Business activity

Investment Policy and Strategy

The Group’s investment policy is to generate an attractive return by making investments which offer predictability and sustainability of cash flow, preservation of investment capital and potential capital appreciation.

The Group has followed, and intends to continue to follow, a disciplined approach to its acquisitions focusing on investments in the UK and Germany. Properties acquired by the Group are leased on a long term basis to tenants whose underlying cash flows are primarily directly or indirectly generated from, or supported by, state agencies.

Typically, targeted properties will have: a profitable track record; high occupancy levels, with historic dips having been quickly filled; where a property has recently joined the market (because it is a new build or has been re-registered for use as a care home) the demand for beds should be strong; a good local reputation and an attractive purchase price.

Acquisitions are funded with a mixture of equity and debt, subject to the senior debt to acquisition cost ratio generally being no more than 80 per cent and the consolidated Group loan to value ratio being no more than 70%. The Group currently hedges most of its interest rate exposure and, subject to costs, it is the intention of the Group to continue to do so.

In addition to direct investments in real estate, the Group may acquire holdings in real estate companies and/or other real estate investment vehicles. The Group may also acquire indirect interests in real estate, for example, building and development rights. However, the Group will not participate in such building and development projects unless they represent attractive opportunities and fall within the Group's investment criteria. The Group may also on a selective basis provide mezzanine finance to third parties to fund all or part of their purchase of real estate which meets the Group’s investment criteria, for example, specialist care homes in the UK.

The Group intends to focus on investments in Germany and the UK. The Directors believe that both of these markets offer attractive returns for the Group. In the longer term, the Group may also consider opportunities in other asset classes and countries which meet its investment criteria.

Germany

Expansion into Germany represents the main investment focus for the Group. The co-operation agreement between RP&C International Inc, and the German property investment fund manager, IMMAC Institutional Client Services GmbH ("IMMAC") is a key element in the Group's ability to source appropriate investment opportunities. IMMAC has arranged a number of acquisitions which would fall in the Group's target investment criteria since 1996, with equity provided by German retail investors. Profunda Vermögen, the main shareholder of IMMAC, owns an affiliated company that currently operates care homes in Germany with an approximate combined capacity of 600 beds. This company operates as a back-up operator for nursing homes from IMMAC’s portfolio.

IMMAC has assisted RP&C with arranging all of the Group’s acquisitions in Germany to date and is keen to continue to work with the Group on acquisitions with operators who are among the leading operators of care homes in Germany.

The Group intends to target those care homes that qualify for funding from the German state if residents cannot keep up payments. The Group is seeking to acquire assets which will be leased to one or more operators for an initial term of 20 years with a gross initial rental yield of approximately 8 per cent. and indexed rent reviews.

The Group may also acquire properties which are designated as “assisted living” homes as part of nursing and residential care home portfolios. Assisted living beds are wholly funded by the residents.

UK

The Group has adopted a strategy of using its existing cash resources to invest in the development of additional bed capacity at its UK care homes, by funding the construction and development of extensions and the redevelopment of existing properties. The Group expects the benefits of this to be increased rental income and fair value gains.

Dividend Policy

The Directors expect that, in the absence of any unforeseen circumstances, the Company will pay a dividend which will represent a yield of 10 per cent. on the 70p per share price at which shares were offered in an open offer conducted by the Company in March 2010. Subject to market conditions, the Directors intend to implement a progressive dividend policy thereafter.

The Directors believe that the Group's existing portfolio provides a solid base for such a dividend policy.

CREST, Settlement and Dealings

CREST is a UK computerised paperless share transfer and settlement procedure which allows shares and other securities, including depository interests, to be held in electronic rather than paper form and which enables transfer otherwise than by a written instrument. Securities issued by non-UK registered companies, such as the Company, cannot be held or transferred in the CREST system. However, to enable investors to settle such securities through the CREST system, a depository or custodian can hold the relevant securities and issue depository interests representing the underlying securities which are held on trust for the holders of depository interests. The Company, through its UK Depositary, Computershare, has established such a facility which is being done pursuant to a deed poll executed by Computershare, acting as depository. The Depository Interests, representing shares, have been admitted to CREST. Accordingly, settlement of transactions in shares may take place within the CREST system if the relevant shareholders so wish. Transfer of depositary interests in CREST will be subject to stamp duty reserve tax.

CREST is a voluntary system and holders of shares who wish to receive and retain share certificates will be able to do so. Shareholders who wish to hold their shares in uncertificated form through the depository interest facility will be bound by the terms of a deed poll, the form of which is available by request to the Company.