1. ACCOMMODATION BONDS: FUTURE DIRECTIONS DAVID ARMSTRONG Chief Executive - Amity Group Pty Ltd & DCA Aged Healthcare Holdings Pty Ltd Director – Guardian Healthcare Group

2. 2 Presentation Overview 1.Overview of DCA Aged Care 2.Australian Industry Overview – Key Features & Trends 3.Improved Capital Funding – Accommodation Bonds 4.Where to from here?

3. 3 DCA Group Businesses Aged Care Diagnostic Imaging Australia Amity Group DCA Group Limited UK Lodestone New Zealand Guardian Healthcare Australia I-MED Network

4. 4 DCA Aged Care Group  Total of 83 centres with around 6,000 beds under operation in Australia and New Zealand  350+ independent living units (mostly Guardian)  12,500 “back to base” medical alarms customers (all Guardian)

5. 5 Amity Group (Aust)  Operate 3,500 beds at 45 centres, with a further 3 centres and a number of extensions under development  Post completion of new developments 4,000 beds under operation Hig h LowES ESES TotalGrand StateCar e HCHC LCLC Operationa l Provisiona l Total 4848 2,13 8 57 2 78 2 2020 3,51 2 45 5 3,967 NS W 2424 1,18 5 19 4 20 6 0 1,58 5 38 9 1,974 QL D 312 3 4949 10 0 027 2 0 VI C 1515 21 0 47 6 2020 1,21 06 1,271 ACT113 4 000 0 SA520 8 1190032 7 0 488 Bond potential on 40% of beds Closer to 50% on completion of developments

6. 6 Current Developments  New 44 bed Extra Service centre in Willoughby, Sydney  Conversion and upgrade of a former general medical / surgical hospital to a 108 bed aged care centre in Waratah, Newcastle;  New 112 bed aged care centre on the Sutherland Hospital site, as Preferred Proponent under a “build own and operate” Joint Venture with SESIAHS;  Low care extensions and upgrades to 6 existing high care centres total 275 beds – average extension size 45 beds

7. 7 Amity Grand at Mosman

8. 8 Amity at Dural

9. 9

10. 10 Amity at Tumut

11. 11 Amity at Tumut

12. 12 Amity at Tumut

13. 13 2.Australian Industry Overview – Key Features & Trends

14. 14 Three Residential Care Asset Classes  High care (Hospital) – operating margins under pressure – indexation of funding not meeting staff cost increases, & poor capital funding as no accommodation bonds can be charged to new high care residents ($11 - $17 pbd).  Low care (Rest home) – poor funding of care services (RCS), can charge accommodation bonds, but demand is for High care (home care usage increasing) – increasing occupancy softness. LC expected to become all HC in future – just meets required ROI now with “ageing in place” of residents’  Extra Service – complicated regulation / funding, but facilitates viable provision of high care by charging accommodation bonds and Extra Service daily care fees New developments virtually all attract accommodation bonds – portfolio moving from 40% to 50% of beds with bond potential

15. 15 Planning Ratios  Aged care planning ratios are determined by Commonwealth Government and are used to guide the allocation of new aged care places to a region  Current ratios per 1,000 people in a planning region aged 70 or over are:  40 High Care places  48 Low Care places  20 Community Aged Care places  Government has allocated around 56,000 aged care places over the past 6 years including around 36,350 residential places

16. 16 Allocated vs Operational Beds: Jun 05 +

17. 17 Other Industry Statistics  Around 1,600 providers with 3,000 homes / 160,000 beds  Average provider has less than 2 homes  61% not for profit, 31% for profit, 8% Government  At June 2003 only 12% of homes were 80 beds +  Funding indexation at around 2% pa + 1.75% pa “top up”

18. 18 Significant variation in profitability of providers Average EBITDA per bed per year ($) StateTop 10% quartile 1 st quartile 2 nd quartile 3 rd quartile 4 th quartile NSW (1) 13,2618,9623,6141,030-5,639 QLD11,2897,8113,921999-4,021 SA (2) 10,3847,8453,7351,110-7,169 TAS (3) 20,07415,8353,5561,163-3,633 VIC15,18410,7333,626980-6,521 WA10,5017,1263,6041,154-3,457 Australia13,3509,1163,6541,044-5,771 Notes: (1) Includes ACT (2) Includes NT (3) The small number of observations calls for cautious interpretation

19. 19 Standard HC Funding Overview Standard high care (hospital) funding around $180 per day Resident pays between $30 and $100 per day – income and asset testing Accommodation component is maximum of $17 per day ($6,205 per year) Top 10% EBITDA - $13,350 pa (per bed) Cost to develop new $120,000 - $200,000+ (per bed) Metro – land $30k, build $140k+, fitout $15k, licence $?? (per bed) $13,350 / $200,000 = 6.6% pa EBITDA return No new high care for pensioners being built in metro areas

20. 20 3.Improved Capital Funding - Accommodation Bonds

21. 21 Accommodation Bonds A payment that a person entering a low care or an extra service aged care home may be asked to pay – either as:  a lump-sum payment - refundable within a specified timeframe after departure (usually 14 days)  providers allowed to deduct a ‘retention’ amount (currently $273.50 per month) for up to 5 years from the date of entry;  a periodic payment, which is made up of 2 components – the retention amount and the interest that the service provider would normally earn on the lump sum; or  a combination of lump sum and periodic payments. Accommodation bonds must be used by the provider to: improve building standards and the quality and range of aged care services provided or to retire debt.

22. 22 Supporting increased investment Increased quality ….greater resident choice

23. 23 Prudential Requirements Various protections are in place for residents who have paid lump sum accommodation bonds. Aged care providers who receive lump sum bonds must:  Guarantee in writing to repay the bond balance within the statutory time periods (usually 14 days after departure);  Pay interest on the bond balance for the period from the date of the resident’s departure to the date the bond is actually repaid;  Provide information to bond-paying residents within four months after the end of the financial year about the:  number of accommodation bond balances that were not refunded within the statutory timeframes during that financial year;  provider’s performance against the prudential requirements; and  Resident’s entry in the ‘bond register’ which all bond taking services must keep up to date. If an aged care provider becomes bankrupt or insolvent, the Australian Government will repay the accommodation bond balance to the resident (including any accrued interest) and has the right to recover the cost by pursuing the defaulting provider and/or levying all aged care providers who hold bonds.

24. 24 Market Acceptance Of Bonds  An estimated 73.6% of aged care homes in Australia held accommodation bonds at 30 June 2005. Note that this includes some ‘ high care ’ homes that accept accommodation bonds when residents ‘ roll over ’ from low care to high care.  The average new accommodation bond agreed with a new resident in 2004-2005 was $127,618 compared with $112,613 in the prior year  Market based, but rule of thumb is around 40% of average house price in area  Percentage of bond payments by way of lump sum has increased from 89.2% in 2001-02 to 91.8% in 2004-05

25. 25 4.Where to from here?

26. 26 Provide increased choice for elderly requiring high / hospital care Those with financial capacity should be provided range of options – esp accommodation and non care (hotel / hospitality) services Home care has service delivery efficiency limitations for those requiring 24 hour assistance Government should plan for ageing population – provision ratios & targeting limited taxpayer dollars to providing aged care safety net for those in need Keep contract / fee structure simple – reducing average length of stay (increased daily fee vs accomm bond vs licence to occupy) Reducing Government regulation with increasing private pay – providers meeting market & community expectations Where to from here?