Target Healthcare REIT plc Annual Report and Financial Statements 2026
Investing
in care.
Delivering
returns.
Annual Report and
Financial Statements 2026
3.91%
3.84%
3.89%
2024
2025
2026
6.13
6.08
6.54
2024
2025
2026
110.7
114.8
122.1
2024
2025
2026
22.5%
21.8%
16.1%
2024
2025
2026
11.8%
9.3%
12.0%
2024
2025
2026
5.712
5.884
6.032
2024
2025
2026
73.0
60.8
82.6
2024
2025
2026
107%
103%
108%
2024
2025
2026
2026 FINANCIAL HIGHLIGHTS:
Introduction
We are Target
Healthcare
We prioritise responsible investment
with a clear purpose – improving the
UK’s care home real estate.
EPRA NTA per share (pence)
122.1 +6.4%
Adjusted EPRA earnings per share (pence)
3
6.54 +7.6%
Net loan-to-value
5
16.1%
Total accounting return
1
12.0%
Dividend per share (pence)
6.032 +2.5%
Average cost of debt
6
3.89% +5bps
IFRS profit (£ million)
82.6
Dividend cover
3
108%
1 Based on EPRA NTA movement and dividends
paid, see alternative performance measures on
page 107.
2 Annual percentage valuation movement,
adjusted for capital expenditure, acquisitions
and disposals.
3 Based on adjusted EPRA earnings, see note 8
to the consolidated financial statements and
alternative performance measures on page 107.
4 See EPRA performance measures on page 109.
5 See glossary of terms and definitions on page112.
6 Weighted average cost of drawn debt, inclusive
of amortisation of arrangement costs.
Annual Report and Financial Statements 2026
01
Corporate Governance
Strategic Report
Financial Statements Additional Information
908.5
929.9
924.1
2024
2025
2026
19.1%
21.8%
18.5%
2024
2025
2026
IN THIS REPORT
04
Strategic Report
Chair’s Statement 06
Our Investments 10
Our Strategy 12
Case Study: Asset Management 21
ESG Commitments 22
Investment Manager’s Report 24
Principal and Emerging Risks
and Risk Management 26
Section 172 Statement 28
30
Corporate Governance
Board of Directors 32
Investment Manager 34
Directors’ Report 36
Statement of Directors’
Responsibilities 43
Corporate Governance
Statement 44
Report of the Audit Committee 49
Directors’ Remuneration Report 54
Independent Auditor’s Report 58
64
Financial Statements
Consolidated Statement of
Comprehensive Income 66
Consolidated Statement
of Financial Position 67
Consolidated Statement
of Changes in Equity 68
Consolidated Statement
of Cash Flows 69
Notes to the Consolidated
Financial Statements 70
Company Financial Statements 88
98
Additional Information
Notice of AGM 100
Shareholder Information 104
Alternative Performance Measures 107
EPRA Performance Measures 108
Data Centre 110
Glossary 111
Corporate Information 114
Portfolio value (£ million)
924.1 +4.9%²
Adjusted EPRA cost ratio
4
18.5% -330bps
Asset Management in Action
This year our Investment Manager
completed initiatives across a number
of homes to secure rental income and
deliver shareholder value. One such
example is covered here in detail.
Read more: page 21
CASE STUDY
Target Healthcare REIT plc
02
At a Glance – Our Market
Committed long-term
investment in modern,
purpose-built care homes
High quality real estate
Homes¹
87
Portfolio
£924m
market value
£61m
contracted rent
Diversified income
Tenants
31
Fee sources
2
78%
private
22%
public
Long-term focus
WAULT
26.0 years
Upwards only
rent reviews
100%
inflation-linked
1 86 operational care homes and one
development site.
2 51% privately paid, 27% topped up privately
paid and 22% publicly funded.
3 A further 66 beds will be added on
completion of the development site held
at 30 June 2026.
PORTFOLIO AT 30 JUNE 2026
Annual Report and Financial Statements 2026
03
Corporate Governance
Strategic Report
Financial Statements Additional Information
2
1
17
19
7
7
6
6
11
11
14%
3%
83%
12%
71%
since 2010
36%
4%
8%
8%
6%
6%
5%
5%
4%
9%
9%
We have clear criteria for home design, quality
and facilities to provide great environments for
residents and care providers. We invest in homes
the length and breadth of the UK, with tenant
diversification being key.
1
= Number of properties in region
MSCI Region
Contracted
Rent (£m)
Market
Value (£m)
South East 10.9 170.6
North West
10.9 164.4
Yorkshire & The Humber
10.7 163.4
Scotland
7.0 105.7
South West
6.1 86.1
West Midlands
5.0 76.6
East Midlands
4.7 67.6
Eastern
4.0 61.1
North East
1.2 19.7
Wales
0.6 8.9
Total 61.1 924.1
BUSINESS
RESULTS
OUR PORTFOLIO
Operator diversification
by contracted rent
Properties by date of construction
Purpose-built 2020 onwards
Purpose-built 2010 – 2019
Purpose-built 2000 – 2009
Purpose-built 1990 – 1999
The first ten blocks represent
our ten largest operators, with
the eleventh representing the
remaining 21 operators, each
below 3.3%.
Scale
5,870
Beds
3
Track Record
7.8% since launch
Total accounting return (annualised)
Prudent Financing
16.1%
Net loan-to-value
BUSINESS
Target Healthcare REIT plc
04
Annual Report and Financial Statements 2026
05
Corporate Governance
Strategic Report
Financial Statements Additional Information
Strategic
Report
04–29
Chair’s Statement 06
Our Investments 10
Our Strategy 12
Case Study: Asset Management 21
ESG Commitments 22
Investment Manager’s Report 24
Principal and Emerging Risks and Risk Management 26
Section 172 Statement 28
Target Healthcare REIT plc
06
Principled investment
exclusively in well-designed,
purpose-built care homes
Alison Fyfe, Chair
Chair’s Statement
Dear Shareholder,
I am pleased to introduce the results for
the year ended 30 June 2026. With a total
accounting return of 12.0%, these represent
the Group’s best annual financial
performance since its IPO in 2013.
This strong return was primarily due to the
Group’s sustainable rental income. The
inflation-linked rental uplifts embedded in
the leases, combined with stable valuation
yields over the year, drove a notable
improvement in like-for-like capital value.
Returns were further enhanced by the net
impact of the Group’s investment activity
during the year. The proceeds of a significant
disposal, which I detailed this time last year,
were comfortably in excess of holding value,
and have since been largely redeployed in
high-quality real estate at an accretive yield.
During the year, the Group also made
significant progress with its ongoing asset
management activities. These have helped
to drive financial returns, improve both the
physical standard and already excellent ESG
credentials of the real estate, and enhance
the quality of the portfolio’s long-duration
rental income. As at 30 June 2026, the
portfolio had returned to full rental
collection, supported by rent cover on
mature homes of 1.9 times over the last
twelve months.
We also took action to strengthen and
de-risk the balance sheet, refinancing the
Group’s shorter-term bank facilities until at
least September 2029. The hedging of these
facilities means that the interest rate on the
entirety of the Group’s £200 million drawn
debt is now fixed at a weighted average cost
of 3.89%. Flexibility has also been maintained
through the introduction of £80 million of
committed revolving credit facilities and a
further £70 million uncommitted accordion
option.
The improvements to the real estate
portfolio, its tenant base and the balance
sheet, all provide a solid foundation from
which the Company can aim for steady and
consistent growth. We are confident that,
having identified a significant pipeline of
high-quality real estate, the Group’s available
capital will be deployed in an earnings
accretive and timely manner.
1. Market overview
As I set out in the Company’s half year
report, the UK real estate market has been
slow to recover from its recent lows, with
stubborn inflation slowing the previously
anticipated reduction in UK interest rates.
Whilst the calendar year started with cautious
optimism, downside risks have subsequently
crystallised, with global geopolitical conflict
and, more locally, a stagnant economy and a
growing government budget deficit. With this
emerging instability altering the economic
outlook for the UK and adding to the volatility
of capital markets, inflation is now expected
to peak towards the end of the calendar year.
Against this backdrop, transactional activity
in the UK healthcare property sector remains
elevated, dominated by overseas capital
attracted by the UK’s supportive elderly care
demographics. Transactions have continued
to focus on either wholeco deals, a
transaction structure where both the
ownership of the real estate and the
operations of the care home are acquired in
a single deal, or those which recombine the
care home operations and the ownership of
Annual Report and Financial Statements 2026
07
Corporate Governance
Strategic Report
Financial Statements Additional Information
EPRA NTA per share movement
+6.4%
Total accounting return
12.0%
Dividend cover
108%
the underlying property – with some care
homes then being operated under a
management contract.
Some of the market participants are thereby
able to generate an enhanced financial
return by combining property ownership and
home operation in a way not suitable for the
Group as a UK REIT specialising in care home
real estate. One such market participant
purchased properties from the Group last
year allowing the Group to generate a
substantial premium to holding value.
This dynamic may present additional
opportunities for the Group to further refresh
its portfolio whilst also delivering enhanced
returns and/or continuing to enhance the
overall quality of the Group’s portfolio.
The Company will continue to invest in care
home real estate let on triple net leases, a
traditional lease structure where the tenant
pays a base rent in addition to being
responsible for ongoing property expenses,
including building insurance and
maintenance costs. Investment demand for
care homes leased on this basis has also
remained high and this has provided
fundamental support to our asset valuations,
despite the higher interest rate environment.
This competitive investor market is further
exacerbated by (i) new entrants seeing the
attractiveness of the sector; and (ii)
alternative sources of finance being available
to tenant operators that may have previously
considered a sale and leaseback. The latter is
partially driven by traditional lenders looking
to rebuild their exposure to the sector as the
aforementioned transactional activity has led
to existing loans being repaid.
This broadening demand and limited supply,
combined with the increased possibility of
aborted deals which are expensive in terms
of both cost and delays in committing
capital, means that careful asset selection,
market knowledge and operator relationships
remain key in identifying and securing further
acquisitions.
The listed real estate market has also
remained active, mainly in relation to
corporate activity. Mergers and take-private
acquisitions have significantly reduced the
number of listed property companies and
increased the scale of those which remain.
Against this backdrop, the Board remains of
the view that there is a place for sector
specialists, supported by an experienced
management team with a detailed focus on
asset management to drive both income and
capital value growth.
The share price discount to NTA has
generally narrowed over the course of
the last year across the property sector,
particularly in sub-sectors supported by
fundamental demand and long income.
This has very much been evident in the
Company’s share price. Recent equity
issuance by other listed property companies,
the first for some time, provides evidence
that there are green shoots of growth in
the listed property sector that will help to
support the Company’s own growth
aspirations.
In relation to the care sector, we note the
Prime Minister’s recent social care plan
speech and the commencement of public
consultation by Baroness Casey of
Blackstock on the need for social care
reform. The Group would welcome new
solutions to the issues in social care, and
considers it is sensible to bring forward the
Casey Report to 2027.
We believe that responsible private operators
and long-term investors, with whom the
Group looks to partner, will continue to play
a key role in ensuring that everybody can
access high-quality care. This is necessary
to provide dignity and security in later life,
benefitting both residents and society.
Further details on developments in the care
sector are considered in the Investment
Manager’s report on pages 24 to 25.
2. Portfolio performance
As I mentioned above, the Group’s property
portfolio has continued to perform strongly,
driven by the level of inflation-linked rental
income growth. At a property level, this is
demonstrated by the portfolio’s
outperformance of the MSCI UK Annual
Healthcare Property Index. The portfolio
generated a standing asset total return of
11.1% for the 2025 calendar year, relative to
the 7.5% total return from the Index. This
placed the portfolio second out of the 39
constituents in the Index over one year and,
having outperformed the Index in every year
since the Company’s IPO, resulted in a
ten-year annualised standing asset return
of 9.7%, compared to the Index’s 7.1%.
The overall like-for-like movement in the
capital value of the portfolio for the year
ended 30 June 2026 was 4.9%. This
consisted of 3.2% from inflation-linked rent
reviews, 1.3% from disposals and other asset
management initiatives and 0.3% from
additional one-off rent increases. A marginal
tightening in yields contributed the final 0.1%.
The key portfolio activities during the year,
further details of which are contained in the
Investment Manager’s Report on pages 24
to 25, were as follows:
• The disposal of 11 assets for £97 million,
representing an average premium to their
holding value at 30 June 2025 of 11.0%
and an implied net initial yield of 5.5%.
These disposals added 1.6 pence per
share to EPRA NTA and primarily related
to the sale of nine assets in late October
2025, which facilitated a reduction in the
Group’s exposure to its largest tenant
group.
• The acquisition of (i) four standing assets
for £45 million, including costs; (ii) a
forward commitment to acquire a fifth
home for £13 million once built; and (iii)
the initial acquisition of a forward funded
development which will total £15 million
over the build period. This deployment
of a total of £73 million of the disposal
proceeds has improved the overall
diversification of the portfolio.
Additionally, the funding of new
developments provides the Group with
access to new, high-quality assets and
maintains the average lease length.
This also provides a benefit to society
in increasing the quantum of quality real
estate available to this important sector.
• The re-tenanting of a total of six assets
in the year, all at unchanged or improved
rental levels. This activity, plus the
crystallisation of a performance-linked
rental uplift incorporated in the lease as
part of a re-tenanting in a prior year, has
resulted in an increase in capital values
of £5.8 million over the year, with the
potential for further yield tightening
should the relevant homes evidence the
expected operational improvement. It
also secured the recovery of agreed rent
arrears of £1.9 million, contributing a
non-recurring 0.18 pence per share to the
Group’s adjusted EPS.
A further illustration of the Group’s approach
to asset management is detailed in the case
study on page 21.
Target Healthcare REIT plc
08
Chair’s Statement continued
3. Financial performance
At the Group level, we delivered a total
accounting return of 12.0% for the year. This
was driven by an EPRA NTA increase of 6.4%,
to 122.1 pence per share from 114.8 pence,
combined with dividends paid in the year.
A more detailed analysis of the components
of this return is provided on page 19 but
fundamentally consists of:
1. the crystallisation of the inherent value of
our portfolio from disposals, along with
the support that both the disposal value
achieved and the aforementioned market
demand provides to the valuation of the
Group’s core portfolio;
2. the recurring and growing EPRA earnings
arising from our best-in-class real estate
portfolio, with inflation-linked income,
operating in a sector supported by
demographic trends; and
3. the result of the asset management
activities detailed earlier, which returned
the portfolio to 100% rent collection by
the year end.
This has been delivered despite a modest
level of gearing. The LTV started the year
at 21.8%, reduced following the property
disposals to c.12.8%, before gradually
increasing to 16.1% at 30 June 2026 as
disposal proceeds were redeployed. Full
investment of the Group’s committed debt
facilities would increase our LTV further, to
approximately 25%. Depending on market
conditions, we may also look to utilise our
uncommitted accordion facilities. All else
being equal, this would increase the Group’s
LTV to approximately 30%.
Notwithstanding the level of investment
and asset management activity in the year,
our overall business model remains simple;
investing for the long-term in a carefully
curated investment portfolio with
sustainable, inflation-linked rental income.
This is financed by a core of long-term
debt fixed at an attractive interest rate,
supplemented by flexible revolving credit
facilities.
As a result of the investment activity in the
year, the Group’s investment portfolio at
30 June 2026 had a contractual rent roll
totalling £61.1 million. This was financed
with £200 million of debt at a weighted
average annual interest rate of 3.89%, fixed
until at least 30 September 2029. The
Group’s operating costs, as measured by
the ongoing charges ratio, has remained
relatively consistent over recent years,
at c.1.5%.
Looking ahead, the Group has approximately
£103 million of committed capital available
for further investment; being £23 million
from current cash and £80 million from its
revolving credit facilities (‘RCF’). If drawn,
these RCFs would carry an interest cost of
SONIA plus 1.50% per annum.
At the time of writing the Group has
committed £26 million of this available
capital to further investment at a weighted
net initial yield of 5.9%. The Investment
Manager has identified a pipeline of further
opportunities with an indicative blended net
initial yield in excess of 6% and an aggregate
value significantly above the committed
capital available.
These identified care home transactions may
take longer to complete than the acquisition
of standing assets in other property sectors.
For example, due to the protracted timetable
for receipt of regulatory permissions where
a transaction includes a change in operator,
or potential delays in the planning process
before the Group will contractually commit
to a forward fund. However, we remain
confident in the Investment Manager’s ability
to deploy the remaining capital in a diligent
but timely manner, and on an earnings
accretive basis.
4. Debt facilities
In September 2025, the Group refinanced
its short-term banking facilities on attractive
terms with the incumbent lenders. The
existing £170 million facilities were replaced
with £130 million of new committed
facilities, consisting of £50 million of term
loans and £80 million of RCFs. These new
facilities were for a minimum term of three
years, with the option of two further
one-year extensions, subject to lender
consent. Subsequent to the year end, the
first of these extension options has been
exercised.
5. Dividend
In the absence of unforeseen circumstances,
the Board intends to increase the quarterly
dividend in respect of the year ending June
2027 by 3.0% to 1.553 pence per share,
providing an annual total dividend of 6.212
pence per share. This increase represents a
modest discount to the Group’s like-for-like
rental growth of 3.7%, in order to continue to
build headroom in dividend cover.
6. Shareholder engagement
We have always placed a significant
emphasis on ensuring that the views of
shareholders are reflected in any strategic
decisions we take on behalf of the Company.
We recognise that there will generally be a
spectrum of views, particularly given the
current market environment for both
property and listed companies, and we have
sought to maintain both direct engagement
with shareholders and the level of
independent feedback provided from our
brokers in order to ensure that the actions
taken by the Board take the views of
investors, as a whole, into consideration.
Annual Report and Financial Statements 2026
09
Corporate Governance
Strategic Report
Financial Statements Additional Information
7. Investment Manager alignment
In line with the previous indication included
in the interim report, the Board confirms that
it has reached agreement with the
Investment Manager that, over a period of
up to three years, the Investment Manager
(including senior members of the
management team and their connected
parties) will invest the equivalent of 25% of
one year’s management fee in acquiring
shares in the Company. Such acquisitions are
expected to be on an ad hoc basis through
the secondary market and will, of course,
remain subject to applicable law and
regulations. It is anticipated that this
investment will commence shortly after the
announcement of these annual results which
will release the Company from its current
closed period.
8. Board succession
As I highlighted last year, the Board intends
to appoint a sixth non-executive Director in
order to bolster the combined skills and
experience available to the Company, and
provide greater depth and continuity to
support our succession planning. The Board
will remain mindful of the benefits of
diversity in making this appointment. This
recruitment process is well advanced, and
the Board anticipates announcing the
successful candidate prior to the Company’s
Annual General Meeting.
9. Annual General Meeting (‘AGM’)
The AGM will be held in London on
2 December 2026. Shareholders that are
unable to attend are encouraged to make
use of the proxy form provided in order to
lodge their votes, and to raise any questions
or comments they may have in advance of
the AGM through the Company Secretary.
10. Outlook
The Board remains committed to the
Group’s investment strategy of investing in
modern, purpose-built care home assets
with sustainable and inflation-linked rental
streams. We are also mindful of the market’s
general preference, received through both
direct shareholder engagement and as
illustrated by the continued acceleration of
consolidation across both the listed property
and investment company sectors, for
companies to increase scale. The primary
aim of such growth must be to enhance
earnings without diluting the quality of either
the real estate held or the sustainability of the
underlying rental stream, with such increased
size also benefitting companies by improving
liquidity in their shares, reducing cost ratios
and increasing diversification in their
investment portfolios.
Whilst the investment market remains
competitive, the care home market itself is
structurally undersupplied and therefore
supportive of the Group’s growth ambitions.
This is driven by dual tailwinds:
(i) UK demographic trends. The number of
people aged over 85, of whom it is estimated
that 1 in 8 will require residential care, is
expected to double from 1.8 million to 3.6
million by 2050. The higher acuity needs of
these more elderly persons generally make
other care options, such as domiciliary care,
a less suitable alternative; and
(ii) a shortage of care homes of suitable real
estate quality and design. The demand for
new purpose-built homes will be driven not
only by the need for an increase in the
overall number of beds to support the aging
demographic above, but also to replace
older homes as they close and are
withdrawn from the market. This should
provide a steady supply of purpose-built
homes of the type typically financed by the
Group. Currently c.100 newly-built homes of
c.66 beds each enter the market each year
and it is expected this will need to increase
further in order to meet demand.
The Company, as the sole UK-listed specialist
in care homes, supported by a focussed
Investment Manager with a proven track
record, is well positioned to provide investors
with exposure to this attractive sector.
The Group has a variety of capital sources
available to support its growth aspirations:
• Equity: where issuance and deployment
in identified opportunities would be
enhancing to earnings and support
dividend growth;
• Debt: where the lower cost of financing
would enhance returns without
exceeding a loan-to-value of c.30%;
• Capital recycling: similar to the activity
demonstrated in the current year, where
disposal proceeds can be redeployed into
earnings-enhancing opportunities, whilst
maintaining or enhancing the quality of
the property portfolio.
Our focus on investing for growth will be
progressed within the parameters of the
competitive markets discussed earlier.
The Board will also continue to consider
alternative financing and investing options
that offer earnings enhancing opportunities.
The Board aims to pursue growth in the
property portfolio without compromising the
overall prudent investment approach which
has served the Company’s shareholders well
to date. Patient investing, particularly in
competitive markets, remains key both in
terms of delivering sustainable financial
returns and in the construction of a balanced
portfolio carefully weighted to those factors
and characteristics that are expected to
ensure that the properties remain attractive
to investors, tenant operators and residents
over the long-term.
We remain confident in our growth
aspirations and that the benefits of (i) the
inherent value of our existing portfolio of
high-quality, purpose-built assets; (ii) the
structural support from annual inflation-
linked rental growth; and (iii) the
demographic tailwinds for the sector, will
continue to deliver attractive returns and
shareholder value.
Alison Fyfe
Chair
21 September 2026
Target Healthcare REIT plc
10
100%
80%
90%
60%
70%
40%
50%
10%
0%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
30%
20%
25%
20%
15%
10%
0%
5%
Annual Total Return
Cumulative Performance
93%
Our approach to investments
Committed long-term investment
Our purpose is to accelerate the improvement in the physical
standards of UK care homes through long-term, responsible
investment in modern real estate that delivers our return
objectives to shareholders.
We are advocates of the benefits that intelligently designed, purpose-built care homes can
bring and we want more residents, care professionals and local communities to benefit from
their positive social impact.
Like-for-like rental growth
3.7%
Five-year average 3.8%
• Our leases have annual, upwards-only rent reviews, linked to inflation with collars and
caps averaging around 1.5% and 3.9% across the portfolio.
• We aim to pass on the associated earnings growth by way of a progressive dividend.
Consistently
outperform
benchmark
Attractive property-derived total
returns at low volatility from
considered investment in a non-
cyclical sector.
Our portfolio has outperformed the
index annually since the Group’s IPO
in 2013 with an annualised return on
standing assets of 10.4% compared
to 7.6% from the Index.
The portfolio is ranked first over the
three-year, and second over the five
and 10-year periods to 31 December
2025 in terms of absolute return.
MSCI index
MSCI UK Annual Healthcare Property Index Total Return THRL Property Portfolio Total Return (ungeared standing assets)
THRL Cumulative Compounded Outperformance
The Index is published annually and covers calendar years. There were 39 constituents in the Index for the year to 31 December 2025 and 12 for the 10-years to
the same date.
Portfolio total return performance
#2/12
as ranked in the MSCI UK Annual
Healthcare Property Index for the
10 years to 31 December 2025 (latest
annual index)
Our Investments
INFLATIONLINKED RENTAL GROWTH
Our portfolio continued to demonstrate its durable characteristics during the year:
• Nil vacancy since launch in 2013.
• Rent cover, reflecting profitability at home level, remains high (c.1.9x).
• Private pay bias supporting resident average weekly fee increases of c.8%.
• Rent collection at 99% for the year, having returned to 100% by 30 June 2026.
These metrics strongly support sustainable and growing financial returns.
SECURE RENTAL INCOME
PORTFOLIO TOTAL RETURNS
Annual Report and Financial Statements 2026
11
Corporate Governance
Strategic Report
Financial Statements Additional Information
A
nticipated minimum legislative requirement
%Portfolio EPC ratings:
100
11
89
0 100
11
89
nil
nil
nil
nil
nil
A
B
C
D
E
F
G
Responsible investment
Our care homes are modern, purpose-built and future-proofed for social and
environmental trends, meeting demand and supporting financial performance.
Carbon emissions and ESG
Our portfolio is sector-leading in modernity and energy efficiency
credentials:
• Our EPC ratings are comfortably in compliance with anticipated
legislation
• Our first operationally Net Zero Carbon (NZC) care home opened
in October 2024 and, whilst still in fill-up, has provided its first full
year of data on energy usage and intensity
• We were delighted to publish our 2025 Sustainability Report in
June 2026, and this is available on our website
Commercial real estate owners with older/converted properties face
a significant financial and operating burden by way of remedial
capital expenditure.
1 This is not a profit forecast. Assumes rental growth is passed on via dividend growth, and investment yields remain constant or tighten.
TREND 2
TREND 1
Demographics
The need for quality care home capacity is driven by a population
that is growing, ageing and encountering increased chronic illness
and dementia.
The number of people aged over 85 is forecast to double from
1.8million to 3.6 million by 2050.*
People over 85 who will require residential care*
1 in 8
Estimated number of people aged over 85 by 2050*
3.6m
* Source: LaingBuisson, Care homes for older people, 36th edition
TREND 3
Future-proofed modern real estate in
what is generally a poor-quality market
78% of UK care home real estate is either converted or,
if purpose-built, built pre-2000s. Our portfolio is 100%
purpose-built with 83% of homes built since 2010.
Our homes offer:
• Sector-leading space per resident, inclusive of mixed social spaces
• Outdoor access
• Private wet-room shower and WC facilities for each resident
See more on page 15. The sector is moving at pace to these higher
real estate standards, with 36% of rooms now compliant relative to
14% in 2014. Poorer quality homes will become obsolete.
TREND 4
Long-term investment with compounding
returns profile
• Consistent shareholder total returns through dividend and capital
appreciation¹, backed by compounding rental growth annually
guaranteed by lease collars
• Dividend fully covered by adjusted EPRA earnings
• Valuations exhibit low volatility with strong investment demand as
investment class has institutionalised
• WAULT of 26.0 years
Target Healthcare REIT plc
12
Our Strategy
Simple approach:
Best-in-class real estate
managed by a specialist
investment manager
We are a responsible investor in ESG-compliant, purpose-built care home real estate which
is commensurate with modern living and care standards.
Build high-quality portfolio
Acquire high quality real estate via a mix of
new developments, recently completed builds,
and modern assets at mature trading.
How we do it
• Specialist Investment Manager whose senior team has
spent 17 continuous years together in the sector
establishing a strong reputation and enviable track record
• Clearly defined ‘house standard’, updated regularly, on
acceptable investment quality
• Active asset management to curate a best-in-class portfolio
2026 highlights
Improved portfolio quality through active asset
management. Sold 11 homes, acquired four modern,
purpose-built standing assets, reached practical
completion on a new care home and contracted one
forward fund and one forward commit.
Trusted landlord
Manage assets and tenants commercially yet fairly,
recognising the value of long-term relationships
and our influence within a complex sector.
How we do it
• Prominent and respected sector presence, tenant selection
based on shared values
• Frequent and regular monitoring and face-to-face contact
with tenants:
– Home visits performed intelligently and sensitively,
with over 250 completed in the year
– Monthly financial data collected and analysed
• Sharing of knowledge, insight, and best practice with
tenants supports their businesses
2026 highlights
Rent cover remains strong, further supporting future
earnings, with six successful re-tenantings returning the
Group to 100% rent collection at the year end.
New build homes supported
1
Disposals (net of costs)
£96.8m
Like-for-like valuation growth
4.9%
Contractual rent
£61.1m
STRATEGIC PILLAR #1 STRATEGIC PILLAR #2
Portfolio occupancy
100%
Mature portfolio rent cover
1.9x
Rent collection
99%
Tenant experience positive
10/10
Our Strategic Pillars
Annual Report and Financial Statements 2026
13
Corporate Governance
Strategic Report
Financial Statements Additional Information
Deliver returns
Convert portfolio income and capital returns into
sustainable returns to shareholders through
disciplined financial and risk management.
How we do it
• Annual rental growth from long-term inflation-linked leases
• Stable cost base
• Conservative approach to debt with current net LTV of
16.1% targeted to increase to between 25% and 30% through
selective acquisitions. Drawn debt 100% hedged
• Disposal of 11 homes representing an average premium of
11.0% to their carrying values
2026 highlights
Highest annual total accounting return since inception,
driven by like-for-like rental growth, NTA growth and
selective disposals. Dividend covered 108% by earnings.
Social purpose
To adhere to our responsible investment
fundamentals, delivering positive social impact
allied with a firm commitment to environmental
sustainability and good governance.
How we do it
• Commitment to our no compromise approach on
acceptable minimum real estate standards for care setting
• Understand our influence and learn and respond to
feedback
• Report in line with established standards. Gold award in
EPRA sBPR and gained inclusion into the 2026 Green
Economy Mark, a London Stock Exchange initiative
2026 highlights
100% of beds have en suite wet-rooms. 43% of our
homes have onsite renewable energy generation, heat
pumps, or both
STRATEGIC PILLAR #3 STRATEGIC PILLAR #4
Adjusted EPRA EPS
6.54pence
Like-for-like rental growth
3.7%
Total accounting return
12.0%
Adjusted EPRA cost ratio
18.5%
Purpose-built homes
100%
A and B EPC ratings
100%
En suite wet-rooms
100%
Energy usage data collection
94%
Key strengths of our approach
1. Our premium quality real estate is attractive to
both operators and investors, in that:
a. it is future-proofed against legislative change
and societal trends influencing demand; and
b. it generates high quality earnings from
financially sustainable rents.
2. Specialist manager, highly engaged within
sector and with our tenants.
3. Prudent approach to financial risks with diversified
income sources, low gearing and long-term, fixed
rate debt.
Why we do it
We are advocates of the benefits that intelligently
designed, purpose-built care homes can bring and
we want more residents, care professionals, families
and local communities to benefit from their positive
social impact.
Our Investment Manager is a specialist who
understands the operational challenges our tenants
face on a daily basis when providing quality care.
STRATEGIC PILLAR #1
Target Healthcare REIT plc
14
Our Strategy continued
Our purpose: to improve
the physical standard of
UK care home real estate
We are creating a portfolio of scale through investment in a mix of development sites,
recently completed builds and modern assets with a trading track record. Our clear focus
on the quality of real estate and sustainable long-term trading provides a stable platform
for consistent total returns.
Focus on maintaining modernity
and quality metrics
We have actively managed the portfolio by
recycling capital to ensure it remains modern,
high quality, and supports the tenants’ ability
to deliver the best possible care. This has seen
successful portfolio management activities
being completed during the year including the
disposal of eleven care homes at a significant
premium, with a substantial proportion of the
proceeds received redeployed into the
acquisition of four modern, purpose-built care
homes, the commitment to forward fund one
care home and a forward commitment to
acquire a further care home once built. This
activity delivered an enhanced return whilst
maintaining the quality and improving the
diversification of the portfolio.
The disposals were made at an aggregate
premium to carrying value of 11.0% and all
at or above carrying value. The disposals are
representative of the wider portfolio, and do
not materially change the portfolio metrics.
The proceeds have been substantially
reinvested. The four standing assets acquired
and one forward commit are all modern,
purpose-built care homes in prime Central
Scotland locations, leased to two new
operators to the Group. The forward-funded
development site is in Suffolk and will fund
a fully electric care home with a targeted
EPC rating of ‘A’ and a BREEAM-In-Use
rating of ‘Excellent’.
Well designed, purpose-built care homes
Our care homes are modern, purpose-built and are future-proofed for
social and environmental trends, meeting demand and supporting
financial performance.
These initiatives continue to maintain
the portfolio’s modernity and longevity.
The positive impact can be seen through
modest progression and maintenance
of key portfolio metrics:
Portfolio modernity
2026 2025
Purpose-built 2010
onwards 83% 84%
WAULT (years) 26.0 25.9
EPC A&B 100% 100%
En suite wet-rooms 100% 100%
Build high-quality portfolio
Annual Report and Financial Statements 2026
15
Corporate Governance
Strategic Report
Financial Statements Additional Information
£47m
(£98m)
£12m
£1m
£32m
£930m
£924m
30 June 2025 Disposals
and asset
management –
gains
Disposals
and surrender
premium –
proceeds
Rent reviewsMarket yield
shift
30 June 2026
Acquisitions and
developments
£850m
£950m
£900m
£1,000m
22%
97%
Company
England & Scotland
36%
100%
Company
England & Scotland
40m
2
49m
2
Company
England & Scotland
9.2 out of 10
9.5 out of 10
Company
England & Scotland
55%
100%
Company
England & Scotland
81%
72%
Company
England & Scotland
Best-in-class care home real estate
Our investment thesis remains that modern,
purpose-built care homes will outperform
poorer real estate assets and generate
attractive, sustainable returns.
Wet-rooms (100%): These are essential for
private and dignified personal hygiene, with
a clear trend to this being the minimum
expected standard for care home beds.
Energy efficiency (100% EPC A or B):
Energy efficiency of real estate is critical,
with legislative change and public opinion
demanding higher standards. Our portfolio
is already fully compliant with anticipated
incoming legislation, reducing capital
expenditure requirements for the Group
and energy costs for tenants.
Modern and purpose-built (100%): All our
properties are designed and built to be used
as care homes and to best meet the needs
of residents and staff, and are expected to
remain in demand by tenant operators.
Financials: Our metrics reflecting capital
values and rental levels compare favourably
with other care home portfolios, whilst
representing significantly better real estate.
Portfolio valuation growth
The portfolio value increased by 4.9% on
a like-for-like basis mainly driven by the
positive impact of the rental growth on
valuations of 3.5%, with a marginal tightening
of valuation yields contributing 0.1%. The
gain arising on disposals and other asset
management initiatives added the
remaining 1.3%.
The 11 disposals in the year resulted in a
decrease of 10.6% based on their valuation
at 30 June 2025, with acquisitions and other
capital expenditure adding 5.1%.
Valuations are prepared quarterly by the
Group’s external valuers with up-to-date
values reflecting latest asset trading and
comparable market transactions. The
portfolio has a strong track record of
valuation growth contributing to total returns
and the realisability of these external
valuations are supported by the aggregate
premium of 11.0% to book value achieved
on the disposals during the year.
Diversification
Asset management activities have continued
to ensure that the portfolio remains
diversified, by leasing our homes to a range
of high-quality regional operators. We have
welcomed three new operators during the
year and successfully exited from six operators
through sales and/or re-tenanting activities.
This resulted in the Group’s total number of
tenants reducing slightly to 31, from 34.
Whilst the total number of tenants may have
reduced, tenant concentration metrics have
improved overall. The largest tenant at
30 June 2026 remained unchanged with
HC-One operating nine of the Group’s
homes and accounting for c.8% of
contracted rent. However, following the
disposal of nine HC-One leased homes
during the year, this reflected a significant
reduction in exposure compared to the
18 homes and 16% of contracted rent at
30 June 2025. The top five operators
concentration has also reduced to 40% from
42% as a result of the transactional activity,
creating a more balanced tenant
diversification across the portfolio.
Underlying resident fees are balanced
between private and public sources, with a
deliberate bias towards private. There is strong
operator evidence that these residents are
Increase Decrease Total
Sources: Target Fund Managers Limited, Carterwood and carehome.co.uk
* Comparative EPC ratings are for illustrative purposes only, capturing homes with matched postcodes.
more accepting of higher fees, particularly for
the quality real estate and care services that
our properties and their operators provide.
Census data from our tenants show that 51%
of residents in our homes are fully privately-
funded, with a further 27% making ‘top up’
payments where residents pay over and above
that which the Local Authority funds for them.
22% of residents are wholly publicly funded.
Geographically, the South East has become
the Group’s largest region by asset value, at
18.5%, marginally ahead of the North West
and Yorkshire and the Humber, which
accounted for 17.8% and 17.7% respectively.
Premium, purpose-built portfolio
Our portfolio remains sector leading in relation to a range of key quality metrics.
Annual Movement in Portfolio Valuation (£ millions)
Purpose-built since 2000
carehome.co.uk average rating
Space per resident
En suite wet-rooms
Regulatory ratings: ‘good’ or better
EPC ratings: B or better*
Trusted landlord
Target Healthcare REIT plc
16
60%
70%
80%
100%
90%
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q3 2025
Q2 2025
Q4 2025
Q1 2026
Q2 2026
1.0x
1.2x
1.4x
1.6x
2.2x
1.8x
2.0x
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q3 2025
Q4 2025
Q1 2025
Q2 2025
Q1 2026
Q2 2026
STRATEGIC PILLAR #2
Portfolio operational performance
– Steady occupancy and strong
profitability continues at home level
Our completed portfolio is, and always has
been, fully let with long term occupational
leases to our tenants, the care providers. The
underlying resident occupancies for mature
homes have remained stable over the last
four years since the pandemic at c.85%.
Given our operators’ emphasis on private pay
and the attractiveness of our modern homes
our operators are able to focus on accepting
new residents who are suitable for the level of
support that the operator is set up to provide,
rather than filling to capacity at uneconomic
fees. This approach efficiently manages
demand, minimises the need for expensive
agency staff, and facilitates a care-led
approach when welcoming new residents to
a home. Despite the changes to the licensing
regime, which reduced the availability of
overseas staff, most of our operators are
reporting stable workforce numbers and
reduced reliance on agency staff.
This approach has supported rent covers,
which have remained stable and robust at
over 1.9x for the year. These profitability
levels support rental payments and financial
resilience, and incentivise care providers to
invest in their businesses and people.
Rent collection in relation to the properties
held at 30 June 2026 returned to 100% in
the final quarter of the year, as a result of
the portfolio management activities
undertaken in the year. Rent collection
for the full year was 99% (2025: 97%). The
significant improvement in the year was
driven by (i) the re-tenanting of a home
placed into administration in the prior year;
and (ii) the consensual re-tenanting of three
homes and the sale of one home that were
not paying rent in full.
Manage portfolio as a trusted landlord
in a fair and commercial manner
The Investment Manager has deep experience within the sector and uses its
unique knowledge to manage the portfolio. Starting with an informed
assessment of home performance using profitability and operational metrics
and a proven ‘house-standard’, through empathetic and sensitive
engagement with our tenants and sector participants as a whole, we are
trusted and respected and people want to partner with us. This enables fair
treatment and commerciality to be balanced – essential in a complex sector.
Spot Resident Occupancy Rates
Mature Homes: rent cover
Rent cover: spot Rent cover: rolling last 12 months
Total occupancy Mature homes occupancy
Our Strategy continued
Annual Report and Financial Statements 2026
17
Corporate Governance
Strategic Report
Financial Statements Additional Information
£3.4m
(£5.8m)
£2.3m
£61.2m
£61.1m
30 June 2025 Rent reviews
and other rent increases
30 June 2026Acquisitions and
developments
Disposals
£55.0m
£60.0m
£65.0m
Growing and compounding
rental income
The portfolio’s contractual rent roll was £61.1
million at the year-end (2025: £61.2 million).
Whilst the rent roll has remained in line with
the prior year, the portfolio delivered
like-for-like growth of 3.7%, with 3.3% arising
from the contractual inflation-linked rent
reviews and a further 0.4% contributed by
asset management initiatives.
This recurring like-for-like growth was set
against a reduction in the rent roll of 9.4%
from the sale of 11 properties. This was
partially offset by an increase of 5.5% from
opening a development home and acquiring
four standing assets, and 0.1% from capex to
install PV panels or otherwise enhance nine
of our homes. With the sales having been
conducted at an average implied net initial
yield of 5.5%, and the acquisitions to date
having averaged a yield in excess of 6.0%,
this investment activity will be accretive to
rental income once the proceeds have been
fully redeployed.
Rents from the Group’s leases increase
annually, linked to inflation. Collars on this
(averaging c.1.5%) ensure the Group receives
guaranteed growth, while caps (averaging
c.3.9%) ensure assets do not become
over-rented, risking rents becoming
unaffordable, in periods of higher inflation.
This is an important aspect in providing
long-term security to our tenants, and in
achieving sustainable investment returns.
Tenant and resident satisfaction
We remain committed to our role as an
effective, supportive and engaged landlord
building collaborative and lasting
relationships with our tenants to raise
standards of care and help our tenants build
sustainable businesses. During the year, the
Investment Manager invited our tenants to
provide formal feedback via a survey
performed by an independent third party. We
were delighted to receive an 85% response
rate, with 100% of respondents saying they
would recommend Target to others. We use
this output, alongside learnings from the
Investment Manager’s annual operator event
and the many informal points of contact we
have, to inform our approach.
Resident satisfaction
Regulator (CQC in England) ratings are
informative but limited with dated inspection
reports remaining a challenge. The
Investment Manager also monitors reviews
on ‘Carehome.co.uk’, a ‘Tripadvisor’ style
website for care homes, on a weekly basis as
a useful source of real-time feedback which
is more focussed on the resident experience,
and that of their loved ones.
Our Tenants
Our Residents
Agreed that Target is a good landlord
to work with
9.7/10
Previous survey (2024): 9.6/10
Agreed that Target provides high-quality
real estate that supports the working
environment and helps deliver dignified
care to residents
9.3/10
Previous survey (2024): 9.2/10
Agreed that Target understands
the needs of the tenants’ business
9.6/10
Previous survey (2024): 9.2/10
The portfolio’s current average rating on
behalf of its residents is
9.5/10
with sufficient review volume and
frequency on ‘carehome.co.uk’ to be
considered a valuable data point for the
quality of service experienced by residents
of homes in the portfolio.
Increase Decrease Total
Annual Movement in Contracted Rent (£ millions)
Target Healthcare REIT plc
18
Our Strategy continued
Deliver returns
Regular dividends for shareholders
The Group has achieved like-for-like rental growth; NTA growth; and
a dividend fully covered by earnings from its disciplined financial and
risk management.
STRATEGIC PILLAR #3
2026
(£m) Movement
2025
(£m)
Rental income (excluding guaranteed uplift) 60.2 -1% 60.6
Administrative expenses (including management fee) (12.0) +2% (11.8)
Credit loss allowance and bad debts 0.9 n/a (1.6)
Net financing costs (8.6) -16% (10.2)
Interest from development funding 0.1 -82% 0.7
Adjusted EPRA earnings 40.6 +8% 37.7
Adjusted EPRA EPS (pence) 6.54 +8% 6.08
EPRA EPS (pence) 8.20 +6% 7.72
Adjusted EPRA cost ratio 18.5% -330 bps 21.8%
EPRA cost ratio 15.5% -280 bps 18.3%
Ongoing Charges Figure (‘OCF’) 1.48% -3 bps 1.51%
Earnings Summary
Earnings
Earnings increased by 7.6%, as measured by
adjusted EPRA EPS which is the Group’s
primary performance measure. Rental
income for the year has decreased by 0.6%,
driven primarily by 11 disposals in the period,
set against four acquisitions, the opening of
one development and like-for-like rental
growth of 3.7%. The disposal of the 11 care
homes resulted in an annualised ungeared
IRR of 11% over the period since acquisition.
In line with the increase to full rent collection
by the year end, and through a number of
asset management initiatives to re-tenant
homes that were not paying rent in full, there
was an overall recovery of rent provisions in
the year of £0.9 million. Further details on
the asset management activity that resulted
in the majority of the recovery of the
historical arrears are contained in the case
study on page 21.
The Group’s reported operating expenses
increased slightly, by 2.2%. This included
one-off costs of c.£0.5 million incurred in
the current year relating to the reorganisation
of the Group’s security structure to improve
the efficiency of the Group’s long-term debt
facilities, with the prior year figures similarly
including a one-off cost from placing a
tenant into administration.
Net finance costs reduced by 15.6% primarily
due to the reduced drawn debt levels
following the property disposals, the
proceeds of which were used to repay the
Group’s revolving credit facilities, combined
with the refinancing of the bank debt
facilities.
Expense ratio
The adjusted EPRA cost ratio, expressing
costs as a percentage of the Group’s rental
income, decreased to 18.5% from 21.8%. This
reflects the aforementioned movements in
rental income and operating expenses,
although the year-on-year movement is
primarily due to the release of the credit loss
allowance following the recovery of
historical arrears as a result of asset
management activities.
The Ongoing Charges Figure, expressing
costs as a percentage of the Group’s net
asset value, provides a measure of recurring
operating expenses which excludes
non-recurring property expenses such as
bad debts. This improved marginally to 1.48%
(2025: 1.51%).
Total Returns
Total accounting return, using EPRA NTA
movement and dividends paid, was the
highest in the Group’s history at 12.0% for
the year ended 30 June 2026, resulting in
an annualised 7.8% since launch. The return
in the year benefitted from the increases in
value from selling the 11 homes at an 11.0%
premium to carrying value and the recovery
of rent arrears following the re-tenanting of
three homes. Our portfolio has returned
like-for-like valuation growth for each of the
14 quarters since the December 2022
macro-driven response to the higher interest
rate environment. Our valuations have been
less volatile than the wider commercial
property population, as reported within the
MSCI Monthly Index (All Property) (see chart
on page 25), due to the strength of
investment demand and the trading
performance at the underlying home level.
This valuation performance, allied with our
dividend payouts, fully covered by earnings,
has seen EPRA NTA per share grow by 6.4%
over the year.
The consistency of Group level total
accounting returns and those at portfolio
level (see page 10) clearly demonstrate the
stability of our business model, and the
defensive, non-cyclical nature of prime care
homes as a real estate asset class.
Annual Report and Financial Statements 2026
19
Corporate Governance
Strategic Report
Financial Statements Additional Information
4.6x
4.6x
3.4x
2024
2025
2026
30 June 2025 Property
revaluations
– yield shift
Property
revaluations
– annual rent reviews
Property
revaluations
– other
Disposals and
surrender premium
Dividends paidAdjusted EPRA
earnings
30 June 2026Acquisition costs
130.0
125.0
120.0
115.0
110.0
105.0
100.0
95.0
90.0
1.7
0.1
4.9
0.5
6.5
(6. 0)
114.8
(0.4)
122.1
Increase Decrease Total
EPRA NTA per share (pence)
Debt Analysis
Debt Provider Facility Size Debt Type Drawn at 30 June 2026 Maturity
Phoenix Group £150m £87m Term debt
£63m Term debt
£87m (fixed rate)
£63m (fixed rate)
January 2032
January 2037
RBS £50m £20m Term debt
£30m Revolving credit facility
£20m (hedged)
nil
September 2029
September 2029
HSBC £80m £30m Term debt
£50m Revolving credit facility
£30m (hedged)
nil
September 2029
September 2029
Total £280m £200m
Net debt to EBITDA ratio
3.4x
Debt
The Group refinanced its short-term banking
facilities at improved terms with the
incumbent banks. £130 million of committed
new facilities, consisting of £50 million of
term loans on which the interest rate has
been fixed through interest rate swaps and
£80 million of revolving credit facilities
replaced the Group’s existing £170 million
facilities with these banks.
These new facilities were for a minimum
term of three years, with the option of two
further one-year extensions, subject to
lender consent. Subsequent to the year end,
the first option to extend, on the first
anniversary of the facilities, was exercised
and approved by both banks. In addition,
the facilities allow for accordion elements
which may provide for an additional £70
million of uncommitted debt funding to
increase shorter-term banking facilities to
an aggregate of £200 million.
This borrowing structure minimises
commitment fees and interest whilst
providing flexibility as the Group redeploys
the proceeds of the recent disposals and
invests to increase the Group’s LTV towards
its stated target of between 25% and 30%.
Debt facilities are £280 million (2025: £320
million). Inclusive of the post year end
extension of the bank facilities, the weighted
average term to expiry on the Group’s total
committed loan facilities was 5.6 years
(30 June 2025: 4.2 years), with drawn debt of
£200 million incurring a weighted average
cost, inclusive of amortisation of loan
arrangement costs, of 3.9% (3.7% on a cash
only basis with costs excluded).
Further details on the Group’s debt facilities
are provided in Note 13 to the Consolidated
Financial Statements.
The bank loan facilities also include accordion options which, subject to the approval of the relevant bank, increase the quantum of the
RBS facility by a further £30 million and the HSBC facility by a further £40 million.
Net debt to EBITDA ratio
This is a leverage ratio that compares the
Group’s long-term liabilities in the form of
net debt to an estimate of its cash flow
available to pay down this debt, in the form
of EBITDA (which stands for earnings before
interest, taxes, depreciation and
amortisation).
The Group uses adjusted EPRA earnings as
its EBITDA, and the gradual reduction
illustrates the improvement in the Group’s
ability to repay the capital value of its debt
from earnings over a period in which interest
rates have risen.
Target Healthcare REIT plc
20
Our Strategy continued
Social purpose
To achieve our social purpose
To adhere to our responsible investment fundamentals, delivering
positive social impact allied with a firm commitment to environmental
sustainability and good governance. We have a clear ESG Charter
(Targeting Tomorrow) to ensure the social impact objective incorporated
at launch remains embedded in our business for years to come, working
with shareholders, tenants and other stakeholders. We have made firm
ESG commitments which we measure and report progress on annually.
STRATEGIC PILLAR #4
Partially met Met
ESG commitments What this means for the Group Status
Responsible
investment
Continue to provide better care home real estate which results in positive social impact for
residents, their carers and local communities.
Support the sector’s transition from poor real estate standards via long-term financial/
investment support for new developments.
Obtain reliable certification and insightful data on the energy efficiency of our real estate.
Increase data coverage of energy consumption by our tenants, aiding transparency and our
ability to positively influence energy efficiency.
Ensure ESG factors embedded into acquisition process and portfolio management.
Net zero carbon commitment with comprehensive, ambitious and realistic targets set with
a clear pathway including measurable milestones.
Responsible
partnerships
Engage with tenants to ensure real estate is meeting their operational and staff needs,
allowing effective care for residents.
Be a responsible landlord to our tenants and their communities through significant
challenges, such as pandemics.
Use energy data obtained from tenants to positively influence behaviours where possible.
Responsible
business
To establish an ESG Committee to provide appropriate focus and impetus to ESG matters.
Ensure the benefits of Board diversity are achieved.
Participate in benchmarking and sector appropriate programmes to provide comparable
information to stakeholders.
Other reporting: Align financial and non-financial reporting with widely used frameworks.
Annual Report and Financial Statements 2026
21
Corporate Governance
Strategic Report
Financial Statements Additional Information
Case Study: Asset Management
Case Study:
Asset Management in Action
BACKGROUND
RETENANTING
RECOVERY OF HISTORICAL ARREARS
The Group completed the re-tenanting of
three properties during the year ended
30 June 2026 which had previously been
leased to a single tenant operator.
The Group had built a relationship with
the tenant over time. Having originally
acquired a turnkey home in a sale and
leaseback transaction in 2015, the Group
further supported the tenant’s growth
with a turnkey acquisition, two forward
fund developments and the sale and lease
back of a mature care home over the
following five years. Following trading
challenges during the pandemic, two of
these homes were successfully
re-tenanted, with trading at both homes
subsequently improving significantly.
The operation of the three remaining
homes remained profitable. However,
cash flow challenges elsewhere in the
tenant’s group that had been exacerbated
by the pandemic, meant that rent on
these homes was not being paid in full.
The Investment Manager and tenant
operator worked together to agree a
consensual re-tenanting of these three
properties, which represented 3.2% of the
Group’s total rent roll. A key priority was to
ensure that the homes remained
operational throughout the re-tenanting
process in order to protect value for the
Group whilst ensuring the uninterrupted
provision of care for residents.
The compelling local demographics and
high-quality real estate made the homes of
interest to a number of operators. The Group
ultimately re-tenanted the three homes to
two of the Group’s existing tenant operators
in September 2025, both with a strong trading
track record in these geographical regions.
The contracted rental level of each of the
homes remained unchanged and no tenant
incentives were granted. The valuation yield
tightened marginally at each of the homes
post re-tenanting.
As intended, the homes remained
operational for staff and residents
throughout the re-tenanting process,
providing continuity of care for residents.
Post re-tenanting, both incoming operators
have successfully integrated these homes
into their operations and in the case of one
home, delivered a comprehensive
refurbishment to two closed units, opening
up bed capacity to the market.
As part of the terms of the re-tenanting,
the Group secured a parent company
guarantee from the outgoing tenant to
support the collection of the agreed rent
arrears of £1.9 million.
These agreed arrears were subsequently
collected in December 2025, with the
reversal of the unrequired provision of
£1.1 million held against the outstanding
balance at 30 June 2025 adding a total of
0.18 pence to the Group’s EPRA EPS for
the current year.
Target Healthcare REIT plc
22
35% 45% 31% 43% 15%
65%
55%
69%
57%
85%
0%
10%
20%
70%
80%
90%
100%
50%
40%
60%
30%
Home 1 Home 4Home 3 Home 5Home 2
ESG Commitments
In 2024, the Group implemented a
project to start retrofitting photovoltaic
(“PV”) panels to care homes in order to
reduce carbon emissions and tenant
energy costs. By funding the installation
costs in exchange for an increase in the
passing rent from the home, this delivers
an attractive return (c.7%) on the capital
deployed to the Group, whilst the tenant
operator benefits from the saving on
electricity costs.
To date PV panels have been installed at
eight care homes through this scheme,
including five homes where they have
been operating for a full calendar year,
allowing the Group to fully analyse the
annual performance impact of the project.
On average the panels have generated
approximately a third of the electrical
energy usage at each home, which has
reduced carbon emissions by
c.50,000kg CO
2
e for these five homes
over the course of the year.
ESG Commitments in focus:
Net Zero Carbon Pathway
Our Net Zero Carbon Pathway sets out a clear, science-based roadmap to achieve net zero
carbon emissions across firstly, our operations and then, secondly, our portfolio. We are
guided strongly by our comprehensive utility data collection regarding our real estate.
ESG IN ACTION: RETROFITTING PV PANELS
Net Zero Carbon Pathway
• 2025 Scope 1 and 2 net zero
carbon achieved
• 2030 target to have renewable energy
generation (or heat pumps) at 50% of
our homes
• 2040 net zero carbon target for property
portfolio related Scope 3 emissions
Quality of input data
Achieving a net zero-carbon portfolio is a
crucial part of our suite of ‘Targeting
Tomorrow’ commitments as a responsible
business.
It is essential to adopt a strategy that is:
(i) based on comprehensive and reliable data;
(ii) achievable and measurable; and
(iii) suitably ambitious.
We are now collecting our tenants’ energy
usage data to an extent which allows a
reliable analysis of our portfolio’s current
position and of the impacts of initiatives.
Output status
The output we currently have:
• Benchmark data on where we currently
stand on carbon intensity, relative to the
CRREM and SBTi joint 1.5°C
decarbonisation pathway.
• Suggested energy efficiency and
carbon reduction initiatives relevant
to our properties.
• Cost estimates and impact assessments
on carbon intensity.
Indicative timeline and actions
• Between 2025 and 2030: Install energy
efficiency measures, such as thermal
installation in plant rooms (2-3% CO
2
savings) and increase renewable energy
generation (including by heat pumps) to
50% of homes.
• Between 2025 and 2035: Increase PV or
solar thermal panel coverage towards
100% of portfolio.
• Between 2030 and 2040: Electrification
of heating, phase out gas boilers and
install heat pumps and appropriate
upgrade of heat distribution in homes.
Our portfolio’s modernity provides an
excellent starting point with annual carbon
intensity of 36.1 kgCO
2
/m
2
.
Risks and areas outside our control
• Suitable technology being available at the
required scale and cost, per expectations
as advised by our external experts, in the
time period outlined.
• Materials and labour being available such
that the Group is able to have technology
installed in a sensible timeframe and at
fair, market (not surge) pricing.
• Need to obtain tenant consent for
potentially disruptive works.
• That the relevant investment costs do not
depress investment returns to such an
extent the Group cannot achieve its
investment objectives to the satisfaction
of shareholders.
The net annual cost saving for the operator,
after rentalisation of the costs to install, has
averaged around £10,000 per home and has
also reduced the operator’s exposure to
energy price volatility.
Electricity usage – grid vs solar
PV electricity usage – 2025 data (KW)
Grid electricity usage – 2025 data (KW)
In addition to this scheme, through
active landlord engagement and
discussions in respect of the benefits of
PV panels, three further homes have
installed PV panels at the tenants’ cost,
which are also delivering ongoing
carbon and costs savings.
Annual Report and Financial Statements 2026
23
Corporate Governance
Strategic Report
Financial Statements Additional Information
2026 activity and highlights
EPC ratings
1
100% A-B ratings
Important measure of energy efficiency
and legislative rating.
BREEAM In-Use certificates
11% coverage
Commitment met to ensure minimum 10%
portfolio certified on an ongoing basis.
Energy consumption data
94%
coverage obtained for 2025 calendar year.
Responsible investment
As an investor we understand that our actions
have influence. We use our platform to lead by
example through embedding appropriate ESG
considerations into our decision-making.
• Increased coverage of portfolio with green
lease provisions to 65% from 61%.
• Carbon reduction investment programme
continues with 43% of the portfolio currently
benefitting from renewable energy
generation, heat pumps, or both.
• Steady, increasing installations of photovoltaic
or solar thermal panels in homes.
• EPRA sBPR Gold Award achieved in relation
to most recent Sustainability Report.
En suite wet-rooms
100%
Defining proxy for real estate quality
and social impact.
National Comparative: 36%*
* Source: Carterwood
Space per resident
49m
2
We assess this against peers
and compare favourably.
Built with our direct support
2
18 homes
1,210 beds
A further measure of our social impact
in supporting the sector’s transition to
modern real estate.
Responsible partnerships
We engage with all our stakeholders
to drive the creation of economic,
social and environmental value around
our buildings and in wider society.
£1m
Approved budget to support tenants
to install energy efficiency initiatives,
with £0.6 million invested to date on
photovoltaic panel installation
Board diversity
40%
Board composition remains at 40%
female, with at least one senior board
position held by a woman, in line with
the target set by the FTSE Women
Leaders Review. Action will be taken in
relation to the Board’s ethnic diversity
over the forthcoming year.
ESG committee
Met at least quarterly.
GRESB
80
Improved score to 80 from 71 in
the Group’s third year of assessment.
This results in the Group earning three
green stars and places us second in
our peer group.
Responsible business
We treat all stakeholders with respect
and deal fairly in a manner consistent
with how we would expect to be
treated ourselves.
1 Non-English homes follow a different rating system and have been converted to English equivalent ratings.
2 Since the launch of Target Healthcare REIT in March 2013. Direct support refers to contractual financial commitment to forward fund a development.
ENVIRONMENTAL
SOCIAL
GOVERNANCE & TRANSPARENCY
Target Healthcare REIT plc
24
Investment Manager’s Report
Portfolio performance
and UK care home
investment market
Portfolio performance
During the year, property level transactions
completed by the Group were significant
with (i) the disposal of 11 care homes for
total proceeds of £97 million; and (ii) the
redeployment of £73 million of these
proceeds into the acquisition of four
operational care homes, one forward fund
development and one forward commitment.
The forward commitment is due to complete
shortly.
These disposals were value accretive, with
the proceeds representing a weighted
average premium of c.11% to their external
valuations at the start of the year and a net
initial yield of 5.5%. However, the primary
intention of the largest disposal was to
reduce the Group’s exposure to its largest
tenant, without significantly changing the
other key statistics for the remaining
portfolio.
The proceeds received have been
substantially redeployed into acquisitions at
an accretive net initial yield in excess of 6%,
with the properties acquired also further
improving the modernity and ESG
credentials of the Group’s portfolio. As an
example, the forward fund relates to a
development site in Suffolk with planning
consent for the construction of a fully
electric (with no fossil fuel use) 66-bed care
home with 100% en suite wet-room
provision. The property will also include
on-site renewable energy generation and has
a targeted EPC rating of ‘A’ and BREEAM-In-
Use rating of ‘Excellent’.
This activity has supported a strong total
accounting return for the year of 12.0%,
like-for-like rental growth of 3.7% and a
like-for-like portfolio valuation increase
of 4.9%.
Asset management
The Investment Manager also successfully
delivered a number of asset management
initiatives, improving both rent collection and
portfolio metrics. These initiatives included:
• A development property reaching practical
completion and being leased, on pre-agreed
terms, to an existing tenant, thereby adding
£0.6 million to the Group’s contractual rental
income.
• One asset, where the operator had not
been paying rent and which the Group had
placed into administration, being re-tenanted
in July 2025 to an existing tenant of the
Group at an improved rental level. The
cumulative valuation uplift of £1.4 million
since the completion of the re-tenanting has
covered the cost of placing the tenant into
administration, with the majority of these
costs having been recognised in the prior
year. The uplift partially reflects a further rent
increase, in addition to the inflation-linkage,
as well as yield tightening, with the potential
for further yield tightening as the operating
performance of the home continues to
improve. More important, however, was the
securing of the future stability of the care
home for both staff and residents.
• Re-tenanting three properties leased to a
single tenant, where the operator was not
paying the rent in full, in September 2025 at
an unchanged rental level to two existing
tenants of the Group. All agreed rent arrears,
totalling £1.9 million, were subsequently
recovered from the previous tenant, resulting
in a non-recurring contribution of 0.18 pence
to the Group’s adjusted EPRA EPS over the
year. More details are set out in the case
study on page 21.
• Re-tenanting one asset at an unchanged
rental level with no tenant incentives being
granted, thereby supporting a tenant who
had taken the strategic decision to exit the
elderly care sector, and extending the new
lease term to 35 years. The completion of
the re-tenanting crystallised the payment
to the Group of a surrender premium of
£1.4 million, equivalent to 0.23p per share,
with no change in the property value to
compensate for the proceeds received.
At the portfolio level, key portfolio metrics
are presented on page 10 which are
reflective of the investment grade
characteristics of our prime, modern UK care
home portfolio. Rental growth was 3.7% on a
like-for-like basis (2025: 3.3%) and this has
been supported by a quality rental stream
from 31 tenants with a robust average rent
cover for the last twelve months of over 1.9x
(2025: 1.9x). Underlying demand for places in
our homes remains robust with mature
home occupancy of 85% (2025: 86%).
The like-for-like valuation growth for the year
was 4.9%, primarily driven by 3.5% from the
growth in rents, supplemented by 0.1% from
an inward movement in valuation yields. The
gain arising on disposals and other asset
management initiatives contributed 1.3%.
Our overall portfolio metrics remain strong.
94% of operational homes are mature in their
trading, 83% (2025: 84%) were built in 2010
or later, and the WAULT remains long at over
26.0 years (2025: 25.9 years). These
characteristics, and the bias towards
private-fee payments of our tenants’ revenue
(78%) all support the quality of our rental
stream and its annual and compounding
long-term growth.
Like-for-like rental growth
3.7%
Mature home occupancy
85%
Like-for-like valuation growth
4.9%
8.00%
7.00%
6.00%
5.00%
2.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 202620252024
4.0 0%
3.00%
2023
Group topped-up NIY MSCI Monthly Index – All Property NIY
Annual Report and Financial Statements 2026
25
Corporate Governance
Strategic Report
Financial Statements Additional Information
Property regulation
In April 2026 an Act received Royal Assent
which on commencement, expected
sometime in 2027/28, will introduce a
statutory ban on upward only rent reviews in
English commercial leases. Importantly, this
will not have a retrospective effect on any of
the Group’s existing leases. The government
has indicated that further consultation will
take place, including around caps and
collars. The outcome of this consultation will
ultimately determine if there is any impact on
the Group’s approach to new leases.
Health and social care update
2026 is potentially shaping up to be a
significant year for the Social Care sector
(‘SC’). The ongoing Casey Commission
gained momentum following the change in
Prime Minister, with Andy Burnham placing
further focus on the sector early in his
tenure. He is no stranger to the sector having
previously launched a white paper whilst he
was Health Minister, and has expressed his
ambition to see ‘substantial’ change within
this parliamentary term.
Earlier in 2026, Baroness Casey spoke of the
fragility of the sector, the imbalance between
the NHS and SC, and the need to press on with
workforce reform. It is the intention of the
government to bring forward the final
conclusions of the Casey Commission to 2027,
a year ahead of the original timeline, which we
welcome, although it keeps it uncomfortably
close to an election year, something which has
scuppered previous attempts at reform.
A complex sector
Residential and nursing care in care homes
have progressively transitioned to the private
sector over the last few decades. The health
and SC landscape remains characterised by
complex funding, commissioning and
delivery arrangements, creating challenges
for the effective delivery of SC. It is widely
agreed that outcomes from SC can make or
break the NHS, which is why there is such a
focus on reform. The statistics are stark: two
in five elderly patients wait for over twelve
hours in A&E; one in ten hospital beds are
blocked daily in England by patients waiting
for SC arrangements; one in six hospital beds
are taken up by those with dementia, and
delayed discharge is said to cost the NHS
£2.7 billion a year. As they weigh up the
idiosyncrasies of the SC sector, both
Baroness Casey and the Prime Minister have
expressed concern over some elements of
private provision, but we believe that the
weight of demand is so deep, responsible
private operators will continue to be required
as an essential part of the provision.
Funding reform
Part of the wider reform being considered by
Baroness Casey is ‘who pays’ for care. Care
home operators with quality real estate, such
as that provided by the Group, have been
able to insulate themselves against tightening
public budgets by attracting private fee
payers. Public consultation will likely bring a
recommendation of ring-fencing an
individual’s self-funded costs at a set level, as
well as proposing a ‘true cost of care’ for
publicly funded support, both of which
operators would welcome. The question of
funding for dementia is also topical. It should
be noted that, like the Scottish system, ‘care’
costs are likely to be differentiated from
‘accommodation’ costs, with the latter
leaving residents and relatives the ability to
retain choice with regard to the level of
quality they wish to choose. We await further
developments with interest.
Staffing
Staffing and recruitment, while still a major
focus of any operator’s enterprise, is less of a
concern than at any time since the
pandemic. Legislation has significantly
reduced overseas recruitment. However,
Skills for Care recently noted that care home
staff vacancies stand at just under 4%, similar
to most other sectors. 2026 brought some
increased benefits for staff with the
introduction of an improved living wage, and
enhanced maternity and sick pay legislation.
The government continues to work toward
the Fair Pay Initiative, which will see sector
representatives, unions, and trade bodies
work together to further improve pay and
conditions. The sector bodies have however
made it clear that while the government has
pledged £500 million toward these reforms,
it is imperative that the operators receive the
aforementioned ‘true cost of care’ for
publicly funded residents, which will reduce
the reliance on the historical cross-subsidy
by private residents in many care homes.
Regulatory
Operators remain somewhat concerned by
the slow progress of the CQC, which lost
both Chair and CEO during the past year.
Operators are particularly frustrated by the
length of time between inspections, which
are often still measured in multiple years. The
CQC’s current aim is to simplify the
inspection process, which is welcome.
Costs and fees
Costs have settled somewhat for operators,
compared to previous post-pandemic years,
not least as the sector has less reliance on
agency and license costs related to overseas
staffing. Energy costs remain high but are a
relatively small percentage of the overall costs
at around 3%, which are dominated by staffing
at or around 55%. Successive years of inflation
have meant resident fees have undergone
significant rises of their own, but indications
are that private fee inflation is more tempered
recently, which we estimate at around 6%,
providing some relief to residents and their
families, while public fees have also tended to
track slightly above inflation at around 4.75%.
Looking forward, the Fair Pay Awards
mentioned earlier, while well deserved, risk
creating a further high inflationary
environment in care delivery.
Target Fund Managers Limited
21 September 2026
Group topped-up Net Initial Yield (‘NIY’) and MSCI Monthly Index – All Property NIY
Target Healthcare REIT plc
26
Risk Report
Principal and emerging risks
and risk management
Risk
Description of risk and factors
affecting risk rating Mitigation
Risk rating
& change
Poor performance
of investments/
investment assets
There is a risk that a tenant’s business could
become unsustainable if its care homes trade
poorly. This could lead to a loss of income for
the Group and an adverse impact on the
Group’s results and shareholder returns. The
strategy of investing in new purpose-built care
homes could lead to additional fill-up risk and
there may be a limited amount of time that
operators can fund start-up losses.
The Investment Manager focuses on tenant diversification
across the portfolio and, by considering the local market
dynamics for each home, aims to ensure that rents are set
at sustainable levels. Rent deposits or other guarantees are
sought, where appropriate, to provide additional security
for the Group. The Investment Manager has ongoing
engagement with the Group’s tenants to proactively assist
and monitor performance. Rent cover, a key measure of
the underlying home profitability, remains at the highest
level since the Group’s IPO.
High
High inflationary
environment
An increase in the UK inflation rate to a level
above the rent review caps in place across the
portfolio’s long-term leases may result in a real
term decrease in the Group’s income and be
detrimental to its performance. Whilst the cap
may prevent rent becoming unaffordable for
tenants, other cost increases, particularly in
relation to staffing and utilities, may erode their
profitability and rent cover unless their revenue
increases accordingly.
The Group’s portfolio includes inflation-linked leases,
with primarily annual upwards-only rent reviews within
a cap and collar. The rate of inflation is currently below
the level of the majority of the Group’s rent review caps.
The Investment Manager is monitoring tenant
performance, including rent covers and whether average
weekly fees paid by the underlying diversified mix of
publicly funded and private-fee paying residents are
growing in line with inflation.
Medium
Adverse interest rate
fluctuations/debt
covenant
compliance
Adverse interest rate fluctuations will increase
the cost of the Group’s variable rate debt
facilities; limit borrowing capacity; adversely
impact property valuations; and be detrimental
to the Group’s overall returns.
The Group has a conservative gearing strategy. The gearing
level remained consistently modest throughout the year,
although net gearing is anticipated to increase as the
Group nears full investment. Loan covenants and liquidity
levels are closely monitored for compliance and headroom.
The Group had fixed interest costs on 100% of its total
borrowings as at 30 June 2026, having hedged its interest
rate exposure by entering into new five-year interest rate
swaps as part of the refinancing activity during the year.
Medium
Negative perception
of the care home
sector
A negative perception of the care home sector,
due to matters such as societal trends, pandemic
or safeguarding failures, or difficulties in
accessing social care, may result in a reduction
in demand for care home beds, causing asset
performance to fall below expectations despite
the demographic shifts and the realities of
needs-based demand in the sector. The resultant
reputational damage could impact occupancy
levels and rent covers across the portfolio.
The Group is committed to investing in high quality real
estate with high quality operators. These assets are
expected to experience demand ahead of the sector
average while in the wider market a large number of care
homes without fit-for-purpose facilities are expected to
close. A trend of improving occupancy rates across the
portfolio has been noted in recent times, with occupancy
rates approaching pre-pandemic levels.
Medium
Availability of capital
Without access to equity or debt capital, the
Group may be unable to grow through
acquisition of attractive investment
opportunities. This is likely to be driven by
both investor demand and lender appetite
which will reflect Group performance,
competitor performance, general market
conditions and the relative attractiveness
of investment in UK healthcare property.
The Group maintains regular communication with investors
and existing debt providers, and, with the assistance of its
brokers and sponsor, regularly monitors the Group’s capital
requirements and investment pipeline alongside
opportunities to raise both equity and debt. Whilst the
Company’s shares remain at a discount, potentially limiting
access to equity capital for further growth, the bank
facilities were recently successfully refinanced and
extended and now carry an earliest repayment date of
September 2029.
Medium
ESG and
climate change
A change in climate, such as an increased risk
of local or coastal flooding, or a change in
tenant/investor demands or regulatory
requirements for properties which meet certain
environmental criteria, such as integral heat
pumps or air conditioning, may result in a fall in
demand for the Group’s properties, reducing
rental income and/or property valuations.
The Group is committed to investing in high quality real
estate with high quality operators. The portfolio’s EPC
and BREEAM in-use ratings suggest the portfolio is well
positioned to meet future requirements/expectations and,
with extreme heat events expected to become more
common, around 40% of the portfolio has air conditioning
or ‘comfort cooling’ in communal spaces. The Investment
Manager uses a house standard to ensure ESG factors are
fully considered during the acquisition process.
Medium
Annual Report and Financial Statements 2026
27
Corporate Governance
Strategic Report
Financial Statements Additional Information
Risk
Description of risk and factors
affecting risk rating Mitigation
Risk rating
& change
Reduced availability
of carers, nurses
and other care
home staff
Recent trends have reduced the availability of
key staff in the care sector which may result
in a reduction in the quality of care for the
underlying residents of our homes, restrict
tenants from being able to admit residents
or result in wage inflation.
The Group is committed to investing in high quality real
estate with high quality operators and these should be
better placed to attract staff. The Investment Manager
continues to engage with tenants in the portfolio and to
share examples of best practice in recruitment and
retention of staff.
Medium
Development costs
The high inflationary environment, particularly
for building materials and staff, combined with
supply chain difficulties, may result in an
increased risk that the developers of contracted
developments do not fulfil their obligations
and/or may increase the cost of new
development opportunities.
The Group is not significantly exposed to development risk,
with forward funded acquisitions being developed under
fixed price contracts, with the Investment Manager having
considered both the financial strength of the developer and
the ability of the developer’s profit to absorb any cost
overruns. As at 30 June 2026, the Group held only one
remaining development, although this may increase as
the Group invests its available capital.
Medium
Breach of REIT
regulations
A breach of REIT regulations, primarily in
relation to making the necessary level of
distributions, may result in loss of tax
advantages derived from the Group’s REIT
status. The Group remains fully compliant
with the REIT regulations and is fully domiciled
in the UK .
The Group’s activities, including the level of distributions,
are monitored to ensure all conditions are adhered to.
The REIT rules are considered during investment appraisal
and transactions structured to ensure conditions are met.
Medium
Changes in
government policies
Changes in government policies, including
those affecting local authority funding of care,
may render the Group’s strategy inappropriate.
Secure income and property valuations will
be at risk if tenant finances suffer from
policy changes.
Government policy is monitored by the Group to
increase the ability to anticipate changes. The Group’s
tenants also typically have a multiplicity of income sources,
with their business models not wholly dependent on
government funding.
Medium
Reliance on third
party service
providers
The Group is externally managed and, as such,
relies on a number of service providers. Poor
quality service from providers such as the
Investment Manager, company secretary,
brokers, legal advisers or depositary could have
potentially negative impacts on the Group’s
investment performance, legal obligations,
compliance or shareholder relations.
The Investment Manager, along with all other significant
service providers, is subject to regular performance
appraisal by the Board. The Investment Manager has
retained the majority of key personnel since the Group’s
IPO and has successfully hired further skilled individuals
and invested in its systems.
Medium
Failure to
differentiate qualities
from competitors or
poor investment
performance
Failing to differentiate strategy and qualities
from competitors is a significant risk for the
business, with increased competition in the
healthcare real estate sector. The failure to
communicate these effectively to stakeholders
could have a negative impact on the
Company’s share price, future demand for
equity raises and/or debt finance and wider
reputational damage.
The stakeholder communications strategy of the Group
has always been to highlight the quality of the real estate in
which the Group invests. The regular production of investor
relations materials (annual and interim reports, investor
presentations and quarterly factsheets) along with direct
engagement with investors helps to mitigate this risk.
Medium
The Company’s risk matrix is reviewed regularly by the Board as detailed on page 50. Emerging risks are identified through regular discussion
at Board meetings of matters relevant to the Company and the sectors in which it operates; including matters that may impact on the
underlying tenant operators. In addition, the Board holds an annual strategy meeting which includes presentations from relevant external
parties to ensure that the Board is fully briefed on relevant matters. At the strategy meeting, as part of an overall SWOT analysis, principal
and emerging risks are discussed and reviewed to ensure that they have all been appropriately identified and, where necessary, addressed.
The detailed consideration of the Company’s viability and its continuation as a going concern, including sensitivity analysis to address the
appropriate risks, is set out on pages 38 and 39.
STRATEGIC PILLARS RISK TREND
Build high-quality
portfolio
Deliver
returns
Trusted
landlord
Social
purpose
Risk
increased
Risk
unchanged
Risk
decreased
Target Healthcare REIT plc
28
Section 172 Statement
Promoting the success of
Target Healthcare REIT plc
The Board considers that it has made decisions during the year which will promote the
success of the Group for the benefit of its members as a whole.
(a) The likely consequences of any
decision in the long-term
Our investment approach is long-term with an average lease length of 26.0 years. We believe this is
the most responsible approach to provide stability and sustainability to tenants and key stakeholders.
Therefore, most decisions require consideration of long-term consequences, from determining a
sustainable rent level and the right tenant partner for each investment, to considering the impact
of debt and key contracts with service providers on the recurring earnings which support dividends
to shareholders.
(b) The interests of the
Company’s employees
The Company is externally managed and therefore has n o employees.
(c) The need to foster the Company’s
business relationships with
suppliers, customers and others
As a REIT with no employees, the Board works in close partnership with the Investment Manager,
which runs the Group’s operations and portfolio within parameters set by the Board and subject to
appropriate oversight. The Investment Manager has deep relationships with tenants, the wider care
home sector, and many of the Group’s other suppliers. These are set out in more detail in the table
on the following page.
(d) The impact of the Company’s
operations on the community
and the environment
The Board is confident the Group’s approach to investing in a sensitive sector is responsible with
regard to social and environmental impact. This is set out in more detail in the ‘community and the
environment’ section of the table on the following page.
(e) The desirability of the Company
maintaining a reputation for high
standards of business conduct
The Board requires high standards of itself, service providers and stakeholders. The Group’s purpose
and investment objectives dictate that these standards are met in order to retain credibility. The ethos
and tone is set by the Board and the Investment Manager.
(f) The need to act fairly as between
members of the Company
The Board encourages an active dialogue with shareholders to ensure effective communication, either
directly or via its brokers and/or Investment Manager. The interests of all shareholders are considered
when issuing new shares and/or considering the level of distributions or other return of capital.
The significant transactions where the interests of stakeholders were actively considered by the Board during the year were:
Ongoing investment and
asset management activity
The Group was actively engaged in several
re-tenantings during the year. Further details
on which are described in the Investment
Manager’s Report on pages 24 and 25.
This included completing the re-tenanting of
a home where the Group had placed the
previous tenant into administration, the first
time that this has been undertaken by the
Group and a decision which was not taken
lightly given both the costs involved and its
potential impact across a number of
stakeholders. This transaction required
careful consideration by the Board to
balance the competing interests of the
Group, its shareholders, the tenant operator
and the staff and residents of the relevant
care home. Despite the additional costs
involved in this process, it resulted in a
successful re-tenanting of the care home;
thereby preventing a further loss of rental
income and protecting capital value for the
Group, whilst ensuring continuity of the
home’s operations for staff and residents.
Another significant tenant activity involved an
operator who decided to exit the elderly care
home market. Working with the operator, the
Group re-tenanted the tenant’s three care
homes to two existing tenants of the Group.
The Group also agreed transactions to sell 11
properties and, with the inclusion of both a
forward commitment and forward fund in
the redeployment of the proceeds received,
is supporting the construction of two new
purpose-built, high-quality care homes and
the provision to the sector, and residents, of
a further 114 much needed beds in fit-for-
purpose real estate.
Board
The Board expects to appoint a sixth Director
to the Board prior to the end of the calendar
year in order to bolster the Board and aid
with future succession planning. It is
anticipated that this appointment will also
ensure that the Company will meet the
‘comply or explain’ requirement of the UK
Listing Rules to have at least one Director
from an ethnic minority and ensure
continued compliance with other diversity
recommendations.
Capital financing
The Board finalised the refinancing of its
shortest dated debt facilities with each of
the existing lenders in advance of their
November 2025 expiry. This required the
Board to assess the appropriate gearing
level of the Group and the potential lenders
to be considered, as well as the appropriate
duration, interest rate hedging strategy and
financial terms of the loan facilities.
Dividends paid
The Board recognised the importance of
dividends to its shareholders and, after
careful financial analysis, decided to increase
the Company’s dividends in relation to the
year ending 30 June 2027 to reflect net
rental growth whilst remaining at a level
which is expected to be fully covered with
the potential for further growth.
Annual Report and Financial Statements 2026
29
Corporate Governance
Strategic Report
Financial Statements Additional Information
Stakeholders
The Company is a REIT and has no executive directors or employees and is governed by the Board of Directors. Its main stakeholders are
shareholders, tenants and their underlying residents, debt providers, the Investment Manager, other service providers and the community and
the environment. The Board considers the long-term consequences of its decisions on its stakeholders to ensure the long-term sustainability
of the Company.
Shareholders
Shareholders are key stakeholders and the Board proactively seeks the views of its shareholders and places great
importance on communication with them.
The Board reviews the detail of significant shareholders and recent movements at each Board Meeting and receives
regular reports from the Investment Manager and brokers on the views of shareholders, and prospective shareholders,
as well as updates on general market trends and expectations. The Chair and other Directors make themselves
available to meet shareholders when required to discuss the Group’s business and address shareholder queries.
The Directors make themselves available at the AGM in person, with the Company also providing the ability for any
questions to be raised with the Board by email in advance of the meeting.
The Company and Investment Manager also provide regular updates to shareholders and the market through the Annual
Report, Interim Report, Sustainability Report, regular RNS announcements, quarterly investor reports and the Company’s
website. The Investment Manager holds a results presentation on the day of publication of each of the Annual and
Interim Reports, and meets with analysts and members of the financial press throughout the year.
Tenants and
underlying residents
As set out in more detail on pages 16 and 17, the Investment Manager liaises closely with tenants to understand their
needs, and those of their underlying residents, through visits to properties and regular communication with both care
home personnel and senior management of the tenant operators. The effectiveness of this engagement is assessed
through a regular tenant survey which, during 2026, was undertaken by an external third-party.
The Investment Manager also receives, and analyses, management information provided by each tenant at least
quarterly and regularly monitors the CQC, or equivalent, rating for each home and any online reviews, such as
carehome.co.uk. Any significant matters are discussed with the tenant and are included within the Board reporting.
Debt providers
The Group has term loan and revolving credit facilities with the Royal Bank of Scotland plc, HSBC Bank plc and
Phoenix Group (see Note 13 to the Consolidated Financial Statements for more information). The Company maintains
a positive working relationship with each of its lenders and provides regular updates, at least quarterly, on portfolio
activity and compliance with its loan covenants in relation to each loan facility. Since the year-end, the Group has
exercised the option, and each bank has provided its consent, to extend each of its shorter-term bank facilities by
one year such that each is now repayable in September 2029, with a remaining option to extend by a further year.
Investment
Manager
The Investment Manager has responsibility for the day-to-day management of the Group pursuant to the Investment
Management Agreement. The Board, and its committees, are in regular communication with the Investment Manager
and receive formal presentations at every Board Meeting to aid its oversight of the Group’s activities and the
formulation of its ongoing strategy.
The Board, through the Management Engagement Committee, formally reviews the performance of the Investment
Manager, the terms of its appointment and the quality of the other services provided at least annually. Further details on
this process and the conclusions reached in relation to the year ended 30 June 2026 are contained on page 45.
Other service
providers
The Board, through the Management Engagement Committee, formally reviews the performance of each of its
significant service providers at least annually. The reviews will include the Company’s legal adviser, brokers, tax adviser,
auditor, depositary, external valuer, company secretary, insurance broker, surveyors and registrar. The purpose of
these reviews is to ensure that the quality of the services provided remains of the standard expected by the Board and
that overall costs and other contractual arrangements remain in the interests of the Group and other significant
stakeholders. The Investment Manager also reports regularly to the Board on these relationships.
The significant other service providers, particularly the Group’s legal advisers and brokers, are invited to attend Board
Meetings, including the annual Strategy Meeting, and report directly to the Directors where appropriate.
Community and
the environment
The Group’s principal non-financial objective is to generate a positive social impact for the end-users of its real estate.
Investment decisions are made based on the fundamental premise that the real estate is suitable for its residents, the staff
who care for them, and their friends, families and local communities, both on original acquisition and for the long-term.
Environmental considerations are an integral part of the acquisition and portfolio management process, given the
strategy of only acquiring modern buildings which benchmark well from an energy efficiency aspect and which meet
the requirements of the Investment Manager’s ESG Charter ‘Targeting Tomorrow’. Under the remit of the ESG
Committee, the progression of the Group’s ESG strategy has prioritised gathering useful energy/consumption data on
its portfolio, whilst progressing work on a straightforward hierarchy of initiatives to maximise the Group’s impact over
both the short and longer term. The Group is continuing to work on improving its feedback and reporting to tenants
of the data collected, including performance relative to their peers, in order to highlight areas in which they may be
able to improve their own performance. The Group has formulated and published a high-level longer term portfolio
strategy in relation to setting and meeting the Group’s net zero carbon target, including initial consideration of interim
targets and intended timescale.
On behalf of the Board
Alison Fyfe
Chair
21 September 2026
Target Healthcare REIT plc
30
Corporate
Governance
30–63
Board of Directors 32
Investment Manager 34
Directors’ Report 36
Statement of Directors’ Responsibilities 43
Corporate Governance Statement 44
Report of the Audit Committee 49
Directors’ Remuneration Report 54
Independent Auditor’s Report 58
Annual Report and Financial Statements 2026
31
Corporate Governance
Strategic Report Financial Statements Additional Information
31
Target Healthcare REIT plc
32
Our experienced
and knowledgeable
Board are
responsible for
the effective
stewardship of
theCompany.
Board of Directors
Alison Fyfe Michael Brodtman Richard Cotton Vince Niblett Dr Amanda Thompsell
Independent Non-Executive Chair Independent Non-Executive Director Independent Non-Executive Director
and Senior Independent Director
Independent Non-Executive Director
and Chair of Audit Committee
Independent Non-Executive Director
Ms Fyfe is a highly experienced property
professional with over 40 years of experience
in surveying, banking and property finance.
Having trained and worked as a commercial
surveyor with Knight Frank in both London
and Edinburgh, she joined the Royal Bank of
Scotland in 1996 to specialise in property
finance. Over a period of 19 years with the
bank she fulfilled several senior property
finance roles, ultimately serving for five years
as Head of Real Estate Restructuring in
Scotland before leaving the bank in 2015.
She has subsequently acted as a director of a
number of companies in the property and debt
finance sectors. She has been elected as a
Governing Board Member of Hillcrest Homes
(Scotland) and serves as a trustee of the
Church of Scotland Housing and Loan Fund.
Ms Fyfe is a member of the Royal Institution
of Chartered Surveyors, a member of Real
Estate: UK and a former Policy Board member
of the Scottish Property Federation.
Mr Brodtman has extensive knowledge of the
property sector. He worked for global property
advisers CBRE for over 40 years, retiring as
chairman of the UK Advisory division in June
2022. He led the firm’s Valuation department for
over 20 years, and served on its Executive Board
and Operating Committee, respectively
responsible for strategic direction and
day-to-day management.
He is a Fellow of the Royal Institution of
Chartered Surveyors, and has been extensively
involved with the RICS throughout his
professional career. He was formerly a member
of the Policy Committee of the British Property
Federation, the RICS Global Valuation
Professional Board and the Bank of England
Commercial Property Forum.
Mr Brodtman is currently a non-executive
director of Grainger plc, a listed residential
property company, and Cadogan Group
Limited. He also holds a number of additional
advisory roles, and has further Board experience
as a former non-executive director of Investment
Property Databank and housing association
Places for People. He is keenly interested in the
healthcare sector, with relevant experience from
his role as a Trustee of Jewish Care, which
provides health and social care services for
London’s Jewish Community, including ten
care homes with some 500 residents.
Mr Cotton has over 40 years of experience in
the property sector and headed the real estate
corporate finance team at JP Morgan
Cazenove until April 2009. Subsequently he
was a managing director of Forum Partners
andchairman of Centurion Properties.
He has wide corporate experience as a former
non-executive director of Hansteen plc, a
former chairman of Helical plc and including
advisory roles with Lloyds Bank and Transport
for London.
Mr Cotton is currently a consultant to Big
Yellow Group plc, where he served as a
non-executive director from 2012 until 2022.
Mr Niblett has many years of financial and
commercial experience having been the
Global Managing Partner Audit for Deloitte.
He held a number of senior leadership roles
within Deloitte including as a member of the
UK Board of Partners and of the Global
Executive Group and the UK Executive
Group before his retirement from Deloitte
in May 2015. During his career at Deloitte,
Mr Niblett served some of the firm’s most
significant public company clients, working
with them on commercial and strategic
issues as well as providing audit services.
Mr Niblett is an independent non-executive
director and chairman of the audit committee
of Forterra plc and an independent non-
executive director and senior independent
director of Big Yellow Group plc.
Dr Thompsell trained and originally practised as
a GP before switching to working in old age
hospital medicine, and then retraining in old
age psychiatry. She has significant clinical
experience of all aspects of caring for older
people and has held a number of clinical and
national leadership roles allowing her to
develop a comprehensive knowledge of the
care home sector. This included 17 years at the
South London and Maudsley NHS Foundation
Trust, where she led a multidisciplinary team
supporting care homes for seven years and was
the clinical lead for a long-stay older people’s
mental health unit for a further five years.
Dr Thompsell is the National Specialist
Advisor: Older People’s Mental Health at NHS
England, a member of the advisory board to
the Journal of Dementia Care, a Medical
Member of the First Tier Tribunal at the UK
Ministry of Justice and a Community
Consultant in West London Mental Health
Trust. She is also the previous chair of the
Faculty of Old Age Psychiatry of the Royal
College of Psychiatrists.
Date of appointment Date of appointment Date of appointment Date of appointment Date of appointment
1 May 2020 1 January 2023 1 November 2022 25 August 2021 1 February 2022
Country of residence Country of residence Country of residence Country of residence Country of residence
UK UK UK UK UK
Independent Independent Independent Independent Independent
Yes Yes Yes Yes Yes
Other public company directorships Other public company directorships Other public company directorships Other public company directorships Other public company directorships
None Grainger plc None Big Yellow Group plc
Forterra plc
None
Committee membership Committee membership Committee membership Committee membership Committee membership
Investment Committee (Chair)
Audit Committee
ESG Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
ESG Committee (Chair)
Audit Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Management Engagement Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Nomination Committee
Remuneration Committee
Audit Committee (Chair)
ESG Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Nomination Committee (Chair)
Remuneration Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Management Engagement Committee
Annual Report and Financial Statements 2026
33
Corporate Governance
Strategic Report Financial Statements Additional Information
Alison Fyfe Michael Brodtman Richard Cotton Vince Niblett Dr Amanda Thompsell
Independent Non-Executive Chair Independent Non-Executive Director Independent Non-Executive Director
and Senior Independent Director
Independent Non-Executive Director
and Chair of Audit Committee
Independent Non-Executive Director
Ms Fyfe is a highly experienced property
professional with over 40 years of experience
in surveying, banking and property finance.
Having trained and worked as a commercial
surveyor with Knight Frank in both London
and Edinburgh, she joined the Royal Bank of
Scotland in 1996 to specialise in property
finance. Over a period of 19 years with the
bank she fulfilled several senior property
finance roles, ultimately serving for five years
as Head of Real Estate Restructuring in
Scotland before leaving the bank in 2015.
She has subsequently acted as a director of a
number of companies in the property and debt
finance sectors. She has been elected as a
Governing Board Member of Hillcrest Homes
(Scotland) and serves as a trustee of the
Church of Scotland Housing and Loan Fund.
Ms Fyfe is a member of the Royal Institution
of Chartered Surveyors, a member of Real
Estate: UK and a former Policy Board member
of the Scottish Property Federation.
Mr Brodtman has extensive knowledge of the
property sector. He worked for global property
advisers CBRE for over 40 years, retiring as
chairman of the UK Advisory division in June
2022. He led the firm’s Valuation department for
over 20 years, and served on its Executive Board
and Operating Committee, respectively
responsible for strategic direction and
day-to-day management.
He is a Fellow of the Royal Institution of
Chartered Surveyors, and has been extensively
involved with the RICS throughout his
professional career. He was formerly a member
of the Policy Committee of the British Property
Federation, the RICS Global Valuation
Professional Board and the Bank of England
Commercial Property Forum.
Mr Brodtman is currently a non-executive
director of Grainger plc, a listed residential
property company, and Cadogan Group
Limited. He also holds a number of additional
advisory roles, and has further Board experience
as a former non-executive director of Investment
Property Databank and housing association
Places for People. He is keenly interested in the
healthcare sector, with relevant experience from
his role as a Trustee of Jewish Care, which
provides health and social care services for
London’s Jewish Community, including ten
care homes with some 500 residents.
Mr Cotton has over 40 years of experience in
the property sector and headed the real estate
corporate finance team at JP Morgan
Cazenove until April 2009. Subsequently he
was a managing director of Forum Partners
andchairman of Centurion Properties.
He has wide corporate experience as a former
non-executive director of Hansteen plc, a
former chairman of Helical plc and including
advisory roles with Lloyds Bank and Transport
for London.
Mr Cotton is currently a consultant to Big
Yellow Group plc, where he served as a
non-executive director from 2012 until 2022.
Mr Niblett has many years of financial and
commercial experience having been the
Global Managing Partner Audit for Deloitte.
He held a number of senior leadership roles
within Deloitte including as a member of the
UK Board of Partners and of the Global
Executive Group and the UK Executive
Group before his retirement from Deloitte
in May 2015. During his career at Deloitte,
Mr Niblett served some of the firm’s most
significant public company clients, working
with them on commercial and strategic
issues as well as providing audit services.
Mr Niblett is an independent non-executive
director and chairman of the audit committee
of Forterra plc and an independent non-
executive director and senior independent
director of Big Yellow Group plc.
Dr Thompsell trained and originally practised as
a GP before switching to working in old age
hospital medicine, and then retraining in old
age psychiatry. She has significant clinical
experience of all aspects of caring for older
people and has held a number of clinical and
national leadership roles allowing her to
develop a comprehensive knowledge of the
care home sector. This included 17 years at the
South London and Maudsley NHS Foundation
Trust, where she led a multidisciplinary team
supporting care homes for seven years and was
the clinical lead for a long-stay older people’s
mental health unit for a further five years.
Dr Thompsell is the National Specialist
Advisor: Older People’s Mental Health at NHS
England, a member of the advisory board to
the Journal of Dementia Care, a Medical
Member of the First Tier Tribunal at the UK
Ministry of Justice and a Community
Consultant in West London Mental Health
Trust. She is also the previous chair of the
Faculty of Old Age Psychiatry of the Royal
College of Psychiatrists.
Date of appointment Date of appointment Date of appointment Date of appointment Date of appointment
1 May 2020 1 January 2023 1 November 2022 25 August 2021 1 February 2022
Country of residence Country of residence Country of residence Country of residence Country of residence
UK UK UK UK UK
Independent Independent Independent Independent Independent
Yes Yes Yes Yes Yes
Other public company directorships Other public company directorships Other public company directorships Other public company directorships Other public company directorships
None Grainger plc None Big Yellow Group plc
Forterra plc
None
Committee membership Committee membership Committee membership Committee membership Committee membership
Investment Committee (Chair)
Audit Committee
ESG Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
ESG Committee (Chair)
Audit Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Management Engagement Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Nomination Committee
Remuneration Committee
Audit Committee (Chair)
ESG Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Nomination Committee (Chair)
Remuneration Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Management Engagement Committee
Target Healthcare REIT plc
34
Investment Manager
Kenneth MacKenzie MBE
MA CA
John Flannelly
BAcc FCA
Andrew Brown Scott Steven
MA
Donald Cameron
BCom CA
James MacKenzie
LLB
Kenneth MacKenzie MBE is the founder and
Chief Executive of Target. He trained as a
Chartered Accountant and has over 50 years
of business leadership experience, the last 25
in healthcare. In 2005, he acquired and grew
Independent Living Services (‘ILS’), Scotland’s
largest independent domiciliary care provider,
before exiting to private equity. He earlier
explored a joint venture with US operator
Sunrise Senior Living. In 2008–2009 he
founded the Kames Target Healthcare Fund (a
joint mandate with Kames Capital (now Aegon
Asset Management), with Scottish Widows as
a cornerstone investor), which invested in
modern purpose-built care homes. Building
on that success, he founded Target Healthcare
REIT plc which listed on the London Stock
Exchange in March 2013. Kenneth serves as
Chief Executive of the Investment Manager
and oversees fund creation, management,
fundraising, and investor relations. In the 2025
King’s Birthday Honours, Kenneth was
appointed Member of the Order of the British
Empire (MBE) for services to the care home
sector and to improving the lives of older
people. He holds a number of pro-bono
charitable roles. Before entering the sector he
created, led and owned businesses in printing
and publishing, IT, shipping and accountancy.
John Flannelly is co-founder and Head of
Investment at Target. A Chartered Accountant
with more than 25 years’ experience, including
20 years in real estate investment
management, he has helped establish each
of Target’s investment vehicles and leads
investment activity across the business. He
has appraised several hundred care home
opportunities, supporting the acquisition of
more than 100 properties for client funds.
Before joining Target, John was investment
director for an institutional investor, where he
held board positions at a UK top-10 care home
operator and a care home development
business. He began his career at Arthur
Andersen, working on audits, financial due
diligence and corporate finance projects,
before moving to Bank of Scotland, where he
structured finance packages for management
buy-outs and later moved into real estate
investment management.
Andrew Brown is a co-founder of Target
and Head of Healthcare where he works
primarily between the Investment and Asset
Management teams utilising his 40+ years
of care sector experience in assessing new
opportunities and potential tenants, including
taking an interest in planning and design of
new build projects. He also liaises closely with
the healthcare specialists as feedback is
received from the existing properties and
tenants and represents Target at sector events.
With his deep knowledge of the sector, he also
keeps the wider Target team advised on
related news and national policy / legislation
issues surrounding care. Andrew spent his
childhood around the family carehome, which
he later helped to grow into one of the most
significant care villages in the UK, with wide
ranging roles from hands on care, finance, and
administration as well as having extensive
development experience. In his role at Target,
Andrew has often undertaken 100+ carehome
visits a year covering numerous operators
ranging across the not-for profit, private and
local government provision.
Scott Steven is Head of Asset Management at
Target, where he leads a dedicated team of 11
finance, property and healthcare specialists,
focused on delivering strong returns for
investors and great environments for
residents. Since joining Target in 2017, Scott
has been instrumental in driving strategic
oversight, tenant engagement and operational
performance of Target’s client portfolios –
overseeing all proactive and reactive asset
management initiatives, including disposals
and “re-tenantings”. His leadership plays a vital
role in supporting the growth of Target
Healthcare REIT plc by ensuring that its
investments in modern, purpose-built care
homes are optimised for long-term
sustainability. Prior to joining Target, Scott
gained significant financial and corporate
experience at Bank of Scotland / Lloyds
Banking Group, working in a variety of
transactional and portfolio management roles
over a 16 year period, predominantly focussed
on real estate. During that time he delivered
complex debt and equity transactions,
managed substantial portfolios and led high
performing teams. Combining this prior
experience with the specialised knowledge of
the elderly care sector since joining Target,
Scott brings a highly strategic and
collaborative approach to asset management,
fostering strong, enduring partnerships with
tenant operators to deliver consistent returns
for investors.
Donald Cameron is Company Secretary
and Director of Financial Reporting at Target.
He is a Chartered Accountant with more than
20 years of experience of financial reporting
and company secretarial services within the
closed-ended investment company sector.
Having originally qualified with Deloitte LLP,
he then worked for over ten years in the
Investment Trust Company Secretarial team
at F&C Asset Management, acting for both
property and equity investment companies. He
is responsible for providing company secretarial
services to the Board and for statutory financial
reporting. He joined Target in 2019, having
provided similar services to the Group for over
three years whilst working for Maitland Group,
a third-party provider of corporate secretarial
andadministration services.
James MacKenzie is Managing Director at
Target. He is a Solicitor with more than 20
years of corporate advisory, relationship
management and corporate governance
experience. He last worked at Aegon UK
where he was General Counsel and Company
Secretary for the last 12 years before joining
Target in January 2025. At Aegon UK, James
provided strategic legal counsel to the board
and played a key role in driving and supporting
major business change programmes,
including M&A activity. James led Target’s
investor relations function until 14 September
2026 when he became Managing Director in
charge of operations.
The Investment Manager
The Group has appointed Target Fund Managers Limited (‘Target’ or the ‘Investment Manager’) as its investment manager pursuant to the
Investment Management Agreement. The Investment Manager is a limited company which is authorised and regulated by the FCA and has the
responsibility for the day-to-day management of the Group and advises the Group on the acquisition of its investment portfolio and on the
development, management and disposal of UK care homes and other healthcare assets in the portfolio. It comprises a team of experienced
individuals with expertise intheoperation of and investment in healthcare property assets.
Key personnel of the Investment Manager
The key personnel who are responsible for managing the Group’s activities are set out below.
Experts in strategic,
responsible investment
Annual Report and Financial Statements 2026
35
Corporate Governance
Strategic Report Financial Statements Additional Information
Kenneth MacKenzie MBE
MA CA
John Flannelly
BAcc FCA
Andrew Brown Scott Steven
MA
Donald Cameron
BCom CA
James MacKenzie
LLB
Kenneth MacKenzie MBE is the founder and
Chief Executive of Target. He trained as a
Chartered Accountant and has over 50 years
of business leadership experience, the last 25
in healthcare. In 2005, he acquired and grew
Independent Living Services (‘ILS’), Scotland’s
largest independent domiciliary care provider,
before exiting to private equity. He earlier
explored a joint venture with US operator
Sunrise Senior Living. In 2008–2009 he
founded the Kames Target Healthcare Fund (a
joint mandate with Kames Capital (now Aegon
Asset Management), with Scottish Widows as
a cornerstone investor), which invested in
modern purpose-built care homes. Building
on that success, he founded Target Healthcare
REIT plc which listed on the London Stock
Exchange in March 2013. Kenneth serves as
Chief Executive of the Investment Manager
and oversees fund creation, management,
fundraising, and investor relations. In the 2025
King’s Birthday Honours, Kenneth was
appointed Member of the Order of the British
Empire (MBE) for services to the care home
sector and to improving the lives of older
people. He holds a number of pro-bono
charitable roles. Before entering the sector he
created, led and owned businesses in printing
and publishing, IT, shipping and accountancy.
John Flannelly is co-founder and Head of
Investment at Target. A Chartered Accountant
with more than 25 years’ experience, including
20 years in real estate investment
management, he has helped establish each
of Target’s investment vehicles and leads
investment activity across the business. He
has appraised several hundred care home
opportunities, supporting the acquisition of
more than 100 properties for client funds.
Before joining Target, John was investment
director for an institutional investor, where he
held board positions at a UK top-10 care home
operator and a care home development
business. He began his career at Arthur
Andersen, working on audits, financial due
diligence and corporate finance projects,
before moving to Bank of Scotland, where he
structured finance packages for management
buy-outs and later moved into real estate
investment management.
Andrew Brown is a co-founder of Target
and Head of Healthcare where he works
primarily between the Investment and Asset
Management teams utilising his 40+ years
of care sector experience in assessing new
opportunities and potential tenants, including
taking an interest in planning and design of
new build projects. He also liaises closely with
the healthcare specialists as feedback is
received from the existing properties and
tenants and represents Target at sector events.
With his deep knowledge of the sector, he also
keeps the wider Target team advised on
related news and national policy / legislation
issues surrounding care. Andrew spent his
childhood around the family carehome, which
he later helped to grow into one of the most
significant care villages in the UK, with wide
ranging roles from hands on care, finance, and
administration as well as having extensive
development experience. In his role at Target,
Andrew has often undertaken 100+ carehome
visits a year covering numerous operators
ranging across the not-for profit, private and
local government provision.
Scott Steven is Head of Asset Management at
Target, where he leads a dedicated team of 11
finance, property and healthcare specialists,
focused on delivering strong returns for
investors and great environments for
residents. Since joining Target in 2017, Scott
has been instrumental in driving strategic
oversight, tenant engagement and operational
performance of Target’s client portfolios –
overseeing all proactive and reactive asset
management initiatives, including disposals
and “re-tenantings”. His leadership plays a vital
role in supporting the growth of Target
Healthcare REIT plc by ensuring that its
investments in modern, purpose-built care
homes are optimised for long-term
sustainability. Prior to joining Target, Scott
gained significant financial and corporate
experience at Bank of Scotland / Lloyds
Banking Group, working in a variety of
transactional and portfolio management roles
over a 16 year period, predominantly focussed
on real estate. During that time he delivered
complex debt and equity transactions,
managed substantial portfolios and led high
performing teams. Combining this prior
experience with the specialised knowledge of
the elderly care sector since joining Target,
Scott brings a highly strategic and
collaborative approach to asset management,
fostering strong, enduring partnerships with
tenant operators to deliver consistent returns
for investors.
Donald Cameron is Company Secretary
and Director of Financial Reporting at Target.
He is a Chartered Accountant with more than
20 years of experience of financial reporting
and company secretarial services within the
closed-ended investment company sector.
Having originally qualified with Deloitte LLP,
he then worked for over ten years in the
Investment Trust Company Secretarial team
at F&C Asset Management, acting for both
property and equity investment companies. He
is responsible for providing company secretarial
services to the Board and for statutory financial
reporting. He joined Target in 2019, having
provided similar services to the Group for over
three years whilst working for Maitland Group,
a third-party provider of corporate secretarial
andadministration services.
James MacKenzie is Managing Director at
Target. He is a Solicitor with more than 20
years of corporate advisory, relationship
management and corporate governance
experience. He last worked at Aegon UK
where he was General Counsel and Company
Secretary for the last 12 years before joining
Target in January 2025. At Aegon UK, James
provided strategic legal counsel to the board
and played a key role in driving and supporting
major business change programmes,
including M&A activity. James led Target’s
investor relations function until 14 September
2026 when he became Managing Director in
charge of operations.
Alternative Investment Fund Managers Directive (‘AIFMD’)
The Board has appointed Target as the Group’s AIFM and Target has received FCA approval to act as AIFM of the Group. An additional requirement
of the AIFMD is for the Group to appoint a depositary, which oversees the property transactions and cash arrangements and other AIFMD
required depositary responsibilities. The Board has appointed IQ EQ Depositary Company (UK) Limited to act as the Company’s depositary.
Target Healthcare REIT plc
36
Directors’ Report
The Directors present their report, along with the financial statements of the Group and Company on pages 66 to 97, for the year ended
30 June 2026.
The Directors consider that, following advice from the Audit Committee, the Annual Report and Consolidated Financial Statements taken as a
whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s position, performance,
business model and strategy. The Audit Committee has reviewed the Annual Report and Consolidated Financial Statements for the purpose of this
assessment. In reaching this conclusion, the Directors have assumed that the reader of the Annual Report and Consolidated Financial Statements
would have a reasonable level of knowledge of the investment industry in general and Real Estate Investment Trusts in particular. The outlook
for the Group can be found in the Chair’s Statement on pages 6 to 9 and the Investment Manager’s Report on pages 24 and 25. Principal and
emerging risks and uncertainties can be found on pages 26 and 27 with further information in Note 16 to the Consolidated Financial Statements.
Results and Dividends
The results for the year are set out in the following Consolidated Financial Statements. The Group has paid four quarterly interim dividends,
totalling 6.032 pence per share, to shareholders in relation to the year ended 30 June 2026. Details of the dividends paid are set out in Note 7
to the Consolidated Financial Statements, and a breakdown of the distributions paid analysed between Property Income Distributions (‘PIDs’)
and Ordinary Dividends is provided on page 105.
The Company
The Company is registered as a Public Limited Company in terms of the Companies Act 2006 (Registered number: 11990238 ) and is an
investment company under section 833 of the Companies Act 2006.
The Target Healthcare REIT group
company to the Group that was incorporated in the United Kingdom , the Company became the parent company of the Group in August
2019. The Company’s shares have been admitted to the Official List of the Financial Conduct Authority and to trading on the Main Market
of the London Stock Exchange. The Company is a constituent of the FTSE-250 Index.
The Company holds a number of wholly-owned subsidiaries, both directly and indirectly, details of which are set out in Note 11 to the
Consolidated Financial Statements and Note 3 to the Company Financial Statements. These subsidiary companies hold the majority of the
Group’s investment properties and loan facilities.
The Company is a member of the Association of Investment Companies (the ‘AIC’) and the European Public Real Estate Association (‘EPRA’).
Investment Objective
The Group’s investment objective is to provide shareholders with an attractive level of income together with the potential for capital and
income growth from investing in a diversified portfolio of freehold and long leasehold care homes that are let to care home operators;
and other healthcare assets in the UK.
Investment Policy
The Group pursues its objective by investing in a portfolio of care homes, predominantly in the UK, that are let to care home operators on full
repairing and insuring leases that are subject to annual uplifts based on increases in the UK retail prices index (subject to caps and collars) or
fixed uplifts. The Group is also able to generate up to 15 per cent of its gross income, in any financial year, from non-rental revenue or profit
related payments from care home operators under management contracts in addition to the rental income due under fully repairing and
insuring leases.
In order to spread risk and diversify its portfolio, the Group is also permitted to invest up to: (i) 15 per cent of its gross assets, at the time of
investment, in other healthcare assets, such as properties which accommodate GP practices and other healthcare related services
including occupational health and physiotherapy practices, pharmacies, special care schools and hospitals; and (ii) 25 per cent of its gross
assets, at the time of investment, in indirect property investment funds (including joint ventures) with a similar investment policy to that of the
Group. The Group may also acquire or establish companies, funds or other SPVs which themselves own assets falling within the Group’s
investment policy.
The Group may either invest in assets that require development or that are under development, which when completed would fall within the
Group’s investment policy to invest in UK care homes and other healthcare assets, including by means of the forward funding of developments
and forward commitments to purchase completed developments, provided that the Group will not undertake speculative development and
that the gross budgeted development costs to the Group of all such developments, including forward funding and forward commitments,
does not exceed 25 per cent of the Group’s gross assets on the commencement of the relevant development. Any development will only
be for investment purposes.
In order to manage risk in the portfolio, at the time of investment, no single asset shall exceed in value 20 per cent of the Group’s gross asset
value and, in any financial year beginning after the Group is fully invested, the rent received from a single tenant or tenants within the same
group (other than from central or local government, or primary health trusts) is not expected to exceed 30 per cent of the total income of the
Group, at the time of investment.
The Group will not acquire any asset or enter into any lease or related agreement if that would result in a breach of the conditions applying to
the Group’s REIT status.
The Group is permitted to invest cash held for working capital purposes and awaiting investment in cash deposits, gilts and money market funds.
Annual Report and Financial Statements 2026
37
Corporate Governance
Strategic Report Financial Statements Additional Information
Gearing, calculated as borrowings as a percentage of the Group’s gross assets, may not exceed 35 per cent at the time of drawdown.
The Board currently intends that, over the medium term, borrowings of the Group will represent no more than approximately 30 per cent
of the Group’s gross assets at the time of drawdown. However, the Group’s borrowings may exceed this level from time to time as borrowings
are incurred to finance the growth of the Group’s property portfolio.
Any material change to the investment policy will require the prior approval of shareholders.
Dividend Policy
Subject to market conditions and the Company’s performance, financial position and financial outlook, it is the Directors’ intention to pay an
attractive level of dividend income to shareholders on a quarterly basis. In order to ensure that the Company continues to pay the required
level of distribution to maintain Group REIT status and to allow consistent dividends to be paid on a regular quarterly basis, the Board intends
to continue to pay all dividends as interim dividends. The Company does not therefore announce a final dividend. The Board believes this
policy remains appropriate to the Group’s circumstances and is in the best interests of shareholders.
Directors
Biographical details of the Directors, all of whom are non-executive, can be found on pages 32 and 33. As explained in more detail in the Corporate
Governance Statement on page 45, any new appointment by the Board is subject to election by shareholders at the Annual General Meeting (‘AGM’)
following the appointment. Thereafter the Board has agreed that all Directors will retire annually and, if appropriate, seek re-election.
Each of the Directors was re-elected at the AGM held on 4 December 2025 and, in line with the Company’s stated policy, will seek annual
re-election at the AGM to be held on 2 December 2026.
In making appointments to the Board, the Directors use a ‘skills and experience’ matrix to ensure the continued appropriateness of the Board
as a whole. The matrix covering the current members of the Board is set out below. The Directors continue to believe that the Board has an
appropriate balance of skills, experience, independence and knowledge of the Group to enable it to provide effective strategic leadership and
proper guidance of the Group. However, as highlighted in the prior year, the Directors remain cognisant of both the need for regular
refreshment of the membership of the Board and the ‘comply or explain’ UK Listing Rules requirement in relation to diversity, and therefore a
process to appoint a sixth Director to the Board is under way. This process is well advanced and is expected to be completed prior to the
Company’s AGM in December, with the appointment becoming effective from the start of 2027. It is intended that this appointment will (i) add
further resilience, knowledge and experience to the Board; (ii) broaden the spread of tenure across the Board and thereby help to ensure that
corporate knowledge and history is retained as part of future succession planning; and (iii) ensure that the Company will be fully compliant
with the diversity requirements of the UK Listing Rules.
Board Tenure Property
Technical
Accounting,
Governance
& Audit
Banking &
Debt Finance
Healthcare
Sector
Corporate
Finance &
Listed Markets
Other
ESG Matters
Alison Fyfe (Chair) 6.2 years
Vince Niblett 4.8 years
Amanda Thompsell 4.4 years
Richard Cotton 3.7 years
Michael Brodtman 3.5 years
areas of core skills, knowledge and experience secondary areas of competence and knowledge
The Board confirms that, following the evaluation process set out in the Corporate Governance Statement on pages 47 and 48, the
performance of each of the Directors continues to be effective and demonstrates commitment to the role. It is also considered that each of
the Directors has sufficient time to meet their Board responsibilities. There are no service contracts in existence between the Company and
any Director but each of the Directors has been issued with, and accepted the terms of, a letter of appointment that sets out the main terms of
his or her appointment. Amongst other things, the letter includes confirmation that the Directors have a sufficient understanding of the Group
and the sector in which it operates, and sufficient time available to discharge their duties effectively taking into account their other
commitments. These letters are available for inspection upon request at the Company’s registered office.
Capital Structure and Voting Rights
Details of the Company’s share capital are set out in Note 15 to the Consolidated Financial Statements. Details of voting rights are also set
out in the Notes to the Notice of Annual General Meeting. There are no significant restrictions concerning the transfer of securities in the
Company (other than certain restrictions imposed by laws and regulations such as insider trading laws); no agreements known to the
Company concerning restrictions on the transfer of securities in the Company or on voting rights; and no special rights with regard to control
attached to securities. There are no significant agreements which the Company is a party to that might be affected by a change of control of
the Company following a takeover bid, provided following such bid the Company’s shares continue to be traded on the main market of the
London Stock Exchange.
The Group’s borrowings are detailed in Note 13 to the Consolidated Financial Statements.
Target Healthcare REIT plc
38
Directors’ Report continued
Substantial Interests in Share Capital
As at 30 June 2026, the Company had received notification of the following holdings of voting rights (under the Financial Conduct Authority’s
Disclosure Guidance and Transparency Rules):
Number of
Ordinary Shares
held
Percentage
held*
Blackrock, Inc 36,471,326 5.9
Schroders plc 32,996,088 5.3
Rathbones Investment Management Limited 30,983,995 5.0
Baillie Gifford & Co 25,358,041 4.1
Premier Miton Group plc 24,348,972 3.9
Alder Investment Management Limited 23,681,156 3.8
Waverton Investment Management Limited 18,869,630 3.0
* Based on 620,237,346 ordinary shares in issue as at 30 June 2026.
Since 30 June 2026, the Company has received notification that Blackrock, Inc has decreased its overall holding to 35,044,027 Ordinary
Shares, representing 5.7 per cent of the ordinary shares in issue.
As at 21 September 2026, the Company has not received notification of any other changes in the holdings of voting rights (under the Financial
Conduct Authority’s Disclosure Guidance and Transparency Rules) compared with those above.
Share Issuance and Share Buy Backs
At the Annual General Meeting held on 4 December 2025, shareholders granted authority for the Company to issue up to 62,023,700 ordinary
shares on a non-pre-emptive basis for cash. This equated to 10 per cent of the shares in issue at the time of passing of the resolution. As at
21 September 2026, the Company has not issued any shares under this authority. The authority will expire on the earlier of 4 March 2027 or
the conclusion of the forthcoming Annual General Meeting, which is expected to be held on 2 December 2026. It is expected that the
Company will continue to seek this authority on an annual basis.
At the Annual General Meeting held on 4 December 2025, shareholders granted authority for the Company to buy back up to 92,973,578
ordinary shares for cancellation or for holding in treasury. The Company did not buy back any shares under this authority, which will expire
at the conclusion of the forthcoming Annual General Meeting.
Statement of Disclosure of Information to Auditor
As far as the Directors are aware, there is no relevant audit information of which the Group’s auditor is unaware, and each Director has taken
all the steps that he or she ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and
to establish that the Group’s auditor is aware of that information.
Continuation Vote
In accordance with the Company’s Articles of Association, an ordinary resolution is required to be put to shareholders at the AGM to be held in
2027 and at every fifth annual general meeting thereafter to seek their approval to the continuation of the Company. If the continuance vote is
not passed, the Directors are required to convene a general meeting of the Company within six months thereafter at which a special resolution
will be proposed to either wind up voluntarily or reconstruct the Company. A resolution in relation to the continuation of the Company was
last proposed at the AGM held on 6 December 2022, in relation to which 100 per cent of the votes cast were in favour of the resolution.
Going Concern
In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council.
They have considered the current cash position of the Group, forecast rental income and other forecast cash flows; taking into consideration
the potential impact of current economic conditions on both the Group, any increase in the likelihood that the tenants of its investment
properties will not be able to meet their contractual rental obligations on a timely basis and the longer term viability considerations set out
below. The Group has agreements relating to its ongoing borrowing facilities with which it has complied during the year and the Board has
considered the ability of the Group to fully draw, repay, refinance or increase its loan facilities on, or before, their expected maturity date.
The Directors also considered the Group’s exposure to rising interest rates, with the interest rate on 100 per cent of the Group’s drawn debt at
30 June 2026, and 100 per cent of its drawn debt at 21 September 2026, being fixed until the expiry of the relevant loan facility.
The Directors have also considered the Group’s level of uninvested capital, the current status of the property investment market and the
Group’s pipeline of capital commitments and other investment opportunities. Based on all the information considered, the Directors believe
that the Group has the ability to meet its financial obligations as they fall due to 30 September 2027, which is a period of at least 12 months
from the date of approval of the financial statements. For this reason, the Board continues to adopt the going concern basis in preparing the
financial statements.
Viability Statement
The AIC Code requires the Board to assess the Group’s prospects, including a robust assessment of the emerging and principal risks facing the
Group including those that would threaten its business model, future performance, solvency or liquidity. This assessment is undertaken with
the aim of stating that the Directors have a reasonable expectation that the Group will continue in operation and be able to meet its liabilities
as they fall due over the period of their assessment.
The Board has conducted this review over a five-year time horizon, which is a period thought to be appropriate for a company investing in UK
care homes with a long-term investment outlook. At each Board Meeting, the Directors consider the key outputs from a detailed financial
model covering a similar five-year rolling period, as this is considered the maximum timescale over which the performance of the Group can
be forecast with a reasonable degree of accuracy. At 30 June 2026, the Group had a property portfolio which has long leases and a weighted
average unexpired lease term of 26.0 years.
Annual Report and Financial Statements 2026
39
Corporate Governance
Strategic Report Financial Statements Additional Information
The Group’s committed loan facilities have staggered expiry dates with £130.0 million being committed until at least 23 September 2029,
£87.3 million to 12 January 2032 and £62.7 million to 12 January 2037. The Group’s debt facilities also include additional accordion facilities
which, subject to approval of the relevant lender, may provide additional uncommitted loan facilities of up to £70.0 million until at least
23 September 2029. At 21 September 2026, the Group had drawn borrowings of £200.0 million consisting of:
• £150.0 million on which the interest rate had been fixed directly until at least 12 January 2032 at a maximum weighted interest rate of
3.18per cent per annum; and
• £50.0 million on which the interest rate had been hedged through interest rate derivatives until 23 September 2030 at a weighted average
margin of 5.30 per cent per annum.
All interest rates stated exclude the amortisation of arrangement costs on each of the relevant loan facilities.
The Directors’ assessment of the Group’s principal risks are highlighted on pages 26 and 27. The most significant risks identified as relevant to
the viability statement were those relating to:
• Poor performance of investments/investment assets: The risk that a tenant is unable to sustain a sufficient rental cover, leading to a loss of
rental income for the Group;
• High inflationary environment: The risk that the level of the UK inflation rate results in a real term decrease in the Group’s income or erodes
the profitability of tenants;
• Adverse interest rate fluctuations: The risk that an increase in interest rates may impact property valuations, increase the cost of the Group’s
variable rate debt facilities, and/or limit the Group’s borrowing capacity;
• Negative perception of the care home sector: The risk that overall demand for care home beds is reduced resulting in a decline in the
capital and/or income return from the property portfolio;
• Reduced availability of care home staff: The risk that unavailability of staff restricts the ability of tenants to admit residents or results in
significant wage cost inflation, impacting on the tenants’ rental cover and leading to a loss of rental income for the Group; and
• Changes in government policies: The risk that changes in government policies, including those affecting the local authority funding of
care, may render the Group’s strategy inappropriate.
In assessing the Group’s viability, the Board has considered the key outputs from a detailed model of the Group’s expected cashflows over
the coming five years under both normal and stressed conditions. The stressed conditions, which were intended to represent severe but
plausible scenarios, included modelling increases in interest rates of 200bps per annum compared to market forecasts at 30 June 2026, a
reduction in the capital value of the property portfolio of 20 per cent and a significant default on rental receipts from the Group’s tenants
equating to an aggregate of c.20 per cent of the Group’s contracted rent roll. The stressed level of default from the Group’s tenants assumed
in the financial modelling was based on a detailed assessment of the financial position of each individual tenant or tenant group and the
structure in place to secure rental income (such as the strength of tenants’ balance sheets, rental guarantees in place or rental deposits held).
The financial modelling assumed that the Group’s dividend continued to be paid throughout the five year period of the assessment, and that
the financial covenants on the Group’s loan facilities remained substantially unchanged. Under the stressed scenario, the Group’s net LTV was
forecast to reach a peak of 31 per cent and no breaches were forecast in relation to the Group’s compliance with the financial covenants on
each of its loan facilities.
Based on the results of the scenario analysis outlined above, the Board has a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the five year period of its assessment.
Audit Tender
The Company last undertook an audit tender in relation to the period from 1 July 2022, which resulted in a recommendation that the
incumbent auditors, Ernst & Young LLP (‘EY’) be re-appointed as auditors. The Company will next be required to conduct a tender of audit
services, and a mandatory rotation of audit firm, by 30 June 2032. The Company does not anticipate undertaking a further tender of audit
services to the Group during the forthcoming year.
Significant Votes Against Previous Resolutions
There were no significant votes against the resolutions proposed at the Annual General Meeting held on 4 December 2025.
Resolutions to be Proposed at the AGM
Directors’ remuneration
The Directors’ remuneration policy and annual report on Directors’ remuneration, which can be found on pages 54 to 57, provide detailed
information on the remuneration arrangements for the Directors of the Company. Included is the Directors’ Remuneration Policy, which
shareholders approved at the AGM in December 2025, and which is expected to next be put to shareholders at the AGM in 2028 or, if earlier,
when any amendments to the policy are proposed. Shareholders are requested to approve the Directors’ Annual Report on Directors’
Remuneration for the year ended 30 June 2026 (resolution 2).
Dividend policy
The Company’s dividend policy is set out on page 37. In order to be able to continue paying a consistent dividend on a regular basis, and to
ensure that sufficient distributions are made to meet the Company’s REIT status, the Company intends to continue to pay all dividends as
interim dividends. Recognising that this means that shareholders will not have the opportunity to vote on a final dividend, the Company will
instead propose a non-binding resolution to approve the Company’s dividend policy at the AGM (resolution 3). The Directors anticipate that
such non-binding resolution to approve the Company’s dividend policy will be proposed annually.
Auditor
The Independent Auditor’s Report can be found on pages 58 to 63. EY has indicated its willingness to continue in office and a resolution will
be proposed at the AGM to re-appoint EY as Auditor until the conclusion of the AGM to be held in 2027 (resolution 4). A separate resolution
will be proposed to authorise the Directors to determine the Auditor’s remuneration (resolution 5).
Target Healthcare REIT plc
40
Directors’ Report continued
Resolutions to be Proposed at the AGM continued
Election of Directors
As explained in more detail on page 37, each Director is subject under the Articles of Association to election by shareholders at the AGM
following their appointment and, by policy of the Board, by annual re-election thereafter. Resolutions 6 to 10 therefore propose each of the
Directors for re-election. The biographies of each of the Directors, which include the skills and experience each Director brings to the Board
for the long-term sustainable success of the Company, are detailed on pages 32 to 33. In addition, how these individual skills and experience
contribute to the Board as a whole are set out in the matrix on page 37. Having considered the knowledge, experience and contribution of
each Director putting themselves forward, the Board has no hesitation in recommending their re-election to shareholders.
Share Issuance Authority
The Directors are seeking authority to allot additional new shares which would not require the publication of a prospectus. Resolution 11
will, if passed, authorise the Directors to allot new shares of £0.01 each up to an aggregate nominal amount of £620,237 (62,023,700
ordinary shares). This is equivalent to approximately 10 per cent of the issued share capital of the Company (excluding treasury shares) as
at 18 September 2026.
In accordance with the provisions of the Company’s Articles of Association and the UK Listing Rules, the directors of a listed company are not
permitted to allot new shares (or grant rights over shares) for cash at a price below the net asset value per share of those shares without first
offering them to existing shareholders in proportion to their existing holdings. Resolution 12, which is a special resolution, seeks to provide the
Directors with the authority to issue shares of £0.01 each or sell shares held in treasury on a non-pre-emptive basis for cash (i.e. without first
offering such shares to existing shareholders pro-rata to their existing holdings) up to an aggregate nominal amount representing 10 per cent
of the issued ordinary share capital of the Company at the date of the passing of resolution 12.
The authorities granted under resolutions 11 and 12 will expire at the conclusion of the next AGM of the Company after the passing of the
resolutions, expected to be held in December 2027, or on the expiry of 15 months from the passing of the resolutions, unless they are
previously renewed, varied or revoked. It is expected that the Company will seek these authorities on an annual basis. The authorities sought
under resolutions 11 and 12 will only be used to issue shares at a premium to net asset value and only when the Directors believe that it would
be in the best interests of shareholders as a whole to do so.
Authority to Buy Back Ordinary Shares
Any buy back of ordinary shares will be subject to the Companies Act 2006 (as amended), the UK Listing Rules and within guidelines
established by the Board from time to time (which will take into account the income and cash flow requirements of the Company).
Resolution 13 will be proposed as a special resolution and seeks to provide the Directors with the authority to purchase up to 92,973,578
ordinary shares or, if less, the number representing approximately 14.99 per cent of the Company’s ordinary shares in issue at the date of the
passing of resolution 13. Any shares purchased by the Company may be cancelled or held in treasury. The Company does not currently hold
any shares in treasury.
For each ordinary share, the minimum price (excluding expenses) that may be paid on the exercise of this authority will not be less than the
nominal value of each ordinary share at the date of purchase. Under the UK Listing Rules, the maximum price that may be paid on the exercise
of this authority must not exceed the higher of: (i) 105 per cent of the average of the middle market quotations (as derived from the Daily
Official List of the London Stock Exchange) for the shares over the five business days immediately preceding the date of purchase; and (ii) the
higher of the last independent trade of an ordinary share in the Company and the highest current independent bid for such share on the
trading venue on which the purchase is carried out at the time the purchase is carried out.
This authority will expire at the conclusion of the next AGM of the Company after the passing of this resolution unless it is previously renewed,
varied or revoked.
Notice for General Meetings
Resolution 14 is being proposed to reflect the provisions of the Companies Act 2006 relating to meetings and the minimum notice period for
listed company General Meetings being increased to 21 clear days, but with an ability for companies to reduce this period to 14 clear days
(other than for AGMs), provided that the Company offers facilities for shareholders to vote by electronic means and that there is an annual
resolution of shareholders approving the reduction in the minimum period for notice of General Meetings (other than for AGMs) from 21 clear
days to 14 clear days. The Board is therefore proposing resolution 14 as a special resolution to ensure that the minimum required period for
notice of General Meetings of the Company (other than for AGMs) is 14 clear days.
The approval will be effective until the earlier of 15 months from the passing of the resolution or the conclusion of the next AGM of the
Company, at which it is intended that a similar resolution will be proposed. The Board intends that this flexibility of a shorter notice period to
be available to the Company will be used only for non-routine business and only where needed in the interests of shareholders as a whole.
Amendments to the Company’s Articles
Resolution 15, which will be proposed as a special resolution, seeks shareholder approval to adopt new Articles of Association (the ‘New
Articles’) in order to update the Company’s current Articles of Association (the ‘Existing Articles’). The proposed amendments being introduced
in the New Articles primarily relate to changes in law and regulation, developments in market practice since the Existing Articles were adopted,
or are otherwise of a clarifying nature. These changes generally reflect modern best practice and may assist in relieving certain administrative
burdens on the Company.
A summary of the principal amendments being introduced in the New Articles is set out in the appendix to the Notice of Annual General
Meeting (on page 103 of this document). Other amendments, which are of a minor, technical or clarifying nature, have not been summarised
in the appendix.
Annual Report and Financial Statements 2026
41
Corporate Governance
Strategic Report Financial Statements Additional Information
A copy of the New Articles, together with a copy of the Existing Articles marked to show the changes being proposed, will be available for
inspection on the Company’s website, www.targethealthcarereit.co.uk, from the date of the Notice of the Annual General Meeting until the
close of the meeting. A hard copy of these documents will be available for inspection at Level 4, Dashwood House, 69 Old Broad Street,
London EC2M 1QS until the close of the meeting.
Recommendation
The Directors consider each resolution being proposed at the Annual General Meeting to be in the best interests of the Company and its
shareholders as a whole and they unanimously recommend that all shareholders vote in favour of them, as they intend to do in respect of
their own beneficial holdings of shares which amount in aggregate to 88,262 ordinary shares representing approximately 0.01 per cent of the
current issued share capital of the Company.
Directors’ Deeds of Indemnity
The Company has entered into deeds of indemnity in favour of each of the Directors. The deeds give each Director the benefit of an indemnity
to the extent permitted by the Companies Act 2006 against liabilities incurred by each of them in the execution of their duties and the exercise
of their powers. A copy of each deed of indemnity is available for inspection at the Company’s registered office during normal business hours
and will be available for inspection at the Annual General Meeting. The Company also maintains directors’ and officers’ liability insurance.
Conflicts of Interest
Under the Companies Act 2006 a Director must avoid a situation where he or she has, or could have, a direct or indirect interest that conflicts,
or possibly may conflict, with the Company’s interests. The requirement is very broad and could apply, for example, if a Director becomes a
director of another company or a trustee of another organisation. The Companies Act 2006 allows directors of public companies to authorise
conflicts and potential conflicts, where appropriate, where the Articles of Association contain a provision to this effect. The Company’s Articles
of Association give the Directors authority to approve such situations. The Company maintains an up-to-date register of Directors’ conflicts
of interest which have been disclosed to, and approved by, the other Directors. This register is considered at each scheduled Board meeting.
The Directors are required to disclose to the Company Secretary any changes to conflicts or any potential new conflicts.
The Investment Manager has in place a conflicts of interest and allocation policy which aims to ensure a fair allocation of investment
opportunities and to mitigate potential conflicts of interest that may arise where the Investment Manager provides investment management,
investment advice or other services to other funds that may have similar investment policies to that of the Company. The Company has
reviewed, and accepted, the policy which remained unchanged during the course of the year.
Depositary
IQ EQ Depositary (UK) Limited (the ‘Depositary’) acts as the Group’s depositary in accordance with the AIFM Directive. The Depositary’s
responsibilities, which are set out in an Investor Disclosure Document available on the Company’s website, include cash monitoring, record
keeping and verification of non-custodial assets and general oversight of the Group’s portfolio. The Depositary receives for its services a fee
based on the value and activity of the property portfolio, payable quarterly. For the year ended 30 June 2026, the fees paid totalled £105,000
(2025: £165,000).
Other Companies Act 2006 Disclosures
The rules for appointment and replacement of Directors are contained in the Articles of Association of the Company. In respect of retiral by
rotation, the Articles of Association provide that each Director is required to retire at the third annual general meeting after the annual general
meeting at which last elected. As mentioned on page 45, the Board has agreed that all Directors will retire annually.
Any amendment of the Company’s Articles of Association and powers to issue and buy back shares require shareholder authority.
There are no agreements between the Company and the Directors providing for compensation for loss of office that occurs because of
a takeover bid.
Future Developments of the Company
The future success of the Company in pursuit of its investment objective is dependent primarily on the performance of its investments and
the outlook for the Company is set out in the Chair’s Statement on pages 6 to 9 and the Investment Manager’s Report on pages 24 and 25.
Environmental, Social and Governance Principles
The Company seeks to conduct its affairs responsibly and environmental factors are, where appropriate, taken into consideration in relation to
investment decisions taken on behalf of the Group, with all investment acquisitions being assessed by the Investment Manager in line with
their “house standard” approach which more explicitly evaluates ESG matters in relation to each proposed acquisition. Further details are
contained on pages 20, 22 and 23 and in the Corporate Governance Statement on page 48.
The Company published its annual Sustainability Report in July 2026, covering ESG matters in more detail, and intends to continue to publish
such report annually to 31 December each year to align with the Group’s data collection and reporting under the GRESB framework (as
considered in more detail on the following page). The most recent Sustainability Report is made available on the Company’s website as soon
as it is published at www.targethealthcarereit.co.uk.
Taskforce on Climate-related Financial Disclosures (‘TCFD’)
The Company acknowledges the recommendations of the Financial Stability Board TCFD to improve and increase reporting of climate-related
financial information and will work towards mitigating, where appropriate, the physical climate risks and opportunities arising in the property
portfolio. Further detail on the climate risks in the portfolio are detailed in the ‘principal and emerging risks and risk management’ on page 26
and consideration of the impact of climate risks on the market value of the property portfolio is included in Notes 9 and 16 to the Consolidated
Financial Statements. More information is included in the Company’s separate Sustainability Report.
Target Healthcare REIT plc
42
Directors’ Report continued
Greenhouse Gas Emissions/Streamlined Energy and Carbon Reporting
All of the Company’s activities are outsourced to third parties. As such it does not have any physical assets, property, employees or operations
of its own and does not generate any significant greenhouse gas or other emissions. As the Group has entered into operational leases on its
property portfolio, the Company does not have operational control over these properties and therefore assesses that the tenant should report
on any carbon emissions associated with the operation of the care homes. Following this assessment, the Group is categorised as a lower
energy user under the HM Government Environmental Reporting Guidelines March 2019 (‘the Guidelines’) and is not required to make the
detailed disclosures of energy and carbon information set out within the Guidelines within this Annual Report. Disclosures on the property
portfolio’s environmental sustainability performance measures, prepared in accordance with the latest European Public Real Estate
Association’s (‘EPRA’) sustainability Best Practices Recommendations (sBPR), which in turn are aligned principally with the Global Reporting
Initiative (‘GRI’) Standards, are included in the Company’s separate Sustainability Report, as referred to on the previous page. The Company
achieved an EPRA sBPR Gold Award for its report in relation to the year ended 31 December 2025, as published in July 2026.
GRESB Framework
GRESB is a mission-driven and investor-led organisation that provides actionable and transparent ESG data to financial markets. GRESB collects,
validates, scores, and independently benchmarks ESG data to provide business intelligence, engagement tools, and regulatory reporting
solutions. This helps to aid transparency and comparability, and allows assessment of performance and trends. The Company submitted data
to GRESB under this framework and achieved a score of 80 in relation to the year ended 31 December 2024, placing the Group second in its
peer group and resulting in the award of three green stars. This demonstrates the underlying quality of the property portfolio and the Group’s
tangible progress in ESG measurement and reporting. The Company continues to participate in the GRESB framework, with an aim of
maintaining its score and peer group position, and has completed its submission for the year ended 31 December 2025. It is expected that
GRESB will publish the results for that submission period during October 2026. The utility data for the Company’s portfolio and the other key
information included in that submission formed the basis of the Company’s Sustainability Report published in July 2026.
Modern Slavery Act 2015
As an investment company with no employees or customers and which does not provide goods or services in the normal course of business,
the Company considers that it does not fall within the scope of the Modern Slavery Act 2015 and it is not, therefore, obliged to make a human
trafficking statement. However, as a matter of good corporate governance and to reflect the Group’s commitment to high business standards
throughout its supply chains, the Company has chosen to publish a Modern Slavery and Human Trafficking Statement, the full detail of which
is available on request. The Company’s own supply chain, which consists predominantly of professional advisers and service providers in the
financial services industry, is considered to be low risk in relation to this matter but this is regularly considered by the Management
Engagement Committee as part of their review of each significant service provider. The Group takes a zero-tolerance approach to modern
slavery and human trafficking and expects all those it deals with to demonstrate the same attitude.
Criminal Finances Act 2017
The Company has a zero tolerance policy to tax evasion and the facilitation of tax evasion. The Company is fully committed to complying with
all legislation and appropriate guidelines designed to prevent tax evasion and/or the facilitation of tax evasion in the jurisdictions in which the
Company, its service providers and business partners operate.
The Company is subject to the Criminal Finances Act 2017 and has adopted a policy, endorsed by the Board, designed to prevent tax evasion
and the facilitation of tax evasion. The policy establishes a culture across the Company and in relation to its service providers and other
counterparties, in which tax evasion and the facilitation of tax evasion is unacceptable. The policy is based on a detailed risk assessment
undertaken by the Board annually.
UK Bribery Act 2010
In order to ensure compliance with the UK Bribery Act 2010, the Directors confirm that the Company follows a zero tolerance approach
towards bribery, insofar as it applies to any Directors of the Company or employee of the Investment Manager or any other organisation with
which the Company conducts business, and a commitment to carry out business openly, honestly and fairly.
The Board also ensures that adequate procedures are in place and followed in respect of the appointment of third-party service providers and
the acceptance of gifts and/or hospitality.
Financial Instruments
The Company’s financial instruments comprise its cash balances, external loans and debtors and creditors that arise directly from
its operations such as deposits held on behalf of tenants and accrued rental income. The financial risk management objectives and
policies arising from its financial instruments and the exposure of the Company to risk are disclosed in Note 16 to the Consolidated
Financial Statements.
Annual General Meeting
The Company is required by law to hold an Annual General Meeting and it will be held at the offices of Dickson Minto LLP, Dashwood
House, 69 Old Broad Street, London EC2M 1QS on 2 December 2026 at 4.00 p.m. The Notice of Annual General Meeting is set out on
pages 100 to 103.
We would strongly encourage all shareholders to make use of the proxy form provided in order to lodge their votes. Shareholders
are also encouraged to raise any questions or comments they may have in advance of the AGM through the Company Secretary
(info@targetfundmanagers.com). These will be relayed to the Board and either the Company Secretary or the Board will respond in due
course either directly or by making available a summary of responses to any frequently asked questions on the Company’s website.
On behalf of the Board
Alison Fyfe
Chair
21 September 2026
Annual Report and Financial Statements 2026
43
Corporate Governance
Strategic Report Financial Statements Additional Information
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to
prepare the Consolidated Financial Statements in accordance with UK-adopted International Financial Reporting Standards (‘IFRSs’) in
conformity with the Companies Act 2006 and have elected to prepare the parent company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law), including Financial Reporting Standard 101
‘Reduced Disclosure Framework’. Under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules, group financial
statements are required to be prepared in accordance with UK-adopted IFRSs.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs and profit or loss of the Company and Group for that period. In preparing these Financial Statements, the Directors are
required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable International Financial Reporting Standards have been followed, subject to any material departures disclosed
and explained in the Financial Statements; and
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and
disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Financial Statements and
the Directors’ Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors’ responsibility statement in respect of the Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. The Directors consider the
Annual Report and the Financial Statements, taken as a whole, provide the information necessary to assess the Company’s position,
performance, business model and strategy and are fair, balanced and understandable.
Directors’ responsibility statement under the disclosure guidance and transparency rules
To the best of our knowledge:
• the Consolidated Financial Statements, prepared in accordance with UK-adopted IFRSs, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
• the Annual Report, including the Strategic Report and the Directors’ Report, includes a fair review of the development and performance
of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
Disclosure of information to the auditor
The Directors confirm that:
• so far as each Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
• the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant
audit information and to establish that the Company’s auditor is aware of that information.
On behalf of the Board
Alison Fyfe
Chair
21 September 2026
Target Healthcare REIT plc
44
Introduction
The Board of Target Healthcare REIT plc has considered the Principles and Provisions of the AIC Code of Corporate Governance (‘AIC Code’).
The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code (the ‘UK Code’), as well as setting out
additional Provisions on issues that are of specific relevance to the Company.
The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting
Council, provides more relevant information to shareholders. The Company has complied with the Principles and Provisions of the AIC Code.
The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the Principles and
Provisions set out in the UK Code to make them relevant for investment companies. The UK Code is available on the website of the Financial
Reporting Council: www.frc.org.uk
The Board
The Board is responsible for the effective stewardship of the Group’s affairs and reviews the schedule of matters reserved for its decision,
which are categorised under various headings. These include investment strategy, investment policy, finance, risk, investment restrictions,
performance, marketing, adviser appointments and the constitution of the Board. It has responsibility for all corporate strategic issues,
dividend policy, share buyback policy and corporate governance matters which are all reviewed regularly. The Board as a whole, through the
Investment Committee, is responsible for authorising all purchases and sales within the Group’s portfolio and for reviewing the quarterly
independent property valuation reports produced by the Group’s external valuer.
In order to enable them to discharge their responsibilities, all Directors have full and timely access to relevant information. At each meeting,
the Board reviews the Group’s investment performance and considers financial analyses and other reports of an operational nature. The Board
monitors compliance with the Company’s objectives and is responsible for setting investment and gearing limits within which the Investment
Manager has discretion to act, and thus supervises the management of the investment portfolio which is contractually delegated to the
Investment Manager.
The table below sets out the number of scheduled Board and Committee meetings held during the year and the number of meetings attended
by each Director. This includes a strategy meeting held at an external venue by the Board during April 2026 in order to consider strategic issues,
with a similar such meeting expected to be held on an annual basis. In addition to these scheduled meetings, there were a further 13 Board and
Board Committee meetings held during the year. These additional meetings included regular updates with the Investment Manager and other
appropriate advisers on significant matters arising to ensure that appropriate actions were taken on a timely basis.
Board Audit Committee
Investment
Committee
Management
Engagement
Committee
ESG Committee
Nomination
Committee
Remuneration
Committee
Held Attended Held Attended Held Attended Held Attended Held Attended Held Attended Held Attended
Alison Fyfe 5 5 4 4 4 4 4 4 4 4 3 3 1 1
Vince Niblett 5 5 4 4 4 4 4 4 4 4 3 3 1 1
Michael Brodtman 5 5 4 4 4 4 4 4 4 4 3 3 1 1
Richard Cotton 5 5 4 4 4 4 4 4 4 4 3 3 1 1
Amanda Thompsell 5 5 4 4 4 4 4 4 4 4 3 3 1 1
Each of the Directors has signed a letter of appointment with the Group which includes twelve months’ notice of termination by either party.
These are available for inspection at the Company’s registered office during normal business hours and are also made available at annual
general meetings.
Individual Directors may, at the expense of the Group, seek independent professional advice on any matter that concerns them in the
furtherance of their duties. The Group maintains appropriate directors’ and officers’ liability insurance. The Board has direct access to
company secretarial advice and services. The Company Secretary is responsible for ensuring that Board and Committee procedures are
followed and applicable regulations are complied with.
Corporate Governance Statement
Welcome to the Corporate
Governance section of the
Annual Report
The aim of this section is to set out the framework
under which the independent Board, and its various
sub-committees, ensure that both the Company and
the service providers acting on its behalf make
appropriate decisions and undertake actions in line
with the interests of the Company’s stakeholders.
Alison Fyfe, Chair
Annual Report and Financial Statements 2026
45
Corporate Governance
Strategic Report Financial Statements Additional Information
Investment management
Target provides investment management and other services to the Group. Details of the arrangements between the Group and the
Investment Manager in respect of management services are provided in the financial statements. The Board keeps the appropriateness of the
Investment Manager’s appointment under review. In doing so the Board reviews performance quarterly and considers the past investment
performance of the Group and the capability and resources of the Investment Manager to deliver satisfactory investment performance in the
future. It also reviews the length of the notice period of the investment management agreement (‘IMA’) and the fees payable to the Investment
Manager, together with the standard of the other services provided.
During the year, through the Management Engagement Committee, the Board considered the appropriateness of the terms of the Investment
Manager’s appointment, including consulting with the Company’s brokers and legal advisers, and concluded that:
• the Investment Manager’s performance remained satisfactory, considering, amongst other matters, the continued outperformance of the
Company’s long term total shareholder return compared to UK listed real estate sector and the outperformance of the Group’s property
portfolio as compared to the MSCI UK Annual Healthcare Property Index;
• the quantum of fees payable to the Investment Manager remained appropriate;
• the specialist and long term nature of investment in the care home sector asset class requires a distinctive range of skills and experience
and the Investment Manager’s long term track record is testament to its success in this regard.
The Management Engagement Committee has noted that certain listed investment companies have amended their management fee
arrangements, following shareholder pressure for greater alignment between the interests of the investment company (and their shareholders
as a whole) and those of their external managers. Whilst recognising that there are certain important features of the running of the Group,
which are not directly comparable to other listed real estate companies, the Board is keen to see greater alignment and is pleased that it has
reached agreement with the Investment Manager that, over a period of up to three years, the Investment Manager (including senior members
of the management team and their connected parties) will invest the equivalent of 25% of one-year’s management fee in acquiring shares in
the Company.
The Directors considered the Investment Manager’s provision of Company Secretarial services and concluded that the provision of such
services did not create a conflict of interest, compromise the ability of the Board to hold the Investment Manager to account, or result in any
diminution in the quality of governance or reporting that would warrant a change in this arrangement. This assessment took into
consideration the fiduciary duties of a Company Secretary, the Directors’ access to independent professional advice where necessary and the
Group’s appointment of, and regular liaison with, external legal advisers and brokers.
The Directors are satisfied with the Investment Manager’s ability to deliver satisfactory shareholder returns and the quality of other services
provided. It is therefore their opinion that the continuing appointment of the Investment Manager on the terms agreed is in the interests of
shareholders as a whole.
Appointments, diversity, tenure and succession planning
Directors may be appointed by the Company by ordinary resolution or by the Board. All new appointments by the Board are subject to
election by shareholders at the next AGM following their appointment. The Company’s Articles of Association require all Directors to retire by
rotation at least every three years. However, in accordance with the recommendations of the AIC Code, the Board has agreed that all Directors
will retire annually and, if appropriate, seek re-election.
The Board believes in the benefits of diversity, including skills and experience, gender, social and ethnic backgrounds, cognitive and personal
strengths and length of service. The aim of the Company is to have an appropriate level of diversity in the boardroom, including each of the
Committees, in order to bring constructive challenge and fresh perspectives to discussions. These matters were all expressly considered as
part of the externally-facilitated recruitment processes completed in relation to the appointment of each of the existing Directors, which were
designed to identify a diverse range of potential candidates, with a number of female candidates and candidates from a minority ethnic
background being interviewed. The subsequent appointments were based on merit and objective criteria in order to ensure that the Board
collectively had the necessary combinations of skills, experience and knowledge.
The Board supports the overall recommendations of the FTSE Women Leaders Review and Parker Review for appropriate gender and ethnic
diversity and notes that the UK Listing Rules include ‘comply or explain’ targets that at least 40 per cent of the Board should be held by
women, that at least one of the senior board positions should be held by a woman, and that at least one member of the Board should be from
a minority ethnic background. At the year end, 40 per cent of the Board were women and Ms Fyfe was Chair and therefore the Company
meets the first two of these targets. The Company’s non-compliance with the third is explained in more detail on the following page. In
accordance with UKLR 6.6.6R (9), (10) and (11) the Board has provided the following information in relation to its diversity. This information has
been collected by self-disclosure directly from the individuals concerned who were asked to confirm their gender and ethnicity. There have
been no changes to the composition of the Board since 30 June 2026.
Number of Board
members
Percentage of the
Board
Number of senior
positions on the Board
(Chair and the SID)
Men 3 60% 1
Women 2 40% 1
Not specified/prefer not to say – – –
Target Healthcare REIT plc
46
Corporate Governance Statement continued
Number of Board
members
Percentage of the
Board
Number of senior
positions on the Board
(Chair and the SID)
White British or other White (including minority-white groups) 5 100% 2
Mixed/Multiple ethnic groups – – –
Asian/Asian British – – –
Black/African/Caribbean/Black British – – –
Other ethnic group – – –
Not specified/prefer not to say – – –
As an externally managed investment company with no executive directors, the Company does not have all the senior positions on its Board
referenced in the UK Listing Rules, specifically it does not have either a chief executive or a chief financial officer. Accordingly, the Company
only has two of these senior positions on its Board, being the positions of chair and senior independent director.
As the Company is an investment company with no executive directors and a small board relative to that which would be expected for a trading
company of equivalent size, it has not managed to comply with the diversity target relating to ethnicity in that none of the current Directors come
from an ethnic minority background. This is the case even though, as set out on the previous page, the aim of recruiting a suitable director of an
ethnic minority background was expressly considered during the appointment processes conducted previously and the various firms of external
recruitment consultants engaged to support the recruitment processes were each explicitly requested to address diversity considerations.
The Board remains cognisant of the UK Listing Rules and supports the Parker Review recommendations in relation to ethnic diversity and
commits to addressing them at such time as future recruitment is undertaken. Therefore, although the conclusions of both the externally
facilitated Board Performance Review conducted in the prior year and the current year internal assessment process, as set out on pages 47
and 48, were that Board was operating effectively as currently constituted, the Directors intend to appoint a sixth non-executive Director to the
Board prior to the end of the calendar year in order to bolster the resilience of the Board and aid in its succession planning. It is expected that,
following this appointment, the Company will meet all three of the previously mentioned ‘comply or explain’ requirements of the UK Listing
Rules in relation to diversity.
In accordance with the Company’s written diversity policy, the Board will continue to take all matters of diversity into account and the benefits
of diversity will continue to be considered as an important factor in all future appointments. All appointments will continue to be based on
merit and objective criteria and will not discriminate on the grounds of matters such as gender, ethnicity, socio-economic background,
religion, sexual orientation, age or physical ability.
The Board’s policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board and, as such, no
limit on the overall length of service of any of the Company’s Directors, including the Chair, has been imposed. However, the Board does not
currently envisage that any Director will serve for more than the nine-year period that the AIC Code considers could impair, or could appear to
impair, a non-executive Director’s independence. This may, however, be adjusted for reasons of flexibility and continuity should this be
recommended by the Nomination Committee and concluded by the Board to be in the best interests of the Company.
Whenever there are new appointments, these Directors receive an induction from the Investment Manager and Company Secretary on joining
the Board. All Directors receive other relevant training, collectively or individually, as necessary.
Independence of Directors
The Board, which is composed solely of independent non-executive Directors, regularly reviews the independence of its members. All the
Directors have been assessed by the Board as remaining independent of the Investment Manager and of the Group itself; none has a past or
current connection with the Investment Manager and each remains independent in character and judgement with no relationships or
circumstances relating to the Group that are likely to affect that judgement.
The basis on which the Group aims to generate value over the longer term is set out in its objective and investment policy as contained on
pages 36 and 37. An investment management agreement between the Group and Target sets out the matters over which the Investment
Manager has authority and the limits beyond which Board approval must be sought. All other matters, including investment and dividend
policies, corporate strategy, gearing, corporate governance procedures and risk management, are reserved for the approval of the Board
of Directors.
The Board meets at least quarterly and receives full information on the Group’s investment performance, assets, liabilities and other relevant information
in advance of Board meetings. Throughout the year a number of committees have been in place as detailed below. The committees operate within
clearly defined terms of reference which are available on request or for inspection at the Company’s registered office during normal business hours.
Senior Independent Director
The Company has appointed Mr Cotton as Senior Independent Director. The role of the Senior Independent Director is to provide a sounding
board for the Chair and to serve as an intermediary for the other Directors and shareholders. The Senior Independent Director will also lead
the appraisal of the Chair’s performance, and will lead any other discussion of the non-executive Directors without the Chair being present on
other occasions as necessary.
Removal of Directors
The Company may by special resolution remove any Director before the expiration of his or her period of office.
Audit Committee
The Board has established an Audit Committee, the role and responsibilities of which are set out in the report on pages 49 to 53.
Remuneration Committee
The Board has established a Remuneration Committee, the role and responsibilities of which are set out in the report on page 54.
Annual Report and Financial Statements 2026
47
Corporate Governance
Strategic Report Financial Statements Additional Information
ESG Committee
The Board has established an ESG Committee which comprises all the Directors and which is chaired by Mr Brodtman. The Committee
oversees the formulation and implementation of the Group’s ESG policy and strategy, including scrutinising those matters delegated to the
Investment Manager. It is responsible for proposing targets to achieve the Board’s policy objectives and monitors progress against those
targets, taking into consideration developments in relation to legal and regulatory requirements and industry practice which may have an
impact on the Group’s activities. The Committee reviews and approves any material public reporting and market disclosures, including within
the Annual Report and the Sustainability Report, in respect of ESG matters.
The ESG Committee met formally on four occasions throughout the year to consider the progress and status of relevant ESG matters, as
reported by the Investment Manager, and to continue the process of developing challenging, but achievable and realistic, targets for the
Group. This included consideration of the appropriate means of measuring results and monitoring progress against those targets. The
members of the ESG Committee also discussed the progress of the Net Zero Carbon Pathway and continued the process of reaching net zero
carbon, including the setting of appropriate interim targets and consideration of any external factors which may prevent the Group from
achieving its stated targets. The Committee also monitored progress in relation to the annual GRESB submission for the year ended
31 December 2025, and reviewed and approved the Group’s annual Sustainability Report which was subsequently published in July 2026.
The Investment Manager has continued to report to the ESG Committee on its asset management plan to identify and implement initiatives
where the energy efficiency and carbon emissions of the Group’s property portfolio can be further improved. Full-year data is now starting to
become available from various projects to which the initial capital expenditure budget has been allocated to date, such as the retrofitting of PV
panels to a number of homes as set out on page 22. These results have been reviewed by the ESG Committee to ensure that the remainder of
the £1 million budget previously approved by the ESG Committee continues to be allocated appropriately and effectively.
In addition to the formal meetings of the Committee, regular meetings were held between the Chair of the Committee and appropriate
representatives of the Investment Manager.
Management Engagement Committee
The Board has established a Management Engagement Committee which comprises all the Directors and which is chaired by Mr Cotton. The
Committee reviews the appropriateness of the Investment Manager’s continuing appointment together with the terms and conditions thereof
on a regular basis. It also reviews the terms and quality of service received from other service providers on a regular basis. Further details of the
work undertaken by the Management Engagement Committee in relation to the terms of appointment of the Investment Manager is set out
on page 45.
Investment Committee
The Board has established an Investment Committee which comprises all the Directors and which is chaired by Ms Fyfe. The Committee
reviews each investment paper prepared by the Investment Manager and is responsible for authorising all purchases and sales, and significant
capital expenditure or asset management activities, within the Company’s portfolio. The Investment Committee considered each investment
paper as and when circulated by the Investment Manager, providing independent challenge where appropriate, and met quarterly to formally
ratify the Investment Committee’s decision to approve or decline each of the investment recommendations proposed.
Nomination Committee
The Board has established a Nomination Committee which comprises all the Directors and which is chaired by Dr Thompsell. The Committee’s
terms of reference do not permit the Committee to be chaired by the Chair of the Board when considering the appointment of his or her successor.
The Board considers that, given its size, it would be unnecessarily burdensome to establish a separate nomination committee which did not
include the entire Board. This is considered appropriate given the Board consists solely of independent, non-executive Directors and ensures
that all Directors are kept fully informed of any issues that arise.
The Nomination Committee is responsible for:
• reviewing and nominating candidates for the approval of the Board to fill vacancies on the Board of Directors and to lead the process for
appointments, including the selection and appointment of any external recruitment consultant;
• considering and reviewing the composition and balance of the Board;
• ensuring that plans are in place for orderly succession to the Board and overseeing the development of a diverse pipeline for succession; and
• reviewing the re-appointment of Directors, as they fall due for re-election, under the terms of their appointment and the AIC Code, and
making recommendations to the Board as considered appropriate.
All of the Nomination Committee’s responsibilities have been carried out over the period of review.
Assessment of the Board and Committees
During the year, the performance of the Board, Committees and individual Directors was evaluated through an assessment process led by the
Chair. This process involved the completion of questionnaires tailored to suit the nature of the Company and, as required, discussions with
individual Directors and individual feedback from the Chair to each of the Directors. The evaluation of the Chair was led by the Senior
Independent Director in consultation with the other Directors.
The main findings of the assessment were:
• that the minor points for development and suggestions raised following the assessment of the Board in the prior year had been appropriately
actioned and were functioning effectively
• that the meetings of the Board and Committees were effectively conducted and chaired, aided by appropriate agendas and supporting
papers, and were of sufficient duration, regularity and timeliness to support effective decision making;
• that the current Directors resulted in a balanced Board with the necessary range of skills and experience to enable effective oversight over
the Group and the performance of the Investment Manager, although recruitment of a sixth Director would help to both support future
succession planning and address Board diversity.
Target Healthcare REIT plc
48
Assessment of the Board and Committees continued
The conclusion from the performance review process conducted in relation to the year ended 30 June 2026 was that the Board and each
committee was operating effectively, with an appropriate and sufficient balance of experience and skills. An assessment process led by an
external facilitator was last conducted in relation to the year ended 30 June 2024 and the Board anticipates having an externally facilitated
Board performance review conducted at least every three years.
Relations with shareholders
The Group pro-actively seeks the views of its shareholders and places great importance on communication with them. The Board receives
regular reports from the Investment Manager and Brokers on the views of shareholders, and the Chair and other Directors make themselves
available to meet shareholders when required to discuss the Group’s business and address shareholder queries. The Chair has held a number of
discussions directly with shareholders over the course of the year on specific areas of interest, and the Board has considered the views of other
shareholders that preferred to meet with the Investment Manager. The Board also requested that its Brokers pro-actively engage with significant
shareholders in order to ensure that the Directors were fully informed on the up-to-date views of shareholders immediately prior to the Board’s
annual strategy meeting. It is expected that direct meetings with the Chair, or the chair(s) of the relevant Committee(s), will continue to be made
available to shareholders, although this may be through the use of video conferencing facilities.
The Notice regarding the Annual General Meeting is included on pages 100 to 103. It is intended that the AGM will be held physically at the offices
of Dickson Minto LLP, Dashwood House, 69 Old Broad Street, London EC2M 1QS. However, as set out on page 42, shareholders are encouraged
to lodge their votes with the Registrar either by use of the proxy form provided, or by electronic means, and to submit any questions they may
have for the Directors or the Investment Manager in advance through the Company Secretary (info@targetfundmanagers.com). The Annual
Report and Notice of Annual General Meeting are posted to shareholders at least 21 clear days before the Annual General Meeting.
Environmental, Social and Human Rights Issues
Responsible Investment and Environmental, Social and Governance (‘ESG’) considerations are core values of the Group and its Investment
Manager. In collaboration with its tenants, the Group provides demonstrable social impact within best-in-class care homes. These are considered
in more detail on pages 20, 22 and 23. The Group has also published a separate Sustainability Report for the year to 31 December 2025.
A summary of the key ESG considerations in the investment and asset management approach followed by the Group is as follows:
• ESG considerations lie at the heart of the Group’s approach because of its belief that a strong care ethos is essential for the long-term
performance of its investments. The Investment Manager commits extensive resources to incorporating ESG (and responsible investing
principles) throughout their investment and decision-making processes, both at the time of the acquisition of any asset and on an ongoing
basis. The Investment Manager has implemented a ‘house standard’ investment approach which formally guides how ESG factors are
considered for each new investment opportunity, which is refreshed on a regular basis.
• Before acquiring any home, the Investment Manager reviews on a granular level, among other factors: the position of the home in the
community and how the home engages with its community, the building layout and facilities, the natural environment of the home, the
management team and general governance shown by the tenant as well as any relevant ratings by regulatory bodies such as the Care
Quality Commission.
• Once the Group has acquired a care home, the Investment Manager undertakes regular reviews of the environmental, social, governance
and ethical policies that the home has in place and (to the extent possible) their adherence to these policies in the delivery of their services.
• The Investment Manager’s role as an engaged landlord includes careful monitoring of the home and ongoing dialogue with management.
In usual circumstances, the Investment Manager will visit every home at least every six months, occasionally visiting the properties
unannounced to gauge the culture and engage with tenants who wish to improve their homes, potentially providing support and funding
for this. The Investment Manager is monitoring the portfolio on an ongoing basis to pro-actively assess opportunities to further improve
the portfolio’s environmental or social credentials.
• The Group’s vision of care includes promoting the conservation, protection and improvement of the physical and natural environments
surrounding care homes not least because this makes the care home more attractive for both tenants and residents.
Stewardship Code
The Investment Manager is a signatory to the Stewardship Code published by the Financial Reporting Council. Stewardship is the responsible
allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the
economy, the environment and society. The Stewardship Code sets high stewardship standards for asset owners and asset managers, and for
service providers that support them. The Investment Manager’s Stewardship Code Statement of Compliance for the year ended 31 December
2025 is available on its website at www.targetfundmanagers.com.
On behalf of the Board
Alison Fyfe
Chair
21 September 2026
Corporate Governance Statement continued
Annual Report and Financial Statements 2026
49
Corporate Governance
Strategic Report Financial Statements Additional Information
Composition of the Audit Committee
An Audit Committee has been established with written terms of reference which are reviewed at each meeting and which are available on
request. The Audit Committee currently comprises all Directors and is chaired by Mr Niblett. The Board will consider each Director’s
membership of the Audit Committee on a case-by-case basis but, in general, believes that, given the Group’s size, a committee which
includes all Directors is appropriate and will enable all Directors to be kept fully informed of any issues that arise.
The Board considers that the Chair’s experience of the property and finance sectors is invaluable to the Audit Committee, particularly in regard
to providing guidance in relation to the appropriateness and risks regarding the Group’s loan facilities and related hedging derivatives and in
assessing and providing challenge to the external valuation of the Group’s property portfolio, and therefore, in line with the AIC Code, the
Board believes it appropriate that the Chair remains a member of the Committee.
At least one member of the Audit Committee has recent and relevant financial experience and the Committee as a whole has competence
relevant to the sectors in which the Group operates, which are considered to be healthcare, property and investment.
Role of the Audit Committee
The Committee’s responsibilities are shown in the table below together with a description of how they have been discharged. More detailed
information on certain aspects of the Committee’s work is given in the subsequent text.
Responsibilities of the Audit Committee How they have been discharged
Monitoring the integrity of the half-year
and annual financial statements, and
any formal announcements relative to
the Group’s financial performance,
including the appropriateness of the
accounting policies applied and any
significant financial reporting
judgements and key assumptions.
This includes consideration of the
narrative elements of the half-year and
annual financial reports, including
whether, taken as a whole, they are fair,
balanced and understandable and
provide the necessary information for
shareholders to assess the Group’s
position, performance, business
model and strategy.
The Committee met four times during the year to:
• review the contents of the half-yearly report;
• consider the audit plan and the proposed audit fee;
• consider, in advance of the Company’s year end, any significant changes to accounting
standards, judgements or estimates, or other disclosure requirements expected to apply at the
Group’s year end; and
• review the contents of the Annual Report, including the structure and content of the Strategic
Report, the impact of changes in financial reporting standards and other areas of guidance, and
approving the Group’s significant accounting policies, judgements and estimates, going concern
and viability statements.
The Investment Manager and Company Secretary attended each of these meetings, with the Auditor
also attending the meetings at which the audit plan and the contents of the half-year and annual
reports were reviewed. The significant matters considered by the Group are listed on pages 52 and
53. In addition, during the year the Committee kept under review the statutory financial reporting of
each of the Group’s subsidiaries for the year ended 30 June 2025, the reporting timetable for the
year ended 30 June 2026 and the internal financing structure of the Group, including the quarterly
settlement of intercompany loans and the payment of intragroup dividends. The Committee also
noted the resignation of the Investment Manager’s Chief Financial Officer in August 2026 and the
Chairman of the Committee has provided input to the ongoing recruitment process in relation to
the appointment of his successor. The Committee also undertook careful monitoring to ensure
that the changes in personnel within the Investment Manager’s finance team during the course of
production of the Annual Report did not adversely impact the accuracy or timeliness of the Group’s
financial reporting.
The Committee considered the appropriateness of the accounting policies, judgements and key
assumptions in relation to the property re-tenantings, surrender premiums received, acquisitions,
forward commitments and disposals completed in the context of the particular circumstances of
each transaction.
As part of this review, the Committee considered the characteristics of good corporate reporting
set out in the FRC’s Annual Review of Corporate Reporting.
Report of the Audit Committee
I am pleased to present
my report as the Chair
of the Audit Committee
This report sets out the role, responsibilities and
actions taken by the Audit Committee to ensure
that the suitable controls continue to operate
effectively and that appropriate financial information
continues to be issued on a timely basis to the
Company’s stakeholders.
Vince Niblett, Chair of the Audit Committee
Target Healthcare REIT plc
50
Report of the Audit Committee continued
Responsibilities of the Audit Committee How they have been discharged
Assessment of the prospects of the
Company, taking account of the
Company’s position and principal risks,
and consideration of the period of
time over which such evaluation
can be made.
The Committee has reviewed the assessment described in more detail under the section ‘Viability
Statement’ within the Directors’ Report, and the underlying data on which such assessment was
based, to ensure that the work undertaken, the conclusions reached and the disclosures included
within the Annual Report were appropriate.
Evaluation of the effectiveness of the
internal controls and risk management
systems and procedures.
The Investment Manager maintains a risk matrix which summarises the Group’s key risks. The risk
matrix is considered by the Directors at least semi-annually, with key principal and emerging risks
also being discussed at the Group’s annual strategy meeting.
The Committee reviewed the Investment Manager’s internal controls report over its own processes,
prepared under ISAE 3402 “Assurance Reports on Controls at a Service Organization” and covering
the year to 30 June 2026 which was unqualified and contained no exceptions. The Committee
noted that this report was a Type II report, which documented the operation of the controls over a
period of time. Following consideration and review, the Committee concluded that this provided
sufficient information to adequately assess the Investment Manager’s control environment, as far as
it was relevant to the Group.
The Committee also considered the internal control reports for other significant service providers,
where available, including the Company’s registrar.
From a review of the risk matrix, the ISAE 3402 report on the Investment Manager, and the regular
management information received by the Board and Committees, combined with discussion with
the Investment Manager and Company Secretary, the Committee has satisfied itself on the
effectiveness of the risk and control procedures.
Consideration of dividend calculations
both in relation to PID/non-PID
payments made by the Company and
other dividends paid internally within
the Group.
The Committee has reviewed the calculation of the split of distributions between PID and non-PID,
including consideration of the suitability of the allocation of the costs of the Group between its
property rental business and its residual business.
The Committee has reviewed the methodology followed by the Investment Manager, and directors
of the subsidiaries, in determining and recommending the level of other dividends paid internally
within the Group.
Monitoring developments in
accounting and reporting requirements
that impact on the Group’s compliance
with relevant statutory and listing
requirements.
The Committee ensures, through its Legal Adviser, Investment Manager, Company Secretary and
Auditor, that any developments impacting on the Company’s responsibilities are tabled for
discussion at Committee or Board meetings. The Committee ensured that the Company was fully
compliant with the AIC Code.
Evaluation of reports received from
the Auditor with respect to the annual
financial statements and assessment
of quality of the audit.
The Auditor’s planning report, timetable and fee proposal were discussed with the Auditor in advance
of work commencing, together with the areas of audit focus, the level of materiality and the audit
work proposed to be undertaken. The Committee paid particular attention to any changes in
accounting standards or in the nature of activities undertaken by the Group and ensured that the audit
plan appropriately addressed these areas. The Committee specifically challenged the Auditors, at both
the planning and reporting stage, in relation to the audit work undertaken on any particular areas of
judgement or estimation; including the valuation of the property portfolio and the methodology
followed to determine the credit loss allowance.
The Committee specifically considered the external valuation of the Group’s property portfolio,
with the external valuers attending the meeting at which the annual results were discussed in order
to present directly to the Committee a summary of their valuation process and any significant
matters they wished to highlight either in relation to the valuation methodology generally or to
specific properties or tenants.
At the conclusion of the audit, the Committee discussed the audit results report with the Auditor,
Company Secretary and Investment Manager. This review considered the quality of the audit
through ensuring that the audit risks identified and the audit work undertaken did, in the opinion
of the Audit Committee, capture and appropriately consider those matters which gave rise to the
risk of material misstatement to the financial statements and disclosures.
Further detail on the assessment of the quality of the audit is included in the section entitled
‘The Auditor’ on page 52.
Annual Report and Financial Statements 2026
51
Corporate Governance
Strategic Report Financial Statements Additional Information
Responsibilities of the Audit Committee How they have been discharged
Management of the relationship with
the external Auditor, including their
appointment and the evaluation of
scope, effectiveness, independence
and objectivity of their audit.
The Auditor attended the meetings of the Committee at which the Company’s audit plan, half-year
report and year end accounts were reviewed and also communicated separately with the Chair of
the Committee on two occasions, firstly, to discuss the findings of their interim review and the audit
plan for the year ahead and, secondly, to provide an update on the findings of their annual audit.
The scope of the audit was discussed at the planning stage along with the staffing and timing of
audit procedures to ensure that an effective audit could be undertaken. The Committee has also
reviewed the independence and objectivity of the Auditor and has considered the effectiveness of
the audit, as set out in more detail in the section entitled ‘The Auditor’ on the following page.
To conduct the tender process and
make recommendations to the Board
for it to put to the shareholders for their
approval in general meeting, about the
appointment, reappointment and
removal of the external auditor.
The Audit Committee does not anticipate undertaking a further tender of the Group’s external audit
during the forthcoming year.
Risk management and internal controls
The principal and emerging risks faced by the Group together with the procedures employed to manage them are described in the Strategic
Report on pages 26 and 27.
Internal controls
The Board is responsible for the internal financial control systems of the Group and for reviewing their effectiveness. It has contractually
delegated to external agencies the services the Group requires, but the Directors are fully informed of the internal control framework
established by the Investment Manager to provide reasonable assurance on the effectiveness of internal financial control in the following areas:
• Income flows, including rental income, the assessment of the financial position of tenants and the appropriateness of credit loss impairments;
• Expenditure, including operating and finance costs;
• Raising finance, including debt facilities and equity fund-raising;
• Capital expenditure, including pre-acquisition diligence and authorisation procedures;
• Dividend payments, including the calculation of Property Income Distributions;
• Monitoring of covenants on loan facilities;
• Data security;
• The maintenance of proper accounting records; and
• The reliability of the financial information upon which business decisions are made and which is used for publication, whether to report
Net Asset Values or used as the basis for a prospectus, a circular to Shareholders or the annual report.
As the Group has evolved, the Investment Manager has developed a system of internal controls covering the processes listed above. As referred
to on page 50, the Audit Committee’s review of the Investment Manager’s ISAE 3402 report, which was unqualified and contained no
exceptions, did not identify any significant issues or concerns over the control environment, including information technology systems.
Committee members receive and consider quarterly reports from the Investment Manager, giving full details of the portfolio and all
transactions and of all aspects of the financial position of the Group. Additional ad hoc reports are received as required and Directors have
access at all times to the advice and services of the Company Secretary, which is responsible to the Board for ensuring that Board procedures
are followed and that applicable rules and regulations are complied with. In addition, the Board keeps under its own direct control, through
the Investment Committee, all property transactions including any significant capital expenditure. The Board retains direct control over any
decisions regarding the Group’s long-term borrowings.
The review procedures detailed above have been in place throughout the year and up to the date of this report and the Board is satisfied with
their effectiveness and that they are in accordance with guidance issued by the FRC in so far as applicable given the Group’s size and structure.
There were no significant weaknesses or failings to report. The procedures are designed to manage rather than eliminate risk and, by their
nature, can only provide reasonable, but not absolute, assurance against material misstatement or loss.
The Board has reviewed the need for an internal audit function, taking into consideration the internal financial control systems set out above
and, in particular, any matters arising in relation to the Investment Manager’s ISAE 3402 report. It has decided that the systems and procedures
employed by the Investment Manager, and the work carried out by the Investment Manager’s Independent Service Auditor, provide sufficient
assurance that a sound system of internal control, which safeguards the Group’s assets, is maintained. An internal audit function specific to the
Group is therefore considered unnecessary.
The Audit Committee has also considered the Group’s risk management and internal control framework in order to ensure that all the
material controls, including financial, operational, reporting and compliance controls, which ensure its effectiveness have been identified.
This work is in preparation to support the declaration that will be given by the Board under Provision 34 of the AIC Code in the Annual
Report 2027 onwards.
Target Healthcare REIT plc
52
Report of the Audit Committee continued
The Auditor
As part of the review of auditor independence and effectiveness, EY has confirmed that they are independent of the Group and have complied
with relevant auditing standards. In reviewing EY’s independence, the Committee noted that EY did not provide any non-audit services to the
Group other than the review of the Group’s Half-Year Report.
In its evaluation of EY’s performance, the Audit Committee has taken into consideration the standing, skills and experience of the firm and of
the audit team, along with their robustness and perceptiveness in their identification, consideration and reporting of the key accounting and
audit judgements. The Committee assessed the effectiveness of the audit process through the quality of the formal reports, both verbal and
written, it received from EY at the planning and conclusion of the audit, including the reasons for any variation from the original audit plan,
together with the contribution which EY made to the discussion and challenge of any matters raised in these reports or by Committee
members. The Committee reviewed the FRC’s Annual Review of Audit Quality 2026 and took into account any relevant observations made by
the Investment Manager and Company Secretary. The Committee is satisfied that EY provides an effective independent challenge in carrying
out its responsibilities.
EY has been the auditor to the Group since its launch in 2013. Following professional guidelines, the audit principal rotates after five years.
The current audit principal is Matthew Price and the audit for the year ended 30 June 2026 constitutes the fourth year of his term. Having
considered the effectiveness of the audit, the Audit Committee has recommended to the Board the continuing appointment of EY as the
Group’s auditor. The performance of the Auditor will continue to be reviewed annually taking into account all relevant guidance and best
practice. The Company is in compliance with the requirements of the Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014. This order relates to the frequency
and governance of tenders for the appointment of the external auditor and the setting of the policy on the provision of non-audit services.
The Group will require to undertake an audit tender, with mandatory rotation of the audit firm, before 30 June 2032.
In relation to the provision of non-audit services by the auditor, it has been agreed that all non-audit work to be carried out by the auditor
must be approved in advance by the Audit Committee and any special projects must also be approved in advance so as not to endanger
the independence of EY as auditor. In this respect it considers that the provision of the non-audit service shown in the table below does
not constitute such a threat.
Other than the review of the half-year financial information, the auditors were not engaged to undertake any non-audit services either during
the year or over the prior three-year rolling period. Different accountancy firms were engaged to provide tax advice and compliance and to
act as the Independent Service Auditor in relation to the review of the internal controls within the Investment Manager.
Service provided (inclusive of irrecoverable VAT) Fee (£’000)
Statutory audit of the Company for the year ended 30 June 2026 171
Statutory audit of the Company’s subsidiaries for the year ended 30 June 2026 300
Review of half-year financial information for the six months ended 31 December 2025 20
Total (inclusive of irrecoverable VAT) 491
In addition to the statutory audit fees payable to EY as auditor to the Group detailed in the table above, additional audit fees of £36,000
payable to a different accountancy firm have been recognised in the Group’s results for the year ended 30 June 2026. These are in relation
to the audit of the individual company accounts for the five subsidiaries acquired during the year, where it is considered more efficient and
effective to retain the services of the incumbent auditors for the initial period given their familiarity with the operations and restructuring
of this sub-group prior to the acquisition by the Group.
Annual Report and Financial Statements
The Board of Directors is responsible for preparing the Annual Report and financial statements. The Audit Committee advises the Board on the
form and content of the Annual Report and financial statements, any issues which may arise and any specific areas which require judgement.
The Audit Committee has also considered certain significant issues during the year in addition to its work on internal controls described above.
These are noted in the table below.
Matter Audit Committee action
Income recognition
Incomplete or inaccurate income recognition could have
an adverse effect on the Group’s net asset value, earnings
per share, its level of dividend cover and compliance with
REIT regulations.
The Audit Committee reviewed the Investment Manager’s processes and controls
around the recording of investment income. It also compared the final level of
net income received for the year to forecasts.
The Audit Committee considered the basis of calculation of the Group’s
estimated credit losses by reviewing the scenario analysis prepared by the
Investment Manager and ensured that this allowance was prepared on a basis
consistent with the Directors’ understanding of the financial position of each
relevant tenant.
The Audit Committee assessed the appropriateness of the accounting treatment
of the fixed rental uplifts and other lease incentives and how this impacted the
Property Income component of dividends paid or payable by the Company.
Annual Report and Financial Statements 2026
53
Corporate Governance
Strategic Report Financial Statements Additional Information
Matter Audit Committee action
Valuation and ownership of the investment
property portfolio
The Group’s property portfolio accounted for 84.2 per
cent of its total assets as at 30 June 2026. Although
valued by an independent firm of valuers, the valuation of
the investment property portfolio is inherently subjective,
requiring judgement by the valuers. Errors in the valuation
could have a material impact on the Group’s net asset
value. Further information about the property portfolio
and inputs to the valuations is set out in Note 9 to the
Consolidated Financial Statements.
The Investment Manager liaises with the valuers on a regular basis and meets
with them prior to the production of each quarterly valuation. The Audit
Committee reviewed the results of the valuation process throughout the year and
the Directors had the opportunity to discuss the detail of each of the quarterly
valuations with the Investment Manager.
The quarterly valuations have been prepared by CBRE Limited (‘CBRE’).
The Board noted the property disposals completed during the year, and
compared the proceeds received to the quarterly valuation of the relevant
properties immediately prior to each such transaction, which provided the
Committee with additional comfort over the ability of the Group to realise
properties, in aggregate, at a level consistent with the external valuation.
The Committee discussed the valuation as at 30 June 2026 directly with
representatives of CBRE to ensure that the Directors understood the assumptions
underlying the valuation and the sensitivities inherent in the valuation and any
particular areas of judgement.
The Committee discussed with the Auditor the work performed to assess the
valuation and confirm ownership of the properties in the portfolio and noted the
report of the Depositary, particularly the sections regarding the Depositary’s
responsibilities and work in relation to asset verification. The Committee
considered the significant estimates and judgements inherent in the valuation
process and considered how the auditors had challenged these by discussing the
outcome of the review of the property valuations directly with the Auditor’s
valuation specialists; focussing particularly on any areas of difference between
the judgement of the external valuers and the auditors.
The Audit Committee noted that the Auditors had not reported any significant indications of systemic weaknesses in the Group’s internal
controls or financial reporting processes and that no material adjustments had been required to the financial statements as presented.
Conclusion with respect to the Annual Report and Financial Statements
The Audit Committee has concluded that the report and financial statements for the year ended 30 June 2026, taken as a whole, is fair,
balanced and understandable and provides the information necessary for shareholders to assess the Group’s position, performance, business
model and strategy.
The Audit Committee has reported its conclusions to the Board of Directors. The Audit Committee reached this conclusion through a process
of review of the document, discussion, and enquiries of the various parties involved in the preparation of the report and financial statements.
Vince Niblett
Chair of the Audit Committee
21 September 2026
Target Healthcare REIT plc
54
Composition and Role of the Remuneration Committee
The Company has established a Remuneration Committee chaired by Dr Thompsell. The Committee works to written terms of reference
which are reviewed at each meeting and which are available on request. The Remuneration Committee is currently comprised of all Directors
which is considered appropriate given the Group’s size and as the Board comprises only independent non-executive Directors. The Company
has no executive Directors or employees.
The role of the Remuneration Committee is to design a remuneration policy and remuneration practices to support the Group’s strategy
and to promote its long-term sustainable success. The objective of such policy is to attract, retain and motivate non-executive Directors
of the quality required to govern the Company successfully without paying more than is necessary, having regard to any views volunteered
by shareholders or other stakeholders. The policy is reviewed by the Committee at least annually to ensure its ongoing appropriateness
and relevance.
The Committee recommends a level of remuneration for each of the Directors to the Board, within the limits set in the Articles of Association
or as otherwise approved by the Company’s shareholders.
Full details of the Group’s policy with regards to Directors’ fees, the fees paid to each Director during the year ended 30 June 2026 and the
intended fees to be paid in relation to the forthcoming year are shown on the following page.
Remuneration policy
The Company’s policy is that the remuneration of the Directors should reflect the experience of the Board as a whole, the time commitment
required and be fair and comparable with that of other similar companies. Furthermore, the level of remuneration should be sufficient to
attract and retain the Directors needed to oversee the Group properly and to reflect its specific circumstances. The policy also provides for
the Company’s reimbursement of all out of pocket approved expenses incurred wholly and exclusively in fulfilling their duties in relation to
the Group, such as reasonable travel and associated expenses incurred by the Directors in attending Board and Committee meetings.
The fees for the Directors are determined within the limit set out in the Company’s Articles of Association and this limit may not be changed
without seeking shareholder approval at a general meeting. The fees are fixed and are payable in cash, quarterly in arrears. Directors are not
eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits. The Company may periodically choose
to benchmark Directors’ fees with an independent review, to ensure they remain fair and reasonable.
It is the Board’s policy that Directors do not have service contracts, but each new Director is provided with a letter of appointment setting out
the terms and conditions of his or her appointment. The Directors’ letters of appointment are available on request at the Company’s registered
office during business hours and will be available for 15 minutes prior to and during the forthcoming Annual General Meeting.
The terms of Directors’ appointments provide that Directors should retire and be subject to election at the first Annual General Meeting after
his or her appointment and, in accordance with the recommendations of the AIC Code, the Board has agreed that all Directors will retire
annually and, if they wish, to offer themselves for re-election. There is no notice period and no provision for compensation upon termination
of appointment.
The Remuneration Policy must be approved by shareholders at least every three years or, if earlier, when any changes to the policy are
proposed by the Company.
Voting at Annual General Meeting on the Directors’ Remuneration Policy
The Company has not received any direct communications from its shareholders in respect of the levels of Directors’ remuneration.
Shareholders last approved the Directors’ Remuneration Policy at the Company’s AGM held on 4 December 2025. 99.9 per cent of the votes
cast were in favour of the resolution and votes withheld represented less than 2.7 per cent of the shares in issue. It is currently intended that
the above policy will continue for a three-year period and will therefore next be considered at the AGM to be held in 2028.
Directors’ Remuneration Report
Welcome to the Directors’
Remuneration Report
The aim of this report is to set out the policy used by
the Company in setting the Directors’ remuneration,
as well as declaring the actual fees paid during the year
and expectations for the following twelve months.
Shareholders will be provided with an opportunity
at the forthcoming AGM to vote in relation to this Report.
Dr Amanda Thompsell,
Chair of the Remuneration Committee
Annual Report and Financial Statements 2026
55
Corporate Governance
Strategic Report Financial Statements Additional Information
Directors’ Fees
The Board considers the level of Directors’ fees at least annually, and intends to appoint an external consultant at least every three years to
provide advice on the level of Directors’ Remuneration in order to ensure that the level of remuneration remains in line with the market level
necessary to attract, retain and motivate non-executive Directors of the quality required to govern the Company successfully.
The most recent external review was conducted in August 2024 and concluded that there would be some merit in continuing to increase the
level of the fees paid, particularly in relation to the role of Chair given this remained below that paid by other similar companies. However,
mindful of both the Group’s share price performance and the overall economic environment, the Committee held Directors’ fees unchanged
for the year ended 30 June 2025 before increasing fees to a level considered consistent with the findings of the external review for the year
ended 30 June 2026. In order to remain competitive with the practices of other similar Boards, an additional fee was also introduced with
effect from 1 January 2026 for each of the Senior Independent Director and the chair of the ESG Committee in order to recognise the
additional workload and responsibilities of these roles.
The Remuneration Committee conducted a review of the level of Directors’ fees at the end of the year ended 30 June 2026, which also included:
• consideration of the annual level of wage and price inflation;
• consideration of the AIC paper regarding director remuneration for investment company directors published in July 2026;
• an assessment of the ongoing workload and responsibilities, taking into account increasingly complex legal and regulatory requirements and
the active asset management particularly required in the care home property sub-sector;
• consideration of the Group’s performance;
• consultation with various of the Group’s advisers in relation to their experiences of current market practice; and
• consideration of the level of fees paid by the Group’s peer group.
The Committee concluded that, in order to ensure that the level of Directors’ fees remained at market levels and in line with the Group’s
remuneration policy, it was appropriate to increase the level of Directors’ fees for the forthcoming year as set out in the table below.
Year ending
30 June 2027
£’s
Year ended
30 June 2026
£’s
Year ended
30 June 2025
£’s
Change
in year ended
30 June 2026
%
Chair 66,250 64,350 58,500 +10.0
Audit Committee Chair 53,550 52,000 47,250 +10.0
Director 43,825 42,550 40,500 +5.1
Since 1 January 2026, an additional fee of £5,000 per annum has been paid to each of the Senior Independent Director and the chair of the
ESG Committee. These additional fee rates will remain unchanged for the year ending 30 June 2027.
The annual percentage change in remuneration paid in relation to each role for recent years is shown in the table below:
Change in
year ending
30 June 2027
%
Change in
year ended
30 June 2026
%
Change in
year ended
30 June 2025
%
Change in
year ended
30 June 2024
%
Change in
year ended
30 June 2023
%
Change in
year ended
30 June 2022
%
Chair +3.0 +10.0 +0.0 +8.3 +8.0 +13.6
Audit Committee Chair +3.0 +10.0 +0.0 +3.8 +3.4 +12.8
Director +3.0 +5.1 +0.0 +3.8 +4.0 +14.5
The present limit on Directors’ fees is an aggregate of £350,000 per annum. This limit may be amended by changing the Company’s Articles
of Association, or by the passing of an ordinary resolution at a general meeting.
Annual Report on Directors’ Remuneration
Relative importance of spend on pay
The table below compares the change in the level of Directors’ remuneration compared to other expenses and distributions to shareholders.
Year ended
30 June 2026
£’000
Year ended
30 June 2025
£’000
Change in
year ended
30 June 2026
%
Aggregate Directors’ remuneration 249 227 +9.7
Management fee and other revenue expenses 11,139 13,335 -16.5
Distributions paid to shareholders in respect of the year 37,412 36,495 +2.5
As an investment company with an external manager, the Group does not have any employees other than the Directors. The Directors
therefore deem the level of the management fee and other revenue expenses, calculated in accordance with the Group’s usual accounting
policies, to be an appropriate measure to assist in understanding the relative importance of the Group’s spend on Directors’ pay.
Target Healthcare REIT plc
56
Directors’ Remuneration Report continued
Annual Report on Directors’ Remuneration continued
Directors’ emoluments for the year (audited)
The Directors who served during the year received the following emoluments in the form of fees. As highlighted on page 55, additional fees
were introduced with effect from 1 January 2026 in relation to fulfilling the role of Senior Independent Director and the role of chair of the
ESG Committee. No other forms of remuneration or taxable benefits were paid during the year.
Year ended
30 June 2026
£’s
Change in
year ended
30 June
2026
1
%
Year ended
30 June 2025
£’s
Change in
year ended
30 June
2025
1
%
Change in
year ended
30 June
2024
1
%
Change in
year ended
30 June
2023
1
%
Change in
year ended
30 June
2022
1
%
Alison Fyfe 64,350 +10.0 58,500 +0.0 +22.9² +26.9² +14.5
Vince Niblett 52,000 +10.0 47,250 +0.0 +3.8 +27.3³ n/a
Amanda Thompsell 42,550 +5.1 40,500 +0.0 +3.8 +149.6⁴ n/a
Richard Cotton 45,050 +11.2 40,500 +0.0 +55.8⁵ n/a n/a
Michael Brodtman 45,050 +11.2 40,500 +0.0 +107.7⁶ n/a n/a
Total 249,000 +9.6 227,250 +0.0 +4.3 +2.0 +17.9
1 In accordance with The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019, these columns show the annual percentage
change over the preceding financial year by comparison to the current financial year in respect of each Director that has served in their relevant role for a minimum
of two financial years. A history of the previous five financial years is presented. The percentage increases shown reflect both: (i) any changes in remuneration arising
if a director served for less than a year, or changed roles, during one of the years being compared; and (ii) increases in rates of remuneration (as per the table on page 55
showing the remuneration per role for recent years).
2 Ms Fyfe was appointed as a Director on 1 May 2020 and as Chair on 6 December 2022.
3 Mr Niblett was appointed as a Director on 25 August 2021 and as Chair of the Audit Committee on 14 December 2021.
4 Dr Thompsell was appointed as a Director on 1 February 2022.
5 Mr Cotton was appointed as a Director on 1 November 2022.
6 Mr Brodtman was appointed as a Director on 1 January 2023.
Directors’ shareholdings (audited)
The Directors who held office at the year-end and their interests (all of which were beneficially held) in the ordinary shares of the Company as
at 30 June 2026 were as follows:
Ordinary shares
30 June 2026
Ordinary shares
30 June 2025
Alison Fyfe 10,000 10,000
Vince Niblett 24,052 24,052
Amanda Thompsell – –
Richard Cotton 30,000 30,000
Michael Brodtman 24,210 24,210
Total 88,262 88,262
There have not been any changes in the Directors’ interests between 30 June 2026 and 21 September 2026. No Director had an interest in
any contracts with the Company during the year or subsequently. Senior representatives of the Investment Manager, including persons closely
associated with them, have an interest in the shares of the Company totalling, in aggregate, 286,317 Ordinary shares. The Investment Manager
has provided a commitment that over a period of up to three years, the Investment Manager, including senior members of the management
team and their connected parties, will invest the equivalent of 25% of one-year’s annual management fee in acquiring shares in the Company.
Such acquisitions are expected to be undertaken on an ad hoc basis through the secondary market and will remain subject to applicable law
and regulations.
Group performance
The Board is responsible for the Group’s investment strategy and performance, although the management of the Group’s investment portfolio
is delegated to the Investment Manager through the investment management agreement, as referred to on page 34.
The graph on the following page compares, for the ten years to 30 June 2026, the share price total return (assuming all dividends are
reinvested) to ordinary shareholders compared to the total return on the FTSE EPRA Nareit UK Index. The index was chosen for comparative
purposes as it represents the performance of real estate companies and REITs listed on the London Stock Exchange; however, it should be
noted that this index will contain types of property assets that may perform significantly differently from the care home properties within the
Group’s investment remit.
Annual Report and Financial Statements 2026
57
Corporate Governance
Strategic Report Financial Statements Additional Information
30/6/16 30/6/17 30/6/18 30/6/19 30/6/20 30/6/21 30/6/22 30/6/24 30/6/25
30/6/26
30/6/23
200
160
170
180
150
190
140
130
120
100
110
90
70
80
FTSE EPRA Nareit UK Index Total Return
Share Price Total Return Sources: EPRA, Target Fund Managers Limited
Share Price Total Return and the FTSE EPRA Nareit UK Index Total Return Performance Graph (rebased to 100 at 30 June 2016)
The share price total return performance included in the above graph is based on the listed share price of Target Healthcare REIT Limited to
7 August 2019 and, following the reconstruction of the Group to introduce a new listed parent company, Target Healthcare REIT plc thereafter.
Voting at Annual General Meeting on the Annual Directors’ Remuneration Report
At the Company’s previous AGM, held on 4 December 2025, shareholders approved the Directors’ Remuneration Report in respect of the year
ended 30 June 2025. 99.6 per cent of the votes cast were in favour of the resolution and votes withheld represented less than 2.7 per cent of
the shares in issue.
An ordinary resolution for the approval of this Annual Report on Directors’ Remuneration will be put to shareholders at the forthcoming
Annual General Meeting to be held on 2 December 2026.
On behalf of the Board
Amanda Thompsell
Director
21 September 2026
Target Healthcare REIT plc
58
Opinion
In our opinion:
• Target Healthcare REIT plc’s Group financial statements and Parent Company financial statements (the ‘financial statements’) give a true
and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June 2026 and of the Group’s profit for the year
then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Target Healthcare REIT plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 30 June 2026 which comprise:
Group Parent Company
Consolidated Statement of Comprehensive Income for the year
ended 30 June 2026
Statement of Financial Position as at 30 June 2026
Consolidated Statement of Financial Position as at 30 June 2026 Statement of Changes in Equity for the year ended 30 June 2026
Consolidated Statement of Changes in Equity for the year ended
30 June 2026
Related notes 1 to 12 to the financial statements, including material
accounting policy information
Consolidated Statement of Cash Flows for the year ended
30 June 2026
Related notes 1 to 22 to the financial statements, including material
accounting policy information
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK adopted
international accounting standards. The financial reporting framework that has been applied in the preparation of the Parent Company
financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 ‘Reduced Disclosure Framework’
(United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and Parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and we remain
independent of the Group and the Parent Company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and Parent Company’s ability to continue to
adopt the going concern basis of accounting included:
• Confirming our understanding of the Group and Parent Company’s going concern assessment process and engaging with the Directors
and the Company Secretary to determine if all key factors have been included in their assessment.
• Inspecting the Directors’ assessment of going concern, including the revenue and expenses forecast for the period to 30 September 2027,
which is at least 12 months from the date the financial statements have been authorised for issue. In preparing the revenue and expenses
forecast, the Group and Parent Company have concluded that it is able to continue to meet its costs as they fall due.
• Reviewing the factors and assumptions, including the impact of external market factors, as applied to the revenue and expenses forecast.
We considered the appropriateness of the methods used to calculate the revenue and expenses forecast, and determined, through testing
of the methodology and calculations, that the methods, inputs and assumptions utilised were appropriate to be able to make an
assessment for the Group and Parent Company.
• In relation to the Group’s borrowing arrangements, inspecting the Directors’ assessment of the risk of breaching the debt covenants as a
result of a reduction in the value of the Group’s portfolio. We recalculated the Group’s compliance with debt covenants in the scenarios
assessed by the Directors and performed reverse stress testing in order to identify what factors would lead to the Group breaching the
financial covenants.
• Evaluating the mitigating actions available to management and included within the revenue forecasts and covenant calculations and
assessed whether these actions were appropriately reflected in the Directors’ going concern assessment.
• Reviewing the Group’s going concern disclosures included in the annual report in order to assess that the disclosures were appropriate
and in conformity with UK adopted international accounting standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern for a period to
30 September 2027, which is at least 12 months from when the financial statements are authorised for issue.
Independent Auditor’s Report to the Members of Target Healthcare REIT plc
Annual Report and Financial Statements 2026
59
Corporate Governance
Strategic Report Financial Statements Additional Information
In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue
as a going concern.
Overview of our audit approach
Key audit matters • Incorrect valuation and ownership of investment properties
• Incomplete or inaccurate recognition of rental income, including accounting for rental uplifts
and lease incentives
Materiality • Overall Group materiality of £7.58m which represents 1% of Group net assets.
An overview of the scope of the Parent Company and Group Audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
Company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account
the risk profile, account size, the organisation of the Group and changes in the business environment when assessing the level of work to be
performed at each Company. All audit work performed for the purposes of the audit was undertaken by the Group audit team which includes
our real estate valuation specialists.
Climate change
Stakeholders are increasingly interested in how climate change will impact Target Healthcare REIT plc. The Group and Parent Company has
determined that the most significant future impacts from climate change on their operations will be on the valuation of investment properties
and potential shareholder returns. These are explained on pages 26 to 27 in the principal risks and uncertainties. Our procedures on these
unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on “Other
information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential
material impact on its financial statements.
Our audit effort in considering the impact of climate change on the financial statements was focused on the adequacy of the Group and
Parent Company’s disclosure in the financial statements as set out in note 1(a) which concludes that there was no further material impact of
climate change to be taken into account other than the potential impact on investment properties. Investment properties are valued at fair
value based on open market valuations as described in Note 1(h). The open market valuation assessment includes consideration of
environmental matters and the condition of each property with detail on the fair value of properties provided within the notes to the financial
statements.
We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and associated
disclosures.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a key
audit matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in
our opinion thereon, and we do not provide a separate opinion on these matters.
Target Healthcare REIT plc
60
Independent Auditor’s Report to the Members of Target Healthcare REIT plc continued
Risk Our response to the risk
Incorrect valuation and ownership of
investment properties
(Refer to Report of the Audit Committee (page 53); Accounting
policies (pages 72 and 73); and Note 9 to the Consolidated
Financial Statements (pages 78 to 80)).
At 30 June 2026, the Group’s investment portfolio consisted of UK
healthcare properties, with a market value of £924.12m (2025:
£929.94m) and carrying value of £833.48m (2025: £840.43m),
which is net of a deduction of £90.64m (2025: £89.51m) to
account for lease incentives, rent reviews and performance
payments accrued as payable to tenants where performance
conditions have been met as at year end. The Parent Company
investment portfolio consisted of UK healthcare properties, with a
market value of £9.13m (2025: £8.86m) and a carrying value of
£8.79m (2025: £8.61m) which is net of a deduction of £0.34m
(2025: £0.25m) to account for rent reviews.
The valuation of the properties held in the investment portfolio,
and unrealised gain/(losses) on the investment portfolio are the key
drivers of the Group’s net asset value and total return. Incorrect
investment pricing, including the assumptions involved in the
valuation of property investments could have an impact on the
portfolio valuation and the return generated for shareholders.
The valuation of investment property requires assumption and
estimates by the Manager (Target Fund Managers Limited) and the
external valuers. Any input inaccuracies or unreasonable bases
used in these assumptions and estimates (such as in respect of
estimated rental value and yield profile applied) could result in a
material misstatement of the Statement of Financial Position and in
the Statement of Comprehensive Income.
The properties are valued externally on behalf of
the Group by CBRE and recorded in the Consolidated Financial
Statements at their carrying value, being
the CBRE open market valuation adjusted for the impact of lease
incentives, rental uplifts, and performance payments.
Failure to maintain proper legal title of the Group’s investment
properties could result in assets being incorrectly recognised within
the Statement of Financial Position.
The valuation of investment properties and the resultant impact on
unrealised gains/(losses) is the area requiring the most assumption
and estimation in the preparation of the financial statements and
has been classified as an area of fraud risk as highlighted below on
page 63.
We performed the following procedures:
We obtained an understanding of the processes and controls
surrounding investment valuation and unrealised gains and losses by
performing walkthrough procedures to evaluate the design and
implementation of controls.
We agreed the value of all the properties in the investment portfolio
held at the year end to the open market valuations included in the
valuation report provided by CBRE.
We agreed the key inputs used by CBRE in the valuation to source
data including lease terms and CQC ratings.
We used our property valuation specialists to perform a review of the
property valuations, which included:
• Evaluating the work performed, competency, capability, and
objectivity of CBRE;
• Reviewing the assumptions used by CBRE in undertaking their
valuation and an assessment of the valuation methodology
adopted;
• Holding discussions with CBRE including an overview of the
portfolio, covenant strength of the tenants within the portfolio
and occupancy and historical rent cover for a sample of
properties;
• Reviewing a sample of the individual property valuations as at
30 June 2026 and assessing the accuracy and appropriateness of
key valuation inputs by agreeing them to underlying lease
agreements and property records, including rental income, rent
review provisions and occupancy data;
• Analysing key changes in the property valuation as a whole
including a review of the reasonableness of the income yields for
the properties; and
• Reviewing the management information and the expected credit
loss models for any indicators or trends that may be relevant to
the valuation of the properties.
For all properties not included in the sample for the valuation
specialists we have reviewed the movement in property values to
the MSCI benchmark.
We reviewed the accounting policy and recalculated the
adjustments made to the CBRE fair value in respect of lease
incentives and rental smoothing to validate the carrying value of
investment properties.
We recalculated the unrealised gains/(losses) on all investment
properties as at the year-end using the book cost reconciliation.
We ensured the consolidated financial statements contain adequate
disclosures regarding the methods and assumptions used in the
valuation, including the required sensitivity analysis under IFRS 13
‘Fair value measurement’ and reviewed the fair value hierarchy
disclosures.
We reviewed the prior year estimate with reference to any disposals
made in the year to confirm the estimate was reasonable.
We obtained direct confirmation from the Group’s legal adviser
regarding legal title to investment properties and forward funding
development sites held as at 30 June 2026.
We agreed a sample of key transaction details (e.g. property and
trade date) of purchases and sales recorded by Target Fund
Managers Limited to legal agreements, completion statements and
bank statements.
Key observations communicated to the Audit Committee: The results of our procedures identified no material misstatement in relation to
the risk of incorrect valuation, calculation of unrealised gains/(losses) or ownership of investment properties.
Annual Report and Financial Statements 2026
61
Corporate Governance
Strategic Report Financial Statements Additional Information
Risk Our response to the risk
Incomplete or inaccurate recognition of rental income including
accounting for rental uplifts and lease incentives
(Refer to Report of the Audit Committee (page 52) and Accounting
Policies (pages 71 and 72)).
During the year ended 30 June 2026, £70.62m (2025: £71.21m) has
been recognised by the Group as rental income. Of this £60.24m
(2025: £60.37m) has been recorded as revenue in the Consolidated
Statement of Comprehensive Income and £10.38m (2025:
£10.84m) as capital relating to accrued rent review uplifts and lease
incentives not yet received.
The rental income receivable by the Group during the period is a
significant factor in the Group’s decision to make a dividend
payment to shareholders. Rental income from the investment
properties is recognised on an accrual basis with the exception of
contingent rents which are recognised on a receipt basis. The lease
agreements tend to have durations of multiple years and minimum
and maximum annual rental increase clauses. Leases may also
include lease incentives such as rent-free periods. IFRS 16 ‘Leases’
requires that lessors recognise lease payments as income on either
a straight-line basis or another systematic basis if that basis is more
representative of the pattern in which benefit derived from the use
of the underlying asset is diminished.
There is a risk of incomplete or inaccurate recognition of rental
income including rental uplifts and lease incentives through the
failure to recognise the proper entitlements or applying the
appropriate accounting treatment and has been classified as an
area of fraud risk as highlighted below on page 63.
We performed the following procedures:
We obtained an understanding of the processes and controls
surrounding rental income recognition including accounting for
rental uplifts and lease incentives by performing walkthrough
procedures to evaluate the design and implementation of controls.
We have verified 100% of the rental rates to lease agreements
(including rent reviews, completed forward funds and re-tenanted
assets) and recalculated 100% of the rental income recognised.
We reperformed the rental adjustment calculations for rental uplifts
under IFRS 16 for all tenants and considered the allocation between
revenue and capital.
We have assessed the appropriateness of all contingent rent with
reference to agreements and confirmed that there was no
contingent rent recognised in the period.
We have agreed a sample of rental income recorded as received to
bank statements to ensure completeness of payments received.
We have tested that a sample of expected rent receipts have been
recorded with reference to executed lease agreements to ensure
completeness.
We reviewed the Group’s accounting policies in respect of the
significant terms of the tenancy agreements (for example rental
uplifts, rent free periods and lease incentives) to confirm that the
accounting treatment is in line with UK adopted international
accounting standards and consider the capital and revenue
allocation to be appropriate.
We reviewed management’s workings for the minimum lease
payment disclosure with reference to audit work performed on the
Group’s operating leases.
Key observations communicated to the Audit Committee: The results of our procedures identified no material misstatement in relation to
the risk of incomplete or inaccurate recognition of rental income including accounting for rental uplifts and lease incentives
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and
in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be £7.58 million (2025: £7.12 million), which is 1% (2025: 1%) of net assets. We believe that net
assets provides us with materiality aligned to a key measurement of the Group’s performance.
We determined materiality for the Parent Company to be £7.83 million (2025: £7.40 million), which is 1% (2025: 1%) of net assets.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality was 75% (2025: 75%) of our planning materiality, namely £5.68m (2025: £5.34m). We have set performance materiality
at this percentage due to our past experience of the audit that indicates a lower risk of misstatements, both corrected and uncorrected.
Target Healthcare REIT plc
62
Independent Auditor’s Report to the Members of Target Healthcare REIT plc continued
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.38m (2025: £0.36m), which
is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report
thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in
the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the Directors’ report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
• the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Group and Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for
our review by the UK Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified set out on pages 38;
• Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is
appropriate set out on pages 38 and 39;
• Directors’ statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its liabilities
set out on page 39;
• Directors’ statement on fair, balanced and understandable set out on page 36;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 27;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
page 51; and;
• The section describing the work of the audit committee set out on pages 49 to 53.
Annual Report and Financial Statements 2026
63
Corporate Governance
Strategic Report Financial Statements Additional Information
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on page 43, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the company
and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant
are the Companies Act 2006, the UK Listing Rules, the UK Corporate Governance Code, the Association of Investment Companies’ Code of
Corporate Governance and Statement of Recommended Practice, Part 12 of the Corporation Tax Act 2010, the Companies (Miscellaneous
Reporting) Regulations 2018 and, for the Group, UK adopted international accounting standards, and for the Parent Company, FRS 101
“Reduced Disclosure Framework”.
• We understood how the Group is complying with those frameworks through discussions with the Audit Committee and Company
Secretary and review of documented policies and procedures.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by
considering the key risks impacting the financial statements. We identified fraud risks with respect to the incomplete or inaccurate
recognition of rental income including accounting for rental uplifts and lease incentives; and incorrect valuation and the calculation of
unrealised gains/(losses) of investment properties. Our audit procedures in response to the identified fraud risks included testing of specific
accounting journal entries and focused testing on the valuation of the investment properties and revenue recognition. We also considered
management’s incentives around improving the performance of the Group, the opportunities available to execute any such actions
through management override as well as the controls established to address any such risks identified, including to prevent, deter and detect
fraud and the monitoring of such controls by management. Further discussion of our approach is set out in the section on key audit
matters above.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our
procedures involved substantive audit procedures including a review of legal expenses incurred, review of the reporting to the Directors
with respect to the application of the documented policies and procedures and review of the financial statements to ensure compliance
with the reporting requirements of the Group and Parent Company.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
• Following the recommendation from the Audit Committee we were appointed by the Group, whose Parent Company at that time was
Target Healthcare REIT Limited, on 10 September 2013 to audit the financial statements. Following a Group reconstruction in August 2019,
Target Healthcare REIT plc became the Parent Company of the Group and re-appointed us as auditor of the Group on 4 September 2019.
• The period of total uninterrupted engagement following reconstruction and including previous renewals and reappointments is seven
years, covering the years ending 30 June 2020 to 30 June 2026.
• The audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
21 September 2026
Target Healthcare REIT plc
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Additional Information
Financial
Statements
64–97
Consolidated Statement
of Comprehensive Income 66
Consolidated Statement
of Financial Position 67
Consolidated Statement
of Changes in Equity 68
Consolidated Statement
of Cash Flows 69
Notes to the Consolidated
Financial Statements 70
Company Financial Statements 88
Target Healthcare REIT plc
66
Year ended 30 June 2026 | Year ended 30 June 2025 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Revenue | |||||||
Rental income | |||||||
Other rental income | |||||||
Other income | |||||||
Total revenue | |||||||
Gains on revaluation of investment properties | 9 | ||||||
Gains on investment properties realised | 9 | ||||||
Total income | |||||||
| Expenditure | |||||||
Investment management fee | 2 | ( | ( | ( | ( | ||
| Credit loss allowance reversal/(charge) | |||||||
and bad debts | 3 | ( | ( | ||||
Other expenses | 3 | ( | ( | ( | ( | ||
Total expenditure | ( | ( | ( | ( | |||
| Profit before finance costs | |||||||
and taxation | |||||||
| Net finance costs | |||||||
Interest income | 4 | ||||||
Finance costs | 5 | ( | ( | ( | ( | ( | ( |
Net finance costs | ( | ( | ( | ( | ( | ( | |
Profit before taxation | |||||||
Taxation | 6 | ||||||
Profit for the year | |||||||
| Other comprehensive income: | |||||||
| Items that are or may be reclassified | |||||||
| subsequently to profit or loss | |||||||
| Movement in fair value of interest | |||||||
rate derivatives designated as cash flow hedges | 13 | ( | ( | ||||
| Total comprehensive income | |||||||
for the year | |||||||
Earnings per share (pence) | 8 |
The total column of this statement represents the Group’s Consolidated Statement of Comprehensive Income, prepared in accordance with
IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of
Investment Companies.
All revenue and capital items in the above statement are derived from continuing operations. No operations were discontinued in the year.
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2026
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Additional Information
| As at | As at | ||
| 30 June 2026 | 30 June 2025 | ||
| Notes | £’000 | £’000 | |
| Non-current assets | |||
Investment properties | 9 | ||
Trade and other receivables | 10 | ||
Interest rate derivatives | 13 | ||
| Current assets | |||
Trade and other receivables | 10 | ||
Interest rate derivatives | 13 | ||
Cash and cash equivalents | 12 | ||
Total assets | |||
| Non-current liabilities | |||
Loans | 13 | ( | ( |
Trade and other payables | 14 | ( | ( |
| Current liabilities | ( | ( | |
Loans | 13 | ( | |
Trade and other payables | 14 | ( | ( |
( | ( | ||
Total liabilities | ( | ( | |
Net assets | |||
| Share capital and reserves | |||
Share capital | 15 | ||
Share premium | |||
Merger reserve | |||
Distributable reserve | |||
Hedging reserve | |||
Capital reserve | |||
Revenue reserve | |||
Equity shareholders’ funds | |||
Net asset value per ordinary share (pence) | 8 |
Company number: 11990238.
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Financial Position
As at 30 June 2026
Target Healthcare REIT plc
68
| Share | Share | Merger | Distributable | Hedging | Capital | Revenue | |||
| capital | premium | reserve | reserve | reserve | reserve | reserve | Total | ||
| Note | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
At 30 June 2025 | |||||||||
Profit for the year | |||||||||
Other comprehensive income | |||||||||
Total comprehensive income | |||||||||
| Transactions with owners | |||||||||
| recognised in equity: | |||||||||
Dividends paid | 7 | ( | ( | ( | |||||
At |
For the year ended 30 June 2025
| Share | Share | Merger | Distributable | Hedging | Capital | Revenue | |||
| capital | premium | reserve | reserve | reserve | reserve | reserve | Total | ||
| Note | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
At 30 June 2024 | |||||||||
Profit for the year | |||||||||
Other comprehensive income | ( | ( | |||||||
Total comprehensive income | ( | ||||||||
| Transactions with owners | |||||||||
| recognised in equity: | |||||||||
Dividends paid | 7 | ( | ( | ( | |||||
At 30 June 2025 |
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Changes in Equity
For the year ended 30 June 2026
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Additional Information
| Year ended | Year ended | ||
| 30 June 2026 | 30 June 2025 | ||
| Notes | £’000 | £’000 | |
| Cash flows from operating activities | |||
Profit before tax | |||
| Adjustments for: | |||
Interest income | ( | ( | |
Finance costs | |||
Revaluation gain on investment properties and movements in lease incentives, net of acquisition costs written off | 9 | ( | ( |
Gain on investment properties realised | 9 | ( | ( |
Decrease in trade and other receivables | |||
Increase in trade and other payables | |||
Interest paid | ( | ( | |
Interest received | |||
( | ( | ||
Net cash inflow from operating activities | |||
| Cash flows from investing activities | |||
Purchase of investment properties, including acquisition costs | ( | ( | |
Disposal of investment properties, net of lease incentives | |||
Net cash inflow/(outflow) from investing activities | ( | ||
| Cash flows from financing activities | |||
Drawdown of bank loan facilities | 13 | ||
Repayment of bank loan facilities | 13 | ( | ( |
Costs of refinancing bank loan facilities | 13 | ( | |
Dividends paid | ( | ( | |
Net cash outflow from financing activities | ( | ( | |
Net increase in cash and cash equivalents | |||
Opening cash and cash equivalents | |||
Closing cash and cash equivalents | 12 | ||
| Transactions which do not require the use of cash | |||
Movement in fixed or guaranteed rent reviews | 9 | ||
Movement in lease incentives | 9 | ||
Fixed or guaranteed rent reviews derecognised on disposal or re-tenanting | 9 | ( | ( |
Total |
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Cash Flows
For the year ended 30 June 2026
Target Healthcare REIT plc
70
1. Accounting policies
Notes to the Consolidated Financial Statements
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Financial Statements
Additional Information
1. Accounting policies continued
(a) Basis of preparation continued
Target Healthcare REIT plc
72
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
(c) Revenue recognition continued
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Additional Information
1. Accounting policies continued
(h) Investment properties continued
Target Healthcare REIT plc
74
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
2. Fee paid to the Investment Manager
| Year ended | Year ended | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Investment management fee | 8,172 | 7,816 |
Total | 8,172 | 7,816 |
The Group’s Investment Manager and Alternative Investment Fund Manager (‘AIFM’) is Target Fund Managers Limited. The Investment Manager
is entitled to an annual management fee calculated on a tiered basis based on the net assets of the Group as set out below. Where applicable,
VAT is payable in addition.
| Management fee | |
| Net assets of the Group | percentage |
Up to and including £500 million | 1.05 |
Above £500 million and up to and including £750 million | 0.95 |
Above £750 million and up to and including £1 billion | 0.85 |
Above £1 billion and up to and including £1.5 billion | 0.75 |
Above £1.5 billion | 0.65 |
The Investment Manager is entitled to an additional fee of £168,000 per annum (plus VAT), increasing annually in line with inflation, in relation
to its appointment as Company Secretary and Administrator to the Group.
The Investment Management Agreement can be terminated by either party on 24 months’ written notice. Should the Company terminate the
Investment Management Agreement earlier then compensation in lieu of notice will be payable to the Investment Manager. The Investment
Management Agreement may be terminated immediately upon the occurrence of certain events, including the insolvency of either party or if
the Investment Manager becomes legally prohibited from carrying on investment business or performing its duties under the Investment
Management Agreement.
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Additional Information
| Year ended | Year ended | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Total movement in credit loss allowance | (2,431) | 1,612 |
Utilisation of bad debts provision for amounts written off | 1,585 | – |
Credit loss allowance (reversal)/charge | (846) | 1,612 |
Valuation and other professional fees | 1,362 | 1,601 |
| Auditor’s remuneration for: | ||
– statutory audit of the Company | 171 | 167 |
– statutory audit of the Company’s subsidiaries | 336 | 286 |
– review of interim financial information | 22 | 17 |
Direct property costs | 444 | 267 |
Other taxation compliance and advisory* | 404 | 382 |
Directors’ fees | 249 | 227 |
Secretarial and administration fees | 245 | 229 |
Public relations and marketing | 169 | 185 |
Listing and Registrar fees | 144 | 134 |
Printing, postage and website | 79 | 146 |
Abortive costs | – | 81 |
Other | 188 | 185 |
Total other expenses | 3,813 | 3,907 |
| Year ended | Year ended | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Deposit interest | 691 | 426 |
Total | 691 | 426 |
| Year ended | Year ended | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Interest paid on loans | 8,677 | 10,040 |
Amortisation of loan costs | 656 | 619 |
Finance and transaction costs relating to the interest rate cap | 281 | 798 |
Total | 9,614 | 11,457 |
6. Taxation
| Year ended | Year ended | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Current tax | – | – |
Adjustment to tax charge for prior years | – | – |
Total tax charge | – | – |
Target Healthcare REIT plc
76
Notes to the Consolidated Financial Statements continued
6. Taxation continued
A reconciliation of the corporation tax charge applicable to the results at the statutory corporation tax rate to the charge for the year is as follows:
| Year ended | Year ended | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Profit before tax | 82,590 | 60,845 |
Tax at 25% (2025: 25%) | 20,648 | 15,211 |
| Effects of: | ||
REIT exempt profits | (11,328) | (10,101) |
REIT exempt gains | (7,614) | (2,890) |
Capital allowances | (1,792) | (2,286) |
Utilisation of excess management expenses brought forward | (128) | (162) |
Expenses not deductible for tax purposes | 214 | 228 |
Total tax charge | – | – |
The Directors intend to conduct the Company’s affairs such that management and control is exercised in the United Kingdom and so that the
Company carries on any trade in the United Kingdom.
Subject to continuing relevant UK-REIT criteria being met, the profits from the Group’s property rental business, arising from both income and
capital gains, are exempt from corporation tax.
The Group has unutilised tax losses carried forward in its residual business of £9.8 million at 30 June 2026 (2025: £10.5 million). No deferred
tax asset has been recognised on this amount as the Group cannot be certain that there will be taxable profits arising within its residual
business from which the future reversal of the deferred tax asset could be deducted.
7. Dividends
Amounts paid as distributions to equity holders during the year to 30 June 2026.
| Dividend rate | Year ended | |
| (pence per | 30 June 2026 | |
| share) | £’000 | |
Fourth interim dividend for the year ended 30 June 2025 | 1.471 | 9,124 |
First interim dividend for the year ended 30 June 2026 | 1.508 | 9,353 |
Second interim dividend for the year ended 30 June 2026 | 1.508 | 9,353 |
Third interim dividend for the year ended 30 June 2026 | 1.508 | 9,353 |
Total | 37,183 |
Amounts paid as distributions to equity holders during the year to 30 June 2025.
| Dividend rate | Year ended | |
| (pence per | 30 June 2025 | |
| share) | £’000 | |
Fourth interim dividend for the year ended 30 June 2024 | 1.428 | 8,857 |
First interim dividend for the year ended 30 June 2025 | 1.471 | 9,123 |
Second interim dividend for the year ended 30 June 2025 | 1.471 | 9,124 |
Third interim dividend for the year ended 30 June 2025 | 1.471 | 9,124 |
Total | 36,228 |
It is the policy of the Directors to declare and pay dividends as interim dividends. The Directors do not therefore recommend a final dividend.
The fourth interim dividend in respect of the year ended 30 June 2026, of 1.508 pence per share, was paid on 28 August 2026 to shareholders
on the register on 14 August 2026 and amounted to £9,353,000. It is the intention of the Directors that the Group will continue to pay
dividends quarterly.
Year ended 30 June 2026 | Year ended 30 June 2025 | |||
£’000 | Pence per share | £’000 | Pence per share | |
Revenue earnings | 40,463 | 6.53 | 37,014 | 5.97 |
Capital earnings | 42,127 | 6.79 | 23,831 | 3.84 |
Total earnings | 82,590 | 13.32 | 60,845 | 9.81 |
Average number of shares in issue | 620,237,346 | 620,237,346 |
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Additional Information
8. Earnings per share and Net Asset Value per share continued
Earnings per share continued
| Year ended | Year ended | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Earnings per IFRS Consolidated Statement of Comprehensive Income | 82,590 | 60,845 |
Adjusted for gains on investment properties realised | (9,228) | (39) |
Adjusted for gains on revaluation of investment properties | (21,358) | (12,244) |
Adjusted for finance and transaction costs on the interest rate cap | 281 | 798 |
Adjusted for other capital items | (1,435) | (1,505) |
EPRA earnings | 50,850 | 47,855 |
Adjusted for rental income arising from recognising guaranteed rent review uplifts | (10,387) | (10,841) |
Adjusted for development interest under forward fund agreements | 128 | 725 |
Group specific adjusted EPRA earnings | 40,591 | 37,739 |
| Earnings per share (‘EPS’) (pence per share) | ||
EPS per IFRS Consolidated Statement of Comprehensive Income | 13.32 | 9.81 |
EPRA EPS | 8.20 | 7.72 |
Group specific adjusted EPRA EPS | 6.54 | 6.08 |
| 2026 | 2026 | 2026 | 2025 | 2025 | 2025 | |
| EPRA NRV | EPRA NTA | EPRA NDV | EPRA NRV | EPRA NTA | EPRA NDV | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
IFRS NAV per financial statements | 757,923 | 757,923 | 757,923 | 712,460 | 712,460 | 712,460 |
Fair value of interest rate derivatives | (347) | (347) | – | (572) | (572) | – |
Fair value adjustment to loans | – | – | 24,786 | – | – | 27,929 |
Estimated purchasers’ costs | 62,030 | – | – | 62,175 | – | – |
EPRA net assets | 819,606 | 757,576 | 782,709 | 774,063 | 711,888 | 740,389 |
EPRA net assets (pence per share) | 132.1 | 122.1 | 126.2 | 124.8 | 114.8 | 119.4 |
Target Healthcare REIT plc
78
Notes to the Consolidated Financial Statements continued
9. Investment properties
Freehold and leasehold properties
| As at | As at | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Opening market value | 929,940 | 908,530 |
Opening fixed or guaranteed rent reviews | (79,138) | (68,856) |
Opening lease incentives | (10,370) | (10,011) |
Opening performance payments (see Note 18) | – | 1,910 |
Opening carrying value | 840,432 | 831,573 |
Disposals – proceeds | (96,803) | (9,753) |
– gain/(loss) on sale | 23,648 | (542) |
Purchases and performance payments | 47,904 | 7,650 |
Acquisition costs capitalised | 1,641 | 30 |
Acquisition costs written off | (1,641) | (30) |
Unrealised (gain)/loss realised during the year | (14,420) | 581 |
Revaluation movement – gains | 36,724 | 25,484 |
Revaluation movement – losses | (2,873) | (2,010) |
Movement in market value | (5,820) | 21,410 |
Fixed or guaranteed rent reviews derecognised on disposal or re-tenanting | 9,718 | 559 |
Movement in fixed or guaranteed rent reviews | (10,387) | (10,841) |
Movement in lease incentives | (465) | (359) |
Movement in performance payments (see Note 18) | – | (1,910) |
Movement in carrying value | (6,954) | 8,859 |
Closing market value | 924,120 | 929,940 |
Closing fixed or guaranteed rent reviews | (79,807) | (79,138) |
Closing lease incentives | (10,835) | (10,370) |
Closing carrying value | 833,478 | 840,432 |
Changes in the valuation of investment properties
| Year ended | Year ended | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Gain/(loss) on sale of investment properties | 23,648 | (542) |
Unrealised (gain)/loss realised during the year | (14,420) | 581 |
Gains on investment properties realised | 9,228 | 39 |
Revaluation movement | 33,851 | 23,474 |
Acquisition costs written off | (1,641) | (30) |
Movement in lease incentives | (465) | (359) |
31,745 | 23,085 | |
Movement in fixed or guaranteed rent reviews | (10,387) | (10,841) |
Gains on revaluation of investment properties | 21,358 | 12,244 |
The investment properties can be analysed as follows:
| As at | As at | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Standing assets | 922,620 | 921,080 |
Developments under forward fund agreements | 1,500 | 8,860 |
Closing market value | 924,120 | 929,940 |
At 30 June 2026, the properties were valued at £924,120,000 (2025: £929,940,000) by CBRE Limited (‘CBRE’) in their capacity as external
valuers. The valuation was prepared on the basis of a fixed fee per property. The valuation was undertaken in accordance with the RICS
Valuation – Global Standards, issued by the Royal Institution of Chartered Surveyors (‘RICS’) on the basis of Market Value, supported by
reference to market evidence of transaction prices for similar properties. CBRE has recent experience in the location and category of the
investment properties being valued.
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Additional Information
9. Investment properties continued
Market Value represents the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing
seller in an arm’s length transaction, after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion. The
quarterly property valuations are reviewed by the Board at each Board meeting. The fair value of the properties after adjusting for the movement in the
fixed or guaranteed rent reviews, lease incentives and performance payments was £833,478,000 (2025: £840,432,000). The adjustment consisted of
£79,807,000 (2025: £79,138,000) relating to fixed or guaranteed rent reviews and £10,835,000 (2025: £10,370,000) of accrued income relating to the
recognition of rental income over rent free periods subsequently amortised over the life of the lease, which are both separately recorded in the accounts
as non-current or current assets within ‘trade and other receivables’ (see Note 10). An adjustment is also made, where applicable, to reflect the amount
by which the portfolio value is expected to increase if the performance payments recognised in ‘trade and other payables’ are paid and the
passing rent at the relevant property increased accordingly (see Note 18). The total purchases in the year to 30 June 2026, inclusive of the
performance payments recognised in the year and/or exclusive of those recognised in the prior year, were £47,904,000 (2025: £5,740,000).
All leasehold properties are carried at fair value rather than amortised over the term of the lease. The same valuation criteria are therefore
applied to leasehold as freehold properties. Other than one property where the leasehold expires in 2265, all leasehold properties have more
than 800 years remaining on the lease term.
The Group’s investment properties have been valued by CBRE on a quarterly basis. The valuation methodology used is the yield model, which
is a consistent basis for the valuation of investment properties within the healthcare industry. This model has regard to the current investment
market and evidence of investor interest in properties with income streams secured on healthcare businesses. On an asset-specific basis, the
valuer makes an assessment of: the quality of the asset; recent and current performance of the asset; and the financial position and
performance of the tenant operator. This asset specific information is used alongside a review of comparable transactions in the market and a
yield is applied to the asset which, along with the contracted rental level, is used to derive a market value.
The real estate investment and occupier markets are currently in a state of transition as they begin to align themselves with the sustainable
development goals of government and the new generation of real estate users. For the purposes of the valuation, CBRE have made enquiries
to ascertain any sustainability factors which are likely to impact on property values and have considered the guidance provided by the RICS
and VPGA 8 of the Red Book. Sustainability encompasses a wide range of physical, social, environmental, and economic factors that can
affect the value of an asset, even if not explicitly recognised. This includes key environmental risks, such as flooding, energy efficiency and
climate, as well as design, legislation and management considerations – and current and historical land use.
The external valuations reflect CBRE’s understanding of how market participants include sustainability factors in their decisions and the
consequential impact on market valuations, although there is still a gap in the exact knowledge of valuation of sustainability features of a green
premium or brown discount. Green building certifications, and reducing energy consumption and carbon emissions, are factors considered
likely to impact on real estate decisions and property values.
The Group is required to classify fair value measurements of its investment properties using a fair value hierarchy, in accordance with IFRS 13
‘Fair Value Measurement’. This hierarchy reflects the subjectivity of the inputs used, and has the following levels:
• Level 1: unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date;
• Level 2: observable inputs other than quoted prices included within level 1;
• Level 3: use of inputs that are not based on observable market data.
In determining what level of the fair value hierarchy to classify the Group’s investments within, the Directors have considered the content and
conclusion of the position paper on IFRS 13 prepared by the European Public Real Estate Association (‘EPRA’), the representative body of the
publicly listed real estate industry in Europe. This paper concludes that, even in the most transparent and liquid markets, it is likely that valuers
of investment property will use one or more significant unobservable inputs or make at least one significant adjustment to an observable
input, resulting in the vast majority of investment properties being classified as level 3.
Observable market data is considered to be that which is readily available, regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively involved in the relevant market. In arriving at the valuation the external
valuers make adjustments to observable data of similar properties and transactions to determine the fair value of a property and this involves
the use of judgement. Considering the Group’s specific valuation process, industry guidance, and the level of judgement required in the
valuation process, the Directors believe it appropriate to classify the Group’s investment properties within level 3 of the fair value hierarchy.
The key unobservable inputs made in determining the fair values are:
• Contracted rental level: the rent payable under the lease agreement at the date of valuation or, where applicable, on expiry of the rent free
period; and
• Yield: the yield is defined as the initial net income from a property at the date of valuation, expressed as a percentage of the gross purchase
price including the costs of purchase.
The contracted rental level and yield are not directly correlated although they may be influenced by similar factors. Rent is set at a long-term,
supportable level and is likely to be influenced by property-specific matters. The yield also reflects market sentiment and the strength of the
covenant provided by the tenant with a stronger covenant attracting a lower yield.
The Group’s investment properties, which are all care homes, are considered to be a single class of assets. The weighted average net initial yield (‘NIY’)
on these assets, as measured by the EPRA topped up NIY, is 6.2 per cent (2025: 6.2 per cent). The yield on the majority of the individual assets ranges
from 5.6 per cent to 8.9 per cent (2025: 5.6 per cent to 8.9 per cent). The average annual contracted rent per bed is £10,414 (2025: £9,696) with the
annual contracted rent per bed on individual assets ranging between £5,360 and £21,874 (2025: between £5,093 and £21,033). There have been no
changes to the valuation technique used through the period, nor have there been any transfers between levels.
The lease agreements on the properties held within the Group’s property portfolio generally allow for annual increases in the contracted
rental level in line with inflation, within a cap and a collar. An increase of 1.0 per cent in the contracted rental level will increase the fair value
of the portfolio, and consequently the Group’s reported income from unrealised gains on investments, by £9,241,000 (2025: £9,299,000);
an equal and opposite movement would have decreased net assets and decreased the Group’s income by the same amount.
Target Healthcare REIT plc
80
Notes to the Consolidated Financial Statements continued
9. Investment properties continued
A decrease of 0.25 per cent in the weighted average net initial yield applied to the portfolio will increase the fair value of the portfolio by £38,521,000
(2025: £38,690,000), and consequently increase the Group’s reported income from unrealised gains on investments. An increase of 0.25 per cent in the
weighted average net initial yield will decrease the fair value of the portfolio by £35,557,000 (2025: £35,718,000) and reduce the Group’s income.
| As at | As at | |
| 30 June 2026 | 30 June 2025 | |
| Non-current trade and other receivables | £’000 | £’000 |
Fixed rent reviews | 79,807 | 79,138 |
Rental deposits held in escrow for tenants | 12,736 | 12,695 |
Lease incentives | 10,440 | 10,028 |
Total | 102,983 | 101,861 |
| As at | As at | |
| 30 June 2026 | 30 June 2025 | |
| Current trade and other receivables | £’000 | £’000 |
Lease incentives | 395 | 342 |
VAT recoverable | 461 | 47 |
Accrued income – rent receivable | 79 | 1,089 |
Accrued development interest under forward fund agreements | – | 809 |
Other debtors and prepayments | 881 | 1,395 |
Total | 1,816 | 3,682 |
| As at | As at | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Cash at bank and in hand | 17,650 | 11,302 |
Short-term deposits | 33,225 | 28,337 |
Total | 50,875 | 39,639 |
| As at | As at | |
| 30 June 2026 | 30 June 2025 | |
| Non-current loans | £’000 | £’000 |
Principal amount outstanding | 200,000 | 150,000 |
Set-up costs | (3,624) | (2,413) |
Amortisation of set-up costs | 1,361 | 852 |
Total | 197,737 | 148,439 |
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Additional Information
13. Loans continued
| As at | As at | |
| 30 June 2026 | 30 June 2025 | |
| Current loans | £’000 | £’000 |
Principal amount outstanding | – | 92,000 |
Set-up costs | – | (2,107) |
Amortisation of set-up costs | – | 1,959 |
Total | – | 91,852 |
Notional Value | Starting Date | Ending Date | Interest paid | Interest received | Counterparty |
30,000,000 | 5 November 2020 | 5 November 2025* | 0.30% | Daily compounded SONIA (floor at -0.08%) | RBS |
50,000,000 | 1 November 2022 | 5 November 2025 | nil | Daily compounded SONIA above 3.0% cap | HSBC |
20,000,000 | 24 September 2025 | 23 September 2030 | 3.76% | Daily compounded SONIA | RBS |
30,000,000 | 24 September 2025 | 23 September 2030 | 3.82% | Daily compounded SONIA | HSBC |
Target Healthcare REIT plc
82
Notes to the Consolidated Financial Statements continued
13. Loans continued
| Cash and cash | Cash and cash | |||||
| equivalents | Borrowing | Net debt | equivalents | Borrowing | Net debt | |
| 2026 | 2026 | 2026 | 2025 | 2025 | 2025 | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
Opening balance | 39,639 | (240,291) | (200,652) | 38,884 | (240,672) | (201,788) |
Cash flows | 11,236 | 43,210 | 54,446 | 755 | 1,000 | 1,755 |
Non-cash flows | – | (656) | (656) | – | (619) | (619) |
Closing balance as at 30 June | 50,875 | (197,737) | (146,862) | 39,639 | (240,291) | (200,652) |
| As at | As at | |
| 30 June 2026 | 30 June 2025 | |
| Non-current trade and other payables | £’000 | £’000 |
Rental deposits | 12,736 | 12,695 |
Total | 12,736 | 12,695 |
| As at | As at | |
| 30 June 2026 | 30 June 2025 | |
| Current trade and other payables | £’000 | £’000 |
Rental income received in advance | 12,011 | 10,463 |
Property acquisition and development costs accrued | 1,969 | 3,218 |
Interest payable | 1,767 | 2,225 |
Investment Manager’s fees payable | 2,079 | 1,979 |
Other payables | 3,277 | 2,855 |
Total | 21,103 | 20,740 |
| Number of | ||
| Allotted, called-up and fully paid ordinary shares of £0.01 each | shares | £’000 |
Balance as at 30 June 2025 and 30 June 2026 | 620,237,346 | 6,202 |
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Additional Information
15. Share capital continued
Target Healthcare REIT plc
84
Notes to the Consolidated Financial Statements continued
16. Financial instruments continued
| More than three | ||||||
| Three months | months but less | More than | ||||
| or less | than one year | 1-2 years | 2-5 years | five years | Total | |
| Financial assets as at 30 June 2026 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Cash and cash equivalents | 50,875 | – | – | – | – | 50,875 |
Rental deposits held in escrow for tenants | – | – | – | – | 12,736 | 12,736 |
Other debtors | 1,061 | – | – | – | – | 1,061 |
Total | 51,936 | – | – | – | 12,736 | 64,672 |
| More than three | ||||||
| Three months | months but less | More than | ||||
| or less | than one year | 1-2 years | 2-5 years | five years | Total | |
| Financial assets as at 30 June 2025 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Cash and cash equivalents | 39,639 | – | – | – | – | 39,639 |
Rental deposits held in escrow for tenants | – | – | – | – | 12,695 | 12,695 |
Other debtors | 2,483 | – | – | – | – | 2,483 |
Total | 42,122 | – | – | – | 12,695 | 54,817 |
| More than three | ||||||
| Three months | months but less | More than | ||||
| or less | than one year | 1-2 years | 2-5 years | five years | Total | |
| Financial liabilities as at 30 June 2026 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Loans and interest rate derivatives | 2,004 | 5,946 | 7,971 | 65,066 | 162,420 | 243,407 |
Rental deposits | – | – | – | – | 12,736 | 12,736 |
Other payables | 9,092 | – | – | – | – | 9,092 |
Total | 11,096 | 5,946 | 7,971 | 65,066 | 175,156 | 265,235 |
| More than three | ||||||
| Three months | months but less | More than | ||||
| or less | than one year | 1-2 years | 2-5 years | five years | Total | |
| Financial liabilities as at 30 June 2025 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Loans and interest rate derivatives | 2,432 | 96,052 | 4,775 | 14,340 | 167,196 | 284,795 |
Rental deposits | – | – | – | – | 12,695 | 12,695 |
Other payables | 10,277 | – | – | – | – | 10,277 |
Total | 12,709 | 96,052 | 4,775 | 14,340 | 179,891 | 307,767 |
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Additional Information
16. Financial instruments continued
As at 30 June 2026 | As at 30 June 2025 | |||
| Fixed rate | Variable rate | Fixed rate | Variable rate | |
| £’000 | £’000 | £’000 | £’000 | |
Cash and cash equivalents | – | 50,875 | – | 39,639 |
Interest rate derivatives | 347 | – | 572 | – |
Loans | (200,000) | – | (230,000) | (12,000) |
(199,653) | 50,875 | (229,428) | 27,639 |
Target Healthcare REIT plc
86
Notes to the Consolidated Financial Statements continued
| As at | As at | |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Less than one year | 61,197 | 61,162 |
Between one and two years | 62,514 | 62,547 |
Between two and three years | 63,470 | 63,529 |
Between three and four years | 64,443 | 64,528 |
Between four and five years | 65,431 | 65,545 |
Over five years | 1,652,001 | 1,638,302 |
Total | 1,969,056 | 1,955,613 |
| 30 June 2026 | 30 June 2025 | |
| £’000 | £’000 | |
Amounts due to complete forward fund developments | 13,025 | 912 |
Other capital expenditure commitments | 2,248 | 1,113 |
Total | 15,273 | 2,025 |
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Additional Information
21. Operating segments
The Board has considered the requirements of IFRS 8 ‘Operating Segments’. The Board is of the view that the Group is engaged in a single
segment of business, being property investment, and in one geographical area, the United Kingdom, and that therefore the Group has only a
single operating segment. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the
Group. The key measure of performance used by the Board to assess the Group’s performance is the EPRA NTA. The reconciliation between
the NAV, as calculated under IFRS, and the EPRA NTA is detailed in Note 8.
The view that the Group is engaged in a single segment of business is based on the following considerations:
• One of the key financial indicators received and reviewed by the Board is the total return from the property portfolio taken as a whole;
• There is no active allocation of resources to particular types or groups of properties in order to try to match the asset allocation of the
benchmark; and
• The management of the portfolio is ultimately delegated to a single property manager, Target.
22. Alternative Investment Fund Managers (‘AIFM’) Directive
With effect from 22 July 2014, the Company’s Investment Manager was authorised as an AIFM by the FCA under the AIFMD regulations.
In accordance with the AIFM Directive, information in relation to the Group’s leverage and the remuneration of the Company’s AIFM,
Target Fund Managers Limited, is required to be made available to investors. The Manager has provided disclosures on its website,
www.targetfundmanagers.com, incorporating the requirements of the AIFMD regulations regarding remuneration.
The Group’s maximum and average actual leverage levels are shown below:
30 June 2026 | 30 June 2025 | |||
| Gross | Commitment | Gross | Commitment | |
| Leverage exposure | method | method | method | method |
Maximum limit | 3.00 | 3.00 | 3.00 | 3.00 |
Actual | 1.55 | 1.62 | 1.76 | 1.81 |
For the purposes of the AIFM Directive, leverage is any method which increases the Group’s exposure, including the borrowing of cash and the
use of derivatives. It is expressed as a percentage of the Group’s exposure to its net asset value and is calculated on both a gross and
commitment method.
Under the gross method, exposure represents the sum of the Group’s positions after deduction of cash balances, without taking account of
any hedging or netting arrangements. Under the commitment method, exposure is calculated without the deduction of cash balances and
after certain hedging and netting positions are offset against each other. Both methods include the Group’s interest rate derivatives measured
at notional value.
The leverage limits are set by the AIFM and approved by the Board and are in line with the maximum leverage levels permitted in the Company’s
Articles of Association. The AIFM is also required to comply with the gearing parameters set by the Board in relation to borrowings.
Detailed regulatory disclosures to investors in accordance with the AIFM Directive are contained in the Investor Disclosure Document which is
made available on the Group’s website at www.targethealthcarereit.co.uk.
Target Healthcare REIT plc
88
Company Statement of Financial Position
As at 30 June 2026
Notes
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Non-current assets
Investment in subsidiary undertakings 3 772,708 801,714
Investment properties 4 8,793 8,608
Trade and other receivables 5 473 387
781,974 810,709
Current assets
Trade and other receivables 5 15,575 1,125
Cash and cash equivalents 6 26,764 311
42,339 1,436
Total assets 824,313 812,145
Non-current liabilities
Trade and other payables 7 (136) (135)
Current liabilities
Trade and other payables 7 (41,468) (71,622)
Total liabilities (41,604) (71,757)
Net assets 782,709 740,388
Share capital and reserves
Share capital 8 6,202 6,202
Share premium 256,633 256,633
Merger reserve 47,751 47,751
Distributable reserve 203,603 222,080
Capital reserve 156,552 153,013
Revenue reserve 111,968 54,709
Equity shareholders’ funds 782,709 740,388
Net asset value per ordinary share (pence) 9 126.2 119.4
Company number: 11990238
The Company made a profit for the year ended 30 June 2026 of £79,50 4,0 00 (2025: £57,543,000).
The financial statements on pages 88 to 97 were approved by the Board of Directors and authorised for issue on 21 September 2026
and were signed on its behalf by:
Alison Fyfe
Chair
The accompanying notes are an integral part of these financial statements.
Company Financial Statements
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Additional Information
Company Statement of Changes in Equity
For the year ended 30 June 2026
Note
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Distributable
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
At 30 June 2025 6,202 256,633 47,751 222,080 153,013 54,709 740,388
Profit for the year – – – – 3,539 75,965 79,504
Transactions with owners recognised in equity:
Dividends paid 2 – – – (18,477) – (18,706) (37,183)
At 30 June 2026 6,202 256,633 47,751 203,603 156,552 111,968 782,709
For the year ended 30 June 2025
Note
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Distributable
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
At 30 June 2024 6,202 256,633 47,751 231,896 150,179 26,412 719,073
Profit for the year – – – – 2,834 54,709 57,543
Transactions with owners recognised in equity:
Dividends paid 2 – – – (9,816) – (26,412) (36,228)
At 30 June 2025 6,202 256,633 47,751 222,080 153,013 54,709 740,388
The accompanying notes are an integral part of these financial statements.
Target Healthcare REIT plc
90
Notes to the Company Financial Statements
1. Accounting policies
(a) Basis of preparation
A summary of the material accounting policy information all of which has been applied consistently throughout the year, is set out below.
Basis of accounting
The Company Financial Statements have been prepared in accordance with FRS 101: Reduced Disclosure Framework and applicable legal and
regulatory requirements of the Companies Act 2006.
Where presentational guidance set out in the Statement of Recommended Practice (‘SORP’) for investment trust companies issued by the
Association of Investment Companies (‘AIC’) in July 2022 is consistent with the requirements of FRS 101, the Directors have sought to prepare
the financial statements on a basis compliant with the recommendations of the SORP.
The notes and financial statements are presented in pounds sterling (being the functional currency and presentation currency for the
Company) and are rounded to the nearest thousand except where otherwise indicated.
The results of the Company have been included in the Consolidated Financial Statements as presented on pages 66 to 87. The accounting
policies adopted are consistent with those adopted by the Group as stated in Note 1 to the Consolidated Financial Statements. The only
additional policies applied are in relation to investments in subsidiary undertakings and dividends received and these are set out below.
The Company has taken advantage of the following exemptions permitted under FRS 101:
• an exemption from preparing the Company cash flow statement and related notes;
• an exemption from listing any new or revised standards that have not been adopted or providing information about their likely impact; and
• an exemption from disclosing transactions between the Company and its wholly-owned subsidiaries.
Going concern
In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council.
After making enquiries, and bearing in mind the nature of the Group’s business and assets, the Directors consider that the Group has adequate
resources to continue in operational existence to 30 September 2027 which is at least twelve months from the date of issuance of this report.
For this reason, they continue to adopt the going concern basis in preparing the financial statements for the year ended 30 June 2026.
Further explanation of the assessment undertaken is provided in the Consolidated Financial Statements on page 71.
Investments in subsidiary undertakings
Investments in subsidiary undertakings are stated at fair value with changes in fair value recognised in profit or loss. Investments in subsidiaries
are initially recognised at fair value at the date at which control is acquired, with subsequent gains or losses arising from changes in fair value
being recognised in net profit or loss for the period as a capital item and transferred to the Capital Reserve. Investments in subsidiaries are
derecognised at the date on which the Company transfers control and substantially all the risks and rewards of ownership to another party.
Dividends received
Dividends received are recognised on the date on which entitlement to receive payment is established. Where dividends are received by way
of an in-specie transfer of assets from a subsidiary undertaking, the dividend is recognised at the fair value of the assets received through profit
or loss as a capital item and transferred to the Capital Reserve.
Company Profit for the financial year
Under Section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account.
Theprofit after tax for the year was £79,504,000 (2025: £57,543,000).
The Company does not have any employees (2025: nil). Details of the Directors’ fees paid during the year are disclosed in the Group’s
Remuneration Report and in Note 3 to the Consolidated Financial Statements. The Company has paid the Directors’ fees which equated to
£249,000 during the year ended 30 June 2026 (2025: £227,000).
Audit fees in relation to the parent company were £173,000 (2025: £170,000), including irrecoverable VAT. This included £3,000 payable by
the Company on behalf of certain subsidiaries (2025: £3,000). The fee for assurance related services, being the review of the Company’s
Interim Report, was £22,000 (2025: £17,000). There were no other non-audit fees paid to EY by the Company during the year (2025: £nil).
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Additional Information
2. Dividends
Amounts paid as distributions to equity holders.
Dividend rate
(pence per
share)
Year ended
30 June 2026
£’000
Dividend rate
(pence per
share)
Year ended
30 June 2025
£’000
Fourth interim dividend for the prior year 1.471 9,124 1.428 8,857
First interim dividend 1.508 9,353 1.471 9,123
Second interim dividend 1.508 9,353 1.471 9,124
Third interim dividend 1.508 9,353 1.471 9,124
Total 5.995 37,183 5.841 36,228
It is the policy of the Directors to declare and pay dividends as interim dividends. The Directors do not therefore recommend a final dividend.
The fourth interim dividend in respect of the year ended 30 June 2026, of 1.508 pence per share, was paid on 28 August 2026 to shareholders
on the register on 14 August 2026 and amounted to £9,353,000. It is the intention of the Directors that the Company will continue to pay
dividends quarterly.
3. Investments in subsidiary undertakings
As at 30 June 2026, the Company’s directly held subsidiary undertakings were:
Name
Country of
incorporation
Class of
Capital
% of class
held
% of equity
held
Book Cost
£’000
Fair Value
£’000
Target Healthcare REIT Limited Jersey Ordinary 100 100 432,841 428,725
THR Number 12 plc England & Wales Ordinary 100 100 103,336 159,516
THR Number 39 Limited England & Wales Ordinary 100 100 14,635 14,995
THR Number 40 Limited England & Wales Ordinary 100 100 13,696 14,170
THR Number 41 Limited England & Wales Ordinary 100 100 14,086 13,461
THR Number 42 Limited England & Wales Ordinary 100 100 14,903 15,583
THR Number 43 plc England & Wales Ordinary 100 100 94,861 117,552
THR Number 44 Limited England & Wales Ordinary 100 100 – –
THR Number 46 Limited England & Wales Ordinary 100 100 8,591 8,706
THR Number 54 Limited England & Wales Ordinary 100 100 – –
THR Number 55 Limited England & Wales Ordinary 100 100 – –
Total 696,949 772,708
The registered office of the companies incorporated in England & Wales is: Level 4 Dashwood House, 69 Old Broad Street, London EC2M 1QS.
The registered office of Target Healthcare REIT Limited is: 3rd Floor, 44 Esplanade, St Helier, Jersey JE4 9WG.
The movement in the fair value of the Company’s investments in subsidiary undertakings during the year was:
Year ended
30 June 2026
£’000
Year ended
30 June 2025
£’000
Opening fair value 801,714 791,304
Additions – 7,816
Disposals (32,275) –
Movement in fair value 3,269 2,594
Closing fair value 772,708 801,714
The Company’s investments in subsidiary undertakings are classified within level 3 of the fair value hierarchy. See Note 9 to the Consolidated
Financial Statements for the definitions of the levels of the fair value hierarchy.
The fair value of the Company’s subsidiaries is primarily dependent on the fair value of the properties and loans that they hold. See Notes 9,
13 and 16 to the Consolidated Financial Statements for an explanation of the Group’s valuation processes, the significant inputs, and the
sensitivities of the fair value of these assets and liabilities to these significant inputs.
Target Healthcare REIT plc
92
Notes to the Company Financial Statements continued
3. Investments in subsidiary undertakings continued
As at 30 June 2026, the Company’s indirectly held subsidiary undertakings were:
Name Country of incorporation Class of Capital % of class held % of equity held
THR Number One plc England & Wales Ordinary 100 100
THR Number Two Limited England & Wales Ordinary 100 100
THR Number 3 Limited England & Wales Ordinary 100 100
THR Number 4 Limited England & Wales Ordinary 100 100
THR Number 5 Limited England & Wales Ordinary 100 100
THR Number 6 Limited England & Wales Ordinary 100 100
THR Number 7 Limited Gibraltar Ordinary 100 100
THR Number 8 Limited Gibraltar Ordinary 100 100
THR Number 9 Limited England & Wales Ordinary 100 100
THR Number 10 Limited England & Wales Ordinary 100 100
THR Number 11 Limited Scotland Ordinary 100 100
THR Number 13 Limited England & Wales Ordinary 100 100
THR Number 14 Limited England & Wales Ordinary 100 100
THR Number 15 plc England & Wales Ordinary 100 100
THR Number 16 Limited England & Wales Ordinary 100 100
THR Number 17 (Holdings) Limited England & Wales Ordinary 100 100
THR Number 17 Limited England & Wales Ordinary 100 100
THR Number 18 Limited England & Wales Ordinary 100 100
THR Number 19 Limited England & Wales Ordinary 100 100
THR Number 20 Limited England & Wales Ordinary 100 100
THR Number 21 Limited England & Wales Ordinary 100 100
THR Number 22 Limited England & Wales Ordinary 100 100
THR Number 23 Limited England & Wales Ordinary 100 100
THR Number 24 Limited England & Wales Ordinary 100 100
THR Number 25 S.à r.l. Luxembourg Ordinary 100 100
THR Number 26 S.à r.l. Luxembourg Ordinary 100 100
THR Number 27 Limited England & Wales Ordinary 100 100
THR Number 28 Limited England & Wales Ordinary 100 100
THR Number 29 Limited England & Wales Ordinary 100 100
THR Number 30 Limited England & Wales Ordinary 100 100
THR Number 31 Limited England & Wales Ordinary 100 100
THR Number 32 Limited England & Wales Ordinary 100 100
THR Number 33 Limited England & Wales Ordinary 100 100
THR Number 34 Limited England & Wales Ordinary 100 100
THR Number 35 Limited England & Wales Ordinary 100 100
THR Number 36 Limited England & Wales Ordinary 100 100
THR Number 37 Limited England & Wales Ordinary 100 100
THR Number 38 Limited England & Wales Ordinary 100 100
THR Number 45 Limited England & Wales Ordinary 100 100
THR Number 47 Limited England & Wales Ordinary 100 100
THR Number 48 Limited England & Wales Ordinary 100 100
THR Number 49 Limited Scotland Ordinary 100 100
THR Number 50 Limited Scotland Ordinary 100 100
THR Number 51 Limited Scotland Ordinary 100 100
THR Number 52 Limited Scotland Ordinary 100 100
THR Number 53 Limited Scotland Ordinary 100 100
The registered office of the companies incorporated in England & Wales is: Level 4 Dashwood House, 69 Old Broad Street, London EC2M 1QS.
The registered office of the companies incorporated in Luxembourg is: 25A Boulevard Royal, L – 2449, Luxembourg.
The registered office of the companies incorporated in Gibraltar is: Suite 23, Portland House, Glacis Road, GX11 1AA, Gibraltar.
The registered office of the companies incorporated in Scotland is: Glendevon House, Castle Business Park, Stirling FK9 4TZ.
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Additional Information
4. Investment properties
Freehold property
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Opening market value 8,860 7,710
Opening fixed or guaranteed rent reviews (252) (170)
Opening performance payment – 910
Opening carrying value 8,608 8,450
Purchases – 910
Revaluation movement – gain 270 240
Movement in market value 270 1,150
Movement in fixed or guaranteed rent reviews (85) (82)
Movement in performance payment – (910)
Movement in carrying value 185 158
Closing market value 9,130 8,860
Closing fixed or guaranteed rent reviews (337) (252)
Closing carrying value 8,793 8,608
At 30 June 2026, the property was valued at £9,130,000 (2025: £8,860,000) by CBRE Limited (‘CBRE’) in their capacity as external valuers.
The valuation was undertaken in accordance with the RICS Valuation Global Standards, issued by the Royal Institution of Chartered Surveyors
(‘RICS’) on the basis of Market Value, supported by reference to market evidence of transaction prices for similar properties. CBRE has recent
experience in the location and category of the investment properties being valued.
Market Value represents the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer
and a willing seller in an arm’s length transaction, after proper marketing where the parties had each acted knowledgeably, prudently and
without compulsion. The quarterly property valuation is reviewed by the Board at each Board meeting. The fair value of the property after
adjusting for the movement in the fixed or guaranteed rent reviews was £8,793,000 (2025: £8,608,000). The adjustment consisted of
£337,000 (2025: £252,000) relating to fixed or guaranteed rent reviews, which is separately recorded in the accounts as a non-current asset
within ‘trade and other receivables’ (see Note 5).
Considering the Company’s specific valuation process, industry guidance, and the level of judgement required in the valuation process, the
Directors believe it appropriate to classify the Company’s investment property within level 3 of the fair value hierarchy. See Note 9 to the
Consolidated Financial Statements for further details on the valuation process, methodology and classification.
The Company’s investment property portfolio, which consisted of a single care home, is considered to be a single class of assets. The weighted
average net initial yield on the property, as measured by the EPRA topped up NIY, is 5.8 per cent (2025: 5.8 per cent). There have been no
changes to the valuation technique used through the period, nor have there been any transfers between levels. The annual contracted rent
per bed is £8,484 (2025: £8,235).
The lease agreement on the property held by the Company allows for an annual increase in the contracted rental level in line with inflation,
within a cap and a collar. An increase of 1.0 per cent in the contracted rental level will increase the fair value of the property, and consequently
the Company’s reported income from unrealised gains on investments, by £91,000 (2025: £89,000); an equal and opposite movement would
have decreased net assets and reduced the Company’s income by the same amount.
A decrease of 0.25 per cent in the yield applied to the property will increase the fair value of the property by £415,000 (2025: £402,000), and
consequently increase the Company’s reported income from unrealised gains on investments. An increase of 0.25 per cent in the net initial
yield will decrease the fair value of the property by £380,000 (2025: £369,000) and reduce the Company’s income.
Target Healthcare REIT plc
94
Notes to the Company Financial Statements continued
5. Trade and other receivables
Non-current trade and other receivables
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Fixed rent reviews 337 252
Rental deposits held in escrow for tenants 136 135
Total 473 387
Current trade and other receivables
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Balances due from group undertakings 15,220 1,003
Other debtors and prepayments 355 122
Total 15,575 1,125
At the year-end, trade and other receivables include a fixed rent review debtor of £337,000 (2025: £252,000) which represents the effect of
recognising guaranteed rental uplifts on a straight line basis over the lease term.
The balances due from group undertakings are unsecured and interest bearing. At 30 June 2026, interest was receivable at a rate of 5.2 per
cent (2025: 5.7 per cent) per annum or such other interest rate that may be agreed from time to time between the Company and the relevant
counterparty. The balances are repayable on demand.
6. Cash and cash equivalents
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Cash at bank and in hand 764 311
Short-term deposits 26,000 –
Total 26,764 311
All cash balances at the year-end were held in cash, current accounts or deposit accounts.
7. Trade and other payables
Non-current trade and other payables
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Rental deposits 136 135
Total 136 135
Current trade and other payables
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Balances due to group undertakings 39,170 69,494
Income tax payable 1,087 1,046
Investment Manager’s fees payable 228 171
Rental income received in advance 129 126
Other payables 854 785
Total 41,468 71,622
The balances due to group undertakings are unsecured and interest bearing. At 30 June 2026, interest was payable at a rate of 5.2 per cent
(2025: 5.7 per cent) per annum or such other interest rate that may be agreed from time to time between the Company and the relevant
counterparty. The balances are repayable on demand.
The Group’s payment policy is to ensure settlement of supplier invoices in accordance with stated terms.
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Additional Information
8. Share capital
Allotted, called-up and fully paid ordinary shares of £0.01 each
Number of
shares £’000
Balance as at 30 June 2025 and 30 June 2026 620,237,346 6,202
Under the Company’s Articles of Association, the Company may issue an unlimited number of ordinary shares. Ordinary shareholders are
entitled to all dividends declared by the Company and to all of the Company’s assets after repayment of its borrowings and ordinary creditors.
Ordinary shareholders have the right to vote at meetings of the Company. All ordinary shares carry equal voting rights.
During the year to 30 June 2026, the Company did not issue any ordinary shares (2025: nil). The Company did not repurchase any ordinary
shares into treasury (2025: nil) or resell any ordinary shares from treasury (2025: nil). At 30 June 2026, the Company did not hold any shares
in treasury (2025: nil).
Capital Management
The Company’s capital is represented by the share capital, share premium, merger reserve, distributable reserve, capital reserve and revenue
reserve and is managed in line with the policies set out for the Group on pages 82 and 83.
9. Net Asset Value
The Company’s net asset value per ordinary share of 126.2 pence (2025: 119.4 pence) is based on equity shareholders’ funds of £782,709,000
(2025: £740,388,000) and on 620,237,346 (2025: 620,237,346) ordinary shares, being the number of shares in issue at the year end.
10. Financial instruments
Consistent with its objective, the Company holds an investment in a UK care home property. In addition, the Company’s financial instruments
comprise investments in subsidiaries, cash and receivables and payables that arise directly from its operations. The Company has no direct
exposure to derivative instruments.
The Company is exposed to various types of risk that are associated with financial instruments. The most important types are credit risk,
liquidity risk, interest rate risk and market price risk. There is no foreign currency risk as all assets and liabilities of the Company are maintained
in pounds sterling.
The Board reviews and agrees policies for managing the Group’s overall risk exposure. These policies are summarised in Note 16 to the
Consolidated Financial Statements and have remained unchanged for the year under review. The following disclosures include, where
appropriate, consideration of the Company’s investment property which, whilst not constituting a financial instrument as defined by FRS 101,
is considered by the Board to be integral to the Company’s overall risk exposure.
Credit risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company.
At the reporting date, the Company’s financial assets exposed to credit risk amounted to £41,987,000 (2025: £1,323,000) consisting of cash
balances of £26,764,000 (2025: £311,000), balances due from group undertakings of £15,220,000 (2025: £1,003,000) and other debtors of
£3,000 (2025: £9,000).
There have been no historical losses from intercompany loans and any resulting provision from the estimated credit loss allowance is considered
to be immaterial. The Company has no financial assets which were either past due or considered impaired at 30 June 2026 (2025: nil).
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in realising assets or otherwise raising funds to meet financial commitments.
The Company’s investments comprise UK care homes and holdings in subsidiary undertakings which, in turn, invest in UK care homes. Property
and property-related assets in which the Company invests are not traded in an organised public market and may be illiquid. As a result, the
Company may not be able to liquidate quickly its investments in these properties or subsidiary undertakings at an amount close to their fair
value in order to meet its liquidity requirements.
At the reporting date, the maturity of the financial assets was:
Financial assets as at 30 June 2026
Three months
or less
£’000
More than three
months but less
than one year
£’000
1-2 years
£’000
2-5 years
£’000
More than
five years
£’000
Total
£’000
Cash and cash equivalents 26,764 – – – – 26,764
Rental deposits held in escrow for tenants – – – – 136 136
Balances due from group undertakings 15,220 – – – – 15,220
Other debtors 3 – – – – 3
Total 41,987 – – – 136 42,123
Target Healthcare REIT plc
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Notes to the Company Financial Statements continued
10. Financial instruments continued
Financial assets as at 30 June 2025
Three months
or less
£’000
More than three
months but less
than one year
£’000
1-2 years
£’000
2-5 years
£’000
More than
five years
£’000
Total
£’000
Cash and cash equivalents 311 – – – – 311
Rental deposits held in escrow for tenants – – – – 135 135
Balances due from Group undertakings 1,003 – – – – 1,003
Other debtors 9 – – – – 9
Total 1,323 – – – 135 1,458
At the reporting date, the contractual maturity of the financial liabilities was:
Financial liabilities as at 30 June 2026
Three months
or less
£’000
More than three
months but less
than one year
£’000
1-2 years
£’000
2-5 years
£’000
More than
five years
£’000
Total
£’000
Rental deposits – – – – 136 136
Balances due to group undertakings 39,170 – – – – 39,170
Other payables 2,169 – – – – 2,169
Total 41,339 – – – 136 41,475
Financial liabilities as at 30 June 2025
Three months
or less
£’000
More than three
months but less
than one year
£’000
1-2 years
£’000
2-5 years
£’000
More than
five years
£’000
Total
£’000
Rental deposits – – – – 135 135
Balances due to group undertakings 69,494 – – – – 69,494
Other payables 2,002 – – – – 2,002
Total 71,496 – – – 135 71,631
Interest rate risk
Some of the Company’s financial instruments are interest-bearing. Interest-rate risk is the risk that future cash flows will change adversely as a
result of changes in market interest rates. The Company’s policy is to hold cash in variable rate or short-term fixed rate bank accounts. Interest
is received on cash at a weighted average variable rate which was 2.8 per cent at 30 June 2026 (2025: nil).
The following table sets out the carrying amount of the Company’s financial instruments that are exposed to cash flow interest rate risk:
As at 30 June 2026 As at 30 June 2025 (restated)
Fixed rate
£’000
Variable rate
£’000
Fixed rate
£’000
Variable rate
£’000
Cash and cash equivalents – 26,764 – 311
Balances due from group undertakings – 15,220 – 1,003
Balances due to group undertakings – (39,170) – (69,494)
Total – 2,814 – (68,180)
Interest on balances due from and to group undertakings is charged at a rate agreed between the Company and the relevant counterparties.
Throughout both the current and prior year, the applicable rate has been reviewed and agreed quarterly, with the agreed rate being based on
three-month SONIA plus an appropriate margin. The balances due from and to group undertakings have therefore been restated as being
exposed to a variable rate of cash flow interest rate risk, having previously been categorised as fixed rate in the prior year.
Based on the Company’s exposure to cash flow interest rate risk, an increase of 0.25 per cent in interest rates would have increased the
reported profit for the year and the net assets at the year end by £7,000 (2025: decrease of £170,000 (restated)), a decrease in interest rates
would have an equal and opposite effect. These movements are calculated based on balances as at 30 June 2026 (30 June 2025) and may
not be reflective of actual future conditions.
Market price risk
The management of market price risk is part of the investment management process and is typical of a property investment company.
The portfolio is managed with an awareness of the effects of adverse valuation movements through detailed and continuing analysis, with
an objective of maximising overall returns to shareholders. Investments in property and property-related assets are inherently difficult to value
due to the individual nature of each property. As a result, valuations are subject to substantial uncertainty. There is no assurance that the
estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date.
Such risk is minimised through the appointment of external property valuers. The Company’s subsidiaries are held at fair value which, in turn,
reflects the external valuations of the underlying properties they hold. The Company’s overall market price risk is therefore the same as that for
the Group as set out in Note 16 to the Consolidated Financial Statements.
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Additional Information
11. Lease length
The Company leases out its investment properties under operating leases.
The minimum lease payments based on the unexpired lessor lease length at the year-end were as follows (based on annual rentals):
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Less than one year 560 544
Between one and two years 566 549
Between two and three years 571 555
Between three and four years 577 560
Between four and five years 583 566
Over five years 17,349 17,577
Total 20,206 20,351
The largest single tenant at the year-end accounted for 100 per cent (2025: 100 per cent) of the current annual rental income. There were no
unoccupied properties at the year-end.
The Company has entered into a commercial property lease on its investment property. This property, held under an operating lease, is
measured under the fair value model as the property is held to earn rentals. The lease is a non-cancellable lease with a lease term remaining
of 31 years (2025: 32 years).
12. Related party transactions
The Board of Directors is considered to be a related party. No Director has an interest in any transactions which are, or were, unusual in their
nature or significant to the nature of the Company.
The Directors of the Company received fees for their services. Total fees paid by the Company in relation to the year were £249,000
(2025: £227,000) of which £nil (2025: £nil) remained payable at the year-end.
The Investment Manager received management fees of £630,000 (inclusive of irrecoverable VAT) from the Company in relation to the year
ended 30 June 2026 (2025: £632,000). Of this amount £228,000 (2025: £171,000) remained payable at the year-end.
The Investment Manager received a further £201,000 (inclusive of irrecoverable VAT) during the year ended 30 June 2026 (2025: £193,000) in
relation to its appointment as Company Secretary and Administrator. Of this amount £50,000 (2025: £48,000) remained payable at the year-end.
Target Healthcare REIT plc
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Additional
Information
98–114
Notice of Annual General Meeting 100
Shareholder Information 104
Alternative Performance Measures 107
EPRA Performance Measures 108
Data Centre 110
Glossary 111
Corporate Information 114
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Additional Information
Target Healthcare REIT plc
100
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the eighth Annual General Meeting (‘AGM’) of Target Healthcare REIT plc (the ‘Company’) will be held on
Wednesday 2 December 2026 at 4.00 p.m. at the offices of Dickson Minto LLP, Level 4, Dashwood House, 69 Old Broad Street, London EC2M
1QS for the purposes of considering and, if thought fit, passing the following resolutions, of which resolutions 1 to 11 inclusive will be proposed
as ordinary resolutions and resolutions 12 to 15 inclusive will be proposed as special resolutions:
Ordinary resolutions
1. That the Annual Report and Accounts for the year ended 30 June 2026 be received.
2. That the Directors’ Annual Report on Remuneration for the year ended 30 June 2026 be approved.
3. That the Company’s dividend policy be approved.
4. That Ernst & Young LLP be re-appointed as the Company’s Auditor until the conclusion of the next Annual General Meeting.
5. That the Directors be authorised to determine the Auditor’s remuneration.
6. To re-elect Michael Brodtman as a Director.
7. To re-elect Richard Cotton as a Director.
8. To re-elect Alison Fyfe as a Director.
9. To re-elect Vince Niblett as a Director.
10. To re-elect Amanda Thompsell as a Director.
11. That, in addition to any existing authority, in accordance with section 551 of the Companies Act 2006, the Directors be generally and unconditionally
authorised to exercise all powers of the Company to allot ordinary shares of £0.01 each (or of such other nominal value as the Directors may
resolve) in the capital of the Company and to grant rights to subscribe for or to convert any security into shares in the Company (‘Securities’)
up to an aggregate nominal amount of £620,237 (being equal to approximately 10% of the Company’s issued share capital (excluding treasury
shares) as at 18 September 2026 on such terms as the Directors may determine, provided that this authority shall, unless renewed, varied or revoked
by the Company, expire at the conclusion of the next Annual General Meeting of the Company or on the date which is 15 months from the passing
of this resolution, whichever is the earlier, save that the Company may, before such expiry, make offers or enter into agreements which would or
might require shares to be allotted or Securities to be granted and the Directors may allot shares or grant Securities in pursuance of such offer
or agreement as if the authority conferred by this resolution had not expired.
Special resolutions
12. That, in addition to any existing authority and subject to the passing of resolution 11, the Directors be and are hereby generally and
unconditionally empowered, pursuant to sections 570 and 573 of the Companies Act 2006 (the ‘Act’), to allot, or make offers or
agreements to allot, equity securities (as defined in section 560 of the Act) for cash pursuant to the authority under section 551 of the Act
either conferred by resolution 11 or by way of a sale of treasury shares as if section 561 of the Act did not apply to any such allotment or
sale, provided that this power:
(a) expires at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution or on expiry of 15
months from the passing of this resolution, whichever is the earlier, unless renewed, varied or revoked by the Company prior to or
on such date, and save that the Company may, before such expiry, make offers or agreements which would or might require equity
securities to be allotted or treasury shares to be sold after such expiry and the Directors may allot equity securities or sell treasury shares
in pursuance of any such offer or agreement as if the power conferred by this resolution had not expired; and
(b) shall be limited to the allotment of equity securities and sale of treasury shares for cash up to an aggregate nominal amount of £620,237
(being approximately equal to 10% of the nominal value of the issued share capital of the Company as at 18 September 2026).
This power applies in relation to the sale of treasury shares as if in the opening paragraph of this resolution the words ‘and subject to the
passing of resolution 11’ were omitted.
13. That, in addition to any existing authority, the Company be and hereby is generally and unconditionally authorised, pursuant to and in
accordance with section 701 of the Companies Act 2006, to make market purchases (within the meaning of section 693(4) of the Companies
Act 2006) of ordinary shares of £0.01 each (or of such other nominal value as the Directors of the Company shall resolve) on such terms and
in such manner as the Directors may from time to time determine, either for retention as treasury shares for future reissue, resale or transfer or
cancellation provided that:
(a) the maximum aggregate number of ordinary shares that may be purchased is 92,973,578 ordinary shares or, if less, 14.99% of the issued
ordinary share capital of the Company immediately prior to the passing of this resolution (excluding treasury shares);
(b) the minimum price (excluding expenses) which may be paid for each ordinary share is the nominal value at the time of purchase;
(c) the maximum price (excluding expenses) which may be paid for each ordinary share is the higher of:
(i) 105% of the average market value of an ordinary share in the Company as derived from the London Stock Exchange Daily Official List for
the five business days prior to the day the purchase is made; and
(ii) the higher of the last independent trade of an ordinary share in the Company and the highest current independent bid for such share
on the London Stock Exchange at the time the purchase is carried out; and
(d) unless previously varied, revoked or renewed, the authority hereby conferred shall expire at the conclusion of the Company’s next
Annual General Meeting or on 15 months from the passing of this resolution, whichever is the earlier, save that the Company may,
before the expiry of the authority granted by this resolution, enter into a contract to purchase ordinary shares which will or may be
executed wholly or partly after the expiry of such authority and may make a purchase of shares pursuant to any such contract.
14. That, the Company be and is hereby generally and unconditionally authorised to hold general meetings (other than Annual General Meetings)
on 14 clear days’ notice, such authority to expire at the conclusion of the next Annual General Meeting of the Company or 15 months from
the passing of this resolution, whichever is the earlier.
15. That, the Articles of Association produced to the meeting and signed by the chair of the meeting for the purposes of identification be
approved and adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the existing Articles of
Association with effect from the conclusion of the meeting.
By order of the Board
Target Fund Managers Limited, Company Secretary
Registered office:
Level 4, Dashwood House
69 Old Broad Street
London EC2M 1QS
21 September 2026
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Notes:
1. Only those shareholders registered in the Company’s register of members at 6.00 p.m. on 30 November 2026 or, if the meeting is
adjourned, 6.00 p.m. on the day two working days prior to the adjourned meeting, shall be entitled to attend and vote at the meeting.
Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote
at the meeting.
2. Information regarding the meeting, including the information required by section 311A of the Companies Act 2006 (the ‘Act’), can be found
at www.targethealthcarereit.co.uk.
3. As a member you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the meeting and you
should have received a proxy form with this notice of meeting. A proxy does not need to be a shareholder of the Company but must attend
the meeting to represent you. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to
different shares. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. You may not
use any electronic address provided either in this notice or any related documents (including the financial statements and proxy form) to
communicate with the Company for any purpose other than those expressly stated.
4. Shareholders can: (a) appoint a proxy and give proxy instructions by returning the enclosed proxy form by post (see Note 5); or (b) if a
CREST member, register their proxy appointment by utilising the CREST electronic proxy appointment service (see Note 6); or (c) via
the Proxymity platform (see Note 7). Appointment of a proxy does not preclude you from attending the meeting and voting in person.
If you have appointed a proxy and attend the meeting and vote in person, your proxy appointment will automatically be terminated.
5. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote. To appoint a proxy
using the proxy form, the form must be: (a) completed and signed; (b) sent or delivered to Computershare Investor Services PLC at
The Pavilions, Bridgwater Road, Bristol BS99 6ZY; and (c) received by Computershare Investor Services PLC no later than 4.00 p.m. on
30 November 2026 or, in the event of an adjournment of the meeting, 48 hours before the adjourned meeting. In the case of a
shareholder which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the
company or an attorney for the company. Any power of attorney or any other authority under which the proxy form is signed (or a duly
certified copy of such power or authority) must be included with the proxy form. If you have not received a proxy form and believe that you
should have one, or if you require additional proxy forms, please contact Computershare Investor Services PLC, The Pavilions, Bridgwater
Road, Bristol BS99 6ZY (Telephone: 0370 703 0013).
6. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the
meeting and any adjournment(s) of it by using the procedures described in the CREST manual (available via www.euroclear.com). CREST
personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s),
should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order
for a proxy appointment made using the CREST service to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’) must be
properly authenticated in accordance with Euroclear UK & International Limited’s (EUI) specifications and must contain the information
required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of
a proxy or is an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be
received by Computershare Investor Services PLC (ID 3RA50) no later than 4.00 p.m. on 30 November 2026 or, in the event of an
adjournment of the meeting, 48 hours before the adjourned meeting. For this purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST applications host) from which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through
CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors
or voting service providers should note that EUI does not make available special procedures in CREST for any particular message. Normal
system timings and limitations will therefore apply in relation to the input of CREST proxy instructions. It is the responsibility of the CREST
member concerned to take (or, if the CREST member is a CREST personal member or sponsored member, or has appointed a voting
service provider(s), to procure that his/her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where
applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST manual concerning
practical limitations of the CREST system and timings. The Company may treat as invalid a CREST proxy instruction in the circumstances
set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
7. Proxymity Voting – if you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform,
a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please
go to www.proxymity.io. Your proxy must be lodged by 4.00 p.m. on 30 November 2026 in order to be considered valid. Before you can
appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read
these carefully as you will be bound by them and they will govern the electronic appointment of your proxy.
8. A corporation which is a shareholder can appoint one or more corporate representatives who may exercise, on its behalf, all its powers
as a member provided that no more than one corporate representative exercises powers over the same share.
9. As at 6.00 p.m. on 18 September 2026, the Company’s issued share capital comprised 620,237,346 Ordinary Shares of £0.01 each. Each
Ordinary Share carries the right to one vote at a General Meeting of the Company and, therefore, the total number of voting rights in the
Company as at 6.00 p.m. on 18 September 2026 is 620,237,346. The website referred to in Note 2 will include information on the number
of shares and voting rights.
10. Under section 319A of the Act, any member attending the meeting has a right to ask questions. The Company must answer any question
you ask relating to the business being dealt with at the meeting unless: (a) answering the question would interfere unduly with the
preparation for the meeting or involve the disclosure of confidential information; (b) the answer has already been given on a website in the
form of an answer to a question; or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question
be answered.
11. Under section 338 of the Act, a member or members meeting the qualification criteria set out in Note 14 on page 102 may, subject to
certain conditions, require the Company to circulate to members notice of a resolution which may properly be moved and is intended to
be moved at that meeting. The conditions are that: (a) the resolution must not, if passed, be ineffective (whether by reason of inconsistency
with any enactment or the Company’s constitution or otherwise); (b) the resolution must not be defamatory of any person, frivolous or
vexatious; and (c) the request: (i) may be in hard copy form or in electronic form; (ii) must identify the resolution of which notice is to be
given by either setting out the resolution in full or, if supporting a resolution sent by another member, clearly identifying the resolution
which is being supported; (iii) must be authenticated by the person or persons making it; and (iv) must be received by the Company not
later than six weeks before the meeting to which the request relates.
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102
12. Under section 338A of the Act 2006, a member or members meeting the qualification criteria set out at Note 14 below may require
the Company to include in the business to be dealt with at the Annual General Meeting a matter (other than a proposed resolution)
which may properly be included in the business (a matter of business). The request must have been received by the Company not later
than 21 October 2026. The conditions are that the matter of business must not be defamatory of any person, frivolous or vexatious.
The request must identify the matter of business by either setting it out in full or, if supporting a statement sent by another member, clearly
identify the matter of business which is being supported. The request must be accompanied by a statement setting out the grounds for
the request. Members seeking to do this should write to the Company providing their full name and address.
13. Under section 527 of the Act, a member or members meeting the qualification criteria set out at Note 14 below may have the right to
request the Company to publish on its website a statement setting out any matter that such members propose to raise at the meeting
relating to the audit of the Company’s accounts (including the Auditor’s Report and the conduct of the audit) that are to be laid before the
meeting. Where the Company is required to publish such a statement on its website: (a) it may not require the shareholders making the
request to pay any expenses incurred by the Company in complying with the request; (b) it must forward the statement to the Company’s
auditors no later than the time the statement is made available on the Company’s website; and (c) the statement may be dealt with as part
of the business of the meeting. The request must: (a) be in writing to Target Fund Managers Limited at Glendevon House, Castle Business
Park, Stirling FK9 4TZ; (b) either set out the statement in full or, if supporting a statement sent by another shareholder, clearly identify the
statement which is being supported; (c) be authenticated by the person or persons making it; and (d) be received by the Company at least
one week before the meeting.
14. In order to be able to exercise the members’ rights in Notes 11 to 13, the relevant request must be made by: (a) a member or members
having a right to vote at the meeting and holding at least 5% of total voting rights of the Company; or (b) at least 100 members having
a right to vote at the meeting and holding, on average, at least £100 of paid-up share capital.
15. If you are a person who has been nominated under section 146 of the Companies Act 2006 to enjoy information rights (Nominated
Person), you may have a right under an agreement between you and the shareholder of the Company who has nominated you to have
information rights (Relevant Shareholder) to be appointed or to have someone else appointed as a proxy for the meeting. If you either do
not have such a right or if you have such a right but do not wish to exercise it, you may have a right under an agreement between you and
the Relevant Shareholder to give instructions to the Relevant Shareholder as to the exercise of voting rights. Your main point of contact in
terms of your investment in the Company remains the Relevant Shareholder (or, perhaps, your custodian or broker) and you should
continue to contact them (and not the Company) regarding any changes or queries relating to your personal details and your interest in
the Company (including any administrative matters). The only exception to this is where the Company expressly requests a response from
you. The statement of the rights of members in relation to the appointment of proxies in Notes 3 and 4 on page 101 does not apply to a
Nominated Person.
16. Any person holding 3% or more of the total voting rights of the Company who appoints a person other than the Chair of the meeting as
his or her proxy will need to ensure that both he/she and his or her proxy comply with their respective disclosure obligations under the
UK Disclosure Guidance and Transparency Rules.
17. Copies of the Directors’ letters of appointment are available for inspection at the Company’s registered office during normal business hours
and at the place of the meeting from at least 15 minutes prior to the meeting until the end of the meeting.
18. A copy of the proposed new articles of association of the Company, together with a copy showing all of the proposed changes to the
existing articles of association, will be available for inspection at the Company’s website, www.targethealthcarereit.co.uk, and at the
Company’s registered office at Level 4, Dashwood House, 69 Old Broad Street, London EC2M 1QS between the hours of 9.00 a.m. and
5.00 p.m. (Saturdays, Sundays and public holidays excepted), from the date of the Notice of Annual General Meeting until the close of the
Annual General Meeting, and will also be available for inspection at the venue of the Annual General Meeting from 15 minutes before and
during the Annual General Meeting. The proposed New Articles will also be available for inspection on the National Storage Mechanism
located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism, from the date of this Notice of Annual General Meeting.
This document is important and requires your immediate attention. If you are in any doubt about the action you should take, you are
recommended to seek your own independent financial advice from your stockbroker, bank manager, solicitor, accountant or other
independent financial adviser authorised under the Financial Services and Markets Act 2000 (as amended by the Financial Services Act 2012) if
you are in the United Kingdom or, if not, from another appropriately authorised financial adviser. If you have sold or otherwise transferred all
your ordinary shares in Target Healthcare REIT plc, please forward this document, together with the accompanying documents immediately
to the purchaser or transferee, or to the stockbroker, bank or agent through whom the sale or transfer was effected for transmission to the
purchaser or transferee.
Notice of Annual General Meeting continued
Annual Report and Financial Statements 2026
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Financial Statements
Additional Information
Appendix: New Articles
Summary of the principal amendments to the Company’s articles of association
Set out below is a summary of the principal amendments which will be made to the Company’s Existing Articles through the adoption of the
New Articles if Resolution 15 to be proposed at the AGM is approved by shareholders.
This summary is intended only to highlight the principal amendments to the Existing Articles which are likely to be of interest to shareholders.
Other amendments which are of a minor, technical, typographical or clarifying nature have not been summarised below. This summary is not
intended to be comprehensive and cannot be relied upon to identify amendments or issues which may be of interest to all shareholders. This
summary is not a substitute for reviewing the full terms of the New Articles which will be available for inspection at the Company’s website,
www.targethealthcarereit.co.uk, and at the Company’s registered office at Level 4, Dashwood House, 69 Old Broad Street, London EC2M 1QS
between the hours of 9.00 a.m. and 5.00 p.m. (Saturdays, Sundays and public holidays excepted), from the date of the Notice of Annual
General Meeting until the close of the Annual General Meeting, and will also be available for inspection at the venue of the Annual General
Meeting from 15 minutes before and during the Annual General Meeting. The proposed New Articles will also be available for inspection on
the National Storage Mechanism located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism, from the date of this Notice of Annual
General Meeting.
If the New Articles are adopted the amendments to the Existing Articles will include:
i. removing provisions in the Existing Articles relating to bearer warrants as such warrants are no longer relevant under UK company law;
ii. clarifying that the proceedings at a general meeting shall not be invalidated where an appointment of a proxy in respect of that meeting is
sent in electronic form but because of a technical problem it cannot be read by the recipient;
iii. removing the existing provisions relating to the retirement of Directors by rotation and inserting provisions which require all Directors to
retire at each annual general meeting (and, if they wish, to offer themselves for re-election) in line with the recommended corporate
governance regime in the UK and the approach to retirement by rotation adopted by the Company in practice;
iv. inserting provisions dealing with the potential situation whereby less than the required minimum number of Directors is re-elected at an
annual general meeting;
v. expanding the provisions in the Existing Articles which allow the Board to immediately remove a director from office;
vi. clarifying that the Directors may use video or web conferencing applications and other appropriate communications devices to conduct
meetings of the Board and its committees;
vii providing that, if on three consecutive occasions any notice, document or other information sent to a member has been returned
undelivered, such member shall not thereafter be entitled to receive notices, documents or other information from the Company until
such member has communicated with the Company and supplied to the Company a new registered address, or a postal address within
the United Kingdom for the service of notices and the despatch or supply of documents and other information, or has informed the
Company of an address for the service of notices etc. in electronic form; and
viii.expressly permitting the Board to allow a depositary appointed to safe-keep the Company’s assets to avail of a contractual discharge of
liability for loss of such assets, provided always that all other conditions for such discharge have been met.
These changes generally reflect modern best practice and may assist in relieving certain administrative burdens on the Company.
Target Healthcare REIT plc
104
Shareholder Information
Tax Summary for Real Estate Investment Trusts
Target Healthcare REIT plc is a Real Estate Investment Trust (REIT) and is tax resident in the UK under Part 12 of the Corporation Tax Act 2010,
subject to continuing compliance with the REIT rules and regulations. The main REIT rules with which the Group must comply in order to
retain its REIT status are summarised as follows:
• at the start of each accounting period, the assets of the tax-exempt business must be at least 75% of the total value of the Group’s assets;
• at least 75% of the Group’s total profits must arise from the tax-exempt business;
• at least 90% of the tax-exempt rental business profits must be distributed in the form of a Property Income Distribution; and
• the Group must carry on a ‘property rental business’ throughout each accounting period and must hold a minimum of either a single
commercial property worth at least £20 million or three properties with none exceeding 40% of the total value of the properties.
A REIT does not suffer UK corporation tax on the profits (income and capital gains) derived from its qualifying property rental businesses in the
UK and elsewhere (the ‘Tax-Exempt Business’), provided that certain conditions are satisfied. Instead, distributions in respect of the Tax-Exempt
Business will be treated for UK tax purposes as UK property income in the hands of shareholders (see further below for details on the UK tax
treatment of shareholders in a REIT). A dividend paid by the Company relating to profits or gains of the Tax-Exempt Business is referred to in
this section as a Property Income Distribution (‘PID’).
UK corporation tax remains payable in the normal way in respect of income and gains from the Company’s other business, generally including
any property trading business, not included in the Tax-Exempt Business (the ‘Residual Business’). Dividends relating to the Residual Business
are treated for UK tax purposes as normal dividends. Any normal dividend paid by the Company is referred to as a Non-Property Income
Distribution (‘Non-PID’).
A REIT may become subject to an additional corporation tax charge if it pays a distribution to corporate shareholders that hold 10 per cent or
more of share capital or voting rights and/or are entitled to 10 per cent or more of distributions. This tax charge will not be incurred if the REIT
has taken reasonable steps to avoid making distributions to such a shareholder in line with HMRC guidance and has been relaxed for
shareholders who are entitled to receive gross PIDs effective from 1 April 2022.
UK Taxation of PIDs
A PID is, together with any property income distribution from any other REIT company, treated as taxable income from a single UK property
business. The basic rate of income tax (currently 20%) will be withheld by the Company (where required) on the PID unless the shareholder
is entitled to receive PIDs without income tax being deducted at source (‘Gross PIDs’). This is dependent on the shareholder notifying the
Company’s registrar of this entitlement sufficiently in advance of a PID being paid and the Company being satisfied that the shareholder
concerned is entitled to that treatment.
Shareholders entitled to elect to receive gross distributions may complete the declaration form which is available on request from the
Company through the contact details provided on its website, www.targethealthcarereit.co.uk, or from the Company’s registrar. Shareholders
who qualify for gross payments are, principally, UK resident companies, certain UK public bodies, UK charities, UK pension schemes and the
managers of ISAs, PEPs and Child Trust Funds, in each case subject to certain conditions. Individuals and non-UK residents do not qualify for
gross payments of distributions and should not complete the declaration form.
Shareholders who are individuals may, depending on their particular circumstances, either be liable to further UK income tax on their PID
at their applicable marginal income tax rate, incur no further UK tax liability on their PID, or be entitled to claim repayment of some or all
of the UK income tax withheld on their PID with potential offsets against tax payable in another jurisdiction under a Double Tax Treaty. The
£1,000 property income allowance does not apply to PIDs.
Corporate shareholders who are within the charge to UK corporation tax will generally be liable to pay corporation tax on their PID and,
if income tax is withheld at source, the tax withheld can be set against the company’s liability to UK corporation tax or against any income
tax which it is required to withhold in the accounting period in which the PID is received.
UK Taxation of Non-PIDs
Under current UK legislation, most individual shareholders who are resident in the UK for taxation purposes receive a tax-free dividend
allowance of £500 per annum for tax year 2026/27 (£500 per annum for tax year 2025/26) and any dividend income (including Non-PIDs)
in excess of this allowance is subject to income tax.
UK resident corporate shareholders (other than dealers and certain insurance companies) are not liable to corporation tax or income tax
in respect of dividends provided that the dividends are exempt under Part 9A of the Corporation Tax Act 2009.
UK Taxation of Chargeable Gains in Respect of Ordinary Shares in the Company
Any gain on disposal (by sale, transfer, redemption or otherwise) of the Company’s ordinary shares by shareholders resident in the UK for
taxation purposes will be subject to capital gains tax in the case of an individual shareholder, or UK corporation tax on chargeable gains in
the case of a corporate shareholder.
Annual Report and Financial Statements 2026
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Additional Information
UK ISAs and SIPPS
It is expected that the Company’s shares will be eligible for inclusion in ISAs and Investment-Regulated Pension Schemes.
The statements on taxation on pages 104 and 105 are intended to be a general outline of certain tax consequences that may arise in relation
to the Company and shareholders. This is not a comprehensive summary of all technical aspects of the taxation of the Company and its
shareholders and is not intended to constitute legal or tax advice to investors.
The statements relate to the UK tax implications of a UK resident individual investing in the Company (unless expressly stated otherwise).
The statements relate to investors acquiring the Company’s ordinary shares for investment purposes only, and not for the purposes of any
trade. The tax consequences for each investor of investing in the Company may depend upon the investor’s own tax position and upon the
relevant laws of any jurisdiction to which the investor is subject. The statements are based on current tax legislation and HMRC practice, both
of which are subject to change at any time, possibly with retrospective effect, and there can be no guarantee that the tax position or proposed
tax position prevailing at the time an investment in the Company is made will endure indefinitely.
Prospective investors should familiarise themselves with, and where appropriate should consult their own professional advisers on, the overall
tax consequences of investing in the Company.
Historical Distributions
Distributions to shareholders may potentially include both PID and Non-PID Dividends as calculated in accordance with specific attribution
rules. The Company provides shareholders with a certificate setting out how much of their dividend is a PID and how much, if any, is a Non-PID.
A breakdown of the dividends paid in relation to the previous five financial years is set out below and details of all the dividends paid since the
Group’s launch are available at www.targethealthcarereit.co.uk
Distribution Ex-dividend date Payment date
PID
(pence per share)
Non-PID
(pence per share)
Total distribution
(pence per share)
In relation to the year ended 30 June 2026
Fourth interim dividend 13/08/26 28/08/26 1.410 0.098 1.508
Third interim dividend 14/05/26 29/05/26 1.508 – 1.508
Second interim dividend 12/02/26 27/02/26 1.508 – 1.508
First interim dividend 13/11/25 28/11/25 1.508 – 1.508
Total 5.934 0.098 6.032
In relation to the year ended 30 June 2025
Fourth interim dividend 14/08/25 29/08/25 – 1.471 1.471
Third interim dividend 15/05/25 30/05/25 1.471 – 1.471
Second interim dividend 13/02/25 28/02/25 1.471 – 1.471
First interim dividend 14/11/24 29/11/24 1.471 – 1.471
Total 4.413 1.471 5.884
In relation to the year ended 30 June 2024
Fourth interim dividend 15/08/24 30/08/24 1.428 – 1.428
Third interim dividend 16/05/24 31/05/24 1.428 – 1.428
Second interim dividend 08/02/24 23/02/24 1.428 – 1.428
First interim dividend 09/11/23 24/11/23 1.428 – 1.428
Total 5.712 – 5.712
In relation to the year ended 30 June 2023
Fourth interim dividend 10/08/23 25/08/23 1.190 0.210 1.400
Third interim dividend 11/05/23 26/05/23 1.400 – 1.400
Second interim dividend 09/02/23 24/02/23 1.690 – 1.690
First interim dividend 10/11/22 25/11/22 1.690 – 1.690
Total 5.970 0.210 6.180
In relation to the year ended 30 June 2022
Fourth interim dividend 11/08/22 26/08/22 – 1.690 1.690
Third interim dividend 12/05/22 27/05/22 1.690 – 1.690
Second interim dividend 10/02/22 25/02/22 1.690 – 1.690
First interim dividend 11/11/21 26/11/21 1.690 – 1.690
Total 5.070 1.690 6.760
Target Healthcare REIT plc
106
Historical Record
Assets
At 30 June 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Total assets (£’000) 306,246 434,822 538,379 663,772 718,394 963,658 908,258 967,370 986,186 989,499
Market value of property
portfolio (£’000) 281,951 385,542 500,884 617,584 684,845 911,596 868,705 908,530 929,940 924,120
Shareholders’ funds (£’000) 256,937 358,607 413,089 494,113 565,185 698,767 654,808 689,293 712,460 757,923
Performance
At 30 June 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
EPRA NTA per share 101.9p 105.7p 107.5p 108.1p 110.4p 112.3p 104.5p 110.7p 114.8p 122.1
Share price 117.8p 110.5p 115.6p 110.0p 115.4p 108.4p 71.8p 78.5p 104.2p 108.4
Premium/(discount) 15.6% 4.5% 7.5% 1.8% 4.5% (3.5)% (31.3)% (29.1)% (9.2)% (11.2)%
IFRS EPS 7.58p 9.77p 8.10p 7.18p 9.23p 8.20p (1.06)p 11.77p 9.81p 13.32p
Adjusted EPRA EPS 5.23p 5.54p 5.45p 5.27p 5.46p 5.05p 6.00p 6.13p 6.08p 6.54p
Dividends per share 6.28p 6.45p 6.58p 6.68p 6.72p 6.76p 6.18p 5.71p 5.88p 6.03p
Ongoing charges 1.48% 1.48% 1.52% 1.51% 1.55% 1.51% 1.53% 1.51% 1.51% 1.48%
Contact Information
Investor relations
Information on Target Healthcare REIT plc can be found on its website at www.targethealthcarereit.co.uk including details on the
Company’s share price history, historical dividends and regulatory reports, including the Group’s Annual Reports, Interim Reports,
Sustainability Reports and Quarterly Investor Reports.
Registrar:
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
T: +44 (0)370 703 0013
E: www.investorcentre.co.uk/contactus
Enquiries about the following administrative matters should be addressed to the Company’s registrar:
• Change of address notification.
• Lost share certificates.
• Dividend payment enquiries.
• Dividend mandate instructions. Shareholders may have their dividends paid directly into their bank or building society accounts by
completing a dividend mandate form. Dividend confirmations, where applicable, are sent directly to shareholders’ registered addresses.
• Amalgamation of shareholdings. Shareholders who receive more than one copy of the Annual Report are invited to amalgamate their
accounts on the share register.
Shareholders can view and manage their shareholdings online at www.investorcentre.co.uk, including updating address records, making dividend
payment enquiries, updating dividend mandates, viewing any outstanding payments and viewing the latest share price. Shareholders will need
their Shareholder Reference Number, which can be found on their share certificate or a recent dividend confirmation, to access this site.
Warning to shareholders – Boiler Room Scams
Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to be
worthless or non-existent, or to buy shares at an inflated price in return for an upfront payment.
If you receive unsolicited investment advice or requests:
• Check the Financial Services Register from www.fca.org.uk to see if the person or firm contacting you is authorised by the Financial
Conduct Authority (‘FCA’);
• Check the investment opportunity you have been offered at www.fca.org.uk/scamsmart;
• Call the FCA on 0800 111 6768 if the firm does not have contact details on the Register or you are told they are out of date;
• Check the FCA Warning List of unauthorised firms to avoid at www.fca.org.uk;
• Consider that if you buy or sell shares from an unauthorised firm you will not have access to the Financial Ombudsman Service or
Financial Services Compensation Scheme; and
• Think about getting independent financial and professional advice.
If you are approached by fraudsters please tell the FCA by using the reporting details at www.fca.org.uk/consumers/report-scam where
you can find out more about investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768. If you have already paid
money to share fraudsters you should contact Report Fraud on 0300 123 2040 or via their website at www.reportfraud.police.uk.
Shareholder Information continued
Annual Report and Financial Statements 2026
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Financial Statements
Additional Information
The Company uses Alternative Performance Measures (‘APMs’). APMs do not have a standard meaning prescribed by GAAP and therefore may
not be comparable to similar measures presented by other entities. The definitions of all APMs used by the Company are highlighted in the
glossary on pages 111 to 113, with detailed calculations, including reconciliation to the IFRS figures where appropriate, being set out below
and within the EPRA Performance Measures on pages 108 and 109.
Discount or Premium – the amount by which the market price per share is lower or higher than the net asset value per share.
2026
pence
2025
pence
EPRA Net Tangible Assets per share (see Note 8 to the Consolidated Financial Statements) (a) 122.1 114.8
Share price at end of year (b) 108.4 104.2
(Discount)/premium = (b-a)/a (11.2)% (9.2)%
Dividend Cover – the percentage by which Group specific adjusted EPRA earnings for the year cover the dividend paid.
2026
£’000
2025
£’000
Group-specific EPRA earnings for the year (see Note 8 to the Consolidated Financial Statements) (a) 40,591 37,739
First interim dividend 9,353 9,123
Second interim dividend 9,353 9,124
Third interim dividend 9,353 9,124
Fourth interim dividend 9,353 9,124
Dividends paid in relation to the year (b) 37,412 36,495
Dividend cover = (a/b) 108% 103%
Net Debt to EBITDA ratio – a leverage ratio that measures the net earnings available to address debt obligations.
2026
£’000
2025
£’000
Net debt (see page 109) (a) 168,807 219,761
Group-specific EPRA earnings for the year (see Note 8 to the Consolidated Financial Statements) 40,591 37,739
Net finance costs 8,642 10,233
EBITDA (b) 49,233 47,972
Net debt to EBITDA ratio = (a/b) 3.4 times 4.6 times
Ongoing Charges – a measure of all operating costs incurred, calculated as a percentage of average net assets in that year.
2026
£’000
2025
£’000
Investment management fee 8,172 7,816
Other expenses 3,813 3,907
Less direct property costs and other non-recurring items* (973) (1,129)
Adjustment to management fee arrangements and irrecoverable VAT** 7 9
Total (a) 11,019 10,603
Average net assets (b) 744,251 702,441
Ongoing charges = (a/b) 1.48% 1.51%
* Excludes, amongst other items, the one-off costs related to reorganising the Group’s security structure and improving the efficiency of its long-term debt facilities (2025:
excluded one-off costs related to the administration of the tenant entity at one of the Group’s care home properties).
** Based on the Group’s net asset value as at 30 June 2026, the management fee is expected to be paid at a weighted average rate of 1.02% (2025: 1.02%) of the Group’s
average net asset plus an effective irrecoverable VAT rate of approximately 8% (2025: 9%). The management fee has therefore been amended so that the Ongoing Charges
figure includes the expected all-in management fee rate of 1.10% (2025: 1.11%).
Total Return – the return to shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease
in the Share Price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares or Net Assets.
2026 2025
EPRA NTA
(pence)
IFRS NAV
(pence)
Share price
(pence)
EPRA NTA
(pence)
IFRS NAV
(pence)
Share price
(pence)
Value at start of year (a) 114.8 114.9 104.2 110.7 111.1 78.5
Value at end of year (b) 122.1 122.2 108.4 114.8 114.9 104.2
Change in value during the year (b-a) (c) 7.3 7.3 4.2 4.1 3.8 25.7
Dividends paid (d) 6.0 6.0 6.0 5.9 5.9 5.9
Additional impact of dividend reinvestment (e) 0.5 0.5 0.6 0.3 0.2 0.9
Total gain in year (c+d+e) (f) 13.8 13.8 10.8 10.3 9.9 32.5
Total return for the year = (f/a) 12.0% 12.0% 10.4% 9.3% 8.9% 41.4%
Alternative Performance Measures
Target Healthcare REIT plc
108
EPRA Performance Measures
The European Public Real Estate Association is the industry body representing listed companies in the real estate sector. EPRA publishes
Best Practice Recommendations (‘BPR’) to establish consistent reporting by European property companies. Further information on the
EPRA BPR can be found at www.epra.com.
The figures below are calculated and presented in line with the BPR Guidelines published by EPRA in September 2024.
2026 2025
EPRA Net Reinstatement Value (£’000) 819,606 774,063
EPRA Net Tangible Assets (£’000) 757,576 711,888
EPRA Net Disposal Value (£’000) 782,709 740,389
EPRA Net Reinstatement Value per share (pence) 132.1 124.8
EPRA Net Tangible Assets per share (pence) 122.1 114.8
EPRA Net Disposal Value per share (pence) 126.2 119.4
EPRA Earnings (£’000) 50,850 47,855
Group specific adjusted EPRA earnings (£’000) 40,591 37,739
EPRA Earnings per share (pence) 8.20 7.72
Group specific adjusted EPRA earnings per share (pence) 6.54 6.08
EPRA Net Initial Yield 6.16% 6.04%
EPRA Topped-up Net Initial Yield 6.21% 6.22%
EPRA Vacancy Rate – –
EPRA Cost Ratio (including direct vacancy costs) 15.5% 18.3%
EPRA Group specific adjusted Cost Ratio (including direct vacancy costs) 18.5% 21.8%
EPRA Cost Ratio (excluding direct vacancy costs) 15.5% 18.3%
EPRA Group specific adjusted Cost Ratio (excluding direct vacancy costs) 18.5% 21.8%
EPRA Loan-to-Value 18.3% 23.6%
Capital Expenditure (£’000) 49,545 7,680
Like-for-like Rental Growth 3.7% 3.3%
EPRA NAV metrics and EPRA Earnings
Full details of these calculations, including reconciliations of each to the IFRS measures, are detailed in Note 8 to the Consolidated Financial
Statements on page 77.
EPRA Net Initial Yield and EPRA Topped-up Net Initial Yield
EPRA Net Initial Yield is calculated as annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the market value of the property, increased with (estimated) purchasers’ costs. The EPRA Topped-up
Net Initial Yield incorporates an adjustment in respect of the expiration of rent-free periods (or other unexpired lease incentives).
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Annualised passing rental income based on cash rents (a) 60,611 59,369
Notional rent expiration of rent-free periods or other lease incentives 516 1,800
Topped-up net annualised rent (b) 61,127 61,169
Standing assets (see page 78) 922,620 921,080
Allowance for estimated purchasers’ costs 62,030 62,175
Grossed-up completed property portfolio valuation (c) 984,650 983,255
EPRA Net Initial Yield = (a/c) 6.16% 6.04%
EPRA Topped-up Net Initial Yield = (b/c) 6.21% 6.22%
EPRA Vacancy Rate
EPRA Vacancy Rate is the estimated rental value (ERV) of vacant space (excluding forward fund developments) divided by the contractual rent
of the investment property portfolio, expressed as a percentage.
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Annualised potential rental value of vacant premises* (a) – –
Annualised potential rental value of the property portfolio (including vacant properties) (b) 61,127 61,169
EPRA Vacancy Rate = (a/b) – –
* As detailed in Note 17 to the Consolidated Financial Statements, there were no unoccupied properties at either 30 June 2025 or 30 June 2026.
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Financial Statements
Additional Information
EPRA Cost Ratio
The EPRA cost ratios are produced using EPRA methodology, which aims to provide a consistent base-line from which companies can provide
additional information, and include all property expenses and management fees. Consistent with the Group specific adjusted EPRA earnings
detailed in Note 8 to the Consolidated Financial Statements, similar adjustments have been made to present the adjusted Cost Ratio which is
thought more appropriate for the Group’s business model.
Year ended
30 June 2026
£’000
Year ended
30 June 2025
£’000
Investment management fee 8,172 7,816
Credit loss allowance and bad debts (846) 1,612
Other expenses 3,813 3,907
EPRA costs (including direct vacancy costs) (a) 11,139 13,335
Specific cost adjustments, if applicable – –
Group specific adjusted EPRA costs (including direct vacancy costs) (b) 11,139 13,335
Direct vacancy costs (c) – –
Gross rental income per IFRS (d) 72,066 72,928
Adjusted for rental income arising from recognising guaranteed rent review uplifts (10,387) (10,841)
Adjusted for surrender premiums recognised in capital (1,435) (1,505)
Adjusted for development interest under forward fund arrangements 128 725
Group specific adjusted gross rental income (e) 60,372 61,307
EPRA Cost Ratio (including direct vacancy costs) = (a/d) 15.5% 18.3%
EPRA Group specific adjusted Cost Ratio (including direct vacancy costs) = (b/e) 18.5% 21.8%
EPRA Cost Ratio (excluding direct vacancy costs) = ((a-c)/d) 15.5% 18.3%
EPRA Group specific adjusted Cost Ratio (excluding direct vacancy costs) = ((b-c)/e) 18.5% 21.8%
EPRA Loan-to-Value
As at
30 June 2026
£’000
As at
30 June 2025
£’000
Borrowings 200,000 242,000
Net payables 19,682 17,400
Cash and cash equivalents (50,875) (39,639)
Net debt (a) 168,807 219,761
Investment properties at market value 924,120 929,940
Total property value (b) 924,120 929,940
EPRA Loan-to-Value = (a/b) 18.3% 23.6%
EPRA Capital Expenditure
Year ended
30 June 2026
£’000
Year ended
30 June 2025
£’000
Acquisitions (including acquisition costs) 44,870 30
Forward fund developments 2,504 3,085
Like-for-like portfolio 2,171 4,565
Total capital expenditure 49,545 7,680
Conversion from accrual to cash basis 440 5,305
Total capital expenditure on a cash basis 49,985 12,985
Like-for-like Rental Growth
Year ended
30 June 2026
£’000
Year ended
30 June 2025
£’000
Opening contractual rent (a) 61,169 58,825
Rent reviews 2,003 1,939
Re-tenanting of properties and performance linked increases 265 15
Like-for-like rental growth (b) 2,268 1,954
Acquisitions and developments 3,449 1,148
Disposals (5,759) (758)
Total movement (c) (42) 2,344
Closing contractual rent = (a+c) 61,127 61,169
Like-for-like rental growth = (b/a) 3.7% 3.3%
Target Healthcare REIT plc
110
0
5
10
15
20
25
1901
1951
1971
1991
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
2052
2054
2056
2058
2060
Number of people (million)
65–74 75–84 85+
2050
c.2x over 85s
Today
14%
36%
2014
2026
1. Demographics
• Number of over 85s forecast
to double to 3.6m by 2050.
• It is forecast that 1 in 8 people
aged over 85 will require
residential care.
• Societal shift means less elderly
care provided within families.
2. Real estate standards
• Resident and family expectations
on accommodation quality
are increasing.
• Only 36% of rooms in UK have
the en suite wet-rooms which are
vital for hygiene, privacy & dignity.
• Purpose-built homes offer
advantages for residents and care
providers, and better social space
for communities.
3. Long-term investment,
stable returns
• Lease structures are long-term
(typically 30-35 years) and
inflation-linked.
• Portfolio track record of strong
returns and low volatility
(defensive, non-cyclical).
• Long-term capital appropriate for
vital UK social care infrastructure.
People aged 64 and over: Trend and projections
469k
beds
407k
residents
Total en suite wet-room provision
Proportion of the market is increasing as
older homes close and new homes are built
Sources: Carterwood, analysis covers Great Britain
as at 30 June 2026.
Supply and demand
15
10
5
0
0
5 10 15 20 30
-5
25
Total Return (per annum) %
< Reduced risk Risk (standard deviation) Increased risk >
Retail
Gilts
Office
Industrial
Equities
Real Estate Equities
THRL Portfolio
Primary Healthcare
Healthcare
Residential
All property
Twelve year total return vs standard deviation 2014-2025
238k
shortage
169k
beds
Total supply Total demand Fit-for-
purpose
supply
Data Centre
As the age of the UK population increases along with the care needs
of older people, there is a clear requirement for investment that
will modernise and grow the supply of fit-for-purpose care homes.
Much of the UK’s existing care home real estate is sub-standard for
residents and their care professionals.
Responsible investment, applying specialist knowledge to a complex and sensitive sector, can deliver stable, long-term returns
and provide positive social and community impact.
Source: MSCI, based on annual index to 31 December 2025.
Sources: 1901–2001, ONS and Census data; Following 2024, successive principal national projections (the
latest being 2022-based) from the Office for National Statistics.
Annual Report and Financial Statements 2026
111
Corporate GovernanceStrategic Report
Financial Statements
Additional Information
Glossary of Terms and Definitions
Corporate Terms
AIC
Association of Investment Companies. This is the trade body for Closed-end Investment Companies
(www.theaic.co.uk).
AIFMD
The UK version of the Alternative Investment Fund Managers Directive and all delegated legislation
thereunder as it forms part of UK law pursuant to the European Union (Withdrawal) Act 2018, as
amended. Issued by the European Parliament in 2012 and 2013, the Directive requires that all investment
vehicles, including Closed-end Investment Companies, must have appointed a Depositary and an
Alternative Investment Fund Manager. The Board of Directors of a Closed-end Investment Company,
nevertheless, remains fully responsible for all aspects of the company’s strategy, operations and
compliance with regulations.
Closed-end Investment Company
A company with a fixed issued ordinary share capital which is traded on an exchange at a price not
necessarily related to the Net Asset Value of the company and where shares can only be issued or
bought back by the company in certain circumstances. This contrasts with an open-ended investment
company, which has units not traded on an exchange but issued or bought back from investors at a price
directly related to the Net Asset Value.
CQC
Care Quality Commission. The independent regulator of all health and social care services in England.
Depositary
Under AIFMD rules, the Company must appoint a Depositary, whose duties in respect of investments,
cash and similar assets include: safekeeping; verification of ownership and valuation; and cash monitoring.
The Depositary’s oversight duties include, but are not limited to, oversight of share buy backs, dividend
payments and adherence to investment limits. The Company’s Depositary is IQ EQ Depositary Company
(UK) Limited.
Discount/Premium*
The amount by which the market price per share of a Closed-end Investment Company is lower or
higher than the net asset value per share. The share price of an Investment Company is derived from
buyers and sellers trading their shares on the stock market. This price is not identical to the NAV. If the
share price is lower than the NAV per share, the shares are trading at a discount and, if the share price is
higher than the NAV per share, are said to be at a premium. The figure is calculated at a point in time and,
unless stated otherwise, the Company measures its discount or premium relative to the EPRA NTA per
share. The detailed method of calculation is shown on page 107.
Dividend
The income from an investment. The Company currently pays interim dividends to shareholders quarterly.
Dividend Cover*
The absolute value of Group specific adjusted EPRA Earnings divided by the absolute value of dividends
relating to the period of calculation. The detailed method of calculation is shown on page 107.
Dividend Yield*
The annual Dividend expressed as a percentage of the share price at the date of calculation.
EBITDA
Earnings before interest, taxes, depreciation and amortisation costs. Generally considered to be a
measure of a company’s operational performance excluding non-operational expenses.
EPRA Best Practice
European Public Real Estate Association. A not-for-profit organisation which aims to foster trust for,
and encourage greater investment in, listed real estate in Europe (www.epra.com). EPRA also issue
best practice recommendations to enhance the financial reporting of listed property companies.
EPRA Cost Ratio
Reflects the relevant overhead and operating costs of the business. It is calculated by expressing the
sum of property expenses (net of service charge recoveries and third-party asset management fees)
and administration expenses (excluding exceptional items) as a percentage of gross rental income.
The detailed method of calculation is shown on page 109.
EPRA Earnings per Share*
Recurring earnings from core operational activities. A key measure of a company’s underlying operating
results from its property rental business and an indication of the extent to which current dividend
payments are supported by earnings. A reconciliation of the earnings per IFRS and the EPRA earnings,
including any items specific to the Group, is contained in Note 8 to the Consolidated Financial Statements.
EPRA Group specific adjusted
Cost Ratio*
The EPRA Cost Ratio adjusted for items thought appropriate for the Group’s specific business model.
The adjustments made are consistent with those made to the Group specific adjusted EPRA earnings
as detailed in Note 8 to the Consolidated Financial Statements.
EPRA Loan-to-Value (‘LTV’)*
A shareholder-gearing measure to determine the percentage of debt comparing to the appraised value
of the properties. EPRA LTV is calculated as total gross debt (adding net trade payables and less cash)
as a proportion of gross property value. The detailed method of calculation is shown on page 109.
EPRA Net Disposal Value (‘NDV’)*
A measure of Net Asset Value which represents the shareholders’ value under a disposal scenario, where
deferred tax, financial instruments and certain other adjustments are calculated to the full extent of their
liability, net of any resulting tax. A reconciliation of the NAV per IFRS and the EPRA NDV is contained in
Note8 to the Consolidated Financial Statements.
EPRA Net Initial Yield*
Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the market value of the property, increased with (estimated)
purchasers’ costs. EPRA’s purpose is to provide a comparable measure around Europe for portfolio
valuations. The detailed method of calculation is shown on page 108.
EPRA Net Reinstatement Value
(‘NRV’)*
A measure of Net Asset Value which assumes that entities never sell assets and aims to represent the value
required to rebuild the entity. The objective is to highlight the value of net assets on a long-term basis.
Assets and liabilities that are not expected to crystallise in normal circumstances, such as the fair value
movements on financial derivatives, are excluded and the costs of recreating the Group through
investment markets, such as property acquisition costs and taxes, are included. A reconciliation of the
NAV per IFRS and the EPRA NRV is contained in Note 8 to the Consolidated Financial Statements.
Target Healthcare REIT plc
112
EPRA Net Tangible Assets (‘NTA’)*
A measure of Net Asset Value which assumes that entities buy and sell assets, thereby crystallising certain
levels of unavoidable deferred tax. A reconciliation of the NAV per IFRS and the EPRA NTA is contained in
Note 8 to the Consolidated Financial Statements.
EPRA Topped-up Net Initial Yield*
Incorporates an adjustment to the EPRA Net Initial Yield in respect of the expiration of rent-free periods
(or other unexpired lease incentives). The detailed method of calculation is shown on page 108.
GAAP
Generally Accepted Accounting Practice. This includes UK GAAP and International GAAP (IFRS or
International Financial Reporting Standards). The Group’s Consolidated Financial Statements are prepared
in accordance with UK-adopted IFRS.
Gearing
Unlike open-ended investment companies, Closed-end Investment Companies have the ability to
borrow to invest. This term is used to describe the level of borrowings that an Investment Company has
undertaken. The higher the level of borrowings, the higher the gearing ratio. The gross gearing figure is
calculated as debt divided by the market value of the properties held. The net gearing figure is calculated
as debt less cash divided by the market value of the properties held.
Investment Manager
The Company’s Investment Manager is Target Fund Managers Limited. Further details are set out on
pages 34 and 35 and in Note 2 to the Consolidated Financial Statements.
IRR (or Internal Rate of Return)*
A metric used in financial analysis to estimate the profitability of potential investments. The IRR is the discount
rate that makes the net present value of all cash flows equal to zero in a discounted cash flow analysis.
Leverage
As defined under AIFMD rules, leverage is any method by which the exposure of an AIF is increased
through borrowing of cash or securities or leverage embedded in derivative positions. Leverage is
broadly equivalent to Gearing, but is expressed as a ratio between the assets (excluding borrowings)
and the net assets (after taking account of borrowing). Under the gross method, exposure represents the
sum of the Group’s positions after deduction of cash balances, without taking account of any hedging or
netting arrangements. Under the commitment method, exposure is calculated without the deduction of
cash balances and after certain hedging and netting positions are offset against each other.
Loan-to-Value*
A measure of the Group’s Gearing level. Gross LTV is calculated as total gross debt as a proportion of gross
property value. Net LTV is calculated as total gross debt less cash as a proportion of gross property value.
Market Capitalisation
The stock market value of the Company as determined by multiplying the number of Ordinary Shares
in issue, excluding any shares held in treasury, by the Share Price of the Ordinary Shares.
MSCI
Produces indexes for both privately-held real estate portfolios, as well as publicly-listed organisations
which provides a long performance history and which are mostly appraised quarterly.
NAV per Ordinary Share
This is calculated as the Net Asset Value (NAV) divided by the number of shares in issue.
Net Asset Value
(or Shareholders’ Funds)
The value of total assets less liabilities. Liabilities for this purpose include current and long-term liabilities.
It represents the underlying value of an Investment Company at a point in time.
Non-Property Income
Distribution (‘Non-PID’)
(or Ordinary Dividend)
The Dividends paid by the Company relating to profits or gains of the Residual Business. Further details on
the categorisation of Dividends paid by a REIT are included in the Tax Summary on pages 104 and 105.
Ongoing Charges Ratio*
A measure of all operating costs incurred in the reporting period, calculated as a percentage of average
net assets in that year. Operating costs exclude costs of buying and selling investments, interest costs,
taxation, non-recurring costs and the costs of buying back or issuing ordinary shares. In calculating this
figure, the Group follows the methodology and guidance published by the AIC. The detailed method of
calculation is shown on page 107.
Ordinary Shares
The main type of equity capital issued by conventional Investment Companies. Shareholders are entitled
to their share of both income, in the form of dividends paid by the Investment Company, and any capital
growth. The Company has only Ordinary Shares in issue.
Property Income Distribution
(‘PID’)
The Dividends paid by the Company relating to profits or gains of the Tax-Exempt Business. Further
details on the categorisation of Dividends paid by a REIT are included in the Tax Summary on pages 104
and 105.
Real Estate Investment Trust
(or REIT)
A tax regime which in the UK exempts participants from corporation tax both on UK rental income
and gains arising on UK investment property sales, subject to certain requirements. Further details
are provided on pages 104 and 105.
Share Price
The value of a share at a point in time as quoted on a stock exchange. The Company’s Ordinary Shares
are traded on the Main Market of the London Stock Exchange.
SORP
Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture
Capital Trusts’ issued by the AIC.
Total Return*
The return to shareholders calculated on a per share basis by adding dividends paid in the period to the
increase or decrease in the Share Price or NAV. The dividends are assumed to have been reinvested in the
form of Ordinary Shares or Net Assets. The detailed method of calculation is shown on page 107.
Total Accounting Return*
The Total Accounting Return is calculated based on the dividends paid in the period and the increase or
decrease in the EPRA NTA. The detailed method of calculation is shown on page 107.
* Alternative Performance Measure.
Glossary of Terms and Definitions continued
Corporate Terms continued
Annual Report and Financial Statements 2026
113
Corporate GovernanceStrategic Report
Financial Statements
Additional Information
Property and ESG Terms
Break Option
A clause in a lease which provides the landlord or tenant with an ability to terminate the lease before
its contractual expiry date.
Building Research Establishment
Environmental Assessment
Method (‘BREEAM’)
BREEAM is the world’s leading science-based suite of validation and certification systems for sustainable
built environment. The BREEAM in-use standards provide a framework to enable property investors,
owners, managers and occupiers to determine and drive sustainable improvements in the operational
performance of their assets, leading to benchmarking, assurance and validation of operational asset data.
Contractual Rent
The annual rental income receivable on a property as at the balance sheet date, adjusted for the inclusion
of rent currently subject to a rent free period.
Covenant Strength
This refers to the quality of a tenant’s financial status and its ability to perform the covenants in the lease.
Deed of Surrender
A legal document which allows the early termination of a lease upon the agreement of both parties. It will
list the obligations that need to be fulfilled by both parties before the rights and interests under the lease
are extinguished. Depending on the circumstances a surrender premium may be payable from the Group
to the tenant, or receivable by the Group from the tenant.
Energy Performance Certificate
(‘EPC’)
An Energy Performance Certificate (EPC) rates how energy efficient a building is using grades from A
to G (with ‘A’ the most efficient grade). All commercial properties leased to a tenant must have an EPC.
AllEPCs are valid for 10 years.
Estimated Rental Value (‘ERV’)
The estimated annual market rental value of a property as determined by the Company’s External Valuer.
This will normally be different from the actual rent being paid.
Fixed and Minimum Guaranteed
Rental Uplifts
Rents subject to fixed uplifts at an agreed level on agreed dates stipulated within the lease, or rents subject
to contracted minimum uplifts at specified review dates.
Forward Fund/Commitment
A contract pertaining to the future purchase of a property. Forward Funding relates to the acquisition
of a property which hasn’t yet been built, with the Group providing the developer with the funding for the
development, usually in staged payments throughout the contract.
GRESB
GRESB is a mission-driven and investor-led organisation that provides actionable and transparent ESG
data to financial markets. GRESB collects, validates, scores and benchmarks ESG data using a
standardised, globally recognised framework so that both investors and Investment Managers can act on
ESG data and insights.
Lease
A legally binding contract between a landlord and a tenant which sets out the basis on which the tenant is
permitted to occupy a property, including the lease length.
Lease Incentive
A payment used to encourage a tenant to take on a new lease, for example by a landlord paying a tenant a
sum of money to contribute to the cost of a tenant’s fit-out of a property or by allowing a rent free period.
Lease Renewal
The renegotiation of a lease with the existing tenant at its contractual expiry.
Mature Homes
Care homes which have been in operation for more than three years. There were 75 homes in the
Group’s portfolio which both met this definition and were held by the Group for the entire duration of the
year ended 30 June 2026, closing at 81 homes on 30 June 2026.
Occupancy Rate or
Resident Occupancy Rate
The occupancy rate calculates the number of occupied rooms as a percentage of the overall capacity of
the care home. This is an important measure in determining the quality of the property held, the strength
of the tenant and the sustainability of the rental income received.
Photovoltaic (‘PV’) Panels
Panels which are used to generate renewable electricity by capturing solar energy.
Portfolio or Passing Rent*
The annual rental income currently receivable on a property as at the balance sheet date, excluding rental
income where a rent-free period is in operation. The gross rent payable by a tenant at a point in time.
Rent Cover*
A measure of the tenant’s ability to meet its rental liability from the profit generated by their underlying
operations. Generally calculated as the tenant’s EBITDARM (earnings before interest, taxes, depreciation,
amortisation, rent and management fees) divided by the contracted rent. Unless otherwise stated, rent
cover is calculated based on Mature Homes only.
Rent Review
A periodic review of rent during the term of a lease, as provided for within a lease agreement.
Science Based Targets initiative
(‘SBTi’)
A corporate climate action organisation that enables companies and financial institutions worldwide to
play their part in combating the climate crisis.
Surrender Premium
A sum of monies that may be paid from the tenant to the landlord, or from the landlord to a tenant,
in order to extinguish a lease prior to the termination date originally set out in the lease agreement.
Valuer
An independent external valuer of a property. The Group’s Valuer is CBRE Limited and detailed
information regarding the valuation of the Group’s properties is included in Note 9 to the Consolidated
Financial Statements.
Wet-room
A private, en-suite shower and toilet room, fully tiled and drained, providing the practical living space for
personal hygiene to be applied in a dignified manner and with assistance as required.
WAULT*
Weighted average unexpired lease term. The average lease term remaining to expiry across the portfolio
weighted by contracted rental income.
* Alternative Performance Measure.
Target Healthcare REIT plc
114
Corporate Information
Directors
Alison Fyfe (Chair)
Michael Brodtman
Richard Cotton*
Vince Niblett**
Amanda Thompsell
Registered Office
AIFM and Investment Manager,
Company Secretary and Administrator
Target Fund Managers Limited
Glendevon House
Castle Business Park
Stirling FK9 4TZ
Legal Adviser
Dickson Minto LLP
Dashwood House
69 Old Broad Street
London EC2M 1QS
Brokers
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
Panmure Liberum Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London EC2Y 9LY
Valuers
CBRE Limited
Henrietta House
Henrietta Place
London W1G 0NB
Auditors
Ernst & Young LLP
Atria One
144 Morrison Street
Edinburgh EH3 8EX
Tax Adviser
Deloitte LLP
Athene Place
66 Shoe Lane
London EC4A 3BQ
Tax Compliance
Alvarez & Marsal Tax LLP
1 West Regent Street
Glasgow G2 1RW
Depositary
IQ EQ Depositary Company (UK) Limited
Two London Bridge
London SE1 9RA
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Website
www.targethealthcarereit.co.uk
* Senior Independent Director
** Chairman of Audit Committee
Annual Report and Financial Statements 2026
115
Corporate GovernanceStrategic Report
Financial Statements
Additional Information
Notes
Target Healthcare REIT plc
116
Notes
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Target Healthcare REIT plc Annual Report and Financial Statements 2026
Target Healthcare REIT plc
Level 4 Dashwood House
69 Old Broad Street
London EC2M 1QS
www.targethealthcarereit.co.uk