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Increased Payout

December 17, 2004

Increased Payout

Our December quarter pre-tax distribution payout is being increased from 2.0 cents a unit to 2.15 cents a unit. On an annual basis the pre-tax distribution will increase from 8.0 cents per unit to 8.6 cents per unit.

We announced the 7.5% increase at the annual meeting held in Tauranga in November, and this decision was based on the recent sale of non-yielding assets and the imminent completion of Epworth Eastern in Melbourne.

In making the announcement the Chairman, Bruce Davidson, said the increase in distribution was “warranted and sustainable”.

Tauranga Annual Meeting

Holding the annual meeting in Tauranga was a great success, with more than 210 attendees.

Based on feedback from those present, the Directors are of the view that taking the annual meeting around the country is a very worthwhile exercise which will be repeated in future years.

Assets Sales

The big news in the lead up to the annual meeting was the completion of the sale of our Waitemata land holding for $12.825 million.

We have received the deposit of $8.5 million in cash, and the remaining $4.325 million, plus interest at our cost of borrowing, will be received over a maximum period of four years.

The sale value represents approximately 6% of our total assets, and is a significant step forward in making our portfolio fully yielding.

We also entered into an option agreement for the sale of our 20% equity interest in Ascot Radiology Limited. The option is exercisable in April 2007.

The option is at a price ranging from $500,000 to more than $1 million. The precise sale price will be determined by reference to Ascot's Radiology’s profitability for the year

ended 31 March 2007. Should profitability not reach a minimum pre-agreed level, either party has the right to terminate the deal.

Having said this, based on the current forecast of Ascot Radiology’s management, the sale price at this point in time is expected to be $1 million.

Epworth Eastern

The other news is that the 100% pre-let Epworth Eastern in Melbourne is forecast for practical completion in late February 2005 with the doors being opened for business in early April 2005.

The complex is a hive of activity as builders and contractors put the finishing touches to the major structure with the army of fit out specialists converting the shell into a state-of-the-art, fully functioning medical facility.

The estimated value of the finished complex is A$42 million, and it will feature with the $66 million Ascot Hospital in Auckland as one of our two flagship properties.

Trust Structure

Prior to the annual meeting the Directors announced the result of their study into the Trust’s corporate governance options.

The conclusion reached was that it was in the best economic interests of Unit Holders for the current structure to be retained.

The study confirmed that rather than changing the structure, the focus of the Directors and Management should be on delivering on four key areas, namely

Improving the earnings, and therefore the distribution paid to unit holders. This should in turn improve unit price Growing the Trust through acquisitions that are earnings positive and have a strategic fit ( not growth for growth’s sake ) Ensuring alignment of the Manager’s incentive and service fees with outcomes that are positive for unit holders Ensuring appropriate quality in the people that make up the Board and management of the Manager.

It is the Manager delivering on these four key areas that will lead to the enhancement of value for unit holders.

Christmas Message

On behalf of the Directors and Management team, I would like to wish Unit Holders and their families all the best for the Christmas and holiday season.

We are closing the office from 12.30pm on December 24, and will reopen again for business at 8.30am on January 5, 2005.

It has been a busy past 12 months for Calan Healthcare, and one in which we have made steady, measurable progress towards our goal of being a low risk, medium return investment that delivers a growing yield to Unit Holders.

We are looking forward to returning in the New Year fully refreshed, and continuing along the way of achieving our goal.


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