Final Results

24 March 2016

Public Service Properties Investments Limited

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

Final results for the year ended 31 December 2015

PSPI (AIM: PSPI), the specialist real estate investment and financing company, announces its audited results for the year ended 31 December 2015.

Highlights

A. Material transactions

· In March 2015 the Group completed the disposal of its investment in the UK healthcare sector with the sale of companies, businesses and assets at a gross sale value of £34.5 million.

· Two German care home properties were sold during 2015 at a gross sale value of €7.9 million (£5.6 million).

· The Group repaid borrowings and prepayment fees of £16.7 million from the proceeds of the sale of UK and German assets and businesses.

· In April and November 2015 the Company completed compulsory partial redemptions for a total of 82.6 million shares on a pro-rata basis at an average price of 26.19 pence per share, returning £21.6 million to shareholders.

· The Group owned four care homes in Germany at 31 December 2015. On 2 February 2016, the Company announced that it had sold one property for €3.0 million (£2.2 million), which completed in early March 2016. On 9 March 2016, the Group executed conditional contracts to dispose of the remaining three care home properties for an aggregate sale price of €10.0 million (£7.4 million). These sales are expected to complete by the end of April 2016 after re-registration of the properties in the appropriate land registry and after registration of charges in favour of the purchasers' lender.

· The net proceeds from these sales are to be used for general working capital purposes pending a proposed return of capital to shareholders. A further announcement will be made in due course.

B. Financial results

· The loss from continuing and discontinued operations for the year ended 31 December 2015 was £3.0 million (2014 - loss £14.8 million) after deducting losses on fair value adjustments on investment properties of £1.4 million (2014 - £3.4 million) and losses on the sale of assets of £0.7 million (2014 - £16.1 million).

· Administrative costs from continuing operations were £0.8 million which was 17% lower than in 2014.

· The Company had cash balances of £6.1 million at 31 December 2015 (2014 - £4.1 million) and assets classified as held for sale of £10.5 million (2014 - £40.0 million).

· The Net Asset Value per share at 31 December 2015 was 54.4 pence per share (2014 - 34.6 pence per share) which was stated before the compulsory partial redemption of shares noted above.

Patrick Hall, the Chairman of PSPI, commented:

"The Company is pleased to announce the disposal of the last investment properties after a period of careful negotiation. The Board will consider making further distributions to shareholders once the outstanding transactions have completed."

For further information please visit www.pspiltd.com or call:

CHAIRMAN'S STATEMENT

I am pleased to report the Group's audited consolidated financial results for the year ended 31 December 2015.

Update on strategic review

The Company made significant progress in disposing of its assets and businesses during 2015 and this process continued into the first quarter of 2016.

The Company disposed of its entire exposure to the UK care home market and ancillary businesses on 4 March 2015 for approximately £34.5 million. The Company owned six German care homes at the beginning of 2015. Two of these properties were sold in 2015 for a combined gross selling price of €7.9 million. The Company repaid £16.7 million of borrowings and prepayment fees during 2015.

Following completion of the sales in 2015, the Board approved two mandatory partial redemptions of ordinary shares of 67.4 million shares in April 2015 for £16.1 million and 15.2 million shares in November 2015 for £5.5 million. Thus the Company returned £21.6 million to shareholders during the year.

A further German property was sold in February 2016 for €3.0 million which completed in early March 2016. The Group executed conditional contracts to dispose of the remaining three German properties on 9 March 2016 at a gross selling price of €10.0 million. These sales are expected to close by the end of April 2016. Approximately €4.1 million of the sale proceeds will be used to repay the remaining senior debt owed by the Group with a further €0.6 million to be used to pay interest rate swap breakage costs and transaction fees with the balance added to the Group's working capital.

Following the completion of these sales the Group will have completed the sale of all its investment properties.

The Directors do not recommend the payment of a final dividend for the year ended 31 December 2015 (2014 - nil).

The Asset Manager's Review describes the financial results for 2015 in more detail.

Other matters

Now that the Company has announced the conditional disposal of its last investment properties the Board will consider a further return of capital to shareholders once these transactions have completed. A further announcement will be made in due course.

Patrick Hall

Chairman

23 March 2016

ASSET MANAGER'S REVIEW

Preparation of the financial statements

Due to the matters referred to in the Chairman's statement, a significant portion of the Company's income and expenses are included in the loss for the year from discontinued operations in the consolidated income statement for the year ended 31 December 2015 and for the comparative period. Similarly, the majority of the Group's assets, excluding cash and a majority of the liabilities are classified as available for sale in the Company's consolidated balance sheet at 31 December 2015. A detailed breakdown of the income and expense items, as well as these assets and liabilities are shown in note 15 of the financial statements.

UK disposals

The Group's entire investment in the UK care home sector was sold during the first quarter of 2015 to the Embrace Group for a gross consideration of £34.5 million. The Company received initial net proceeds of £14.2 million, after repayment of debt secured against the UK assets of £16.3 million, taxation and transaction costs. £2.5 million of the consideration was deferred at the time of the transaction, but was received on 31 December 2015.

Germany

On 1 January 2015, the Group owned six care home properties in Germany with three different tenants which generated a gross rental income at the rate of €2.3 million per annum. The Group sold two of the properties during 2015 at an aggregate gross sale price of €7.9m. The Group repaid €1.9 million of bank financing secured against the assets sold, €0.2 million in interest rate swap breakage costs, prepayment penalties and related professional fees.

Repayment of capital to shareholders

On 27 April 2015 the Company completed the compulsory partial redemption of 67,434,020 ordinary shares at 23.875p per ordinary share redeemed, repaying £16,099,871.93 to shareholders. The Company's share capital after the partial redemption comprised 37,931,697 ordinary shares of $0.01 each.

On 9 November 2015 the Company completed a further compulsory partial redemption of 15,172,643 shares at 36.50p per ordinary share redeemed, repaying a further £5,538,014.70 to shareholders. The Company's share capital after the partial redemption, and as at 31 December 2015, comprises 22,759,054 ordinary shares of $0.01 each.

Business Overview

The Company continued to own four investment properties in Germany at 31 December 2015. Three properties were leased to Marseille Kliniken AG ("MK") and the one other property, Brakel, was leased to a separate third party operator.

On 2 February 2016, the Company announced that it had exchanged contracts to dispose of its Brakel care home property for a gross price of €3.0 million (£2.2 million). The sale was executed with a company owned by the same beneficial owner as the tenant at Brakel and completed on 4 March 2016. The property is included at its sale value in the Company's audited consolidated results as at 31 December 2015. There was no debt secured against the property and transaction costs were estimated at €0.1 million and will be settled from the sale proceeds.

On 9 March 2016, the Company exchanged conditional contracts to dispose of its three remaining properties leased to MK for an aggregate gross price of €10.0 million (£7.4 million). The sales were executed with subsidiaries of MK and are expected to close by the end of April 2016 after completion of re-registration of the properties in the appropriate land registry and after registration of charges in favour of the purchasers' lender. The properties are included at their sale value in the Company's audited consolidated results at 31 December 2015. Approximately €4.1 million (£3.0 million) of the sale proceeds will be used to repay senior debt secured against the three properties and approximately €0.2 million will be used to settle prepayment penalties under an interest rate swap agreement with the senior lender. The Group will apply the net sale proceeds to settle transaction costs, estimated at €0.4 million, with the balance to be used for general working capital purposes.

The Company has now completed the sale of its remaining investment properties held in all jurisdictions and the balance of funds from these sales, after repayment of debt and associated costs, are to be used for general working capital purposes pending a proposed return of capital to shareholders.

Financial Review for 2015

The comparative figures in the consolidated income statement have been re-stated to reflect the results of the German assets under discontinued operations. All revenue derived from investment properties is reflected in the net loss from discontinued operations as described in note 15 to the consolidated financial statements.

Administration costs within continuing operations, consisting of central group costs, were £0.8 million for the year ended 31 December 2015, 17% lower than the than the previous year ended 31 December 2014.

Finance costs were stated at £1.1 million (2014 - £1.1 million) primarily reflecting the impact of changes in foreign exchange rates on intra-group funding in Euros, offset by exchange rate differences of £1.0 million deducted from the carrying value of investment properties. Overall, the Company reported a positive increase in the Company's translation reserve of £0.4 million at 31 December 2015.

Total annual rental income for 2015 from discontinued operations was £1.5 million. The Group's property portfolio throughout the year was fully let and all rental income was paid in full.

The Group's investment property assets at 31 December 2015, consisted of four German properties classified as available for sale at a total value of £9.6 million (€13.0 million). The Group also reflected cash and cash equivalents and restricted cash of £0.5 million as assets held for sale.

Liabilities directly associated with the assets classified as available for sale of £3.9 million consist of senior debt secured against three of these properties of approximately £3.0 million (€4.1 million), before amortisation of debt issue costs, and accruals and other payables of £0.9 million. These predominately relate to breakage costs on interest rate swap agreements and other transactions costs.

The Company had a contingent liability to fund up to €1.5 million should one of the MK operated properties require redevelopment, however this contingent liability will be eliminated on completion of the sale transactions noted above. The Group has given certain warranties in respect of the various sale transactions in the UK and Germany, the majority of which will expire during the course of 2016.

The Company will maintain sufficient cash balances to meet any claims under the warranties given, although none are expected to arise.

The Group had cash balances of £6.1 million at 31 December 2015 compared to £4.1m as at 31 December 2014.

The Company repaid debt of £17.6 million from the sale of UK and German assets during 2015 and returned £21.6 million to shareholders, as described in more detail above.

Total equity at 31 December 2015 was £12.3 million compared to £36.4 million at 31 December 2014. The Net Asset Value per share2 at 31 December 2015 was 54.4 pence per share compared to 34.6 pence per share at 31 December 2014.

RP&C International

23 March 2016

Notes:

¹ Figures in Euros at 31 December 2015 are reflected at an exchange rate of €1.3572:£1

2 Total equity divided by the number of ordinary shares in issue as at the balance sheet date.

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

CONSOLIDATED INCOME STATEMENT

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

CONSOLIDATED BALANCE SHEET

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

CONSOLIDATED CASH FLOW STATEMENT

PUBLIC SERVICE PROPERTIES INVESTMENTS LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Attributable to equity holders of the Company

The notes on pages 12 to 41 form part of these consolidated financial statements.

1. GENERAL INFORMATION

Public Service Properties Investments Limited was incorporated in 2001 and is domiciled in the British Virgin Islands (registered office at Nerine Chambers, Road Town, Tortola, British Virgin Islands) and is the parent company of the PSPI Group. Public Service Properties Investments Limited and its subsidiaries (together "the Group" or "the Company"), is an investment property group with a portfolio in Germany. It is involved in leasing real estate where the rental income is primarily generated directly or indirectly from governmental sources. As at 31 December 2015, the Group owns four investment properties in Germany, these have been presented as held for sale within these consolidated financial statements and their results for the year treated as discontinued operations as it is anticipated that these will be sold within the first half of 2016. After the sale of these assets the Group will hold no investment properties.

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 2015, which have been drawn up according to uniform Group accounting principles.

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

Comparative information in the consolidated income statement and consolidated statement of comprehensive income have been restated in order to be consistent with the presentation of certain items as discontinued operations in 2015 as detailed in Note 15.

Adoption of new standards and interpretations

No new standards or interpretations have been adopted during the year by the group.The group has adopted, without impact, the following annual improvements and amendment.Annual improvements 2010-2012 (effective 1 July 2014)Annual improvements 2011-2013 (effective 1 July 2014)Amendment to IAS 19, 'Employee benefits', on defined benefit plans (effective 1 July 2014) New standards not yet adopted

The following new standards have been issued but are not effective for the financial year ended 31 December 2015 and have not been early adopted:

IFRS 15, 'Revenue from contracts with customers' deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted. The adoption of IFRS 15 is not expected to have a material impact on the consolidated financial statements.

IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 will require impairments to be based on a forward-looking model; will change the approach to hedging financial exposures and related documentation and the recognition of certain fair value changes. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The adoption of IFRS 9 is not expected to have a material impact on the consolidated financial statements.

2.1 Basis of preparation (Continued)

IFRS 16: IFRS 16 Leases substantially changes the financial statements as the majority of leases will become on-balance sheet liabilities with corresponding right of use assets on the balance sheet. The standard replaces IAS 17 Leases and is effective January 1, 2019. Early application is permitted for companies that also apply IFRS 15 Revenue from Contracts with Customers. The Group is yet to assess the possible impact of IFRS 16.

 2.2 Principles of consolidation

2.2.1 Subsidiaries

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Groups accounting policies.

2.2.2 Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

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.

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 Germany (discontinued in 2015)

· Activities in the United Kingdom (discontinued in 2014)

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.

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 Group's presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of each transaction. 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 and qualifying net investment hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented net in the income statement within finance costs and finance income respectively. All other foreign exchange gains and losses are presented net in the statement of comprehensive income.

Group Companies

The results and financial position of all the Group entities 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 in the statement of comprehensive income.

On the disposal of a foreign operation (that is, a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation) all of the exchange differences accumulated in equity in respect of that operation attributable to the equity holders of the Group are reclassified to profit or loss.

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

2.5 Investment property

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

Investment property comprises freehold land and buildings and is initially recognised at historic cost, including related transaction costs and borrowing costs. After initial recognition investment property is held at fair value which 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 independent 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 any cash outflows that could be expected in respect of the property.

Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognized

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 where necessary.

Where the Group disposes of a property at fair value in an arm's length transaction, the carrying value immediately prior to the sale is adjusted to the transaction price, and the adjustment is recorded in the income statement within net gain from fair value adjustment on investment property

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.

Operating lease:

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.

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.

2.7 Loans and receivables

Loans are classified in accordance with the specific contractual arrangements.

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 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 the statement of comprehensive income. 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.

2.9 Cash and cash equivalents

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.

2.10 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.

2.11 Trade payables and other payables

Trade payables and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.12 Dividends

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

2.13 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.

2.14 Current and deferred income tax expense

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 Group 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.

2.15 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. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

2.16 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Rental income from investment properties is recognised in accordance with the terms of the lease. Every investment property is accounted for individually. Operating lease agreements of the German investment properties are based on long-term leasing contracts of 20 years.

2.17 Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. The Group has chosen to capitalise borrowing costs on all qualifying assets irrespective of whether they are measured at fair value or not.

2.18 Finance income and expense

Interest income and expense are recognised within 'finance income' and 'finance costs' in profit or loss using the effective interest rate method, except for borrowing costs relating to qualifying assets, which are capitalised as part of the cost of that asset. 'Finance income' is presented before operating profit and 'Finance costs' are presented after operating profit.

2.19 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.

2.20 Discontinued operations

Discontinued operations are shown in accordance with IFRS 5, any part of the entity which has either been disposed of or is classified as held for sale is treated as a discontinued operation if it represents a separate major line or geographical area of operations. The total post tax profit or loss is presented as a single figure on the face of the income statement and details of revenue, expenses, taxation and cash flows are separately disclosed.

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 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

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to euros. 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. In particular the Group is exposed to foreign currency movements in relation to Euro denominated intercompany balances between Euro and Sterling denominated segments.

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

 (b) Credit risk

Credit risk arises from cash, derivative financial instruments and deposits with banks and financial institutions.

The table below shows the credit rating and balance of the three major bank counterparties at the balance sheet date. The table includes all cash and cash equivalents including that classified as held for sale.

The balances in relation to Bremer Kreditbank AG are included within those presented as held for sale as at 31 December 2015 (see Note 15). Ratings for this bank are not available.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. 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 date to the contractual maturity date. The amounts disclosed in the table are the continuing contractual undiscounted cash flows.

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 cash flows 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 (if free cash is available for dividend declaration), return capital to shareholders, issue new shares or sell assets to reduce debt.

3.2 Fair value estimation

The table below provides disclosure of fair value measurements as at 31 December 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).

See Note 15 for disclosures of the disposal assets and liabilities held for sale and have been measured at fair value.

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.

For further information of the valuation of Investment Properties see Note 11.

3.3 Other risk factors

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.

As at 31 December 2015, the valuation of the investment property has been based on the estimated market value. As mentioned in Note 15 the properties were being actively marketed as at 31 December 2015 and negotiations were at an advanced stage, from these negotiations the Group was able to estimate current price in an active market.

6. REVENUE

The group derives its revenue entirely from rental income received from investment property. As at 31 December 2015, the four remaining investment properties owned by the group in Germany have been presented as held for sale. As these represent a significant separate geographical line of business, it has been treated as a discontinued operation (see Note 15), as such no rental income is shown within continued operations in the consolidated income statement (comparatives have also been restated).

The majority of investment properties in Germany are leased for an initial period of 20 years; however the lessee has the right to renew the leases for a further period of 5 or 10 years, subject to the agreement of the revised rent. The rent on the majority of leases is changed every four years from the anniversary of inception, with reference to the German Consumer Price Index.

The investment properties in the UK were included in discontinued operations in 2014 and sold on 4 March 2015 (see Note 15). The investment properties were leased for an initial period of 35 years. The leases terminated in 2039, although the lessee had 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. Each lease was subject to an upward only market rent review every five years from the start of the lease. In the event that a UK property was damaged or destroyed by any insured risk and was not reinstated by the Group within a period of 3 years, the lessee had the right to terminate the lease in respect of that UK property. The lessor had the option to terminate each lease, subject to the senior lender's consent, for various reasons including the breach of material clauses of the lease.

7. ADMINISTRATIVE EXPENSES

8. 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.

10. DIVIDENDS

No interim or final dividend was paid in 2014. No interim dividend was paid in 2015 and the Directors do not recommend a final dividend for 2015. See Note 18 for details of Compulsory Partial Redemptions of Ordinary Shares made during 2015.

11. INVESTMENT PROPERTY

Investment property held for sale

Included in investment property held for sale as at 31 December 2015 are the four remaining investment properties held by the Company in Germany (Brakel, Buren, Arnsberg and Kreuztal-Kromabch); these were approved for sale in 2015.

As at 31 December 2014 and 30 June 2015 these investment properties were valued by Colliers International Property Consultants Limited ("Colliers"). The valuation basis is market value and conforms to international valuation standards. The main inputs in the model are the annual net rental and the average capitalisation rate of 11.7% (2014 - 9.29%). The capitalisation rate is based on properties in similar conditions and reflects the expectations on future incomes. Given the unobservable inputs used for the valuation, the fair value is of level 3 (2014 - Level 3). Colliers is a qualified independent valuer who holds recognised and relevant professional qualifications and has recent experience in the relevant locations and category of properties being valued. The valuations were presented before estimated purchasers' costs; however, sellers' costs are not included. Prior to the transfer to the disposal group classified as held for sale, these properties were written down to their estimated sales values (€3,000,000 in relation to the Brakel property and €10,000,000 in relation to the three properties in Buren, Arnsberg and Kreuztal-Krombach, in total €13,000,000 (£9,580,381)), which is also in line with the latest Colliers valuation.

The group announced the sale of the Brakel property on 2 February 2016 for a gross price of €3,000,000 (£2,210,433) and the sale of the three remaining assets leased to Marseille Kliniken on 10 March 2016 for a gross price of €10,000,000 (£7,369,938) (see Note 29).

Disposal of investment property

Disposals during the year ended 31 December 2015 relate to the sale of one care home in Germany (Huttenstrasse, Berlin). This property was written down to its sales value of €5,400,000 (£3,933,853) prior to disposal. In doing so the Group recognised a loss of €550,676 (£399,765) which is included in the net losses on fair value adjustments of £1,442,732 in the table above.

As discussed in Note 15, the Group disposed of its UK companies, businesses and assets on 4 March 2015. As these companies were approved for sale in 2014, the UK investment properties were treated as held for sale as at 31 December 2014. Prior to transfer to the disposal group classified as held for sale, these assets were written down to their sales value of £29,546,400.

Also included in Investment property held for sale as at 31 December 2014 is one investment property in Germany (Lichtenberg) which was approved for sale prior to the year end. This had a sales value of €2,500,000 (£1,956,182) and the sale finalised in 2015.

Disposals during the year ended 31 December 2014 relate to the disposal of a German partnership which owns two care home properties in Germany (Langen and Lutzerath) which completed in November 2014. The disposal value of £11,286,970 (€14,319,780) represents the fair value at the date of disposal which equated to the Colliers valuation performed in June 2014.

Bank borrowings are secured on investment property as outlined in Note 19.

12. FINANCIAL INSTRUMENTS BY CATEGORY

The accounting policies for financial instruments have been applied to the line items below. See Note 15 for disclosures of the disposal assets and liabilities held for sale and have been measured at fair value less cost to sale.

12. FINANCIAL INSTRUMENTS BY CATEGORY (Continued)

The accounting policies for financial instruments have been applied to the line items below. See Note 15 for disclosures of the disposal assets and liabilities held for sale and have been measured at fair value less cost to sale.

13. RECEIVABLE FROM FINANCE LEASES

As referred to in Note 15, the remaining UK portfolio was approved for disposal by the Directors in December 2014 and sold on 4 March 2015. As such the receivable from finance lease was transferred to the disposal group classified as held for sale as at 31 December 2014.

The Group had 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 had been licensed to an independent third party for 35 years with annual increases in line with the Retail Price Index, subject to a maximum increase of 5%. The operator maintained the right to run the business and receive any benefits/losses derived from running the business. The remaining life of this licence was 25 years.

The Group does not have any finance leases as at 31 December 2015.

14. INVESTMENTS IN SUBSIDIARIES

15. NON-CURRENT ASSETS HELD FOR SALE, DISCONTINUED OPERATIONS AND OTHER TRANSACTIONS

a) Non-current assets held for sale

As at 31 December 2015, the assets and liabilities directly associated with the four remaining German investment properties held by the group have been presented as held for sale and written down to their anticipated sales value following the approval for their disposal in 2015. As at 31 December 2015, the properties were available for immediate sale and being actively marketed, with negotiations with potential buyers at an advanced stage. Other assets and liabilities directly associated with the investment properties which will be disposed of in the same transaction have also been presented in this disposal group. The completion dates for these transactions are anticipated to be in the first half of 2016 (See Note 29).

As at 31 December 2014, the assets and liabilities related to four subsidiary companies Healthcare (Wellcare) Limited, HCP Community Support Services, HCP Wellcare Progressive Lifestyles Limited and Healthcare (I) Limited along with one investment property owned in Germany have been presented as held for sale following the approval of the Directors in December 2014 for their disposal. The completion dates for these transactions were in March 2015.

Assets of disposal group classified as held for sale

Liabilities of disposal group classified as held for sale

b) Discontinued operations

In the year ended 31 December 2015, the results of the German segment of the business was treated as discontinued operations as it represents a significant segment of the business and the four remaining investment properties have been presented as available for sale at 31 December 2015, with the expected completion date of these transactions to be within the first quarter of 2016. The comparative information for the year ended 31 December 2014 has been restated to reflect this treatment.

Additionally, in the year ended 31 December 2014, the results of the four subsidiary companies listed in 15 a) were treated as discontinued operations as they represent significant segments of the business.

An analysis of the result of discontinued operations, and the result recognised on the re-measurement of assets or disposal group is as follows: