaced the previous LTIP adopted on 8 December 2005. The LTIP is delivered through two share schemes:

• (a) the 2011 Approved Employee Share Option Scheme ("The ESOS"); and
• (b) the 2011 Performance Share Plan ("The PSP").

The ESOS was introduced as a replacement for the former HMRC approved share option plan which had expired. The ESOS is used in conjunction with the PSP to provide a proportion of LTIP awards on a tax efficient basis. The terms of options granted under the ESOS are the same as awards granted under the PSP (subject to HMRC requirements).

Participation

The individual limit on participation in the LTIP in any financial year is 150 per cent. of annual base salary although, in exceptional circumstance (for example for new hires), awards of up to 200 per cent. of annual base salary may be made. Awards for participants below Board level will not normally exceed 100 per cent. of annual base salary.

Awards

Awards made under the PSP will have a performance period of at least three years and a minimum vesting period of three years subject to the achievement of performance conditions set by the Committee. Vesting of awards may, at the discretion of the Committee, be deferred in whole or in part for a period of up to two years following the end of a three year vesting period. The awards made to the Executive Directors in 2012 will vest as to two thirds after three years and one third after four years (to the extent the performance conditions have been achieved over the three year performance period). Awards made to participants other than the Executive Directors will vest as to 100 per cent. after three years to the extent the performance conditions have been achieved. The number of shares vesting at the end of the deferral period may be adjusted by the Remuneration Committee in the instance of a mis-statement of results relating to the performance period.

Limits

The limit on the number of shares which may be issued to satisfy awards and options granted under the ESOS and any other employee plan operated by the Company is 10 per cent. in any 10 year rolling period.

Leavers

Where participants leave due to redundancy, retirement, injury, disability or as a result of their employing subsidiary being transferred out of the group, their vested rights may be exercised within six months of cessation, together with such number of unvested rights as the Committee determines (based on the proportion of the vesting period which the participant was employed). The Committee shall adjust the number of shares vesting to the extent that conditions have not been satisfied over the period to the date of leaving. Where a participant leaves for any other reason, awards lapse on cessation of employment, unless the Committee in its absolute discretion permits vesting based on the proportion of the vesting period during which the participant was employed and the achievement of performance conditions.

Change of Control

Vesting of unvested awards is permitted on a change of control over such number of shares as the Committee determines based on the extent to which performance conditions have been satisfied and the extent to which the vesting period has elapsed at the time of the change of control.

The Committee has a discretion prior to vesting of an award to make a payment in cash or shares equal in value to the dividends that would have been paid on the vested shares in respect of dividend record dates occurring during the vesting period.

The number of unvested PSP awards may be adjusted at the end of the deferred period in the event of mis-statement of results or an error in assessing the achievement of performance conditions, a subsequent fall in the underlying performance of the Group, or in any other circumstance that the Remuneration Committee considers appropriate.

Variations in share capital

The number of shares subject to an Award and the exercise price (where relevant) may be adjusted in the event of a capitalisation, offer by way of rights (including an open offer) or any sub-division, reduction, consolidation or other variation of share capital.

Amendments

The LTIP can be amended by the Committee, provided that no amendments may be made to the benefit of participants, the share capital and individual participation limits, the basis for determining a participant's entitlement to shares and any adjustment in the event of a variation of share capital without the prior approval of the Company in general meeting (except for minor amendments to benefit the administration of the LTIP, to take account of a change in legislation or to obtain or maintain favourable exchange control or regulatory treatment).

ESOS

Options granted under the ESOS must have an exercise price of not less than the market value of an Ordinary Share at the time of grant.

The maximum value of shares under option granted to an individual under the ESOS is £30,000. No change to a key feature of the ESOS may be made without the prior approval of HM Revenue and Customs.

10.2 The Unapproved Company Share Option Scheme

Prior to 2011 the incentive plans under which awards were made were the 2005 LTIP and The UNITE Group plc Unapproved Scheme (the "Unapproved Scheme"). No options have been granted to Directors under the Unapproved Scheme since 2005.

(a) Ordinary Shares currently under option

Options to subscribe for a total of 113,329 Ordinary Shares have been granted under the Unapproved Company Share Option Scheme and remain outstanding as at 4 March 2014.

(b) Pensionability of options

Options granted under the Scheme are not pensionable.

10.3 The UNITE Group plc Savings-Related Share Option Scheme

All employees are eligible to participate in the (the "SAYE Scheme") on the same terms, and options are usually deferred annually.

The current SAYE Scheme was adopted in 2010 and was approved by HMRC under Schedule 3 Income Tax (Earnings and Pensions) Act 2003 on 18 May 2010.

Options may be granted under the SAYE Scheme by the Remuneration Committee. The principal features of the SAYE Scheme are as follows:

(a) Eligibility

All UK resident employees and any directors of the Company required to devote substantially the whole of their working time to the Company and its participating subsidiaries, who are resident in the UK for tax purposes and who have completed such minimum period of service not exceeding 5 years as the Remuneration Committee determines, are eligible to participate.

(b) Scheme limits

No option to subscribe for Ordinary Shares under the SAYE Scheme may be granted to a person if such shares together with any shares issued or remaining issuable in respect of such person's rights granted within the previous ten years under the SAYE Scheme and any other employees' share scheme for the benefit of employees of the Group, would exceed ten per cent. of the Company's issued Ordinary Share capital at that time.

Shares issued from the treasury would be included as "issued" for the purposes of the SAYE Scheme.

(c) Savings Contracts

An eligible employee who applies for an option under the SAYE Scheme must also enter into an HMRC approved savings contract. Under this contract, the employee will agree to make monthly savings contributions of a fixed amount (currently not less than £10 and not more than £250) for either three or five years. Ordinary Shares may only be acquired under the SAYE Scheme on exercise of the option using the amount repaid under this contract. Participants can choose to leave their savings for a further two years in order to acquire shares at the end of the seven year period with an increased bonus. The repayment will be taken as including the bonus payable under the savings contract.

(d) Issue of invitations

The Remuneration Committee may issue invitations to participate in the 42 day periods commencing on the date of the announcement of the Company's interim or final results. In exceptional circumstances, the Remuneration Committee may permit the issue of invitations outside these periods.

(e) Grant of options and scaling down

The Remuneration Committee may specify the maximum number of shares available each time invitations are issued and if applications exceed this figure they will be scaled down accordingly. Options must be granted no later than 30 days (or 42 in the event applications need to be scaled down) of the date by reference to which the exercise price is determined invitations are issued.

(f) Exercise price

The price payable for an Ordinary Share subject to an option will be specified in the invitation (or notified to participants after the invitation is issued) and will not be less than the higher of the nominal value of an Ordinary Share and 80 per cent. of its market value. Market value will be taken as the closing middle market quotation of a share as quoted on the Official List on the business day immediately preceding the date of invitation.

(g) Exercise of options

Options may normally be exercised only during the six month period starting from the date on which the related savings contract matures (the "Bonus Date"). At the end of that period, they lapse.

Exercise is permitted for six months following on the cessation of employment in specified circumstances (such as injury, disability, redundancy, retirement, or the employing company or business leaving the Group). Options will otherwise lapse on cessation of employment.

Early exercise is permitted in the event of a takeover, amalgamation or winding-up of the Company and in specified circumstances options may be exchanged for options in the acquiring company. Options may be satisfied by the issue of new ordinary shares or the transfer of existing shares.

If the option holder dies within six months after the Bonus Date, the option may be exercised by his personal representatives prior to the first anniversary of the Bonus Date. Where an option holder dies before the Bonus Date, his options will be exercisable for 12 months from the date of death.

Options may only be exercised before the Bonus Date to the extent of the savings accumulated to that date, plus interest (if any).

(h) Rights attaching to shares

If shares are to be allotted and issued to a participant pursuant to the exercise of any option, the Company shall apply for such shares to be admitted to the Official List of the UK Listing Authority and to trading on the London Stock Exchange. Such shares will rank pari passu with all other issued shares of the Company except for any rights determined by reference to a date preceding the date on which the option is exercised.

(i) Amendments

The SAYE Scheme may be amended at any time by the Committee, provided that, without the prior approval of the Company in general meeting, no amendments may be made to the advantage of participants without the prior approval of the Company in general meeting (except for minor amendments to benefit the administration of the scheme, to take account of a change in legislation or to obtain or maintain favourable taxation, exchange control or regulatory treatment).

No amendment may be made to the SAYE Scheme which would adversely affect the subsisting rights of a participant unless the consent of a majority of the participants to the making of such amendment is obtained.

Any amendments to a key feature of the Scheme will require prior HMRC approval.

(j) Variation of share capital

The number of shares comprised in an option and/or the exercise price may be adjusted in such manner as the Committee considers fair and reasonable in the event of a capitalisation issue, offer by way of rights (including an open offer) or any sub-division, reduction, consolidation or other variation of the Company's share capital. Such adjustments will require the prior approval of HMRC.

(k) Pensionability of options

Options granted under the SAYE Scheme are not pensionable.

10.4 Employee Trust

The Employee Trust is constituted by a trust deed entered into by the Company and Compass Trustees Limited as trustees ("Trustees") dated 18 September 2000. The current trustee is Close Trustees Jersey Limited. Funds may be lent or gifted to the Employee Trust by any Group Company to acquire Ordinary Shares from time to time which can be used to support the UNITE Share Schemes.

PART XII

ADDITIONAL INFORMATION

1. The Company

• 1.1 UNITE was incorporated and registered in England and Wales on 15 May 1996 under the name Tracklynx Limited and registered with number 03199160 as a private company limited by shares. The Company was re-registered as a public company limited by shares on 24 June 1998 with the name The LDC Group plc and on 17 February 1999 the company changed its name to The UNITE Group plc.
• 1.2 The principal legislation under which the Company operates, and pursuant to which the New Ordinary Shares will be created, is the Act and regulations made thereunder.
• 1.3 The Company is domiciled in England and Wales and its registered and head office is The Core, 40 St. Thomas Street, Bristol, BS1 6JX (telephone number: +44 117 302 7000).
• 1.4 The auditors of UNITE are, and have been throughout the period covered by the financial information in this document, KPMG Audit plc. KPMG Audit plc is a member firm of the Institute of Chartered Accountants in England and Wales.

2. Share Capital

2.1 Share capital summary

(a) As at 1 January 2011, the issued share capital of the Company, all of which was fully paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,268,343	£40,067,085.75

(b) On 15 February 2011, the Company allotted 3,117 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,271,460	£40,067,865.00

(c) As at 31 December 2011, the issued share capital of the Company, all of which was fully paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,271,460	£40,067,865.00

(d) On 16 March 2012, the Company allotted 864 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,272,324	£40,068,081

(e) On 16 May 2012, the Company allotted 1,013 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,273,337	£40,068,334.25

(f) On 4 September 2012, the Company allotted 4,666 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,278,003	£40,069,500.75

(g) On 12 September 2012, the Company allotted 5,198 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,283,201	£40,070,800.25

(h) On 14 September 2012, the Company allotted 1,010 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,284,211	£40,071,052.75

(i) On 28 September 2012, the Company allotted 162,790 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,447,001	40,111,750.25

(j) On 12 October 2012, the Company allotted 8,255 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,455,256	£40,113,814

(k) On 29 October 2012, the Company allotted 288 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,455,544	£40,113,886

(l) On 4 December 2012, the Company allotted 1,638 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,457,182	£40,114,295.50

(m) On 10 December 2012, the Company allotted 819 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,458,001	£40,114,500.25

(n) On 19 December 2012, the Company allotted 3,441 Ordinary Shares pursuant to the exercise of options by certain Shareholders, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,461,442	£40,115,360.50

(o) As at 31 December 2012, the issued share capital of the Company, all of which was fully paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,461,442	£40,115,360.50

(p) On 24 January 2013, the Company issued 2,538 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,463,980	£40,115,995

(q) On 15 February 2013, the Company issued 469 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,464,449	£40,116,112.25

(r) On 14 March 2013, the Company issued 36,308 Ordinary Shares under the Unapproved Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,500,757	£40,125,189.25

(s) On 14 March 2013, the Company issued 2,630 Ordinary Shares under the Approved Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,503,387	£40,125,846.75

(t) On 14 March 2013, the Company allotted 2,630 Ordinary Shares under the Approved Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,506,017	£40,126,504.25

(u) On 14 March 2013, the Company issued 2,458 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,508,475	£40,127,118.75

(v) On 27 March 2013, the Company issued 4,097 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,512,572	£40,128,143.00

(w) On 8 April 2013, the Company issued 3,703 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,516,275	£40,129,068.75

(x) On 9 April 2013, the Company issued 2,630 Ordinary Shares under the Approved Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,518,905	£40,129,726.25

(y) On 10 May 2013, the Company issued 3,974 Ordinary Shares under the Approved Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,522,879	£40,130,719.75

(z) On 13 May 2013, the Company issued 4,097 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	160,526,976	£40,131,744.00

(aa) On 13 June 2013, the Company issued 16,000,000 Ordinary Shares pursuant to placing agreement of the same date, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	176,526,976	£44,131,744.00

(bb) On 4 July 2013, the Company issued 3,429 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	176,530,405	£44,132,601.25

(cc) On 22 October 2013, the Company issued 24,068 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	176,554,473	£44,138,618.25

(dd) On 29 October 2013, the Company issued 55,235 Ordinary Shares under the Unapproved Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	176,609,708	£44,152,427.00

(ee) On 11 December 2013, the Company issued 42,328 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	176,652,036	£44,163,009.00

(ff) On 17 December 2013, the Company issued 5,888 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	176,657,924	£44,164,481.00

(gg) On 6 February 2014, the Company issued 555 Ordinary Shares under the SAYE Scheme, following which the issued share capital of the Company, all of which was paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	176,658,479	£44,164,619.75

(hh) As at 31 December 2013, being the latest date to which audited accounts for the Company have been prepared, the issued share capital of the Company, all of which was fully paid up, was made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares	176,657,924	£44,164,481.00

(ii) As at 4 March 2014 (being the latest practicable date prior to the publication of this document), the issued share capital of the Company, all of which is fully paid up, as at the date of publication of this document is made up as follows:

		Issued
Class of share	Number	Amount
Ordinary Shares of 25 pence	176,658,479	£44,164,619.75

(jj) The issued share capital of the Company, all of which will be fully paid up on or before Admission, as it is expected to be immediately following Admission will be made up as follows:

	Issued
		Nominal
Class of share	Number	Value
Ordinary Shares of 25 pence	201,158,479	£50,289,619.75

(kk) Details of the total number of options (all granted for nil consideration) under the Share Schemes outstanding as at 4 March 2014 (being the latest practicable date prior to the publication of this document) are as follows:

LTIP (PSP):
Date of grant	Number of Ordinary Shares under option	Exercise price (p)	Exercise period
July 2011 & October 2011	1,057,125	Nil cost options	From vesting through to 10 years from date of grant
April 2012	1,333,294	Nil cost options	From vesting through to 10 years from date of grant
April 2013	771,017	Nil cost options	From vesting through to 10 years from date of grant
Total	–––––––– 3,161,436 ––––––––

LTIP (ESOS):
	Number of
	Ordinary Shares	Exercise
Date of grant	under option	price (p)	Exercise period
October 2011	219,475	156.8	From vesting through to 10 years from date of grant
April 2012	240,795	185.2	From vesting through to 10 years from date of grant
April 2013	75,211	319	From vesting through to 10 years from date of grant
Total	–––––––– 535,481 ––––––––
Unapproved Scheme:
	Number of
	Ordinary Shares	Exercise
Date of grant	under option	price (p)	Exercise period
May 2004	10,470	191	Expires May 2014
September 2004	58,662	232.5	Expires September 2014
October 2004	37,180	234	Expires September 2014
April 2005	7,017 ––––––––	285	Expires April 2015
Total	113,329 ––––––––
SAYE Scheme:
	Number of
	Ordinary Shares	Exercise
Date of grant	under option	price (p)	Exercise period
3 or 5 year SAYE schemes issued each year with the oldest outstanding scheme issued for 5 years in December 2008	307,266	Ranging from 138.5 to 315.92 depending on issue year of the scheme	Various schemes with latest scheme expiring May 2019

• (ll) The Ordinary Shares are in registered form and capable of being held in uncertificated form. Application has been made to Euroclear for the New Ordinary Shares to be enabled for dealings through CREST as a participating security. The International Securities Identification Number (ISIN) for the Ordinary Shares is GB0006928617. No temporary documents of title will be issued. It is expected that definitive share certificates will be posted to those Shareholders who have requested the issue of New Ordinary Shares in certificated form by 4 April 2014.
• (mm) The Company does not have in issue any securities not representing share capital and there are no outstanding debentures, convertible securities, exchangeable securities or securities with warrants issued or proposed to be issued by the Company, other than the £89,9000,000 2.50 per cent. guaranteed convertible bonds which were issued by UNITE Jersey Issuer Limited (and guaranteed by the Company) pursuant to a Trust Deed dated 10 October 2013. In certain circumstances, each bond shall entitle the bondholder to convert each £100,000 bond into one fully paid preference share of the issuer, at a paid-up value of £100,000 each. The terms of these bonds are summarised in paragraph 6.7 of this Part XII.
• (nn) As at 4 March 2014 (being the latest practicable date prior to the publication of this document), the Company held no treasury shares.

2.2 Existing Shareholder authorities

• (a) Pursuant to the Act (and the regulations made thereunder) and to a special resolution of the Company dated 18 May 2010, the limit on the maximum number of shares that may be allotted by the Company was removed.
• (b) Pursuant to an ordinary resolution of the Company dated 16 May 2013, the Directors are generally and unconditionally authorised pursuant to section 551 of the Act to:
• (i) allot shares and grant rights to subscribe for or to convert any security into shares (such shares and rights to subscribe for or to convert any security into shares being "relevant securities") up to an aggregate nominal amount of £13,372,037 (such amount to be reduced by the nominal amount of any allotments or grants made under paragraph (ii) below in excess of £13,372,037); and further
• (ii) to allow equity securities (as defined by Section 560(1) of the Act) up to an aggregate nominal amount of £26,744,074 (such amount to be reduced by the nominal amount of any allotments or grants made under paragraph (a) above in connection with an offer by way of rights issue:
  • (A) in favour of holders of Ordinary Shares in the capital of the Company, where the equity securities respectively attributable to the interest of such holders are proportionate (as nearly as may be practicable), to the respective number of Ordinary Shares in the capital of the Company held by them, and
  • (B) to holders of any other equity securities as required by the rights of those securities or as the Directors otherwise consider necessary,

but subject to such exclusions or other arrangements as the Directors consider expedient in relation to treasury shares, fractional entitlements, legal or practical problems under the laws in any territory or the requirements of any relevant regulatory body or stock exchange or any other matter whatsoever,

such authority to expire upon the earlier of the conclusion of the next Annual General Meeting of the Company and the date which is 15 months from the date of passing of the resolution, except that the Directors can during such period make offers or arrangements which could or might require the allotment of relevant securities after the expiry of such period.

• (c) Pursuant to a special resolution of the Company dated 16 May 2013, the Directors are empowered pursuant to section 570(1) of the Act to allot equity securities (as defined in section 560(1) of the Act) of the Company wholly for cash pursuant to the authority of the Directors under section 551 of the Act conferred by paragraph (b) above, and/or by way of a sale of treasury shares by virtue of section 573 of the Act, as if the provisions of section 561 of the Act did not apply to such allotment provided that this power is limited to:
• (i) the allotment of equity securities in connection with an invitation or offer of equity securities to the Shareholders on a fixed record date in proportion (as nearly as practicable) to their respective holdings of shares or in accordance with the rights attached to such shares (but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or as a result of legal, regulatory or practical problems arising under the laws of or the requirements of any overseas territory or by virtue of shares being represented by depository receipts or the requirements of any regulatory body or stock exchange or any other matter whatsoever); and
• (ii) the allotment (other than pursuant to the power referred to in sub-paragraph (i) above) of equity securities up to an aggregate nominal value equal to £2,005,805,

such authority to expire upon the earlier of the conclusion of the next Annual General Meeting of the Company and the date which is 15 months from the date of passing of the resolution, except that the Directors can during such period make offers or arrangements which could or might require the allotment of equity securities after the expiry of such period.

(d) The provisions of section 561 of the Act (to the extent not disapplied pursuant to section 570 of the Act) confer on Shareholders certain rights of pre-emption in respect of the allotment of equity securities (as defined in section 560(1) of the Act) which are, or are to be, paid up in cash and apply to the authorised but unissued equity share capital of the Company. These provisions have been disapplied to the extent referred to above.

3. Summary of the Articles

The Articles, which were adopted pursuant to a special resolution of the Company passed on 18 May 2010, contain, amongst other things, provisions to the following effect:

(a) Objects

Section 31 of the Act provides that the objects of a company are unrestricted unless any restrictions are set out in its articles.

The Articles do not contain any restrictions on the objects of the Company.

Pursuant to section 31 of the Act, the Company has given notice to the Registrar of Companies to remove the Company's objects.

(b) Rights attaching to Ordinary Shares

(i) Voting rights

Subject to the provisions of the Act and the Articles and to any rights or restrictions as to voting attached to any class of shares, at any general meeting on a show of hands, every Shareholder who (being an individual) is present in person has one vote. On a vote on a show of hands, a proxy appointed by one Shareholder has one vote and a proxy appointed by more than one member has one vote, if instructed to vote in the same way by all those Shareholders, and is entitled to one vote for and one vote against, if instructed to vote in different ways by those Shareholders. On a poll, every Shareholder present in person or by proxy or (being a corporation) by a duly authorised representative has one vote for each share of which he is the holder. A Shareholder of the Company shall not be entitled, in respect of any share held by him, to vote (either personally or by proxy) at any general meeting of the Company unless all amounts payable by him in respect of that share in the Company have been paid or credited as having been paid.

(ii) Joint holders

In the case of joint holders of shares, only the vote of the senior holder who votes (and any proxies duly authorised by him) may be counted. For this purpose, the senior holder of a share shall be determined by the order in which the names of the joint holders stand in the register of Shareholders.

(iii) Dividends

Subject to the provisions of the Act and of the Articles and to any special rights attaching to any shares, the Board may by ordinary resolution, declare that out of profits available for distribution dividends be paid to Shareholders of the Company according to their respective rights and interests in the profits of the Company. However, no such dividends shall exceed the amount recommended by the Board. Interim dividends may be paid provided that they appear to the Board to be justified by the profits available for distribution and the financial position of the Company. If at any time the share capital of the Company is divided into different classes, the Board may pay interim dividends in shares which rank after shares conferring preferential rights as well as shares conferring preferential rights, unless at the time of payment any preferential dividend is in arrears.

Except as otherwise provided by the Articles or by the rights attached to shares, all dividends shall be apportioned and paid pro rata according to the amounts paid up or credited as paid up (otherwise than in advance of calls) on the shares during any portion or portions of the period in respect of which the dividend is paid. If any share is issued on terms providing that it shall rank for dividend as from a particular date, or be entitled to dividends declared after a particular date, it shall rank for or be entitled to dividends accordingly.

Unless otherwise provided by the rights attached to any share, no dividends payable by the Company shall bear interest as against the Company.

The Company in general meeting may, on the recommendation of the Board, by ordinary resolution direct that payment of any dividend declared may be satisfied wholly or partly by the distribution of assets, and in particular, of fully paid shares or debentures of any other company.

The Board may, with the prior authority of an ordinary resolution of the Company and provided the Company has sufficient undistributed profits or reserves to give effect to it, offer the holders of Ordinary Shares the right to elect to receive Ordinary Shares credited as fully paid in whole or in part instead of cash in respect of all or part of any dividend specified in the ordinary resolution.

The Board may, at its discretion make provisions to pay certain Shareholders a dividend in a currency or currencies other than sterling.

Any dividend unclaimed for a period of 12 years from the date on which the dividend became due for payment shall (if the Board so resolves) be forfeited and shall revert to the Company.

(iv) Return of capital

On a winding-up of the Company, the surplus assets remaining after payment of all creditors shall be divided amongst the Shareholders in proportion to the capital which, at the commencement of the winding up, is paid up on their respective shares or the liquidator may, with the sanction of a special resolution of the Company (and any other sanction required by law), divide amongst the Shareholders in specie the whole or any part of the assets of the Company in such manner as shall be determined by the liquidator.

(c) Transfer of shares

Save in the case of shares which have become participating securities for the purposes of the CREST Regulations, title to which may be transferred by means of a relevant system such as CREST without a written instrument, all transfers of shares must be effected by an instrument of transfer in writing in any usual form or in any other form approved by the Board. The instrument of transfer shall be executed by or on behalf of the transferor and (in the case of a transfer of a share which is not fully paid up) by or on behalf of the transferee. The Board may, in its absolute discretion, refuse to register any transfer of certificated shares unless it is:

• (i) in respect of a share which is fully paid up;
• (ii) in respect of a share on which the Company has no lien;
• (iii) in respect of only one class of share;
• (iv) in favour of a single transferee or not more than four joint transferees;
• (v) duly stamped (if required); and

(vi) delivered for registration to the registered office of the Company (or such other place as the Board may from time to time determine) accompanied by the relevant share certificate(s) and such other evidence as the Board may reasonably require to prove the title of the transferor and the due execution by him of the transfer or, if the transfer is executed by some other person on his behalf, the authority of that person to do so,

provided that the Board may not exercise such discretion in such a way as to prevent dealings in such shares from taking place on an open and proper basis.

The Board shall register a transfer of title to any uncertificated share, except the Board may, in its absolute discretion, refuse (subject to any relevant requirements of the London Stock Exchange) to register the transfer of an uncertificated share which is in favour of more than four persons jointly or in any other circumstances permitted by the CREST Regulations.

If the Board refuses to register a transfer of a share it must, within two months after the date on which the transfer was lodged with the Company, send notice of the refusal to the transferee together with its reasons for refusal.

There exist no provisions in the Articles that would delay, defer or prevent a change in control of the Company.

The Ordinary Shares issued are, and the New Ordinary Shares to be issued will be, in registered form. The Ordinary Shares are freely transferable and there are no restrictions on transfer in the UK. Title to the Ordinary Shares in issue or to be issued may be transferred by means of a relevant system such as the CREST system.

(d) Disclosure of interests in shares

The provisions of rule 5 of the Disclosure and Transparency Rules govern the circumstances in which a person may be required to disclose his interests in the share capital of the Company. Amongst other things, this requires a person who is interested in three per cent. or more of the voting rights in respect of the Company's issued Ordinary Share capital to notify his interest to the Company (and above that level, any change in such interest equal to one per cent. or more). In addition, the Code contains further provisions pursuant to which a person may be required to disclose his interests in the share capital of the Company.

Pursuant to the Articles, if a Shareholder, or any other person appearing to be interested in shares held by that Shareholder, has been issued with a notice pursuant to section 793 of the Act and has failed in relation to any shares (the "default shares") to give the Company the information thereby required within the prescribed period from the date of the notice or, in purported compliance with such notice, has made a statement which is false or inadequate in a material particular, then the Board may, at least 14 days after service of the notice, serve on the holder of such default shares a notice ("disenfranchisement notice") pursuant to which the following sanctions shall apply:

• (i) the Shareholder shall not, with effect from the service of the disenfranchisement notice, be entitled in respect of the default shares to be present or to vote (either in person or by proxy) at any general meeting or at any separate meeting of the holders of any class of shares of the Company or on any poll or to exercise any other right conferred by membership in relation to any such meeting or poll; and
• (ii) where the default shares represent at least 0.25 per cent. in nominal value of their class:

• (A) any dividend or other money payable in respect of the shares shall be withheld by the Company which shall not have any obligation to pay interest on it and the Shareholder shall not be entitled to elect in the case of a scrip dividend to receive shares instead of that dividend; and

• (B) subject, in the case of uncertificated shares to the CREST Regulations, no transfer, other than an approved transfer, of any shares held by the Shareholder shall be registered unless:

• the Shareholder is not himself in default as regards supplying the information required; and
• the Shareholder proves to the satisfaction of the Board that no person in default as regards supplying such information is interested in any of the shares which are the subject of the transfer.

The above sanctions shall also apply to any shares in the Company issued in respect of the default shares (whether on capitalisation, a rights issue or otherwise) unless a separate notice is issued in respect of such further shares.

(e) Purchase of own shares

Subject to the provisions of the Act and to any rights for the time being attached to any shares, the Company may with the sanction of a special resolution (in respect of any shares in issue of a class entitling the holders to convert into equity share capital of the Company) enter into any contract for the purchase of its own shares.

(f) Distribution of assets on liquidation

On a winding-up of the Company, the surplus of assets available for distribution shall (after payment of all creditors) be divided amongst the Shareholders in proportion to the amounts paid up on their respective shares at the commencement of the winding-up, or with the sanction of an extraordinary resolution of the Company, be divided amongst the Shareholders in specie in such manner as shall be determined by the liquidator.

(g) Variation of rights

Subject to the provisions of the Act and of the Articles, if at any time the share capital of the Company is divided into shares of different classes, any of the rights attached to any share or class of share in the Company may (unless otherwise provided by the terms of issue of the shares of that class) be varied or abrogated in such manner (if any) as may be provided by those rights or, in the absence of any such provision, either with the consent in writing of the holders of not less than three-quarters in nominal value of the issued shares of the class (excluding any shares of that class held as treasury shares) or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class duly convened and held as provided in the Articles (but not otherwise) and may be so varied or abrogated whilst the Company is a going concern or while the Company is or is about to be in liquidation.

The quorum for such separate general meeting of the holders of the shares of the class shall be not less than two persons present holding or representing by proxy at least one-third in nominal value of the issued shares of the class in question (excluding any shares of that class held as treasury shares).

(h) General Meetings

Subject to the provisions of the Act, annual general meetings shall be held at such time and place as the Board may determine. The Board may convene any other general meeting whenever it thinks fit. A general meeting shall also be convened by the Board on the requisition of Shareholders in accordance with the Act.

A general meeting of the Company (other than an adjourned meeting) shall be called by notice of:

• in the case of an annual general meeting, at least 21 clear days; and

• in any other case, at least 14 clear days (unless, at the relevant time, either of the conditions set out in sub-section 307A(2) and sub-section 307A(3) of the Act have not been met by the Company, in which case at least 21 clear days' notice will be required).

The accidental omission to give notice of general meeting or, in cases where it is intended that it be sent out with the notice, an instrument of proxy, or to give notice of a resolution intended to be moved at a general meeting to, or the non-receipt of any of them by, any person(s) entitled to receive the same shall not invalidate the proceeding at that meeting and shall be disregarded for the purpose of determining whether the notice of the meeting, instrument of proxy or resolution were duly given.

No business shall be transacted at any general meeting unless the requisite quorum is present when the meeting proceeds to business but the absence of a quorum shall not preclude the choice or appointment of a chairman which shall not be treated as part of the business of the meeting. Subject to the provisions of the Articles, two persons entitled to attend and vote on the business to be transacted, each being a Shareholder present in person or a proxy for a Shareholder, shall be a quorum.

With the consent of any general meeting at which a quorum is present the chairman may, and shall if so directed by the meeting, adjourn the meeting from time to time (or indefinitely) and from place to place as he shall determine. The chairman may, without consent of the meeting, interrupt or adjourn any general meeting if he is of the opinion that it has become necessary to do so in order to secure the proper and orderly conduct of the meeting or to give all persons entitled to do so a reasonable opportunity of speaking and voting at the meeting or to ensure that the business of the meeting is otherwise properly disposed of.

Notice of adjournment or of the business to be transacted at the adjourned meeting is not required unless the meeting is adjourned for 14 days or more, in which case at least 7 clear days' notice is required. No business shall be dealt with at any adjourned meeting, the general nature of which was not stated in the notice of the original meeting.

(i) Board authorisation of conflicts

Subject to and in accordance with the Act and the provisions of the Articles, the Board may authorise any matter or situation in which a Director has, or can have, a direct or indirect interest that conflicts, or may possibly conflict, with the interests of the Company. Any such authorisation shall be effective only if:

• (i) any relevant situation arose on or after 1 October 2008;
• (ii) any requirement as to the quorum at any meeting of the Directors at which the matter is considered is met without counting either the conflicted Director or any other interested Director;
• (iii) the matter or situation was agreed to and any relevant resolution was passed without counting the votes of the conflicted Director and without counting the votes of any other interested Director; and
• (iv) the conflicted Director has disclosed in writing all material particulars of the matter, office, employment or position which relates to the matter or situation which is the subject of the conflict or possible conflict.

(j) Directors' interests in contracts

Provided permitted by any relevant legislation and provided that he has disclosed to the Board the nature and extent of his interest in accordance with the Articles, a Director, notwithstanding his office:

(i) may be party to or otherwise interested in any contract, arrangement, transaction or proposal with the Company or in which the Company is otherwise interested;

• (ii) may hold any other office or position of profit under the Company (except that of auditor of the Company or of any subsidiary of the Company) and may act by himself or through his firm in a professional capacity for the Company;
• (iii) may be a Shareholder of or a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by or promoting the Company or in which the Company is otherwise interested or as regards which the Company has any powers of appointment; and
• (iv) shall not, by reason of his office, be liable to account to the Company for any dividend, profit, remuneration, superannuation payment or other benefit which he derives from any such office, employment, contract, arrangement, transaction or proposal or from any interest in any such body corporate and no such contract, arrangement, transaction or proposal shall be avoided on the grounds of any Director having any such interest or receiving any such dividend, profit, remuneration, payment or benefit.

(k) Directors' ability to vote and count for quorum

A Director shall not vote on or be counted in the quorum in relation to, any resolution of the Board or any committee of the Board concerning any transaction or arrangement with the Company in which he has an interest which may reasonably be regarded as likely to give rise to a conflict of interest, save that a Director shall be entitled to vote and be counted in the quorum in respect of any resolution at such meeting if the resolution relates to one of the following matters:

• (i) the giving to him of any guarantee, security or indemnity in respect of money lent or obligations incurred by him at the request of or for the benefit of the Company or any of its subsidiary undertakings;
• (ii) the giving to a third party of any guarantee, security or indemnity in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part, either alone or jointly with others, under a guarantee or indemnity or by the giving of security;
• (iii) where the Company or any of its subsidiary undertakings is offering securities in which offer the Director is or may be entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which the Director is to participate;
• (iv) relating to another company in which he and any persons connected with him do not to his knowledge hold an interest in shares representing 1 per cent. or more of either any class of the equity share capital, or the voting rights, in such company;
• (v) relating to an arrangement for the benefit of the employees of the Company or any of its subsidiary undertakings which does not award him any privilege or benefit not generally awarded to the employees to whom such arrangement relates;
• (vi) concerning insurance which the Company proposes to maintain or purchase for the benefit of Directors or for the benefit of persons including Directors;
• (vii) the funding of expenditure by one or more Directors in defending proceedings against him or them or doing anything to enable such Directors to avoid incurring such expenditure provided that such funding is consistent with, or no more beneficial to him or them than the provisions of the Articles and is permitted pursuant to the provisions of the relevant legislation; or
• (viii) the giving of an indemnity or indemnities in favour of one or more Directors which is/are consistent with, or no more beneficial to him or them than any such indemnities provided pursuant to the Articles (and provided such indemnities are permitted pursuant to the relevant legislation).

A Director may not vote or be counted in the quorum on any resolution of the Board or committee of the Board concerning his own appointment as the holder of any office or position of profit with the Company or any company in which the Company is interested (including fixing or varying the terms of such appointment or its termination).

Where proposals are under consideration concerning the appointments (including fixing or varying the terms of the appointment) of two or more Directors to offices or position of profit with the Company or any company in which the Company is interested, such proposals may be divided and a separate resolution considered in relation to each Director. In such case, each such Director (if not otherwise debarred from voting) is entitled to vote (and be counted in the quorum) in respect of each resolution except that resolution concerning his own appointment.

(l) Directors

The Directors (other than alternate Directors) shall be entitled to receive by way of fees for their services as Directors such sum as the Board may from time to time determine (not exceeding £500,000 per annum in aggregate or such other sum as the Company in general meeting shall from time to time determine). Such sum (unless otherwise directed by the resolution of the Company by which it is voted) shall be divided amongst the Directors in such proportions and in such manner as the Board may determine or, in default of such determination, equally (save where any Director has held office for less than the whole of the relevant period in respect of which the fees are paid).

Each Director shall be entitled to be repaid all reasonable travelling, hotel and other expenses properly incurred by them in or about the performance of his duties as Director. If by arrangement with the Board any Director performs any special duties or services outside his ordinary duties as a Director and not in his capacity as a holder of employment or executive office, he may be paid such reasonable additional remuneration (whether by way of a lump sum or by way of salary, commission, participation in profits or otherwise) as the Board may from time to time determine.

(m) Pensions and benefits

The Board may exercise all the powers of the Company to provide pensions or other retirement or superannuation benefits and to provide death or disability benefits or other allowances or gratuities (whether by insurance or otherwise) for any person who is or who has at any time been a Director or any director of a subsidiary company of the Company or allied to or associated with the Company or such subsidiary or predecessor in business of the Company or any such subsidiary (and for any Shareholder of his family including a spouse or former spouse or civil partner or former civil partner or any person who is or was dependent on him). For this purpose the Board may establish, maintain, subscribe and contribute to any scheme, institution, club, trust or fund and pay premiums.

(n) Indemnification of Directors

Subject to, and to the fullest extent permitted by, law, every Director and every director of any associated company, former Director, alternate Director secretary or other officer of the Company (other than an auditor) shall be fully indemnified out of the assets of the Company against all or any part of any costs, charges, losses, damages and liabilities incurred by him in relation to anything done, omitted or alleged to have been done by him in the actual or purported execution or discharge of his duties or exercise of his powers in relation to the Company or in connection with the Company's activities as trustee of any occupational pension scheme, subject to the exclusions set out in the Articles.

(o) Borrowing powers

Subject to the provisions of the Act and to the provisions set out in the Articles, the Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and assets (present or future) and uncalled capital, or any part or parts thereof, and to issue debentures and other securities whether outright or as collateral security for any debt, liability or obligation of the Company or any third party.

The Board shall restrict the borrowings of the Company and exercise all voting and other rights, powers of control or rights of influence exercisable by the Company in relation to its subsidiary undertakings (if any) so as to secure (so far as regards subsidiary undertakings, as by such exercise as the Board can secure) that the aggregate amount for the time being remaining outstanding of all monies borrowed by the Group (as hereinafter defined) and for the time being owing to persons outside the Group less the aggregate amount of Current Asset Investments (as hereinafter defined) shall not at any time without the previous sanction of the Company in general meeting exceed an amount equal to four times the Adjusted Capital and Reserves.

4. Major Shareholders

4.1 In addition to the interests of the Directors set out in Part XI of this document as at 4 March 2014 (being the latest practicable date prior to the publication of this document), insofar as it is known to the Company, the following persons are, or will at Admission be, interested directly or indirectly in three per cent. or more of the voting rights in respect of the issued Ordinary Share capital of the Company:

	As at 4 March 2014 (being the late practicable date prior to the publication
	of this document)
Name	Number of Ordinary Shares	Percentage of issued Ordinary Shares
FIL Limited/FMR LLC	15,982,915	9.05
Old Mutual Asset Mangers (UK) Limited	10,595,968	6.00
Lloyds Banking Group Plc	8,903,521	5.04
BlackRock, Inc	8,888,323	5.03
Royal London Asset Management Limited	8,122,726	4.60
Franklin Resources Inc	7,756,799	4.39
APG Investments	7,595,530	4.30
Aberforth Partners	6,256,334	3.54
Legal & General Investment Management Limited	5,921,910	3.35
Norges Bank Investment Management	5,508,938	3.12
Principal Financial Group	5,292,581	3.00

No Director nor their immediate families, nor any person connected with any Director within the meaning of section 252 of the Act, has any interests (beneficial or non-beneficial) in any of the shareholders listed above.

Pursuant to DTR5, Shareholders are required to notify the Company of the percentage of voting rights they hold as shareholders (or hold or are deemed to hold through their direct or indirect holding of financial instruments) if, as a result of an acquisition or disposal of shares of financial instruments, the percentage of these voting rights reaches, exceeds or falls below three per cent. and each one per cent. threshold above three per cent. up to 100 per cent.

In the period from 1 January 2013 to 4 March 2014 (being the latest practicable date prior to the publication of this document), the following Shareholders acquired shareholdings requiring notification under DTR5:

• BlackRock, Inc;
• Franklin Resources, Inc;
• Aberforth Partners;

• Legal & General Investment Management Limited;

• Norges Bank Investment Management; and

• Principal Financial Group,

whereas the following ceased to have shareholdings requiring notification under DTR5:

• JP Morgan Asset Management Holdings, Inc;
• Perennial Investment Partners (Australia) Limited;
• Orange European Property Fund NV; and
• Allianz SE.

In the financial year ended 31 December 2012, the following Shareholders acquired shareholdings requiring notification under DTR5:

• Old Mutual Asset Management Limited,

whereas the following ceased to have shareholdings requiring notification under DTR5:

• Fortis Investment Management SA;
• Morgan Stanley Investment Management Ltd;
• BNP Paribas Investment Partners SA; and
• Legal & General Group plc.

In the financial year ended 31 December 2011, the following Shareholders acquired shareholdings requiring notification under DTR5:

• Royal London Asset Management Limited,

and no shareholders ceased to have shareholdings requiring notification under DTR5.

• 4.2 Save as disclosed above, the Directors are not aware of any person who is interested directly or indirectly in three per cent. or more of the existing issued share capital of the Company.
• 4.3 As at 4 March 2014 (being the latest practicable date prior to the publication of this document), the Company was not aware of any person or persons who directly or indirectly, jointly or severally, exercise or could exercise control over the Company, nor is it aware of any arrangements the operation of which may result in a change in control of the Company.
• 4.4 The Company's share capital consists of one class of Ordinary Shares with equal voting rights (subject to the Articles). None of the Company's major shareholders has or will have different voting rights attached to the shares they hold in the Company.
• 4.5 With respect to transactions between The UNITE Group plc and its co-investment vehicles, please see paragraphs 2.7 and 2.8 of Part IV (Information on UNITE) and paragraphs 6.1, 6.2 and 6.3 of this Part XII (Additional Information).

5. Related party transactions

5.1 Pursuant to the USAF Pipeline Agreement, UNITE is required to offer all of its recently completed direct let assets to USAF. USAF is obliged to purchase any offered assets, provided that each asset is 85 per cent. occupied, has a minimum income return (5.5 per cent. for assets in London and 6 per cent. for regional assets) and USAF has sufficient capital. USAF has an LTV target of 40 per cent. and therefore has theoretical capacity to acquire £130 million of assets under the USAF Pipeline Agreement. Since USAF was established in 2006, £1,159 million of assets have been sold/acquired under the USAF Pipeline Agreement. UNITE can receive payment in either cash or units at its discretion.

5.2 Save as disclosed in the financial information set out in the related party note to the financial statements of UNITE for the financial years ended 31 December 2010, 31 December 2011 and 31 December 2012 which are set out in Appendix 1 of this document, the Group has entered into no related party transactions of the kind set out in the Standards adopted according to Regulation (EC) No 1606/2002 during the financial years ended 31 December 2011, 31 December 2012 and 31 December 2013, or during the period between 31 December 2013 and 4 March 2014 (being the latest practicable date prior to the publication of this document).

6. Material Contracts

Part A – material contracts of the UNITE Group

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by UNITE or another member of the Group (i) within the two years immediately preceding the date of this document and are or may be material to the Group or (ii) which contain provisions under which any member of the Group has an obligation or entitlement which is or may be material to the Group as at the date of this document.

6.1 Agreements relating to the constitution and management of the UNITE UK Student Accommodation Fund

(a) Trust Instrument

USAF was established on 1 August 2006 as a Jersey unit trust by means of a trust instrument entered into between Mourant & Co. Trustees Limited (as the Trustee) and USAF Jersey Manager Limited (as the "Trust Manager") as amended and restated on 3 April 2008, 25 July 2008 and 28 April 2010, and as varied by a supplemental trust instrument dated 5 May 2010.

The objects of USAF are to acquire and manage a diversified portfolio of institutional quality UK direct-let student accommodation properties and to:

• (i) hold an ownership interest in the initial portfolio of properties;
• (ii) acquire development assets, acquisition assets and investment assets;
• (iii) acquire ownership interests in investment subsidiaries; and
• (iv) acquire property rights,

and to actively manage the same.

The Trust Instrument sets out the rights and obligations attaching to units in USAF. In particular, a unitholder may transfer its units (but not part of any unit) with the prior written consent of the Manager. A B unitholder may only transfer B Units to an Associate of UNITE Integrated Solutions plc (as the "Property Manager").

Unitholders are entitled to request that their units be redeemed with effect from 30 June or 31 December in any year. Subject to availability of funds, such units shall be redeemed at 98 per cent., of the trust net asset value per unit, as adjusted for any subsequent issues or redemptions of units. Where there are insufficient funds available to redeem units in respect of which redemption requests have been made, the Trust Manager will endeavour to accommodate such requests through seeking purchasers for such units; increasing leverage (subject to the leverage restrictions of USAF); raising additional equity in USAF; and/or, where necessary, selling properties, subject to certain conditions. Where a property is to be sold to satisfy redemptions, it shall first be offered to the Company and, subject to the consent of USAF's advisory committee, shall be sold, if the Company elects, to the Company at its market value plus the notional SDLT (if any).

The Company shall be entitled to redeem its units on the same terms as other unitholders subject to maintaining a minimum combined ownership interest in USAF based on the following marginal ownership percentages: (a) 20 per cent. up to an aggregate net asset value of £300 million; (b) 10 per cent. for that part of aggregate net asset value from £300 million to £500 million; and (c) 5 per cent. for that part of aggregate net asset value greater than £500 million, provided that the Company must maintain an absolute minimum holding of 10 per cent. of the aggregate net asset value.

The Trustee may, at the direction of the Trust Manager, arrange borrowing on behalf of USAF, provided that borrowing may not exceed 60 per cent. of the aggregate market value of all properties owned (or the proportionate interest owned) by USAF, without the consent of USAF's advisory committee.

(b) Property and Asset Management Agreement

Pursuant to the terms of the Property and Asset Management Agreement dated 7 November 2006 between, inter alia, the Trustee, the Trust Manager, USAF Management Limited and the Property Manager, the Property Manager provides investment advice to the Trust Manager, as well as property and asset management services. The Property Manager's appointment may be terminated in accordance with the provisions of the Property and Asset Management Agreement and the Trust Instrument.

The Property Manager shall be entitled to the following cash fees in respect of the provision of its services:

• (i) an asset management fee equivalent to 0.5925 per cent. per annum of the proportion of the market value of the properties owned by USAF and attributable to third party investors;
• (ii) a cash management fee equal to 0.1 per cent. per annum of the average daily cash balance (excluding certain amounts) held by USAF; and
• (iii) an acquisition fee of 1 per cent. of the acquisition price of any asset acquired by USAF from third parties other than the Company.

In addition to those fees paid in cash, UNITE is entitled to a performance fee payable in units which is calculated as 25 per cent. of any cumulative returns over a 9 per cent. internal rate of return.

USAF will meet all the direct costs associated with the operation of properties held by USAF.

(c) USAF Pipeline Agreement

Development Assets

Under the terms of the USAF Pipeline Agreement dated 7 November 2006 (as amended by a deed of variation dated 3 April 2008) and between the Company, USAF and the Trust Manager, USAF agrees to purchase all UK direct-let student accommodation properties that have been developed and are owned by the Company or its associates ("Development Assets"), subject to such Development Assets, individually or as a portfolio, satisfying USAF's investment and operating criteria and subject to USAF having sufficient funds. This does not apply to certain excluded properties.

The Company is obliged to notify the Trust Manager once the relevant Development Asset(s) meet(s) the investment and operating criteria. Subject to the satisfaction of certain conditions, including that USAF has sufficient funds in accordance with the Trust Instrument to complete the acquisition, USAF will acquire the relevant Development Asset(s). The purchase price of the relevant Development Asset(s) will be its/their market value.

The Company may retain or dispose of a Development Asset to a third party if such Development Asset fails to meet the investment and operating criteria within 24 months of reaching practical completion. The obligation on the Company to sell Development Assets to USAF ceases when the Trust Manager determines that USAF no longer has sufficient funds available from the undrawn amounts committed by investors prior to completion of the proposed transaction, to meet the anticipated purchase price.

Acquisition Assets

The Company agrees to notify USAF of existing UK direct-let student accommodation properties that the Company has identified for potential acquisition by USAF from third parties ("Acquisition Assets") and which meet the investment and operating criteria as soon as reasonably practicable. Subject to the foregoing and USAF having sufficient funds, USAF is obliged to acquire the Acquisition Asset once terms are agreed with the third party. If the Acquisition Asset does not meet the investment and operating criteria, and USAF has sufficient funds in accordance with the Trust Instrument, the approval for the acquisition by the advisory committee is required prior to USAF acquiring the Acquisition Asset, in the absence of such consent such Acquisition Asset may be acquired by the Company.

The USAF Pipeline Agreement terminates on the earlier of the termination of USAF and the Property Manager ceasing to be an associate of the Company.

6.2 OCB Development joint venture

A joint venture was entered into in the form of a shareholders' agreement between (1) UCCJ, (2) OCBES and (3) OCB UNITE Property Holdings (Jersey) Limited ("JVCo") on 11 August 2009 (the "Joint Venture Agreement") whereby the principal joint venture entity is a newly incorporated Jersey resident private limited company, JVCo. Shares in JVCo are held by UCCJ and OCBES (the "Joint Venture Shareholders") in the following proportions:

• (a) UCCJ: 25 per cent.; and
• (b) OCBES: 75 per cent.

Under the terms of the Joint Venture Agreement, transfers of the shares in JVCo are not permitted to companies outside of the Group. Material default by a Joint Venture Shareholder results in the nondefaulting Joint Venture Shareholder having the right to acquire the interest of the defaulting shareholder.

Each Joint Venture Shareholder has the right to appoint an equal number of directors to the board of JVCo. Under the terms of the Joint Venture Agreement certain reserved matters must also be approved by OCBES. Where a matter to be considered by the board is a "Conflict Matter", the conflicted directors are precluded from voting.

In the case of a deadlock among the board:

• (i) the matter in dispute is referred to the Chief Executive Officers of the Company and OCB for resolution; or
• (ii) where the dispute is deemed to be a matter relating to the development of a property or to the day to day management of the business, the decision is to be referred to a third party expert.

Certain properties (the "Properties") are held via a series of subsidiaries of JVCo. UNITE Integrated Solutions plc is appointed as development and property and asset manager of the Properties. Under the Joint Venture Agreement, either Joint Venture Shareholder may call for a disposal of any or all of the Properties at any time after the third anniversary of the date of the Joint Venture Agreement.

6.3 Agreements relating to UCC and LSAV

(a) UNITE Capital Cities joint venture

UNITE Capital Cities is a joint venture with GIC Real Estate, the real estate investment arm of the Government of Singapore Investment Corporation ("GIC").

On 13 September 2012, LDC (Imperial Wharf) Limited and UNITE (Capital Cities) Jersey Limited (being wholly owned subsidiaries of the Company) entered into an Amended and Restated Unitholders' Agreement in relation to the UCC pursuant to which the unitholders (including Euro Hall, a subsidiary of Government of Singapore Investment Corporation (Realty) Pte Limited agreed (among other things) to extend the term of UCC to 13 September 2022, to use reasonable endeavours to equalise the ownership of UCC (such that the Company will seek to increase its ownership share from 30 per cent. to 50 per cent. and to merge UCC with the LSAV Unit Trust.

On the same date, Mourant & Co. Trustees Limited (as managing trustee of UCC) entered into an Amended Trust Instrument in relation to UCC to include a mechanism by which the Company (through its subsidiaries) may equalise its ownership of UCC by a number of means, including the acquisition of units in UCC from GIC, the crystallisation and reinvestment of the Company's performance fee in UCC, the disposal of certain assets by UCC and the potential transfer by the Company at market value of the property known as Waterloo Road, London to UCC (that transaction being recorded in a Put Option and Asset Contract dated 13 September 2012 and made between LDC (Hampton Street) Limited (as seller), UNITE Capital Cities Limited Partnership (as buyer) and the Company (as guarantor of the seller)).

(b) London Student Accommodation Venture

On 13 September 2012, the following material contracts were entered into in connection with the formation of LSAV (a newly formed 50:50 joint venture between the Company and GIC):

• (1) Trust Instrument constituting LSAV Unit Trust between LSAV (Trustee) Limited (as trustee) and LSAV (Jersey Manager) Limited (a wholly owned subsidiary of the Company) (as manager);
• (2) Unitholders Agreement in relation to the LSAV Unit Trust made between UNITE (Capital Cities) Jersey Limited ("UCCJL", a wholly owned subsidiary of the Company) and Euro Hall, a subsidiary of GIC);
• (3) Shareholders' Agreement between UCCJL, Euro Fairview Private Limited (a subsidiary of GIC) and LSAV Holdings Limited (being the parent company of the trustee of the LSAV Unit Trust) and relating to LSAV Holdings Limited; and
• (4) Limited Partnership Agreement between LSAV (GP) Limited (as general partner) and LSAV (Trustee) Limited (as trustee of LSAV Unit Trust) (as limited partner) constituting LSAV (Property Holdings) LP.

Pursuant to the above contracts each of UCCJL and Euro Hall has made a commitment to invest up to £100,000,000 (principally by way of subscription for units in LSAV Unit Trust) to finance the acquisition, development and management of student accommodation in London by the LSAV joint venture. The joint venture is for an initial term of 10 years. It is jointly controlled by subsidiaries of the Company and GIC with certain management functions being delegated to subsidiaries of the Company pursuant to the following management agreements (each dated 13 September 2012):

• (1) Asset Management Agreement between (among others) LSAV (Property Holdings) LP, UNITE Integrated Solutions plc (as manager) and the Company. UIS is appointed to provide (among other things) asset management services, investment management services, property management services and administration services to the LSAV venture in return for which UIS receives an annual management fee equal to 0.5 per cent. of the aggregate value of the LSAV properties.
• (2) Property Management Agreement between LSAV (GP) Limited, UIS (as manager) and the Company. UIS is appointed to provide property management services in respect of the LSAV properties in return for which UIS receives a management fee equal to 6.2 per

cent. of the aggregate rental income paid in each quarter in respect of the LSAV properties.

• (3) Development Management Agreement between LSAV (GP) Limited, UIS (as manager) and the Company. UIS is appointed to provide development management advice and services in respect of the LSAV properties in return for which UIS receives a management fee equal to approximately 4 per cent. of the development costs in respect of each development project undertaken by the LSAV joint venture.
• (4) London Development Pipeline Agreement between UIS (as pipeline manager), the Company, LSAV (Property Holdings) LP and LSAV (GP) Limited. The agreement sets out the basis upon which the Company and UIS are obliged to source and offer development opportunities to the LSAV joint venture. During the period in which the LSAV joint venture has capital available to invest in the development of student accommodation properties, the agreement precludes the Company from acquiring, managing or developing student accommodation properties in London without first offering the opportunity to the LSAV joint venture. UIS receives a management fee equal to 1 per cent. of the anticipated development costs in respect of each development project to be undertaken by the LSAV joint venture.

On 13 September 2012, the Company (through a number of its wholly owned subsidiaries) entered into the following material contracts to sell, on a forward commitment basis, two of the Company's existing London development projects (following practical completion and stabilisation):

• (1) Forward Unit Sale Agreement between UCCJL and USAFJIL, a wholly owned subsidiary of the Company) (as sellers), LSAV (GP) Limited and LSAV Holdings Limited (as buyers), the Company (as guarantor of the sellers) and UIS (as developer) for the sale and purchaser of all the units in LDC (Ferry Lane 2) Unit Trust, being the holding vehicle for the property known as North Lodge, Tottenham Hale;
• (2) Forward Unit Sale Agreement between UCCJL and USAFJIL (as sellers), LSAV (GP) Limited and LSAV Holdings Limited (as buyers), the Company (as guarantor of the sellers) and UIS (as developer) for the sale and purchaser of all the units in LDC (Stratford) Unit Trust, being the holding vehicle for the property at Stratford City;
• (3) Forward Share Sale Agreement between LDC (Ferry Lane 2) Holdings Limited (a wholly owned subsidiary of the Company) (as seller), LSAV (GP) Limited (as buyer) and the Company (as guarantor of the seller) for the sale and purchase of the entire issued share capital in LDC (Ferry Lane 2) GP1 Limited and LDC (Ferry Lane 2) GP2 Limited to LSAV GP for a nominal consideration of £2.

6.4 Bank facilities

The following are the Group's material banking facilities:

(a) Massachusetts Mutual Life Insurance Company – £124 million facility

A term loan facility was entered into on 29 January 2014. The borrower is LDC (Porfolio 20) Limited and the lender is Massachusetts Mutual Life Insurance Company. The total commitments under the facility are £100 million, and the maturity date of the facility is 29 January 2024.

The interest rate applicable to the loan advanced pursuant to the facility will be as set out in a separate rate fixing letter, and shall be the aggregate of the swap rate (as will be defined in the rate fixing letter) and the margin of 1.75 per cent. per annum. The facility contains certain financial covenants including:

• (i) at all times following the first anniversary on which the loan is made, the historic interest cover must be at least 150 per cent.;
• (ii) at all times, the projected interest cover must be at least 150 per cent; and
• (iii) the LTV must not exceed 75 per cent.

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

(b) Legal and General Pensions Limited – £149 million loan facility

On 19 December 2013, a facility agreement was entered into for the purposes of property financing, between UNITE Capital Cities Limited Partnership, LDC (Capital Cities) Limited, LDC (Capital Cities Nominee No.1) Limited, UNITE Accommodation Management Ig Limited, LGIM Commercial Lending Limited, Legal & General Pensions Limited and LGIM Commercial Lending Limited. The total commitments under the facility are £149 million and the final maturity date of the facility is 19 December 2022.

Pursuant to the facility agreement, certain assets of the Company are secured.

The interest rate of the facility is the aggregate of the applicable margin, applicable ask rate and the mandatory costs.

The facility agreement also contains representations, undertakings and events of default typical for loan facilities of this type.

(c) Royal Bank of Scotland plc – £77 million loan facility

In December 2013, a term loan facility agreement was entered into for the lower of:

• (i) £76,700,000;
• (ii) 68.2 per cent of the aggregate market value of the properties listed in the agreement; and
• (iii) an amount sufficient to ensure that the Historic Interest Cover (as defined in the agreement) at the date of the agreement.

The borrower is UNITE Capital Cities Two LP (acting by its general partner LDC Capital Cities Two (GP) Limited) and the lender is Royal Bank of Scotland Plc.

The interest payable on the facility is (for each interest period) the percentage rate per annum which is the aggregate of the applicable margin (determined in accordance with the relevant LTV ratio) and LIBOR.

Under the facility, the borrower has given certain covenants, including that it will not create or permit to subsist any security over any of its assets, and that it shall not issue any further shares or amend any rights attaching to issued shares.

Additionally, the facility agreement contains representations, undertakings and events of default typical for loan facilities of this type.

(d) Legal and General Pensions Limited – £121 million loan facility

On 27 April 2012, a term loan facility was entered into for the purposes of property financing. The borrower is LDC (Portfolio 100) Limited and the lender is Legal and General Pensions Limited. The total commitments under the facility are £121 million, and the maturity date of the facility is 27 April 2022.

The interest rate of the facility is fixed at 5.05 per cent. for the duration of the loan.

The facility contains no LTV covenant, but does have a Loan Service Cover covenant of 150 per cent. The loan will amortise to £109 million, with a 55 per cent. loan to value covenant, by 2022.

Additionally, the facility agreement contains representations, undertakings and events of default typical for loan facilities of this type.

(e) Nationwide Building Society – £100 million loan facility

A facility agreement relating to a sterling revolving loan facility for a maximum of £100 million was entered into on 20 April 2009 between (1) LDC (Portfolio Ten) Limited and (2) Nationwide Building Society (as original lender, arranger, agent and security trustee). The maturity date of the loan facility is 20 April 2014.

The interest rate applicable to loans advanced pursuant to the facility agreement is the aggregate of applicable margin, LIBOR and mandatory costs (if any) for the selected interest period. The margin is determined by the operation of a ratchet mechanism based on a loan to value ratio of the financed properties, subject to a minimum and maximum level.

The facility agreement contains certain financial covenants, which include:

• (i) a loan to value covenant requiring the amount of the loans advanced to be no greater than 75 per cent., of the value of the financed properties:
• (ii) an interest cover covenant requiring the cashflow attributable to the financed properties to be at least 130 per cent., of the finance costs attributable to the financed properties; and
• (iii) an occupancy cover covenant requiring at least 80 per cent., of the rooms in the financed properties to be occupied.

Additionally, the facility agreement contains representations, undertakings and events of default typical for loan facilities of this type.

(f) BNP Paribas – £34 million loan facility

A term loan facility was entered into on 27 May 2007 before being amended and restated on 29 November 2010, for the purposes of property financing. The borrowers are LDC (Curzon Street) Limited; LDC (Hampton Street) Limited; and LDC (Nairn Street) Limited; and the lender is BNP Paribas. The total commitments under the facility are £34 million, and the maturity date of the facility is 30 November 2015.

The interest rate applicable to loans advanced pursuant to the facility is the aggregate of applicable agreed margin, LIBOR and mandatory costs (if any) for the relevant interest period.

The facility contains certain financial covenants including:

• (i) LTV covenant of 70 per cent.; and
• (ii) ICR covenant of 130 per cent.

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

(g) National Westminster Bank plc – £82 million loan facility

On 28 February 2012, revolving term loan, working capital and overdraft facilities were entered into with National Westminster Bank plc (as lender).

The revolving term loan facility was entered into for the purposes of property financing. The borrowers are LDC (Mansfield) Management Limited Partnership and LDC (Thurso Street) Management Limited. The total commitments under the facility are £82 million, and the maturity date of the facility is 30 September 2015.

The facility includes various financial covenants including:

• (i) a tangible net worth covenant of £250m;
• (ii) LTV covenant of 65 per cent.; and
• (iii) ICR covenant of 150 per cent.

The working capital facility was entered into for the purposes of providing short term working capital. The borrower is the Company. The total commitments under the facility are £10 million, and the maturity date of the facility is 30 September 2015.

(h) Barclays Bank plc – £67.4 million loan facility

On 17 September 2010, a term loan facility was entered into. The borrower is LDC (Gt Suffolk St) Limited Partnership acting by its general partners LDC (Gt Suffolk St) GP1 Limited and LDC (Gt Suffolk St) GP2 Limited and the lender is Barclays Bank plc. The total commitments under the facility are £67.4 million, and the maturity date of the facility is 16 September 2015.

The interest rate applicable to loans advanced pursuant to the facility is the aggregate of applicable agreed margin, LIBOR and mandatory costs (if any) for the relevant interest period.

The facility contains certain financial covenants including:

• (i) a LTV covenant between 60 and 65 per cent. depending on the ICR covenant; and
• (ii) an ICR of between 115 and 175 per cent. depending on the LTV covenant.

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

(i) HSBC Bank plc – £48.4 million loan facility

In 30 January 2012, a term loan facility was entered into. The borrower is LDC (St Pancras Way) Limited Partnership acting by its general partners LDC (St Pancras Way) GP1 Limited and LDC (St Pancras Way) GP2 Limited and the lender is HSBC Bank plc. The total commitments under the facility are £48.8 million, and the maturity date of the facility is 31 October 2016.

The interest rate applicable to loans advanced pursuant to the facility is the aggregate of applicable agreed margin, LIBOR and mandatory costs (if any) for the relevant interest period.

The facility contains certain financial covenants including:

• (i) a LTV covenant of 70 per cent.; and
• (ii) an ICR covenant of 130 per cent. until 30 January 2016, then increasing to 150 per cent.

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

(j) HSBC Bank plc – £43.9 million loan facility

On 18 January 2012, a term loan facility was entered into. The borrower is LDC (Project 110) Limited and the lender is HSBC Bank plc. The total commitments under the facility are £43.9 million, and the maturity date of the facility is 31 October 2016.

The interest rate applicable to loans advanced pursuant to the facility is the aggregate of applicable agreed margin, LIBOR and mandatory costs (if any) for the relevant interest period. The facility contains certain financial covenants including:

• (i) a LTV covenant of 65 to 70 per cent.; and
• (ii) an ICR covenant of 130 per cent. until 18 January 2016, then increasing to 150 per cent.

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

(k) Lloyds TSB Bank plc – £25 million facility

A revolving credit facility was entered into on 18 June 2013. The borrowers are USAF No.1 Limited Partnership (acting through its general partner USAF GP No.1 Limited), USAF No.10 Limited Partnership (acting through its general partner USAF GP No.10 Limited), Filbert Village Student Accommodation, L.P. (acting through is general partner Filbert Village GP Limited) and the lender is Lloyds Bank TSB plc. The total commitment under the facility is £25 million and the maturity date of the facility is 18 June 2018.

The interest rate applicable to the loan advanced pursuant to the facility will be the aggregate of the applicable margin, LIBOR and mandatory cost (if any) per annum. The facility contains certain financial covenants including:

• (i) the LTV must be:
• (A) in relation to any loan drawn on the first anniversary of the utilisation date, less than or equal to 55 per cent. (taking into account the proposed loan); or
• (B) in relation to any loan drawn after the first utilisation date, less than or equal to 65 per cent. (taking into account the proposed loan).

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

(l) National Westminster Bank plc – £25 million facility

A group of accounts overdraft facility was entered into on 12 June 2009 (as amended from time to time). The borrowers are The UNITE Group plc, UNITE Modular Solutions Limited, UNITE Integrated Solutions plc, LDC (Holdings) plc and UNITE FM Limited and the lender is National Westminster Bank plc acting through The Royal Bank of Scotland plc. The purpose of the facility is to manage he balances on a number of accounts in the name of the borrowers (the "Facility Accounts"), and to provide an additional overdraft for general business purposes. Credit and debit balances across the Facility Accounts are grouped together to measure the total drawn under the facility. Under the facility, the Facility Accounts may be overdrawn so long as:

• (i) the total of the debit balances on the Facility Accounts, reduced by the total of the credit balances on the Facility Accounts does not exceed £10 million; and
• (ii) the total of the debit balances on the Facility Accounts does not exceed £25 million.

The interest rate applicable to the amounts overdrawn under the facility are:

• (i) zero per cent. per annum where the total of the debit balances on the Facility Accounts equal the total of the credit balances on the Facility Accounts;
• (ii) 2.50 per cent. per annum over the National Westminster Bank plc's base rate on any amounts by which the debit balances on the Facility Accounts exceed the credit balances on the Facility Accounts, up to a limit of £10 million; and
• (iii) 7.25 per cent. per annum over the National Westminster Bank plc's base rate on any amounts by which the debit balances on the Facility Accounts exceed the credit balances on the Facility Accounts by more than £10 million.

The facility is secured and repayable on demand.

(m) Bank of Scotland – £10.98 million term facility

An overdraft facility (to be transferred to a term facility, pursuant to the agreement) was entered into on 13 November 2002. The borrower is LDC (Loughborough) Limited and the lender is Bank of Scotland. The total commitment under the overdraft facility was £10,396,000 to be extended up to £10,396,000 under the term facility. The maturity date is 20 years from the first draw down of the term loan facility.

The interest rate applicable to the term facility is the total of one and one eight per cent. plus three month LIBOR plus mandatory liquidity asset costs.

The facility contains the following security cover:

• (i) the realisation value of the property charged in favour of the bank shall not be less than 130 per cent. of the amount of the term loan outstanding from time to time;
• (ii) in the event that the realisation value does not equal 130 per cent. of the borrower's total indebtedness under the facility, the borrow shall (upon written demand of the bank):
• (A) reduce the amount of the facility; or
• (B) provide additional security, which shall ensure the compliance with the financial covenant.

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

6.5 6.125 per cent. Retail Bonds due 2020

£90,000,000 6.125 per cent. retail bonds were issued by the Company in December 2012. A trust deed was entered into between Company and U.S. Bank Trustees Limited on 12 December 2012 (the "2012 Trust Deed") which created the bonds. The bonds are issued in the domination of £100 (each with bearer coupons attached on issue). They are transferrable, unsecured and shall rank at least equally with the Company's other present and future unsecured and unsubordinated obligations.

Pursuant to the 2012 Trust Deed, the Company covenants that it will ensure that none of its subsidiaries will create any security interest, other than a "permitted interest" (as defined below), upon the whole or any part of its present or future undertaking, assets or revenues.

A "permitted security interest" means one of the following:

• (a) any security interest existing on assets at the time of their acquisition or securing relevant indebtedness of a person existing at the time that such person is merged into or consolidated with the issuer of becomes a subsidiary, provided that such security interest was not created in contemplation of such acquisition, merger or consolidation or event and in the case of a merger or consolidation, does not extend to any assets or property of the issuer or any subsidiary;
• (b) any security interest which is in existence prior to the date of issue and any renewal or perfection undertaken on such security interest pursuant to an amendment, restatement or re-financing of the relevant underlying indebtedness; or
• (c) any security interest mandatorily imposed by law.

The interest rate applicable to the bonds is 6.125 per cent. per annum, payable semi-annually in equal instalments of £3.0625 per £100 until the due date for redemption. Unless previously redeemed or purchased and cancelled, the bonds will be redeemed at their principal amount on 12 June 2020. Bonds may be redeemed at the option of the Company, for example for taxation reasons, or by the bondholders upon a change of control of the Company.

The Company has given certain covenants, including the following financial covenants:

• (a) a LTV covenant of 75 per cent.; and
• (b) an ICR covenant, requiring the ratio of net see-through operating income to net see-through financing costs to be at least 1.5.

In certain circumstances, such as non-payment, insolvency or cross-acceleration, U.S. Bank Trustees Limited may give notice to the Company that the bonds are due, and they shall immediately become due and payable at their principal amount (together with any interest).

6.6 Guaranteed Convertible Bonds due 2018

£89,900,000 2.50 per cent. guaranteed convertible bonds were issued in October 2013. A trust deed was entered into between the Company (as guarantor), UNITE Jersey Issuer Limited (the "Issuer") and BNY Mellon Corporate Trustee Services Limited on 10 October 2013 (the "2013 Trust Deed").

The bonds are in registered form and in principal amounts of £100,000 each. They constitute direct, unconditional, unsubordinated and unsecured obligations which shall rank at least equally with the Issuer's other present and future unsecured and unsubordinated obligations. Subject to the terms of an agency agreement dated 10 October 2013, the bonds may be transferred.

Pursuant to the 2013 Trust Deed, the Company covenants that it will ensure that none of its subsidiaries will create any security interest, other than a "permitted interest" (as defined below), upon the whole or any part of its present or future undertaking, assets or revenues.

A "permitted security interest" means one of the following:

• (a) any security interest existing on assets at the time of their acquisition (or securing relevant indebtedness of a person existing at the time that such person is merged into or consolidated with the guarantor or becomes a subsidiary) provided that such security interest was not created in contemplation of such acquisition, merger or consolidation or event, and in the case of a merger or consolidation, does not extend to any assets or property of the guarantor or any subsidiary;
• (b) any security interest which is in existence prior to the closing date and any renewal or perfection undertaken on such security interest pursuant to an amendment, restatement or re-financing of the relevant underlying indebtedness; or
• (c) any security interest mandatorily imposed by law.

The interest rate applicable to the bonds is 2.50 per cent. per annum, payable in semi-annual instalments each year. Each bond will cease to bear interest from:

• (a) in respect of any conversion right which has been exercised, the interest payment date immediately preceding the relevant date of conversion; or
• (b) in respect of any bond which is redeemed or repaid, from the due date of redemption or repayment.

In certain circumstances, each bond shall entitle the bondholder to convert each £100,000 bond into one fully paid preference share of the Issuer, at a paid-up value of £100,000 each. All preference shares issued on conversion of bonds shall automatically be transferred on the relevant conversion date from the bondholder to the Company. The Company will then issue or transfer to the relevant bondholder the number of Ordinary Shares as is determined by dividing the aggregate paid-up value in respect of the preference shares by the Exchange Price (as defined in the 2013 Trust Deed), on the relevant conversion date.

Unless previously redeemed, converted or purchased and cancelled, the bonds will be redeemed at their principal amount on 10 October 2018. Bonds may be redeemed at the option of the Company, for example for taxation reasons, or by the bondholders upon a change of control.

In certain circumstances, such as non-payment and no-performance of obligations, BNY Mellon Corporate Trustees Limited may give notice to the Company that the bonds are due, and they shall immediately become due and payable at their principal amount (together with any interest).

The Company, as guarantor, gives certain undertakings to BNY Mellon Corporate Trustees Limited, including that it will not modify the rights attaching to Ordinary Shares with respect to voting, dividends or liquidation and that it will not reduce its share capital (save in certain circumstances).

6.7 Placing Agreement in respect of 2013 Placing

The Company carried out a placing to raise £49.9 million (net of commissions and expenses) in June 2013. A placing agreement in respect of this placing was entered into between the Company, J.P. Morgan Cazenove and Numis on 13 June 2013 pursuant to which J.P. Morgan Cazenove and Numis agreed, subject to certain conditions, to act as agent for the Company and to use their reasonable endeavours to procure subscribers for 16,000,000 Ordinary Shares at 320 pence per share, failing which, they would subscribe themselves, as principal, for the shares not taken up.

The placing agreement contained warranties from the Company in favour of J.P. Morgan Cazenove and Numis in relation to matters relating to the Group and its business. In addition, the Company agreed to indemnify J.P. Morgan Cazenove and Numis in respect of certain liabilities they might incur in respect of that placing.

The Company agreed to pay all of J.P. Morgan Cazenove and Numis' costs and expenses (including any applicable VAT) in respect of the placing.

6.8 Placing Agreement in respect of the Firm Placing and Placing and Open Offer

Under the Placing Agreement, J.P. Morgan Cazenove, Numis and Jefferies have severally agreed, subject to certain conditions, as agents for the Company to each use their reasonable endeavours to procure subscribers for the New Ordinary Shares at the Issue Price, failing which, they have severally agreed to subscribe themselves, as principal, for any New Ordinary Shares not taken up in the Firm Placing and Placing or in the Open Offer.

Under the Placing Agreement, J.P. Morgan Cazenove and Numis have agreed to act as Joint Sponsors to the Company under the Listing Rules in connection with the application for Admission.

The Placing Agreement is conditional upon, amongst other things, Admission occurring on or before 8.00 a.m. on 27 March 2014 (or such later date as the Company and J.P. Morgan Cazenove, Numis and Jefferies may agree, being not later than 3.00 p.m. on 3 April 2014). The Placing Agreement contains warranties from the Company in favour of J.P. Morgan Cazenove, Numis and Jefferies in relation to, amongst other things, the accuracy of the information in this document and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify J.P. Morgan Cazenove, Numis and Jefferies in respect of certain liabilities they may incur in respect of the Placing. J.P. Morgan Cazenove, Numis and Jefferies have the right to terminate the Placing Agreement in certain circumstances prior to Admission, including, in the event of a breach of the warranties or a force majeure event.

Under the Placing Agreement and subject to it becoming unconditional and not being terminated in accordance with its terms, the Company has agreed to pay J.P. Morgan Cazenove, Numis and Jefferies a commission of 2.25 per cent. on the value at the Issue Price of the New Ordinary Shares allocated under the Firm Placing and Placing and Open Offer together with any applicable VAT, amounting to £2,260,125 in aggregate.

The Company has also agreed to pay each placee in respect of the Open Offer Shares a commission of 1.25 per cent. of the Issue Price multiplied by the number of Open Offer Shares allocated to that placee.

Additionally, the Company has agreed to pay a document fee to the joint sponsors and to pay all of J.P. Morgan Cazenove, Numis and Jefferies' costs and expenses, and advisers' fees (including any applicable VAT) incurred in connection with the Firm Placing and Placing and Open Offer.

Part B – material contracts of The UNITE Group plc's co-investment vehicles

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by certain co-investment vehicles (i) within the two years immediately preceding the date of this document and are or may be material to the Group or (ii) which contain provisions under which any member of the Group has an obligation or entitlement which is or may be material to the Group as at the date of this document:

6.9 USAF – Commercial Mortgage Backed Notes due 30 June 2028

£380,000,000 3.374 per cent. commercial mortgage backed notes were issued in June 2013. A note trust deed was entered into between Capita Trust Company Limited and UNITE (USAF) II plc (as issuer) on 18 June 2013.

The notes constitute direct, secured, unsubordinated and unconditional obligations on the issuer, and rank equally without preference or priority amongst themselves.

Pursuant to the note trust deed, the issuer makes certain covenants, including that it will not do any of the following:

• (a) create (or permit to subsist) any security interest over any of its assets or undertaking;
• (b) dispose of any of its assets;
• (c) pay any dividend or make any other distribution to shareholders;
• (d) consolidate or merge with any other person; or
• (e) acquire obligations or securities of its shareholders.

The interest rate applicable to the bonds is 3.374 per cent. per annum, payable quarterly in arrears on the 31 March, 30 June, 30 September and 31 December (each an "Interest Payment Date") until the due date for redemption. Unless previously redeemed or purchased and cancelled, the bonds will be redeemed at their principal amount on the Interest Payment Date falling on the 30 June 2028. Bonds may be redeemed at the option of the Company, for example for taxation reasons.

In certain circumstances, such as non-payment, insolvency or failure by the issuer to perform any of its obligations, Capita Trust Company Limited may, at its discretion, give notice to the Company that the bonds are due, and they shall immediately become due and payable at their principal amount (together with any interest).

6.10 USAF – Commercial Mortgage Backed Notes due 30 June 2030

£185,000,000 3.921 per cent. commercial mortgage backed notes were issued in June 2013. As detailed above, a note trust deed was entered into between Capita Trust Company Limited and UNITE (USAF) II plc (as issuer) on 18 June 2013.

The notes constitute direct, secured, unsubordinated and unconditional obligations on the issuer, and rank equally without preference or priority amongst themselves and the initial 3.374 per cent. notes due 30 June 2028.

Pursuant to the note trust deed, the issuer makes certain covenants, including that it will not do any of the following:

• (a) create (or permit to subsist) any security interest over any of its assets or undertaking;
• (b) dispose of any of its assets;
• (c) pay any dividend or make any other distribution to shareholders;
• (d) consolidate or merge with any other person; or
• (e) acquire obligations or securities of its shareholders.

The interest rate applicable to the bonds is 3.921 per cent. per annum, payable quarterly in arrears on the 31 March, 30 June, 30 September and 31 December (each an "Interest Payment Date") until the due date for redemption. Unless previously redeemed or purchased and cancelled, the bonds will be redeemed at their principal amount on the Interest Payment Date falling on the 30 June 2030. Bonds may be redeemed at the option of the Company, for example for taxation reasons.

In certain circumstances, such as non-payment, insolvency or failure by the issuer to perform any of its obligations, Capita Trust Company Limited may, at its discretion, give notice to the Company that the bonds are due, and they shall immediately become due and payable at their principal amount (together with any interest).

6.11 UCC – Legal & General Pensions Limited – £149 million facility

On 19 December 2013, a term loan facility was entered into. The borrower is UNITE Capital Cities Limited Partnership and the lender is Legal & General Pensions Limited. The total commitments under the facility are £149 million, and the maturity date of the facility is 19 December 2022.

The interest rate applicable to loans advanced pursuant to the facility is the aggregate of applicable agreed margin, the ask rate and mandatory cost for the relevant interest period.

The facility contains certain financial covenants, including that:

• (a) the LTV in respect of UCC will not exceed 55 per cent.; and
• (b) the loan to exit value in respect of UCC will not exceed 50 per cent.

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

6.12 UCC – Royal Bank of Scotland plc – £76.7 million facility

On 19 December 2013, a term loan facility was entered into. The borrower is UNITE Capital Cities Two LP (acting by its general partner LDC Capital Cities Two (GP) Limited) and the lender is the Royal Bank of Scotland plc. The total commitments under the facility are £76.7 million, and the maturity date of the facility is 31 January 2019.

The interest rate applicable to loans advanced pursuant to the facility is the aggregate of the applicable margin and LIBOR.

The facility contains the following financial covenants:

• (a) on and from the date of the agreement up to and including the 36 month anniversary of the date of the agreement, the LTV in respect of UCC must not exceed 75 per cent.; and
• (b) thereafter, the LTV in respect of UCC must not exceed 65 per cent.

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

6.13 USAF – Lloyds TSB Bank plc – £92 million facility

In November 2011, a term loan facility was entered into. The borrower is USAF no 8 Limited Partnership and the lender is Lloyds TSB Bank plc. The total commitments under the facility are £92 million, and the maturity date of the facility is 30 September 2016.

The interest rate applicable to loans advanced pursuant to the facility is the aggregate of the applicable margin, LIBOR and mandatory cost (if any).

The facility contains the following financial covenants:

• (a) on and from the date of the agreement up to 30 September 2014, the LTV in respect of USAF shall not exceed 65 per cent. of the market value of the Properties (defined therein); and
• (b) from 1 October 2014, the LTV in respect of USAF must not exceed 60 per cent.

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

6.14 LSAV – HSBC Bank plc – £135 million facility

On 11 December 2013, a term loan facility was entered into. The borrower is LSAV (Angel Lane) LP (acting by its general partners LSAV (Angel Lane) GP1 Limited and LSAV (Angel Lane) GP2 Limited) and the lender is HSBC Bank plc. The total commitments under the facility are £135 million, and the maturity date of the facility is 31 October 2018.

The interest rate applicable to loans advanced pursuant to the facility is the aggregate of the applicable margin, LIBOR and mandatory costs.

The facility contains the following financial covenants:

• (a) the acquisition/development loans ("A&D Loans") for acquisition purpose to value in respect of LSAV must not exceed 65 per cent.;
• (b) the investment loans to value in respect of LSAV must not exceed 60 per cent.;
• (c) the A&D Loans to gross development value in respect of LSAV must not exceed 50 per cent. and
• (d) the A&D Loans to cost in respect of LSAV must not exceed 65 per cent.

Additionally, the facility contains representations, undertakings and events of default typical for loan facilities of this type.

7. Significant subsidiaries

The Company is the principal operating and holding company of the Group. The principal subsidiaries and subsidiary undertakings of the Company are as follows:

			Proportion
			of share
			capital held
	Registration		(per cent.)	Country of
Name	number	Status	(Note 1)	incorporation
LDC (Holdings) plc	02625007	Active	100%	England and Wales
UNITE Holdings plc	03148468	Active	100%	England and Wales
UNITE Integrated Solutions plc	02402714	Active	100%	England and Wales
USAF LP Ltd	05860874	Active	100%	England and Wales
USAF Jersey Investments Ltd	94064	Active	100%	Jersey
UNITE (Capital Cities) Jersey Ltd	89664	Active	100%	Jersey
LDC (Imperial Wharf) Ltd	0451678	Active	100%	England and Wales
UNITE Finance One (Property) Ltd	04303331	Active	100%	England and Wales
USAF Feeder (Guernsey) Ltd	0049501G	Active	51%	Guernsey

Note 1: The proportion of voting power held is the same as the proportion of share capital held.

8. Working capital

In the opinion of the Company the working capital available to the Group is sufficient for the Group's present requirements, that is for at least the next 12 months following the date of this document.

9. Litigation

There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware), during a period covering at least the 12 months preceding the date of this document which may have, or have had in the recent past, significant effects on the Company's and/or the Group's financial position or profitability.

10. Sources and bases of selected financial information

• 10.1 In this document unless otherwise stated financial information relating to the Group has been extracted (without material adjustment) from the audited annual report and accounts for UNITE for the financial years ended 31 December 2011 and 31 December 2012, and from the audited financial results of UNITE for the year ended 31 December 2013 as announced on 6 March 2014, in each case which were reported under IFRS.
• 10.2 Where information contained in this document originates from a third party source, it is identified where it appears in this document together with the name of its source. Such third party information has been accurately reproduced and, so far as UNITE is aware and is able to ascertain from information published by the relevant third party, no facts have been omitted which would render the reproduced information inaccurate or misleading.

11. Significant change

There has been no significant change in the financial or trading position of the Group since 31 December 2013, being the end of the period for which the Group's last audited consolidated financial information was published.

12. Share price history

	High	Low
2013	408.50p	272.10p
2012	287.40p	164.00p
2011	224.10p	152.90p
2010	308.40p	163.00p
2009	300.00p	38.29p
	Financial year ended 2013
Q1	330.00p	272.10p
Q2	387.50p	307.50p
Q3	403.00p	350.00p
Q4	408.50p	370.00p
H1	387.50p	272.10p
H2	408.50p	350.00p
	Financial year ended 2012
Q1	211.50p	164.00p
Q2	199.00p	180.25p
Q3	263.60p	195.00p
Q4	287.40p	260.70p

13. Consent

• 13.1 CBRE Limited, whose address is St Martin's Court, 10 Paternoster Row, London EC4M 7HP, has given and not withdrawn its written consent to the inclusion in this document of its reports in Part IX of this document and the references to its name in the form and context in which they appear and has authorised the contents of these parts of the document which comprise its reports for the purposes of Rule 5.5.3(R(2)(f) of the Prospectus Rules. The valuation reports prepared by CBRE Limited have been prepared at the Company's request for inclusion in this document.
• 13.2 Knight Frank LLP, whose address is Woolgate Exchange, 25 Basinghall Street, London EC2V 5HA, has given and not withdrawn its written consent to the inclusion in this document of its report in Part IX of this document and the references to its name in the form and context in which they appear and has authorised the contents of these parts of the document which comprise its reports for the purposes of Rule 5.5.3(R(2)(f) of the Prospectus Rules. The valuation reports prepared by Knight Frank LLP have been prepared at the Company's request for inclusion in this document.
• 13.3 Jones Lang Lasalle Limited, whose address is 22 Hanover Square, London W1S 1JA, has given and not withdrawn its written consent to the inclusion in this document of its reports in Part IX of this document and the references to its name in the form and context in which they appear and has authorised the contents of these parts of the document which comprise its reports for the purposes of Rule 5.5.3(R(2)(f) of the Prospectus Rules. The valuation reports prepared by Jones Lang Lasalle Limited have been prepared at the Company's request for inclusion in this document.
• 13.4 KPMG Audit Plc, whose address is 15 Canada Square, London E14 5GL, has given and has not withdrawn its written consent to the inclusion in this document of its report on the unaudited pro forma financial information in Part VIII of this document, in the form and context in which it is included and has authorised the content of that report for the purposes of Prospectus Rule 5.5.3R(2)(f).

14. Property, plant and equipment

• 14.1 There is no freehold or leasehold property or any other material asset which is owned or leased by a Shareholder of the Group, and there is no existing or planned tangible fixed asset which is material to the business of the Group.
• 14.2 The Group is not aware of any environmental issues that may affect the Group's utilisation of any of its tangible fixed assets.

15. Net proceeds and costs and expenses of the Firm Placing and Placing and Open Offer

The net proceeds of the Firm Placing and Placing and Open Offer receivable by the Company are expected to be approximately £96 million net of expenses of the Firm Placing and Placing and Open Offer. Expenses of the Firm Placing and Placing and Open Offer are estimated at £4 million, excluding VAT, (including the commission payable to J.P. Morgan Cazenove, Numis and Jefferies, the UK Listing Authority listing fee, professional fees and expenses and the costs of printing and distribution of documents) and are payable by the Company.

16. General

• 16.1 Save as disclosed in this document, the Directors are unaware of any exceptional factors which have influenced the Company's activities.
• 16.2 Save as disclosed in this document, the Directors are unaware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the Company's prospects for the current financial year.
• 16.3 Save as disclosed in this document, there are no investments in progress and there are no future investments on which the Directors have already made firm commitments which are significant to the Group.
• 16.4 Save as disclosed in this document, the Directors believe that the Company is not dependent on patents or licences, industrial, commercial or financial contracts or new manufacturing processes which are material to the Company's business or profitability.
• 16.5 The Company is subject to the provisions of the Code, including the rules regarding mandatory takeover offers set out in the Code. Under Rule 9 of the Code, when (i) a person acquires shares which, when taken together with shares already held by him or persons acting in concert with him (as defined in the Code), carry 30 per cent. or more of the voting rights of a company subject to the Code or (ii) any person who, together with persons acting in concert with him, holds not less than 30 per cent. but not more than 50 per cent. of the voting rights of a company subject to the Code, and such person, or any person acting in concert with him, acquires additional shares which increases his percentage of the voting rights in the company, then, in either case, that person, together with the persons acting in concert with him, is normally required to make a general offer in cash, at the highest price paid by him or any person acting in concert with him for shares in the company within the preceding 12 months, for all of the remaining equity share capital of the company.
• 16.6 The Ordinary Shares will also be subject to the compulsory acquisition procedures set out in sections 979 to 991 of the Act. Under section 979 of the Act, where an offeror makes a takeover offer and has, by virtue of acceptances of the offer, acquired or unconditionally contracted to acquire not less than 90 per cent. of the shares to which the offer relates and, in a case where the shares to which the offer relates are voting shares, not less than 90 per cent. of the voting rights carried by those shares, that offeror is entitled to compulsorily acquire the shares of any holder who has not acquired the offer on the terms of the offer.
• 16.7 Since 1 January 2013, there has been no takeover offer (within the meaning of Part 28 of the Act) for any Ordinary Shares.

17. Documents on display

Copies of the following documents are available for inspection during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) for a period of 12 months following Admission at the offices of Osborne Clarke, One London Wall, London EC2Y 5EB:

• (a) the articles of association of the Company;
• (b) the audited consolidated financial information of the Company for the three financial years ended 31 December 2011, 31 December 2012 and 31 December 2013;
• (c) the report from KPMG Audit Plc to the Company on the unaudited pro forma financial information set out in Part VIII of this document;
• (d) the property valuation reports by CBRE Limited, Knight Frank LLP and Jones Lang Lasalle Limited on the property values set out in Part IX of this document;
• (e) the written consents referred to in paragraphs 13.1, 13.2, 13.3 and 13.4 above; and
• (f) this document.

Dated: 6 March 2014

PART XIII

DEFINITIONS

The following definitions apply throughout this document unless the context otherwise requires:

"Act"	the Companies Act 2006 (as amended)
"Adjusted EBITDA"	earnings before interest, tax, depreciation and amortisation, excluding amounts in respect of the Group's share-based payments and exceptional items
"Adjusted net asset value" or "Adjusted NAV"	IFRS NAV adjusted to exclude the impact of deferred tax and interest rate swaps and include the valuation gain not recognised on properties held at cost
"Adjusted net debt"	debt, net of cash and unamortised debt raising costs, excluding the fair value adjustment on interest rate swaps
"Admission"	the admission of the New Ordinary Shares to listing on the premium listing segment of the Official List in accordance with the Listing Rules and to trading on the London Stock Exchange's main market for listed securities in accordance with the Admission and Disclosure Standards and references to Admission becoming "effective" shall be construed accordingly
"Admission and Disclosure Standards"	the requirements contained in the publication "Admission and Disclosure Standards" (as amended from time to time) published by the London Stock Exchange containing, amongst other things, the requirements to be observed by companies seeking admission to trading on the London Stock Exchange's main market for listed securities
"Approved Scheme"	the ESOS
"Articles"	the articles of association of UNITE
"Audit Committee"	the audit committee of UNITE
"Basic Entitlement"	the pro rata entitlement of Qualifying Shareholders to subscribe for 2 Open Offer Shares for every 21 Existing Ordinary Shares registered in their name as at the Record Date
"Beds"	the number of bedrooms that the Group owns or manages
"Board" or "Directors"	the board of directors of UNITE, whose names are set out on page 34 of this document, and "Director" means any member of the Board
"Business Day"	any day on which banks are generally open in London for the transaction of business other than a Saturday or Sunday or public holiday
"certificated" or "in certificated form"	a share or other security which is not in uncertificated form (that is, not in CREST)
"Closing Price"	the closing, middle market quotation of an Existing Ordinary Share, as published in the Daily Official List
"Code"	the City Code on Takeovers and Mergers

"Corporate Governance Code"	the UK Corporate Governance Code published by the Financial Reporting Council in September 2012
"CREST"	the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the operator
"CREST Manual"	the rules governing the operation of CREST, consisting of the CREST Reference Manual, CREST International Manual, CREST Central Counterparty Service Manual, CREST Rules, Registrars Service Standards, Settlement Discipline Rules, CCSS Operations Manual, Daily Timetable, CREST Application Procedure and CREST Glossary of Terms (all as defined in the CREST Glossary of Terms promulgated by Euroclear UK on 15 July 1996 and as amended since)
"CREST member"	a person who has been admitted by Euroclear as a system member (as defined in the CREST Regulations)
"CREST participant"	a person who is, in relation to CREST, a system participant (as defined in the CREST Regulations)
"CREST Regulations"	the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755)
"CREST sponsor"	a CREST participant admitted to CREST as a CREST sponsor
"CREST sponsored member"	a CREST member admitted to CREST as a sponsored member
"Daily Official List"	the daily official list of the London Stock Exchange
"Dealing Day"	a day upon which dealings in domestic securities may take place on and with the authority of the London Stock Exchange
"Delivered"	a development is "delivered" in the year in which the construction of such development was completed and new buildings were opened and occupied
"Development profit"	the total development profit that has been recognised (delivered developments) or is forecast to be recognised (secured developments), calculated as the GAV on completion of a property less the total cost of developing such property
"Disclosure and Transparency Rules"	the disclosure rules and transparency rules made by the FCA pursuant to section 73A of the FSMA
"DTR5"	Rule 5 of the Disclosure and Transparency Rules
"EBITDA"	earnings before interest, tax, depreciation and amortisation
"EEA State"	a member state of the European Economic Area
"Efficiency measure"	operating expenses in NPC less management fees, as a proportion of the Group's gross asset value
"Employee Trust"	the Company's employee share ownership scheme
"Enlarged Share Capital"	the issued ordinary share capital of the Company following the issue of the New Ordinary Shares pursuant to the Firm Placing and Placing and Open Offer
"EPRA"	European Public Real Estate Association

"EPRA earnings"	IFRS profit attributable to the owners of the parent company adjusted in accordance with EPRA guidelines
"EPRA earnings per share" or "EPRA EPS"	earnings per share adjusted in accordance with the EPRA Guidelines
"EPRA EPS Yield on NAV"	earnings per share (adjusted in accordance with the EPRA Guidelines) as a proportion of opening adjusted NAV per share
"EPRA NAV"	IFRS NAV adjusted in accordance with EPRA guidelines
"EPS"	earnings per share
"ESOS" or "Approved Scheme"	Approved Employee Share Option Scheme of the LTIP
"EU"	the European Union first established by the treaty made at Maastricht on 7 February 1992
"Euroclear"	Euroclear UK & Ireland Limited
"Euro Hall"	Euro Hall Private Limited
"European Economic Area"	the EU, Iceland, Norway and Liechtenstein
"Excess Application Facility"	the arrangement pursuant to which Qualifying Shareholders may apply for additional Open Offer Shares in excess of their Basic Entitlement in accordance with the terms and conditions of the Open Offer
"Excess CREST Open Offer Entitlement"	in respect of each Qualifying CREST Shareholder who has taken up his Basic Entitlement in full, the entitlement (in addition to his Basic Entitlement) to apply for Open Offer Shares up to the number of Open Offer Shares comprised in his Open Offer Entitlement, credited to his stock account in CREST, pursuant to the Excess Application Facility, which may be subject to scaling back in accordance with the provisions of this document
"Excess Shares"	Open Offer Shares which are not taken up by Qualifying Shareholders pursuant to their Basic Entitlement and are offered to Qualifying Shareholders under the Excess Application Facility
"Exchange Act"	the United States Securities Exchange Act of 1934
"Exchange Information"	certain business and financial information which the Company is required to publish in accordance with the rules and practices of the UK Listing Authority and the London Stock Exchange
"Excluded Overseas Shareholder"	other than as agreed in writing by the Company, J.P. Morgan Cazenove, Numis and Jefferies and as permitted by applicable law, Shareholders who are located or have registered addresses in a Restricted Jurisdiction
"Executive Directors"	Mark Allan, Joe Lister, Richard Simpson and Richard Smith
"Existing Ordinary Shares"	the Ordinary Shares in issue as at the date of this document
"FCA"	the Financial Conduct Authority in its capacity as competent authority for the purposes of Part VI of the FSMA
"Firm Placed Shares"	the 7,675,383 New Ordinary Shares to be allotted and issued by the Company pursuant to the Firm Placing

"Firm Placees"	any persons with whom a conditional Firm Placing of Firm Placed Shares has been or will be made
"Firm Placing"	the conditional placing of the Firm Placed Shares with the Firm Placees at the Issue Price
"FSMA"	the Financial Services and Markets Act 2000 (as amended)
"GIC"	GIC Real Estate, the real estate investment arm of GIC Private Limited (formerly known as Government of Singapore Investment Corporation)
"Gross asset value" or "GAV"	the carrying value of the Group's property assets and the Group's share of co-investment property assets
"HEFCE"	The Higher Education Funding Council for England
"HMRC"	Her Majesty's Revenue & Customs
"ICR"	interest cover ratio
"IFRS"	International Financial Reporting Standards as adopted by the European Union
"Income return"	the level of distribution made by USAF in a financial year as a proportion of USAF's opening adjusted NAV
"Interest coverage ratio" or "ICR"	as defined in the relevant debt facility, but typically the ratio of rental income from properties less all costs directly attributable to running those properties, to the interest incurred on such debt facility
"Investment assets" or "Investment property"	property that is held at carrying value, because of uncertainty about whether it will be sold
"Issue"	together the Firm Placing and the Placing and Open Offer
"Issue Price"	410 pence per New Ordinary Share
"Jefferies"	Jefferies International Limited of Vintners Place, 68 Upper Thames Street, London EC4V 3BJ
"Joint Bookrunners"	J.P. Morgan Cazenove, Numis and Jefferies
"Joint Sponsors"	J.P. Morgan Cazenove and Numis
"J.P. Morgan Cazenove"	J.P. Morgan Securities plc of 25 Bank Street, Canary Wharf, London E14 5JP
"Listing Rules"	the listing rules made by the FCA pursuant to section 73A of the FSMA
"Loan to value ratio" or "LTV"	the ratio of the principal amount outstanding under a particular debt facility to the aggregate open market value of the properties subject to a legal mortgage or first-ranking standard security interest in relation to such facility
"London Stock Exchange"	London Stock Exchange plc
"LTIP"	the UNITE Group Long Term Incentive Plan 2011

"Model Code"	the model code on directors' dealings in securities set out in Chapter 9 of the Listing Rules
"Money Laundering Regulations"	the Money Laundering Regulations 2007 (SI 2007 No. 2157), as amended from time to time
"NAV"	net asset value
"Net operating income" or "NOI"	rental income on a property less operating costs directly related to such property
"Net operating income margin" or "NOI margin"	Net operating income as a proportion of gross rental income
"Net portfolio contribution" or "NPC"	net operating income of the Group plus fees received by the Group for managing co-investment vehicles, less financing costs and the Group's operating expenses excluding development related activities
"New Ordinary Shares"	the new Ordinary Shares to be issued by the Company pursuant to the Firm Placing and Placing and Open Offer
"Nomination Committee"	the nomination committee of UNITE
"Non-core"	those properties that the Group has identified as having lower rental growth prospects or as being operationally inefficient
"Non-CREST Application Form"	the application form for use by Qualifying Non-CREST Shareholders relating to applications for Open Offer Shares (including in respect of Excess Shares under the Excess Application Facility)
"Non-executive Directors"	Philip White, Sir Tim Wilson, Manjit Wolstenholme, Richard Walker, Andrew Jones and Elizabeth McMeikan
"NPC"	net portfolio contribution as explained in Part VI of this document
"Numis"	Numis Securities Limited of The London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT
"OCBES"	OCB Education Solutions Ltd
"Occupancy"	academic year occupancy, from September of a calendar year to May of the following calendar year, excluding the three-month period from June until August in such following calendar year
"Official List"	the official list maintained by the FCA
"Opening adjusted NAV"	Adjusted NAV at the start of the period
"Open Offer"	the invitation by the Company to Qualifying Shareholders to apply to subscribe for Open Offer Shares on the terms and conditions set out in this document, and in the case of Qualifying Non-CREST Shareholders, in the Non-CREST Application Form
"Open Offer Entitlement"	an entitlement to subscribe for Open Offer Shares allocated to a Qualifying Shareholder under the Open Offer
"Open Offer Shares"	the 16,824,617 new Ordinary Shares to be offered to Qualifying Shareholders under the Open Offer

"Operational gearing"	the Group's ability to generate more net operating income without materially increasing operating expenses (as a proportion of the Group's operating expenses are relatively stable and do not fluctuate according to the number of beds under management by the Group)
"Ordinary Shares"	ordinary shares of 25 pence each in the capital of UNITE
"Overseas Shareholders"	holders of Ordinary Shares with registered addresses outside the UK or who are citizens of, incorporated in, registered in or otherwise resident in, countries outside the UK
"PBSA"	purpose-built student accommodation
"Placing"	the conditional placing of the Open Offer Shares with insitutional investors at the Issue Price (subject to clawback in respect of valid applications made by qualifying Shareholders under the Open Offer)
"Placing Agreement"	the conditional agreement dated 6 March 2014 between (1) the Company (2) J.P. Morgan Cazenove, (3) Numis and (4) Jefferies, details of which are set out in paragraph 6.8 of Part XII (Additional information)
"premium listing"	a listing by the FCA of equity securities of a company which is required to comply with the provisions of Chapter 6 of the Listing Rules and the other rules in the Listing Rules that are expressed to apply to such securities with a premium listing
"Prospectus" or "this document"	this document dated 6 March 2014
"Prospectus Directive"	EU Prospectus Directive (2003/71/EC) (as amended), including any relevant implementing measure in each EEA State that has implemented Directive 2003/71/EC
"Prospectus Directive Regulation"	Commission Regulation (EC) No 809/2004
"Prospectus Rules"	the prospectus rules made by the FCA pursuant to section 73A of the FSMA
"QIB"	a qualified institutional buyer as defined in Rule 144A promulgated under the Securities Act
"Qualified Institutional Buyer" or "QIB"	has the meaning given by Rule 144A under the Securities Act
"Qualifying CREST Shareholders"	Qualifying Shareholders holding Existing Ordinary Shares in uncertificated form
"Qualifying Non-CREST Shareholders"	Qualifying Shareholders holding Existing Ordinary Shares in certificated form
"Qualifying Shareholders"	holders of Existing Ordinary Shares on the register of members of the Company on the Record Date with the exception (subject to certain exceptions) of persons with a registered address or located or resident in any Restricted Jurisdiction
"Receiving Agent"	Computershare Investor Services PLC
"Record Date"	6.00 p.m. on 5 March 2014

"Registrar"	Computershare Investor Services PLC
"Regulation S"	Regulation S under the Securities Act
"Regulatory Information Service"	any channel recognised as a channel for the dissemination of regulatory information by listed companies as defined in the Listing Rules
"Remuneration Committee"	the remuneration committee of UNITE
"Restricted Jurisdiction"	each of Australia, Canada, Japan, New Zealand, South Africa and the United States
"Restricted Share Award"	a restricted share award made under the terms of the LTIP
"Rule 144A"	Rule 144A as defined in the Securities Act
"SAYE Scheme"	The UNITE Group plc Savings-Related Share Option Scheme
"SDRT"	UK stamp duty reserve tax
"SEC"	United States Securities and Exchange Commission
"Secured"	the Group considers a development to be "secured" when the Group has exchanged contracts to acquire the land, even if the Group has not exchanged contracts or obtained planning consents in relation to building on such land
"Securities Act"	the United States Securities Act of 1933, as amended
"See-through"	information presented on the basis of the relevant line item of the Group (as extracted without material adjustment from the Group's financial statements for the relevant period), plus the Group's proportionate share of the equivalent line item from the financial statements for each of the co-investment vehicles in which the Group holds an interest
"SFC"	Scottish Funding Council
"Shareholder"	a holder of Ordinary Shares
"stock account"	an account within a member account in CREST to which a holding of a particular share or other security in CREST is credited
"subsidiary"	a subsidiary as that term is defined in section 1159 of the Act
"subsidiary undertaking"	a subsidiary undertaking as that term is defined in section 1162 of the Act
"Total return on NAV"	growth in adjusted NAV plus interim and final dividends as a proportion of opening adjusted NAV
"Trust Manager"	USAF Jersey Manager Limited
"Trustee"	Mourant & Co. Trustees Limited
"TSR"	Total Shareholder Return
"UCC"	UNITE Capital Cities
"UCCJ"	UNITE (Capital Cities) Jersey Limited
"UK" or "United Kingdom"	the United Kingdom of Great Britain and Northern Ireland

"UK Listing Authority" or "UKLA"	the FCA acting in its capacity as the competent authority for the purposes of Part VI of the FSMA
"UKLA Rules"	the Listing Rules, the Prospectus Rules and the Disclosure and Transparency Rules
"Unapproved Scheme"	the Unapproved Share Option Scheme 1999
"uncertificated" or "in uncertificated form"	recorded on the register of Ordinary Shares as being held in uncertificated form in CREST, entitlement to which, by virtue of the CREST Regulations, may be transferred by means of CREST
"Ungeared returns"	the income return on and growth in value of a property, as a proportion of the opening property valuation
"UNITE" or the "Company"	The UNITE Group plc, registered in England and Wales with company number 03199160
"UNITE Group" or "Group"	UNITE, and its subsidiary undertakings and "Group Company" should be interpreted accordingly
"UNITE Share Option Schemes"	the LTIP, the SAYE Scheme and the Unapproved Scheme
"UCC"	UNITE Capital Cities Unit Trust
"UMS"	UNITE Modular Solutions Limited
"US" or "United States"	the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia
"USAF"	The UNITE UK Student Accommodation Fund, in which UNITE currently has a 16.4 per cent. interest
"USAFJIL"	USAF Jersey Investments Limited
"USAF Pipeline Agreement"	the Acquisition and Development Pipeline Agreement dated 7 November 2006 (as amended by a deed of variation dated 3 April 2008) made between the Company, USAF and USAF Jersey Manager Limited
"USE instruction"	Unmatched stock event instruction
"US persons"	has the meaning ascribed to it under Regulation S
"US Shareholder"	a Shareholder (i) whose address appears on the register of members of the Company as being in the United States, (ii) who is a US person or (iii) any other Shareholder to the extent such Shareholder holds Existing Ordinary Shares on behalf of a person located within the United States or a US person
"VAT"	any value added tax imposed under directive 2006/11 2/EC, the Value Added Tax Act 1994 and/or any primary or secondary legislation supplemental to either of them.
"Weighted actual covenant position"	the average covenant position of the Group under its debt facilities, weighted according to the value of each facility
"Weighted covenant allowance"	the average covenant allowance of the Group under its debt facilities, weighted according to the value of each facility
"Wider Group"	the Group and the co-investment vehicles in which the Group holds interests

"Yield on cost" the ratio of net operating income on a particular property to the estimated total development cost of such property

All references to legislation in this document are to the legislation of England and Wales unless the contrary is indicated. Any reference to any provision of any legislation or regulation shall include any amendment, modification, re-enactment or extension thereof.

Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.

APPENDIX 1

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

Independent Auditor's Report to the members of The UNITE Group plc only

Opinions and conclusions arising from our audit

1. Our opinion on the financial statements is unmodified

We have audited the financial statements of The UNITE Group plc for the year ended 31 December 2013 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated and Company Statement of Changes in Shareholders' Equity, the Consolidated and Company Statements of Cash Flows and the related notes. 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 31 December 2013 and of the group's profit for the year then ended;
• the group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU);
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation.

2. Our assessment of risks of material misstatement

In arriving at our audit opinion above on the financial statements the risks of material misstatement that had the greatest effect on our audit were as follows.

Valuation of investment properties and investment properties under development (£863.1 million)

Refer to the Audit Committee Report and note 3.1 for the accounting policy and financial disclosures.

• The risk Investment properties and investment properties under development are held at fair value in the group's financial statements, and at every period end the change in fair value is reflected in the income statement of the group. The valuation models applied are complex and require consideration of the existing market conditions, estimates regarding rental income, occupancy and property management costs. Valuing investment properties under development can be further complicated by the need to forecast discounted cash flows with a deduction for costs to complete (which are likely to require significant judgement).
• Our response In this area our audit procedures included, among others, evaluating the competency of the external experts engaged by the group to value the investment and development properties, in the context of their ability to generate a reliable estimate of the fair value. The assessment of the external experts included but was not limited to, assessing their professional qualifications, experience and independence from the group. We met with all the external valuation experts to discuss their valuation methodology. We used our own valuation specialists to assist us in critically assessing the valuation methodology applied, and considered whether it is in line with accounting requirements and best practice. We challenged all key assumptions, including rental income, occupancy and property operating costs. Specifically, we performed our own assessment of these inputs and compared rental income to current tenancy contracts on a sample basis, occupancy to sales reports and property operating costs for a sample of properties through to actual costs for the year.

In addition, for investment properties under development, we compared the costs to complete used in the valuations to internal budgets and business plans and considered the historical accuracy of such budgets and business plans.

We assessed whether the group's disclosures (see note 3.1) in respect of the inputs into the valuations properly reflected the assumptions used and met the requirements of the relevant accounting standards.

Deferred tax assets (£22.4 million)

Refer to the Audit Committee Report and note 2.6 for the accounting policy and financial disclosures.

• The risk The group has deferred tax liabilities and recognised deferred tax assets of £22.4m in respect of tax losses considered to be recoverable against future taxable profits. In addition a deferred tax asset of £9.6m has not been recognised due to the uncertainty of future taxable profits and the ability to offset losses against them. The estimate of future taxable profits requires judgement and interpretation of tax laws as well as estimating future profits. The recoverability of assets recognised could vary significantly if different assumptions are applied in estimating future taxable profits and the ability to utilise the tax losses. The risk is that the amount recognised on the balance sheet may be over- or under-estimated and any adjustment would directly affect the profit and the effective tax rate for the period.
• Our response In this area our audit procedures included, among others, testing the principles and integrity of the model used to forecast taxable profits, comparison of the key input assumptions (such as rental income, property operating costs, administration costs, capital expenditure) to business plans and considered the historical accuracy of such business plans. We used our own tax specialists to consider the appropriateness of the application of tax laws, the appropriateness of tax deductions and the ability to offset projected tax profits against the brought forward losses. We also considered whether the group's disclosures (see note 2.6) met the requirements of the relevant accounting standards.

3. Our application of materiality and an overview of the scope of our audit

The materiality for the group financial statements as a whole was set at £5 million. This has been determined with reference to a benchmark of group total assets (of which it represents 0.5%) which we consider to be one of the principal considerations for members of the Company in assessing the financial performance of the group.

We agreed with the audit committee to report to it all corrected and uncorrected misstatements we identified through our audit with a value in excess of £0.25 million, in addition to other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds.

The group consists of a number of components, all of which are accounted for at the group's head office in Bristol. The group audit team performed the audit of the all these components at the group level as if it was a single aggregated set of financial information. The audit was performed using the materiality level set out above.

4. Our opinion on other matters prescribed by the Companies Act 2006 is unmodified

In our opinion:

• the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;
• 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.

5. We have nothing to report in respect of the matters on which we are required to report by exception

Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading.

In particular, we are required to report to you if:

• we have identified material inconsistencies between the knowledge we acquired during our audit and the directors' statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the group's performance, business model and strategy; or
• the Audit Committee report does not appropriately address matters communicated by us to the Audit Committee.

Under the Companies Act 2006 we are required 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;

Under the Listing Rules we are required to review:

• the directors' statement, set out in the Directors' Report, in relation to going concern; and
• the part of the Corporate Governance Statement relating to the company's compliance with the nine provisions of the 2010 UK Corporate Governance Code specified for our review.

We have nothing to report in respect of the above responsibilities.

Scope of report and responsibilities

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. A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the company's members as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2013a, which are incorporated into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.

William Meredith (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor

Chartered Accountants 15 Canada Square London E14 5GL

6 March 2014

Introduction and table of contents

Whilst these financial statements are prepared in accordance with IFRS, the Board of Directors manage the business based on the adjusted results being net portfolio contribution (NPC), adjusted earnings and adjusted net asset value (NAV) which can be found in section 2. The adjusted results are also aligned with the European Real Estate Association (EPRA) best practice recommendation.

We have grouped the notes to the financial statements under five main headings:

• Results for the year, including segmental information, adjusted profits and adjusted NAV
• Asset management
• Funding
• Working capital
• Key management and employee benefits

Each section sets out the relevant accounting policies applied in these financial statements together with the key judgements and estimates used.

Primary statements

Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Company balance sheet Consolidated statement of changes in shareholders' equity Company statement of changes in shareholders' equity Statements of cash flows

Section 1: Basis of preparation

Section 2: Results for the year

• 2.1 Segmental information
• 2.2 Adjusted profit and EPS
• 2.3 Adjusted Net Assets and NAV per share
• 2.4 Revenue
• 2.5 Provisions for onerous contracts
• 2.6 Tax
• 2.7 Audit fees

Section 3: Asset management

• 3.1 Wholly owned property assets
• 3.2 Inventories
• 3.3 Other non-current assets
• 3.4 Investments in joint ventures
• 3.5 Investments in subsidiaries

Section 4: Funding

• 4.1 Borrowings
• 4.2 Interest rate swaps
• 4.3 Net financing costs
• 4.4 Gearing
• 4.5 Financial risk factors
• 4.6 Operating leases
• 4.7 Capital management
• 4.8 Equity
• 4.9 Dividends

Section 5: Working capital

• 5.1 Cash
• 5.2 Trade and other receivables
• 5.3 Credit risk
• 5.4 Trade and other payables
• 5.5 Transactions with other group companies

Section 6: Key management and employee benefits

• 6.1 Staff numbers and costs
• 6.2 Key management personnel
• 6.3 Share based compensation

Consolidated income statement For the year ended 31 December 2013

		2013	2012
		Total	Total
	Note	£m	£m
Rental income	2.4	81.0	79.4
Property sales and other income	2.4	20.6	135.2
Total Revenue	2.4	101.6	214.6
Cost of sales		(41.8)	(145.2)
Operating expenses		(23.4) ––––––––	(28.0) ––––––––
Results from operating activities		36.4	41.4
Loss on disposal of property		(1.0)	(2.4)
Net valuation gains on property	3.1	35.4	29.8
Valuation gains recognised on transfer	3.1	– ––––––––	49.7 ––––––––
Profit before net financing costs		70.8 ––––––––	118.5 ––––––––
Loan interest and similar charges	4.3	(19.3)	(16.0)
Mark to market changes in interest rate swaps	4.3	0.7 ––––––––	(7.6) ––––––––
Finance costs	4.3	(18.6)	(23.6)
Finance income	4.3	15.7 ––––––––	1.0 ––––––––
Net financing costs	4.3	(2.9) ––––––––	(22.6) ––––––––
Share of joint venture profit	3.4b	9.2 ––––––––	30.3 ––––––––
Profit before tax		77.1	126.2
Tax	2.6	2.2 ––––––––	1.0 ––––––––
Profit for the year		79.3	127.2
Profit for the period attributable to
Owners of the parent company	2.2b	78.0	125.6
Minority interest		1.3 ––––––––	1.6 ––––––––
		79.3	127.2
Earnings per share		––––––––	––––––––
Basic	2.2b	46.0p ––––––––	78.3p ––––––––
Diluted	2.2b	46.0p ––––––––	78.3p ––––––––

Included above is £nil (2012: £49.7 million) of valuation gains not previously recognised on property transferred from current assets to non-current assets during the year.

Consolidated statement of comprehensive income For the year ended 31 December 2013

	2013	2012
	£m	£m
Profit for the period	79.3	127.2
Movements in effective hedges	0.7	0.6
Gains on hedging instruments transferred to income statement	–	2.5
Share of joint venture movements in effective hedges	3.6	2.7
Share of joint venture movement on hedging instruments transferred
to income statement	2.9	–
Other comprehensive income for the period	–––––––– 7.2	–––––––– 5.8
Total comprehensive income for the period	–––––––– 86.5	–––––––– 133.0
Attributable to	––––––––	––––––––
Owners of the parent company	84.9	131.4
Minority interest	1.6 ––––––––	1.6 ––––––––
	86.5	133.0
	––––––––	––––––––

All movements above are shown net of deferred tax. All other comprehensive income may be classified as profit and loss in the future.

Consolidated balance sheet At 31 December 2013

		2013	2012
	Note	£m	£m
Assets
Investment property	3.1	767.6	762.8
Investment property under development	3.1	95.5	37.6
Investment in joint ventures	3.4b	237.2	194.8
Joint venture investment loans	3.4b	10.2	11.2
Other non-current assets	3.3	7.3	5.0
Deferred tax asset	2.6c	0.6 ––––––––	– ––––––––
Total non-current assets		1,118.4 ––––––––	1,011.4 ––––––––
Properties under development	3.1	61.5	26.5
Inventories	3.2	3.2	1.7
Trade and other receivables	5.2	50.0	53.5
Cash and cash equivalents	5.1	43.2	75.4
Total current assets		–––––––– 157.9 ––––––––	–––––––– 157.1 ––––––––
Total assets		1,276.3	1,168.5
Liabilities		––––––––	––––––––
Borrowings	4.1	(29.7)	(100.2)
Interest rate swaps	4.2	(2.0)	(0.7)
Trade and other payables	5.4	(85.2)	(82.0)
Provisions	2.5	–	(0.5)
Current tax creditor		(0.3)	(0.5)
Total current liabilities		–––––––– (117.2)	–––––––– (183.9)
Borrowings	4.1	–––––––– (483.7)	–––––––– (427.7)
Interest rate swaps	4.2	(3.4)	(23.0)
Provisions	2.5	–	(0.2)
Total non-current liabilities		–––––––– (487.1)	–––––––– (450.9)
Total liabilities		–––––––– (604.3)	–––––––– (634.8)
Net assets		–––––––– 672.0	–––––––– 533.7
Equity		––––––––	––––––––
Issued share capital		44.2	40.1
Share premium		295.3	249.2
Merger reserve		40.2	40.2
Retained earnings		266.0	195.0
Hedging reserve		(1.8)	(8.7)
Equity portion of convertible instrument		9.4 ––––––––	– ––––––––
Equity attributable to the owners of the parent company		653.3	515.8
Minority interest		18.7	17.9
Total equity		–––––––– 672.0	–––––––– 533.7
		––––––––	––––––––

These financial statements were approved by the Board of Directors on 6 March 2014 and were signed on its behalf by:

M C Allan	J J Lister
Director	Director

Company balance sheet At 31 December 2013

		2013	2012
	Note	£m	£m
Assets
Investments in subsidiaries	3.5a	323.8	228.4
Investments in joint ventures	3.5a	– ––––––––	– ––––––––
Total investments		323.8	228.4
Loan to group undertaking	3.5a	179.9	90.0
Joint venture investment loan	3.5a	–	–
Total non-current assets		–––––––– 503.7 ––––––––	–––––––– 318.4 ––––––––
Amounts due from group undertakings	5.2	393.5	321.5
Cash and cash equivalents	5.1	–	–
Total current assets		–––––––– 393.5 ––––––––	–––––––– 321.5 ––––––––
Total assets		897.2	639.9
Current liabilities		––––––––	––––––––
Borrowings	4.1	(4.9)	(1.2)
Amounts due to group undertakings	5.4	(59.4)	(29.7)
Other payables	5.4	(3.0)	(3.2)
Total current liabilities		–––––––– (67.3)	–––––––– (34.1)
Borrowings	4.1	–––––––– (169.0)	–––––––– (90.0)
Total non-current liabilities		–––––––– (169.0)	–––––––– (90.0)
Total liabilities		–––––––– (236.3)	–––––––– (124.1)
Net assets		–––––––– 660.9	–––––––– 515.8
Equity		––––––––	––––––––
Issued share capital		44.2	40.1
Share premium		295.3	249.2
Merger reserve		40.2	40.2
Retained earnings		13.7	23.6
Revaluation reserve		258.1	162.7
Equity portion of intercompany loan		9.4 ––––––––	– ––––––––
Total equity		660.9	515.8
		––––––––	––––––––

Total equity is wholly attributable to equity holders of The UNITE Group plc.

These financial statements were approved by the Board of Directors on 6 March 2014 and were signed on its behalf by:

M C Allan	J J Lister
Director	Director

Company statement of changes in shareholders' equity For the year ended 31 December 2013

							Equity Attributable
	Issued					portion of	to owners
	share	Share				Merger Retained Hedging convertible	of the	Minority
	capital	premium	reserve	earnings		reserve instrument	parent	interest	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2013	40.1	249.2	40.2	195.0	(8.7)	–	515.8	17.9	533.7
Profit for the period	–	–	–	78.0	–	–	78.0	1.3	79.3
Other comprehensive
income for the period	–	–	–	–	6.9	–	6.9	0.3	7.2
Total comprehensive
income for the period	–	–	–	78.0	6.9	–	84.9	1.6	86.5
Shares issued	4.1	46.1	–	–	–	–	50.2	–	50.2
Fair value of share
based payments	–	–	–	1.1	–	–	1.1	–	1.1
Own shares acquired	–	–	–	(0.6)	–	–	(0.6)	–	(0.6)
Equity arising on issue
of convertible bond	–	–	–	–	–	9.4	9.4	–	9.4
Dividends paid to
owners
of the parent company	–	–	–	(7.5)	–	–	(7.5)	–	(7.5)
Dividends to minority
interest	–	–	–	–	–	–	–	(0.8)	(0.8)
At 31 December 2013	–––––– 44.2	–––––– 295.3	–––––– 40.2	–––––– 266.0	–––––– (1.8)	–––––– 9.4	–––––– 653.3	–––––– 18.7	–––––– 672.0
	–––––	–––––	–––––	–––––	–––––	–––––	–––––	–––––	–––––
							Equity Attributable
	Issued					portion of	to owners
	share capital	Share premium	reserve	earnings		Merger Retained Hedging convertible reserve instrument	of the parent	Minority interest	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2012	40.1	249.0	40.2	72.8	(14.5)	–	387.6	17.1	404.7
Profit for the period	–	–	–	125.6	–	–	125.6	1.6	127.2
Other comprehensive
income for the period	–	–	–	–	5.8	–	5.8	–	5.8
Total comprehensive
income for the period	–	–	–	125.6	5.8	–	131.4	1.6	133.0
Shares issued	–	0.2	–	–	–	–	0.2	–	0.2
Fair value of share
based payments	–	–	–	1.5	–	–	1.5	–	1.5
Own shares acquired	–	–	–	(1.3)	–	–	(1.3)	–	(1.3)
Dividends paid to
owners
of the parent company	–	–	–	(3.6)	–	–	(3.6)	–	(3.6)
Dividends to minority
interest At 31 December 2012	– –––––– 40.1	– –––––– 249.2	– –––––– 40.2	– –––––– 195.0	– –––––– (8.7)	– –––––– –	– –––––– 515.8	(0.8) –––––– 17.9	(0.8) –––––– 533.7

	Issued					Equity portion of inter-
	share	Share	Merger		Retained Revaluation	company
	capital	premium	reserve	earnings	reserve	loan	Total
	£m	£m	£m	£m	£m	£m	£m
At 1 January 2013	40.1	249.2	40.2	23.6	162.7	–	515.8
Loss for the period	–	–	–	(2.4)	–	–	(2.4)
Equity arising on
intercompany loan	–	–	–	–	–	9.4	9.4
Revaluation of investments
in subsidiaries	–	–	–	–	95.4	–	95.4
Shares issued	4.1	46.1	–	–	–	–	50.2
Dividends to shareholders	–	–	–	(7.5)	– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––	–	(7.5)
At 31 December 2013	44.2	295.3	40.2	13.7	258.1	9.4	660.9
	Issued share capital £m	Share premium £m	Merger reserve £m	earnings £m	–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– Retained Revaluation reserve £m	Equity portion of inter- company loan £m	Total £m
At 1 January 2012	40.1	249.0	40.2	25.4	48.8	–	403.5
Loss for the period	–	–	–	(0.7)	–	–	(0.7)
Transfer on sale of joint venture	–	–	–	2.5	(2.5)	–	–
Revaluation of investments
in subsidiaries	–	–	–	–	116.4	–	116.4
Shares issued	–	0.2	–	–	–	–	0.2
Dividends to shareholders	–	–	–	(3.6)	– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––	–	(3.6)
At 31 December 2012	40.1	249.2	40.2	23.6	162.7 –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––	–	515.8

Company statement of changes in shareholders' equity For the year ended 31 December 2013

Statements of cash flows For the year ended 31 December 2013

		Group			Company
		2013	2012	2013	2012
	Note	£m	£m	£m	£m
Cash flows from operating activities	5.1	5.9	58.4	(2.5)	(2.4)
Cash flows from taxation		(0.7)	(0.9)	–	–
Investing activities
Proceeds from sale of investment property		11.8	27.5	–	–
Payments to/on behalf of subsidiaries		–	–	(84.9)	(13.2)
Payments from subsidiaries		–	–	42.6	14.1
Repayment received of joint venture
investment loan		–	–	–	3.9
Loan to subsidiaries		–	–	(89.9)	(90.0)
Loan to joint ventures		(1.4)	–	–	–
Dividends received		9.9	9.6	–	–
Interest received		0.3	0.2	6.8	–
Investment in joint ventures		(11.8)	–	–	–
Acquisition of intangible assets		(2.2)	(1.6)	–	–
Acquisition of property		(38.4)	(49.5)	–	–
Acquisition of plant and equipment		(2.3)	(0.2)	–	–
Cash flows from investing activities		–––––––– (34.1)	–––––––– (14.0)	–––––––– (125.4)	–––––––– (85.2)
Financing activities		––––––––	––––––––	––––––––	––––––––
Total interest paid		(24.2)	(21.1)	(6.9)	(0.3)
Interest capitalised into property under
development included in cash flows
from operating activities		3.2	5.1	–	–
Interest paid in respect of financing activities		–––––––– (21.0)	–––––––– (16.0)	–––––––– (6.9)	–––––––– (0.3)
Ineffective swap payments		(16.7)	(18.8)	–	–
Proceeds from the issue of share capital		59.6	0.2	50.2	0.2
Payments to acquire own shares		(0.6)	(1.3)	–	–
Proceeds from non-current borrowings		149.8	291.3	88.4	90.0
Repayment of borrowings		(166.1)	(235.9)	–	–
Dividends paid to the owners of the
parent company		(7.5)	(3.6)	(7.5)	(3.6)
Dividends paid to minority interest		(0.8)	(0.8)	–	–
Cash flows from financing activities		–––––––– (3.3)	–––––––– 15.1	–––––––– 124.2	–––––––– 86.3
Net (decrease)/increase in cash and		––––––––	––––––––	––––––––	––––––––
cash equivalents		(32.2)	58.6	(3.7)	(1.3)
Cash and cash equivalents at start of year		75.4 ––––––––	16.8 ––––––––	(1.2) ––––––––	0.1 ––––––––
Cash and cash equivalents at end of year	5.1	43.2	75.4	(4.9)	(1.2)

–––––––– –––––––– –––––––– ––––––––

This section lays out the Group's accounting policies that relate to the financial statements as a whole. Where an accounting policy is specific to a particular note to the financial statements, the policy is described in the note to which it relates and has been clearly identified in a box.

The financial statements consolidate those of The UNITE Group plc, (the Company) and its subsidiaries (together referred to as the Group) and include the Group's interests in jointly controlled entities. The parent company financial statements present information about the Company as a separate entity and not as a group.

Both the parent company financial statements and the group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU (Adopted IFRS). On publishing the parent company financial statements here together with the group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement and related notes.

The accounting policies have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements.

The Company is domiciled in the United Kingdom.

Going concern

The Group's business activities, together with the factors likely to affect its future development and position are set out in the Strategic Report on pages 16 to 21. In addition, section 4 of these Notes to the financial statements includes the Group's objectives, policies and processes for managing its capital; details of its borrowings and interest rate swaps; and in note 5.3 its exposure to credit risk.

The Group has prepared cash flow projections until the end of 2015. Following the significant level of financing activity that was completed during 2012 and 2013, the Group has significant levels of cash headroom. The Group has two facilities maturing in the second half of 2015 and plans to initiate discussions with banks about their renewal around twelve months before the maturity dates. The Group has historically maintained positive relationships with its lending banks and has always secured new facilities before maturity dates and remained within its covenant levels. The Group is in full compliance with its covenants at 31 December 2013 as set out in note 4.5. In order to manage future financial commitments, the Group operates a formal approval process, through its Major Investment Approvals committee, to ensure appropriate review is undertaken before any land is acquired or build contracts are agreed.

The Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. The financial statements have therefore been prepared on a going concern basis.

Measurement convention

The financial statements are prepared on the historical cost basis except for investment property, investment property under development, investments in subsidiaries, interest rate swaps and land and buildings included in property, plant and equipment all of which are stated at their fair value.

Basis of consolidation

Subsidiaries are those entities controlled by the Company. Control exists when the Company has the power, directly or indirectly,

to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently 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.

Intra-group balances and transactions, and any unrealised gains and losses arising from intra-group transactions, such as property disposals and management fees are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the Group's retained interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains except where the loss provides evidence of a reduction in the net realisable value of current assets or an impairment in value of fixed assets.

Impact of accounting standards and interpretations in issue but not yet effective

The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

• IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements (2011), IFRS 11 Joint Arrangements, IAS 28 Investments in Associates and Joint Ventures (2011) and IFRS 12 Disclosure of Interests in Other Entities are all mandatory for years commencing on or after 1 January 2014. These are part of a new suite of standards on consolidation and related standards, replacing the existing accounting for subsidiaries and joint ventures (now joint arrangements), and making limited amendments in relation to associates.
• Offsetting Financial Assets and Financial Liabilities Amendments to IAS 32 is mandatory for years commencing on or after 1 January 2014 and clarifies the offsetting criteria for assets and liabilities.
• Continuing hedge accounting after derivative novations Amendments to IAS 39 is effective for years commencing on or after 1 January 2014 and allows an entity not to discontinue hedge accounting where there has been a swap novation.

Accounting estimates and judgements

The preparation of financial statements requires management to exercise judgement in applying the Group's accounting policies.

It also requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Estimates and assumptions are reviewed on an ongoing basis with revisions recognised in the period in which the estimates are revised and in any future periods affected.

The areas involving a higher degree of judgement of complexity are set out below and are explained in more detail in the related notes to the financial statements.

The areas involving the most sensitive estimates and assumptions that are significant to the financial statements are set out below and in more detail in the related notes:

• valuation of investment property, investment property under development, completed property and properties under development (note 3.1)
• taxation (note 2.6)
• valuation of interest rate swaps (note 4.2)

The accounting policy descriptions set out the areas where judgement needs exercising, the most significant of which are as follows:

• classification of joint venture vehicles (note 3.4)

This section focuses on the results and performance of the Group. On the following pages you will find disclosures explaining the Group's results for the year, segmental information, taxation, earnings and adjusted net asset value (NAV) per share.

Net portfolio contribution (NPC) and NAV movement are the Group's main key performance indicators. This reflects the way the business is managed and how the directors assess the performance of the Group.

The Group's adjusted earnings and net asset value are also aligned with the European Public Real Estate Association (EPRA) best practice recommendations.

EPRA performance measures

		2013	2012
	Note	£m	£m
EPRA earnings		30.6m	15.9m
EPRA earnings per share (pence)	2.2b	18.0p	9.9p
EPRA NAV	2.3c	681.6m	566.5m
EPRA NAV per share (pence)		382p	350p
EPRA NNNAV	2.3c	665.5m	523.0m
EPRA NNNAV per share (pence)		373p	323p

2.1 Segmental information

The Board of Directors monitor the business along two activity lines. The reportable segments for the years ended 31 December 2013 and 31 December 2012 are Operations and Property.

The Group undertakes its Operations and Property activities directly and through joint ventures with third parties. The joint ventures are an integral part of each segment and are included in the information used by the Board to monitor the business.

The Group's properties are located exclusively in the United Kingdom. The Board therefore does not consider that the Group has meaningful geographical segments.

(a) Operations

The Operations business manages rental properties, owned directly by the Group or by joint ventures. Its revenues are derived from rental income and asset management fees earned from joint ventures. NPC is the key indicator which is used by the Board to manage the Operations business. The segmental result is outlined below.

								Group
								on see
								through
	UNITE				Share of joint ventures			basis
	Total	USAF	UCC	LSAV	OCB	USV	Total	Total
	£m	£m	£m	£m	£m	£m	£m	£m
Rental income	81.0	19.1	8.4	2.1	2.8	–	32.4	113.4
Property operating expenses	(25.1)	(5.5) __ _ ___	(1.0)	(0.4)	(0.4)	–	(7.3)	(32.4)
Net operating income	55.9	13.6	7.4	1.7	2.4	–	25.1	81.0
Management fees	13.7	(1.4)	(1.1)	(0.3)	(0.3)	–	(3.1)	10.6
Operating expenses	(18.5)	(0.2) __ _ ___	(0.1)	(0.1)	(0.1)	–	(0.5)	(19.0)
	51.1	12.0	6.2	1.3	2.0	–	21.5	72.6
Operating lease rentals*	(13.7)	–	–	–	–	–	–	(13.7)
Net financing costs	(23.1)	(4.7) __ _ ___	(3.6)	(0.5)	(1.4)	–	(10.2)	(33.3)
Net portfolio contribution	14.3	7.3	2.6	0.8	0.6	–	11.3	25.6
		–––––– –––––– –––––– –––––– –––––– –––––– –––––– ––––––

Included in the UNITE total above is rental income of £19.7 million and property operating expenses of £6.4 million relating to sale and leaseback properties.

2012

								Group
								on see
								through
	UNITE				Share of joint ventures			basis
	Total	USAF	UCC	LSAV	OCB	USV	Total	Total
	£m	£m	£m	£m	£m	£m	£m	£m
Rental income	79.4	18.8	9.4	0.3	3.3	0.2	32.0	111.4
Property operating expenses	(24.6)	(5.6) __ _ ___	(1.5)	–	(0.6)	–	(7.7)	(32.3)
Net operating income	54.8	13.2	7.9	0.3	2.7	0.2	24.3	79.1
Management fees	13.2	(1.4)	(1.2)	–	(0.3)	–	(2.9)	10.3
Operating expenses	(21.5)	(0.1) __ _ ___	–	(0.1)	(0.1)	–	(0.3)	(21.8)
	46.5	11.7	6.7	0.2	2.3	0.2	21.1	67.6
Operating lease rentals*	(12.8)	–	–	–	–	–	–	(12.8)
Net financing costs	(24.7)	(5.3) __ _ ___	(3.8)	(0.1)	(1.7)	(0.1)	(11.0)	(35.7)
Net portfolio contribution	9.0	6.4	2.9	0.1	0.6	0.1	10.1	19.1
		–––––– –––––– –––––– –––––– –––––– –––––– –––––– ––––––

Included in the UNITE total above is rental income of £18.5 million and property operating expenses of £5.5 million relating to sale and leaseback properties.

* Operating lease rentals arise from properties which the Group has sold and is now leasing back. As these properties contribute to the Group's rental income, the Group consider these lease costs to be a form of financing.

(b) Property

The Group's Property business undertakes the acquisition and development of properties. This included the manufacture and sale of modular building components in the first half of 2012 prior to the business closure, through UNITE Modular Solutions Limited, 'UMS'. The Property Segment's revenue comprises revenue from development management fees earned from joint ventures; and the sale of modules to third parties and joint ventures, as set out in note 2.4. The Property segmental result is set out below.

	2013	2012
	£m	£m
Pre-contract, abortive and other costs	(3.3) ––––––––	(3.7) ––––––––
Property segment result	(3.3)	(3.7)
	––––––––	––––––––

(c) Segmental contribution to NAV

The Board does not use balance sheet information split out by segment to monitor and manage the Group's activities. Instead the position of the Group is managed by reviewing the increases in EPRA NAV contributed by each segment during the period.

Contributions to EPRA NAV by each segment during the year is as follows:

		2013	2012
	Note	£m	£m
Operations
Net portfolio contribution	2.1a	25.6	19.1
Property
Rental growth		28.1	33.8
Specific property write downs		(0.7)	(6.1)
Disposals and acquisition costs		(2.8)	(1.4)
Capital expenditure and refurbishments		1.3 ––––––––	1.8 ––––––––
Rental property gains		25.9	28.1
Development property gains		24.1	23.7
Pre-contract and other development costs		(3.3)	(3.7)
Total property		–––––––– 46.7	–––––––– 48.1
Unallocated		––––––––	––––––––
Shares issued		50.2	–
Dividends paid		(7.5)	(3.6)
Equity portion of convertible instruments		9.4	–
Share of monies received from Landsbanki		2.3	2.9
UCC promote fee		7.5	–
Swap losses and debt exit costs		(17.9)	(10.6)
LSAV set-up costs		–	(1.7)
Purchase of own shares		(0.6)	(1.3)
Other		(0.6) ––––––––	(0.9) ––––––––
Total unallocated		42.8	(15.2)
Total EPRA NAV movement in the period		–––––––– 115.1	–––––––– 52.0
Total EPRA NAV brought forward		–––––––– 566.5	–––––––– 514.5
Total EPRA NAV carried forward	2.3a	–––––––– 681.6	–––––––– 566.5
		––––––––	––––––––

2.2 Adjusted profit and EPS

In addition to the IFRS reporting measures, the Group reports adjusted profit on the basis recommended for real estate companies by EPRA, the European Public Real Estate Association.

(a) EPRA earnings and reconciliation to IFRS

EPRA earnings exclude movements relating to changes in values of investment properties and interest rate swaps, which are included in the profit reported under IFRS. In addition a further adjusted profit is shown below to demonstrate the non-recurring impact of the UCC promote fee recognised in 2013. The adjusted profit reconciles to the profit reported under IFRS as follows:

		2013	2012
	Note	£m	£m
Operations segment result – Net portfolio contribution	2.1a	25.6	19.1
Property segment result	2.1b	(3.3)	(3.7)
Unallocated to segments		0.8	0.5
Adjusted profit pre UCC promote fee		–––––––– 23.1	–––––––– 15.9
UCC promote fee		7.5	–
EPRA Earnings		–––––––– 30.6	–––––––– 15.9
Net valuation gains on investment property	3.1	35.4	29.8
Valuation gains realised on transfer of completed property	3.1	–	49.7
Property disposals and write downs		(1.9)	14.7
LSAV set up costs		–	(1.3)
Debt exit costs		(0.4)	–
Share of joint venture gains on investment property	3.4b	13.5	14.9
Share of joint venture property disposals and write downs		(0.1)	0.3
Share of joint venture LSAV set up costs		–	(0.4)
Share of joint venture debt exit costs	3.4b	(2.2)	–
Mark to market changes in interest rate swaps*	4.3	0.7	(7.6)
Interest rate swap payments on ineffective hedges*		4.4	9.0
Share of joint venture interest rate swaps charges	3.4b	(3.8)	(0.6)
Deferred tax relating to interest rate swap movement		2.1	1.6
Share of joint venture deferred tax credit	3.4b	–	0.4
Minority interest share of reconciling items**		0.3 ––––––––	(0.8) ––––––––
Profit attributable to owners of the parent company		78.0	125.6
		––––––––	––––––––

• * Within IFRS reported profit, there is a £0.7 million profit (2012: £7.6 million loss) relating to movements in the mark to market of ineffective interest rate swaps, this full loss can be seen in note 4.3. Part of this movement, £4.4 million (2012: £9.0 million) relates to actual interest payments made on these swaps and is considered to be a true operating cost of the Operations Segment. It is therefore already included within Net Financing Costs in NPC (Operating Segment result) in note 2.1a.
• ** The minority interest share, or non-controlling interest, arises as a result of the Company not owning 100 per cent. of the share capital of one of its subsidiaries, USAF (Feeder) Guernsey Ltd. More detail is provided in note 3.4.

Unallocated to segments includes share of joint venture amounts received from Landsbanki of £2.3 million (2012: £2.9 million), current tax charges of £0.4 million (2012: £0.4 million), deferred tax credit of £0.6m (2012: nil), contributions to the UNITE Foundation of £0.5 million (2012: £0.2 million) and share option fair value charges of £1.1 million (2012: £1.5 million).

(b) Earnings per share

EPS is the amount of post-tax profits attributable to each share. Basic EPS is adjusted in line with EPRA guidelines in order to more accurately show the business performance of the Group in a consistent manner and to reflect how the business is managed and measured on a day to day basis. EPRA EPS and adjusted EPS are calculated using EPRA earnings and adjusted profit as set out above.

The calculations of basic and adjusted EPS for the year ended 31 December 2013 is as follows:

	Note	2013	2012
		£m	£m
Earnings
Basic (and diluted)		78.0	125.6
EPRA	2.2a	30.6	15.9
Adjusted pre UCC promote fee	2.2a	23.1	15.9
Weighted average number of
shares (thousands)
Basic		169,561	160,319
Dilutive potential ordinary shares
(share options)		255	136
Diluted		–––––––– 169,816	–––––––– 160,455
Earnings per share (pence)		––––––––	––––––––
Basic		46.0p	78.3p
Diluted		46.0p	78.3p
EPRA EPS		18.0p	9.9p
Adjusted pre UCC promote fee		13.6p	9.9p

Movements in the weighted average number of shares have resulted from the placing in June 2013 and the issue of shares arising from the employee share based payment schemes.

The placing comprised 16,000,000 shares and gave rise to proceeds of £51.2 million, £49.9 million net of issue costs.

Excluded from the potential dilutive shares (share options) are 3,697,000 options in existence at 31 December 2013 (2012: 3,176,000) which do not affect the diluted weighted average number of shares.

2.3 Adjusted Net Assets and NAV per share

EPRA NAV excludes the mark to market valuation of swaps, deferred tax liabilities and recognises all properties at market value. This is the key performance measure that the Board uses to monitor and manage the performance of the Property segment.

(a) EPRA net assets

		2013			2012
	Wholly	Share of		Wholly	Share of
	owned £m	JV's £m	Total £m	owned £m	JV's £m	Total £m
Investment properties	767.6	407.6	1,175.2	762.8	399.3	1,162.1
Completed properties (at market value)	– ––––––––	– ––––––––	– ––––––––	– ––––––––	– ––––––––	– ––––––––
Rental properties	767.6 ––––––––	407.6 ––––––––	1,175.2 ––––––––	762.8 ––––––––	399.3 ––––––––	1,162.1 ––––––––
Investment properties under development Properties under development	95.5	15.1	110.6	37.6	0.2	37.8
(at market value)	84.3	–	84.3	45.5	–	45.5
Development properties	–––––––– 179.8 ––––––––	–––––––– 15.1 ––––––––	–––––––– 194.9 ––––––––	–––––––– 83.1 ––––––––	–––––––– 0.2 ––––––––	–––––––– 83.3 ––––––––
Total property portfolio	947.4	422.7	1,370.1	845.9	399.5	1,245.4
Debt on properties (net of cash)	(470.2)	(195.9)	(666.1)	(452.6)	(195.1)	(647.7)
Other assets/(liabilities)	(24.4) ––––––––	2.0 ––––––––	(22.4) ––––––––	(23.1) ––––––––	(8.1) ––––––––	(31.2) ––––––––
EPRA net assets	452.8 ––––––––	228.8 ––––––––	681.6 ––––––––	370.2 ––––––––	196.3 ––––––––	566.5 ––––––––
Loan to value (%)	50	46	49	53	49	52
	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––

(b) Reconciliation to IFRS

EPRA NAV reconciles to NAV reported under IFRS and EPRA Triple Net Asset Value (NNNAV) as follows:

		2013	2012
	Note	£m	£m
EPRA NAV	2.3a	681.6	566.5
Mark to market interest rate swaps		(5.5)	(31.7)
Valuation gain not recognised on property held at cost	3.1	(22.8)	(19.0)
Net asset value reported under IFRS		–––––––– 653.3	–––––––– 515.8
Recognise valuation gain on property held at cost		–––––––– 22.8	–––––––– 19.0
Mark to market of fixed rate debt		(10.6)	(11.8)
EPRA NNNAV		–––––––– 665.5	–––––––– 523.0
		––––––––	––––––––

(c) Net Asset Value per share

The Board regularly monitors the adjusted NAV attributable to its shareholders. NAV per share as at 31 December 2013 is calculated as follows:

	Note	2013	2012
		£m	£m
Net assets
Basic (as reported under IFRS on the
balance sheet)	2.3b	653.3	515.8
EPRA (pre-dilution)	2.1c	681.6	566.5
EPRA diluted (takes into account
the dilutive effect of all share options
being exercised)		683.7	568.4
EPRA NNNAV (diluted)		667.6	524.9
Number of shares (thousands)
Basic		176,658	160,461
Outstanding share options		2,457 ––––––––	2,111 ––––––––
Diluted		179,115	162,572
Net asset value per share (pence)		––––––––	––––––––
Basic		370p	321p
Adjusted pre dilution		386p	353p
EPRA (fully diluted)		382p	350p
EPRA NNNAV (fully diluted)		373p	323p

2.4 Revenue

The Group earns revenue from the following activities:

		Note	2013	2012
			£m	£m
Rental income	Operations segment	2.1a	81.0	79.4
Management fees	Operations segment		11.2	10.9
Development revenue	Property segment		2.1	–
Manufacturing revenue	Property segment		–	12.5
Property sales	Unallocated		–	112.1
UCC promote fee	Unallocated		7.5 ––––––––	– ––––––––
			101.8	214.9
Impact of minority interest on management fees			(0.2)	(0.2)
Impact of minority interest on property sales			– ––––––––	(0.1) ––––––––
Total revenue			101.6	214.6
			––––––––	––––––––

The revenue above excludes the Group's share of revenue from joint ventures; this can be seen in note 2.1a.

Revenue has decreased because of the reduction in planned sales of completed property mitigated by an increase in rental income and the UCC promote fee receivable.

Accounting policies

Revenue is recognised on the following bases:

Rental income

Rental income from property leased out under operating leases (comprising direct lets to students and leases to Universities and commercial tenants) is recognised in the income statement on a straight line basis over the term of the lease. Lease incentives are sometimes granted on commercial units; these are recognised as an integral part of the total rental income and spread over the term of the lease.

Property sales

Income relating to the sale of trading properties is recognised once contracts for sale have been unconditionally exchanged.

Manufacturing revenue

Revenue from the sale of modules and related services is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. For modules this is on receipt of customer acceptance following manufacture and for related services as the service is provided.

Management and promote fees

Management and promote fees are recognised, in line with the management contracts, in the period to which they relate as services are provided. The Group can earn promote fees relative to criteria specified in the joint venture agreements.

2.5 Provisions for onerous contracts

	Current	Non-current	Total
	liability	liability	liability
	£m	£m	£m
At 1 January 2013	0.5	0.2	0.7
Provisions utilised in the year	(0.5)	(0.2)	(0.7)
At 31 December 2013	–––––––– – ––––––––	–––––––– – ––––––––	–––––––– – ––––––––
At 1 January 2012	6.3	4.7	11.0
Provisions utilised in the year	(5.8)	(4.5)	(10.3)
At 31 December 2012	–––––––– 0.5 ––––––––	–––––––– 0.2 ––––––––	–––––––– 0.7 ––––––––

2.6 Tax

The Group has not paid any corporation tax in the recent past due to the availability of capital allowances, indexation and brought forward losses. However it does pay UK income tax on rental income that arises from investments held by offshore subsidiaries (predominantly the investments in USAF).

Accounting policies

The tax charge for the period is recognised in the income statement and the statement of comprehensive income, according to the accounting treatment of the related transaction. The tax charge comprises both current and deferred tax.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable in respect of previous years. The current tax charge is based on tax rates that are enacted or substantively enacted at the year end.

Deferred tax arises due to certain temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and those for taxation purposes. Temporary differences relating to investments in subsidiaries and joint ventures are not provided for to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. The deferred tax provision in respect of property assets is calculated on the basis that assets will not be held indefinitely and therefore takes account of available indexation. A deferred tax asset is recognised only to the extent that it is probable that sufficient future taxable profits will be available against which the asset can be utilised.

(a) Tax – income statement

The total taxation charge/(credit) in the income statement is analysed as follows:

	2013	2012
	£m	£m
Income tax on UK rental income arising in non-UK companies	0.5	0.6
Current tax charge	–––––––– 0.5	–––––––– 0.6
Origination and reversal of temporary differences	(1.8)	(1.3)
Effect of change in tax rate	(0.3)	(0.3)
Recognition of previously unrecognised asset	(0.6) ––––––––	– ––––––––
Deferred tax charge/(credit)	(2.7) ––––––––	(1.6) ––––––––
Total tax credit in income statement	(2.2)	(1.0)
	––––––––	––––––––

In order to understand how, in the income statement, a tax credit of £2.2 million arises on a profit before tax of £77.1 million, the taxation charge that would arise at the standard rate of UK corporation tax is reconciled to the actual tax charge as follows:

	2013	2012
	£m	£m
Profit before tax	77.1	126.2
Income tax using the UK corporation tax rate of 23.3% (2012: 24.5%)	17.9	30.9
Effect of indexation on investment and development property	(3.0)	(3.3)
Non-deductible items	(6.9)	0.8
Effect of transferring property from current to non-current assets	–	(10.8)
Share of joint venture profit	–	(0.1)
Movement on unprovided deferred tax asset	(8.0)	(13.1)
Profits chargeable at lower rate	(0.1)	–
Effect of property disposals	(0.2)	(4.3)
Rate difference on deferred tax	(1.3)	(1.1)
Recognition of previously unrecognised deferred tax asset	(0.6) ––––––––	– ––––––––
Total tax credit in the income statement	(2.2)	(1.0)
	––––––––	––––––––

(b) Tax – other comprehensive income

Within other comprehensive income a tax charge totalling £0.3 million (2012: £0.8 million) has been recognised representing deferred tax. An analysis of this is included below in the deferred tax movement table.

(c) Tax – balance sheet

The table below outlines the deferred tax liabilities/(assets) that are recognised in the balance sheet, together with their movements in the year:

2013

	At				At
	31 December		(Credited)	Charged	31 December
	2012	Transfers	in income	in equity	2013
	£m	£m	£m	£m	£m
Investment property	15.9	–	1.0	–	16.9
Property held in current assets	–	–	–	–	–
Property, plant and machinery	(0.7)	–	(0.1)	–	(0.8)
Investments in joint ventures	7.1	–	(0.5)	–	6.6
Interest rate swaps	(4.2)	–	3.1	0.3	(0.8)
Interest rate swaps relating to
joint ventures	(1.9)	–	–	1.8	(0.1)
Tax value of carried forward
losses recognised	(16.2)	–	(6.2)	–	(22.4)
Net tax liabilities	–––––––– –	–––––––– -	–––––––– (2.7)	–––––––– 2.1	–––––––– (0.6)
	––––––––	––––––––	––––––––	––––––––	––––––––

2012
------

	At 31				At
	December		(Credited)	Charged	31 December
	2011	Transfers	in income	in equity	2012
	£m	£m	£m	£m	£m
Investment property	8.8	–	7.1	–	15.9
Property held in current assets	(1.3)	–	1.3	–	–
Property, plant and machinery	(1.2)	–	0.5	–	(0.7)
Investments in joint ventures	7.6	–	(0.5)	–	7.1
Interest rate swaps	(8.0)	–	3.0	0.8	(4.2)
Interest rate swaps relating to
joint ventures	(2.7)	–	–	0.8	(1.9)
Tax value of carried forward
losses recognised	(3.2)	–	(13.0)	–	(16.2)
Net tax liabilities	–––––––– –	–––––––– –	–––––––– (1.6)	–––––––– 1.6	–––––––– –

A deferred tax asset of £9.6 million (2012: £20.0 million) in respect of losses of £47.9 million (2012: £86.9 million) has not been recognised. Complexities in the Group structure mean these losses may be inaccessible and the Group is considering converting to REIT status in the medium term. Accordingly, the recognised deferred tax asset has been restricted to those losses which are likely to be ultilised in the next three years.

–––––––– –––––––– –––––––– –––––––– ––––––––

A reduction in the UK corporation tax rate from 24 per cent. to 23 per cent. (effective 1 April 2013) was substantively enacted on 3 July 2012 respectively. Further reductions to 21 per cent. (effective from 1 April 2014) and 20 per cent. (effective from 1 April 2015) were substantively enacted on 2 July 2013. This will reduce the Group's future current tax charge accordingly. The deferred tax asset at 31 December 2013 has been calculated based on the rates of 20 per cent. and 21 per cent. substantively enacted at the balance sheet date.

Company

Deferred tax has not been recognised on temporary timing differences of £51.6 million (2012: £44.1 million) in respect of revaluation of subsidiaries and investment in joint ventures as it is probable that the temporary timing difference will not reverse in the foreseeable future.

2.7 Audit fees

Disclosures in respect of fees paid to the auditors can be found in the Audit Committee Report, page [xx].

The Group holds its property portfolio directly and through its joint ventures. The performance of the property portfolio whether wholly owned or in joint ventures is the key factor that drives adjusted net asset value (NAV), one of the Group's key performance indicators.

The following pages provide disclosures about the Group's investments in property assets and joint ventures and their performance over the year.

3.1 Wholly owned property assets

The Group's wholly owned property portfolio is held in four groups on the balance sheet at the carrying values detailed below. In the Group's adjusted NAV, all these groups are shown at market value.

(i) Investment property (fixed assets)

These are assets that the Group intends to hold for a long period to earn rental income or capital appreciation. The assets are held at fair value in the balance sheet with changes in fair value taken to the income statement.

(ii) Investment property under development (fixed assets)

These are assets which are currently in the course of construction and which will be transferred to 'Investment property' on completion.

(iii) Completed properties (current assets)

These are assets acquired by the Group with the intention to hold the assets for a short period prior to disposal to a joint venture or third parties. The Group continues to earn rental income and capital appreciation on these assets which are held at cost in the balance sheet.

(iv) Properties under development (current assets)

These are assets which are currently in the course of construction and which will be transferred to 'Completed properties' on completion.

The Group also acquires land which it intends to develop. Land is held within inventories until planning permission is obtained, at which point it is transferred to investment property under development or properties under development.

Accounting policies

Properties held under operating leases are not included in assets, but the future payments due in respect of these properties are disclosed in note 4.6a.

Investment property and investment property under development are held at fair value.

Completed properties, properties under development and inventories are shown at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. All costs directly associated with the purchase and construction of a property, and all subsequent qualifying expenditure is capitalised.

The recognition of acquisitions and disposals of investment and other property occurs on unconditional exchange of contracts.

Borrowing costs are capitalised if they are directly attributable to the acquisition and construction of a property asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalisation of borrowing costs continues until the assets are substantially ready for their intended use but stops if development activities are suspended. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised. The capitalisation rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development cost financed out of general borrowings, to the average rate. During the year the average capitalisation rate used was 6.3 per cent. (2012: 5.9 per cent.).

Valuation process

The valuation of the properties are performed twice a year on the basis of valuation reports prepared by external, independent valuers, having an appropriate recognised professional qualification. The fair values are based on market values as defined in the RICS Appraisal and Valuation Manual, issued by the Royal Institution of Chartered Surveyors. CB Richard Ellis Ltd, Jones Lang LaSalle and Messrs Knight Frank, Chartered Surveyors were the valuers in the years ending 31 December 2013 and 2012.

The reports are based on both:

Information provided by the Group such as current rents, occupancy, operating costs, terms and conditions of leases and nomination agreements, capital expenditure, etc. This information is derived from the Group's financial systems and is subject to the Group's overall control environment.

Assumptions and valuation models used by the valuers – the assumptions are typically market related, such as yields and discount rates. These are based on their professional judgement and market observation.

The information provided to the valuers – and the assumptions and the valuation models used by the valuers – are reviewed by the Property Board and the CFO. This includes a review of fair value movements over the period.

The movements in the carrying value of the Group's wholly owned property portfolio during the year ended 31 December 2013 were as follows:

	Investment property £m	Investment property under development £m	Completed property £m	Property under development £m	Total £m
At 1 January 2013	762.8	37.6	–	26.5	826.9
Cost capitalised	8.0	29.2	–	31.8	69.0
Interest capitalised	–	2.9	–	3.2	6.1
Transfer from investment property	(8.7)	8.7	–	–	–
Disposals	(12.8)	–	–	–	(12.8)
Valuation gains	23.6	17.4	–	–	41.0
Valuation losses	(5.3)	(0.3)	–	–	(5.6)
Net valuation gains	18.3 ––––––––	17.1 ––––––––	– ––––––––	– ––––––––	35.4 ––––––––
Carrying value at 31 December 2013	767.6 ––––––––	95.5 ––––––––	– ––––––––	61.5 ––––––––	924.6 ––––––––

Whilst completed property and property under development are held at cost on the balance sheet, the Group manages the assets based on their market value (fair value). These properties are included in adjusted NAV at their fair value, valued on the same basis as for investment property and investment property under development, by external valuers. The fair value of the Group's wholly owned properties at the year ended 31 December 2013 is as follows:

	Investment property £m	Investment property under development £m	Completed property £m	Property under development £m	Total £m
Carrying value at 31 December 2013
(above)	767.6	95.5	–	61.5	924.6
Valuation gains not recognised under
IFRS but included in Adjusted NAV
Brought forward	–	–	–	19.0	19.0
Valuation gain in year	–	–	–	3.8	3.8
	– ––––––––	– ––––––––	– ––––––––	22.8 ––––––––	22.8 ––––––––
Market value at 31 December 2013	767.6 ––––––––	95.5 ––––––––	– ––––––––	84.3 ––––––––	947.4 ––––––––

The movements in the carrying value of the Group's wholly owned property portfolio during the year ended 31 December 2012 were as follows:

		Investment		Property
	Investment property	property under development	Completed property	under development	Total
	£m	£m	£m	£m	£m
At 1 January 2012	396.2	–	198.7	135.2	730.1
Acquisitions	56.8	–	–	–	56.8
Cost capitalised	2.4	28.8	0.4	46.0	77.6
Interest capitalised	–	0.9	–	5.1	6.0
Transfer of completed property	263.6	–	(263.6)	–	–
Transfer from property under
development	–	–	159.2	(159.2)	–
Transfer from work in progress	–	1.4	–	–	1.4
Disposals	(29.2)	–	(95.1)	–	(124.3)
Reversal of impairment/(impairment)	–	–	0.4	(0.6)	(0.2)
Valuation gains recognised on transfer
of completed property	49.7	–	–	–	49.7
Valuation gains	30.5	6.5	–	–	37.0
Valuation losses	(7.2)	–	–	–	(7.2)
Net valuation gains	23.3	6.5	–	–	29.8
Carrying value at 31 December 2012	–––––––– 762.8 ––––––––	–––––––– 37.6 ––––––––	–––––––– – ––––––––	–––––––– 26.5 ––––––––	–––––––– 826.9 ––––––––

The fair value of the Group's wholly owned property portfolio at the year ended 31 December 2012 is as follows:

	Investment property £m	Investment property under development £m	Completed property £m	Property under development £m	Total £m
Carrying value at 31 December 2012
(above)	762.8	37.6	–	26.5	826.9
Valuation gains not recognised under IFRS but included in Adjusted NAV
Brought forward	–	–	22.2	53.9	76.1
Transfer from property under development	–	–	49.4	(49.4)	–
Transfer of completed property	–	–	(49.7)	–	(49.7)
Disposals	–	–	(26.0)	–	(26.0)
Valuation gain in year	–	–	4.1	14.5	18.6
	– ––––––––	– ––––––––	– ––––––––	19.0 ––––––––	19.0 ––––––––
Market value at 31 December 2012	762.8 ––––––––	37.6 ––––––––	– ––––––––	45.5 ––––––––	845.9 ––––––––

During 2012 properties with a carrying value of £263.6 million and a fair value of £313.3 million were transferred from completed property to investment property. This resulted in the recognition of £49.7 million of previously unrecognised valuation gains.

Included within investment properties are £30.8 million (2012: £29.7 million) of assets held under a long leasehold and £11.3 million (2012: £12.7 million) of assets held under short leasehold.

Total interest capitalised in investment and development properties at 31 December 2013 was £37.9 million (2012: £32.1 million) on a cumulative basis. Total internal costs relating to manufacturing, construction and development costs of group properties amount to £48.1 million at 31 December 2013 (2012: £46.7 million) on a cumulative basis.

2012

Recurring fair value measurement

All investment and development properties are classified as Level 3 in the fair value hierarchy. Whilst completed property and property under development are held at cost in the balance sheet, the Group discloses the fair value of these assets and includes them at fair value in adjusted NAV. Completed property and property under development fair value measurements are categorised as Level 3 in the fair value hierarchy and their fair value is measured using the same techniques as for investment properties and investment properties under development.

Class of asset	2013	2012
	£m	£m
London – Rental properties	274.5	273.7
Major provincial – Rental properties	332.5	328.7
Other provincial – Rental properties	160.6	160.4
London – Development properties	149.6	75.8
Major provincial – Development properties	17.9	7.3
Other provincial – Development properties	12.3	–
Market value	–––––––– 947.4	–––––––– 845.9
	––––––––	––––––––

The valuation technique for investment properties is a discounted cash flow using the following inputs: net rental income, estimated future costs, occupancy and property management costs.

Where the asset is leased to a university, the valuations also reflect the length of the lease, the allocation of maintenance and insurance responsibilities between the Group and the lessee, and the market's general perception of the lessee's credit worthiness.

The resulting valuations are cross-checked against the initial yields and the capital value per bed derived from actual market transactions.

For development properties, the fair value is usually calculated by estimating the fair value of the completed property (using the discounted cash flow method) less estimated costs to completion.

Fair value using unobservable inputs (Level 3)

	2013	2012
	£m	£m
Opening fair value	845.9	806.2
Gains and losses recognised in income statement	35.4	29.6
Gains and losses not recognised on properties under development	3.8	18.6
Acquisitions	–	56.8
Capital Expenditure	75.1	85.0
Disposals	(12.8) ––––––––	(150.3) ––––––––
Closing fair value	947.4	845.9
	––––––––	––––––––

			Quantitative information about fair value measurements using unobservable inputs
(Level 3)

	Fair value	Valuation technique	Unobservable inputs	Range	Weighted average
London – rental properties	274.5	Discounted cash flows	Net rental income (£ per week) Estimated future rent (%) Discount rate (yield) (%)	187 – 326 1 – 3 6.15 – 6.50	£220 3 6.24
Major provincial – rental properties	332.5	Discounted cash flows	Net rental income (£ per week) Estimated future rent (%) Discount rate (yield) (%)	93 – 135 2 – 3 6.40 – 6.90	£109 3 6.68
Other provincial – rental properties	160.6	Discounted cash flows	Net rental income (£ per week) Estimated future rent (%) Discount rate (yield) (%)	78 – 124 2 – 3 6.40 – 8.40	£106 3 6.83
London – development properties	149.6	Discounted cash flows	Estimated cost to complete (£m) Estimated future rent (%) Discount rate (yield) (%)	8.7m – 12.2m 3 6.10 – 6.50	10.9 3 6.35
Major provincial – development properties	17.9	Discounted cash flows	Estimated cost to complete (£m) Estimated future rent (%) Discount rate (yield) (%)	22.9m 3 6.25 – 7.00	22.9 3 6.64
Other provincial – development properties	12.3	Discounted cash flows	Estimated cost to complete (£m) Estimated future rent (%) Discount rate (yield) (%)	5.7m 3 6.75	5.7 3 6.75
Fair value at 31 December 2013	974.4
	Fair value	Valuation technique	Unobservable inputs	Range	Weighted average
London – rental properties	273.7	Discounted cash flows	Net rental income (£ per week) Estimated future rent (%) Discount rate (yield) (%)	181 – 317 1 – 3 6.15 – 6.35	£214 3 6.28
Major provincial – rental properties	328.7	Discounted cash flows	Net rental income (£ per week) Estimated future rent (%) Discount rate (yield) (%)	86 – 135 2 – 3 6.40 – 7.25	£106 3 6.80
Other provincial – rental properties	160.4	Discounted cash flows	Net rental income (£ per week) Estimated future rent (%) Discount rate (yield) (%)	73 – 119 2 – 3 6.40 – 8.25	£103 3 6.84
London – development properties	75.8	Discounted cash flows	Estimated cost to complete (£m) Estimated future rent (%) Discount rate (yield) (%)	27.7m – 43.0m 37.4m 3 6.50	3 6.50
Major provincial – development properties	7.3	Discounted cash flows	Estimated cost to complete (£m) Estimated future rent (%) Discount rate (yield) (%)	21.7m 3 6.50 – 7.00	21.7m 3 6.77
Fair value at 31 December 2012	845.9

A decrease in net rental income, estimated future rents or occupancy will result in a decrease in the fair value, whereas a decrease in the discount rate (yield) or the estimated costs to complete will result in an increase in fair value. There are interrelationships between these rates as they are partially determined by market rate conditions.

3.2 Inventories

	2013	2012
	£m	£m
Interests in land	–	0.6
Other stocks	3.2	1.1
Inventories	–––––––– 3.2	–––––––– 1.7
	––––––––	––––––––

The movement in other stock is caused by an increase in activity during the year relating to costs incurred in connection with the acquisition of assets for the LSAV joint venture.

3.3 Other non-current assets

Accounting policies

Property, plant and equipment

Other than land and buildings; property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see below). Land and buildings are stated at fair value on the same basis as investment properties. Property, plant and equipment mainly comprise leasehold improvements at the Group's head office and London office as well as computer hardware and software at these sites.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items of property, plant and equipment. Freehold land is not depreciated. The estimated useful lives are as follows:

•	Leasehold improvements	Shorter life of lease and economic life

• Other assets 4-20 years

Intangible assets

Intangible assets predominately comprise internally developed computer software which allows customers to book online and processes transactions within the sales cycle. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Expenditure on research activities is recognised in the income statement as an expense incurred. The assets are amortised on a straight-line basis over 4 to 5 years being the estimated useful lives of the intangible assets, from the date they are available for use. Amortisation is charged to the income statement.

The Group's other non-current assets can be analysed as follows:

		2013			2012
	Property,			Property,
		plant and Intangible			plant and Intangible
	equipment	assets		Total equipment	assets	Total
	£m	£m	£m	£m	£m	£m
Cost or valuation
At 1 January	7.7	17.5	25.2	19.8	19.5	39.3
Additions	2.3	2.2	4.5	0.2	1.6	1.8
Disposals	–	–	–	(12.3)	(3.6)	(15.9)
At 31 December	10.0	19.7	29.7	7.7	–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– 17.5	25.2
Depreciation, amortisation and impairment losses
At 1 January	6.5	13.7	20.2	17.5	15.0	32.5
Depreciation/amortisation
charge for the year	0.7	1.5	2.2	0.6	2.3	2.9
Disposals	–	–	–	(11.6)	(3.6)	(15.2)
At 31 December	7.2	15.2	22.4	6.5	–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– 13.7	20.2
Carrying value at 1 January	1.2	3.8	5.0	2.3	4.5	6.8
Carrying amount at					–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
31 December	2.8	4.5	7.3	1.2	3.8	5.0

Accounting policies

Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement. The consolidated financial statements include joint ventures initially at cost subsequently increased or decreased by the Group's share of total gains and losses of joint ventures on an equity basis. Interest free joint venture investment loans are initially recorded at fair value – the difference between the nominal amount and fair value being treated as an investment in the joint venture. The implied discount is amortised over the contracted life of the investment loan.

The Directors consider that the agreements integral to its joint ventures result in the Group having joint control; a significant degree of judgement is exercised in this assessment due to the complexity of the contractual arrangements.

Joint venture	Group's share of assets/results 2013 (2012)	Objective	Partner	Legal entity in which Group has interest
The UNITE UK Student Accommodation Fund (USAF)	18.9%* (18.9%)	Invest and operate student accommodation throughout the UK	Consortium of investors	UNITE Student Accommodation Fund, a Jersey Unit Trust
UNITE Capital Cities (UCC)	30% (30%)	Invest and operate student accommodation in the capital cities of London and Edinburgh	GIC Real Estate Pte, Ltd Real estate investment vehicle of the Government of Singapore	UNITE Capital Cities Unit Trust, incorporated in Jersey
London Student Accommodation Venture (LSAV)	50% (50%)	Develop and operate student accommodation in London	GIC Real Estate Pte, Ltd Real estate investment vehicle of the Government of Singapore	LSAV Unit Trust, a Jersey Unit Trust and LSAV (Holdings) Ltd, incorporated in Jersey
OCB Property Holdings (OCB)	25% (25%)	Develop and operate three investment properties located in London	Oasis Capital Bank	OCB Property Holdings (Jersey) Ltd, incorporated in Jersey

The Group has four joint ventures:

* Part of the Group's interest is held through a subsidiary, USAF (Feeder) Guernsey Ltd, in which there is an external investor. A minority interest therefore occurs on consolidation of the Group's results representing the external investor's share of profits and assets relating to its investment in USAF. The ordinary shareholders of The UNITE Group plc are beneficially interested in 16.4 per cent. (2012: 16.4 per cent.) of USAF.

(a) Net assets and results of the joint ventures

The summarised balance sheets and results for the period, and the Group's share of these joint ventures are as follows:

2013
		USAF	UCC		LSAV		OCB		Total
		£m	£m		£m		£m		£m
	Gross	Share	Gross	Share	Gross	Share	Gross	Share	Gross	Share
Investment property 1,354.7		256.5	389.9	117.0	80.4	40.2	173.7	43.4	1,998.7	457.1
Cash	62.4	11.8	11.3	3.4	7.5	3.7	8.4	2.1	89.6	21.0
Debt	(645.5)	(122.2)	(223.1)	(66.9)	(32.2)	(16.1)	(105.6)		(26.4) (1,006.4)	(231.6)
Swap liabilities	(3.5)	(0.6)	–	–	0.8	0.4	–	–	(2.7)	(0.2)
Other current assets	11.8	2.3	0.3	–	0.9	0.5	0.2	–	13.2	2.8
Other current
liabilities	(26.9) ––––––	(5.1) ––––––	(7.8) ––––––	(2.3) ––––––	(1.5) –––––– ––––––	(0.7)	(4.4) ––––––	(1.1) ––––––	(40.6) ––––––	(9.2) ––––––
	753.0	142.7	170.6	51.2	55.9	28.0	72.3	18.0	1,051.8	239.9
Investment loans	–	–	–	–	–	–	(40.8)	(10.2)	(40.8)	(10.2)
UCC promote	– ––––––	– ––––––	– ––––––	7.5 ––––––	– –––––– ––––––	–	– ––––––	– ––––––	– ––––––	7.5 ––––––
Net assets	753.0	142.7	170.6	58.7	55.9	28.0	31.5	7.8	1,011.0	237.2
Profit/(loss) for the	––––––	––––––	––––––	––––––	–––––– ––––––		––––––	––––––	––––––	––––––
period	62.7	(0.8)	10.2	3.0	13.9	7.0	2.3	–	89.1	9.2
Adjusted net assets	–––––– 756.5	–––––– 124.5	–––––– 170.6	–––––– 58.7	–––––– –––––– 55.1	27.6	–––––– 72.3	–––––– 18.0	–––––– 1,054.5	–––––– 228.8
	––––––	––––––	––––––	––––––	–––––– ––––––		––––––	––––––	––––––	––––––

Share of USAF profit is significantly impacted by the unwinding of discounts on interest free loans made by the Group to the joint venture as disclosed in note 3.4b.

2012
		USAF	UCC			LSAV	OCB		Total
		£m	£m			£m	£m		£m
	Gross	Share	Gross	Share	Gross	Share	Gross	Share	Gross	Share
Investment property	1,320.1	250.0	381.2	114.4	49.8	24.9	174.7	43.7	1,925.8	433.0
Cash	50.1	9.5	12.6	3.8	2.5	1.3	7.8	1.9	73.0	16.5
Debt	(621.7)	(117.7)	(226.7)	(68.0)	(24.2)	(12.1)	(112.5)	(28.1)	(985.1)	(225.9)
Swap liabilities	(17.5)	(2.9)	(16.9)	(5.1)	(0.2)	(0.1)	(0.5)	(0.1)	(35.1)	(8.2)
Other current assets	1.6	0.3	0.3	0.1	0.1	0.1	0.2	0.1	2.2	0.6
Other current liabilities	(24.9)	(4.8)	(9.4)	(2.9)	(2.1)	(1.1)	(4.5)	(1.2)	(40.9)	(10.0)
	707.7	134.4	141.1	42.3	25.9	13.0	65.2	16.3	939.9	206.0
Investment loans	(3.2)	(3.2)	¬–	–	–	–	(32.1)	(8.0)	(35.3)	(11.2)
Net assets	704.5	131.2	141.1	42.3	25.9	13.0	33.1	8.3	904.6	194.8
Profit/(loss) for the	––––––	––––––	––––––	––––––	–––––– ––––––		––––––	––––––	––––––	––––––
period	81.5	17.7	21.7	6.5	17.1	8.6	(11.8)	(2.9)	108.5	29.9
USV profit for period	––––––	––––––	––––––	––––––	–––––– ––––––		––––––	––––––	0.9 ––––––	0.4 ––––––
Profit for the period									109.4	30.3
Adjusted net assets	–––––– 725.2	–––––– 119.5	–––––– 157.9	–––––– 47.4	–––––– –––––– 26.1	13.0	–––––– 65.7	–––––– 16.4	–––––– 974.9	–––––– 196.3
	––––––	––––––	––––––	––––––	–––––– ––––––		––––––	––––––	––––––	––––––

Net assets and profit for the period above include the minority interest, whereas adjusted net assets exclude the minority interest.

(b) Movement in carrying value of the Group's investments in joint ventures

The carrying value of the Group's investment in joint ventures has increased by £42.4 million during the year ended 31 December 2013 (2012: £21.8 million), resulting in an overall carrying value of £237.2 million (2012: £194.8 million). The following table shows how the increase has been achieved.

		2013			2012
		Joint			Joint
	Investment	venture		Investment	venture
		in joint investment	Total		in joint investment	Total
	venture	loan	interest	venture	loan	interest
	£m	£m	£m	£m	£m	£m
Recognised in the
income statement:
Net portfolio contribution
(NPC)	11.3	–	11.3	10.1	–	10.1
Minority interest share
of NPC	1.1	–	1.1	1.0	–	1.0
Management fee adjustment
related to trading with
joint venture	2.4	–	2.4	2.3	–	2.3
Net revaluation gains	13.5	–	13.5	14.9	–	14.9
Deferred tax	–	–	–	0.4	–	0.4
Discount on interest free
loans (note 4.3)	(15.4)	15.4	–	(0.8)	0.8	–
Debt exit costs	(2.2)	–	(2.2)	–	–	–
Loss on cancellation of
interest rate swaps	(3.8)	–	(3.8)	(0.6)	–	(0.6)
Landsbanki cash received	2.3	–	2.3	2.9	–	2.9
Other	–	–	–	0.1	–	0.1
	9.2	–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– 15.4	24.6	30.3	0.8	31.1
Recognised in equity:
Movement in effective hedges	8.4	–	8.4	3.6	–	3.6
Deferred tax on movement
in effective hedges	–	–	–	(0.1)	–	(0.1)
Other adjustments to the
carrying value:
Profit adjustment related
to trading
with joint venture	(4.2)	1.8	(2.4)	(10.1)	0.2	(9.9)
Increase in loan to OCB	–	1.4	1.4	–	–	–
Additional capital invested
in UCC	3.4	–	3.4	–	–	–
Additional capital invested
in LSAV	8.4	–	8.4	–	–	–
UCC promote	7.5	–	7.5	–	–	–
Acquisition of remaining
49% in USV	–	–	–	(3.8)	(3.9)	(7.7)
Acquisition of 50% share
in LSAV	–	–	–	11.5	–	11.5
Transfer from investment
loan to investments	19.6	(19.6)	–	–	–	–
Distributions received	(9.9)	–	(9.9)	(9.6)	–	(9.6)
Increase/(decrease) in		–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
carrying value	42.4	(1.0)	41.4	21.8	(2.9)	18.9
Carrying value at 1 January	194.8	11.2 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––	206.0	173.0	14.1	187.1
Carrying value at
31 December	237.2	10.2	247.4	194.8	11.2	206.0
		–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

In addition to its equity shares, the Group has also provided interest free investment loans to some of the joint ventures. These were primarily provided on the setting up of the joint venture to provide capital to acquire investment properties. As a result of being provided interest free, the loans were discounted on recognition to reflect the fair value, the unwinding of the discount is reflected in the Group's finance income.

During the year three joint venture investment loans to USAF were transferred to investment in joint ventures following a change in the terms of these loans as a result of the refinancing within USAF. This also resulted in the accelerated unwinding of the discount on joint venture interest free loans of £15.4 million in the income statement (note 4.3). This is the offset in the income statement by a corresponding accelerated unwinding of discount through the share of joint venture profit of £15.4 million (note 3.4a).

(c) Transactions with joint ventures

The Group acts as asset and property manager for the joint ventures and receives management fees in relation to these services.

In addition, the Group is entitled to promote fees from USAF and UCC if the joint ventures outperform certain benchmarks. The Group receives an enhanced equity interest in the JV's as consideration for the promote fee. The Group has recognised the following management fees in its results for the year.

	2013	2012
	£m	£m
USAF	6.6	6.3
UCC	3.1	3.3
OCB	0.9	1.0
LSAV	0.4 ––––––––	– ––––––––
Property management fees	11.0	10.6
LSAV	0.9	–
Development management fees	–––––––– 0.9	–––––––– –
UCC	7.5	–
Promote fees	–––––––– 7.5 ––––––––	–––––––– – ––––––––
Total fees	19.4	10.6
	––––––––	––––––––

Included in share of joint venture profit in the income statement is a share of joint venture property management fee costs of £0.6 million (2012: £0.5 million). On a see-through basis these costs are deducted from the property management fees shown above, plus an adjustment for the minority interest of £0.2 million (2012: £0.2 million). This results in the net fees included in NPC (note 2.1a) of £10.6 million (2012: £10.3 million).

No properties have been sold to joint ventures in 2013. During 2012 the Group sold one property to USAF for £30.4 million and one property to LSAV for £45.2 million. The two properties were held on the balance sheet as completed property within current assets, the proceeds and carrying value of the properties is therefore recognised in revenue and cost of sales in the income statement and the cash flows in operating activities. The profits relating to sales and associated disposal costs and related cash flows are set out below:

	Profit and loss 2013		Profit and loss 2012
	USAF £m	LSAV £m	USAF £m	LSAV £m
Included in revenue (net of joint venture
trading adjustment) Included in cost of sales	– –	– –	29.7 (26.7)	38.2 (31.2)
Profit on disposal of property	–––––––– – ––––––––	–––––––– – ––––––––	–––––––– 3.0 ––––––––	–––––––– 7.0 ––––––––
		Cash flow 2013	Cash flow 2012
	USAF	LSAV	USAF	LSAV
	£m	£m	£m	£m
Gross proceeds Part settled by:	–	–	31.0	46.2
Investment in joint venture	– ––––––––	– ––––––––	– ––––––––	(11.5) ––––––––
Net cash flows included in cash flows from operating activities	– ––––––––	– ––––––––	31.0 ––––––––	34.7 ––––––––

Included within cash flows from financing activities is £nil (2012: (£32.2 million)) relating to the repayment of non-current borrowings on disposal of properties to joint ventures. £nil (2012: (£9.9 million)) relates to USAF and £nil (2012: (£22.3 million)) relating to LSAV.

UCC properties are partly funded by debt totalling £225.7 million (2012: £226.7 million) which equates to 57.9 per cent. (2012: 59.5 per cent.) of the market value of these properties. In 2012 the Group guaranteed its share, 30 per cent., of this debt amounting to £68.0 million. This guarantee only took effect in the event that the joint venture was unable to repay the debt within nine months of it becoming due. The Group no longer guarantees any UCC debt. These guarantees were accounted for in accordance with IFRS 4.

OCB properties are partly funded by debt totalling £106.0 million (2012: £113.0 million) which equates to 61.0 per cent. (2012: 64.7 per cent.) of the market value of these properties. In 2012 the Group guaranteed one facility amounting to £50.0 million. The Group had a back to back guarantee from Oasis Capital Bank for £37.5 million. This guarantee only took effect in the event that the joint venture was unable to repay the debt within six months of it becoming due. The Group no longer guarantees any OCB debt. These guarantees were accounted for in accordance with IFRS 4.

Accounting policies

In the financial statements of the Company, investments in subsidiaries and joint ventures are carried at fair value with movements in fair value being recognised directly in equity.

(a) Carrying value of investment in subsidiaries and joint ventures

The movements in the Company's interest in unlisted subsidiaries and joint ventures during the year are as follows.

		Investment in		Investment in
	subsidiaries			joint ventures
	2013	2012	2013	2012
	£m	£m	£m	£m
At 1 January	228.4	112.0	–	2.5
Acquisitions	–	1.8	–	–
Transfer from investment in joint ventures	–	2.5	–	(2.5)
Disposals	–	(4.3)	–	–
Revaluation	95.4	116.4	–	–
At 31 December	–––––––– 323.8	–––––––– 228.4	–––––––– –	–––––––– –
	––––––––	––––––––	––––––––	––––––––

The carrying value of investment in subsidiaries has been calculated using the equity attributable to the owners of the parent company from the consolidated balance sheet adjusted for the fair value of fixed rate loans and properties under development. This includes investment property, investment property under development and swaps at a fair value calculated by a third party expert. All investment properties and investment properties under development are classified as level 3 in the IFRS 13 fair value hierarchy and have been discussed on page 85. The fixed rate loans range between level 1 and level 2 in the IFRS 13 fair value hierarchy and have been discussed further on page 94.

In addition to the equity investment in subsidiaries and joint ventures, the Company has provided a loan with interest chargeable at 6.125 per cent. to LDC (Holdings) plc. The carrying value of the loan to LDC (Holdings) plc was £90.0 million (2012: £90.0 million). A further loan of £89.9 million was provided to LDC (Holdings) plc in the year with interest chargeable at 5.0 per cent..

A full list of the Company's subsidiaries is appended to the annual return. The Company's principal subsidiaries and joint ventures are:

	Country of	Class of	Ownership
	incorporation	Shares held	interest
LDC (Holdings) plc*	England and Wales	Ordinary	100%
UNITE Holdings plc*	England and Wales	Ordinary	100%
UNITE Integrated Solutions plc	England and Wales	Ordinary	100%
USAF LP Ltd	England and Wales	Ordinary	100%
USAF Jersey Investments Ltd	Jersey	Ordinary	100%
UNITE (Capital Cities) Jersey Ltd	Jersey	Ordinary	100%
LDC (Imperial Wharf) Ltd	England and Wales	Ordinary	100%
UNITE Finance One (Property) Ltd	England and Wales	Ordinary	100%
USAF Feeder (Guernsey) Ltd	Guernsey	Ordinary	51%
OCB UNITE Property Holdings
(Jersey) Ltd^	Jersey	Ordinary	25%

* Held directly by the Company.

^ Joint venture. Joint control is explained in note 3.4.

The Group finances its development and investment activities through a mixture of retained earnings, borrowings and equity. The Group continuously monitors its financing arrangements to manage its gearing.

Interest rate swaps are used to manage the Group's risk to fluctuations in interest rate movements.

The following pages provide disclosures about the Group's funding position, including borrowings, gearing and hedging instruments; its exposure to market risks; and its capital management policies.

4.1 Borrowings

Accounting policies

Interest bearing borrowings are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

On 10 October 2013 the Group issued a convertible bond. The unsecured instrument pays a coupon of 2.5 per cent. until 10 October 2018. In accordance with IFRS, the equity and debt components of the bond are accounted for separately and the fair value of the debt component has been determined using the market interest rate for an equivalent non-convertible bond. As a result, £80.3 million was recognised as a liability in the balance sheet on issue and the remainder of the proceeds, £9.6 million, which represents the equity component, was credited to reserves. The difference between the fair value of the liability and the principal value is amortised through the income statement from the date of issue. Issue costs of £2.0 million were allocated between equity and debt and the element relating to the debt component is being amortised over the life of the bond. The issue costs apportioned to equity of £0.2 million are not amortised.

The table below analyses the Group's borrowings which comprise bank and other loans by when they fall due for payment:

	Group		Company
	2013	2012	2013	2012
	£m	£m	£m	£m
Current
In one year or less, or on demand	29.7	100.2	4.9	1.2
Non-current
In more than one year but not more than two years	93.2	65.1	–	–
In more than two years but not more than five years	182.3	131.8	79.0	–
In more than five years	208.2 ––––––––	230.8 ––––––––	90.0 ––––––––	90.0 ––––––––
	483.7	427.7	169.0	90.0
Total borrowings	–––––––– 513.4	–––––––– 527.9	–––––––– 173.9	–––––––– 91.2
	––––––––	––––––––	––––––––	––––––––

In addition to the borrowings currently drawn as shown above, the Group has available undrawn facilities of £58.2 million (2012: £34.9 million). A further working capital facility of £20.0 million (2012: £20.0 million) is also available.

A further £101 million (2012: £146 million) of facilities are available if certain conditions are met. Of this amount £73 million (2012: £75 million) is only available for rental properties and £15 million (2012: £41 million) for development properties. The remaining amount is available for investment or development.

The carrying value of borrowings is considered to be approximate to fair value, except for the Group's fixed rate loans carried at £211.0 million (2012: £227.8 million) and the convertible bond carried at £80.7 million (2012: £nil). The convertible bond and £90.0 million (2012: £90.0 million) of the fixed rate loans are classified as level 1 in the IFRS 13 fair value hierarchy and have a fair value of £188.5 million (2012: £91.5 million).

The remaining £119.5 million (2012: £137.8 million) of the fixed rate loans are classified as level 2 in the IFRS 13 fair value hierarchy. The fair value of these fixed rate loans has been calculated by a third party expert discounting estimated future cash flows on the basis of market expectations of future interest rates. The fair value of these loans is £116.7 million (2012: £145.7 million).

Properties with a carrying value of £657.2 million (2012: £728.1 million) have been pledged as security against the Group's drawn down borrowings.

On 31 January 2014 the Group successfully secured a 10 year fixed-rate £124 million debt facility, which has been secured against four wholly owned properties at 50 per cent. loan-to-value. As part of this transaction the Group repaid £120.3 million of existing debt. This is comprised of amounts being due for payment in less than one year (£28.5 million), between one and two years (£54.1 million), and between two and five years (£37.7 million).

4.2 Interest rate swaps

The Group uses interest rate swaps to manage the Group's exposure to interest rate fluctuations. In accordance with the Group's treasury policy, the Group does not hold or issue interest rate swaps for trading purposes and only holds swaps which are considered to be commercially effective.

Accounting policies

Interest rate swaps are recognised initially and subsequently at fair value, with mark to market movements recognised in the income statement unless cash flow hedge accounting is applied.

Hedge accounting, as defined in IFRS, is when the interest rate swap is designated as the hedging instrument in a hedge of the variability in cash flows attributable to the interest risk of borrowings. The effective portion of changes in fair value of the interest rate swap is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the interest rate swap is recognised immediately in profit or loss. The Group only applies hedge accounting when the hedge is expected to be highly effective.

When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss at that point remains in equity with any subsequent movements in fair value taken to the income statement. If the hedged transaction is no longer probable, the cumulative unrealised gain or loss recognised in equity is recognised in the income statement immediately.

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current credit worthiness of the swap counterparties.

The following table shows the fair value of interest rate swaps:

	2013	2012
	£m	£m
Current	2.0	0.7
Non-current	3.4	23.0
Fair value of interest rate swaps	–––––––– 5.4	–––––––– 23.7
	––––––––	––––––––

The fair values of interest rate swaps have been calculated by a third party expert, discounting estimated future cash flows on the basis of market expectations of future interest rates, representing level 2 in the IFRS 13 fair value hierarchy. The IFRS 13 level categorisation relates to the extent the fair value can be determined by reference to comparable market values. The classifications range from level 1 where instruments are quoted on an active market through to level 3 where the assumptions used to arrive at fair value do not have comparable market data.

4.3 Net financing costs

Accounting policies

Net financing costs comprise interest payable on borrowings less interest receivable on funds invested (both calculated using the effective interest rate method) and gains and losses on hedging instruments that are recognised in the income statement.

Recognised in the income statement:

	2013	2012
	£m	£m
Finance income
– Interest income on deposit	(0.3)	(0.2)
– Impact of discounting on interest free joint venture investment loans
(note 3.4b)	(15.4) ––––––––	(0.8) ––––––––
Finance income	(15.7) ––––––––	(1.0) ––––––––
Gross interest expense on loans	25.0	21.9
Loan break costs	0.4	0.1
Interest capitalised	(6.1)	(6.0)
Loan interest and similar charges	–––––––– 19.3	–––––––– 16.0
Changes in mark to market of interest rate swaps not accounted for
as hedges	(0.7)	7.6
Finance costs	–––––––– 18.6	–––––––– 23.6
Net financing costs	–––––––– 2.9	–––––––– 22.6
	––––––––	––––––––

The Group's overall average cost of debt as at 31 December 2013 is 5.1 per cent. (2012: 5.5 per cent.). The average cost of the Group's investment debt at 31 December 2013 is 5.1 per cent. (2012: 5.5 per cent.). The overall average cost of debt on a see-through basis is 4.7 per cent. (2012: 5.5 per cent.).

4.4 Gearing

The Group's adjusted gearing ratio is a key indicator that the Group uses to manage its indebtedness. Adjusted net asset value (NAV) and adjusted net debt are used to calculate adjusted gearing. Adjusted net debt excludes mark to market of interest rate swaps as shown below.

The Group's gearing ratios are calculated as follows:

	Note	2013	2012
		£m	£m
Cash and cash equivalents	5.1	43.2	75.4
Current borrowings	4.1	(29.7)	(100.2)
Non-current borrowings	4.1	(483.7)	(427.7)
Interest rate swaps liabilities	4.2	(5.4)	(23.7)
Net debt per balance sheet		–––––––– (475.6)	–––––––– (476.2)
Mark to market of interest rate swaps		5.4	23.6
Adjusted net debt		–––––––– (470.2)	–––––––– (452.6)
		––––––––	––––––––

	Note	2013	2012
		£m	£m
Reported net asset value (attributable to owners of
the parent company)	2.3c	653.3	515.8
EPRA net asset value	2.3c	681.6	566.5
Gearing
Basic (Net debt/Reported net asset value)		73%	92%
Adjusted gearing (Adjusted net debt/EPRA
net asset value)		69%	80%
See-through adjusted gearing (including share of
JV properties and net debt)		98%	114%
See-through adjusted LTV		49%	52%

4.5 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risks – primarily interest rate risk, credit risk and liquidity risk.

The Group's treasury policy focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. Details on credit risk can be found in note 5.3.

(a) Interest rate risk

Interest rate risk is the risk that the Group is impacted by significant changes in interest rates. Borrowings issued at or swapped to floating rates expose the Group to interest rate risk. The Group's policy is separated into two main areas:

(i) Development and refinancing

The Group had specific development borrowings of £17.5m as at 31 December 2013 (2012: £nil). As at 31 December 2013 all Group specific development borrowings were unhedged. The Group will continue to review the level of its hedging in the light of the current low interest rate environment.

The Group's principal exposure to interest rate fluctuations during development relates to movements in longer term interest rates which affect the amount of debt the property income is capable of servicing at completion. Significant adverse movements undermine the Group's ability to release equity from its developments.

The Group's policy also allows this exposure to be managed through the use of forward starting swaps.

(ii) Medium and long-term finance

The Group holds its medium and long-term bank finance under both floating and fixed rate arrangements. The majority of this floating debt is hedged through the use of interest rate swap agreements, although not all these arrangements qualify for hedge accounting under IAS 39. During 2013, the Group's policy guideline has been to hedge in excess of 75 per cent. of the Group's exposure for terms of approximately 2-10 years.

At 31 December 2013, after taking account of interest rate swaps, 84 per cent. (2012: 88 per cent.) of the Group's medium and long-term investment borrowing was held at fixed rates. Excluding the £133 million of swaps the fixed investment borrowing is at an average rate of 4.7 per cent. (2012: 5.5 per cent.) for an average period of 7 years (2012: 9 years), including these swaps the average rate is 4.1 per cent..

The Group holds interest rate swaps at 31 December 2013 against £133 million (2012: £258 million) of the Group's borrowings.

The maturity of these swaps and the applicable interest rates are as follows:

	2013	2013	2012	2012
	Nominal	Applicable	Nominal	Applicable
	amount hedged		interest rates amount hedged	interest rates
	£m	%	£m	%
Within one year	34.0	3.1-5.8	–	–
Between one and two years	55.0	2.3	116.2	2.3-5.8
Between two and five years	38.0	2.6	122.8	1.7-5.3
More than five years	6.0	5.6	1.8	5.6

During the year, if interest rates had increased/decreased by 1 per cent., pre-tax profit for the year would have been £0.7 million (2012: £1.2 million) lower/higher.

(b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. For development activities, the Group has a policy to inject substantially the full amount of equity required for each development before drawing debt against the specific facility for the development. The funding requirements of each scheme are therefore substantially 'ring fenced' and secured at the outset of works.

The table below analyses the Group's financial liabilities and interest rate swaps into relevant maturity groupings based on the period remaining until the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest), so will not always reconcile with the amounts disclosed on the balance sheet.

2013

	Total		Between	Between
	contractual	Less than	1 and 2	2 and 5	Over
	cash flows	1 year	years	years	5 years
	£m	£m	£m	£m	£m
Bank and other loans	542.6	47.9	111.7	142.8	240.2
Convertible bonds	101.1	2.2	2.2	96.7	–
Trade and other payables	85.2	85.2	–	–	–
Interest rate swaps – effective	3.2	1.4	1.1	0.4	0.3
Interest rate swaps – ineffective	4.3 ––––––––	2.4 ––––––––	1.2 ––––––––	0.7 ––––––––	– ––––––––
	736.4	139.1	116.2	240.6	240.5
	––––––––	––––––––	––––––––	––––––––	––––––––

2012

	Total		Between	Between
	contractual	Less than	1 and 2	2 and 5	Over
	cash flows	1 year	years	years	5 years
	£m	£m	£m	£m	£m
Bank and other loans	652.3	119.7	82.3	175.0	275.3
Convertible bonds	–	–	–	–	–
Trade and other payables	82.0	82.0	–	–	–
Interest rate swaps – effective	4.4	1.3	1.3	1.2	0.6
Interest rate swaps – ineffective	11.2	5.6	3.1	2.5	–
	–––––––– 749.9	–––––––– 208.6	–––––––– 86.7	–––––––– 178.7	–––––––– 275.9
	––––––––	––––––––	––––––––	––––––––	––––––––

During the year the Group issued £89.9 million of convertible bonds. The bonds have a maturity date of 10 October 2018. The bondholders may exercise the Conversion Right in certain circumstances but this is contingent on a number of factors and therefore the bonds are shown to maturity in the above disclosure.

(c) Covenant compliance

Many of the Group's funding facilities carry covenants. The Group monitors its covenant position and the headroom available on an ongoing basis. At 31 December 2013, the Group was in full compliance with all of its borrowing covenants. The Group is able to use available cash to reduce debt to increase headroom on its loan to value (LTV) covenants. The covenant headroom position is outlined below and assumes that the Group is able to use a mixture of available cash and add additional property to banks' security pools.

		31 December 2013		31 December 2012
	Weighted	Weighted	Weighted	Weighted
	covenant	actual	covenant	actual
Loan to value	70%	25%*	70%	35%*
Interest cover	1.45	2.50	1.38	2.60
Minimum net worth	£250m	£682m	£250m	£567m

* Calculated on the basis that available cash is used to reduce debt and available property can be used as additional security.

4.6 Operating leases

(a) Payable

Accounting policies

Payments made under operating leases are recognised in the income statement on a straight line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. Where the property interest under an operating lease is classified as an investment property, the property interest is accounted for as if it were a finance lease and the fair value model is used for the asset recognised.

The total future minimum lease rentals payable under non-cancellable operating leases fall due for repayment as follows:

	2013	2012
	£m	£m
Less than one year	14.7	15.3
Between one and five years	56.5	58.2
More than five years	183.2	192.9
Total	–––––––– 254.4	–––––––– 266.4
	––––––––	––––––––

These leases primarily relate to properties which the group has sold and leased back and on which rental income is earned. The leases are generally for periods between 17 and 25 years and subject to annual RPI-based rent review. Two properties are subject to a fixed annual rent increase of 2 per cent.. The total operating lease expenditure incurred during the year was £15.0 million (2012: £15.3 million)

(b) Receivable

The Group accounts for its tenancy contracts offered to commercial and individual tenants as operating leases. The future minimum lease payments receivable under non-cancellable operating leases are as follows:

	2013	2012
	£m	£m
Less than one year	63.4	48.8
Between one and five years	47.6	40.1
More than five years	48.0	50.6
Total	–––––––– 159.0	–––––––– 139.5
	––––––––	––––––––

4.7 Capital management

The capital structure of the Group consists of shareholders' equity and adjusted net debt, including cash held on deposit. The Group's equity is analysed into its various components in the Statement of Changes in Equity. The components and calculation of adjusted net debt is set out in note 4.4. Capital is managed so as to continue as a going concern and to promote the long-term success of the business and to maintain sustainable returns for shareholders and joint venture partners.

The Group uses a number of key metrics to manage its capital structure:

• adjusted net debt (4.4)
• adjusted gearing (4.4)
• see through LTV (2.3a)
• weighted average cost of investment debt (4.5aii)

In order to manage levels of adjusted gearing over the medium term, the Group seeks to deliver NAV growth and to dispose of non-core property assets in order to offset capital that is committed to development activity. £13 million of non-core assets were sold in 2013 and a further £77.1 million of non-core property disposals are targeted by December 2014. The Group targets new developments with a yield on cost of approximately 9 per cent.. The Group does not commit to developing new sites until sufficient equity and funding to fulfil the full cost of the development is secure.

The Board monitors the ability of the Group to pay dividends out of available cash and distributable profits. The Operations Segment generated cash of £23.2 million (2012: £17.2 million) during the year, thereby covering the proposed dividend of £8.5 million, 2.7 times (2012: £6.4 million, 2.7 times).

4.8 Equity

Accounting policies

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction, net of tax, in equity from the proceeds. Share issue costs incurred directly in connection with a business combination are deducted from the proceeds of the issue.

The Company's issued share capital has increased during the year as follows:

		Number of ordinary shares
	2013	2012
Issued at start of year – fully paid	160,461,442	160,271,460
Share placing	16,000,000	–
Share options exercised	196,482	189,982
Issued at end of year – fully paid	————— 176,657,924	————— 160,461,442
	—————	—————

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

On 13 June 2013 the Group completed a share placing of 16,000,000 shares, which gave rise to proceeds of £51.2 million, £49.9 million net of issue costs.

The Group are in the process of raising gross proceeds of £100 million through the issue of 24,500,000 shares through a placing and open offer, at a price of £4.10p per share.

4.9 Dividends

Accounting policies

Dividends are recognised through equity on the earlier of their approval by the Company's shareholders or their payment.

During the year, the Company declared and paid an interim dividend of £2.8 million (2012: £1.6 million) and paid a £4.7 million final dividend relating to the year ended 31 December 2012 (2011: £2.0 million).

After the year end, the Directors proposed a final dividend per share of 3.2p (2012: 3p), bringing the total dividend per share for the year to 4.8p (2012: 4p). No provision has been made in relation to this dividend.

Section 5: Working capital

This section focuses on how the Group generates its operating cash flows. Careful management of working capital is vital to ensure that the Group can meet its trading and financing obligations within its ordinary operating cycle.

On the following pages you will find disclosures around the Group's cash position and how cash is generated from the Group's trading activities, and disclosures around trade receivables and payables.

5.1 Cash

Accounting policies

Cash and cash equivalents comprise cash balances and call deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

The Group's cash position at 31 December 2013 was £43.2 million (2012: £75.4 million).

At 31 December 2013 the Company had an overdraft of £4.9 million (2012: £1.2 million).

The Group's cash balances include £13.4 million (2012: £12.1 million) whose use at the balance sheet date is restricted by funding agreements to pay operating costs and loan interest relating to specific properties.

The Group generates cash from its operating activities as follows:

		Group			Company
		2013	2012	2013	2012
	Note	£m	£m	£m	£m
Profit/(loss) for the year		79.3	127.2	(2.4)	(0.7)
Adjustments for:
Depreciation and amortisation	3.3	2.2	2.9	–	–
Fair value of share based payments	6.1	1.1	1.5	–	–
UCC promote		(7.5)	–	–	–
Change in value of investment
property	3.1	(35.4)	(79.5)	–	–
Net finance costs	4.3	2.9	22.6	0.1	0.3
Profit on acquisition of subsidiary		–	–	–	(2.2)
Loss on disposal of investment
property		1.0	2.4	–	–
Share of joint venture profit	3.4b	(9.2)	(30.3)	–	–
Trading with joint venture
adjustment		2.4	(1.6)	–	–
Tax credit	2.6a	(2.2) ————	(1.0) ————	– ————	– ————

	Group			Company
	2013	2012	2013	2012
Note	£m	£m	£m	£m
Cash flows from operating activities
before changes in working capital	34.6	44.2	(2.3)	(2.6)
Decrease/(increase) in trade and
other receivables	3.6	(12.9)	–	–
(Increase)/decrease in completed property
and property under development	(35.0)	43.8	–	–
(Increase)/decrease in inventories	(1.5)	5.3	–	–
Increase/(decrease) in trade and
other payables	4.9	(11.7)	(0.2)	0.2
Decrease in provisions	(0.7)	(10.3)	–	–
Cash flows from operating activities	———— 5.9	———— 58.4	———— (2.5)	———— (2.4)
	————	————	————	————

Cash flows consist of the following segmental cash inflows/(outflows): Operations £23.2 million (2012: £17.2 million), property (£94.0 million) (2012: £48.3 million) and unallocated £38.6 million (2012: (£6.9 million)). The unallocated amount includes Group dividends (£7.5 million) (2012: (£3.6 million)), LSAV set-up costs £nil (2012: (£1.3 million)), own shares purchased £nil (2012: (£1.3 million)), tax payable of (£0.7 million) (2012: (£0.9 million)), investment in JV's (£11.8 million) (2012: £nil), contributions to UNITE foundation (£0.5 million) (2012: £nil) and amounts received from shares issued £59 million (2012: £0.2 million).

5.2 Trade and other receivables

Accounting policies

Trade receivables are initially recognised at the amount invoiced to the customer (fair value) and subsequently at the amounts considered recoverable (amortised cost). Estimates are used in determining the level of receivables that will not, in the opinion of the Board, be collected. These estimates include such factors as historical experience and industry specific factors. A provision for impairment of trade receivables is established when there is sufficient evidence that the Group will not be able to collect all amounts due. The carrying value of trade receivables is considered to approximate fair value.

Trade and other receivables can be analysed as follows, all trade and other receivables are current.

	Group		Company
	2013	2012	2013	2012
	£m	£m	£m	£m
Trade receivables	2.2	7.8	–	–
Amounts due from group undertakings	–	–	393.5	321.5
Amounts owed by joint ventures	29.3	27.9	–	–
Prepayments and accrued income	15.3	16.7	–	–
Other receivables	3.2	1.1	–	–
Trade and other receivables	———— 50.0	———— 53.5	———— 393.5	———— 321.5
	————	————	————	————

The Group offers tenancy contracts to commercial (Universities and retail unit tenants) and individual tenants based on the academic year. The Group monitors and manages the recoverability of its receivables based on the academic year to which the amounts relate. Rental income is payable immediately, therefore all receivables relating to tenants are past the payment due date.

	Ageing by academic year
	Total	2013/14	2012/13	Prior years
	£m	£m	£m	£m
Rental debtors
Commercial tenants (past due
and impaired)	1.2	0.5	0.4	0.3
Individual tenants (past due
and impaired)	2.4	1.6	0.7	0.1
Provisions carried	(1.5) ————	(0.4) ————	(0.8) ————	(0.3) ————
Rental debtors (past due but
not impaired)	2.1	1.7	0.3	0.1
Manufacturing debtors (not past
due or impaired)	0.1	–	0.1	–
Trade receivables	———— 2.2	———— 1.7	———— 0.4	———— 0.1
	————	————	————	————

2012

	Ageing by academic year
	Total	2012/13	2011/12	Prior years
	£m	£m	£m	£m
Rental debtors
Commercial tenants (past due
and impaired)	6.2	5.6	0.6	–
Individual tenants (past due
and impaired)	4.1	2.3	0.9	0.9
Provisions carried	(3.4) ————	(1.2) ————	(1.3) ————	(0.9) ————
Rental debtors (past due but
not impaired)	6.9	6.7	0.2	–
Manufacturing debtors (not past
due or impaired)	0.9	0.9	–	–
Trade receivables	———— 7.8	———— 7.6	———— 0.2	———— –
	————	————	————	————

Amounts receivable from joint ventures are not past due or impaired.

Movements in the Group's provision for impairment of trade receivables can be shown as follows:

	2013	2012
	£m	£m
At 1 January	3.4	5.9
Impairment charged to income statement in year	0.5	1.4
Receivables written off during the year (utilisation of provision)	(2.4) ————	(3.9) ————
At 31 December	1.5	3.4
	————	————

5.3 Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It arises principally from the Group's cash balances, the Group's receivables from customers and joint ventures and loans provided to the Group's joint ventures.

At the year end, the Group's exposure to credit risk was as follows:

		2013	2012
	Note	£m	£m
Cash	5.1	43.2	75.4
Trade receivables	5.2	2.2	7.8
Amounts due by joint ventures (excluding loans
that are capital in nature)	5.2	29.3	27.9
Joint venture investment loans	3.4b	10.2	11.2
		———— 84.9	———— 122.3
		————	————

(a) Cash

The Group operates investment guidelines with respect to surplus cash. Counterparty limits for cash deposits are largely based upon long-term ratings published by credit rating agencies and credit default swap rates.

(b) Trade receivables

The Group's customers can be split into three groups – (i) students (individuals), (ii) commercial organisations including Universities and (iii) manufacturing customers. The Group's exposure to credit risk is influenced by the characteristics of each customer. The Group holds tenant deposits of £8.1 million (2012: £7.9 million) as collateral against individual customers.

(c) Joint ventures

Amounts receivable from joint ventures fall into two categories – working capital balances and investment loans.

5.4 Trade and other payables

Accounting policies

Trade payables are initially recognised at the value of the invoice received from a supplier (fair value) and subsequently at amortised cost. The carrying value of trade payables is considered approximate to fair value.

Trade and other payables due within one year can be analysed as follows:

		Group		Company
	2013	2012	2013	2012
	£m	£m	£m	£m
Trade payables	16.5	4.1	–	–
Retentions on construction
contracts for properties	2.2	2.4	–	–
Amounts due to group undertakings	–	–	59.4	29.7
Other payables and accrued expenses	35.5	41.9	3.0	3.2
Deferred income	31.0	33.6	–	–
Trade and other payables	———— 85.2	———— 82.0	———— 62.4	———— 32.9
	————	————	————	————

Other payable and accrued expenses include £8.1 million (2012: £7.9 million) in relation to customer deposits. These will be returned at the end of the tenancy subject to the condition of the accommodation and payment of any outstanding amounts. Deferred income relates to rental income that has been collected in advance of it being recognised as revenue.

5.5 Transactions with other group companies

During the year, the company entered into various interest free loans with its subsidiaries, the aggregate of which are disclosed in the cash flow statement. In addition, the Company was charged by UNITE Integrated Solutions plc for corporate costs of £2.2 million (2012: £2.4 million).

As a result of these intercompany transactions, the following amounts were due (to)/from the Company's subsidiaries at the year end.

	2013	2012
	£m	£m
UNITE Holdings plc	81.2	74.6
LDC (Holdings) plc	312.3	246.9
Amounts due from group undertakings	———— 393.5	———— 321.5
Unilodge Holding Ltd	———— (27.7)	———— (13.9)
Unilodge Holdings (UK) Ltd	(30.5)	(15.8)
UNITE Jersey Issuer Ltd	(1.2)	–
Amounts due to group undertakings	———— (59.4)	———— (29.7)
	————	————

The Company has had a number of transactions with its joint ventures, which are disclosed in note 3.4c.

The Company has guaranteed £164 million of its subsidiary companies borrowings (2012: £152 million). The guarantees have been entered into in the normal course of business. A liability would only arise in the event of the subsidiary failing to fulfil its contractual obligations. These guarantees are accounted for in accordance with IFRS 4.

The Group's greatest resource is its staff and it works hard to develop and retain its people. The remuneration policies in place are aimed to help recognise the contribution that UNITE's people make to the performance of the Group.

Over the next couple of pages you will find disclosures on wages and salaries and share option schemes which allow employees of the Group to take an equity interest in the Group.

6.1 Staff numbers and costs

The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:

	Number of employees
	2013	2012
Managerial and administrative	286	338
Site operatives	604	628
	———— 890	———— 966
The aggregate payroll costs of these persons were as follows:	————	————
	2013	2012
	£m	£m
Wages and salaries	29.8	32.8
Social security costs	3.3	3.5
Pension costs	0.7	0.6
Fair value of share based payments	1.1 ————	1.5 ————
	34.9	38.4

The wages and salaries costs include redundancy costs of £0.4 million (2012: £0.3 million).

Accounting policies

The Group operates a defined contribution pension scheme. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.

———— ————

6.2 Key management personnel

The Board considers that the key management personnel within the Group are those appointed to the Board. As such, the remuneration of key management personnel is contained within the Remuneration Report on pages [xx] to [xx].

6.3 Share based compensation

A transaction is classified as a share based transaction where the Group receives services from employees and pays for these in shares or similar equity instruments. The Group operates a number of share-based compensation schemes allowing employees to acquire shares in the Company.

(a) Share schemes

The Group operates the following schemes:

Executive share option scheme –
'The Approved Scheme'	Details can be found in the Directors'
Executive share option scheme –	{ Remuneration Report
'The Unapproved Scheme'
Executive Long-Term Incentive Plan (LTIP)
Save As You Earn Scheme (SAYE)	Open to employees, vesting periods of three to five years, service condition
Employee Share Ownership (ESOT)	Used to award part of Directors' and senior managers' bonuses in shares, vest after three years continued service

(b) Outstanding share options

The table below summarises the movements in the number of share options outstanding for the Group and their average exercise price:

	Weighted average	Number of options	Weighted average	Number of options
	exercise price		(thousands) exercise price	(thousands)
	2013	2013	2012	2012
Outstanding at 1 January	£0.52	3,720	£0.85	2,375
Forfeited during the year	£0.18	(258)	£1.44	(308)
Exercised during the year	£1.34	(277)	£1.44	(190)
Granted during the year	£0.51 ––––––––	994 ––––––––	£0.35 ––––––––	1,843 ––––––––
Outstanding at 31 December	£0.48 ––––––––	4,179 ––––––––	£0.52 ––––––––	3,720 ––––––––
Exercisable at 31 December	£2.21	181	£2.22	256
	––––––––	––––––––	––––––––	––––––––

For those options exercised in the year, the average share price during 2013 was £3.75 (2012: £2.63).

For those options still outstanding, the range of exercise prices at the year end was 0p to 319p (2012: 0p to 299p) and the weighted average remaining contractual life of these options was 0.2 years (2012: 0.3 years).

The Group funds the purchase of its own shares by the 'Employee Share Ownership Trust' to meet the obligations of the LTIP and executive bonus scheme. The purchases are shown as 'Own shares acquired' in retained earnings.

The accounting is in accordance with the relevant standards. No further information is given as the amounts for share based payments are immaterial.

APPENDIX 2

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012

Independent auditor's report to the members of the UNITE Group plc

We have audited the financial statements of The UNITE Group plc for the year ended 31 December 2012 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated and Company Statement of Changes in Shareholders' Equity, the Group and Company Statements of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the 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 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 company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 67, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/auditscopeukprivate.

Opinion on 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 31 December 2012 and of the group's profit for the year then ended
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

• the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006
• the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements
• information given in the Corporate Governance Statement set out on page 45 with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required 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
• 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
• certain disclosures of directors' remuneration specified by law are not made
• we have not received all the information and explanations we require for our audit
• a Corporate Governance Statement has not been prepared by the Company

Under the Listing Rules we are required to review:

• the Directors' statement, set out on page 66, in relation to going concern
• the part of the Corporate Governance Statement on pages 42 to 51 relating to the Company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review
• certain elements of the report to shareholders by the Board on Directors' remuneration

William Meredith (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants

15 Canada Square London E14 5GL

6 March 2013

Introduction and table of contents

Whilst these financial statements are prepared in accordance with IFRS, the Board of Directors manage the business based on the adjusted results being net portfolio contribution (NPC), adjusted earningsand adjusted net asset value (NAV) which can be found in section 2.

We have grouped the notes to the financial statements under five main headings:

• Results for the year, including segmental information, adjusted profits and adjusted NAV
• Asset management
• Funding
• Working capital
• Key management and employee benefits

Each section sets out the relevant accounting policies applied in these financial statements together with the key judgements and estimates used.

Primary statements

Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Company balance sheet Consolidated statement of changes in shareholders' equity Company statement of changes in shareholders' equity Statements of cash flows

Section 1 Basis of preparation

Section 2 Results for the year

• 2.1 Segmental information
• 2.2 Adjusted Profit and EPS
• 2.3 Adjusted Net Assets and NAV per share
• 2.4 Revenue
• 2.5 Provisions for onerous contracts
• 2.6 Tax
• 2.7 Audit fees

Section 3 Asset management

• 3.1 Wholly owned property assets
• 3.2 Inventories
• 3.3 Other non-current assets
• 3.4 Investments in joint ventures
• 3.5 Investments in subsidiaries

Section 4 Funding

• 4.1 Borrowings
• 4.2 Interest rate swaps
• 4.3 Net financing costs
• 4.4 Gearing
• 4.5 Financial risk factors
• 4.6 Operating leases
• 4.7 Capital management
• 4.8 Equity
• 4.9 Dividends

Section 5 Working capital

• 5.1 Cash
• 5.2 Trade and other receivables
• 5.3 Credit risk
• 5.4 Trade and other payables
• 5.5 Transactions with other group companies

Section 6 Key management and employee benefits

• 6.1 Staff numbers and costs
• 6.2 Key management personnel
• 6.3 Share based compensation

Consolidated income statement For the year ended 31 December 2012

			2011
		2012	Excluding	2011	2011
		Total	UMS	UMS	Total
	Note	£m	£m	£m	£m
Revenue	2.4	214.6	83.5	11.4	94.9
Cost of sales		(145.2)	(42.2)	(20.5)	(62.7)
Operating expenses		(28.0)	(27.2)	(11.9)	(39.1)
Results from operating activities		–––––––– 41.4	–––––––– 14.1	–––––––– (21.0)	–––––––– (6.9)
Loss on disposal of property		(2.4)	(0.2)	–	(0.2)
Net valuation gains on property	3.1	29.8	7.7	–	7.7
Valuation gains recognised on transfer	3.1	49.7	–	–	–
Profit before net financing costs		–––––––– 118.5	–––––––– 21.6	–––––––– (21.0)	–––––––– 0.6
Loan interest and similar charges	4.3	–––––––– (16.0)	–––––––– (8.7)	–––––––– –	–––––––– (8.7)
Mark to market changes in interest rate swaps	4.3	(7.6)	(10.6)	–	(10.6)
Finance costs	4.3	–––––––– (23.6)	–––––––– (19.3)	–––––––– –	–––––––– (19.3)
Finance income	4.3	1.0	0.8	–	0.8
Net financing costs	4.3	–––––––– (22.6)	–––––––– (18.5)	–––––––– –	–––––––– (18.5)
Share of joint venture profit	3.4b	–––––––– 30.3	–––––––– 22.6	–––––––– –	–––––––– 22.6
Profit before tax	2.2a	–––––––– 126.2	–––––––– 25.7	–––––––– (21.0)	–––––––– 4.7
Tax	2.6	1.0	(0.8)	–	(0.8)
Profit for the year		–––––––– 127.2	–––––––– 24.9	–––––––– (21.0)	–––––––– 3.9
Profit for the period attributable to
Owners of the parent company	2.2b	125.6	23.1	(21.0)	2.1
Minority interest		1.6	1.8	–	1.8
		–––––––– 127.2	–––––––– 24.9	–––––––– (21.0)	–––––––– 3.9
Earnings per share		––––––––	––––––––	––––––––	––––––––
Basic	2.2b	78.3p	14.4p	(13.1p)	1.3p
Diluted	2.2b	78.3p	14.4p	(13.1p)	1.3p

Included above is £49.7 million (2011: £nil) of valuation gains not previously recognised on property transferred from current assets to non-current assets during the year.

Consolidated statement of comprehensive income For the year ended 31 December 2012

	2012	2011
	£m	£m
Profit for the period	127.2	3.9
Movements in effective hedges	0.6	(2.6)
Gains on hedging instruments transferred to income statement	2.5	–
Share of joint venture movements in effective hedges	2.7 –––––––	0.1 –––––––
Other comprehensive income for the period	5.8 –––––––	(2.5) –––––––
Total comprehensive income for the period	133.0	1.4
Attributable to	–––––––	–––––––
Owners of the parent company	131.4	(0.2)
Minority interest	1.6 –––––––	1.6 –––––––
	133.0	1.4

––––––– –––––––

All movements above are shown net of deferred tax.

Consolidated balance sheet At 31 December 2012

	Note	2012	2011
		£m	£m
Assets
Investment property	3.1	762.8	396.2
Investment property under development	3.1	37.6	–
Investment in joint ventures	3.4b	194.8	173.0
Joint venture investment loans	3.4b	11.2	14.1
Other non-current assets	3.3	5.0 ––––––––	6.8 ––––––––
Total non-current assets		1,011.4 ––––––––	590.1 ––––––––
Completed property	3.1	–	198.7
Properties under development	3.1	26.5	135.2
Inventories	3.2	1.7	8.4
Trade and other receivables	5.2	53.5	41.0
Cash and cash equivalents	5.1	75.4	16.8
Total current assets		–––––––– 157.1	–––––––– 400.1
Total assets		–––––––– 1,168.5	–––––––– 990.2
Liabilities		––––––––	––––––––
Borrowings	4.1	(100.2)	(29.2)
Interest rate swaps	4.2	(0.7)	–
Trade and other payables	5.4	(82.0)	(84.4)
Provisions	2.5	(0.5)	(6.3)
Current tax creditor		(0.5)	(0.4)
Total current liabilities		–––––––– (183.9)	–––––––– (120.3)
Borrowings	4.1	–––––––– (427.7)	–––––––– (421.5)
Interest rate swaps	4.2	(23.0)	(39.0)
Provisions	2.5	(0.2)	(4.7)
Total non-current liabilities		–––––––– (450.9)	–––––––– (465.2)
Total liabilities		–––––––– (634.8)	–––––––– (585.5)
Net assets		–––––––– 533.7	–––––––– 404.7
Equity		––––––––	––––––––
Issued share capital		40.1	40.1
Share premium		249.2	249.0
Merger reserve		40.2	40.2
Retained earnings		195.0	72.8
Hedging reserve		(8.7) ––––––––	(14.5) ––––––––
Equity attributable to the owners of the parent company		515.8	387.6
Minority interest		17.9	17.1
Total equity		–––––––– 533.7	–––––––– 404.7
		––––––––	––––––––

These financial statements were approved by the Board of Directors on 6 March 2013 and were signed on its behalf by:

MC Allan	JJ Lister
Director	Director

Company balance sheet At 31 December 2012

		2012	2011
	Note	£m	£m
Assets
Investments in subsidiaries	3.5a	228.4	112.0
Investments in joint ventures	3.5a	– ––––––––	2.5 ––––––––
Total investments		228.4	114.5
Loan to group undertaking	3.5a	90.0	–
Joint venture investment loan	3.5a	– ––––––––	3.9 ––––––––
Total non-current assets		318.4 ––––––––	118.4 ––––––––
Amounts due from group undertakings	5.2	321.5	317.7
Cash and cash equivalents	5.1	– ––––––––	0.1 ––––––––
Total current assets		321.5	317.8
Total assets		–––––––– 639.9	–––––––– 436.2
Current liabilities		––––––––	––––––––
Borrowings	4.1	(1.2)	–
Amounts due to group undertakings	5.4	(29.7)	(29.7)
Other payables	5.4	(3.2) ––––––––	(3.0) ––––––––
Total current liabilities		(34.1) ––––––––	(32.7) ––––––––
Borrowings	4.1	(90.0) ––––––––	– ––––––––
Total non-current liabilities		(90.0) ––––––––	– ––––––––
Total liabilities		(124.1)	(32.7)
Net assets		–––––––– 515.8	–––––––– 403.5
Equity		––––––––	––––––––
Issued share capital		40.1	40.1
Share premium		249.2	249.0
Merger reserve		40.2	40.2
Retained earnings		23.6	25.4
Revaluation reserve		162.7 ––––––––	48.8 ––––––––
Total equity		515.8 ––––––––	403.5 ––––––––

Total equity is wholly attributable to equity holders of The UNITE Group plc.

These financial statements were approved by the Board of Directors on 6 March 2013 and were signed on its behalf by:

MC Allan JJ Lister Director Director

						Attributable
	Issued					to owners
	share	Share	Merger	Retained	Hedging	of the	Minority
	capital	premium	reserve	earnings	reserve	parent	interest	Total
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2012	40.1	249.0	40.2	72.8	(14.5)	387.6	17.1	404.7
Profit for the period Other comprehensive	–	–	–	125.6	–	125.6	1.6	127.2
income for the period	–	–	–	–	5.8	5.8	–	5.8
Total comprehensive income for the period	–	–	–	125.6	5.8	131.4	1.6	133.0
Shares issued	–	0.2	–	–	–	0.2	–	0.2
Fair value of share
based payments	–	–	–	1.5	–	1.5	–	1.5
Own shares acquired Dividends paid to	–	–	–	(1.3)	–	(1.3)	–	(1.3)
owners of the parent company Dividends to minority	–	–	–	(3.6)	–	(3.6)	–	(3.6)
interest	– ––––––	– ––––––	– ––––––	– ––––––	– ––––––	– ––––––	(0.8) ––––––	(0.8) ––––––
At 31 December 2012	40.1	249.2	40.2	195.0	(8.7)	515.8	17.9	533.7
	––––– Issued	–––––	–––––	–––––	–––––	––––– Attributable to owners	–––––	–––––
	share	Share	Merger	Retained	Hedging	of the	Minority
	capital	premium	reserve	earnings	reserve	parent	interest	Total
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2011	40.1	249.0	40.2	70.4	(12.2)	387.5	16.2	403.7
Profit for the period	–	–	–	2.1	–	2.1	1.8	3.9
Other comprehensive income for the period	–	–	–	–	(2.3)	(2.3)	(0.2)	(2.5)
Total comprehensive
income for the period Fair value of share	–	–	–	2.1	(2.3)	(0.2)	1.6	1.4
based payments	–	–	–	1.2	–	1.2	–	1.2
Own shares acquired Dividends paid to	–	–	–	(0.1)	–	(0.1)	–	(0.1)
owners of the parent company Dividends to minority	–	–	–	(0.8)	–	(0.8)	–	(0.8)
interest	–	–	–	–	–	–	(0.7)	(0.7)
At 31 December 2011	–––––– 40.1 –––––	–––––– 249.0 –––––	–––––– 40.2 –––––	–––––– 72.8 –––––	–––––– (14.5) –––––	–––––– 387.6 –––––	–––––– 17.1 –––––	–––––– 404.7 –––––

Company statement of changes in shareholders' equity For the year ended 31 December 2012

Company statement of changes in shareholders' equity For the year ended 31 December 2012

	Issued
	share	Share	Merger		Retained Revaluation
	capital	premium	reserve	earnings	reserve	Total
	£m	£m	£m	£m	£m	£m
At 1 January 2012	40.1	249.0	40.2	25.4	48.8	403.5
Loss for the period	–	–	–	(0.7)	–	(0.7)
Transfer on sale of joint venture	–	–	–	2.5	(2.5)	–
Revaluation of investments in
subsidiaries and joint ventures	–	–	–	–	116.4	116.4
Shares issued	–	0.2	–	–	–	0.2
Dividends to shareholders	– ––––––––	– ––––––––	– ––––––––	(3.6) ––––––––	– ––––––––	(3.6) ––––––––
At 31 December 2012	40.1	249.2	40.2	23.6	162.7	515.8
	–––––––– Issued	––––––––	––––––––	––––––––	––––––––	––––––––
	share	Share	Merger		Retained Revaluation
	capital	premium	reserve	earnings	reserve	Total
	£m	£m	£m	£m	£m	£m
At 1 January 2011	40.1	249.0	40.2	27.1	44.8	401.2
Loss for the period	–	–	–	(0.9)	–	(0.9)
Revaluation of investments in
subsidiaries and joint ventures	–	–	–	–	4.0	4.0
Dividends to shareholders	– ––––––––	– ––––––––	– ––––––––	(0.8) ––––––––	– ––––––––	(0.8) ––––––––
At 31 December 2011	40.1 ––––––––	249.0 ––––––––	40.2 ––––––––	25.4 ––––––––	48.8 ––––––––	403.5 ––––––––

Statements of cash flows For the year ended 31 December 2012

			Group	Company
		2012	2011	2012	2011
	Note	£m	£m	£m	£m
Cash flows from operating activities	5.1	58.4	(74.0)	(2.4)	(2.4)
Cash flows from taxation		(0.9)	(0.6)	–	–
Investing activities
Proceeds from sale of investment property		27.5	8.3	–	–
Payments to/on behalf of subsidiaries		–	–	(13.2)	(42.0)
Payments from subsidiaries		–	–	14.1	42.6
Repayment received of joint venture
investment loan		–	–	3.9	–
Loan to subsidiaries		–	–	(90.0)	–
Dividends received		9.6	8.9	–	2.3
Interest received		0.2	0.1	–	–
Acquisition of intangible assets		(1.6)	(1.5)	–	–
Acquisition of property		(49.5)	(18.3)	–	–
Acquisition of plant and equipment		(0.2) ––––––––	(0.6) ––––––––	– ––––––––	– ––––––––
Cash flows from investing activities		(14.0)	(3.1)	(85.2)	2.9
Financing activities		––––––––	––––––––	––––––––	––––––––
Total interest paid		(21.1)	(15.0)	(0.3)	(0.1)
Interest capitalised into inventory and
property under development included
in cash flows from operating activities		5.1	7.1	–	–
Interest paid in respect of financing activities		–––––––– (16.0)	–––––––– (7.9)	–––––––– (0.3)	–––––––– (0.1)
Ineffective swap payments		(18.8)	(11.7)	–	–
Proceeds from the issue of share capital		0.2	–	0.2	–
Payments to acquire own shares		(1.3)	(0.1)	–	–
Proceeds from non-current borrowings		291.3	113.6	90.0	–
Repayment of borrowings		(235.9)	(21.7)	–	–
Dividends paid to the owners of the
parent company		(3.6)	(0.8)	(3.6)	(0.8)
Dividends paid to minority interest		(0.8)	(0.7)	–	–
Cash flows from financing activities		–––––––– 15.1	–––––––– 70.7	–––––––– 86.3	–––––––– (0.9)
Net increase/(decrease) in cash and cash		––––––––	––––––––	––––––––	––––––––
equivalents		58.6	(7.0)	(1.3)	(0.4)
Cash and cash equivalents at start of year		16.8 ––––––––	23.8 ––––––––	0.1 ––––––––	0.5 ––––––––
Cash and cash equivalents at end of year	5.1	75.4	16.8	(1.2)	0.1

–––––––– –––––––– –––––––– ––––––––

This section lays out the Group's accounting policies that relate to the financial statements as a whole. Where an accounting policy is specific to a particular note to the financial statements, the policy is described in the note to which it relates and has been clearly identified in a box.

The financial statements consolidate those of The UNITE Group plc, (the Company) and its subsidiaries (together referred to as the Group) and include the Group's interests in jointly controlled entities. The parent company financial statements present information about the Company as a separate entity and not as a group.

Both the parent company financial statements and the group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU (Adopted IFRS). On publishing the parent company financial statements here together with the group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement and related notes.

The accounting policies have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements.

The Company is domiciled in the United Kingdom.

Going concern

The Group's business activities, together with the factors likely to affect its future development and position are set on in the Business Review on pages 22 to 37. In addition, section 4 of these Notes to the financial statements includes the Group's objectives, policies and processes for managing its capital; details of its borrowings and interest rate swaps; and in note 5.3 its exposure to credit risk.

The Group has prepared cash flow projections until the end of 2014. The Group has borrowing facilities expiring in 2013 and 2014, but has capacity in place within existing committed facilities to refinance all of the 2013 expiries. Plans are also in place to refinance remaining debt facilities that mature in 2013 and 2014 over the course of the next 12 months. Historically the Group has maintained positive relationships with lenders and has arranged a significant level of new debt every year to manage its debt position and remain within its borrowing covenants. The Group is in full compliance with its borrowing covenants at 31 December 2012 as set out in note 4.5c.

The Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future.

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

Measurement convention

The financial statements are prepared on the historical cost basis except for investment property, investment property under development, investments in subsidiaries, interest rate swaps and land and buildings included in property, plant and equipment all of which are stated at their fair value.

Basis of consolidation

Subsidiaries are those entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently 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.

Intra-group balances and transactions, and any unrealised gains and losses arising from intra-group transactions, such as property disposals and management fees are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the Group's retained interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains except where the loss provides evidence of a reduction in the net realisable value of current assets or an impairment in value of fixed assets.

Impact of accounting standards and interpretations in issue but not yet effective

There are no new standards, amendments or interpretations which are effective for the first time in 2012.

The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

• Amendments to IAS 1 'Presentation of Items of Other Comprehensive Income' (mandatory for year commencing on or after 1 July 2012). The amendments require an entity to present the items of other comprehensive that may be recycled to profit or loss in the future if certain conditions are met, separately from those that would never be recycled to profit or loss. Consequently, as the Group presents items of other comprehensive income before related income tax effects the aggregated income tax amount would need to be allocated between those sections.
• IFRS 10 Consolidated Financial Statements and IAS 27 (2011) Separate Financial Statements, IFRS 11 Joint Arrangements and Amendments to IAS 28 (2008) Investments in Associates and Joint Ventures and IFRS 12 Disclosure of Interests in Other Entities are all mandatory for years commencing on or after 1 January 2014. These are part of a new suite of standards on consolidation and related standards, replacing the existing accounting for subsidiaries and joint ventures (now joint arrangements), and making limited amendments in relation to associates.
• IFRS 13 Fair Value Measurement (mandatory for year commencing on or after 1 January 2013).
• Amendments to IFRS 7 "Disclosures Offsetting Financial Assets and Financial Liabilities" (mandatory for years commencing on or after 1 January 2013).

Accounting estimates and judgements

The preparation of financial statements requires management to exercise judgement in applying the Group's accounting policies. It also requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Estimates and assumptions are reviewed on an ongoing basis with revisions recognised in the period in which the estimates are revised and in any future periods affected.

Transfer of properties held as current assets

In December 2012, the Board decided to transfer most of the properties held as current assets to investment property based on a change of use. All of these properties are being leased to customers and the Board has now concluded that these assets are no longer likely to be sold in the near term but will be held for rental income and capital growth.

Since the establishment of the UNITE UK Student Accommodation Fund (USAF) in 2006, the Group has been required to offer all newly completed properties which meet certain performance criteria for sale to USAF, and USAF may be required to purchase assets which meet certain conditions. Hence these assets have been accounted for as current assets since that time. More recently USAF has had limited equity available to purchase property and the Group strategy has also shifted to holding property longer term. The Group will continue to make strategic disposals to manage the quality of the portfolio and the gearing levels in the business.

During the second half of 2012 the Group entered into a new joint venture intending to develop and hold investment property in London and designed to be its primary development vehicle. The Group has also secured further long term funding with Legal and General and with the issue of its retail bond, this supports the Group strategy to hold property for the longer term.

It is the combination of these factors that has led the Group to conclude that transfer is now appropriate. As shown in note 3.1, this has resulted in the recognition in the income statement of £49.7 million of revaluation gains not previously recognised in theIFRS statements.

There remain a few properties under development which have not been transferred as there is a clear current intention to sell these in the near future.

The other areas involving a higher degree of judgement of complexity are set out below and are explained in more detail in the related notes to the financial statements.

The accounting policy descriptions set out the areas where judgement needs exercising, the most significant of which are as follows:

• classification of joint venture vehicles (note 3.4)

The areas involving the most sensitive estimates and assumptions that are significant to the financial statements are set out below and in more detail in the related notes:

• valuation of investment property, investment property under development, completed property and properties under development (note 3.1)
• onerous contract provisions (note 2.5)
• taxation (note 2.6)
• valuation of interest rate swaps (note 4.2)
• impairment of trade receivables (note 5.2)

This section focuses on the results and performance of the Group. On the following pages you will find disclosures explaining the Group's results for the year, segmental information, taxation, earnings and adjusted net asset value (NAV) per share.

Net portfolio contribution (NPC) and NAV movement are the Group's main key performance indicators.

This reflects the way the business is managed and how the directors assess the performance of the Group.

2.1 Segmental information

The Board of Directors monitor the business along two activity lines. The reportable segments for the years ended 31 December 2012 and 31 December 2011 are Operations and Property.

The Group undertakes its Operations and Property activities directly and through joint ventures with third parties. The joint ventures are an integral part of each segment and are included in the information used by the Board to monitor the business.

The Group's properties are located exclusively in the United Kingdom. The Board therefore does not consider that the Group has meaningful geographical segments.

(a) Operations

The Operations businessmanages rental properties, owned directly by the Group or by joint ventures. Its revenues are derived from rental income and asset management fees earned from joint ventures. NPC is the key indicator which is used by the Board to manage the Operations business. The segmental result is outlined below.

2012

								Group
								on see
								through
	UNITE				Share of joint ventures			basis
	Total	USAF	UCC	LSAV	OCB	USV	Total	Total
	£m	£m	£m	£m	£m	£m	£m	£m
Rental income	79.4	18.8	9.4	0.3	3.3	0.2	32.0	111.4
Property operating expenses	(24.6)	(5.6) __ _ ___	(1.5)	–	(0.6)	–	(7.7)	(32.3)
Net operating income	54.8	13.2	7.9	0.3	2.7	0.2	24.3	79.1
Management fees	13.2	(1.4)	(1.2)	–	(0.3)	–	(2.9)	10.3
Operating expenses	(21.5)	(0.1) __ _ ___	–	(0.1)	(0.1)	–	(0.3)	(21.8)
	46.5	11.7	6.7	0.2	2.3	0.2	21.1	67.6
Operating lease rentals*	(12.8)	–	–	–	–	–	–	(12.8)
Net financing costs	(24.7)	(5.3) __ _ ___	(3.8)	(0.1)	(1.7)	(0.1)	(11.0)	(35.7)
Net portfolio contribution	9.0	6.4	2.9	0.1	0.6	0.1	10.1	19.1
		–––––– –––––– –––––– –––––– –––––– –––––– –––––– ––––––

Included in the UNITE total above is rental income of £18.5 million and property operating expenses of £5.5 million relating to sale and leaseback properties.

								Group
								on see
								through
	UNITE				Share of joint ventures			basis
	Total	USAF	UCC	LSAV	OCB	USV	Total	Total
	£m	£m	£m	£m	£m	£m	£m	£m
Rental income	63.6	17.8	8.1	–	3.1	3.0	32.0	95.6
Property operating expenses	(21.7)	(5.0) __ _ ___	(1.2)	–	(0.5)	(1.0)	(7.7)	(29.4)
Net operating income	41.9	12.8	6.9	–	2.6	2.0	24.3	66.2
Management fees	12.8	(1.3)	(1.1)	–	(0.3)	–	(2.7)	10.1
Operating expenses	(21.2)	(0.2) __ _ ___	(0.1)	–	(0.1)	–	(0.4)	(21.6)
	33.5	11.3	5.7	–	2.2	2.0	21.2	54.7
Operating lease rentals*	(12.6)	–	–	–	–	–	–	(12.6)
Net financing costs	(18.8)	(5.3) __ _ ___	(4.0)	–	(1.7)	(1.3)	(12.3)	(31.1)
Net portfolio contribution	2.1	6.0	1.7	–	0.5	0.7	8.9	11.0
		–––––– –––––– –––––– –––––– –––––– –––––– –––––– ––––––

Included in the UNITE total above is rental income of £18.0 million and property operating expenses of £6.2 million relating to sale and leaseback properties.

* Operating lease rentals arise from properties which the Group has sold and is now leasing back. As these properties contribute to the Group's rental income, the Group consider these lease costs to be a form of financing.

(b) Property

The Group's Property business undertakes the acquisition and development of properties. This included the manufacture and sale of modular building components in the first half of 2012 prior to the business closure, through UNITE Modular Solutions Limited, 'UMS'. The Property Segment's revenue comprises revenue from development management fees earned from joint ventures; and the sale of modules to third parties and joint ventures, as set out in note 2.4. The Property segmental result is set out below.

	2012 £m	2011 £m
Pre-contract, abortive and other costs UMS losses	(2.7) (1.0)	(3.3) (21.0)
Property segment result*	–––––––– (3.7)	–––––––– (24.3)
	––––––––	––––––––

* The Group has restated its Property Segment result in 2011 to exclude profits from the sale of properties and property impairments; so that it's adjusted profit is presented consistently with that recommended by EPRA, except for minority interest. All periods presented have been restated accordingly (see note 2.2 for more details).

The UMS loss in 2012 includes trading losses of £nil (2011: £5.5 million) together with a provision of £1.0 million (2011: £5.6 million)for completing loss making contracts; provisions foronerous leases of nil (2011: £5.4 million); and impairment of other fixed assets of £nil (2011: £3.7 million) and inventory of £nil (2011: £0.8 million).

(c) Segmental contribution to NAV

The Board does not use balance sheet information split out by segment to monitor and manage the Group's activities. Instead the position of the Group is managed by reviewing the increases in Adjusted NAV contributed by each segment during the period.

Contributions to Adjusted NAV by each segment during the year is as follows:

		2012	2011
	Note	£m	£m
Operations
Net portfolio contribution	2.1a	19.1	11.0
Property
Rental growth		33.8	22.9
Yield movement		(6.1)	–
Disposals and acquisition costs		(1.4)	0.6
Capital expenditure and refurbishments		1.8 ––––––––	– ––––––––
Rental property gains		28.1	23.5
Development property gains		23.7 ––––––––	33.3 ––––––––
		51.8	56.8
UMS		(1.0)	(21.0)
Pre-contract and other development costs		(2.7) ––––––––	(3.4) ––––––––
Total property		48.1 ––––––––	32.4 ––––––––
Unallocated		(15.2)	(3.4)
Total adjusted NAV movement in the period		–––––––– 52.0	–––––––– 40.0
Total adjusted NAV brought forward		–––––––– 514.5	–––––––– 474.5
Total adjusted NAV carried forward	2.3a	–––––––– 566.5	–––––––– 514.5

The unallocated amount includes cash received from Landsbankiof £2.9 million (2011: £nil), restructuring costs of £nil (2011: £1.6 million), dividends of £3.6 million (2011: £0.8 million), current tax charges of £0.4 million (2011: £0.4 million), costs relating to the set-up of LSAV £1.7 million (2011: £nil) and swap losses, associated with the early termination of swaps relating to refinancing activity of £10.4 million (2011: £0.5 million).

–––––––– ––––––––

2.2 Adjusted profit and EPS

In addition to the IFRS reporting measures, the Group reports adjusted profit on the basis recommended for real estate companies by EPRA, the European Public Real Estate Association, except for minority interests. The calculation of adjusted profit/(loss) and adjusted earnings per share has been changed in the period to exclude the impact of property disposals and tradingin order to align adjusted profit/(loss) with that recommended by EPRA and to remove the fluctuations these items cause to Group's underlying recurring profits. Prior period numbers have been restated to present the results on a consistent basis.

(a) Adjusted profit and reconciliation to IFRS

The adjusted profit/(loss) excludes movements relating to changes in values of investment properties and interest rate swaps, which are included in the profit reported under IFRS. The adjusted profit/(loss) reconciles to the profit reported under IFRS as follows:

		2012	2011
	Note	£m	£m
Operations segment result –
Net portfolio contribution	2.1a	19.1	11.0
Property segment result pre UMS losses	2.1b	(2.7)	(3.3)
Unallocated to segments		0.5	(3.6)
Adjusted profit pre UMS losses		–––––––– 16.9	–––––––– 4.1
UMS losses	2.1b	(1.0)	(21.0)
Adjusted profit/(loss)		–––––––– 15.9	–––––––– (16.9)
Net valuation gainson investment property	3.1	29.8	7.7
Valuation gains realised on transfer of completed property	3.1	49.7	–
Property disposals and write downs		14.7	1.3
LSAV set up costs		(1.3)	–
Share of joint venture gains on investment property	3.4b	14.9	10.7
Share of joint venture property disposals and write downs		0.3	–
Share of joint venture LSAV set up costs		(0.4)	–
Mark to market changes in interest rate swaps*	4.3	(7.6)	(10.6)
Interest rate swap payments on ineffective hedges*		9.0	10.2
Share of joint venture interest rate swaps charges	3.4b	(0.6)	0.4
Current tax included in unallocated to segments		0.4	0.4
Share of joint venture deferred tax credit/(charge)	3.4b	0.4	0.3
Minority interest share of NPC**	3.4b	1.0	1.2
Profit before tax		–––––––– 126.2 ––––––––	–––––––– 4.7 ––––––––

• * Within IFRS reported profit, there is a £7.6 million loss (2011: £10.6 million loss) relating to movements in the mark to market of ineffective interest rate swaps, this full loss can be seen in note 4.3. Part of this movement, £9.0 million (2011: £10.2 million) relates to actual interest payments made on these swaps and is considered to be a true operating cost of the Operations Segment. It is therefore already included within Net Financing Costs in NPC (Operating Segment result) in note 2.1a.
• ** The minority interest share, or non-controlling interest, arises as a result of the Company not owning 100 per cent. of the share capital of one of its subsidiaries, USAF (Feeder) Guernsey Ltd. More detail is provided in note 3.4.

Unallocated to segments includes share of joint venture amounts received from Landsbanki of £2.9 million (2011: £nil), restructuring costs of £nil million (2011: £1.6 million), current tax charges of £0.4 million (2011: £0.4 million), contributions to the UNITE Foundation of £0.2 million (2011: £nil) and share option fair value charges of £1.5 million (2011: £1.2 million).

(b) EPS and Adjusted EPS

EPS is the amount of post-tax profits attributable to each share. Basic EPS is adjusted in order to more accurately show the business performance of the Group in a consistent manner and to reflect how the business is managed and measured on a day to day basis. Adjusted EPS is calculated using adjusted profit/(loss) as set out above.

The calculations of basic and adjusted EPS for the year ended 31 December 2012 is as follows:

		2012	2011
	Note	£m	£m
Earnings
Basic (and diluted)		125.6	2.1
Adjusted	2.2a	15.9	(16.9)
Adjusted pre UMS losses	2.2a	16.9	4.1
Weighted average number of shares (thousands)
Basic		160,319	160,271
Dilutive potential ordinary shares (share options)		136 ––––––––	39 ––––––––
Diluted		160,455 ––––––––	160,310 ––––––––
Earnings per share (pence)
Basic		78.3p ––––––––	1.3p ––––––––
Diluted		78.3p ––––––––	1.3p ––––––––
Adjusted		9.9p	(10.5p
Adjusted (pre-UMS result)		–––––––– 10.5p ––––––––	–––––––– 2.6p ––––––––

Movements in the weighted average number of shares have resulted from the issue of shares arising from the employee share based payment schemes. In addition to the potential dilutive ordinary shares (share options) shown above, there were no further share options in existence at 31 December 2012 (2011: 29,000) which are excluded from this calculation because they would increase EPS (they are anti-dilutive). Also excluded from the potential dilutive shares (share options) are 3,176,000 options in existence at31 December 2012 (2011: 1,460,000) which are subject to conditions that have not yet been met.

2.3 Adjusted Net Assets and NAV per share

Adjusted NAV as recommended by EPRA excludes the mark to market valuation of swaps, deferred tax liabilities and recognises all properties at market value. This is the key performance measure that the Board uses to monitor and manage the position of the segments.

(a) Adjusted net assets

		2012			2011
	Wholly	Share		Wholly	Share
	owned	of JV's	Total	owned	of JV's	Total
	£m	£m	£m	£m	£m	£m
Investment properties	762.8	399.3	1,162.1	396.2	400.1	796.3
Completed properties
(at market value)	–	–	–	220.9	–	220.9
Rental properties	–––––– 762.8 ––––––	–––––– 399.3 ––––––	–––––– 1,162.1 ––––––	–––––– 617.1 ––––––	–––––– 400.1 ––––––	–––––– 1,017.2 ––––––
Investment properties
under development	37.6	0.2	37.8	–	–	–
Properties under development
(at market value)	45.5 ––––––	– ––––––	45.5 ––––––	189.1 ––––––	0.2 ––––––	189.3 ––––––
Development properties	83.1 ––––––	0.2 ––––––	83.3 ––––––	189.1 ––––––	0.2 ––––––	189.3 ––––––

		2012			2011
	Wholly	Share		Wholly	Share
	owned	of JV's	Total	owned	of JV's	Total
	£m	£m	£m	£m	£m	£m
Total property portfolio	845.9	399.5	1,245.4	806.2	400.3	1,206.5
Debt on rental properties
(net of cash)	(452.6)	(195.1)	(647.7)	(393.7)	(212.1)	(605.8)
Debt on properties under
development	– ––––––	– ––––––	– ––––––	(40.3) ––––––	– ––––––	(40.3) ––––––
	(452.6)	(195.1)	(647.7)	(434.0)	(212.1)	(646.1)
Other liabilities	(23.1)	(8.1)	(31.2)	(39.9)	(6.0)	(45.9)
Adjusted net assets	–––––– 370.2	–––––– 196.3	–––––– 566.5	–––––– 332.3	–––––– 182.2	–––––– 514.5
Loan to value (%)	–––––– 53	–––––– 49	–––––– 52	–––––– 54	–––––– 53	–––––– 54
	––––––	––––––	––––––	––––––	––––––	––––––

(b) Reconciliation to IFRS

Adjusted NAV reconciles to NAV reported under IFRS as follows:

		2012	2011
	Note	£m	£m
Adjusted NAV	2.3a	566.5	514.5
Mark to market interest rate swaps		(31.7)	(50.5)
Valuation gain not recognised on property held at cost	3.1	(19.0)	(76.1)
Deferred tax		– ––––––––	(0.3) ––––––––
Net asset value reported under IFRS		515.8	387.6
		––––––––	––––––––

(c) NAV per share and Adjusted NAV per share

The Board continuously monitors the adjusted NAV attributable to its shareholders. NAV per share as at 31 December 2012 is calculated as follows:

		2012	2011
	Note	£m	£m
Net assets
Basic (as reported under IFRS on the balance sheet)	2.3b	515.8	387.6
Adjusted pre-dilution (as defined by EPRA)	2.1c	566.5	514.5
Adjusted diluted (takes into account the dilutive effect of
all share options being exercised)		568.4	516.4
Number of shares (thousands)
Basic		160,461	160,271
Outstanding share options		2,111 ––––––––	2,344 ––––––––
Diluted		162,572	162,615
Net asset value per share (pence)		––––––––	––––––––
Basic		321p	242p
Adjusted pre dilution		353p	321p
Adjusted diluted		350p	318p

2.4 Revenue

The Group earns revenue from the following activities:

	Note	2012	2011
		£m	£m
Operations segment	2.1a	79.4	63.6
Operations segment		10.9	10.6
Property segment		–	1.3
Property segment		12.5	11.4
Unallocated		112.1	8.2
		214.9	–––––––– 95.1
Impact of minority interest on management fees		(0.2)	(0.2)
Impact of minority interest on property sales		(0.1)	–
		214.6	–––––––– 94.9
			–––––––– ––––––––

–––––––– –––––––– The revenue above excludes the Group's share of revenue from joint ventures; this can be seen in note 2.1a.

Revenue has increased due to increased rental income and planned property sales to the UNITE UK Student Accommodation Fund (USAF), the London Student Accommodation Venture (LSAV) (note 3.4c) and other third parties.

Accounting policies

Revenue is recognised on the following bases:

Rental income

Rental income from property leased out under operating leases (comprising direct lets to students and leases to Universities and commercial tenants) is recognised in the income statement on a straight line basis over the term of the lease. Lease incentives are sometimes granted on commercial units; these are recognised as an integral part of the total rental income and spread over the term of the lease.

Property sales

Income relating to the sale of trading properties is recognised once contracts for sale have been unconditionally exchanged.

Manufacturing revenue

Revenue from the sale of modules and related services is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. For modules this is on receipt of customer acceptance following manufacture and for related services as the service is provided.

Management and promote fees

Management and promote fees are recognised, in line with the management contracts, in the period to which they relate as services are provided. The Group can earn promote fees relative to criteria specified in the joint venture agreements.

2.5 Provisions for onerous contracts

	Current	Non-current	Total
	liability	liability	liability
	£m	£m	£m
At 1 January 2012	6.3	4.7	11.0
Provisions utilised in the year	(5.8)	(4.5)	(10.3)
At 31 December 2012	–––––––– 0.5	–––––––– 0.2	–––––––– 0.7
	––––––––	––––––––	––––––––

	Current	Non-current	Total
	liability	liability	liability
	£m	£m	£m
At 1 January 2011	–	–	–
Increase in provisions charged to the
income statement	6.3	4.7	11.0
At 31 December 2011	–––––––– 6.3	–––––––– 4.7	–––––––– 11.0
	––––––––	––––––––	––––––––

The provisions relate to onerous leases at the group's manufacturing facility (UMS). The decision to cease trading at UMS resulted in future lease payments and associated costs becoming onerous. Discounted future payments of £0.7 million (2011: £5.4 million) (relating to the lease of the factory site) have been provided in respect of these leases of which £0.2 million (2011: £4.7 million) is not expected to be realised until 2014 and is therefore disclosed as due after one year. There has been a reduction of £4.7 million in the lease provision following sub-let interest in the manufacturing premises, which has been offset by further costs incurred completing the onerous contracts. Contract losses exceeded the amount previously provided by £5.7 million resulting in a net UMS related loss of £1.0 million as shown in note 2.1b. Future payments have been discounted using a market rate of 5 per cent.

2.6 Tax

The Group has not paid any corporation tax in the recent past due to the availability of capital allowances, indexation and brought forward losses. However it does pay UK income tax on rental income that arises from investments held by offshore subsidiaries (predominantly the investments in USAF).

Accounting policies

The tax charge for the period is recognised in the income statement and the statement of comprehensive income, according to the accounting treatment of the related transaction. The tax charge comprises both current and deferred tax.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable in respect of previous years. The current tax charge is based on tax rates that are enacted or substantively enacted at the year end.

Deferred tax arises due to certain temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and those for taxation purposes. Temporary differences relating to investments in subsidiaries and joint ventures are not provided for to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. The deferred tax provision in respect of property assets is calculated on the basis that assets will not be held indefinitely and therefore takes account of available indexation. A deferred tax asset is recognised only to the extent that it is probable that sufficient future taxable profits will be available against which the asset can be utilised.

(a) Tax – income statement

The total taxation (credit)/charge in the income statement is analysed as follows:

	2012	2011
	£m	£m
Corporation tax in respect of income	–	–
Income tax on UK rental income arising in non-UK companies	0.6	0.5
Adjustments for prior years	–	–
Current tax charge	–––––––– 0.6	–––––––– 0.5
Origination and reversal of temporary differences	(1.3)	0.9
Effect of change in tax rate	(0.3)	(0.3)
Adjustments for prior years	– ––––––––	(0.3) ––––––––
Deferred tax (credit)/charge	(1.6)	0.3
Total tax (credit)/charge in income statement	–––––––– (1.0)	–––––––– 0.8
	––––––––	––––––––

In order to understand how, in the income statement, a tax credit of £1.0 million arises on a profit before tax of £126.2 million, the taxation charge that would arise at the standard rate of UK corporation tax is reconciled to the actual tax charge as follows:

	2012	2011
	£m	£m
Profit before tax	126.2 ––––––––	4.7 ––––––––
Income tax using the UK corporation tax rate of 24.5%
(2011: 26.5%)	30.9	1.2
Effect of indexation on investment and development property	(3.3)	(2.4)
Non-deductible expenses	0.8	0.9
Effect of transferring property from current to non-current assets	(10.8)	–
Share of joint venture profit	(0.1)	0.4
Movement on unprovided deferred tax asset	(13.1)	1.6
Profit on disposal of assets not chargeable to tax	–	0.1
Effect of property disposals	(4.3)	(0.4)
Adjustments for prior years – deferred tax	–	(0.3)
Rate difference on deferred tax	(1.1) ––––––––	(0.3) ––––––––
Total tax (credit)/charge in the income statement	(1.0)	0.8
	––––––––	––––––––

(b) Tax – other comprehensive income

Within other comprehensive income a tax charge totalling £0.8 million (2011: £0.4 million) has been recognised representing deferred tax. An analysis of this is included below in the deferred tax movement table.

(c) Tax – balance sheet

The table below outlines the deferred tax liabilities/(assets) that are recognised in the balance sheet, together with their movements in the year:

2012

	At 31				At 31
	December		(Credited)	Charged	December
	2011	Transfers	in income	in equity	2012
	£m	£m	£m	£m	£m
Investment property	8.8	–	7.1	–	15.9
Property held in current assets	(1.3)	–	1.3	–	–
Property, plant and machinery	(1.2)	–	0.5	–	(0.7)
Investments in joint ventures	7.6	–	(0.5)	–	7.1
Interest rate swaps	(8.0)	–	3.0	0.8	(4.2)
Interest rate swaps relating to
joint ventures	(2.7)	–	–	0.8	(1.9)
Tax value of carried forward
losses recognised	(3.2)	–	(13.0)	–	(16.2)
Net tax liabilities	–––––––– –	–––––––– –	–––––––– (1.6)	–––––––– 1.6	–––––––– –
	––––––––	––––––––	––––––––	––––––––	––––––––

2011

	At 31				At 31
	December		Charged	(Credited)	December
	2010	Transfers	in income	in equity	2011
	£m	£m	£m	£m	£m
Investment property	7.5	–	1.3	–	8.8
Property held in current assets	(0.7)	–	(0.6)	–	(1.3)
Property, plant and machinery	(0.3)	–	(0.9)	–	(1.2)
Investments in joint ventures	8.0	–	(0.4)	–	7.6
Interest rate swaps	(10.0)	–	2.4	(0.4)	(8.0)
Interest rate swaps relating to
joint ventures	(2.7)	–	–	–	(2.7)
Tax value of carried forward
losses recognised	(1.8)	–	(1.4)	–	(3.2)
Net tax liabilities	–––––––– –	–––––––– –	–––––––– 0.4	–––––––– (0.4)	–––––––– –
	––––––––	––––––––	––––––––	––––––––	––––––––

A deferred tax asset of £20.0 million (2011: £31.9 million) in respect of losses of £86.9 million (2011: £127.6 million) has not been recognised due to uncertainty of future taxable profits and the ability to offset these losses against them.

Company

Deferred tax has not been recognised on temporary timing differences of £44.1 million (2011: £12.2 million) in respect of revaluation of subsidiaries and investment in joint ventures as it is probable that the temporary timing difference will not reverse in the foreseeable future.

2.7 Audit fees

Disclosures in respect of fees paid to the auditors can be found in the Audit Committee Report, page 50.

The Group holds its property portfolio directly and through its joint ventures. The performance of the property portfolio whether wholly owned or in joint ventures is the key factor that drives adjusted net asset value (NAV), one of the Group's key performance indicators.

The following pages provide disclosures about the Group's investments in property assets and joint ventures and their performance over the year.

3.1 Wholly owned property assets

The Group's wholly owned property portfolio is held in four groups on the balance sheet at the carrying values detailed below. In the Group's adjusted NAV, all these groups are shown at market value.

(i) Investment property (fixed assets)

These are assets that the Group intends to hold for a long period to earn rental income or capital appreciation. The assets are held at fair value in the balance sheet with changes in fair value taken to the income statement.

(ii) Investment property under development (fixed assets)

These are assets which are currently in the course of construction and which will be transferred to 'Investment property' on completion.

(iii) Completed properties (current assets)

These are assets acquired by the Group with the intention to hold the assets for a short period prior to disposal to a joint venture or third parties. The Group continues to earn rental income and capital appreciation on these assets which are held at cost in the balance sheet.

(iv) Properties under development (current assets)

These are assets which are currently in the course of construction and which will be transferred to 'Completed properties' on completion.

The Group also acquires land which it intends to develop. Land is held within inventories until planning permission is obtained, at which point it is transferred to investment property under development or properties under development.

As disclosed in note 1 in greater detail, in 2012 the Group has transferred all of its completed property to investment property, based on a change of use and an intention to hold for the longer term. The effects of this change are shown in the following tables.

As at 31 December 2012 three properties remain classified as property under development as there is a clear intention to sell in the near term. These include one property with a carrying value of £19.2 million and a fair value of £38.2 million which is subject to a conditional contract to sell to LSAV after completion of construction.

The property portfolio is valued every six months by external, independent valuers, having an appropriate recognised professional qualification. The fair values are based on market values as defined in the RICS Appraisal and Valuation Manual, issued by the Royal Institution of Chartered Surveyors, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction where the parties had each acted knowledgeably, prudently and without compulsion. CB Richard Ellis Ltd, Jones Lang LaSalle Ltd and Messrs Knight Frank, Chartered Surveyors were the external valuers in the years ending 31 December 2012 and 2011.

Accounting policies

Properties held under operating leases are not included in assets, but the future payments due in respect of these properties are disclosed in note 4.6a.

Investment property and investment property under development are held at fair value.

Completed properties, properties under development and inventories are shown at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. All costs directly associated with the purchase and construction of a property, and all subsequent qualifying expenditure is capitalised.

The recognition of acquisitions and disposals of investment and other property occurs on unconditional exchange of contracts. Borrowing costs are capitalised if they are directly attributable to the acquisition and construction of a property asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalisation of borrowing costs continues until the assets are substantially ready for their intended use but stops if development activities are suspended. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised. The capitalisation rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development cost financed out of general borrowings, to the average rate. During the year the average capitalisation rate used was 5.9 per cent. (2011: 6.7 per cent.).

The valuations are based on assumptions made by considering the aggregate of the net annual rents receivable and associated costs. Valuations reflect, where appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market's general perception of their credit worthiness; the allocation of maintenance and insurance responsibilities between lessor and lessee; and the remaining economic life of the property.

The movements in the carrying value of the Group's wholly owned property portfolio during the year ended 31 December 2012 were as follows:

2012

		Investment
		property		Property
	Investment	under	Completed	under
	property	development	property	development	Total
	£m	£m	£m	£m	£m
At 1 January 2012	396.2	–	198.7	135.2	730.1
Acquisitions	56.8	–	–	–	56.8
Cost capitalised	2.4	28.8	0.4	46.0	77.6
Interest capitalised	–	0.9	–	5.1	6.0
Transfer of completed
property	263.6	–	(263.6)	–	–
Transfer from property
under development	–	–	159.2	(159.2)	–
Transfer from work in
progress	–	1.4	–	–	1.4
Disposals	(29.2)	–	(95.1)	–	(124.3)
Reversal of impairment/
(impairment)	–	–	0.4	(0.6)	(0.2)
Valuation gains recognised
on transfer of completed
property	49.7	–	–	–	49.7
Valuation gains	30.5	6.5	–	–	37.0
Valuation losses	(7.2)	–	–	–	(7.2)
Net valuation gains	23.3	6.5	–	–	29.8
Carrying value at	––––––––	––––––––	––––––––	––––––––	––––––––
31 December 2012	762.8	37.6	–	26.5	826.9
	––––––––	––––––––	––––––––	––––––––	––––––––

Whilst completed property and property under development are held at cost on the balance sheet, the Group manages the assets based on their market value (fair value). These properties are included in adjusted NAV at their fair value, valued on the same basis as for investment property and investment property under development, by external valuers. The fair value of the Group's wholly owned properties at the year ended 31 December 2012 is as follows:

		Investment
		property		Property
	Investment	under	Completed	under
	property	development	property	development	Total
	£m	£m	£m	£m	£m
Carrying value at
31 December 2012 (above)	762.8	37.6	–	26.5	826.9
Valuation gains not recognised
under IFRS but included in
Adjusted NAV
Brought forward	–	–	22.2	53.9	76.1
Transfer from property under
development	–	–	49.4	(49.4)	–
Transfer of completed
property	–	–	(49.7)	–	(49.7)
Disposals	–	–	(26.0)	–	(26.0)
Valuation gain in year	–	–	4.1	14.5	18.6
	–––––––– –	–––––––– –	–––––––– –	–––––––– 19.0	–––––––– 19.0
Market value at	––––––––	––––––––	––––––––	––––––––	––––––––
31 December 2012	762.8	37.6	–	45.5	845.9
	––––––––	––––––––	––––––––	––––––––	––––––––

During the year properties with a carrying value of £263.6 million and a fair value of £313.3 million were transferred from completed property to investment property. This resulted in the recognition of £49.7 million of previously unrecognised valuation gains.

The movements in the carrying value of the Group's wholly owned property portfolio during the year ended 31 December 2011 were as follows:

2011

			Property
	Investment	Completed	under
	property	property	development	Total
	£m	£m	£m	£m
At 1 January 2011	375.7	105.1	113.0	593.8
Acquisitions	13.5	–	–	13.5
Cost capitalised	5.2	0.2	112.6	118.0
Interest capitalised	–	–	7.1	7.1
Transfer from property under
development	–	92.1	(92.1)	–
Transfer from work in progress	–	–	1.1	1.1
Disposals	(5.9)	–	(7.9)	(13.8)
Reversal of impairment	–	1.3	1.4	2.7
Valuation gains	13.5	–	–	13.5
Valuation losses	(5.8)	–	–	(5.8)
Net valuation gains	7.7 ––––––––	– ––––––––	– ––––––––	7.7 ––––––––
Carrying value at 31 December 2011	396.2	198.7	135.2	730.1
	––––––––	––––––––	––––––––	––––––––

The fair value of the Group's wholly owned property portfolio at the year ended 31 December 2011 is as follows:

			Property
	Investment property	Completed property	under development	Total
	£m	£m	£m	£m
Carrying value at
31 December 2011 (above)	396.2	198.7	135.2	730.1
Valuation gains not recognised
under IFRS but included in
Adjusted NAV
Brought forward	–	12.3	24.8	37.1
Transfer from property
under development	–	8.3	(8.3)	–
Valuation gain in year	–	1.6	37.4	39.0
	–––––––– –	–––––––– 22.2	–––––––– 53.9	–––––––– 76.1
Market value at	––––––––	––––––––	––––––––	––––––––
31 December 2011	396.2	220.9	189.1	806.2

Included within investment properties are £29.7 million (2011: £43.1 million) of assets held under a long leasehold and £12.7 million (2011: £9.9 million) of assets held under short leasehold.

–––––––– –––––––– –––––––– ––––––––

Total interest capitalised in investment and development properties at 31 December 2012 was £32.1 million (2011: £32.9 million) on an accumulative basis. Total internal costs relating to manufacturing, construction and development costs of group properties amount to £46.7 million at 31 December 2012 (2011: £53.6 million) on an accumulative basis.

3.2 Inventories

	2012	2011
	£m	£m
UMS modules for sale to third parties or joint ventures	–	1.0
Interests in land	0.6	1.4
Other stocks	1.1 ––––––––	6.0 ––––––––
Inventories	1.7	8.4
	––––––––	––––––––

The movement in other stock is caused by a decrease in manufacturing work in progress, raw materials and consumables relating to the cessation of manufacturing activity during the year.

3.3 Other non-current assets

Accounting policies

Property, plant and equipment

Other than land and buildings; property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see below). Land and buildings are stated at fair value on the same basis as investment properties. Property, plant and equipment mainly comprise leasehold improvements at the Group's head office and London office as well as computer hardware and software at these sites.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items of property, plant and equipment. Freehold land is not depreciated. The estimated useful lives are as follows:

• Leasehold improvements Shorter life of lease and economic life
• Other assets 4-20 years

Intangible assets

Intangible assets predominately comprise internally developed computer software which allows customers to book online and processes transactions within the sales cycle. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Expenditure on research activities is recognised in the income statement as an expense incurred. The assets are amortised on a straight-line basis over 4 to 5 years being the estimated useful lives of the intangible assets, from the date they are available for use. Amortisation is charged to the income statement.

The Group's other non-current assets can be analysed as follows:

		2012			2011
	Property,			Property,
	plant and	Intangible		plant and	Intangible
	equipment	assets	Total	equipment	assets	Total
	£m	£m	£m	£m	£m	£m
Cost or valuation
At 1 January	19.8	19.5	39.3	19.4	18.2	37.6
Additions	0.2	1.6	1.8	0.6	1.5	2.1
Disposals	(12.3) ––––––––	(3.6) ––––––––	(15.9) ––––––––	(0.2) ––––––––	(0.2) ––––––––	(0.4) ––––––––
At 31 December	7.7	17.5	25.2	19.8	19.5	39.3
Depreciation, amortisation and
impairment losses
At 1 January	17.5	15.0	32.5	12.5	12.4	24.9
Depreciation/amortisation charge
for the year	0.6	2.3	2.9	1.5	2.6	4.1
Disposals	(11.6)	(3.6)	(15.2)	(0.1)	(0.1)	(0.2)
Impairment	– ––––––––	– ––––––––	– ––––––––	3.6 ––––––––	0.1 ––––––––	3.7 ––––––––
At 31 December	6.5	13.7	20.2	17.5	15.0	32.5
Carrying value at 1 January	2.3	4.5	6.8	6.9	5.8	12.7
Carrying amount at 31 December	–––––––– 1.2	–––––––– 3.8	–––––––– 5.0	–––––––– 2.3	–––––––– 4.5	–––––––– 6.8
	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––

3.4 Investments in joint ventures (Group)

Accounting policies

Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement. The consolidated financial statements include joint ventures initially at cost subsequently increased or decreased by the Group's share of total gains and losses of joint ventures on an equity basis. Interest free joint venture investment loans are initially recorded at fair value – the difference between the nominal amount and fair value being treated as an investment in the joint venture. The implied discount is amortised over the contracted life of the investment loan.

The Directors consider that the agreements integral to its joint ventures result in the Group having joint control; a significant degree of judgement is exercised in this assessment due to the complexity of the contractual arrangements.

The Group has four joint ventures:

Joint venture	Group's share of assets/results 2012 (2011)	Objective	Partner	Legal entity in which Group has interest
The UNITE UK Student Accommodation Fund (USAF)	18.9%* (18.9%)	Invest and operate student accommodation throughout the UK	Consortium of investors	UNITE Student Accommodation Fund, a Jersey Unit Trust
UNITE Capital Cities (UCC)	30% (30%)	Invest and operate student accommodation in the capital cities of London and Edinburgh	GIC Real Estate Pte, Ltd Real estate investment vehicle of the Government of Singapore	UNITE Capital Cities Unit Trust, incorporated in Jersey
London Student Accommodation Venture (LSAV)	50% (nil)	Develop and operate student accommodation in London	GIC Real Estate Pte, Ltd Real estate investment vehicle of the Government of Singapore	LSAV Unit Trust, a Jersey Unit Trust and LSAV (Holdings) Ltd, incorporated in Jersey
OCB Property Holdings (OCB)	25% (25%)	Develop and operate three investment properties located in London	Oasis Capital Bank	OCB Property Holdings (Jersey) Ltd, incorporated in Jersey

* Part of the Group's interest is held through a subsidiary, USAF (Feeder) Guernsey Ltd, in which there is an external investor. A minority interest therefore occurs on consolidation of the Group's results representing the external investor's share of profits and assets relating to its investment in USAF. The ordinary shareholders of The UNITE Group plc are beneficially interested in 16.4 per cent. (2011: 16.3 per cent.) of USAF.

On 18 January 2012 the Group acquired the balance of the share capital in USV for £2.4 million and discharged shareholder loans amounting to £3.8 million.

(a) Net assets and results of the joint ventures

The summarised balance sheets and results for the period, and the Group's share of these joint ventures are as follows:

2012

	USAF		UCC		LSAV		OCB		Total
	£m Gross	Share	£m Gross	Share	£m Gross	Share	£m Gross	Share	£m Gross	Share
Investment property	1,320.1	250.0	381.2	114.4	49.8	24.9	174.7	43.7	1,925.8	433.0
Cash	50.1	9.5	12.6	3.8	2.5	1.3	7.8	1.9	73.0	16.5
Debt	(621.7)	(117.7)	(226.7)	(68.0)	(24.2)	(12.1)	(112.5)	(28.1)	(985.1)	(225.9)
Swap liabilities	(17.5)	(2.9)	(16.9)	(5.1)	(0.2)	(0.1)	(0.5)	(0.1)	(35.1)	(8.2)
Other current assets	1.6	0.3	0.3	0.1	0.1	0.1	0.2	0.1	2.2	0.6
Other current liabilities	(24.9) ––––––	(4.8) ––––––	(9.4) ––––––	(2.9) ––––––	(2.1) ––––––	(1.1) ––––––	(4.5) ––––––	(1.2) ––––––	(40.9) ––––––	(10.0) ––––––
	707.7	134.4	141.1	42.3	25.9	13.0	65.2	16.3	939.9	206.0
Investment loans	(3.2) ––––––	(3.2) ––––––	– ––––––	– ––––––	– ––––––	– ––––––	(32.1) ––––––	(8.0) ––––––	(35.3) ––––––	(11.2) ––––––
Net assets	704.5	131.2	141.1	42.3	25.9	13.0	33.1	8.3	904.6	194.8
Profit/(loss)	––––––	––––––	––––––	––––––	––––––	––––––	––––––	––––––	––––––	––––––
for the period	81.5	17.7	21.7	6.5	17.1	8.6	(11.8)	(2.9)	108.5	29.9
USV profit for period									0.9 ––––––	0.4 ––––––
Profit for the period	––––––	––––––	––––––	––––––	––––––	––––––	––––––	––––––	109.4 ––––––	30.3 ––––––
Adjusted net assets	725.2	119.5	157.9	47.4	26.1	13.0	65.7	16.4	974.9	196.3
2011	––––––	––––––	––––––	––––––	––––––	––––––	––––––	––––––	––––––	––––––
	USAF		UCC		USV		OCB		Total
	£m		£m		£m		£m		£m
	Gross	Share	Gross	Share	Gross	Share	Gross	Share	Gross	Share
Investment property	1,273.0	240.6	387.0	116.1	58.2	29.1	189.0	47.2	1,907.2	433.0
Cash	28.4	5.3	12.3	3.7	3.5	1.8	6.3	1.6	50.5	12.4
Debt	(607.9)	(114.9)	(248.4)	(74.5)	(43.7)	(21.9)	(112.7)		(28.2) (1,012.7)	(239.5)
Swap liabilities	(17.8)	(3.0)	(25.6)	(7.7)	(1.0)	(0.5)	(2.9)	(0.7)	(47.3)	(11.9)
Other current assets	1.4	0.3	0.2	0.1	0.1	0.1	0.2	0.1	1.9	0.6
Other current liabilities	(16.1) ––––––	(3.0) ––––––	(6.2) ––––––	(1.9) ––––––	(3.4) ––––––	(1.7) ––––––	(3.6) ––––––	(0.9) ––––––	(29.3) ––––––	(7.5) ––––––
	661.0	125.3	119.3	35.8	13.7	6.9	76.3	19.1	870.3	187.1
Investment loans	(2.9) ––––––	(2.9) ––––––	– ––––––	– ––––––	(7.8) ––––––	(3.9) ––––––	(29.2) ––––––	(7.3) ––––––	(39.9) ––––––	(14.1) ––––––
Net assets	658.1	122.4	119.3	35.8	5.9	3.0	47.1	11.8	830.4	173.0
Profit/(loss)	––––––	––––––	––––––	––––––	––––––	––––––	––––––	––––––	––––––	––––––
for the period	72.9 ––––––	15.1 ––––––	22.4 ––––––	6.7 ––––––	(3.4) ––––––	(1.7) ––––––	10.0 ––––––	2.5 ––––––	101.9 ––––––	22.6 ––––––

–––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– Net assets and profit for the period above include the minority interest, whereas adjusted net assets exclude the minority interest.

Adjusted net assets 678.8 111.3 144.9 43.5 15.3 7.6 79.2 19.8 918.2 182.2

(b) Movement in carrying value of the Group's investments in joint ventures

The carrying value of the Group's investment in joint ventures has increased by £21.8 million during the year ended 31 December 2012 (2011: £11.4 million), resulting in an overall carrying value of £194.8 million (2011: £173.0 million). The following table shows how the increase has been achieved.

		2012			2011
		Joint			Joint
	Investment	venture		Investment	venture
		in joint investment	Total		in joint investment	Total
	venture	loan	interest	venture	loan	interest
	£m	£m	£m	£m	£m	£m
Recognised in the income
statement:
Net portfolio contribution
(NPC)	10.1	–	10.1	8.9	–	8.9
Minority interest share
of NPC	1.0	–	1.0	1.2	–	1.2
Management fee adjustment
related to trading with
joint venture	2.3	–	2.3	2.2	–	2.2
Net revaluation gains	14.9	–	14.9	10.7	–	10.7
Deferred tax	0.4	–	0.4	0.3	–	0.3
Discount on interest free loans	(0.8)	0.8	–	(0.7)	0.7	–
Loss on cancellation of
interest rate swaps	(0.6)	–	(0.6)	0.4	–	0.4
Landsbanki cash received	2.9	–	2.9	–	–	–
Ineffective swaps	–	–	–	(0.4)	–	(0.4)
Other	0.1	–	0.1	–	–	–
	––––––	––––––	––––––	––––––	––––––	––––––
Recognised in equity:	30.3	0.8	31.1	22.6	0.7	23.3
Movement in effective hedges	3.6	–	3.6	0.3	–	0.3
Deferred tax on movement
in effective hedges	(0.1)	–	(0.1)	(0.2)	–	(0.2)
Other adjustments to the
carrying value:
Profit adjustment related
to trading with joint
venture	(10.1)	0.2	(9.9)	(2.4)	0.2	(2.2)
Acquisition of remaining
49% in USV Acquisition of 50% share	(3.8)	(3.9)	(7.7)	–	–	–
in LSAV	11.5	–	11.5	–	–	–
Distributions received	(9.6)	–	(9.6)	(8.9)	–	(8.9)
	––––––	––––––	––––––	––––––	––––––	––––––
Increase in carrying value	21.8	(2.9)	18.9	11.4	0.9	12.3
Carrying value at 1 January	173.0 ––––––	14.1 ––––––	187.1 ––––––	161.6 ––––––	13.2 ––––––	174.8 ––––––
Carrying value at
31 December	194.8	11.2	206.0	173.0	14.1	187.1
	––––––	––––––	––––––	––––––	––––––	––––––

In addition to its equity shares, the Group has also provided interest free investment loans to some of the joint ventures. These were primarily provided on the setting up of the joint venture to provide capital to acquire investment properties. As a result of being provided interest free, the loans were discounted on recognition to reflect the fair value, the unwinding of the discount is reflected in the Group's finance income.

(c) Transactions with joint ventures

The Group acts as asset and property manager for the joint ventures and receives management fees in relation to these services.

In addition, the Group is entitled to a promote fee from USAF if the joint venture outperforms certain benchmarks. The Group receives additional units in USAF as consideration for the promote fee. The Group has recognised the following management fees in its results for the year.

	2012	2011
	£m	£m
USAF	6.3	6.3
UCC	3.3	3.1
OCB	1.0 ––––––––	0.9 ––––––––
Property management fees	10.6	10.3
USAF	–	1.2
OCB	– ––––––––	0.1 ––––––––
Development management fees	–	1.3
Total fees	–––––––– 10.6	–––––––– 11.6
	––––––––	––––––––

During the year the Group sold one property to USAF for £30.4 million and one property to LSAV for £45.2 million. The two properties were held on the balance sheet as completed property within current assets, the proceeds and carrying value of the properties is therefore recognised in revenue and cost of sales in the income statement and the cash flows in operating activities. No properties were sold to joint ventures in 2011. The profits relating to sales and associated disposal costs and related cash flows are set out below:

	Profit and loss 2012			Profit and loss 2011
	USAF	LSAV	USAF	LSAV
	£m	£m	£m	£m
Included in revenue
(net of joint venture trading adjustment)	29.7	38.2	–	–
Included in cost of sales	(26.7) ––––––––	(31.2) ––––––––	– ––––––––	– ––––––––
Profit on disposal of property	3.0 ––––––––	7.0 ––––––––	– ––––––––	– ––––––––
	Cash flow 2012			Cash flow 2011
	USAF	LSAV	USAF	LSAV
	£m	£m	£m	£m
Gross proceeds Part settled by:	31.0	46.2	–	–
Investment in joint venture	– ––––––––	(11.5) ––––––––	– ––––––––	– ––––––––
Net cash flows included in cash flows
from operating activities	31.0 ––––––––	34.7 ––––––––	– ––––––––	– ––––––––

Included within cash flows from financing activities is (£32.2 million) relating to the repayment of non-current borrowings on disposal of properties to joint ventures. (£9.9 million) relates to USAF and (£22.3 million) relating to LSAV.

UCC properties are partly funded by debt totalling £226.7 million (2011: £248.4 million) which equates to 59.5 per cent. (2011: 64.2 per cent.) of the market value of these properties. The Group has guaranteed its share, 30 per cent., of this debt amounting to £68.0 million (2011: £74.5 million). This guarantee only takes effect in the event that the joint venture is unable to repay the debt within nine months of it becoming due. The Group considers the likelihood of the guarantee being invoked to be remote based on the level of debt and the time frames allowed under the arrangements. These guarantees are accounted for in accordance with IFRS4.

OCB properties are partly funded by debt totalling £113.0 million (2011: £113.5 million) which equates to 64.7 per cent. (2011: 60.1 per cent.) of the market value of these properties. The Group has guaranteed one facility amounting to £50.0 million (2011: £50.0 million). The Group has a back to back guarantee from Oasis Capital Bank for £37.5 million (2011: £37.5 million). This guarantee only takes effect in the event that the joint venture is unable to repay the debt within six months of it becoming due. The Group considers the likelihood of the guarantee being invoked to be remote based on the level of debt and the time frames allowed under the arrangements. These guarantees are accounted for in accordance with IFRS 4.

3.5 Investments in subsidiaries (Company)

Accounting policies

In the financial statements of the Company, investments in subsidiaries and joint ventures are carried at fair value with movements in fair value being recognised directly in equity.

(a) Carrying value of investment in subsidiaries and joint ventures

The movements in the Company's interest in unlisted subsidiaries and joint ventures during the year are as follows.

	Investment in subsidiaries		Investment in joint ventures
	2012	2011	2012	2011
	£m	£m	£m	£m
At 1 January	112.0	106.8	2.5	3.7
Acquisitions	1.8	–	–	–
Transfer from investment
in joint ventures	2.5	–	(2.5)	–
Disposals	(4.3)	–	–	–
Revaluation	116.4	5.2	–	(1.2)
At 31 December	–––––––– 228.4	–––––––– 112.0	–––––––– –	–––––––– 2.5

The carrying value of investment in subsidiaries has been calculated using the equity attributable to the owners of the parent company from the consolidated balance sheet adjusted for the fair value of fixed rate loans. This includes investment property, investment property under development and swaps at a fair value calculated by a third party expert. In addition a market value adjustment is applied based on the profitability of the main development company. This represents Level 2 in the IFRS 7 fair value hierarchy.

–––––––– –––––––– –––––––– ––––––––

In addition to the equity investment in subsidiaries and joint ventures, the Company has provided a loan with interest chargeable at 6.125 per cent. to LDC (Holdings) plc. The carrying value of the loan to LDC (Holdings) plc was £90.0 million (2011: nil). During the year the interest free loan the Company made to the USV joint venture was repaid as part of the Group's acquisition of the second half of the USV joint venture. The carrying value of the investment loan to USV at 31 December 2012 was £nil (2011: £3.9 million).

A full list of the Company's subsidiaries is appended to the annual return. The Company's principal subsidiaries and joint ventures are:

	Country of	Class of	Ownership
	incorporation	Shares held	interest
LDC (Holdings) plc*	England and Wales	Ordinary	100%
UNITE Holdings plc*	England and Wales	Ordinary	100%
UNITE Integrated Solutions plc	England and Wales	Ordinary	100%
UNITE Modular Solutions Ltd	England and Wales	Ordinary	100%
USAF LP Ltd	England and Wales	Ordinary	100%

	Country of	Class of	Ownership
	incorporation	Shares held	interest
USAF Jersey Investments Ltd	Jersey	Ordinary	100%
UNITE (Capital Cities) Jersey Ltd	Jersey	Ordinary	100%
LDC (Imperial Wharf) Ltd	England and Wales	Ordinary	100%
UNITE Finance One (Property) Ltd	England and Wales	Ordinary	100%
USAF Feeder (Guernsey) Ltd	Guernsey	Ordinary	51%
OCB UNITE Property Holdings
(Jersey) Ltd^	Jersey	Ordinary	25%

* Held directly by the Company.

^ Joint venture. Joint control is explained in note 3.4.

The Group finances its development and investment activities through a mixture of retained earnings, borrowings and equity. The Group continuously monitors its financing arrangements to manage its gearing.

Interest rate swaps are used to manage the Group's risk to fluctuations in interest rate movements.

The following pages provide disclosures about the Group's funding position, including borrowings, gearing and hedging instruments; its exposure to market risks; and its capital management policies.

4.1 Borrowings

Accounting policies

Interest bearing borrowings are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

The table below analyses the Group's borrowings which comprise bank and other loans by when they fall due for payment:

		Group		Company
	2012	2011	2012	2011
	£m	£m	£m	£m
Current
In one year or less, or on demand	100.2	29.2	1.2	–
Non-current	––––––––	––––––––	––––––––	––––––––
In more than one year but not more than
two years	65.1	251.9	–	–
In more than two years but not more than
five years	131.8	140.4	–	–
In more than five years	230.8 ––––––––	29.2 ––––––––	90.0 ––––––––	– ––––––––
	427.7	421.5	90.0	–
Total borrowings	–––––––– 527.9	–––––––– 450.7	–––––––– 91.2	–––––––– –
	––––––––	––––––––	––––––––	––––––––

In addition to the borrowings currently drawn as shown above, the Group has available undrawn facilities of £34.9 million (2011: £14.3 million). A further working capital facility of £20.0 million (2011: £20.0 million) is also available.

A further £146 million (2011: £132 million) of facilities are available if certain conditions are met. Of this amount £75 million (2011: £30 million) is only available for rental properties and £41 million (2011: £99 million) for development properties. The remaining amount is available for investment or development.

The carrying value of borrowings is considered to be approximate to fair value, except for the Group's fixed rate loans carried at £227.8 million (2011: £17.4 million). The fair value of these fixed rate loans has been calculated by a third party expert discounting estimated future cash flows on the basis of market expectations of future interest rates. The fair value of these loans is £237.2 million (2011: £18.4 million).

Properties with a carrying value of £728.1 million (2011: £696.8 million) have been pledged as security against the Group's borrowings.

4.2 Interest rate swaps

The Group uses interest rate swaps to manage the Group's exposure to interest rate fluctuations. In accordance with the Group's treasury policy, the Group does not hold or issue interest rate swaps for trading purposes and only holds swaps which are considered to be commercially effective.

Accounting policies

Interest rate swaps are recognised initially and subsequently at fair value, with mark to market movements recognised in the income statement unless cash flow hedge accounting is applied.

Hedge accounting, as defined in IFRS, is when the interest rate swap is designated as the hedging instrument in a hedge of the variability in cash flows attributable to the interest risk of borrowings. The effective portion of changes in fair value of the interest rate swap is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the interest rate swap is recognised immediately in profit or loss. The Group only applies hedge accounting when the hedge is expected to be highly effective.

When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss at that point remains in equity with any subsequent movements in fair value taken to the income statement. If the hedged transaction is no longer probable, the cumulative unrealised gain or loss recognised in equity is recognised in the income statement immediately.

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current credit worthiness of the swap counterparties.

The following table shows the fair value of interest rate swaps:

	2012	2011
	£m	£m
Current	0.7	–
Non-current	23.0	39.0
Fair value of interest rate swaps	–––––––– 23.7	–––––––– 39.0
	––––––––	––––––––

The fair values of interest rate swaps have been calculated by a third party expert, discounting estimated future cash flows on the basis of market expectations of future interest rates, representing Level 2 in the IFRS 7 fair value hierarchy. The IFRS7 level categorisation relates to the extent the fair value can be determined by reference to comparable market values. The classifications range from level 1 where instruments are quoted on an active market through to level 3 where the assumptions used to arrive at fair value do not have comparable market data.

4.3 Net financing costs

Accounting policies

Net financing costs comprise interest payable on borrowings less interest receivable on funds invested (both calculated using the effective interest rate method) and gains and losses on hedging instruments that are recognised in the income statement.

	2012	2011
	£m	£m
Recognised in the income statement:
Finance income
– Interest income on deposit	(0.2)	(0.1)
– Impact of discounting on interest free joint venture investment
loans (note 3.4b)	(0.8) ––––––––	(0.7) ––––––––
Finance income	(1.0) ––––––––	(0.8) ––––––––
Gross interest expense on loans	21.9	15.8
Loan break costs	0.1	–
Interest capitalised	(6.0)	(7.1)
Loan interest and similar charges	–––––––– 16.0	–––––––– 8.7
Changes in mark to market of interest rate swaps not accounted for
as hedges	7.6	10.6
Finance costs	–––––––– 23.6	–––––––– 19.3
Net financing costs	–––––––– 22.6	–––––––– 18.5
	––––––––	––––––––

The Group's overall average cost of debt as at 31 December 2012 is 5.5 per cent. (2011: 5.7 per cent.). The average cost of the Group's investment debt at 31 December 2012 is 5.5 per cent. (2011: 5.4 per cent.).

4.4 Gearing

The Group's adjusted gearing ratio is a key indicator that the Group uses to manage its indebtness. Adjusted net asset value (NAV) and adjusted net debt are used to calculate adjusted gearing. Adjusted net debt excludes mark to market of interest rate swaps as shown below.

The Group's gearing ratios are calculated as follows:

		2012	2011
	Note	£m	£m
Cash and cash equivalents	5.1	75.4	16.8
Current borrowings	4.1	(100.2)	(29.2)
Non-current borrowings	4.1	(427.7)	(421.5)
Interest rate swaps liabilities	4.2	(23.7) ––––––––	(39.0) ––––––––
Net debt per balance sheet		(476.2)	(472.9)
Mark to market of interest rate swaps		23.6	38.9
Adjusted net debt		–––––––– (452.6)	–––––––– (434.0)
Reported net asset value (attributable to owners of		––––––––	––––––––
the parent company)	2.3c	515.8	387.6
Adjusted net asset value	2.3c	566.5	514.5
Gearing
Basic (Net debt/Reported net asset value)		92%	122%
Adjusted gearing (Adjusted net debt/Adjusted net asset		––––––––	––––––––
value)		80%	84%
See-through adjusted gearing (including share of JV		––––––––	––––––––
properties and net debt)		114%	126%
See- through adjusted LTV		–––––––– 52%	–––––––– 54%
		––––––––	––––––––

4.5 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risks – primarily interest rate risk, credit risk and liquidity risk.

The Group's treasury policy focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. Details on credit risk can be found in note 5.3.

(a) Interest rate risk

Interest rate risk is the risk that the Group is impacted by significant changes in interest rates. Borrowings issued at or swapped to floating rates expose the Group to interest rate risk. The Group's policy is separated into two main areas:

(i) Development and refinancing

The Group had no specific development borrowings at 31 December 2012 and is currently funding its developments from general borrowings. The Group has development debt facilities in place to finance those going forward. After taking account of interest rate swaps, £36 million (89 per cent.) of the Group's development borrowings at 31 December 2011 was fixed. The Group will continue to review the level of its hedging in the light of the current low interest rate environment.

The Group's principal exposure to interest rate fluctuations during development relates to movements in longer term interest rates which affect the amount of debt the property income is capable of servicing at completion. Significant adverse movements undermine the Group's ability to release equity from its developments.

The Group's policy also allows this exposure to be managed through the use of forward starting swaps.

(ii) Medium and long-term finance

The Group holds its medium and long-term bank finance under both floating and fixed rate arrangements. The majority of this floating debt is hedged through the use of interest rate swap agreements, although not all these arrangements qualify for hedge accounting under IAS 39. During 2012, the Group's policy guideline has been to hedge in excess of 75 per cent. of the Group's exposure for terms of approximately 2–10 years.

At 31 December 2012, after taking account of interest rate swaps, 88 per cent. (2011: 69 per cent.) of the Group's medium and long-term investment borrowing was held at fixed rates. Excluding the £241 million of swaps the fixed investment borrowing is at an average rate of 5.5 per cent. (2011: 5.7 per cent.) for an average period of 9 years (2011: 2 years), including these swaps the average rate is 5.5 per cent.

The Group holds interest rate swaps at 31 December 2012 against £258 million (2011: £302.9 million) of the Group's borrowings.

The maturity of these swaps and the applicable interest rates are as follows:

	2012	2012	2011	2011
	Nominal	Applicable	Nominal	Applicable
	amount hedged		interest rates amount hedged	interest rates
	£m	%	£m	%
Within one year	–	–	–	–
Between one and
two years	116.2	2.3–5.8	27.6	5.2–5.3
Between two and
five years	122.8	1.7–5.3	242.5	2.8–5.8
More than five years	1.8	5.6	32.8	5.3–5.6
	––––––––	––––––––	––––––––	––––––––

During the year, if interest rates had increased/decreased by 1 per cent., pre-tax profit for the year would have been £1.2 million (2011: £0.8 million) lower/higher.

(b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. For development activities, the Group has a policy to inject substantially the full amount of equity required for each development before drawing debt against the specific facility for the development. The funding requirements of each scheme are therefore substantially 'ring fenced' and secured at the outset of works.

The table below analyses the Group's financial liabilities and interest rate swaps into relevant maturity groupings based on the period remaining until the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest), so will not always reconcile with the amounts disclosed on the balance sheet.

2012

	Total		Between	Between
	contractual	Less than	1 and 2	2 and 5	Over
	cash flows	1 year	years	years	5 years
	£m	£m	£m	£m	£m
Bank and other loans	652.3	119.7	82.3	175.0	275.3
Trade and other payables	82.0	82.0	–	–	–
Interest rate swaps –
effective	4.4	1.3	1.3	1.2	0.6
Interest rate swaps –
in effective	11.2 ––––––––	5.6 ––––––––	3.1 ––––––––	2.5 ––––––––	– ––––––––
	749.9	208.6	86.7	178.7	275.9
	––––––––	––––––––	––––––––	––––––––	––––––––
2011
	Total		Between	Between
	contractual	Less than	1 and 2	2 and 5	Over
	cash flows	1 year	years	years	5 years
	£m	£m	£m	£m	£m
Bank and other loans	480.0	42.2	260.4	146.0	31.4
Trade and other payables	84.4	84.4	–	–	–
Interest rate swaps –
effective	13.5	3.9	4.4	4.7	0.5
Interest rate swaps –
ineffective	17.9 ––––––––	10.8 ––––––––	5.1 ––––––––	2.0 ––––––––	– ––––––––
	595.8	141.3	269.9	152.7	31.9

(c) Covenant compliance

Many of the Group's funding facilities carry covenants. The Group monitors its covenant position and the headroom available on an ongoing basis. At 31 December 2012, the Group was in full compliance with all of its borrowing covenants. The Group is able to use available cash to reduce debt to increase headroom on its loan to value (LTV) covenants. The covenant headroom position is outlined below and assumes that available cash is used to reduce debt.

–––––––– –––––––– –––––––– –––––––– ––––––––

	31 December 2012			31 December 2011
	Weighted	Weighted	Weighted	Weighted
	covenant	actual	covenant	actual
Loan to value	70%	35%*	74%	56%*
Interest cover	1.38	2.60	1.18	1.74
Minimum net worth	£250m	£567m	£250m	£515m

* Calculated on the basis that available cash is used to reduce debt.

4.6 Operating leases

(a) Payable

Accounting policies

Payments made under operating leases are recognised in the income statement on a straight line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. Where the property interest under an operating lease is classified as an investment property, the property interest is accounted for as if it were a finance lease and the fair value model is used for the asset recognised.

The total future minimum lease rentals payable under non-cancellable operating leases fall due for repayment as follows:

	2012 £m	2011 £m
Less than one year	15.3	14.5
Between one and five years	58.2	57.2
More than five years	192.9	226.5
Total	–––––––– 266.4	–––––––– 298.2
	––––––––	––––––––

These leases primarily relate to properties which the group has sold and leased back and on which rental income is earned. The leases are generally for periods between 17 and 25 years and subject to annual RPI-based rent review. Two properties are subject to a fixed annual rent increase of 2 per cent. The total operating lease expenditure incurred during the year was £15.3 million (2011: £14.6 million).

(b) Receivable

The Group accounts for its tenancy contracts offered to commercial and individual tenants as operating leases. The future minimum lease payments receivable under non-cancellable operating leases are as follows:

	2012	2011
	£m	£m
Less than one year	48.8	52.0
Between one and five years	30.1	22.3
More than five years	10.5 ––––––––	13.4 ––––––––
Total	89.4	87.7
	––––––––	––––––––

4.7 Capital management

The capital structure of the Group consists of shareholders' equity and adjusted net debt, including cash held on deposit. The Group's equity is analysed into its various components in the Statement of Changes in Equity. The components and calculation of adjusted net debt is set out in note 4.4. Capital is managed so as to continue as a going concern and to promote the long-term success of the business and to maintain sustainable returns for shareholders and joint venture partners.

The Group uses a number of key metrics to manage its capital structure:

• adjusted net debt (4.4)
• adjusted gearing (4.4)
• see through LTV (2.3a)
• weighted average cost of investment debt (4.5aii)

In order to manage levels of adjusted gearing over the medium term, the Group seeks to deliver NAV growth and to dispose of non-core property assets in order to offset capital that is committed to development activity. £150 million of non-core assets were sold in 2012 and a further £50 million of non-core property disposals are targeted by December 2013. The Group targets new developments with a yield on cost of approximately 9 per cent. The Group does not commit to developing new sites until sufficient equity and funding to fulfil the full cost of the development is secure.

The Board monitors the ability of the Group to pay dividends out of available cash and distributable profits and reinstated dividends during 2011. The Operations Segment generated cash of £17.2 million (2011: £13.8 million) during the year, thereby covering the proposed dividend of £6.4 million, 3 times (2011: £2.8 million, 5 times).

4.8 Equity

Accounting policies

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction, net of tax, in equity from the proceeds. Share issue costs incurred directly in connection with a business combination are deducted from the proceeds of the issue.

The Company's issued share capital has increased during the year as follows:

		Number of ordinary shares
	2012	2011
Issued at start of year – fully paid	160,271,460	160,268,343
Share options exercised	189,982	3,117
Issued at end of year – fully paid	–––––––––– 160,461,442	–––––––––– 160,271,460
	––––––––––	––––––––––

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

4.9 Dividends

Accounting policies

Dividends are recognised through equity on the earlier of their approval by the Company's shareholders or their payment.

During the year, the Company declared and paid an interim dividend of £1.6 million (2011: £0.8 million) and paid a £2.0 million final dividend relating to the year ended 31 December 2011.

After the year end, the Directors proposed a final dividend per share of 3p (2011: 1.25p), bringing the total dividend per share for the year to 4p (2011: 1.75p). No provision has been made in relation to this dividend.

This section focuses on how the Group generates its operating cash flows. Careful management of working capital is vital to ensure that the Group can meet its trading and financing obligations within its ordinary operating cycle.

On the following pages you will find disclosures around the group's cash position and how cash is generated from the group's trading activities, and disclosures around trade receivables and payables.

5.1 Cash

Accounting policies

Cash and cash equivalents comprise cash balances and call deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

The Group's cash position at 31 December 2012 was £75.4 million (2011: £16.8 million).

At 31 December 2012 the Company had an overdraft of £1.2 million (2011 cash position: £0.1 million).

The Group's cash balances include £12.1 million (2011: £14.5 million) whose use at the balance sheet date is restricted by funding agreements to pay operating costs and loan interest relating to specific properties.

The Group generates cash from its operating activities as follows:

	2012	2011	2012	2011
Note	£m	£m	£m	£m
				(0.9)
				–
				(2.3)
				–
3.3	–	3.7	–	–
3.1	(79.5)	(7.7)	–	–
4.3	22.6	18.5	0.3	0.1
	–	–	(2.2)	–
	2.4	0.2	–	–
3.4b	(30.3)	(22.6)	–	–
	(1.6)	2.2	–	–
2.6a	(1.0)	0.8	–	–
	3.3 6.1	127.2 2.9 – 1.5	Group 3.9 4.1 – 1.2	Company (0.7) – – – –––––––– –––––––– –––––––– –––––––– ––––––––

		Group		Company
		2012	2011	2012	2011
	Note	£m	£m	£m	£m
Cash flows from operating
activities before changes in
working capital		44.2	4.3	(2.6)	(3.1)
(Increase)/decrease in trade and
other receivables		(12.9)	1.2	–	–
Decrease/(increase) in completed
property and property
under development		43.8	(114.7)	–	–
Decrease/(increase) in inventories		5.3	(6.8)	–	–
(Decrease)/increase in trade and
other payables		(11.7)	31.0	0.2	0.7
(Decrease)/increase in provisions		(10.3)	11.0	–	–
Cash flows from operating activities		58.4	–––––––– –––––––– –––––––– –––––––– (74.0)	(2.4)	(2.4)
			–––––––– –––––––– –––––––– ––––––––

Cash flows consist of the following segmental cash inflows/(outflows): Operations £17.2 million (2011: £13.8 million), property £48.3 million (2011: (£17.2 million)) and unallocated (£6.9 million) (2011: £3.6 million). The unallocated amount includes restructuring £nil (2011: £1.4 million), Group dividends (£3.6 million) (2011: £0.8 million), LSAV set-up costs (£1.3 million) (2011: £nil), own shares purchase (£1.3 million) (2011: (£0.1 million)), tax payable of (£0.9 million) (2011: £0.6 million) and amounts received from shares issued £0.2 million (2011: £nil).

5.2 Trade and other receivables

Accounting policies

Trade receivables are initially recognised at the amount invoiced to the customer (fair value) and subsequently at the amounts considered recoverable (amortised cost). Estimates are used in determining the level of receivables that will not, in the opinion of the Board, be collected. These estimates include such factors as historical experience and industry specific factors. A provision for impairment of trade receivables is established when there is sufficient evidence that the Group will not be able to collect all amounts due. The carrying value of trade receivables is considered to approximate fair value.

Trade and other receivables can be analysed as follows, all trade and other receivables are current.

	Group		Company
	2012	2011	2012	2011
	£m	£m	£m	£m
Trade receivables	7.8	6.7	–	–
Amounts due from group undertakings	–	–	321.5	317.7
Amounts owed by joint ventures	27.9	13.4	–	–
Prepayments and accrued income	16.7	19.5	–	–
Other receivables	1.1	1.4	–	–
Trade and other receivables	–––––––– 53.5	–––––––– 41.0	–––––––– 321.5	–––––––– 317.7
	––––––––	––––––––	––––––––	––––––––

The Group offers tenancy contracts to commercial (Universities and retail unit tenants) and individual tenants based on the academic year. The Group monitors and manages the recoverability of its receivables based on the academic year to which the amounts relate. Rental income is payable immediately, therefore all receivables relating to tenants are past the payment due date.

Total	2012/13		2011/12 Prior years
£m	£m	£m	£m
			–
4.1	2.3	0.9	0.9
(3.4)	(1.2)	(1.3)	(0.9)
6.9	6.7	0.2	–––––––– –
0.9	0.9	–	–
7.8	7.6	0.2	–––––––– – ––––––––
	6.2 –––––––– –––––––– ––––––––	5.6 –––––––– –––––––– ––––––––	Ageing by academic year 0.6 –––––––– –––––––– ––––––––

2011

Total	2011/12		2010/11 Prior years
£m	£m	£m	£m
4.3	4.3	–	–
6.3	1.0	2.0	3.3
(5.9)	(1.2)	(1.7)	(3.0) ––––––––
4.7	4.1	0.3	0.3
2.0	2.0	–	– ––––––––
6.7	6.1	0.3	0.3 ––––––––
	–––––––– –––––––– ––––––––	–––––––– –––––––– ––––––––	Ageing by academic year –––––––– –––––––– ––––––––

Amounts receivable from joint ventures are not past due or impaired.

Movements in the Group's provision for impairment of trade receivables can be shown as follows:

	2012	2011
	£m	£m
At 1 January	5.9	6.3
Impairment charged to income statement in year	1.4	2.6
Receivables written off during the year (utilisation of provision)	(3.4) ––––––––	(3.0) ––––––––
At 31 December	3.9	5.9
	––––––––	––––––––

5.3 Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It arises principally from the Group's cash balances, the Group's receivables from customers and joint ventures and loans provided to the Group's joint ventures.

At the year end, the Group's exposure to credit risk was as follows:

		2012	2011
	Note	£m	£m
Cash	5.1	75.4	16.8
Trade receivables	5.2	7.8	6.7
Amounts due by joint ventures (excluding loans that are capital
in nature)	5.2	27.9	13.4
Joint venture investment loans	3.4b	11.2	14.1
		–––––––– 122.3	–––––––– 51.0

–––––––– ––––––––

(a) Cash

The Group operates investment guidelines with respect to surplus cash. Counterparty limits for cash deposits are largely based upon long-term ratings published by credit rating agencies and credit default swap rates.

(b) Trade receivables

The Group's customers can be split into three groups – (i) students (individuals), (ii) commercial organisations including Universities and (iii) manufacturing customers. The Group's exposure to credit risk is influenced by the characteristics of each customer. The Group holds tenant deposits of £7.9 million (2011: £9.0 million) as collateral against individual customers.

(c) Joint ventures

Amounts receivable from joint ventures fall into two categories – working capital balances and investment loans.

5.4 Trade and other payables

Accounting policies

Trade payables are initially recognised at the value of the invoice received from a supplier (fair value) and subsequently at amortised cost. The carrying value of trade payables is considered approximate to fair value.

Trade and other payables due within one year can be analysed as follows:

		Group		Company
	2012	2011	2012	2011
	£m	£m	£m	£m
Trade payables	4.1	9.7	–	–
Retentions on construction contracts for properties	2.4	3.1	–	–
Amounts due to group undertakings	–	–	29.7	29.7
Other payables and accrued expenses	41.9	53.0	3.2	3.0
Deferred income	33.6	18.6	–	–
Trade and other payables	–––––––– 82.0	–––––––– 84.4	–––––––– 32.9	–––––––– 32.7
	––––––––	––––––––	––––––––	––––––––

Other payable and accrued expenses include £7.9 million (2011: £9.0 million) in relation to customer deposits. These will be returned at the end of the tenancy subject to the condition of the accommodation and payment of any outstanding amounts. Deferred income relates to rental income that has been collected in advance of it being recognised as revenue.

5.5 Transactions with other group companies

During the year, the company entered into various interest free loans with its subsidiaries, the aggregate of which are disclosed in the cash flow statement. In addition, the Company was charged by UNITE Integrated Solutions plc for corporate costs of £2.4 million (2011: £2.7 million).

As a result of these intercompany transactions, the following amounts were due (to)/from the company's subsidiaries at the year end.

	2012	2011
	£m	£m
UNITE Holdings plc	74.6	76.5
LDC (Holdings) plc	246.9	241.2
Amounts due from group undertakings	–––––––– 321.5	–––––––– 317.7
Unilodge Holding Ltd	–––––––– (13.9)	–––––––– (13.9)
Unilodge Holdings (UK) Ltd	(15.8)	(15.8)
Amounts due to group undertakings	–––––––– (29.7)	–––––––– (29.7)
	––––––––	––––––––

The Company has had a number of transactions with its joint ventures, which are disclosed in note 3.4c.

The Company has guaranteed £152 million of its subsidiary companies borrowings (2011: £235 million). The guarantees have been entered into in the normal course of business. A liability would only arise in the event of the subsidiary failing to fulfil its contractual obligations. These guarantees are accounted for in accordance with IFRS 4.

The Group's greatest resource is its staff and it works hard to develop and retain its people. The remuneration policies in place are aimed to help recognise the contribution that UNITE's people make to the performance of the Group.

Over the next couple of pages you will find disclosures on wages and salaries and share option schemes which allow employees of the Group to take an equity interest in the Group.

6.1 Staff numbers and costs

The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:

	Number of employees
	2012	2011
Managerial and administrative	338	371
Site operatives	628 ––––––––	606 ––––––––
	966	977
The aggregate payroll costs of these persons were as follows:	––––––––	––––––––
	2012	2011
	£m	£m
Wages and salaries	32.8	30.7
Social security costs	3.5	3.2
Pension costs	0.6	0.7
Fair value of share based payments	1.5	1.2
	–––––––– 38.4	–––––––– 35.8
	––––––––	––––––––

The wages and salaries costs include redundancy costs of £0.3 million (2011: £1.1 million).

Accounting policies

The Group operates a defined contribution pension scheme. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.

6.2 Key management personnel

The Board considers that the key management personnel within the Group are those appointed to the Board. As such, the remuneration of key management personnel is contained within the Remuneration Report on pages 52 to 63.

6.3 Share based compensation

A transaction is classified as a share based transaction where the Group receives services from employees and pays for these in shares or similar equity instruments. The Group operates a number of share-based compensation schemes allowing employees to acquire shares in the Company.

(a) Share schemes

The Group operates the following schemes:

Executive share option scheme – 'The Approved Scheme' Executive share option scheme – 'The Unapproved Scheme' Executive Long-Term Incentive Plan (LTIP)	Details can be found in the Directors' { Remuneration Report
Save As You Earn Scheme (SAYE)	Open to employees, vesting periods of three to five years, service condition
Employee Share Ownership (ESOT)	Used to award part of Directors' and senior managers' bonuses in shares, vest after three years continued service

(b) Outstanding share options

The table below summarises the movements in the number of share options outstanding for the Group and their average exercise price:

			Weighted
	Weighted	Number of	average	Number of
	average	options	exercise	options
	exercise price	(thousands)	price	(thousands)
	2012	2012	2011	2011
Outstanding at 1 January	£0.85	2,375	£1.92	875
Forfeited during the year	£1.44	(308)	£1.21	(355)
Exercised during the year	£1.44	(190)	£1.90	(3)
Granted during the year	£0.35	1,843	£0.41	1,858
Outstanding at 31 December	–––––––– £0.52	–––––––– 3,720	–––––––– £0.85	–––––––– 2,375
Exercisable at 31 December	–––––––– £2.22	–––––––– 256	–––––––– £1.92	–––––––– 439
	––––––––	––––––––	––––––––	––––––––

For those options exercised in the year, the average share price during 2012 was £2.63 (2011: £2.08).

For those options still outstanding, the range of exercise prices at the year end was 0p to299p (2011: 0p to 344p) and the weighted average remaining contractual life of these options was 0.3 years (2011: 0.9 years).

The Group funds the purchase of its own shares by the 'Employee Share Ownership Trust' to meet the obligations of the LTIP and executive bonus scheme. The purchases are shown as 'Own shares acquired' in retained earnings.

The accounting is in accordance with the relevant standards. No further information is given as the amounts for share based payments are immaterial.

APPENDIX 3

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

Independent auditor's report to the members of the UNITE Group plc

We have audited the financial statements of The UNITE Group plc for the year ended 31 December 2011 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated and Company Statement of Changes in Shareholders' Equity, the Group and Company Statements of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the 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 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 company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 63, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.

Opinion on 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 31 December 2011 and of the group's profit for the year then ended;
• The group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
• The parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and
• The financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

• The part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;
• The information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• Information given in the Corporate Governance Statement set out on pages 48 with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required 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; or
• A Corporate Governance Statement has not been prepared by the company.

Under the Listing Rules we are required to review:

• The directors' statement, set out on page 61, in relation to going concern;
• The part of the Corporate Governance Statement on pages 45 to 49 relating to the company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and
• Certain elements of the report to shareholders by the Board on directors' remuneration.

Stephen Bligh (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants 15 Canada Square London E14 5GL

1 March 2012

Introduction and table of contents

In preparing these financial statements we have changed the format and layout following the principles outlined in the Financial Reporting Council's publication 'Cutting Clutter'. We have made these changes to make UNITE's financial statements easier to follow and more relevant to shareholders. The purpose of these changes is to provide readers with a clearer understanding of what drives the financial performance of the Group.

Whilst these financial statements are prepared in accordance with IFRS, the Board of Directors manage the business based on the adjusted results being net portfolio contribution and adjusted net asset value which can be found in section 2.

We have grouped the notes to the financial statements under five main headings:

• Results for the year, including segmental information, adjusted profits and adjusted NAV;
• Funding;
• Asset management;
• Working capital; and
• Key management and employee benefits.

Each section sets out the relevant accounting policies applied in these financial statements together with the key judgements and estimates used.

Primary statements

Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Company balance sheet Consolidated statement of changes in shareholders' equity Company statement of changes in shareholders' equity Statements of cash flows

Section 1 Basis of preparation

Section 2 Results for the year

• 2.1 Revenue
• 2.2 Segmental information
• 2.3 Adjusted Profit and EPS
• 2.4 Adjusted Net Assets and NAV per share
• 2.5 Provisions for onerous contracts
• 2.6 Tax
• 2.7 Audit fees

Section 3 Asset management

• 3.1 Wholly owned property assets
• 3.2 Inventories
• 3.3 Other fixed assets
• 3.4 Investments in joint ventures
• 3.5 Investments in subsidiaries

Section 4 Funding

• 4.1 Borrowings
• 4.2 Interest rate swaps
• 4.3 Net financing costs
• 4.4 Gearing
• 4.5 Financial risk factors
• 4.6 Operating leases
• 4.7 Capital management
• 4.8 Equity
• 4.9 Dividends

Section 5 Working capital

• 5.1 Cash
• 5.2 Trade and other receivables
• 5.3 Credit risk
• 5.4 Trade and other payables

Section 6 Key management and employee benefits

• 6.1 Staff numbers and costs
• 6.2 Key management personnel
• 6.3 Share based compensation

Consolidated income statement For the year ended 31 December 2011

		2011			2010
		Excluding UMS	2011 UMS	2011 Total	Excluding UMS	2010 UMS	2010 Total
	Note	£m	£m	£m	£m	£m	£m
Revenue	2.1	83.5	11.4	94.9	186.2	7.2	193.4
Cost of sales Operating expenses		(42.2) (27.2)	(20.5) (11.9)	(62.7) (39.1)	(139.8) (23.7)	(7.2) (4.8)	(147.0) (28.5)
Results from operating activities		–––––––– 14.1	–––––––– (21.0)	–––––––– (6.9)	–––––––– 22.7	–––––––– (4.8)	–––––––– 17.9
Loss on disposal of property		(0.2)	–	(0.2)	(2.9)	–	(2.9)
Net valuation gains on property	3.1	7.7	–	7.7	15.4	–	15.4
Profit before net financing costs		–––––––– 21.6	–––––––– (21.0)	–––––––– 0.6	–––––––– 35.2	–––––––– (4.8)	–––––––– 30.4
Loan interest and similar charges Mark to market changes in	4.3	–––––––– (8.7)	–––––––– –	–––––––– (8.7)	–––––––– (13.8)	–––––––– –	–––––––– (13.8)
interest rate swaps	4.3	(10.6) ––––––––	– ––––––––	(10.6) ––––––––	(18.6) ––––––––	– ––––––––	(18.6) ––––––––
Finance costs	4.3	(19.3)	–	(19.3)	(32.4)	–	(32.4)
Finance income	4.3	0.8 ––––––––	– ––––––––	0.8 ––––––––	0.9 ––––––––	– ––––––––	0.9 ––––––––
Net financing costs	4.3	(18.5)	–	(18.5)	(31.5)	–	(31.5)
Share of joint venture profit	3.4b	–––––––– 22.6 ––––––––	–––––––– – ––––––––	–––––––– 22.6 ––––––––	–––––––– 25.3 ––––––––	–––––––– – ––––––––	–––––––– 25.3 ––––––––
Profit before tax	2.3a	25.7	(21.0)	4.7	29.0	(4.8)	24.2
Tax	2.6	(0.8)	–	(0.8)	(2.9)	–	(2.9)
Profit for the year Profit for the period attributable to		–––––––– 24.9	–––––––– (21.0)	–––––––– 3.9	–––––––– 26.1	–––––––– (4.8)	–––––––– 21.3
Owners of the parent company	2.3b	23.1	(21.0)	2.1	24.4	(4.8)	19.6
Minority Interest		1.8	–	1.8	1.7	–	1.7
		–––––––– 24.9	–––––––– (21.0)	–––––––– 3.9	–––––––– 26.1	–––––––– (4.8)	–––––––– 21.3
Earnings per share		––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
Basic	2.3b	14.4p	(13.1p)	1.3p	15.2p	(3.0p)	12.2p
Diluted	2.3b	14.4p	(13.1p)	1.3p	15.2p	(3.0p)	12.2p

The results have been presented in a columnar format to show the significant impact of UMS trading losses and the decision to cease trading at UMS, as discussed in note 2.2b. The comparatives have been restated in columnar formatfor consistency.

Consolidated statement of comprehensive income For the year ended 31 December 2011

	2011	2010
	£m	£m
Profit for the period	3.9	21.3
Movements in effective hedges	(2.6)	0.5
Share of joint venture movements in effective hedges	0.1 ––––––––	0.1 ––––––––
Other comprehensive income for the period	(2.5) ––––––––	0.6 ––––––––
Total comprehensive income for the period	1.4	21.9
Attributable to	––––––––	––––––––
Owners of the parent company	(0.2)	20.2
Minority Interest	1.6 ––––––––	1.7 ––––––––
	1.4	21.9

–––––––– ––––––––

All movements above are shown net of deferred tax.

Consolidated balance sheet At 31 December 2011

		2011	2010
	Note	£m	£m
Assets
Investment property	3.1	396.2	375.7
Property, plant and equipment	3.3	2.3	6.9
Investment in joint ventures	3.4b	173.0	161.6
Joint venture investment loans	3.4b	14.1	13.2
Intangible assets	3.3	4.5 ––––––––	5.8 ––––––––
Total non-current assets		590.1 ––––––––	563.2 ––––––––
Completed property	3.1	198.7	105.1
Properties under development	3.1	135.2	113.0
Inventories	3.2	8.4	2.7
Trade and other receivables	5.2	41.0	44.6
Cash and cash equivalents	5.1	16.8 ––––––––	23.8 ––––––––
Total current assets		400.1 ––––––––	289.2 ––––––––
Total assets		990.2	852.4
Liabilities		––––––––	––––––––
Borrowings	4.1	(29.2)	(0.3)
Interest rate swaps	4.2	–	(0.2)
Trade and other payables	5.4	(84.4)	(52.8)
Provisions	2.5	(6.3)	–
Current tax creditor		(0.4) ––––––––	(0.5) ––––––––
Total current liabilities		(120.3)	(53.8)
Borrowings	4.1	–––––––– (421.5)	–––––––– (357.8)
Interest rate swaps	4.2	(39.0)	(37.1)
Provisions	2.5	(4.7)	–
Total non-current liabilities		–––––––– (465.2)	–––––––– (394.9)
Total liabilities		–––––––– (585.5)	–––––––– (448.7)
Net Assets		–––––––– 404.7	–––––––– 403.7
Equity		––––––––	––––––––
Issued share capital		40.1	40.1
Share premium		249.0	249.0
Merger reserve		40.2	40.2
Retained earnings		72.8	70.4
Hedging reserve		(14.5) ––––––––	(12.2) ––––––––
Equity attributable to the owners of the parent company		387.6	387.5
Minority interest		17.1 ––––––––	16.2 ––––––––
Total equity		404.7	403.7
		––––––––	––––––––

These financial statements were approved by the Board of Directors on 1 March 2012 and were signed on its behalf by:

MC Allan	JJ Lister
Director	Director

Company balance sheet At 31 December 2011

		2011	2010
	Note	£m	£m
Assets
Investments in subsidiaries	3.5a	112.0	106.8
Investments in joint ventures	3.5a	2.5 ––––––––	3.7 ––––––––
Total investments		114.5	110.5
Joint venture investment loan	3.5a	3.9 ––––––––	3.9 ––––––––
Total non-current assets		118.4	114.4
Amounts due from group undertakings	5.2	–––––––– 317.7	–––––––– 318.3
Cash and cash equivalents	5.1	0.1 ––––––––	0.5 ––––––––
Total current assets		317.8	318.8
Total assets		–––––––– 436.2	–––––––– 433.2
Current Liabilities		––––––––	––––––––
Amounts due to group undertakings	5.4	(29.7)	(29.7)
Other payables	5.4	(3.0) ––––––––	(2.3) ––––––––
Total current liabilities		(32.7)	(32.0)
Net Assets		–––––––– 403.5	–––––––– 401.2
Equity		––––––––	––––––––
Issued share capital		40.1	40.1
Share premium		249.0	249.0
Merger reserve		40.2	40.2
Retained earnings		25.4	27.1
Revaluation reserve		48.8 ––––––––	44.8 ––––––––
Total equity		403.5 ––––––––	401.2 ––––––––

Total equity is wholly attributable to equity holders of The UNITE Group plc.

These financial statements were approved by the Board of Directors on 1 March 2012 and were signed on its behalf by:

MC Allan	JJ Lister
Director	Director

						Attributable
	Issued					to owners
	share	Share	Merger	Retained	Hedging	of the	Minority
	capital	premium	reserve	earnings	reserve	parent	interest	Total
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2011	40.1	249.0	40.2	70.8	(12.2)	387.5	16.2	403.7
Profit for the period	–	–	–	2.1	–	2.1	1.8	3.9
Other comprehensive
income for the period	–	–	–	–	(2.3)	(2.3)	(0.2)	(2.5)
Total comprehensive
income for the period	–	–	–	2.1	(2.3)	(0.2)	1.6	1.4
Fair value of share
based payments	–	–	–	1.2	–	1.2	–	1.2
Own shares acquired	–	–	–	(0.1)	–	(0.1)	–	(0.1)
Dividends paid to
owners of the
parent company	–	–	–	(0.8)	–	(0.8)	–	(0.8)
Dividends to minority
interest	– ––––––	– ––––––	– ––––––	– ––––––	– ––––––	– ––––––	(0.7) ––––––	(0.7) ––––––
At 31 December 2011	40.1	249.0	40.2	72.8	(14.5)	387.6	17.1	404.7
	–––––	–––––	–––––	–––––	–––––	–––––	–––––	–––––
						Attributable
	Issued share	Share	Merger	Retained	Hedging	to owners of the	Minority
	capital	premium	reserve	earnings	reserve	parent	interest	Total
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2010	39.9	247.5	40.2	51.0	(12.8)	365.8	15.2	381.0
Profit for the period	–	–	–	19.6	–	19.6	1.7	21.3
Other comprehensive
income for the period	–	–	–	–	0.6	0.6	–	0.6
Total comprehensive income for the period	–	–	–	19.6	0.6	20.2	1.7	21.9
Shares issued	0.2	1.5	–	–	–	1.7	–	1.7
Fair value of share
based payments	–	–	–	1.3	–	1.3	–	1.3
Own shares acquired	–	–	–	(1.5)	–	(1.5)	–	(1.5)
Dividends to minority
interest	– ––––––	– ––––––	– ––––––	– ––––––	– ––––––	– ––––––	(0.7) ––––––	(0.7) ––––––
At 31 December 2010	40.1	249.0	40.2	70.4	(12.2)	387.5	16.2	403.7
	–––––	–––––	–––––	–––––	–––––	–––––	–––––	–––––

Consolidated statement of changes in shareholders' equity For the year ended 31 December 2011

Company statement of changes in shareholders' equity For the year ended 31 December 2011

					Total
£m	£m	£m	£m	£m	£m
40.1	249.0	40.2	27.1	44.8	401.2
–	–	–		–	(0.9)
–	–	–	–	4.0	4.0
–	–	–		–	(0.8) ––––––––
40.1	249.2	40.2	25.4	48.8	403.5
Issued					––––––––
share	Share	Merger
capital	premium	reserve	earnings	reserve	Total
£m	£m	£m	£m	£m	£m
39.9	247.5	40.2	29.7	18.2	375.5
–	–	–		–	(2.6)
					26.6
0.2	1.5	–	–	–	1.7 ––––––––
40.1 ––––––––	249.0 ––––––––	40.2 ––––––––	27.1 ––––––––	44.8 ––––––––	401.2 ––––––––
	Issued share capital –––––––– –––––––– – ––––––––	Share premium –––––––– –––––––– – ––––––––	Merger reserve –––––––– –––––––– – ––––––––	earnings –––––––– –––––––– – ––––––––	Retained Revaluation reserve (0.9) (0.8) –––––––– –––––––– Retained Revaluation (2.6) 26.6 ––––––––

Statements of cash flows For the year ended 31 December 2011

			Group	Company
		2011	2010	2011	2010
	Note	£m	£m	£m	£m
Cash flows from operating activities	5.1	(74.0)	40.1	(2.4)	(2.9)
Cash flows from taxation		(0.6)	0.8	–	–
Investing activities
Proceeds from sale of investment property		8.3	42.7	–	–
Payments to/on behalf of subsidiaries		–	–	(42.0)	(34.8)
Payments from subsidiaries		–	–	42.6	35.7
Dividends received		8.9	5.4	2.3	–
Interest received		0.1	0.2	–	–
Acquisition of intangible assets		(1.5)	(1.5)	–	–
Acquisition of property		(18.3)	(5.6)	–	–
Acquisition of plant and equipment		(0.6) ––––––––	(0.6) ––––––––	– ––––––––	– ––––––––
Cash flows from investing activities		(3.1)	40.6	2.9	0.9
Financing activities		––––––––	––––––––	––––––––	––––––––
Total interest paid		(15.0)	(15.5)	(0.1)	(0.2)
Interest capitalised into inventory and
property under development included
in cash flows from operating activities		7.1 ––––––––	2.5 ––––––––	– ––––––––	– ––––––––
Interest paid in respect of financing activities		(7.9)	(13.0)	(0.1)	(0.2)
Ineffective swap payments		(11.7)	(11.2)	–	–
Proceeds from the issue of share capital		–	1.7	–	1.7
Payments to acquire own shares		(0.1)	(1.5)	–	–
Proceeds from non-current borrowings		113.6	45.4	–	–
Repayment of borrowings		(21.7)	(127.2)	–	–
Dividends paid to the owners of the
parent company		(0.8)	–	(0.8)	–
Dividends paid to minority interest		(0.7) ––––––––	(0.7) ––––––––	– ––––––––	– ––––––––
Cash flows from financing activities		70.7	(106.5)	(0.9)	1.5
Net decrease in cash and cash equivalents		–––––––– (7.0)	–––––––– (25.0)	–––––––– (0.4)	–––––––– (0.5)
Cash and cash equivalents at start of year		23.8 ––––––––	48.8 ––––––––	0.5 ––––––––	1.0 ––––––––
Cash and cash equivalents at end of year	5.1	16.8	23.8	0.1	0.5

–––––––– –––––––– –––––––– ––––––––

This section lays out the Group's accounting policies that relate to the financial statements as a whole. Where an accounting policy is specific to a particular note to the financial statements, the policy is described in the note to which it relates and has been clearly identified in a box. This section also shows new EU endorsed accounting standards, amendments and interpretations which are effective in 2011 or later years.

The financial statements consolidate those of The UNITE Group plc, ('the Company') and its subsidiaries (together referred to as 'the Group') and include the Group's interests in jointly controlled entities. The parent company financial statements present information about the Company as a separate entity and not as a group.

Both the parent company financial statements and the group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ('Adopted IFRS'). On publishing the parent company financial statements here together with the group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement and related notes.

The accounting policies have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements.

The Company is domiciled in the United Kingdom.

Going concern

The Group's business activities, together with the factors likely to affect its future development and position are set on in the Business Review on pages 18 to 31. In addition, section 4 of these Notes to the financial statements includes the Group's objectives, policies and processes for managing its capital; details of its borrowings and interest rate swaps; and in note 5.3 its exposure to credit risk.

The Group has prepared cash flow projections with appropriate sensitivities until the end of 2013. The group has borrowing facilities expiring in 2012 and 2013, but it has already refinanced one of these facilities for a further three years and is making good progress with another new facility. While the Group will continue to extend future debt maturities, it expects to have sufficient headroom in existing banking facilities and its forecast cash balances to repay any facilities expiring and to meet its funding requirements until at least the end of 2013, while remaining within its banking covenants. The Group is in full compliance with its borrowing covenants at 31 December 2011 as set out in Note 4.5c.

The directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. The financial statements have therefore been prepared on a going concern basis.

Measurement convention

The financial statements are prepared on the historical cost basis except for investment property, interest rate swaps and land and buildings included in property, plant and equipment all of which are stated at their fair value.

Basis of consolidation

Subsidiaries are those entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently 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.

Intra-group balances and transactions, and any unrealised gains and losses arising from intra-group transactions, such as property disposals and management fees are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the Group's retained interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains except where the loss provides evidence of a reduction in the net realisable value of current assets or an impairment in value of fixed assets.

Impact of accounting standards and interpretations in issue but not yet effective

A number of new standards, amendments to standards and interpretations became effective for the year ended 31 December 2011, but none of these had a material effect on the consolidated financial statements of the Group.

The Group has not adopted early any standard, amendment or interpretation. A number of new standards, amendments to standards and interpretations have been announced but are not yet effective for the year ended 31 December 2011. None of these are expected to have a material effect on the consolidated financial statements of the Group.

Accounting estimates and judgements

The preparation of financial statements requires management to exercise judgement in applying the Group's accounting policies. It also requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Estimates and assumptions are reviewed on an ongoing basis with revisions recognised in the period in which the estimates are revised and in any future periods affected.

The areas involving a higher degree of judgement of complexity are set out below and are explained in more detail in the related notes to the financial statements.

The accounting policy descriptions set out the areas where judgement needs exercising, the most significant of which are as follows:

• Classification of properties (note 3.1);
• Classification of joint venture vehicles (note 3.4);

The areas involving the most sensitive estimates and assumptions that are significant to the financial statements are set out below and in more detail in the related notes:

• Valuation of investment property, completed property and properties under development (note 3.1);
• Onerous contract provisions (note 2.5);
• Taxation (note 2.6);
• Valuation of interest rate swaps (note 4.2);
• Impairment of trade receivables (note 5.2).

This section focuses on the results and performance of the Group. On the following pages you will find disclosures explaining the Group's results for the year, segmental information, taxation, earnings and net asset value per share.

Net portfolio contribution and net asset value movement are the Group's main key performance indicators. This reflects the way the business is managed and how the directors assess the performance of the Group.

2.1 Revenue

The Group earns revenue from the following activities:

			2011	2010
		Note	£m	£m
Rental income	Operations segment	2.2a	63.6	63.5
Property sales	Property segment		8.2	111.9
Manufacturing revenue	Property segment		11.4	7.2
Management fees	Operations segment	2.2a	10.6	8.9
Management fees	Property segment		1.3 ––––––––	2.1 ––––––––
			95.1	193.6
Impact of minority interest on
management fees			(0.2) ––––––––	(0.2) ––––––––
Total Revenue			94.9	193.4
			––––––––	––––––––

Revenue has reduced to £94.9 million (2010: £193.4 million) due to a planned reduction in the volume of property sales to the UNITE UK Student Accommodation Fund (USAF). Revenue from property sales includes £nil (2010: £103.5 million)to USAF, a joint venture, and represents 0 per cent. (2010: 54 per cent.) of total revenue.

Accounting policies

Revenue is recognised on the following bases:

Rental income

Rental income from property leased out under operating leases (comprising direct lets to students and leases to universities and commercial tenants) is recognised in the income statement on a straight line basis over the term of the lease. Lease incentives are sometimes granted on commercial units, these are recognised as an integral part of the total rental income and spread over the term of the lease.

Property sales

Income relating to the sale of trading properties is recognised once contracts for sale have been unconditionally exchanged.

Manufacturing revenue

Revenue from the sale of modules and related services is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. For modules this is on receipt of customer acceptance following manufacture and for related services as the service is provided.

Management and promote fees

Management and promote fees are recognised, in line with the management contracts, in the period to which they relate as services are provided. The Group can earn promote fees relative to criteria specified in the joint venture agreements.

2.2 Segmental information

The Board of Directors monitor the business along two activity lines. The reportable segments for the years ended 31 December 2011 and 31 December 2010 are Operations and Property (in prior years, the same segments were referred to as Investment and Development, however the names have been changed in the current year to be consistent with the Group's new internal terminology).

The Group undertakes its Operations and Property activities directly and through joint ventures with third parties.The joint ventures are an integral part of each segment and are included in the information used by the Board to monitor the business.

The Group's properties are located exclusively in the United Kingdom. The Board therefore does not consider that the Group has meaningful geographical segments.

(a) Operations Segment result

The Operations Segment manages rental properties, owned directly by the Group or by joint ventures. Its revenues are derived from rental income and asset management fees earned from joint ventures. Net portfolio contribution is the key indicator which is used by the Board to manage the Operations business.

2011

							Group
							on see
							through
	UNITE			Share of joint ventures			basis
	Total	USAF	UCC	USV	OCB	Total	Total
	£m	£m	£m	£m	£m	£m	£m
Rental income	63.6	17.8	8.1	3.0	3.1	32.0	95.6
Property operating expenses	(21.7) –––––––	(5.0) –––––––	(1.2) –––––––	(1.0) –––––––	(0.5) –––––––	(7.7) –––––––	(29.4) –––––––
Net operating income	41.9	12.8	6.9	2.0	2.6	24.3	66.2
Management fees	10.6	–	(0.5)	–	–	(0.5)	10.1
Operating expenses	(21.2) –––––––	(0.2) –––––––	(0.1) –––––––	– –––––––	(0.1) –––––––	(0.4) –––––––	(21.6) –––––––
	31.3	12.6	6.3	2.0	2.5	23.4	54.7
Operating lease rentals*	(12.6)	–	–	–	–	–	(12.6)
Net financing costs	(18.8) –––––––	(5.3) –––––––	(4.0) –––––––	(1.3) –––––––	(1.7) –––––––	(12.3) –––––––	(31.1) –––––––
Net portfolio contribution	(0.1)	7.3	2.3	0.7	0.8	11.1	11.0
	–––––––	–––––––	–––––––	–––––––	–––––––	–––––––	–––––––

2010

							Group
							on see
							through
	UNITE			Share of joint ventures			basis
	Total	USAF	UCC	USV	OCB	Total	Total
	£m	£m	£m	£m	£m	£m	£m
Rental income	63.5	14.9	7.1	2.7	0.8	25.5	89.0
Property operating expenses	(20.3) –––––––	(4.2) –––––––	(1.4) –––––––	(0.8) –––––––	(0.2) –––––––	(6.6) –––––––	(26.9) –––––––
Net operating income	43.2	10.7	5.7	1.9	0.6	18.9	62.1
Management fees	8.9	–	(0.5)	–	–	(0.5)	8.4
Operating expenses	(19.2) –––––––	(0.1) –––––––	(0.2) –––––––	– –––––––	(0.1) –––––––	(0.4) –––––––	(19.6) –––––––
	32.9	10.6	5.0	1.9	0.5	18.0	50.9
Operating lease rentals*	(12.1)	–	–	–	–	–	(12.1)
Net financing costs	(24.4) –––––––	(4.4) –––––––	(4.1) –––––––	(1.3) –––––––	(0.5) –––––––	(10.3) –––––––	(34.7) –––––––
Net portfolio contribution	(3.6)	6.2	0.9	0.6	–	7.7	4.1

* Operating lease rentals arise from properties which the Group has sold and is now leasing back. As these properties contribute to the Group's rental income, the Group consider these lease costs to be a form of financing.

––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––

(b) Property Segment result

The Group's Property Segment undertakes the acquisition and development of properties. This includes the manufacture and sale of modular building components, through UNITE Modular Solutions Limited, 'UMS'. The Property Segment's revenue predominantly comprises the sales proceeds from properties, including those sold to the UNITE UK Student Accommodation Fund; revenue from the sale of modules to third parties and joint ventures, and development management fees earned from joint ventures.

2011	2010
£m	£m
(3.2)	(3.2)
1.3	4.0
(0.1)	(0.2) ––––––––
(2.0)	0.6
(21.0)	(4.8) ––––––––
(23.0)	(4.2) ––––––––
	–––––––– –––––––– ––––––––

The property segment derives its revenue from property sales, manufacturing revenue and management fees as set out in note 2.1

The UMS loss in 2011 includes trading losses of £5.5 million together with a provision of £5.6 million for completing loss making contracts in 2012; provisions for onerous leases of £5.4 million; and impairment of other fixed assets of £3.7 million and inventory of £0.8 million.

(c) Segmental contribution to Net Asset Value

The Board does not use balance sheet information split out by segment to monitor and manage the Group's activities. Instead the position of the Group is managed by reviewing the increases in Adjusted Net Asset Value contributed by each segment during the period.

Contributions to Adjusted Net Asset Value (NAV) by each segment during the year is as follows:

		2011	2010
	Note	£m	£m
Operations
Net portfolio contribution	2.2a	11.0	4.1
Property
Rental growth		22.9	19.3
Yield movement		–	14.6
Disposals and acquisition costs		0.6	(5.4)
Capital expenditure and refurbishments		– ––––––––	(0.4) ––––––––
Rental property gains		23.5	28.1
Development property gains		33.3	27.5
		–––––––– 56.8	–––––––– 55.6
UMS		(21.0)	(4.8)
Pre-contract and other development costs		(3.4)	(3.5)
Total property		–––––––– 32.4	–––––––– 47.3
Unallocated		–––––––– (3.4) ––––––––	–––––––– 0.1 ––––––––
Total adjusted NAV movement in the period		40.0	51.5
Total adjusted NAV brought forward		–––––––– 474.5	–––––––– 423.0
Total adjusted NAV carried forward	2.4a	–––––––– 514.5	–––––––– 474.5
		––––––––	––––––––

The unallocated amount includes restructuring costs of £1.6 million (2010: £nil), dividends of £0.8 million (2010: £nil), current tax charges of £0.4 million (2010: credit £1.0 million) and the share of joint venture swap losses of £0.5 million (2010: £0.7 million).

2.3 Adjusted profit and EPS

In addition to the IFRS reporting measures, the Group reports adjusted profit on the basis recommended for real estate companies by EPRA, the European Public Real Estate Association. EPRA recommends that real estate investment companies exclude development profits and profits from disposal of assets as they are one off in nature, however the development of properties for future sale is an on-going business activity for the Group and therefore results of this core activity are included in the adjusted result through the Property Segment result.

(a) Adjusted profit and reconciliation to IFRS

The adjusted profit/(loss) excludes movements relating to changes in values of investment properties and interest rate swaps, which are included in the profit reported under IFRS. The adjusted profit/(loss) reconciles to the profit reported under IFRS as follows:

	Note	2011	2010
		£m	£m
Operations Segment result – Net portfolio
contribution	2.2a	11.0	4.1
Property segment result pre UMS losses	2.2b	(2.0)	0.6
Unallocated to segments		(3.6)	(0.4)
Adjusted profit pre UMS losses		–––––––– 5.4	–––––––– 4.3
UMS losses	2.2b	(21.0)	(4.8)
Adjusted loss*		–––––––– (15.6)	–––––––– (0.5)
Net valuation gainson investment property	3.1	7.7	15.4
Share of joint venture gains on investment property	3.4b	10.7	18.1
Mark to market changes in interest rate swaps**	4.3	(10.6)	(18.6)
Interest rate swap payments on ineffective hedges**		10.2	10.9
Share of joint venture changes in fair value of
interest rate swaps	3.4b	0.4	(0.3)
Current tax included in unallocated to segments		0.4	(1.0)
Share of joint venture deferred tax credit/(charge)	3.4b	0.3	(0.5)
Minority interest share of NPC***	3.4b	1.2	1.0
Minority interest share of property segment result		– ––––––––	(0.3) ––––––––
Profit before tax		4.7 ––––––––	24.2 ––––––––

* The adjusted loss for 2010 has been restated to include losses on disposal of investment property of £2.9 million, which had been previously excluded,so that all property disposals are included in adjusted loss.

** Within IFRS reported profit, there is a £10.6 million loss (2010: £18.6 million loss) relating to movements in the mark to market of ineffective interest rate swaps, this full loss can be seen in note 4.3. Part of this movement, £10.2 million (2010: £10.9 million) relates to actual interest payments made on these swaps and is considered to be a true operating cost of the Operations Segment. It is therefore already included within Net Financing Costs in Net Portfolio Contribution (Operating Segment result) in note 2.2a.

*** The minority interest share, or non-controlling interest, arises as a result of the Company not owning 100 per cent. of the share capital of one of its subsidiaries, USAF (Feeder) Guernsey Ltd. More detail is provided in note 3.4.

Unallocated to segments includes restructuring costs of £1.6 million (2010: £nil), current tax charges of £0.4 million (2010: credit £1.0 million) and share option fair value charges of £1.2 million (2010: £1.3 million).

(b) EPS and Adjusted EPS

Earnings per share ('EPS') is the amount of post-tax profits attributable to each share. Basic EPS is adjusted in order to more accurately show the business performance of the Group in a consistent manner and to reflect how the business is managed and measured on a day to day basis. Adjusted EPS is calculated using adjusted loss as set out above.

The calculations of basic and adjusted earnings per share for the year ended 31 December 2011 is as follows:

	Note	2011	2010
		£m	£m
Earnings
Basic (and diluted)		2.1	19.6
Adjusted	2.3a	(15.6)	(0.5)
Adjusted pre UMS losses	2.3a	5.4	4.3
Weighted average number of shares (thousands)
Basic		160,271	160,074
Dilutive potential ordinary shares (share options)		39 ––––––––	81 ––––––––
Diluted		160,310	160,155
Earnings per share (pence)		––––––––	––––––––
Basic		1.3p	12.2p
Diluted		1.3p	12.2p
Adjusted		–––––––– (9.7p)	–––––––– (0.3p)
Adjusted (pre-UMS result)		–––––––– 3.4p	–––––––– 2.7p

Movements in the weighted average number of shares have resulted from the issue of shares arising from the employee share based payment schemes. In addition to the potential dilutive ordinary shares (share options) shown above, there were a further 29,000 share options in existence at 31 December 2011 (2010: 794,000) which are excluded from this calculation because they would increase EPS (they are anti-dilutive). Also excluded from the potential dilutive shares (share options) are 1,460,000 options in existence at 31 December 2011 (2010: nil) which are subject to conditions that have not yet been met.

–––––––– ––––––––

2.4 Adjusted Net Assets and NAV per share

Adjusted net asset value as recommended by EPRA excludes the mark to market valuation of swaps, deferred tax liabilities and recognises all properties at market value. This is the key performance measure that the Board uses to monitor and manage the position of the segments.

(a) Adjusted net assets

		2011			2010
	Wholly	Share of		Wholly	Share of
	owned	JV's	Total	owned	JV's	Total
	£m	£m	£m	£m	£m	£m
Investment properties	396.2	400.1	796.3	375.7	391.1	766.8
Completed properties
(at market value)	220.9 ––––––––	– ––––––––	220.9 ––––––––	117.4 ––––––––	– ––––––––	117.4 ––––––––
Rental properties	617.1	400.1	1,017.2	493.1	391.1	884.2
Properties under
development
(at market value)	189.1 ––––––––	0.2 ––––––––	189.3 ––––––––	137.8 ––––––––	0.2 ––––––––	138.0 ––––––––
Total property portfolio	806.2	400.3	1,206.5	630.9	391.3	1,022.2
Debt on rental properties
(net of cash)	(393.7)	(212.1)	(605.8)	(267.9)	(212.5)	(480.4)
Debt on properties under
development	(40.3) ––––––––	– ––––––––	(40.3) ––––––––	(66.7) ––––––––	– ––––––––	(66.7) ––––––––
	(434.0)	(212.1)	(646.1)	(334.6)	(212.5)	(547.1)
Other assets/(liabilities)	(39.9)	(6.0)	(45.9)	6.5	(7.1)	(0.6)
Adjusted net assets	–––––––– 332.3	–––––––– 182.2	–––––––– 514.5	–––––––– 302.8	–––––––– 171.7	–––––––– 474.5
Loan to value (%)	–––––––– 54	–––––––– 53	–––––––– 54	–––––––– 53	–––––––– 54	–––––––– 54
	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––

The movement in other assets/(liabilities) shown above is caused mainly by the provision for onerous contracts in UMS and a significant increase in development creditors.

(b) Reconciliation to IFRS

Adjusted NAV reconciles to NAV reported under IFRS as follows:

	Note	2011	2010
		£m	£m
Adjusted NAV	2.4a	514.5	474.5
Mark to mark interest rate swaps		(50.5)	(49.6)
Valuation gain not recognised on property held at cost	3.1	(76.1)	(37.1)
Deferred tax		(0.3)	(0.3)
Net asset value reported under IFRS		–––––––– 387.6	–––––––– 387.5
		––––––––	––––––––

(c) Net asset value per share and Adjusted NAV per share

The Board continuously monitors the adjusted net asset value attributable to its shareholders. Net asset value per share as at 31 December 2011 is calculated as follows:

		Note	2011	2010
			£m	£m
	Net assets
	Basic (as reported under IFRS on the balance sheet)	2.4b	387.6	387.5
	Adjusted pre-dilution (as defined by EPRA)	2.2c	514.5	474.5
	Adjusted diluted (takes into account the dilutive
	effect of all share options being exercised)		516.4	476.0
	Number of shares (thousands)
	Basic		160,271	160,268
	Outstanding share options		2,344	830
	Diluted		–––––––– 162,615	–––––––– 161,098
	Net asset value per share (pence)		––––––––	––––––––
	Basic		242p	242p
	Adjusted pre dilution		321p	296p
	Adjusted diluted		318p	295p
2.5	Provisions for onerous contracts
		Current	Non-current	Total
		liability	liability	liability
		£m	£m	£m
	At 1 January 2011	–	–	–
	Increase in provisions charged to the income statement	6.3 ––––––––	4.7 ––––––––	11.0 ––––––––
	At 31 December 2011	6.3	4.7	11.0

The provisions relate to onerous trading contracts and leases at the group's manufacturing facility (UMS). Provision has been made for forecast unavoidable losses on existing trading contracts of £5.6 million, all expected to be realised in 2012. The decision to cease trading at UMS also resulted in future lease payments and associated costs becoming onerous. Discounted future payments of £5.4 million (relating primarily to the lease of the factory site) have been provided in respect of these leases of which £4.7 million is not expected to be realised until between 2013 and 2017 and is therefore disclosed as due after one year. Future payments have been discounted using a market rate of 5 per cent.

–––––––– –––––––– ––––––––

2.6 Tax

The Group has not paid any corporation tax in the recent past due to the availability of capital allowances, indexation and brought forward losses. However it does pay UK income tax on rental income that arises from investments held by offshore subsidiaries (predominantly the investments in USAF).

The preparation of the tax charge in the financial statements requires the directors to make significant judgements around the outcome of challenges by HMRC to the tax treatment of certain of the Group's activities; where appropriate, the directors seek advice from leading tax professionals and tax counsel in arriving at such judgements.

Accounting policies

The tax charge for the period is recognised in the income statement and the statement of comprehensive income, according to the accounting treatment of the related transaction. The tax charge comprises both current and deferred tax.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable in respect of previous years. The current tax charge is based on tax rates that are enacted or substantively enacted at the year end.

Deferred tax arises due to certain temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and those for taxation purposes. Temporary differences relating to investments in subsidiaries and joint ventures are not provided for to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. The deferred tax provision in respect of property assets is calculated on the basis that assets will not be held indefinitely and therefore takes account of available indexation. A deferred tax asset is recognised only to the extent that it is probable that sufficient future taxable profits will be available against which the asset can be utilised.

(a) Tax – Income Statement

The total taxation charge/(credit) in the income statement is analysed as follows:

	2011	2010
	£m	£m
Corporation tax in respect of income	–	–
Income tax on UK rental income arising in non-UK companies	0.5	0.5
Adjustments for prior years	– ––––––––	(1.3) ––––––––
Current tax charge/(credit)	0.5	(0.8)
Origination and reversal of temporary differences	0.9	2.5
Effect of change in tax rate	(0.3)	(0.1)
Adjustments for prior years	(0.3) ––––––––	1.3 ––––––––
Deferred tax charge	0.3 ––––––––	3.7 ––––––––
Total tax charge in income statement	0.8	2.9
	––––––––	––––––––

In order to understand how, in the income statement, a tax charge of £0.8 million arises on a profit before tax of £4.7 million, the taxation charge that would arise at the standard rate of UK corporation tax is reconciled to the actual tax charge as follows:

	2011	2010
	£m	£m
Profit before tax	4.7	24.2
Income tax using the UK corporation tax rate of 26.5%	––––––––	––––––––
(2010: 28%)	1.2	6.8
Effect of indexation on investment and development property	(2.4)	(3.5)
Non-deductible expenses	0.9	1.3
Share of joint venture profit	0.4	(0.7)
Movement on unprovided deferred tax asset	1.6	(0.3)
Profit on disposal of assets not chargeable to tax	0.1	–
Effect of property disposals to USAF	(0.4)	(0.6)
Adjustments for prior years – deferred tax	(0.3)	1.3
Adjustments for prior years – current tax	–	(1.3)
Rate difference on deferred tax	(0.3)	(0.1)
Total tax charge in the income statement	–––––––– 0.8	–––––––– 2.9

(b) Tax – Other comprehensive income

Within other comprehensive income a tax charge totalling £0.4 million (2010: £3.7 million) has been recognised representing deferred tax. An analysis of this is included below in the deferred tax movement table.

–––––––– ––––––––

(c) Tax – Balance sheet

The table below outlines the deferred tax liabilities/(assets) that are recognised in the balance sheet, together with their movements in the year:

2011

	At				At
	31 December		Charged		(Credited) 31 December
	2010	Transfers	in income	in equity	2011
	£m	£m	£m	£m	£m
Investment property	7.5	–	1.3	–	8.8
Property heldin current assets	(0.7)	–	(0.6)	–	(1.3)
Property, plant and machinery	(0.3)	–	(0.9)	–	(1.2)
Investments in joint ventures	8.0	–	(0.4)	–	7.6
Interest rate swaps	(10.0)	–	2.4	(0.4)	(8.0)
Interest rate swapsrelating to
joint ventures	(2.7)	–	–	–	(2.7)
Tax value of carried forward
losses recognised	(1.8)	–	(1.4)	–	(3.2)
Net tax liabilities	–––––––– –	–––––––– –	–––––––– 0.4	–––––––– (0.4)	–––––––– –
	––––––––	––––––––	––––––––	––––––––	––––––––

	At 31 December 2009 £m	Transfers £m	Charged in income £m	in equity £m	At (Credited) 31 December 2010 £m
Investment property	2.8	–	4.7	–	7.5
Property held in current assets	(2.9)	–	2.2	–	(0.7)
Property, plant and machinery	(0.3)	–	–	–	(0.3)
Investments in joint ventures	7.4	–	0.6	–	8.0
Interest rate swaps	(7.0)	–	(2.0)	(1.0)	(10.0)
Interest rate swapsrelating to joint ventures	–	–	–	(2.7)	(2.7)
Tax value of carried forward
losses recognised	–	–	(1.8)	–	(1.8)
Net tax liabilities	–––––––– – ––––––––	–––––––– – ––––––––	–––––––– 3.7 ––––––––	–––––––– (3.7) ––––––––	–––––––– – ––––––––

A deferred tax asset of £35.1 million (2010: £33.6 million) in respect of losses of £140.7 million (2010: £124.6 million) has not been recognised due to uncertainty of future taxable profits and the ability to offset these losses against them.

Company

Deferred tax has not been recognised on temporary timing differences of £12.2 million (2010: £12.1 million) in respect of revaluation of subsidiaries and investment in joint ventures as it is probable that the temporary timing difference will not reverse in the foreseeable future.

2.7 Audit fees

Disclosures in respect of fees paid to the auditors can be found in the Corporate Governance Report, page 50.

The Group holds its property portfolio directly and through its joint ventures. The performance of the property portfolio whether wholly owned or in joint ventures is the key factor that drives adjusted net asset value, one of the Group's key performance indicators.

The following pages provide disclosures about the Group's investments in property assets and joint ventures and their performance over the year.

3.1 Wholly owned property assets

The Group's wholly owned property portfolio is held in three groups on the balance sheet at the carrying values detailed below. In the Group's adjusted net asset value, all these groups are shown at market value.

(i) Investment property (fixed assets)

These are assets that were acquired by the Group with the intention to hold the assets for a long period to earn rental income or capital appreciation, prior to establishing The UNITE UK Student Accommodation ('USAF'). The assets are held at fair value in the balance sheet with changes in fair value taken to the income statement.

(ii) Completed properties (current assets)

Following the establishment of USAF in 2006, the Group is required to offer all completed properties which meet certain performance criteria for sale to USAF, and USAF maybe required to purchase assets which meet certain conditions. Therefore, all properties constructed and completed after 2006 are held as completed properties in current assets, because these may be sold to USAF. The Group continues to earn rental income and capital appreciation on these assets which are held at cost in the balance sheet.

(iii) Properties under development (current assets)

These are assets which are currently in the course of construction and which will be transferred to 'Completed properties' on completion.

The Group also acquires land which it intends to develop. Land is held within inventories until planning permission is obtained, at which point it is transferred to properties under development.

The property portfolio is valued every six months by external, independent valuers, having an appropriate recognised professional qualification. The fair values are based on market values as defined in the RICS Appraisal and Valuation Manual, issued by the Royal Institution of Chartered Surveyors, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction where the parties had each acted knowledgeably, prudently and without compulsion. CB Richard Ellis Ltd, Jones Lang LaSalle Ltd and Messrs Knight Frank, Chartered Surveyors were the external valuers in the years ending 31 December 2011 and 2010.

Accounting policies

Properties held under operating leases are not included in assets, but the future payments due in respect of these properties are disclosed in note 4.6a.

Investment properties are held at fair value.

Completed properties, properties under development and inventories are shown at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. All costs directly associated with the purchase and construction of a property, and all subsequent qualifying expenditure is capitalised.

The recognition of acquisitions and disposals of investment and other property occurs on unconditional exchange of contracts.

Borrowing costs are capitalised if they are directly attributable to the acquisition and construction of a property asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalisation of borrowing costs continues until the assets are substantially ready for their intended use but stops if development activities are suspended. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised. The capitalisation rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development cost financed out of general borrowings, to the average rate. During the year the average capitalisation rate used was 6.7 per cent. (2010: 7.0 per cent.).

The valuations are based on assumptions made by considering the aggregate of the net annual rents receivable and associated costs. Valuations reflect, where appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market's general perception of their credit worthiness; the allocation of maintenance and insurance responsibilities between lessor and lessee; and the remaining economic life of the property.

The movements in the carrying value of the Group's wholly owned property portfolio during the year ended 31 December 2011 were as follows:

2011

			Property
	Investment	Completed	under
	property	property	development	Total
	£m	£m	£m	£m
At 1 January 2011	375.7	105.1	113.0	593.8
Acquisitions	13.5	–	–	13.5
Cost capitalised	5.2	0.2	112.6	118.0
Interest capitalised	–	–	7.1	7.1
Transfer from property under development	–	92.1	(92.1)	–
Transfer from work in progress	–	–	1.1	1.1
Disposals	(5.9)	–	(7.9)	(13.8)
Reversal of impairment	–	1.3	1.4	2.7
Valuation gains	13.5	–	–	13.5
Valuation losses	(5.8)	–	–	(5.8)
Net valuation gains	7.7 ––––––––	– ––––––––	– –––––––– ––––––––	7.7
Carrying value at 31 December 2011	396.2	198.7	135.2	730.1

–––––––– –––––––– –––––––– ––––––––

Whilst completed property and property under development are held at cost on the balance sheet, the Group manages the assets based on their market value ('fair value'). These properties are included in adjusted net asset value at their fair value, valued on the same basis as for investment properties, by external valuers. The fair value of the Group's wholly owned properties at the year ended 31 December 2011 is as follows:

	Investment property £m	Completed property £m	Property under development £m	Total £m
Carrying value at 31 December 2011 (above)	396.2	198.7	135.2	730.1
Valuation gains not recognised under IFRS but included in Adjusted NAV
Brought forward	–	12.3	24.8	37.1
Transfer from property under development	–	8.3	(8.3)	–
Valuation gain in year	– ––––––––	1.6 ––––––––	37.4 –––––––– ––––––––	39.0
	– ––––––––	22.2 ––––––––	53.9 –––––––– ––––––––	76.1
Market value at 31 December 2011	396.2	220.9	189.1	806.2
	––––––––	––––––––	–––––––– ––––––––

The movements in the carrying value of the Group's wholly owned property portfolio during the year ended 31 December 2010 were as follows:

2010

			Property
	Investment property	Completed property	under development	Total
	£m	£m	£m	£m
At 1 January 2010	403.6	204.1	38.1	645.8
Cost capitalised	4.7	0.5	76.5	81.7
Interest capitalised	–	–	2.5	2.5
Transfer from property under development	–	(0.8)	0.8	–
Transfer from work in progress	–	–	0.6	0.6
Disposals	(48.0)	(96.6)	(3.0)	(147.6)
Impairment	–	(2.1)	(2.5)	(4.6)
Valuation gains	17.4	–	–	17.4
Valuation losses	(2.0)	–	–	(2.0)
Net valuation gains	15.4 ––––––––	– ––––––––	– –––––––– ––––––––	15.4
Carrying value at 31 December 2010	375.7	105.1	113.0	593.8
	––––––––	––––––––	–––––––– ––––––––

The fair value of the Group's wholly owned property portfolio at the year ended 31 December 2010 is as follows:

Investment property £m	Completed property £m	Property under development £m	Total £m
375.7	105.1	113.0	593.8
–	17.2	0.8	18.0
–		–	(12.9)
–	8.0	24.0	32.0
–	12.3	24.8	37.1
375.7	117.4	137.8	630.9
	–––––––– ––––––––	–––––––– ––––––––	(12.9) –––––––– –––––––– –––––––– ––––––––

Included within investment properties are £43.1 million (2010: £44.5 million) of assets held under a long leasehold and £9.9 million (2010: £10.6 million) of assets held under short leasehold.

Total interest capitalised in investment and development properties at 31 December 2011 was £32.9 million (2010: £28.4 million) on an accumulative basis. Total internal costs relating to manufacturing, construction and development costs of group properties amount to £53.6 million at 31 December 2011 (2010: £45.6 million) on an accumulative basis.

3.2 Inventories

	2011	2010
	£m	£m
Modules for sale to third parties or joint ventures	1.0	–
Interests in land	1.4	1.8
Other stocks	6.0	0.9
Inventories	–––––––– 8.4	–––––––– 2.7
	––––––––	––––––––

The movement in other stock is caused by an increase in manufacturing work in progress, raw materials and consumables relating to an increase in manufacturing activity at the end of the year.

3.3 Other fixed assets

Accounting policies

Property, plant and equipment

Other than land and buildings, property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see below). Land and buildings are stated at fair value on the same basis as investment properties.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items of property, plant and equipment. Freehold land is not depreciated. The estimated useful lives are as follows:

•	Other assets	4 – 20 years
---	--------------	--------------

Intangible assets

Intangible assets predominately comprise internally developed computer software which allows customers to book on line and processes transactions within the sales cycle. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Expenditure on research activities is recognised in the income statement as an expense incurred. The assets are amortised on a straight-line basis over 4 to 5 years being the estimated useful lives of the intangible assets, from the date they are available for use. Amortisation is charged to the income statement.

The Group's other fixed assets can be analysed as follows:

	2011		2010
	Property, plant		Intangible Property, plant	Intangible
	and equipment		assets and equipment	assets
	£m	£m	£m	£m
Cost or valuation
At 1 January	19.4	18.2	18.8	16.7
Additions	0.6	1.5	0.6	1.5
Disposals	(0.2) ––––––––	(0.2) ––––––––	– ––––––––	– ––––––––
At 31 December	19.8	19.5	19.4	18.2
Depreciation and impairment losses
At 1 January	12.5	12.4	11.4	10.2
Depreciation charge for the year	1.5	2.6	1.1	2.2
Disposals	(0.1)	(0.1)	–	–
Impairment	3.6 ––––––––	0.1 ––––––––	– ––––––––	– ––––––––
At 31 December	17.5	15.0	12.5	12.4
Carrying value at 1 January	6.9 ––––––––	5.8 ––––––––	7.4 ––––––––	6.5 ––––––––
Carrying amount at 31 December	2.3 ––––––––	4.5 ––––––––	6.9 ––––––––	5.8 ––––––––

UMS freehold land and buildings, carried at fair value of £0.7 million (2010: £0.7 million), are included within property, plant and equipment and have a historic cost of £1.8 million (2010: £1.8 million).

The impairment reduces the carrying value of other UMS fixed assets to their scrap value of £0.2 million. This arises from the decision to cease trading at UMS, as disclosed in note 2.5. UMS is a separate cash generating unit.

Accounting policies

Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement. The consolidated financial statements include joint ventures initially at cost subsequently increased or decreased by the Group's share of total gains and losses of joint ventures on an equity basis. Interest free joint venture investment loans are initially recorded at fair value - the difference between the nominal amount and fair value being treated as an investment in the joint venture. The implied discount is amortised over the contracted life of the investment loan.

The Directors consider that the agreements integral to its joint ventures result in the Group having joint control; a significant degree of judgement is exercised in this assessment due to the complexity of the contractual arrangements.

Joint venture	Group's share of assets/results 2011 & 2010	Objective	Partner	Legal entity in which Group has interest
The UNITE UK Student Accommodation Fund ('USAF')	18.9%*	Invest and operate student accommodation throughout the UK	Consortium of investors	UNITE Student Accommodation Fund, a Jersey Unit Trust
UNITE Capital Cities ('UCC')	30%	Develop and operate student accommodation in the capital cities of London and Edinburgh	GIC Real Estate Pte, Ltd Real estate investment vehicle of the Government of Singapore	UNITE Capital Cities Unit Trust, incorporated in Jersey
OCB Property Holdings ('OCB')	25%	Develop and operate 3 investment properties located in London	Oasis Capital Bank	OCB Property Holdings (Jersey) Ltd, incorporated in Jersey
UNITE Student Village ('USV')	51%**	Develop and operate a student village located in Sheffield	Lehman Brothers	LDC (Project 110) Ltd, incorporated in England and Wales

The Group has four joint ventures:

• * Part of the Group's interest is held through a subsidiary, USAF (Feeder) Guernsey Ltd, in which there is an external investor. A minority interest therefore occurs on consolidation of the Group's results representing the external investor's share of profits and assets relating to its investment in USAF. The ordinary shareholders of The UNITE Group plc are beneficially interested in 16.3 per cent. (2010: 16.3 per cent.) of USAF.
• ** At 31 December 2011, the Group held a 75 per cent. interest in the ordinary shares of the joint venture, however under the Articles of Association the Group cannot exercise control and are only entitled to a beneficial interest of 51 per cent. of the joint ventures assets and results.

On 18 January 2012 the Group acquired the balance of the share capital in USV for £2.4 million and discharged shareholder loans amounting to £3.8 million. The payment of these amounts is deferred until 31 October 2012.

(a) Net assets and results of the joint ventures

The summarised balance sheets and results for the period, and the Group's share of these joint ventures are as follows:

2011
		USAF	UCC		USV		OCB		Total
		£m	£m		£m		£m		£m
	Gross	Share	Gross	Share	Gross	Share	Gross	Share	Gross	Share
Investment
property	1,273.0	240.6	387.0	116.1	58.2	29.1	189.0	47.2	1,907.2	433.0
Cash	28.4	5.3	12.3	3.7	3.5	1.8	6.3	1.6	50.5	12.4
Debt	(607.9)	(114.9)	(248.4)	(74.5)	(43.7)	(21.9)	(112.7)		(28.2) (1,012.7)	(239.5)
Swap liabilities	(17.8)	(3.0)	(25.6)	(7.7)	(1.0)	(0.5)	(2.9)	(0.7)	(47.3)	(11.9)
Other current assets	1.4	0.3	0.2	0.1	0.1	0.1	0.2	0.1	1.9	0.6
Other current
liabilities	(16.1) ––––––	(3.0) ––––––	(6.2) ––––––	(1.9) ––––––	(3.4) –––––– ––––––	(1.7)	(3.6) ––––––	(0.9) ––––––	(29.3) ––––––	(7.5) ––––––
	661.0	125.3	119.3	35.8	13.7	6.9	76.3	19.1	870.3	187.1
Investment loans	(2.9) ––––––	(2.9) ––––––	– ––––––	– ––––––	(7.8) –––––– ––––––	(3.9)	(29.2) ––––––	(7.3) ––––––	(39.9) ––––––	(14.1) ––––––
Net assets	658.1	122.4	119.3	35.8	5.9	3.0	47.1	11.8	830.4	173.0
Profit/(loss) for the	––––––	––––––	––––––	––––––	–––––– ––––––		––––––	––––––	––––––	––––––
period	72.9	15.1	22.4	6.7	(3.4)	(1.7)	10.0	2.5	101.9	22.6
Adjusted	––––––	––––––	––––––	––––––	–––––– ––––––		––––––	––––––	––––––	––––––
Net assets	678.8	111.3	144.9	43.5	15.3	7.6	79.2	19.8	918.2	182.2
	––––––	––––––	––––––	––––––	–––––– ––––––		––––––	––––––	––––––	––––––
2010
		USAF	UCC		USV		OCB		Total
	Gross	£m Share	£m Gross	Share	£m Gross	Share	£m Gross	Share	£m Gross	Share
Investment
property	1,231.5	232.8	379.5	113.8	63.0	31.5	179.6	44.9	1,853.6	423.0
Cash	32.7	6.2	6.6	2.0	3.5	1.8	4.3	1.1	47.1	11.1
Debt	(607.2)	(114.7)	(253.3)	(76.0)	(44.9)	(22.5)	(100.9)		(25.2) (1,006.3)	(238.4)
Swap liabilities	(11.0)	(2.0)	(27.0)	(8.1)	(2.4)	(1.2)	(6.3)	(1.6)	(46.7)	(12.9)
Other current assets	1.4	0.3	0.4	0.1	–	–	2.0	0.5	3.8	0.9
Other current
liabilities	(22.0) ––––––	(4.0) ––––––	(5.9) ––––––	(1.7) ––––––	(3.0) –––––– ––––––	(1.5)	(7.1) ––––––	(1.7) ––––––	(38.0) ––––––	(8.9) ––––––
	625.4	118.6	100.3	30.1	16.2	8.1	71.6	18.0	813.5	174.8
Investment loans	(2.6) ––––––	(2.6) ––––––	– ––––––	– ––––––	(7.8) –––––– ––––––	(3.9)	(26.2) ––––––	(6.7) ––––––	(36.6) ––––––	(13.2) ––––––
Net assets	622.8	116.0	100.3	30.1	8.4	4.2	45.4	11.3	776.9	161.6
Profit for the	––––––	––––––	––––––	––––––	–––––– ––––––		––––––	––––––	––––––	––––––
period	71.9	16.4	11.6	3.5	4.2	2.1	13.2	3.3	100.9	25.3
Adjusted	––––––	––––––	––––––	––––––	–––––– ––––––		––––––	––––––	––––––	––––––
Net assets	636.4	104.3	127.3	38.2		9.7		19.5	861.1	171.7
	––––––	––––––	––––––	––––––	19.4 –––––– ––––––		78.0 ––––––	––––––	––––––	––––––

Net assets and profit for the period above include the minority interest, whereas adjusted net assets exclude the minority interest.

(b) Movement in carrying value of the Group's investments in joint ventures

The carrying value of the Group's investment in joint ventures has increased by £11.4 million during the year ended 31 December 2011 (2010: £13.3 million), resulting in an overall carrying value of £173.0 million (2010: £161.6 million). The following table shows how the increase has been achieved.

		2011			2010
		Joint			Joint
	Investment	venture		Investment	venture
		in joint investment	Total		in joint investment	Total
	venture	loan	interest	venture	loan	interest
	£m	£m	£m	£m	£m	£m
Recognised in the
income statement:
Net portfolio contribution
(NPC)	11.1	–	11.1	7.7	–	7.7
Minority interest share
of NPC	1.2	–	1.2	1.0	–	1.0
Net revaluation gains	10.7	–	10.7	18.1	–	18.1
Deferred tax	0.3	–	0.3	(0.5)	–	(0.5)
Discount on interest
free loans	(0.7)	0.7	–	(0.7)	0.7	–
Loss on cancellation of
interest rate swaps	(0.4)	–	(0.4)	–	–	–
Ineffective swaps	0.4	–	0.4	(0.3)	–	(0.3)
	––––––– 22.6	––––––– 0.7	––––––– 23.3	––––––– 25.3	––––––– 0.7	––––––– 26.0
Recognised in equity:
Movement in effective
hedges	0.3	–	0.3	(2.6)	–	(2.6)
Deferred tax on movement
in effective hedges	(0.2)	–	(0.2)	–	–	–
Other adjustments to the
carrying value:
Profit adjustment related
to trading with
joint venture	(2.4)	0.2	(2.2)	(4.0)	0.3	(3.7)
Distributions received	(8.9)	–	(8.9)	(5.4)	–	(5.4)
Increase in carrying value	––––––– 11.4	––––––– 0.9	––––––– 12.3	––––––– 13.3	––––––– 1.0	––––––– 14.3
Carrying value at
1 January	161.6	13.2	174.8	148.3	12.2	160.5
Carrying value at	–––––––	–––––––	–––––––	–––––––	–––––––	–––––––
31 December	173.0	14.1	187.1	161.6	13.2	174.8

In addition to its equity shares, the Group has also provided interest free investment loans to some of the joint ventures. These were primarily provided on the setting up of the joint venture to provide capital to acquire investment properties. As a result of being provided interest free, the loans were discounted on recognition to reflect the fair value, the unwinding of the discount is reflected in the Group's finance income.

––––––– ––––––– ––––––– ––––––– ––––––– –––––––

(c) Transactions with joint ventures

The Group acts as asset and property manager for the joint ventures and receives management fees in relation to these services. In addition, the Group is entitled to a promote fee from USAF if the joint venture outperforms certain benchmarks. The Group receives additional units in USAF as consideration for the promote fee. The Group has recognised the following management fees in its results for the year.

	2011	2010
	£m	£m
USAF	6.3	5.3
UCC	3.1	2.8
OCB	0.9 ––––––––	0.4 ––––––––
Property management fees	10.3	8.5
USAF	1.2	–
OCB	0.1 ––––––––	2.1 ––––––––
Development management fees	1.3 ––––––––	2.1 ––––––––
Total fees	11.6	10.6
	––––––––	––––––––

During the year the Group did not sell any properties to USAF.In 2010 the group sold 5 properties to USAF for £146.2 million. £105.7 million of the properties were held on the balance sheet as completed property within current assets, the proceeds and carrying value of the properties is therefore recognised in turnover and cost of sales in the income statement and the cash flows in operating activities. The remaining £40.5 million of properties were classified as investment properties within fixed assets, the proceeds and carrying value of the properties is therefore recognised in loss on disposal of property in the income statement and the cash flows in investing activities.

UCC properties are partly funded by debt totalling £248.4 million (2010: £253.3 million) which equates to 64.2 per cent. (2010: 66.7 per cent.) of the market value of these properties. The Group has guaranteed its share, 30 per cent., of this debt amounting to £74.5 million (2010: £76.0 million). This guarantee only takes effect in the event that the joint venture is unable to repay the debt within nine months of it becoming due. The Group considers the likelihood of the guarantee being invoked to be remote based on the level of debt and the time frames allowed under the arrangements. These guarantees are accounted for in accordance with IFRS4.

3.5 Investments in subsidiaries (Company)

Accounting policies

In the financial statements of the Company, investments in subsidiaries and joint ventures are carried at fair value with movements in fair value being recognised directly in equity.

(a) Carrying value of investment in subsidiaries and joint ventures

The movements in the Company's interest in unlisted subsidiaries and joint ventures during the year are as follows.

		Investment in subsidiaries		Investment in
				joint ventures
	2011	2010	2011	2010
	£m	£m	£m	£m
At 1 January	106.8	96.8	3.7	1.6
Disposals	–	(14.4)	–	–
Impact of discounting on
interest free loans	–	–	–	(0.1)
Revaluation	5.2	24.4	(1.2)	2.2
At 31 December	–––––––– 112.0	–––––––– 106.8	–––––––– 2.5	–––––––– 3.7

In addition to the equity investment in subsidiaries and joint ventures, the Company has provided an interest free loan to the USV joint venture. The carrying value of the investment loan at 31 December 2011 was £3.9 million (2010: £3.9 million).

–––––––– –––––––– –––––––– ––––––––

A full list of the company's subsidiaries is appended to the annual return. The Company's principal subsidiaries and joint ventures are:

	Country of	Class of	Ownership
	incorporation	Shares held	interest
LDC (Holdings) plc*	England and Wales	Ordinary	100%
UNITE Holdings plc*	England and Wales	Ordinary	100%
UNITE Integrated Solutions plc	England and Wales	Ordinary	100%
UNITE Modular Solutions Ltd	England and Wales	Ordinary	100%
USAF LP Ltd	England and Wales	Ordinary	100%
USAF Jersey Investments Ltd	Jersey	Ordinary	100%
UNITE (Capital Cities) Jersey Ltd	Jersey	Ordinary	100%
LDC (Imperial Wharf) Ltd	England and Wales	Ordinary	100%
UNITE Finance One (Property) Ltd	England and Wales	Ordinary	100%
USAF Feeder (Guernsey) Ltd	Guernsey	Ordinary	51%
OCB UNITE Property Holdings
(Jersey) Ltd^	Jersey	Ordinary	25%

* Held directly by the Company.

^ Joint venture. Joint control is explained in note 3.4.

(b) Transactions with other group companies

During the year, the company entered into various interest free loans with its subsidiaries, the aggregate of which are disclosed in the cash flow statement. In addition, the Company was charged by UNITE Integrated Solutions plc for corporate costs of £2.7 million (2010: £2.3 million).

As a result of these intercompany transactions, the following amounts were due (to)/from the company's subsidiaries at the year end.

	2011	2010
	£m	£m
UNITE Holdings plc	76.5	77.7
UNITE Finance Ltd	–	33.4
LDC (Holdings) plc	241.2 ––––––––	207.2 ––––––––
Amounts due from group undertakings	317.7	318.3
Unilodge Holding Ltd	–––––––– (13.9)	–––––––– (13.9)
Unilodge Holdings (UK) Ltd	(15.8)	(15.8)
Amounts due to group undertakings	–––––––– (29.7)	–––––––– (29.7)
	––––––––	––––––––

The Company has had a number of transactions with its joint ventures, which are disclosed in note 3.4c.

The Company has guaranteed £235 million of its subsidiary companies borrowings (2010: £192 million). The guarantees have been entered into in the normal course of business. A liability would only arise in the event of the subsidiary failing to fulfil its contractual obligations. These guarantees are accounted for in accordance with IFRS 4.

The Group finances its development and investment activities through a mixture of retained earnings, borrowings and equity. The Group continuously monitors its financing arrangements to manage its gearing.

Interest rate swaps are used to manage the Group's risk to fluctuations in interest rate movements.

The following pages provide disclosures about the Group's funding position, including borrowings, gearing and hedging instruments; its exposure to market risks; and its capital management policies.

4.1 Borrowings

Accounting policies

Interest bearing borrowings are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

The table below analyses the Group's borrowings which comprise bank and other loans by when they fall due for payment:

	2011	2010
	£m	£m
Current
In one year or less, or on demand	29.2	0.3
Non-current	––––––––	––––––––
In more than one year but not more than two years*	251.9	68.3
In more than two years but not more than five years	140.4	260.3
In more than five years	29.2 ––––––––	29.2 ––––––––
	421.5	357.8
Total borrowings	–––––––– 450.7	–––––––– 358.1

–––––––– –––––––– * Since the year end £78.3 million of this debt has been refinanced through an extended facility of £82.0 million expiring in 2015.

In addition to the borrowings currently drawn as shown above, the Group has available undrawn facilities of £14.3 million (2010: £39.7 million). A further working capital facility of £20.0 million (2010: £20.0 million) is also available.

A further £132 million (2010: £227 million) of facilities are available if certain conditions are met. Of this amount £30 million (2010: £44 million) is only available for rental properties and £99 million (2010: £99 million) for development properties. The remaining amount is available for investment or development.

The carrying value of borrowings is considered to be approximate to fair value, except for the Group's fixed rate loans carried at £17.4 million (2010: £39.4 million). The fair value of these fixed rate loans has been calculated by a third party expert discounting estimated future cash flows on the basis of market expectations of future interest rates. The fair value of these loans is £18.4 million (2010: £40.8 million).

Properties with a carrying value of £696.8 million (2010: £582.4 million) have been pledged as security against the Group's borrowings.

4.2 Interest rate swaps

The Group uses interest rate swaps to manage the Group's exposure to interest rate fluctuations. In accordance with the Group's treasury policy, the Group does not hold or issue interest rate swaps for trading purposes and only holds swaps which are considered to be commercially effective.

Accounting policies

Interest rate swaps are recognised initially and subsequently at fair value, with mark to market movements recognised in the income statement unless cash flow hedge accounting is applied.

Hedge accounting, as defined in IFRS, is when the interest rate swap is designated as the hedging instrument in a hedge of the variability in cash flows attributable to the interest risk of borrowings. The effective portion of changes in fair value of the interest rate swap is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the interest rate swap is recognised immediately in profit or loss. The Group only applies hedge accounting when the hedge is expected to be highly effective.

When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss at that point remains in equity with any subsequent movements in fair value taken to the income statement. If the hedged transaction is no longer probable, the cumulative unrealised gain or loss recognised in equity is recognised in the income statement immediately.

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current credit worthiness of the swap counterparties.

	2011	2010
	£m	£m
Current	–	0.2
Non-current	39.0	37.1
Fair value of interest rate swaps	–––––––– 39.0	–––––––– 37.3

–––––––– ––––––––

The following table shows the fair value of interest rate swaps:

The fair values of interest rate swaps have been calculated by a third party expert, discounting estimated future cash flows on the basis of market expectations of future interest rates, representing Level 2 in the IFRS 7 fair value hierarchy. The IFRS7 level categorisation relates to the extent the fair value can be determined by reference to comparable market values. The classifications range from level 1 where instruments are quoted on an active market through to level 3 where the assumptions used to arrive at fair value do not have comparable market data.

4.3 Net financing costs

Accounting policies

Net financing costs comprise interest payable on borrowings less interest receivable on funds invested (both calculated using the effective interest rate method) and gains and losses on hedging instruments that are recognised in the income statement.

	2011 £m	2010 £m
Recognised in the income statement:
Finance income
– Interest income on deposit	(0.1)	(0.2)
– Impact of discounting on interest free joint venture investment
loans (note 3.4b)	(0.7) ––––––––	(0.7) ––––––––
Finance income	(0.8)	(0.9)
Gross interest expense on loans	–––––––– 15.8	–––––––– 16.3
Interest capitalised	(7.1) ––––––––	(2.5) ––––––––
Loan interest and similar charges	8.7	13.8
Changes in mark to market of interest rate swaps not accounted for as hedges	10.6	18.6
Finance costs	–––––––– 19.3	–––––––– 32.4
Net financing costs	–––––––– 18.5	–––––––– 31.5
	––––––––	––––––––

The Group's overall average cost of debt as at 31 December 2011 is 5.7 per cent. (2010: 6.9 per cent.). The average cost of the Group's investment debt at 31 December 2011 is 5.4 per cent. (2010: 6.1 per cent.). This excluded £27 million of swaps and associated debt which are not specifically allocated to properties, see note 4.5a(i) for further details.

4.4 Gearing

The Group's adjusted gearing ratio is a key indicator that the Group uses to manage its indebtness. Adjusted net asset value and adjusted net debt are used to calculate adjusted gearing. Adjusted net debt excludes mark to market of interest rate swaps as shown below.

The Group's gearing ratios are calculated as follows:

		2011	2010
	Note	£m	£m
Cash and cash equivalents	5.1	16.8	23.8
Current borrowings	4.1	(29.2)	(0.3)
Non-current borrowings	4.1	(421.5)	(357.8)
Interest rate swaps liabilities	4.2	(39.0) ––––––––	(37.3) ––––––––
Net debt per balance sheet		(472.9)	(371.6)
Mark to market of interest rate swaps		38.9 ––––––––	37.0 ––––––––
Adjusted net debt		(434.0)	(334.6)
Reported net asset value (attributable to owners of the parent		––––––––	––––––––
company)	2.4c	387.6	387.5
Adjusted net asset value	2.4c	514.5	474.5
Gearing
Basic (Net debt/Reported net asset value)		122%	96%
Adjusted gearing (Adjusted net debt/Adjusted net asset value)		84%	71%
See-through adjusted gearing (including share of JV properties
and net debt)		126%	115%

4.5 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risks – primarily interest rate risk, credit risk and liquidity risk. The Group's treasury policy focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. Details on credit risk can be found in note 5.3.

(a) Interest rate risk

Interest rate risk is the risk that the Group is impacted by significant changes in interest rates. Borrowings issued at or swapped to floating rates expose the Group to interest rate risk. The Group's policy is separated into two main areas:

(i) Development and refinancing

After taking account of interest rate swaps, £36million (89 per cent.) of the Group's development borrowing at 31 December 2011 (2010: £27million (41 per cent.)) is fixed. The Group will continue to review the level of its hedging in the light of the current low interest rate environment.

The Group's principal exposure to interest rate fluctuations during development relates to movements in longer term interest rates which affect the amount of debt the property income is capable of servicing at completion. Significant adverse movements undermine the Group's ability to release equity from its developments.

The Group currently manages this risk by retaining swaps of £27 million relating to loans against properties that have been sold with the intention of allocating them against imminent new developments. Prior to this reallocation these swaps were commercially hedging loans against rental properties. The Group's policy also allows this exposure to be managed through the use of forward starting swaps.

(ii) Medium and long-term finance

The Group holds its medium and long-term bank finance under floating rate arrangements. The majority of this debt is hedged through the use of interest rate swap agreements, although not all these arrangements qualify for hedge accounting under IAS 39. During 2011, the Group's policy guideline has been to hedge in excess of 75 per cent. of the Group's exposure for terms of approximately 2-15 years.

At 31 December 2011, after taking account of interest rate swaps, 69 per cent. (2010: 97 per cent.) of the Group's medium and long-term investment borrowing was held at fixed rates. This was temporarily below the hedging policy guideline of 75 per cent. New funding facilities are to be put in place in early 2012 which will require further hedging taking the hedge ratio above 75 per cent. again. Excluding the £27 million of swaps the fixed investment borrowing is at an average rate of 5.7 per cent. (2010: 6.8 per cent.) for an average period of 2 years (2010: 3 years),including these swaps the average rate is 5.4 per cent.

The Group holds interest rate swaps at 31 December 2011 against £302.9 million (£295.6 million) of the Group's borrowings. The maturity of these swaps and the applicable interest rates are as follows:

	2011	2011	2010	2010
	Nominal	Applicable	Nominal	Applicable
	amount hedged		interest rates amount hedged	interest rates
	£m	%	£m	%
Within 1 year	–	–	5.0	4.8
1–2 years	27.6	5.2–5.3	–	–
2–5 years	242.5	2.8–5.8	243.5	5.2–5.8
More than 5 years	32.8	5.3–5.6	47.1	4.50–5.6

At 31 December 2011, if interest rates had increased/decreased by 1 per cent., pre-tax profit for the year would have been £0.8million (2010: £0.3 million) lower/higher.

(b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. For development activities, the Group has a policy to inject substantially the full amount of equity required for each development before drawing debt against the specific facility for the development. The funding requirements of each scheme are therefore substantially 'ring fenced' and secured at the outset of works.

The table below analyses the Group's financial liabilities and interest rate swaps into relevant maturity groupings based on the period remaining until the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest), so will not always reconcile with the amounts disclosed on the balance sheet.

2011

	Total
	contractual	Less than	Between	Between	Over
	cash flows		1 year 1 and 2 years 2 and 5 years		5 years
	£m	£m	£m	£m	£m
Bank and other loans	480.0	42.2	260.4	146.0	31.4
Trade and other payables	84.4	84.4	–	–	–
Interest rate swaps – effective	13.5	3.9	4.4	4.7	0.5
Interest rate swaps – ineffective	17.9	10.8	5.1	2.0	–
	–––––––– 595.8	–––––––– 141.3	–––––––– 269.9	–––––––– 152.7	–––––––– 31.9
2010	––––––––	––––––––	––––––––	––––––––	––––––––
	Total
	contractual	Less than	Between	Between	Over
	cash flows		1 year 1 and 2 years 2 and 5 years		5 years
	£m	£m	£m	£m	£m
Bank and other loans	398.2	11.0	78.8	272.5	35.9
Trade and other payables	52.8	52.8	–	–	–
Interest rate swaps – effective	6.1	1.8	1.6	2.0	0.7
Interest rate swaps – ineffective	46.4 ––––––––	11.4 ––––––––	11.4 ––––––––	21.4 ––––––––	2.2 ––––––––
	503.5	77.0	91.8	295.9	38.8
	––––––––	––––––––	––––––––	––––––––	––––––––

(c) Covenant compliance

Many of the Group's fundingfacilities carry covenants. The Group monitors its covenant position and the headroom available on an ongoing basis. At 31 December 2011, the Group was in full compliance with all of its borrowing covenants. The Group is able to use available cash to reduce debt to increase headroom on its loan to value covenants. The covenant headroom position is outlined below and assumes that available cash is used to reduce debt.

		31 December 2011		31 December 2010
	Weighted	Weighted	Weighted	Weighted
	covenant	actual	covenant	actual
Loan to value	74%	56%*	74%	54%*
Interest cover	1.18	1.74	1.11	1.60
Minimum net worth	£250m ––––––––	£515m ––––––––	£250m ––––––––	£475m ––––––––

* Calculated on the basis that available cash is used to reduce debt.

4.6 Operating leases

(a) Payable

Accounting policies

Payments made under operating leases are recognised in the income statement on a straight line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. Where the property interest under an operating lease is classified as an investment property, the property interest is accounted for as if it were a finance lease and the fair value model is used for the asset recognised.

The total future minimum lease rentals payable under non-cancellable operating leases fall due for repayment as follows:

	2011	2010
	£m	£m
Less than one year	14.5	14.2
Between one and five years	57.2	56.6
More than five years	226.5 ––––––––	211.5 ––––––––
Total	298.2	282.3
	––––––––	––––––––

These leases primarily relate to properties which the group has sold and leased back and on which rental income is earned. The leases are generally for periods between 17 and 25 years and subject to annual RPI-based rent review. One property is subject to a fixed annual rent increase of 2 per cent. The total operating lease expenditure incurred during the year was £14.6 million (2010: £14.5 million)

(b) Receivable

The Group accounts for its tenancy contracts offered to commercial and individual tenants as operating leases. The future minimum lease payments receivable under non-cancellable operating leases are as follows:

	2011	2010
	£m	£m
Less than one year	52.0	40.8
Between one and five years	22.3	26.1
More than five years	13.4 ––––––––	14.7 ––––––––
Total	87.7	81.6
	––––––––	––––––––

4.7 Capital management

The capital structure of the Group consists of shareholders' equity and adjusted net debt, including cash held on deposit. The Group's equity is analysed into its various components in the Statement of Changes in Equity. The components and calculation of adjusted net debt is set out in note 4.4. Capital is managed so as to continue as a going concern and to promote the long-term success of the business and to maintain sustainable returns for shareholders and joint venture partners.

The Group uses a number of key metrics to manage its capital structure:

• Adjusted net debt (4.4)
• Adjusted gearing (4.4)
• See through loan to value (2.4a)
• Weighted average cost of investment debt (4.5aii)

In order to manage levels of adjusted gearing over the medium term, the Group seeks to deliver NAV growth and to dispose of non-core property assets in order to offset capital that is committed to development activity. £100 million to £150 million of non-core property disposals are targeted by December 2012. The Group targets new developments with a yield on cost of approximately 9 per cent. The Group does not commit to developing new sites until sufficient equity and funding to fulfil the full cost of the development is secure.

The Board monitors the ability of the Group to pay dividends out of available cash and distributable profits and has reinstated dividends during 2011. The operations segment generated cash of £13.8 million during the year, thereby covering the proposed dividend of £2.8 million, 5 times.

4.8 Equity

Accounting policies

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction, net of tax, in equity from the proceeds. Share issue costs incurred directly in connection with a business combination are deducted from the proceeds of the issue.

The Company's issued share capital has increased during the year as follows:

	Number of
	ordinary shares
	2011	2010
Issued at start of year – fully paid	160,268,343	159,606,942
Shares issued to long-term incentive plan	–	640,000
Share options exercised	3,117	21,401
Issued at end of year – fully paid	–––––––––– 160,271,460	–––––––––– 160,268,343
	––––––––––	––––––––––

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

4.9 Dividends

Accounting policies

Dividends are recognised through equity on the earlier of their approval by the Company's shareholders or their payment

During the year, the Company declared and paid an interim dividend of £0.8 million (2010: £nil). After the year end, the directors proposed a final dividend of 1.25p per share. No provision has been made in relation to this dividend.

This section focuses on how the Group generates its operating cash flows. Careful management of working capital is vital to ensure that the Group can meet its trading and financing obligations within its ordinary operating cycle.

On the following pages you will find disclosures around the group's cash position and how cash is generated from the group's trading activities, and disclosures around trade receivables and payables.

5.1 Cash

Accounting policies

Cash and cash equivalents comprise cash balances and call deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

The Group's cash position at 31 December 2011 was £16.8 million (2010: £23.8 million).

The Company's cash position at 31 December 2011 was £0.1 million (2010: £0.5 million).

The Group's cash balances include £14.5 million (2010: £15.6 million) whose use at the balance sheet date is restricted by funding agreements to pay operating costs and loan interest relating to specific properties.

The Group generates cash from its operating activities as follows:

		Group		Company
	Note	2011	2010	2011	2010
		£m	£m	£m	£m
Profit/(loss) for the year		3.9	21.3	(0.9)	(2.6)
Adjustments for:
Depreciation and amortisation	3.3	4.1	3.3	–	–
Dividends receivable		–	–	(2.3)	–
Fair value of share based payments	6.1	1.2	1.3	–	–
Impairment of fixed assets	3.3	3.7	–	–	–
Change in value of investment property	3.1	(7.7)	(15.4)	–	–
Net finance costs	4.3	18.5	31.5	0.1	0.1
Loss on disposal of investment property		0.2	2.9	–	–
Share of joint venture profit	3.4b	(22.6)	(25.3)	–	–
Trading with joint venture adjustment		2.2	3.7	–	–
Tax charge	2.6a	0.8 ––––––	2.9 ––––––	– ––––––	– ––––––
Cash flows from operating activities before
changes in working capital		4.3	26.2	(3.1)	(2.5)
Decrease in trade and other receivables		1.2	2.5	–	(0.1)
(Increase)/decrease in completed property and
property under development		(114.7)	24.7	–	–
(Increase)/decrease in inventories		(6.8)	4.9	–	–
Increase/(decrease)in trade and other payables		31.0	(18.2)	0.7	(0.3)
Increase in provisions		11.0 ––––––	– ––––––	– ––––––	– ––––––
Cash flows from operating activities		(74.0)	40.1	(2.4)	(2.9)
		––––––	––––––	––––––	––––––

Cash flows consist of the following segmental cash inflows/(outflows): Operations £13.8 million (2010: £0.6 million), property (£17.2 million (2010: (25.9 million) and unallocated (£3.6 million) (2010: £0.3 million). The unallocated amount includes restructuring (£1.4 million) (2010: £nil), Group dividends (£0.8 million) (2010: £nil), dividend payable to minority interests (£0.7 million) (2010: (£0.7 million)) and tax payable of (£0.6 million) (2010: £0.8 million).

5.2 Trade and other receivables

Accounting policies

Trade receivables are initially recognised at the amount invoiced to the customer (fair value) and subsequently at the amounts considered recoverable (amortised cost). Estimates are used in determining the level of receivables that will not, in the opinion of the Board, be collected. These estimates include such factors as historical experience and industry specific factors. A provision for impairment of trade receivables is established when there is sufficient evidence that the Group will not be able to collect all amounts due. The carrying value of trade receivables is considered to approximate fair value.

Trade and other receivables can be analysed as follows, all trade and other receivables are current.

		Group		Company
	2011	2010	2011	2010
	£m	£m	£m	£m
Trade receivables	6.7	12.0	–	–
Amounts due from group undertakings	–	–	317.7	318.3
Amounts owed by joint ventures	13.4	20.2	–	–
Prepayments and accrued income	19.5	11.8	–	–
Other receivables	1.4 ––––––––	0.6 ––––––––	– ––––––––	– ––––––––
Trade and other receivables	41.0	44.6	317.7	318.3
	––––––––	––––––––	––––––––	––––––––

The Group offers tenancy contracts to commercial (universities and retail unit tenants) and individual tenants based on the academic year. The Group monitors and manages the recoverability of its receivables based on the academic year to which the amounts relate. Rental income is payable immediately, therefore all receivables relating to tenants are passed the payment due date.

2011

	Ageing by academic year
	Total	2011/12		2010/11 Prior years
	£m	£m	£m	£m
Rental debtors
Commercial tenants (past due and impaired)	4.3	4.3	–	–
Individual tenants (past due and impaired)	6.3	1.0	2.0	3.3
Provisions carried	(5.9)	(1.2)	(1.7)	(3.0)
Rental debtors (past due but not impaired)	–––––––– 4.7	–––––––– 4.1	–––––––– 0.3	–––––––– 0.3
Manufacturing debtors
(not past due or impaired)	2.0	2.0	–	–
Trade receivables	–––––––– 6.7	–––––––– 6.1	–––––––– 0.3	–––––––– 0.3
	––––––––	––––––––	––––––––	––––––––

	Ageing by academic year
	Total	2010/11		2009/10 Prior years
	£m	£m	£m	£m
Rental debtors
Commercial tenants (past due and impaired)	8.1	6.7	0.8	0.6
Individual tenants (past due and impaired)	8.0	2.3	3.8	1.9
Provisions carried	(6.3) ––––––––	(1.0) ––––––––	(3.3) ––––––––	(2.0) ––––––––
Rental debtors (past due but not impaired)	9.8	8.0	1.3	0.5
Manufacturing debtors (not past due or impaired)	2.2 ––––––––	2.2 ––––––––	– ––––––––	– ––––––––
Trade receivables	12.0	10.2	1.3	0.5
	––––––––	––––––––	––––––––	––––––––

Amounts receivable from joint ventures are not past due or impaired.

As at 31 December 2011, trade receivables of £10.6 million (2010: £16.1 million) were provided against. Movements in the Group's provision for impairment of trade receivables can be shown as follows:

	2011	2010
	£m	£m
At 1 January	6.3	3.5
Impairment charged to income statement in year	2.6	2.8
Receivables written off during the year (utilisation of provision)	(3.0) ––––––––	– ––––––––
At 31 December	5.9	6.3
	––––––––	––––––––

5.3 Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It arises principally from the Group's cash balances, the Group's receivables from customers and joint ventures and loans provided to the Group's joint ventures.

At the year end, the Group's exposure to credit risk was as follows:

	Note	2011 £m	2010 £m
Cash	5.1	16.8	23.8
Trade receivables	5.2	6.7	12.0
Amounts due by joint ventures
(excluding loans that are capital in nature)	5.2	13.4	20.2
Joint venture investment loans	3.4b	14.1	13.2
		–––––––– 51.0	–––––––– 69.2
		––––––––	––––––––

(a) Cash

The Group operates investment guidelines with respect to surplus cash. Counterparty limits for cash deposits are largely based upon long-term ratings published by credit rating agencies and credit default swap rates.

(b) Trade receivables

The Group's customers can be split into three groups – (i) students (individuals), (ii) commercial organisations including universities and (iii) manufacturing customers. The Group's exposure to credit risk is influenced by the characteristics of each customer. The Group

2010

holds tenant deposits of £9.0 million (2010: £8.1 million) as collateral against individual customers.

(c) Joint ventures

Amounts receivable from joint ventures fall into two categories – working capital balances and investment loans.

5.4 Trade and other payables

Accounting policies

Trade payables are initially recognised at the value of the invoice received from a supplier (fair value) and subsequently at amortised cost. The carrying value of trade payables is considered approximate to fair value.

	Group		Company
	2011 £m	2010 £m	2011 £m	2010 £m
Trade payables	9.7	4.7	–	–
Retentions on construction contracts
for properties	3.1	2.4	–	–
Amounts due to group undertakings	–	–	29.7	29.7
Other payables and accrued expenses	53.0	30.3	3.0	2.3
Deferred income	18.6	15.4	–	–
Trade and other payables	–––––––– 84.4	–––––––– 52.8	–––––––– 32.7	–––––––– 32.0

Other payable and accrued expenses include £9.0 million (2010: £8.1 million) in relation to customer deposits. These will be returned at the end of the tenancy subject to the condition of the accommodation and payment of any outstanding amounts.

The Group's greatest resource is its staff and it works hard to develop and retain its people. The remuneration policies in place are aimed to help recognise the contribution that UNITE's people make to the performance of the Group.

Over the next couple of pages you will find disclosures on wages and salaries and share option schemes which allow employees of the Group to take an equity interest in the Group.

6.1 Staff numbers and costs

The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:

	Number of
		employees
	2011	2010
Managerial and administrative	371	370
Site operatives	606 ––––––––	543 ––––––––
	977	913
The aggregate payroll costs of these persons were as follows:	––––––––	––––––––
	2011	2010
	£m	£m
Wages and salaries	30.7	27.7
Social security costs	3.2	2.9
Pension costs	0.7	0.6
Fair value of share based payments	1.2	1.3
	–––––––– 35.8	–––––––– 32.5

The staff numbers above are average full time equivalents and therefore are only marginally affected by the reduction in headcount as a result of the restructure late in 2011. Managerial and administrative full time equivalents in December 2011 amounted to 354 (2010: 378), a reduction of 24.

–––––––– ––––––––

The wages and salaries costs include redundancy costs of £1.1 million (2010: £0.3 million).

Accounting policies

The Group operates a defined contribution pension scheme. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.

6.2 Key management personnel

The Board considers that the key management personnel within the Group are those appointed to the Board. As such, the remuneration of key management personnel is contained within the Remuneration Report on pages 53 to 60.

6.3 Share based compensation

A transaction is classified as a share based transaction where the Group receives services from employees and pays for these in shares or similar equity instruments. The Group operates a number of share-based compensation schemes allowing employees to acquire shares in the Company.

(a) Share schemes

The Group operates the following schemes:

Executive share option scheme –
'The Approved Scheme'
Executive share option scheme –	Details can be found in the Directors'
{ 'The Unapproved Scheme'	Remuneration Report
Executive Long-Term Incentive Plan ('LTIP')
Save As You Earn Scheme ('SAYE')	Open to employees, vesting periods of 3 to 5 years, service condition
Employee Share Ownership ('ESOT')	Used to award part of directors' and senior managers' bonuses in shares, vest after 3 years' continued service

(b) Outstanding share options

The table below summarises the movements in the number of share options outstanding for the Group and their average exercise price:

	Weighted average exercise price	Number of options	Weighted average (thousands) exercise price	Number of options (thousands)
	2011	2011	2010	2010
Outstanding at 1 January	£1.92	875	£2.08	877
Forfeited during the year	£1.21	(355)	£2.31	(181)
Exercised during the year	£1.90	(3)	£2.38	(20)
Granted during the year	£0.41 ––––––––	1,858 ––––––––	£1.62 ––––––––	199 ––––––––
Outstanding at 31 December	£0.85	2,375	£1.92	875
Exercisable at 31 December	–––––––– £1.92 ––––––––	–––––––– 439 ––––––––	–––––––– £1.97 ––––––––	–––––––– 474 ––––––––

For those options exercised in the year, the average share price during 2011 was £2.08 (2010: £2.97).

For those options still outstanding, the range of exercise prices at the year end was 0p to 344p (2010: 129p to 344p) and the weighted average remaining contractual life of these options was 0.9 years (2010: 1.5 years).

The Group funds the purchase of its own shares by the 'Employee Share Ownership Trust' to meet the obligations of the LTIP and executive bonus scheme. The purchases are shown as 'Own shares acquired' in retained earnings.

The accounting is in accordance with the relevant standards. No further information is given as the amounts for share based payments are immaterial.