Financing Primary Healthcare The UK LIFT Programme and the Bristol LIFT project 5–6 December 2007 Bilkent Hotel, Ankara

Introduction to UK Healthcare and LIFT Overview of UK Health Care governance The healthcare sector in the UK is dominated by the NHS Currently, healthcare expenditure in the UK is estimated to be of the order of £55-57bn NHS Plan in July 2000: Over 3,000 General Practitioner (“GP”) premises modernised/rebuilt and 500 new one stop primary care centres built by 2004;

Introduction to UK Healthcare and LIFT GP surgeries replaced or modernised through new public private joint ventures called NHS Local Improvement Finance Trust (“LIFT”) companies. The primary care outlets use private funding to develop community “one-stop” health centres. Partnership for Health (“PfH”)

Introduction to UK Healthcare and LIFT PfH Bristol PCTs Infracare 20% 20% 60%

Introduction to UK Healthcare and LIFT Primary Care Trusts (“PCTs”) bring together the primary care services (e.g. GP Practices and Community Nursing Services) in an area in response to the needs of the local community The LIFT Company will have a long term partnering agreement with the PCT to deliver investment and services in local care facilities.

Contractual Structure Bristol LIFTCO Strategic Partnering Agreement Direct Agreement SMBC Shareholder Loan Agreement Lease Plus Agreement Bristol PCT’s Infracare Bristol FUNDC 1 Limited Infracare Bristol Holding 1 Limited Shareholder Construction Agreement FM Agreement Mowlem PLC Cofathec Heatsave Ltd

Bristol LIFT Bristol Lift was the 19th scheme to be formed and the first of the third wave of the introduction of these schemes by Partnerships for Health (“PfH”) Tranche 1 of the Bristol LIFT developments consists of 2 initial schemes (Fishponds & West Bristol) and 3 subsequent schemes Not all wrapped into a single financial close: the 2 initial schemes will close together as one project financing requiring c£20m of Senior Debt.

Architectural Renderings and Plans Fishponds

Architectural Renderings and Plans West Bristol

Description of Term Loan and Bid Cost Loan Facilities Sculpted repayment structure fully amortising. Loan tenor of construction period PLUS 23.5 years (i.e. around 25.5 years), to give an 18 month tail before the end of the lease (Lease Plus Agreement) Repayment source is LPA revenue. Similar in characteristics to a term loan in a standard PFI project Bid Cost Loan This vanilla corporate-style facility has been provided to cover costs incurred in developing other schemes for Bristol LIFT. These will be incurred over the next few years as the Bristol LIFT develops. The bid costs facility is available until 7 years from financial close, which is also the maturity date. The bid costs facility will be repaid by a bullet repayment

Description of Residual Value Loan Facility Residual Value Bullet Loan Bullet repayment, interest is serviced via LPA revenue. Maturity at expiry of LPA, giving a tenor of Construction period PLUS 25 years operation (i.e. around 27 years). Repayment will be sourced from the residual value derived from the properties at the expiry of the LPA. The bank made 2 key stipulations regarding the sizing of this facility: Loan to Residual Value ratio Total size of loan restricted relative to total project costs The Bank’s exposure to Residual Value is protected through an early cash-sweeping mechanic, triggered by regular valuations

Repayment Profile versus Site Value

Residual Value Methodology The “Residual Value” is the value of the property at the end of the concession, The valuation that is being used for the Bank Base Case model is the conservative valuation based upon “Vacant Possession” A detailed report provided by the bank’s independent valuers, to assess the Valuation provided by the Sponsors valuer, and to calculate a Residual Value for the Bank’s base case. Residual Value calculated by taking the Open Market Value of the site (immediately following construction), assuming it will be converted to Residential property, then indexed at a growth rate of 4% for 25 years.

Historic UK Property Growth

Residual Value Risk Management Residual Value risk is mitigated as follows Conservative loan to Residual Value ratio Conservative bank base case Residual Value The Open Market Value will be assessed every 5 years from completion of construction, and then from year 15 of operation it will be valued annually. The Residual Value will then be re-calculated each time, giving the Bank regular updates regarding the Loan to Value ratio, and giving rise to cash sweeping if value reduces materially (as above).

Residual Value Risk Management There is a Cash Sweep mechanism in place that allows the Bank to lockup all project cashflow and sweep into escrow, if it is deemed that the Residual Value has fallen below a set level. There is a Concession Life Cover Test from day one of operations which tests residual value and project cashflow With a conservative Loan-to-value (“LTV”) , a conservative RV and the right to sweep cash early, the Bank has tools to manage the residual value risk prudently and robustly.

Description of CLCR Concession Life Cover Ratio The CLCR takes into account all project cashflows including residual value sales proceeds. If the Base Case ratio is breached (either by reduced annual cashflow, or by a projected reduction in RV proceeds) then all project cashflow will be locked up in escrow until the ratio is remedied. This ratio continues until Year 15 of operations

RV Loan Bullet Payment Exit Strategy PCT extends the lease: This is the most likely scenario as primary care must continue in Bristol PCT Purchases the Sites: At the end of the lease, the PCT has the option to purchase the sites at the Open Market Value, to be agreed by the Bank, the LIFT company and the PCT, all using valuers. If the valuers do not agree on the value the PCT must pay, there is an arbitration process PCT Exits the Sites: At the expiry of the lease, the PCT exits and the LIFT company sells in the open market (most likely to a residential developer).

Contact Details Anthony Sykes Deputy General Manager Head of PPP/Infrastructure Tel: 020 7786 1556 Email: anthony_sykes@gb.smbcgroup.com SMBC Europe Limited Project Finance 99 Queen Victoria Street London EC4V 4EH