Trading Statement

30 January 2014

Public Service Properties Investments Limited

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

Trading Update for the Year to 31 December 2013

PSPI (AIM: PSPI), the specialist European real estate investment and financing company, announces a trading update for its financial year to 31 December 2013.

Total unaudited annual rental and finance lease income from continuing operations¹ was £7.9 million. UK rental and finance lease income, currently at £4.9 million per annum, will increase in February 2014 by the annual increase in the retail price index at the end of January 2014. Rental income in Germany in 2014 is expected to be at comparable levels, in euros, to income received in 2013. The Group's property portfolio remains fully let and all rental income continues to be paid when due.

Independent valuations of the Group's investment property assets at 31 December 2013 were undertaken by Colliers International ("Colliers"). The gross aggregate capital value² of the investment properties at 31 December 2013 decreased by 14.2% compared to 31 December 2012. The UK portfolio decreased by £9.6 million or 20.4% to £37.7 million whilst the German portfolio decreased by £3.1 million or 8.3% in constant currency, offset by a foreign exchange gain of £0.8 million, to £34.4 million.

The decline in the valuation of the UK investment portfolio reflected an increase in the average Capitalisation Rate³ from 8.3% at 31 December 2012 to 10.6% at 31 December 2013. Individual capitalisation rates varied between 7.0% and 22.5%. The Group's UK tenant, European Care Group ("ECG") saw average occupancy of the Group's UK investment properties decline from 89.8% of available beds at 31 December 2012 to 82.5% at 31 December 2013. As a result, ECG reported a decline of approximately 25% in the operating profit, before rent, across the Group's portfolio for the year compared to the preceding period. Part of the decline in valuation related to properties where the tenant is in the process of resolving operational issues and ECG has stated that it is optimistic that overall performance of these properties will improve. Colliers has indicated that further declines in valuation may be necessary if improvements in ECG's operational performance of the Group's UK investment properties are not evidenced during the first six months of 2014.

Some of the adverse performance by the UK tenant can be attributed to challenging trading conditions in the UK care home sector, which have been exacerbated due to management distraction at ECG whilst it addresses its own historic debt position.

The decline in the value of the German investment portfolio reflected an increase in the average Capitalisation Rate³ from 7.8% at 31 December 2012 to 8.5% at 31 December 2013. Individual capitalisation rates varied between 7.5% and 12.2% at 31 December 2013. Average occupancy across the portfolio was stable at approximately 83% of available beds up to the end of the third quarter of 2013 and is expected to have been maintained in the last quarter. Colliers reduced the valuation on one home that has experienced operational difficulties and three further homes located in North Rhine Westphalia ("NRW") where regulatory changes due to be introduced in 2018 would, as currently drafted, result in a reduction of permitted dual occupancy rooms, leading to a reduction in available beds without further investment to re-configure or extend the properties. PSPI's local adviser in Germany believes that the planned provisions are likely to be amended, in favour of care home operators, due to the overall impact of the changes in NRW.

During 2013, the Company successfully completed two refinancings secured against the Company's UK assets and has extended the final maturity of this debt to April 2016. The Company has agreed to utilise 50% of free cash flow from any asset disposals outside the UK to accelerate amortisation of debt secured against the UK portfolio. The majority of the German debt matures in March 2020 with a small facility maturing in May 2014, for which the Company has the cash to meet the repayment.

The Group continues to generate sufficient cash to meet all of its scheduled interest payments, debt repayment obligations and other operational costs. Loan to Value4 at 31 December 2013 was 42.5% and 44.5% for the portfolios in the UK and Germany, respectively, and 43.4% for the Group as a whole. Loan to Value net of cash balances at 31 December 2013 was 36.8% for the Group.

Patrick Hall, the Chairman of PSPI, reports that:

"The Company made significant progress in stabilising its trading position throughout 2013 with the completion of asset disposals in Germany and the US in the first quarter of the year. These disposals resulted in reducing leverage which remains an important focus for the Board over the medium term. The Company agreed revisions to the terms of the agreement with the asset manager eliminating the long notice period in exchange for a six monthly revolving engagement and agreed a reduction in the asset management fee from 1.5% to 0.85% of net assets.

The Company continues to test the market for all of its remaining assets and will make announcements on the progress of its ongoing strategic review as appropriate. The operational difficulties affecting the UK portfolio have partly been a result of the diversion of the tenant's senior management time; however all rents continue to be paid when due. An early resolution to ECG's discussions with its lenders and prospective purchasers should be desirable for the Company.

The Company currently expects to announce its audited results for the year ended 31 December 2013 during the last week of March 2014."

Notes:

¹ Includes income from ten UK properties and eight German properties.

² The valuations are stated gross of certain costs of up to 7% that a purchaser may incur if the assets were sold.

³ 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.

4 Gross debt outstanding expressed as a percentage of the gross value of investment properties, including a valuation of the finance lease which also forms part of the collateral for the UK debt, where applicable.

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

Forward-looking statements

This release may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this release and include, but are not limited to, statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial position, liquidity, prospects, growth, strategies and expectations of the industry.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the development of the markets and the industry in which the Group operates may differ materially from those described in, or suggested by, any forward-looking statements contained in this release. In addition, even if the development of the markets and the industry in which the Group operates are consistent with the forward-looking statements contained in this release, those developments may not be indicative of developments in subsequent periods. A number of factors could cause developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, asset disposals, general economic and business conditions, industry trends, competition, changes in law or regulation, currency fluctuations, changes in its business strategy, and political and economic uncertainty. Save as required by any laws or regulatory provisions, the Company is under no obligation to update the information contained in this release.

Past performance cannot be relied on as a guide to future performance.

Nothing in this release should be construed as a profit forecast.

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