Final Results

4 April 2011

Public Service Properties Investments Limited

("PSPI", "the Group" or "the Company")

Final Results for the year ended 31 December 2010

PSPI (AIM: PSPI), the specialist European care home real estate investment and financing company, announces audited results for the year ended 31 December 2010.

Highlights:

§ Adjusted earnings before tax of £8.0 million or 8.62p per share (2009 - £6.4 million or 9.53p per share).

§ Cash rental income increase by 2.5% to £16.7 million (2009 - £16.3 million).

§ Recommended final dividend of 4.5p per share, making a total dividend for the year of 7.0p per share (2009 - 6.5p per share).

§ Investment properties¹ valued at £272.2 million (2009 - £271.8 million, including accrued income).

§ Net asset value per share at 119.9p and adjusted net asset value per share² at 150.5p at 31 December 2010 (2009 - 154.6p and 195.8p).

§ Open Offer in April 2010, raised net proceeds of £24 million - issue of 35.6 million new shares at 70p per share.

§ Conservative leverage - 52 % Loan to Value³ at 31 December 2010 (2009 - 53%) and compliant with all banking covenants.

Commenting on the results, Chairman Patrick Hall, said,

"The Group continues to benefit from a fully let portfolio, long term leases with well established tenants, indexed rents, conservative leverage and geographical diversification, all of which supports an encouraging outlook.

2010 saw the Company raise additional capital, source new debt secured against its German portfolio, repay expensive subordinated debt and continue its progressive dividend policy.

The Company is moving ahead with the capital expenditure programme on a number of the care home assets in the UK and will commence a refurbishment for a property in Berlin, all of which will create additional value over the medium term."

Notes:

¹ Investment properties including accrued income on straight line lease recognition in 2009.

² Adjusted net asset value per share is represented by net assets less goodwill plus deferred tax provided on business combinations and fair value gains divided by the number of ordinary shares in issue.

³ Loan to Value is represented by total short and long term borrowings expressed as a percentage of total non-current assets, excluding goodwill, loans and receivables.

For further information, please visit www.pspiltd.com or contact:

Chairman's Statement

I am pleased to report the Group's consolidated financial results for the year ended 31 December 2010.

The Group continues to benefit from a fully let portfolio, long term leases with well established tenants, indexed rents, conservative leverage and geographical diversification, all of which support an encouraging outlook. We believe that your Company, as a specialist real estate investment company, is well placed in current market conditions as demonstrated by these results. 2010 saw the Company raise additional capital, source new secured debt against its German portfolio, repay expensive subordinated debt, and continue its progressive dividend policy. The Company is moving ahead with the capital expenditure programme on a number of care home assets in the UK and will commence refurbishment of a property in Berlin, all of which will create additional value over the medium term.

Cash rental income rose by 2.5% to £16.7 million for the year ended 31 December 2010 over the comparable period in 2009. Annual rent reviews for the UK properties reflected average increases of 4.5% for the year.

Fair value adjustments on investment properties showed a reduction of £7.9 million at 31 December 2010, representing a decline of 2.6% for the investment property portfolio since 31 December 2009, primarily as a result of higher capitalisation rates for the UK portfolio, including assets which are currently subject to capital expenditure projects.

Adjusted earnings increased from £6.4m in 2009 to £8.0m this year, although adjusted earnings per share¹ for 2010 were 8.6p compared to 9.5p for the comparable period in 2009. The reduction reflects an increase in the average number of shares in issue following the Open Offer which successfully completed on 13 April 2010, raising net proceeds of £24.0 million from the issue of 35,631,326 new shares at 70p. The Board of Directors has recommended a final dividend for the current financial year of 4.5p per share, which takes the total dividends for the year as a whole to 7.0p per share (2009: 6.5p per share).

Total equity increased from £103.3 million at 31 December 2009 to £122.9 million at 31 December 2010, reflecting the proceeds from the Open Offer and the profit for the year less £5.6 million of dividends paid in 2010. Net Asset Value per share at 31 December 2010 stood at 119.9p per share, or 153.0p per share if adjusted for goodwill and deferred taxation.

The Company continued to invest in the capital expenditure projects announced in 2010. The investment programme will continue for the rest of 2011, after which the Company will have enlarged and upgraded a significant portion of the UK properties to provide a portfolio generating a higher income return and well positioned for the future. During 2011 the Company will also invest in a refurbishment programme for one of its German care homes where the current lease expires in 2013. Terms have already been agreed for the tenant to enter into a new 25 year lease on completion of the project in the first quarter of 2012.

The economic climate in the Company's various markets remains challenging, and we have adopted a strategy to invest for the longer term benefit of the Company's existing assets whilst taking a cautious approach to acquisitions at this time.

We continually review the Company's markets to determine how best to utilise the Company's capital in the face of prevailing conditions. The Asset Manager's Review includes further detail on the Group's performance and development plans and comments from the tenant of our UK portfolio.

Patrick Hall

Chairman

4 April 2011

¹ Earnings per share adjusted to exclude the impact of non cash and one-off items as disclosed in the notes to the Interim Report.

² Loan to Value is represented by total short and long term borrowings expressed as a percentage of total non-current assets, excluding goodwill, loans and receivables.

Asset Manager's Review

Business Outlook

The impact of the credit crisis continues to adversely affect the property sector, with senior debt providers lending on a more cautious and selective basis. The Group continues to enjoy very good relationships with its senior debt providers and remains fully compliant with all debt service and loan to value covenants. However, the continued availability of senior debt for operations and acquisitions will be critical going forward.

The Group remains well positioned as a pure property owner with a fully let portfolio, on long leases located in several jurisdictions. The weighted average unexpired lease term is 21 years and the Company is investing in expansion and refurbishments in the UK and Germany that will result in increases in the average term. The Group maintains a conservative level of gearing with a majority of debt subject to fixed interest rates.

The Company is investing in a number of projects that will add capacity through expansion, re-configuration and refurbishment of a number of properties in the UK portfolio. One enlarged home in the North-East is due to re-open in April 2011, and a second extended home close to Scarborough, is expected to increase occupancy around the middle of the year. Three other projects in Bury and Derby are scheduled to be completed during the fourth quarter of 2011, and a number of other projects are being considered at this time. On completion of each project, rent payable under the relevant leases will increase by 8% of the gross capital expenditure. In the meantime, the Company has agreed to capitalise rent on properties where there is a material disruption to occupancy, and hence operational cash flow for the Company's tenant, prior to commencement of the new construction and refurbishment through to the post completion build up in occupancy.

Whilst the longer term fundamentals of the care home sector remain strong, there are short term pressures on operators, most notably in the UK where government spending cuts have impacted cash flows. Although we do not expect significant changes in Government support for the care home sector, there are a number of factors, such as later-stage referrals of residents, which have affected occupancy. The Company believes that its tenant in the UK is taking appropriate action to address these factors by amongst others targeting residents with higher care needs and controlling its wage costs. The Company also believes that these measures, coupled with the capital investment mentioned herein, will result in improved performance over the medium term.

We have asked the tenant of the Company's UK care homes, European Care, to offer some insight into its operations compared to those of the wider sector and these are set out below.

The European Care Group ("EC") remains the sixth largest independent provider of health and social care in the United Kingdom providing care for approximately 4,200 service users from the elderly to children and adults with special needs. Approximately 83% of beds are focused on elderly care which contributes to 70% of revenue. The balance is focused on specialist care which contributes to 30% of revenue. EC has over 5,500 staff employed throughout the UK and has maintained a stable management team for many years. EC's focus is on provision of independently accredited high quality service with an ever increasing emphasis on specialist care including dementia and the treatment and care of several mental disorders. EC's activities are regulated by the Care Quality Commission in England, the Care Commission (Scotland), the Care and Social Services Inspectorate Wales, whilst children's services are regulated by Ofsted.

EC's turnover for 2011 is expected to total approximately £140 million (2010 - £124 million) with an expected EBITDAR, before central overheads, of approximately £40 million (2010 - £34 million). EC is focused on growth in occupancy and cost control in very challenging markets.

The UK care sector has not been immune from the effects of the economic downturn precipitated by the financial crisis which started in 2007. Local government authorities are referring residents later than before and as a result, core occupancy within EC has declined by approximately 3% over the last financial year, in line with trends across the sector. The EC group owns a majority of its care facilities which sets it apart from several members of the peer group which are facing increased rents and diminishing revenues across the whole of their portfolios. The parent company of the EC has raised additional capital during the last six months, some of which has been used to augment working capital in the operating group.

PSPI owns the vast majority of the properties leased by EC and has agreed a programme of development on a number of facilities which will add a further positive contribution to EC's earnings in the future.

We remain convinced of the positive drivers for the sector over the longer term as the elderly population in the UK continues to increase, many existing facilities which lack new investment are becoming obsolete and insufficient new care homes are being developed.

The European Care Group, March 2011.

The care home property market in Germany remains stable. Currently, we do not foresee material changes to government support for residents who cannot afford to pay for care in the types of care homes which are owned by the Group. There are opportunities to acquire individual assets and portfolios, leased to efficient and well run independent operators. Debt financing for such purchases presents challenges in the present market; however, long term financing is available on a selective basis. Although the Company's primary focus is on expansion and refurbishment of properties in the UK, it will remain open to potential acquisitions in Germany should attractive opportunities arise.

The rents for the German portfolio increase every three or four years by a proportion of the increase in the German Consumer Price Index. The Swiss investment property increases annually in line with the Swiss consumer price index whilst the US investment portfolio provides a fixed income stream l throughout the term of the lease until renewal in 2022.

Financial Review

Group revenues increased by 3.3% to £19.3 million for the year ended 31 December 2010. This increase primarily reflects indexation in respect of the majority of the investment properties in the UK offset by foreign currency movements for non-sterling denominated revenues. The Group's underlying cash rental income increased by 2.5% to £16.7 million in 2010 compared to £16.3 million in 2009.

Rent reviews for approximately 37% of the Company's UK investment properties occur during the first quarter of the year which has resulted in increases averaging 5.0% per annum, based on the rise in the UK Retail Price Index. Residents' fees paid by local authorities are expected to rise by a smaller amount which will put additional pressure on tenant margins in the short term. We expect EC to increase its focus on specialist care where pressures on fees may be less acute and to continue a policy of cost control whilst increasing occupancy over the medium term. Effective as of 31 December 2010, the Company and its tenant agreed to remove the guaranteed annual rental increase on all its UK leases, the majority of which were set at 1.5%, in substitution for an upward only market review every five years. Rents will continue to increase annually based on the increase in the Retail Price Index, subject to a maximum of 5% per annum.

The independent valuation of the UK portfolio, which represented 69% of the Company's portfolio at 31 December 2010, decreased by 2.1% during 2010 with the average capitalisation rate for the UK investment properties assessed at 6.8% at 31 December 2010 compared to 6.3% at 31 December 2009. Of the Company's 39 properties in the UK, the individual capitalisation rate was increased for 25 properties, including eight which are subject to extension or re-configuration projects and several others that may also be considered for inclusion in the capital expenditure programme in the future. Subject to market conditions and the tenant's ability to re-build occupancy, it is expected that those properties in the capital expenditure programme will benefit from a valuation re-rating post completion, in addition to increased annual revenue.

The independent valuation of the German portfolio, which represented 19% of the Company's portfolio value at 31 December 2010, increased by 1.4% in constant currency during 2010. The average capitalisation rate for the German portfolio was 6.7% compared to 6.8% at 31 December 2009. The Company has entered into an agreement to refurbish one of its properties in Berlin where the lease had been set to expire in 2013. As part of the refurbishment programme, the tenant has agreed to enter into a new 25 year lease at an increased rent.

In April 2010, the Company raised €18 million of three-year senior debt, secured against some of its German investment properties at a fixed interest rate of 3.8% per annum. These funds have augmented the Company's working capital and will primarily be used to repay debt maturing in the months ahead, thereby maintaining a conservative Loan to Value ratio.

The independent valuation of the US and Swiss portfolios, representing 12% of the Company's portfolio at 31 December 2010, declined in value by 2.7% and 6.7%, respectively, in constant currency during 2010.

Adjusted earnings for the year amounted to 8.6p per share (2009: 9.5p) after taking into account the increased weighted average number of shares in issue during 2010. The Board of Directors has recommended a final dividend of 4.5p per share (2009: second interim 4.5p), totalling £4.6 million which will be paid on 27 May 2011 to shareholders on the register on 6 May 2011. If approved by shareholders, the total dividend for the year will be 7.0p per share representing an increase of 7.7% compared to 2009.

The Group's non current assets increased from £287.1 million at 31 December 2009 to £290.0 million at 31 December 2010 due to capital expenditure on the UK portfolio offset by the fair value adjustments noted above and as a result of changes in foreign currency exchange rates. Total assets increased from £294.4 million to £308.9 million during the same period, primarily due to the net increase in cash following completion of the Open Offer in April 2010 less debt repayments and dividends paid during the year.

The Group's short and long term borrowings at 31 December 2010 were approximately £33.3 million and £112.4 million, respectively, compared to £19.0 million and £129.6 million at 31 December 2009. The overall decrease was as a result of £15.2 million senior debt secured against some of the German properties as noted earlier less debt repayments of £17.9 million made during the year. Total borrowings at 31 December 2010 represented 52% of non-current assets excluding goodwill, loans and receivables. Total borrowings have declined to 49% on the same basis following a further debt repayment of £7.5 million in February 2011. While the Board continues to monitor the Group's debt levels it considers the Group's overall gearing to be conservative given the strength of the Group's underlying cash flow from its long term leases.

Deferred taxation on fair value gains, business combinations and recognition decreased from £34.2 million at 31 December 2009 to £33.9 million at 31 December 2010, primarily as a result of a the net fair value reduction in asset values during the period.

Total equity increased from £103.3 million at 31 December 2009, to £122.9 million at 31 December 2010. The increase primarily reflects the net effect of the Open Offer in April 2010 and the profit for the year less dividends paid. The balance sheet reflects a net increase of £0.3 million due to movements in the fair value hedging and translation reserves.

The Group's net asset value per share at 31 December 2010 was 119.9p and the net asset value per share, adjusted for goodwill and deferred taxation on fair value gains and business combinations, was 153.0p per share.

The Company's focus in the short term will remain on investment in its UK and German properties, primarily through the capital expenditure programme outlined above. We continue to review the Group's other investments.

RP&C International

4 April 2011

¹ Capitalisation rate is represented by the net rental income receivable divided by the market value of the properties from which the rental income is derived

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

CONSOLIDATED INCOME STATEMENT

The notes on pages 9 to 41 form part of these financial statements.

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The notes on pages 9 to 41 form part of these financial statements.

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

CONSOLIDATED BALANCE SHEET

The consolidated financial statements on pages 4 to 41 were approved by the board of directors on 1 April 2011 and were signed on its behalf by:

Director…………………………..Date…………… Director…………………………..Date………………

The notes on pages 9 to 41 form part of these financial statements.

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

CONSOLIDATED CASH FLOW STATEMENT

The notes on pages 9 to 41 form part of these financial statements.

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Attributable to equity holders of the Company

The notes on pages 9 to 41 form part of these consolidated financial statements.

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

Public Service Properties Investments Limited, domiciled in the British Virgin Islands (registered office at Nerine Chambers, Road Town, Tortola, British Virgin Islands), is the parent company of the PSPI Group. Public Service Properties Investments Limited and its international subsidiaries (together the Group), is an investment property Group with a portfolio in the USA, the UK and Continental Europe. It is principally involved in leasing out real estate where the rental income is primarily generated directly or indirectly from governmental sources. Public Service Properties Investments Limited was formed in February 2001.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with and comply with International Financial Reporting Standards (IFRS), published by the International Accounting Standards Board (IASB). The consolidated financial statements are reported in Pounds Sterling unless otherwise stated and are based on the annual accounts of the individual subsidiaries at 31 December 2010, which have been drawn up according to uniform Group accounting principles.

The consolidated financial statements are prepared under the historical cost convention as modified by the revaluation of investment properties, other financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results can differ from those estimates.

The group has adopted the following new standards, amendments to standards and interpretations which are mandatory for the financial year ended 31 December 2010.

Amendments to IFRS 3 - Business combinations (applicable to business combinations occurring in accounting periods beginning or after 1 July 2009, prospective application. Early application permitted if IAS 27R also adopted.). The amendment entails several changes in the application of the acquisition method. Subsequent changes to the purchase price which depend on future events are recognised in profit or loss (when a liability) instead of goodwill. A step acquisition will result in re-measurement of the previous investment to fair value, through the income statement. All transaction costs will be expensed. The amendment had no impact on the financial statements for the financial year ended 31 December 2010.

Amendments to IAS 27 - Consolidated and separate financial statements (effective as from 1 July 2009, prospective for measurement of non-controlling interest. Early application permitted if IFRS 3R also adopted.) Choice of whether to account for non-controlling interest at time of a business combination at fair value (i.e. incl. goodwill) or based on their proportionate share of the net assets (i.e. excl. goodwill). The amendment requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control ("economic entity model"). When control over a previous subsidiary is lost. Any remaining non-controlling interest in the entity is re-measured to fair value and the resulting gain or loss is recognised in the income statement. The amendment had no impact on the financial statements for the financial yearended 31 December 2010.

IAS 38 (amendment), 'Intangible Assets'. The amendment is part of the IASB's annual improvements project published in April 2009 and the Group will apply IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. The amendment had no material impact on the financial statements for the financial year ended 31 December 2010.

IFRIC 17, 'Distribution of non-cash assets to owners' (effective on or after 1 July 2009). The interpretation is part of the IASB's annual improvements project published in April 2009. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non- cash assets to shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. The standard had no impact on the financial statements for the financial year ended 31 December 2010.

IFRS 5 (amendment), 'Measurement of non-current assets (or disposal groups) classified as held for-sale'. The amendment is part of the IASB's annual improvements project published in April 2009. The amendment provides clarification that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. The amendment had no impact on the financial statements for the financial year ended 31 December 2010.

IAS 1 (amendment), 'Presentation of financial statements'. The amendment is part of the IASB's annual improvements project published in April 2009. The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. The amendment had no material impact on the financial statements for the financial year ended 31 December 2010.

The following new standards, amendments to standards and interpretations have been issued but are not effective for 2010 and have not been early adopted:

Amendments to IFRS 7 'Disclosures - Transfers of financial assets' (effective on 1 July 2011, early application permitted). The amendments require additional disclosures in respect of risk exposures arising from transferred financial assets (e.g. factoring, securitisation), any associated liabilities and it includes additional disclosure requirements in respect to those transfers. The Group has not elected to adopt the amendment before the effective date. The amendment is not expected to have a material impact on the financial statements.

IFRS 9 'Financial Instruments' (effective 1 January 2013, retrospective application, early application permitted). IFRS 9 comprises two measurement categories for financial assets: amortised cost and fair value. All equity instruments are measured at fair value. Management has an option to present in other comprehensive income unrealised and realised fair value gains and losses on equity investments that are not held for trading. A debt instrument is at amortised cost only if it is the entity's business model to hold the financial asset to collect contractual cash flows and the cash flows represent principal and interest. It will otherwise need to be considered at fair value through profit or loss. The Group has not elected to adopt the standard before the effective date. The amendment is not expected to have a material impact on the financial statements.

Amendments to IFRS 9, 'Financial instruments' (effective 1 January 2013, retrospective application, early application permitted) The amendment includes guidance on financial liabilities and derecognition of financial instruments. The accounting and presentation for financial liabilities and for derecognising financial instruments has been relocated from IAS 39 without change, except for financial liabilities that are designated at fair value through profit or loss. Entities with financial liabilities designated at FVTPL recognise changes in the fair value due to changes in the liability's credit risk directly in OCI. There is no subsequent recycling of the amounts in OCI to profit or loss, but accumulated gains or losses may be transferred within equity. The Group has not elected to adopt the amendment before the effective date. The amendment is not expected to have a material impact on the financial statements.

Amendments to IAS 12 'Deferred Tax: Recovery of Underlying Assets' (effective 1 January 2012, early application permitted). The amendment affects investment properties measured at fair value. The recognition of deferred taxes in relation to those investment properties is based on an expected recovery through a sales transaction. The SIC 21 guidance has been included in the standard. The Group has not elected to adopt the amendment before the effective date. The amendment is expected to have a material impact on the financial statements; however the impact of the change cannot be reasonably estimated as of the reporting date.

Amendments to IAS 32 'Financial Instruments: Presentation' (Classification of rights issues; effective as from 1 February 2010, early application permitted). The amendment implies that rights issues are now required to be classified as equity if they are issued for a fixed amount of cash regardless of the currency in which the exercise price is denominated provided they are offered on a pro rata basis to all owners of the same class of equity. The Group has not elected to adopt the amendment before the effective date. The amendment is not expected to have a material impact on the financial statements.

IFRIC 19 'Extinguishing financial liabilities with equity instruments' (effective 1 July 2010, retrospective application from beginning of the earliest comparative period, early application permitted). IFRIC 19 clarifies the accounting when an entity renegotiates the terms of its debt with the result that the liability is extinguished by the debtor issuing its own equity instruments to the creditor (referred to as a "debt for equity swap"). The interpretation requires a gain or loss to be recognised in profit or loss when a liability is settled through the issuance of the entity's own equity instruments. Furthermore, it provides guidance on the calculation of those gains or losses. The Group has not elected to adopt the amendment before the effective date. The amendment is not expected to have a material impact on the financial statements.

 2.2 Principles of consolidation

The results of subsidiary undertakings, which are those entities in which the Group has an interest of more than one half of the voting rights or otherwise has power to exercise control over the operations, are consolidated. Subsidiaries are consolidated from the date on which control is transferred to the Group and they cease to be consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. All intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

2.3 Segmental Reporting 

Segmental reporting has been prepared in accordance with IFRS 8 (Segment Reporting)

The chief operating decision maker has been identified as the board of directors, who review the group's internal reporting and management information in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

It has been determined that the board of directors reviews management information, considers the business and makes decisions from a geographic perspective. As such, the group has been organised into the following segments

·; Activities in the United Kingdom

·; Activities in Germany

·; Activities in Switzerland

·; Activities in the United States of America

A geographical segment is one that is engaged in providing products or services within a particular economic area which are subject to risks and returns that are different from those of segments operating in other economic areas. Revenues are wholly derived from operating leases and finance leases, sales between segments are carried out at arms length.

The board of directors assess the performance of the business using a number of measures; however particular emphasis is placed on "adjusted net earnings" (as shown in Note 9). This excludes the effects of any non-cash and exceptional one-off non-recurring expenses and income to give an indication of the groups' underlying business performance.

Total segment assets and liabilities excludes certain assets and liabilities which are managed on a central basis, these form the reconciliation to total balance sheet assets.

2.4 Foreign currency transactions and translation

Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in Pounds Sterling, which is the Company's functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except where deferred in equity as qualifying cash flow hedges.

Group Companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet are translated at the closing rate at the date of the balance sheet;

(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates in which case income and expenses are translated at the rates on those dates of the transactions); and

(iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to comprehensive income. When a foreign entity is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.

The translation rates used are disclosed in Note 5 to the consolidated financial statements.

2.5 Investment property

Property held for long-term rental yields or for capital appreciation or both and not occupied by the Group is classified as investment property.

Investment property comprises freehold land and buildings. Investment property is initially recognised at historic cost including related transaction costs. After initial recognition investment property is held at fair value. Fair value is based on active market prices, adjusted if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. These valuations are performed in accordance with guidance issued by the International Valuation Standard Committee and are prepared annually by external valuers.

The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions. The fair value also reflects on a similar basis, any cash outflows that could be expected in respect of the property.

Subsequent expenditure is charged to the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. In accordance with ISA 40, these items are capitalised at cost as the fair value of the expenditure is not reasonably determinable. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.

Changes in fair values are recorded in the income statement. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statement.

2.6 Leases

Finance lease:

When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income.

Lease income is recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return.

The Group has leased out a business under a licence agreement. The business is in respect of the provision of domiciliary care to clients in their own properties which has been licensed to an independent third party for 35 years with annual increases in line with the RPI index - minimum increase of 1.5%, maximum increase of 5%. The operator maintains the right to run the Business and receive any benefits/losses derived from running the business.

Operating lease:

See Notes 2.10 and 2.19

Lease classification:

See Note 4.c

2.7 Loans and receivables

Loans are classified as non-current assets unless management has the express intention of holding the loans for less than 12 months from the balance sheet date, in which case they are included in current assets. The directors determine the classification of the loans at initial recognition and re-evaluate the designation at every reporting date.

Purchases and sales of loans are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Loans are initially recognised at fair value plus transaction costs and are subsequently carried at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of loans is established when there is evidence that the Group will not be able to collect all amounts due according to the original terms of loans. In the case of loans, the financial position of the underlying companies and their ability to repay the preference share capital is considered in determining whether the loans are impaired.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement. Loans are derecognised when the rights to receive cash flows from the loans have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. When investments are sold the resulting gains and losses are included in the income statement as gains and losses from loans.

2.8 Impairment of assets for non-financial assets

The recoverable amounts of assets such as intangible assets are estimated whenever there is an indication that the asset may be impaired.

Goodwill is not subject to amortisation but is tested annually for impairment. An impairment loss is recognised for the amount by which the assets carrying value exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the levels for which there are separately identifiable cash flows (cash generating units).

Non financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of impairment at each reporting date.

2.9 Accounting for derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

Cash flow hedges:

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Amounts accumulated in equity are recognised in the income statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, if the forecast transaction that is hedged results in the recognition of a non-financial asset or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the costs of the asset or liability.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

2.10 Accounting for leases and accrued income

The Group currently treats all of its investment property leases as operating leases, however this classification is considered by the directors for each property on acquisition. An operating lease is a lease in which substantially all the risks and rewards of the asset (investment property) remain with the lessor and as such these assets remain in the Group's balance sheet. Lease payments from the lessee are recognised as rental income and as such disclosed in the income statement on a straight-line basis over the period of the lease.

2.11 Trade receivables and prepayments

Trade receivables and prepayments are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Effective 31 December 2010, the Company adopted a policy whereby a provision of 50% and 100% would be made against any trade receivables outstanding for more than six and twelve months, respectively. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original term of the trade receivables. The amount of the provision is recognised in the income statement.

2.12 Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand; deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings under current liabilities.

2.13 Share capital

Ordinary shares are classified as equity.

Any transaction costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. The costs of an equity transaction that is abandoned are recognised as an expense.

2.14 Trade payables and other payables

Trade payables and other payables are recognised initially at fair value.

2.15 Dividends

Dividends are recorded as a liability in the Company's financial statements in the period in which they are approved by the Company's shareholders.

2.16 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

2.17 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using the tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Due to the tax jurisdictions of the Group companies no tax impact is anticipated.

2.18 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain

2.19 Revenue recognition

Revenue consists of minimum lease rentals payable over the terms of the operating leases, recognised on a straight line basis, and incremental lease rentals payable under rent escalation clauses in the leases recognised as they arise. Every investment property is accounted for individually. Operating lease agreements are based on long-term leasing contracts of 7 to 35 years.

2.20 Business combinations

Business combinations are accounted for using the purchase method of accounting. The costs of a business combination are equivalent to the fair value, valid at the time of purchase, of the assets paid and the liabilities entered into or assumed. Any difference between the acquisition costs of the business combination and the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill (see Note 15).

If the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the Group

(a) reassesses the identification and measurement of the Group's identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the combination, and

(b) recognises immediately in the profit and loss any excess remaining after that reassessment.

2.21 Borrowing costs

In respect of borrowings relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009, the group capitalises borrowing costs directly attributable to the acquisition or construction of a qualifying asset as part of the cost of the asset. Other borrowing costs are charged to the income statement.

2.22 Joint ventures

The Group's interests in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share of the joint ventures' individual income and expenses, assets and liabilities and cash flows on a line by line basis with similar items in the Group's financial statements. The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture that is attributable to the other venturers. The Group does not recognise its share of profits or losses from the joint venture that result from the Group's purchase of assets from the joint venture until it resells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss.

2.23 Earnings per share

The Group has chosen to disclose an adjusted earnings per share figure. This provides an indication of the Group's underlying business performance and excludes significant "non cash" items such as fair value movements on investment properties, the recognition of accrued income, foreign exchange movements and movements in the value of derivative financial instruments charged to the income statement.

3. FINANCIAL AND OTHER RISK MANAGEMENT

3.1 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including currency and price risk), cash flow and fair value interest rate risk, credit risk and liquidity rate risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by the senior management of the asset manager under policies approved by the board of directors. Senior management identifies, evaluates and hedges financial risks. The board provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

(a) Market risk

(i) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar, Euros and the Swiss Franc. Limited foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. However most operating entities have limited exposure to exchange risk outside their functional currencies.

The Group has investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group's foreign operations in the US and Continental Europe are managed primarily through borrowings denominated in the relevant foreign currencies, although the directors monitor and permit currency exposure in this regard as an element of its financing strategy.

Historically the Group has not entered into any hedging transactions in respect of the net assets of subsidiaries denominated in currencies other than Pounds Sterling. The Group will review this policy from time to time.

(ii) Cash flow and fair value interest rate risk

The Group's interest-rate risk mainly arises from long-term borrowings, derivative financial instruments and to a limited extent, from cash and cash equivalents. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates and derivative financial instruments expose the Group to fair value interest-rate risk. Group policy is to maintain a significant percentage of its borrowings in fixed rate instruments. The Board regularly meet to review levels of fixed and variable borrowings and takes appropriate action as required.

The table below shows the sensitivity of profit and equity to movements in market interest rates:

(c) Credit risk

Credit risk arises from cash, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to rental customers, including outstanding receivables. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' (as per Standard & Poor's credit rating) are accepted.

The table below shows the balance of the three major bank counterparties at the balance sheet date.

Bank A is Allied Irish Bank (UK) plc which is a wholly owned subsidiary of Allied Irish Banks plc ("AIB"). In October 2010, Standard and Poor's downgraded AIB. In December 2010 AIB was effectively nationalised by the Irish Government.

The Group's concentration of credit risk with non financial institutions is primarily with its rental customers. Management has assessed that the credit risk is low as the rental contracts are granted to customers with good credit history and due to the good record of recovery of receivables. As a result the Group has not incurred any significant losses.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Due to the nature of the underlying businesses, the Group maintains flexibility in funding by maintaining availability under committed credit lines.

Management monitors rolling forecasts of the Group's liquidity reserve on the basis of expected cash flow.

The table below analyses the Group's financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Borrowings in the table above include future interest payable.

Where an interest rate swap is in place, the fixed rate implicit in the agreement has been used to calculate future payments, consequently the position is shown after any cashflows arising from interest rate swaps.

(d) Capital risk management

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

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the loan to value ratio. This ratio is calculated as total debt divided by total non current assets less goodwill and loans and receivables. Debt is calculated as total borrowings (including 'current and non-current borrowings' as shown in the consolidated balance sheet).

The Group's intention is to maintain the loan to value ratio below 70%. The loan to value ratios at 31 December 2010 and 2009 were as follows:

3.2 Fair value estimation

Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value, this requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

·; Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

·; Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

·; Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The following table presents the Group's liabilities that are measured at fair value at 31 December:

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Specific valuation techniques used to value financial instruments include:

·; Quoted market prices or dealer quotes for similar instruments.

·; The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves.

·; The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting values discounted back to present value.

·; Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

3.3 Other risk factors

Price risk and market rental risks:

The Group is exposed to property price and market rental risks. Wherever possible the Group builds into the terms of its leases indexation linked to consumer price indices, in order to manage its market rental risk.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstance. The Group makes estimates and assumptions concerning the future. By definition, the resulting accounting estimates may not equal the related actual results. The estimates and assumptions that may have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are described below.

(a) Estimate of fair value of investment properties

The best evidence of fair value is current prices in an active market for similar lease and other contracts. In the absence of such information, the Group determines the amount within a range of reasonable fair value estimates. In making this judgement, the Group considers information from a variety of sources including:

i) current prices in an active market for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences;

ii) recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and

iii) discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and other contracts, and (where possible) from external evidence such as market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of cash flows.

(b) Principal assumptions for management's estimations of fair value

If information on current or recent prices or assumptions underlying the discounted cash flow approach investment properties are not available, the fair values of investment properties are determined using discounted cash flow valuation techniques. The Group uses assumptions that are mainly based on market conditions existing at each balance sheet date.

The principal assumptions underlying management's estimation of fair value are those related to: the receipt of contractual rentals; expected future market rentals; void periods; maintenance requirements; and appropriate discount rates. These valuations are regularly compared to actual market yield data and actual transactions by the Group and those reported by the market.

Management relies on valuations prepared by qualified independent valuation companies. Were the discounted rate used in preparing the independent valuation reports to differ by 5% to the rate used by the independent valuer, the net effect of the carrying amount of investment properties after deferred taxation would be an estimated £10.5 million lower (2009 - £10.6 million) or £9.5 million higher (2009 - £9.6 million).

The expected future market rentals are determined based on the specific terms of the rental contracts.

(c) Lease classification

The Group determines the classification of leases on each asset having regard to whether substantially all risks and rewards incidental to ownership of the asset are transferred to the lessee. The Group has determined that all of its leases are operating leases except for a business under licence agreement (see Note 2.6). The key factor in making the classification between finance leases and operating leases is the estimated life of the properties. The Group estimated the life of the buildings between 70 years and 75 years. The lease periods are between 7 years and 35 years.

5. FOREIGN EXCHANGE RATES

6. REVENUE

Rental income is stated after reallocation of £583,974 (2009 - £552,741) to interest income as referred to in Note 14.

Rental income includes accrued income provided to recognise guaranteed future income over the period of the leases, see Note 17 up to 31 December 2010. As at this date the UK leases were amended to remove the guaranteed 1.5% annual increase (see Note 17).

The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:

A majority of the investment properties in the UK are leased for an initial period of 35 years. The leases terminate between 2036 and 2039, although the lessee has the right to renew the leases two years before their expiry, for a further period of 35 years subject to agreement on the revised rent. The remaining Investment Properties in the UK are leased for an initial period of 7 years, with the leases terminating in 2012. These leases have the same renewal rights as those described above. Effective 31 December 2010 each of the leases relating to UK properties was amended to reflect that the rent on each lease increases on its anniversary by the annual increase in the UK Retail Price Index, subject to a maximum of 5% of the prior year's rent. In addition, each lease is subject to an upward only market rent review every five years from the start of the lease. Prior to the 31 December 2010, each lease was subject to a minimum increase of 1.5% and maximum of 5.0% per annum with no market reviews. In the event that a UK property is damaged or destroyed by any insured risk and is not reinstated by the Group within a period of 3 years, the lessee has the right to terminate the lease in respect of that UK property. The lessor may terminate each lease, subject to the senior lender's consent, for various reasons including the breach of material clauses of the lease.

The investment property in Switzerland is leased for a term of 20 years expiring on 30 June 2023. The lessor may terminate the lease prior to the end of the term in accordance with Swiss law and on 3 months written notice in the event of a change in control of the lessee. The lease rental payments are adjusted annually on 1 July of each year, in accordance with movements in the Swiss Index of Consumer Prices.

Investment properties in the United States of America are leased to the United States Postal Service under a master lease executed in March 1997 and amended on 29 January 1999. The lease expires on 28 February 2022. The rent under the lease is fixed for the entire period of the lease. The lessee has the right to unilaterally relinquish use of up to 25 of the post office properties provided that the resultant reduction in annual rent payable under the lease does not exceed a maximum of $300,000 (£193,911) per annum or 13% of the annual rental. Management have factored this into their analysis of minimum lease payments, and have no reason to believe that this right will be exercised in the foreseeable future.

The majority of investment properties in Germany are leased for an initial period of 25 years; however the lessee has the right to renew the leases for a further period of 5 years, subject to the agreement of the revised rent. The rent on the leases is changed at least every three years from the anniversary of inception, with reference to the German Consumer Price Index.

7. ADMINISTRATIVE EXPENSES

8. a) NET FINANCE INCOME

b) NET FINANCE COSTS

9. EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares outstanding during the period.

In January 2004, the Company issued CHF 7 million (£3.15 million) of 4% Senior Unsecured Pre-IPO Notes due in 2011. CHF 6.47 million (£2.74 million) of these notes were redeemed in October 2006 and a further CHF 0.51 million (£0.21 million) were redeemed in February 2007. Each note holder received warrants attached to the notes which may be exercised up to two years after a public offering of the Company's shares. The warrants entitle the note holders to subscribe for the Company's shares at a discount to the public offering of shares between 5% - 20% depending on the timing of a public flotation of the Company's shares.

Management has estimated that the maximum number of additional ordinary shares that could be issued at 31 December 2010 as 610 (2009 - 610). Based on this, the diluted earnings/(loss) per share at 31 December 2010 was 0.65 pence (2009 - 8.89 pence).

Adjusted Earnings per Share - Non GAAP

The Directors have chosen to disclose "adjusted earnings per share" in order to provide an indication of the Group's underlying business performance. Accordingly it excludes the effect of items as detailed below.

10. DIVIDENDS

A second interim dividend for 2009 in the amount of 4.5p per share was paid in May 2010; this resulted in a distribution of £3,006,393 (2009 - £2,672,350).

The Directors approved an interim dividend for 2010 in the amount of 2.5p per share which was paid in October 2010; this resulted in a distribution of £2,561,002 (2009 - £1,336,174).

The Directors approved a final dividend for 2010 in the amount of 4.5p per share which will be paid on 27 May 2011.

11. INVESTMENT PROPERTY

Bank borrowings are secured on investment property as outlined in Note 21.

Valuations of the investment properties were made as at 31 December 2010 by independent property consultants.

The valuation of the investment properties in the UK was conducted by Colliers CRE, UK. Based on the detailed review of relevant information, Colliers CRE concluded that capitalisation rates of between 5.75% - 10.0% (2009 - 6.0% - 7.5%) were appropriate under market conditions prevailing at 31 December 2010, resulting in an average capitalisation rate of 6.81% (31 December 2009 - 6.30%) PSPI has applied individual capitalisation rates as advised by Colliers CRE to each investment property in preparation of the consolidated financial statements.

The valuation of the investment properties in the US was conducted by Real Estate Asset Counselling Inc, US, using the direct capitalisation of the NOI (Net Operating Income) approach in their valuation. Based on the most recent transactions in the sector reviewed by REAC, the overall direct capitalisation rates ranged between 7.50% and 7.66% (2009 - 7.35% and 7.73%). The Company applied the mean capitalisation rate of 7.58% (2009 - 7.53%).

The valuation of the investment properties in Switzerland was conducted by Botta Management AG, using a discounted cash flow analysis. A discount factor of 4.5% (2009 - 4.5%) was used for the valuation at 31 December 2010.

The valuation of the investment properties in Germany were conducted by Colliers CRE, UK. Based on the duration of the leases, the future cash flows and after due consideration of transaction activity in the market, Colliers CRE concluded that capitalisation rates of 6.35% to 7.5% (2009: 6.35% to 8.50%) were appropriate under the market conditions prevailing at 31 December 2010, resulting in an average capitalisation rate of 6.70% (31 December 2009 - 6.74%) PSPI has applied individual capitalisation rates as advised by Colliers CRE to each investment property in preparation of the consolidated financial statements.

Included in property rent, maintenance and office expenses, as detailed in Note 7, are repairs of £102,649 (2009 - £95,135) in respect of investment properties generating rental income. These costs were incurred in respect of investment properties where the Group is responsible for structural and roof repairs. There were no repairs and maintenance costs incurred in respect of investment properties that did not generate rental income.

Additions resulting from subsequent expenditure consist of £5,105,279 (2009 - £5,406,838) in relation to capital expenditure on properties in the United Kingdom which has been completed during the year. The balance of £2,260,021 (2009 - £2,885,184) relates to capital expenditure on properties still under construction. This has been reflected under Investment Properties in accordance with IAS 40.

Of the total additions of £7,365,300 in the year, £4,541,427 relates to cash spent on capital expenditure with the balance of £2,823,873 representing accrued interest and capitalised rent. PSPI has a contractual obligation to perform repairs and maintenance on certain investment properties.

12. FINANCIAL INSTRUMENTS BY CATEGORY

13. RECEIVABLE FROM FINANCE LEASES

The Group has leased out a business under a licence agreement. The business is in respect of the provision of domiciliary care to clients in their own properties which has been licensed to an independent third party for 35 years with annual increases in line with the RPI index - minimum increase of 1.5%, maximum increase of 5%. The operator maintains the right to run the business and receive any benefits/losses derived from running the business. The remaining life of this licence is 29 years.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security. All receivables from finance leases are denominated in Pounds Sterling.

None of the receivable from finance leases were past due nor impaired.

14. LOANS AND RECEIVABLES

Loans consist of 100% of the issued redeemable preference shares in lessee companies. These companies lease the investment properties as referred to in Note 11. These preference shares are redeemable at any time.

The preference shares are non-voting, not entitled to a dividend, are cancelled on the termination of the leases written with the relevant lessee companies and are repayable at par. Interest income, implicit on the loans is treated as interest income, as referred to in Note 6, on the same basis as specified in the lease agreements. During the year ended 31 December 2010, £583,943 (2009 - £552,741) was deducted from rental income and included in interest income. The various rental contracts are referred to in Note 6.

The fair values of loans and receivables are as follows:

The fair values are based on cash flows discounted using a rate based on the borrowing rate of 12.34% for the preference shares (2009 - 11.17% preference share).

The effective interest rates on non-current receivables were as follows:-