Results for the year ended 30 September 2011

RNS Number : 5716T

The MedicX Fund Limited

08 December 2011

For immediate release 8 December 2011

MedicX Fund Limited

("MedicX Fund", "the Fund" or "the Company")

Results for the year ended 30 September 2011

MedicX Fund Limited (LSE: MXF), the specialist primary care infrastructure investor in modern purpose-built primary healthcare properties in the United Kingdom, today announces its results for the year ended 30 September 2011.

Highlights

Financial results

· Total shareholder return of 9.4% for the year (2010: 8.6%)¹

· Quarterly dividend of 1.375p per share announced November 2011²; total dividends of 5.5p per share for the year or 7.3% dividend yield (2010: total dividends of 5.4p; 7.3% dividend yield)³

· Rental income for the year £11.8 million representing a 8.7% increase from prior year

· £3.3 million rent reviews agreed in the year ended 30 September 2011 with the equivalent of an average 2.3% per annum increase, 1.9% from open market reviews, 4.3% from RPI reviews, and 2.5% from fixed uplifts

· 17.5% increase in EBITDA to £9.0 million⁴

· Finance costs for the year of £5.1 million an increase of only £0.1 million or 2.0% from the prior year (2010: £5.0 million)

· Marginal improvement in valuation net initial yield to 5.84% compared with 5.88% at 30 September 2010, together with rent reviews generating a valuation gain for the year of £3.4 million

· Adjusted earnings of £4.0 million, an increase of £1.3 million or 51.1% from prior year, equivalent to 2.4p per share (30 September 2010: £2.7 million; 2.1p per share)⁴

· Discounted cash flow net asset value of £169.8 million equivalent to 88.2p per share (30 September 2010: £129.3 million; 91.5p per share)

· Adjusted net asset value of £127.1 million equivalent to 66.0p per share (30 September 2010: £92.9 million; 65.7p per share)⁵

· Adjusted net asset value plus the estimated benefit of fixed rate debt of £131.0 million equivalent to 68.0p per share (30 September 2010: £100.9 million; 71.4p per share)⁵

Investments

· £249.8 million committed investment⁶ in 63 primary healthcare properties as at 5 December 2011

· One new property acquired with six properties under construction completed since 1 October 2010; eight remain to be completed as at 5 December 2011

· Annualised rent roll as at 5 December 2011 now £15.4 million with 91% of rents reimbursed by the NHS

· New committed investment and approved investments since 1 October 2010 of £73.4 million acquired at a cash yield of 6.16%

· Strong pipeline of approximately £54.1 million further acquisition opportunities as at 5 December 2011

Funding

· £35.8 million net proceeds raised from 50.8 million shares issued since 1 October 2010 at an average issue price of 72.3p per share

· Existing £100 million of interest only debt at fixed rate of 5.0% until 2036 or for a further 25 years.

· Loan to value ratio of 65.4% and debt service interest cover ratio of 194% on £100 million Aviva facility against covenants of 75% and 140% respectively as at 5 December

· Net debt £82.4 million (37.7% adjusted gearing⁵) at year end

· £7.5 million of Deutsche Postbank facility drawn down and swapped at a fixed all-in rate of 3.14% to April 2015 at 5 December 2011. Debt service interest cover ratio of 404%, forecast interest cover ratio of 364%⁷ and loan to value ratio of 58.6% on the facility against covenants of 140% (interest cover) and 70% (loan to value)

· Terms agreed on a £50 million 20 year facility with Aviva at an indicative all-in fixed rate of 4.71% as at 5 December 2011

· Including new facilities agreed the average all-in fixed rate of debt is 4.82% with an average unexpired term of 22.4 years.

David Staples, Chairman said "MedicX Fund has now passed its fifth anniversary. Throughout this period of uncertainty in the world's economy, the MedicX Fund model has provided some stability. Our strategy has remained unchanged and at the same time we have maintained modest gearing levels over this period so our balance sheet has not come under pressure. We have maintained our progressive dividend policy with an increase in dividends for the year to 5.5 pence from 5.4 pence the previous year, and the 5.0 pence at the time of the listing of the Fund. The shares currently yield 7.4% based on the share price at 5 December 2011 of 74.00 pence.

In the year to 30 September 2011, the total shareholder return, as measured by dividends received and share price growth, was 9.4%. This continues the solid delivery of returns to our shareholders, with the total shareholder returns for the previous two years being 8.6% and 11.4% respectively.

There is no doubt that, whilst the NHS will see changes, demand will continue for modern purpose-built primary healthcare properties. Primary care property assets remain attractive investments and the Fund's portfolio continues to be a good route for accessing secure long term cash flows. At 30 September 2011, the portfolio had a valuation yield of 5.84% which compares favourably with a benchmark 20-year gilt rate of 3.54%.

During the year under review the Fund again successfully raised both equity and debt funding on a non-dilutive earnings enhancing basis. The funds raised from the March 2011 equity raising were successfully deployed into new property acquisitions that meet the Fund's criteria. As a result of committed and approved investments we have recently agreed terms on an additional £50 million 20-year debt facility with Aviva which, if drawn down today, would be able to be fixed at an all-in rate of 4.71%. Including the new facility agreed, the average all-in fixed rate of debt is 4.82% with an unexpired term of 22.4 years.

The Investment Adviser, MedicX Adviser Ltd, continues to have access to a healthy pipeline and future investment opportunities at unprecedented spreads between the yields we can buy the properties at, and the cost of long term debt that we can fix and Government gilts. We will therefore again consider further equity capital raising in the New Year to continue to support the Fund's growth in a balanced manner.

We have agreed a new fee basis with the Investment Adviser, to progressively reduce the investment advisory fees as a percentage of gross assets excluding cash and all of these factors contribute to our confidence in our ability to continue with the Fund's dividend policy and also enhance dividend cover over the medium term."

For further information please contact:

MedicX Group: +44 (0) 1483 869 500

Keith Maddin, Chairman

Mike Adams, Chief Executive Officer

Mark Osmond, Chief Financial Officer

MedicX Fund: +44 (0) 1481 723 450

David Staples, Chairman

Collins Stewart Europe Limited: +44 (0) 20 7523 8000

Andrew Zychowski/Lucy Lewis

Buchanan Communications: +44 (0) 20 7466 5000

Charles Ryland/Suzanne Brocks

Information on MedicX Fund Limited

MedicX Fund Limited ("MXF", the "Fund" or the "Company", or together with its subsidiaries, the "Group") the specialist primary care infrastructure investor in modern, purpose-built primary healthcare properties in the United Kingdom, listed on the London Stock Exchange in November 2006. It has committed investment of £249.8 million and a portfolio of 63 properties.

The Investment Adviser to the Company is MedicX Adviser Ltd, which is authorised and regulated by the Financial Services Authority and is a subsidiary of the MedicX Group. The MedicX Group is a specialist investor, developer and manager of healthcare properties with 26 people operating across the UK.

The Company's website address is www.medicxfund.com

1 Based on share price growth between 30 September 2010 and 30 September 2011 and dividends received during the year

2 Ex dividend date 16 November 2011, Record date 18 November 2011, Payment date 30 December 2011

3 Total dividends declared divided by share price at 5 December 2011 (2010: at 6 December 2010)

4 Excluding revaluation impact, deferred taxation and performance fees

5 Adjusted to exclude goodwill and the impact of deferred tax not expected to crystallise

6 Includes completed properties, properties under construction and committed investment

7 Forecast interest payments divided by forecast income from secured properties over the next year

Chairman's statement

Introduction

I am pleased to present the fifth annual report for the Fund, on behalf of the board.

Results overview

2011 has been a very good year for the Fund.

Against the backdrop of a turbulent stock market and significant uncertainty in the world economy, the Fund offers investors some stability of income, security and growth from a straightforward business model, that of a specialist property investor in modern purpose built healthcare properties with rents reimbursed by the NHS. This, together with our investment and fundraising this year has positioned the Company well to deliver further solid returns to its investors.

Demand for new purpose-built primary healthcare properties continues to be strong with the changes to the NHS continuing to place increased demands on primary care, and has enabled the Fund to increase its portfolio with ten new properties committed during the period under review. The Group now has committed investment of £249.8 million across 63 properties of which eight remain under construction.

The Group's net asset value, adjusted to exclude goodwill and deferred taxation, at 30 September 2011 was £127.1 million or 66.0 pence per share. In line with other infrastructure funds, and given the long-term predictable cash flows, it is appropriate to calculate a net asset value based upon discounted cash flows. This basis as set out in the Investment Adviser's report gives a net asset value of £169.8 million or 88.2 pence per share.

With a decrease in long-term interest rates during the year, the debt benefit of the Group's £100 million fixed rate interest only debt facility has decreased to £4.0 million or 2.1 pence per share as at 30 September 2011. This has not been included in the adjusted net asset value reported above; if it were included the adjusted net asset value would be equivalent to 68.0 pence per share.

The Group realised a profit of £4.0 million, excluding the impact of revaluations, deferred taxation and performance fees, which equates to 2.4 pence per share, an improvement of £1.3 million, on the previous financial year.

Rental income grew by £0.9 million or 8.7% during the year. Costs are in line with expectations and for the third year in succession we met our target for annual overheads; £675,000 for the current year. Costs will continue to be managed prudently and we are targeting to keep overheads at a similar level for the forthcoming year, despite inflation and the increased size of our portfolio.

EBITDA (earnings before interest, taxation and depreciation), excluding the impact of revaluations, deferred taxation and performance fees, has increased 17.5% to £9.0 million for the year to September 2011, from £7.7 million in the previous year.

Funding

In March 2011, the Company issued 47.6 million shares at 72 pence per share, by way of a placing, open offer and offer. This placing generated net proceeds of £34.3 million. In addition during the year the Company issued 1.6 million new Ordinary Shares for cash at an average price of 74.47p per share pursuant to the block listing application announced by the Company on 26 June 2008, and a further 1.5 million shares were issued at a price of 78.25p per share pursuant to a separate listing application. In total these additional share issues have generated net proceeds of £2.3 million. The Company issued a further 536,900 new Ordinary Shares under the scrip dividend scheme. All shares were issued at prices above the adjusted net asset value.

The Fund continues to follow its growth strategy and during the course of the year raised both equity and debt to pursue its investment objectives. This measured approach has enabled the Fund to continue to grow without creating undue stress on its balance sheet, an important consideration in the current economic climate, and essential in ensuring that shareholder value is not eroded.

In December 2009, the Group entered into a £25.5 million facility with Deutsche Postbank for a 5‑year term, and this facility was extended to £37.1 million in August 2011. At 30 September 2011, £0.5 million had been drawn under this facility. The first significant draw down of this facility for an amount of £7 million was made in November 2011 with a fixed all-in interest rate of 3.14%, and the loan interest rate will continue to be fixed as the loan is drawn down. This is the only swap the Group has and it matches the term of the loan.

The loan will be drawn down at 62.5% loan to value on the properties secured, against a 70% loan to value covenant that will only be tested after years two and four. As a result of the extension in August, the facility does not amortise. Under the previous terms the facility amortised at 1% per annum. The income to interest covenant of the loan is 140% and is expected to be comfortably exceeded.

I am pleased also to report that the Group has recently agreed a new £50 million debt facility with Aviva for a 20-year period. The interest rate on this facility will be fixed on completion. The facility is interest only for the first 10 years, after which it amortises at £2 million per annum over the second ten years, with the remainder repayable at the end of the 20 year term, and can be drawn down to a 65% loan to value on any properties secured against it. If the facility was completely drawn as at 5 December 2011 the interest rate could be fixed at an all-in rate of 4.71%.

Including new facilities agreed, the average all-in fixed rate of debt is 4.82% with an average unexpired term of 22.4 years.

With the successful deployment of the funds from the March 2011 equity raising into new property acquisitions, and in view of the committed investment and attractive investment pipeline the Company will therefore again consider further equity capital raising in the New Year to continue to support the Fund's growth in a balanced manner by maintaining a modest gearing ratio while at the same time utilising the debt facilities available.

Dividends

In November 2011 the Directors approved a quarterly dividend of 1.375p per Ordinary Share in respect of the period 1 July 2011 to 30 September 2011. The dividend will be paid on 30 December 2011 to ordinary shareholders on the register as at close of business on 18 November 2011 (the "Record Date"). The corresponding ex-dividend date was 16 November 2011. The Fund has maintained its progressive dividend policy, with total dividends declared of 5.5p per Ordinary Share in respect of the financial year ended 30 September 2011, an increase from the dividends of 5.4p per ordinary share for the year to 30 September 2010, progressing from the initial dividend of 5.0p at the time of the listing of the Company.

The Company has offered qualifying shareholders the opportunity to take new Ordinary Shares in the Company, credited as fully paid, in lieu of the cash dividend to be paid on 30 December 2011, by participating in the Scrip Dividend Scheme (the "Scheme") put in place by the Company on 5 May 2010. The results from this offer will be announced on 14 December 2011.

For further information on the Scheme, together with a copy of the Scheme Document (containing the terms and conditions of the Scheme) and relevant mandate forms, please refer to the Scrip Dividend portal on the Company's website (www.medicxfund.com/scrip).

Dividend cover for the year to 30 September 2011 was 44%, up from 41% last year, as calculated using adjusted earnings excluding the impact of revaluations, deferred taxation and performance fees and 82% as calculated using the adjusted earnings including revaluation impact but excluding deferred taxation and performance fees. In addition 3.9% of the September 2011 dividend was in the form of scrip dividends and so to that extent did not result in a cash outflow from the Company. Dividend cover is targeted to continue to grow over time and following further future capital raising. However the intention remains to grow dividends over time and to distribute via dividends a proportion of the increase in the value of properties.

Investment Adviser Fee

The Board has agreed to a proposal from the Investment Adviser to reduce its base fee structure.

The existing Investment Adviser fee of 1.5% of gross assets excluding cash up to £150 million, and 0.75% of gross assets excluding cash over £300 million, will change to 1.5% of gross assets excluding cash up to £150 million, 0.65% of gross assets excluding cash between £300 million and £500 million, 0.5% of gross assets excluding cash between £500 million and £750 million, and 0.4% of gross assets excluding cash over £750 million. The new fee will apply from 1 October 2011.

Property management fees remain unchanged at 3% of the passing rent of properties managed. It has also been agreed to amend the calculation of the performance fee, to calculate it with reference to the average daily closing share price during the last month of the period rather than the closing price on the final day, which will reduce any volatility in that calculation.

Annual General Meeting

At the Annual General Meeting held on 24 February 2011, shareholders passed all the resolutions proposed. These included the authority for the Directors to issue Ordinary Shares for cash up to an amount representing 10% of the issued Ordinary Share capital on 24 February 2011 on a non-pre-emptive basis provided that such Ordinary Shares shall be allotted for cash at a price which is not less than the Company's adjusted net asset value at the time of the issue. This power expires immediately prior to the date of the Annual General Meeting of the Company to be held on 17 February 2012. However, the Board will seek renewal of this authority at the forthcoming Annual General Meeting. During the year 1.6 million Ordinary Shares were issued pursuant to the block listing application announced by the Company on 26 June 2008, and a further 1.5 million shares were issued pursuant to a separate listing application, all at prices greater than adjusted net asset value.

Share price and outlook

In the year to 30 September 2011, the total shareholder return, as measured by dividends received and share price growth, was 9.4%. Of the return, 7.6% was attributable to dividends received with the remainder from growth in the share price. This continues the solid delivery of returns to our shareholders, with the total shareholder returns for the previous two years being 8.6% and 11.4% respectively.

At 5 December 2011, the mid-market share price was 74.0 pence per share ex dividend, this represents a 7.4% dividend yield based upon the 5.5 pence per share dividends declared for the year, and a premium of 12.2% to the adjusted net asset value of 66.0p per share. Additionally, this represents a premium of 8.8% to the adjusted net asset value plus the estimated mark to market benefit of debt of 68.0p per share and a discount of 16.1% to the discounted cash flow net asset value of 88.2p per share.

The Fund enters its sixth year with a track record of delivering steady returns from its property portfolio, and with a number of properties due to complete in the near future the return on the investment activity in the year will start to be realised. Despite the continuing uncertainty in the world's economy the Fund model has proved itself. Primary care infrastructure assets are attractive investments and the Fund's portfolio continues to be a good route for accessing secure long-term cash flows. In addition, a new fee basis has been agreed with the Investment Adviser, MedicX Adviser Ltd, which will progressively reduce the fund management fees as a percentage of gross assets as the Fund grows. These factors contribute to our confidence that the Company is well positioned to deliver progressive long-term returns to shareholders.

David Staples

Chairman

7 December 2011

Investment Adviser's report

Market

The IPD UK Annual Healthcare Index total return (published annually) in 2010 was 11.1% year-on-year, falling behind the IPD UK All Property total return for the first time in four years which showed a return of 15.1% for the same period as the overall index benefitted from a market correction in yields yet to be seen in primary care property. Whilst MedicX Fund achieved a comparable total return of 7.1% for the year ended 31 December 2010, this was the impact of the market catching up to the Company as the return for the past three years ending December 2010 of 3.6% is comparable to the healthcare index return of 3.7% for the same period. The IPD UK Healthcare Index total return outperformed the IPD UK All Property total returns in 2007, 2008 and 2009 and over the four year period to the end of 2010 showed a positive return of 5.7% per annum compared with negative return of 2.7% per annum for UK All Property.

The October 2011 IPD UK Monthly Index net initial yield figures for All Property and Retail were 6.20% and 5.98% respectively, a proportionate reduction of 21.6% and 21.4% respectively since the low point in property values in June 2009 and reductions of 3.28% and 2.13% respectively from October 2010. Prime Retail and Office properties have in many cases returned to pre-recession yields with net initial yields ranging between 3.75% and 5.25%.

The primary care property sector has historically been less volatile and lagged behind other property classes with net initial yield for the Fund at 5.84% in September 2011 compared with 5.88% in September 2010. The low point in valuations since the launch of MedicX Fund occurred in March 2009 with a net initial yield of 6.09%, compared with the peak of 5.01% in March 2007. The September 2011 net initial yield of 5.84% represents only a 4.1% reduction since the low point in property values in March 2009.

The restructuring of the NHS is becoming clearer with the NHS Bill now being debated by the Lords. Clinical commissioning groups are the proposed replacement for the existing PCT structure, but will have a wider community involvement. To this end some steps have already been taken to restructure the PCTs into clinical consortia to support the new structure when the new legislation is implemented, which is currently anticipated to be in February 2012. Continued debate over the final form of the NHS Bill means that the role the GPs will take in the revised structure of the NHS has yet to be defined, but they will continue to be the cornerstone of primary care delivery. The question of who will take ownership for the existing NHS primary care estates once the PCT structure is dissolved is still being debated, although it is anticipated that this will be the commissioning groups.

A continuing theme in the discussions over the restructuring is the ability for the NHS to deliver efficiencies in the provision of healthcare. The provision of modern purpose-built and flexible primary care properties, such as those in the Fund's portfolio, is consistent with the search for further efficiencies in NHS operations. Demand for new primary care premises continues with a majority of premises still not fit for purpose.

Portfolio update

The Fund now has committed investment of £249.8 million⁶ at today's date in 63 primary healthcare properties. The annualised rent roll of the portfolio properties is £15.4 million at 5 December 2011.

The valuation of the portfolio undertaken by Jones Lang LaSalle LLP (formerly King Sturge LLP), independent valuers to the Group, as at 30 September 2011 stood at £241.0 million on the basis that all properties were complete, reflecting a net initial yield of 5.84%. This reflects a marginal improvement of the property values during the year to the uplift reported in the 30 September 2010 valuation of 5.88% net initial yield.

At 5 December 2011, the portfolio of properties had an average age of 4.2 years, remaining lease length of 17.8 years and an average value of £3.8 million. Of the rents payable, 90.8% are from government-funded doctors and Primary Care Trusts/Local Health Boards, 7.6% from pharmacies and 1.6% from other parties.

In the year, successful completion was achieved of properties under construction at Bilborough, Halifax, Apsley and Bermondsey, a total commitment of £11.5m. All of the completed projects were delivered within budget. The forward purchase of Clapham, expected to complete in August 2011, is now expected to complete in the first quarter of 2012.

Construction continued on the existing project at Hounslow, and commenced on the properties at Raynes Park and West Wirral. Construction also commenced on the new properties at Woolwich Royal Arsenal, Rochdale, Hirwaun, East Cowes, Corby Glen and Grangetown. Of the projects under construction as at 30 September 2011, the properties at Hounslow and Woolwich Royal Arsenal have been completed, on time and within budget.

Including the purchase of a completed medical centre at Immingham in February 2011, the Fund has acquired new investments representing a total commitment of £38.7 million.

The Fund has also approved a number of investment opportunities which are in the process of being completed as acquisitions. These approved investments represent a further commitment of £34.7 million, and comprise nine new properties. The combined committed and approved investment totals £73.4 million at a cash yield of 6.16%.

The Pen-y-bryn Surgery investment property at Gorseinon, West Glamorgan was sold in April 2011 at its valuation of £0.6 million. This was the smallest property within the portfolio and had been acquired as part of the initial portfolio of investment properties in November 2006. The intention to sell a number of the smaller and older properties remains, and a number of further disposal opportunities have been identified.

As noted the valuation yield on investments is 5.84% compared with the Group's weighted average fixed rate debt of 5% and a benchmark 20-year gilt rate of 3.54% at 30 September 2011. With committed and approved investment since 1 October 2010 of £73.4 million, further identified investment opportunities of approximately £54.1 million, and an unprecedented spread between the acquisition yields of these opportunities, the cost of long term debt rates that we can fix at, and Government gilts, the Fund is in an excellent position to continue to grow and to deliver value to its shareholders.

Asset management

During the year to 30 September 2011, 33 leases and rents of £3.3 million have been reviewed and the equivalent of a 2.3% per annum increase was achieved. Of these reviews, 1.9% per annum was achieved on open market reviews, 2.5% per annum was achieved on fixed uplift reviews and 4.3% on RPI based rental reviews. An increase in open market reviews has been seen in respect of the most recent review dates, with open market reviews broadly tracking RPI over time. Reviews of £4.5 million of passing rent are currently under negotiation as at 5 December 2011.

Of the £15.4 million annualised rent roll at 5 December 2011, there is £12.1 million, 78.4%, subject to open market review, £2.6 million, 17.1%, subject to RPI reviews and £0.7 million, 4.5%, subject to fixed uplift reviews, of an average 2.5% per annum increase. The proportion of rent subject to RPI uplifts has increased over the last five years from 6.0% to 17.1%.

Cash and debt

As at 30 September 2011, the Group had net debt of £82.4 million, which is 37.8% of gross assets excluding cash and goodwill (30 September 2010: £83.6 million and 45.7%). In relation to the Aviva Loan, the debt service cover ratio was 194.3% versus a covenant of 140% and the loan to value ratio was 65.4% against a covenant of 75%.

Although in accordance with IFRS, the net assets on the Consolidated Statement of Financial Position do not reflect the fair value of the £100 million Aviva facility. Advice from the Group's lenders indicates that the fixed interest rate for a loan with similar terms taken out at 30 September 2011 would have had a margin of 2% over the gilt yield, equivalent in aggregate to 5.54%. On this basis, the mark-to-market benefit of the facility at September 2011 was £4.0 million, or 2.1 pence per share. Incorporating this benefit would take the Group's net asset value to £131.0 million or 68.0 pence per share. The debt benefit as at 5 December 2011 was £1.6 million, or 0.8p per share due to the decrease in long term interest rates since the end of the year.

The Deutsche Postbank facility was extended at 1 August 2011 by £11.6 million, bringing the total facility to £37.1 million. As at 30 September 2011 only £0.5 million of the facility was drawn. A further £7 million of this facility has since been drawn down achieving a fixed all-in interest rate of 3.14% using interest rate swaps, and any further draw downs will also be fixed at the time the funds are drawn.

The Group has also agreed terms for a further 20-year debt facility of £50 million with Aviva. The facility will be interest only for the first ten years, and will later amortise at £2 million per annum over the second ten years with the remaining principle repayable on expiry of the facility. The interest rate on this facility will be fixed at completion of the agreement. If this entire facility was drawn down as at 5 December 2011, it could be fixed at an all-in interest rate of 4.71%.

The spreads between the yields the Fund can acquire the properties at, the cost of long term debt that we can fix, and Government gilts are unprecedented. Both the Deutsche Postbank and new Aviva facilities are working well for investors, and it is pleasing to report that based on current rates these facilities would lower the weighted average debt cost when fully drawn to 4.82%. The average unexpired term of the Group's debt is 22.4 years.

Discounted cash flow valuation of assets and debt

On the Fund's behalf the Investment Adviser has carried out a discounted cash flow ("DCF") valuation of the Group assets and associated debt at each period end. The basis of preparation is similar to that calculated by infrastructure funds. The values of each investment are derived from the present value of the property's expected future cash flows, after allowing for debt and taxation, using reasonable assumptions and forecasts based on the predominant lease at each property. The total of the present values of each property and associated debt cash flows so calculated is then aggregated with the surplus cash position of the Group.

At 30 September 2011, the DCF valuation was £169.8 million or 88.2p per share compared with £129.3 million or 91.5p per share at 30 September 2010.

The discount rates used are 7% for completed and occupied properties and 8% for properties under construction. These represent 2.5% and 3.5% risk premiums to an assumed 4.5% long-term gilt rate. The weighted average discount rate is 7.20% and this represented a 3.66% risk premium to the 20 year gilt rate at 30 September 2011 of 3.54%.

The discounted cash flows assume an average 2.5% per annum increase in individual property rents at their respective review dates. Residual values continue to be based upon capital growth at 1% per annum from the current valuation until the expiry of leases, (when the properties are notionally sold), and also assuming the current level of borrowing facilities.

Interest in voting rights of the Company

The Investment Adviser has beneficial interest in the following number shares in the Company:

	2011	2010
MedicX Adviser Limited	669,225	622,456

During the year the Investment Adviser received dividends on the holding in the Company in addition to fees received for services. With the Scrip Dividend Scheme in place, the Investment Adviser elected to receive their dividends in the form of new Ordinary Shares. The cash equivalent of the dividends received by the Investment Adviser was £35,045. In 2010, the Investment Adviser received dividends as a combination of shares and cash payment. The cash equivalent of the dividends received in that year was £32,443.

Sensitivities

The Investment Adviser has carried out sensitivities to the discounted cash flow net asset value. For the discounted cash flow net asset value to equate to the share price as at 5 December 2011 of 74.00 pence per share, the discounted cash flow calculation would have to assume a 0.3% decrease in rents per annum, or a 1.4% capital reduction per annum, or a weighted average discount rate of 9.3%. These reductions in rents and capital values would need to take place every year until the expiry of individual property leases.

Taking the adjusted net asset value plus the estimated benefit of fixed rate debt of 68.0 pence per share and assumed purchaser costs of 7.3 pence per share, an implied net initial yield of 5.29% is required get to the discounted cash flow net asset value of 88.2 pence.

A review of sensitivities has been carried out in relation to the valuation of properties. A 0.5% movement in net initial yield would have an approximate impact of 10.8 pence per share on the adjusted net asset value. If valuation yields firmed by 0.5%, or a net initial yield of 5.34%, the adjusted net asset value would increase to 77.7 pence per share and the adjusted net asset value plus debt would increase to 79.8 pence per share.

Pipeline and investment opportunity

The spread between the yields the Fund can acquire properties at, the cost of long term debt that we can fix, and Government gilts are unprecedented. The Investment Adviser has continued to successfully source properties both through the MedicX Group's development arm, MedicX Property, and through its established relationships with investors, developers and agents in the sector. The Fund currently has access to a property pipeline, subject to contract, which is already estimated to be worth approximately £54.1 million in value when fully developed. Including the committed and approved investments of £73.4 million, and taking into account the available debt facilities, the Investment Adviser supports the Board's view that new equity raising should be considered in the new year.

Keith Maddin Chairman

Mike Adams Chief Executive Officer

Mark Osmond Chief Financial Officer

MedicX Adviser Ltd

1 Based on share price growth between 30 September 2010 and 30 September 2011 and dividends received during the year

2 Ex dividend date 16 November 2011, Record date 18 November 2011, Payment date 30 December 2011

3 Total dividends declared divided by share price at 5 December 2011 (2010: at 6 December 2010)

4 Excluding revaluation impact, deferred taxation and performance fees

5 Adjusted to exclude goodwill and the impact of deferred tax not expected to crystallise

6 Includes completed properties, properties under construction and committed investment

7 Forecast interest payments divided by forecast income from secured properties over the next year

Principal risks and uncertainties

The key risk factors relating to the Group are listed below:

· A property market recession could materially adversely affect the value of properties.

· Property and property related assets are inherently difficult to value and valuations are subject to uncertainty. There can be no assurance that the estimates resulting from the valuation process will reflect actual realisable sale prices.

· Rental income and the market value for properties are generally affected by overall conditions in the local economy, demographic trends, inflation and changes in interest rates, which in turn may impact upon the demand for properties. Movements in interest rates may also affect the cost of financing.

· Investments in property are relatively illiquid and usually more difficult to realise than listed equities or bonds.

· Any change in the tax status or tax residence of the Company or in tax legislation or practice (in Guernsey or the UK) may have an adverse effect on the returns available on an investment in the Company. Similarly, any changes under Guernsey company law may have an adverse impact on the Company's ability to pay dividends.

· The rental costs of premises used for the provision of primary healthcare are reimbursed to GPs (subject to the fulfilment of certain standard conditions) by the PCTs. In light of the Health and Social Care Bill and the proposal that PCTs will be abolished by 2013, there is no guarantee that rental costs will continue to be reimbursed to GPs in this way or what will replace the PCTs under the existing arrangements. The Board is monitoring government proposals in relation to PCTs.

· Initiatives introduced by the previous government pledged increased funding to provide modernisation of GP premises. Whilst the Company is confident that the modernisation program is not sensitive to the change in government, the Company has no influence over the future direction of primary care initiatives in the public sector. In particular, a reduction in the funding of PCTs or their successors may reduce the funds available for the development of, or investment in, NHS properties and adversely affect the Company's ability to grow its assets and source appropriate opportunities in accordance with its investment policy.

· In the event that a PCT or other tenant found itself unable to meet its liabilities the Group may not receive rental income when due and/or the total income received may be less than that due under the relevant contract. Budgetary restrictions might restrict or delay the number of opportunities available to the Company.

· Prospective investors should be aware that the Group uses and intends to use borrowings to raise capital, which may have an adverse impact on net asset value or dividends, and that borrowings may not be available at the appropriate time or at appropriate terms.

· The Company is in compliance with financial covenants in its borrowing facilities. The Directors consider a breach of the Company's financial covenants under its borrowing facilities to be very unlikely. However, should such circumstances arise where it would be unable to remedy such breach, the Group may be required to repay such borrowings requiring the Group to sell assets at less than their market value.

· The Company is exposed to risks and uncertainties on financial instruments. The principal areas are credit risk (the risk that a counterparty fails to meet its obligations), interest rate risk (the risk of adverse interest rate fluctuations), and liquidity risk (the risk that funding is withdrawn from the business).

The principal risks and uncertainties in relation to financial instruments are set out in note 18. More information on the principal financial risks and how they are mitigated can be found in the note.

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2011

		2011	2010
	Notes	£'000	£'000

Income
Rent receivable	2	11,768	10,825
Finance income	2	168	43
Other income	2	706	250
Total income		12,642	11,118

Valuation and impairment adjustments
Net valuation gain on investment properties	10	3,409	6,180
Charge for impairment of goodwill	8	(514)	(605)
Total valuation and impairment adjustments		2,895	5,575

Expenses
Loss on disposal of property	10	12	-
Direct property expenses		214	190
Investment advisory fee	20	2,250	2,250
Investment advisory performance fee	20	282	89
Property management fee	20	337	331
Administrative fees	20	51	58
Audit fees	4	74	74
Professional fees		198	227
Directors' fees	3	125	117
Other expenses		214	172
Finance costs	5	5,125	5,024
Total expenses		(8,882)	(8,532)

Profit before tax		6,655	8,161

Taxation	6	665	(186)

Profit attributable to equity holders of the parent		7,320	7,975

Total comprehensive income attributable to equity holders of the parent		7,320	7,975

Earnings per ordinary share Basic and diluted	9	4.3p	6.4p

1. All items in the above statement are derived from continuing operations.

2. Included in note 9 is an adjusted earnings per share calculation that adjusts for the impact of deferred tax and goodwill which, based on the expected manner of realisation of the carrying amount of investment properties, is unlikely to crystallise.

The accompanying notes form an integral part of the financial statements.

Consolidated Statement of Financial Position

As at 30 September 2011

		2011	2010
	Notes	£'000	£'000
Non-current assets
Goodwill	8	6,410	6,924
Investment properties	10	213,603	180,447
Total non-current assets		220,013	187,371

Current assets
Trade and other receivables	11	5,125	2,475
Cash and cash equivalents	16	18,112	17,289
Total current assets		23,237	19,764

Total assets		243,250	207,135

Current liabilities
Trade and other payables	12	9,316	6,150

Non-current liabilities
Long-term loans	13	100,443	100,859
Performance fee provision	7	-	342
Deferred tax liability	6	5,914	6,579
Total non-current liabilities		106,357	107,780

Total liabilities		115,673	113,930

Net assets		127,577	93,205

Equity
Share capital	14	-	-
Share premium	14	80,315	44,132
Distributable reserves	15	48,752	57,883
Accumulated losses		(1,490)	(8,810)

Total attributable to equity holders of the parent		127,577	93,205

Net asset value per share Basic and diluted	9	66.2p	66.0p

The financial statements were approved and authorised for issue by the Board of Directors on 7 December 2011 and were signed on its behalf by

Shelagh Mason

Director

The accompanying notes form an integral part of the financial statements.

Consolidated Statement of Changes in Equity

For the year ended 30 September 2011

	Notes	Share Premium £'000	Distributable Reserve £'000	Accumulated Losses £'000	Total £'000

Balance at 1 October 2009		18,284	64,476	(16,785)	65,975
Proceeds on issue of shares		26,502	-	-	26,502
Share issue costs		(654)	-	-	(654)
Total comprehensive income for the year		-	-	7,975	7,975
Dividends paid	17	-	(6,593)	-	(6,593)
Balance at 30 September 2010		44,132	57,883	(8,810)	93,205
Proceeds on issue of shares		37,077	-	-	37,077
Share issue costs		(894)	-	-	(894)
Total comprehensive income for the year		-	-	7,320	7,320
Dividends paid	17	-	(9,131)	-	(9,131)
Balance at 30 September 2011		80,315	48,752	(1,490)	127,577

The accompanying notes form an integral part of the financial statements.

Consolidated Statement of Cash Flows

For the year ended 30 September 2011

		2011	2010
	Notes	£'000	£'000
Operating activities
Profit before taxation		6,655	8,161
Adjustments for:
Net valuation (gain) on investment properties		(3,409)	(6,180)
Goodwill impairment		514	605
Loss on disposal of investment property		12	-
Financial income receivable		(168)	(43)
Finance costs payable and similar charges		5,125	5,024
		8,729	7,567

Increase in trade and other receivables		(2,613)	(536)
Increase in trade and other payables		2,763	85
Interest paid		(5,297)	(5,106)
Interest received		131	43
Net cash inflow from operating activities		3,713	2,053

Investing activities
Proceeds from sale of investment properties		623	-
Additions to investment properties and properties under construction		(30,076)	(11,364)
Net cash outflow from investing activities		(29,453)	(11,364)

Financing activities
Net proceeds from issue of share capital		35,779	25,848
Net repayment of long-term borrowings		(489)	(12)
Dividends paid		(8,727)	(6,408)
Net cash inflow from financing activities		26,563	19,428

Increase in cash and cash equivalents		823	10,117

Opening cash and cash equivalents		17,289	7,172

Closing cash and cash equivalents	16	18,112	17,289

The accompanying notes form an integral part of the financial statements

Notes to the Financial Statements

For the year ended 30 September 2011

1. Business and investment objective

MedicX Fund Limited ("the Company") and its subsidiaries (together "the Group") have been established for the purpose of investing in primary healthcare properties in the United Kingdom. The Group's investment objective is to achieve rising rental income and capital growth from the ownership of a portfolio of mainly modern, purpose built, primary healthcare properties. The Group receives investment and property advice and management services from MedicX Adviser Ltd, a member of the MedicX Group, an independent group of companies which is a specialist investor in, developer of and manager of primary healthcare properties.

The Group's investment policy is to acquire primary healthcare properties in the United Kingdom that are principally let to GPs and Primary Care Trusts, some of which may have potential for enhancement, which will be sourced in the market by MedicX Adviser Ltd. Acquisitions may include properties that form part of the MedicX Group's own pipeline of development and investment opportunities.

2. Principal accounting policies

Basis of preparation and statement of compliance

The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB'') and as adopted by the European Union, interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC'') and applicable legal and regulatory requirements of Guernsey Law. The financial statements have been prepared on a going concern basis. The principal accounting policies are set out below.

Impact of revision to International Financial Reporting Standards

The accounting policies applied and the presentation of figures are consistent with those of the annual financial statements for the year ended 30 September 2010.

The following standards and interpretations have been issued by the IASB and IFRIC with effective dates falling after the date of these financial statements. The Board have chosen not adopt early any of the revisions contained within these standards in the preparation of these financial statements:

International Accounting Standards (IAS/IFRS)		Effective date - periods beginning on or after

IFRS 7	Financial instruments: Disclosure	1 July 2011
IFRS 9	Financial instruments: Recognition and measurement	1 January 2013
IAS 24	Related Party Disclosures	1 January 2011
IFRS 10	Consolidated financial statements	1 January 2013
IFRS 11	Joint arrangements	1 January 2013
IFRS 12	Disclosure of interests in other entities	1 January 2013
IFRS 13	Fair value measurement	1 January 2013

Only the amendment to IFRS 9 has been adopted by the European Union at the date of approval of these financial statements.

2. Principal accounting policies (continued)

Basis of consolidation

The group financial statements consolidate the financial statements of MedicX Fund Limited and entities controlled by the Company (its subsidiary undertakings) made up to 30 September 2011. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to benefit from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Goodwill

Goodwill on acquisitions comprises the excess of the aggregate of the fair value of the consideration transferred, the fair value of any previously held interests, and the recognised value of the non-controlling interest in the acquiree over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed.

Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for impairment annually.

Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being investment in primary healthcare properties in the United Kingdom.

Revenue recognition

Rent receivable comprises rent for the year in relation to the Group's investment properties exclusive of value added tax. Rent is recognised on a straight line basis over the period invoiced.

Other income includes licence fee income, which is receivable on properties under construction, this being a mechanism to incentivise developers to complete projects on time. Licence fee income is recognised on an accruals basis exclusive of value added tax.

Finance income from cash balances held at banks is included in the financial statements as it is earned.

Expenses

All expenses are accounted for on an accruals basis.

Employees

The Group has no employees.

Cash and cash equivalents

Cash on hand and deposits in banks are carried at cost. Cash and cash equivalents are defined as cash in hand, demand deposits, and highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash in hand and deposits in banks.

Trade and other receivables

Trade and other receivables are measured at initial recognition at their invoiced value inclusive of any value added taxes that may be applicable. Provision is made for any doubtful debts which are not deemed recoverable.

Trade and other payables

Trade and other payables are recognised and carried at their invoiced value inclusive of any value added taxes that may be applicable.

2. Principal accounting policies (continued)

Bank loans and borrowings

All bank loans and borrowings are initially recognised at cost, being fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on settlement.

Taxation

The tax liability represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year.

Deferred tax is the tax that may become payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Full provision is made for deferred tax assets and liabilities arising from all temporary differences between the recognition of gains and losses in the financial statements and recognition in the tax computation.

A net deferred tax asset is recognised only if it is probable that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.

Deferred tax assets and liabilities are calculated at the tax rates expected to be effective at the time the temporary differences are expected to reverse.

Deferred tax assets and liabilities are not discounted.

Investment properties

The Group's completed investment properties are held for long-term investment. Freehold properties acquired are initially recognised at cost, being fair value of consideration given including transaction costs associated with the property. After initial recognition, freehold properties are measured at fair value, with unrealised gains and losses recognised in the consolidated statement of comprehensive income. Both the base costs and valuations take account of core fixtures and fittings.

Long-leasehold properties are accounted for as freehold properties and, after initial recognition at cost, are measured at fair value on the same basis as freehold properties above.

Investment properties under construction are initially recognised at cost and are revalued at the period end as determined by professionally qualified external valuers. Gains or losses arising from the changes in fair value of investment properties under construction are included in the consolidated statement of comprehensive income in the period in which they arise.

The fair value of completed investment properties and investment properties under construction is based upon the valuations of the properties as provided by Jones Lang LaSalle LLP (formerly King Sturge LLP), an independent firm of chartered surveyors, as at the period end, adjusted as appropriate for costs to complete.

Costs of financing specific developments are capitalised and included in the cost of each development. During the year a portion of the Aviva loan facility disclosed in note 13 was utilised to fund development work on investment properties under construction. Interest costs attributable to development work in progress of £306,000 (2010: £64,000) were capitalised.

2. Principal accounting policies (continued)

Derivative financial instruments and hedging activities

The Group had no derivative financial instruments during the period.

Finance costs

Borrowing costs are taken to the consolidated statement of comprehensive income in the year to which they relate on an accruals basis except where they relate to properties under construction when borrowing costs are capitalised.

Impairment of assets

The Group assesses annually whether there is any indication that any of its assets have been impaired. If such indication exists, the asset's recoverable amount is estimated and compared to its carrying value. Where it is impossible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the smallest cash-generating unit to which the asset is allocated.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount an impairment loss is recognised immediately in Consolidated Statement of Comprehensive Income, unless the asset is carried at a revalued amount, in which case the impairment loss is recognised as revaluation decrease.

For goodwill, intangible assets that have an indefinite life, and intangible assets not yet available for use, the recoverable amount is estimated annually and whenever there is an indication of impairment.

Use of estimates

In the process of applying the Group's accounting policies described above, the Directors are required to make certain judgements and estimates to arrive at fair carrying value for its assets and liabilities. Significant areas requiring judgement in the preparation of these financial statements include the assessment of the fair value of investment properties and investment properties under construction described above, the impairment of goodwill and the deferred tax provision required on latent gains, which are themselves an estimate as both items rely on the valuations and on an assessment of the nature of expenditure for taxation purposes. The valuations are performed by a firm of independent chartered surveyors applying current Appraisal and Valuation Standards of The Royal Institution of Chartered Surveyors.

3. Directors' fees

	2011	2010
	£'000	£'000
During the year each of the directors received the following fees:
D Staples (Chairman)	45	45
S Mason	32	30
C Bennett (Audit Committee Chairman)	36	32
J Hearle	32	30
	145	137
Less additional fees paid in relation to fundraising	(20)	(20)
Total charged in the statement of comprehensive income	125	117

The above fees were charged to the consolidated statement of comprehensive income. Those fees paid in relation to the fundraising, reflecting the additional time and duties involved in that exercise, have been expensed against the share premium arising from the issue of new shares at the time of the fundraising.

4. Auditors' remuneration

The amount disclosed in the consolidated statement of comprehensive income relates to an accrual for audit fees for the year ending 30 September 2011, payable to PKF (UK) LLP.

Fees paid to PKF (UK) LLP include the following amounts:

	2011	2010
	£'000	£'000
Audit fees for the current year	74	74
Total audit fees	74	74
Review of the interim report	16	15
Tax compliance	26	47
Other tax services	11	49
For acting as reporting accountants in respect of the share issue	30	30
Other professional services	-	3
Total audit and other fees	157	218

5. Finance costs

	2011	2010
	£'000	£'000

Interest payable on long-term loan	5,431	5,088
Interest capitalised on properties under construction	(306)	(64)
	5,125	5,024

During the year interest costs on funding attributable to investment properties under construction were capitalised. The funding was sourced from the Aviva loan facility which has an effective interest rate of 5.008%.

6. Taxation

	2011	2010
	£'000	£'000
Current Tax
Corporate tax charge for the year	-	-
Corporate tax charge for prior periods	-	-

Deferred Tax
Change in corporate tax rate	470	-
On fair value movement for the year	195	(186)
Total tax charged in the statement of comprehensive income	665	(186)

The Board have estimated that for the year under review the Group does not have any profits chargeable to tax in jurisdictions outside Guernsey.

The Company has obtained exempt company status in Guernsey under the terms of Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 so that it is exempt from Guernsey taxation on income arising outside Guernsey and on bank interest receivable. The Company is, therefore, only liable to a fixed fee of £600 per annum. The Directors intend to conduct the Group's affairs such that the Company continues to remain eligible for the exemption. Guernsey companies are subject to UK taxation on UK net rental income. During the year no tax arose in respect of the income of any of the Guernsey companies. The Company's UK subsidiaries, MedicX Properties II Ltd, MedicX Properties III Ltd, MedicX Properties IV Ltd, MedicX (Verwood) Ltd and MedicX (Istead Rise) Ltd are subject to United Kingdom corporation tax on their profits less losses.

6. Taxation (continued)

A reconciliation of the current tax charge/credit to the notional tax charge/credit applying the Schedule A income tax rate of 20% (2010: 20%) and at the average standard rate of UK corporation tax of 27% (2010: 28%) where appropriate is set out below:

				2011		2010
				£'000		£'000

Profit on ordinary activities before tax				6,506		8,161

Profit on ordinary activities multiplied by the average standard rate of corporation tax in the UK of 27% (2010: 28%)				1,757		2,285
Additional taxable income - gains				-		666
Expenses not deductible for tax purposes				2,306		1,147
Profits not subject to UK taxation				(6,845)		(5,791)
Effect of change in tax rate on brought forward deferred tax liability				(470)		-
Effect of difference in deferred and corporation tax rates				(26)		-
Effect of different rates of tax on income				(1,013)		(196)
Current year losses carried forward				3,626		2,075
Total tax charged in the statement of comprehensive income				(665)		186
Deferred tax liability/(asset) in respect of:
	Fair value gain on acquisition	Fair value gains post acquisition	Accelerated capital allowances		Unrelieved management expenses		Total
	£'000	£'000	£'000		£'000		£'000

At 1 October 2009	6,774	-	1,641		(2,022)		6,393
Released/provided in year	(605)	166	199		426		186
At 30 September 2010	6,169	166	1,840		(1,596)		6,579
Change in tax rate	(440)	(12)	(129)		111		(470)
Released/provided in year	(77)	(154)	182		(146)		(195)
At 30 September 2011	5,652	-	1,893		(1,631)		5,914

As required by IAS 12 "Income taxes", full provision has been made for the temporary timing differences arising on the fair value gain of investment properties held by UK resident companies that have passed through the Group's consolidated statement of comprehensive income. In the opinion of the Directors, this provision is only required to ensure compliance with IAS 12. It is the Directors' view that the deferred tax attributable to the fair value gain on the Group's investment property portfolio is unlikely to crystallise as, in common with practice in the sector, the Group would most likely sell the company that holds the property portfolio rather than sell an individual property. Had the provision not been previously made, the Group's earnings for the year would be £683,000 lower (2010: £439,000 lower).

There are accumulated tax losses within MedicX Properties I Limited, MedicX Properties V Limited and MedicX Properties VI Limited totalling £53.0 million (2010: £28.5 million) which are currently not recognised within the financial statements of the Group due to uncertainty over whether these will be completely utilised in the future as the losses can only be utilised within the company in which they arose.

7. Performance fee provision

	2011	2010
	£'000	£'000

Brought forward	342	766
Provided in year	282	89
Payable at year end	(624)	(513)
At 30 September	-	342

Full provision was made for performance fees payable to the Investment Adviser that were in excess of 1.5% of gross assets (excluding cash) for the period and were carried forward for payment in future years.

The amount payable at year end has been transferred to trade and other payables due to its short term nature.

8. Goodwill

	2011	2010
	£'000	£'000

Brought forward	6,924	7,529
Impairment recognised in year	(514)	(605)
Carried forward	6,410	6,924

Goodwill arose in a prior period on the acquisitions of MedicX Properties II Ltd, MedicX Properties III Ltd, MedicX Properties IV Ltd and MedicX (Istead Rise) Ltd and was primarily due to the requirement of IAS 12 "Income taxes" to recognise deferred tax on the fair value gains at the date of acquisition. In keeping with common practice within the property investment sector, the consideration for the acquisitions did not reflect such a deferred tax liability as it is often regarded as unlikely to crystallise as it is usually possible to sell the company that holds the property portfolio rather than sell an individual property. The impact of providing for such deferred tax gave rise to an excess of the fair value of the consideration paid over the fair value of the net assets acquired as determined under International Accounting Standards. Consequently, goodwill is inextricably linked to the fair value of the underlying property portfolio acquired as they form a single cash generating unit.

As a result of the change in corporation tax rate from 28% to 26% the impact of any latent UK capital gains tax on the properties acquired in this manner is reduced, and has resulted in a release of £440,000 which represents the change in the carrying value of deferred tax on fair value gain on acquisitions that is solely attributable to the tax rate change (refer to note 6). Consequently when looking at the cash generating unit as a whole, goodwill is impaired to the extent of an amount equivalent to the change in the deferred tax liability attributed to those properties on acquisition caused by the change in the corporate tax rate, but net of a £3,000 adjustment relating to the sale of a property.

The Board have reviewed the carrying value of goodwill and consider it to be impaired to the extent of the movement in the deferred tax liability relating to fair value gains on acquisition (refer to note 6).

9. Earnings and net asset value per ordinary share

Basic and diluted earnings and net asset value per share

The basic and diluted earnings per ordinary share are based on the gain for the year attributable to Ordinary Shares of £7,320,000 (2010: £7,975,000) and on 170,516,709 (2010: 124,587,668) Ordinary Shares being the weighted average aggregate of Ordinary Shares in issue calculated over the year. This gives rise to a basic and diluted earnings per Ordinary Share of 4.3 pence (2010: 6.4 pence) per ordinary share.

The basic and diluted net asset value per ordinary share are based on the net asset position at the period end attributable to Ordinary Shares of £127,577,000 (2010: £93,205,000) and on 192,604,010 (2010: 141,317,110) Ordinary Shares being the aggregate of Ordinary Shares in issue at the period end. This gives rise to a basic and diluted net asset value per Ordinary Share of 66.2 pence per Ordinary Share (2010: 66.0 pence per Ordinary Share).

Adjusted earnings per share and net asset value per share

The Directors believe that the following adjusted earnings per Ordinary Share and net asset value per Ordinary Share are more meaningful key performance indicators for the Group.

	2011	2010

Adjusted earnings per Ordinary Share - basic and diluted	4.2p	7.0p
Adjusted net asset value per Ordinary Share - basic and diluted	66.0p	65.7p

The adjusted earnings per Ordinary Share is based on the gain for the year of £7,320,000 (2010: £7,975,000) attributable to Ordinary Shares, adjusted for the impact of the deferred tax gain and goodwill impairment attributable to Ordinary Shares for the year of £665,000 (2010: charge of £186,000) and £514,000 (2010: £605,000), respectively, giving an adjusted earnings profit of £7,169,000 (2010: £8,766,000) and on 170,516,709 (2010: 124,587,668) Ordinary Shares being the weighted average number of Ordinary Shares in issue in the year.

The adjusted net asset value per Ordinary Share is based on the net asset position attributable to Ordinary Shares at the period end of £127,577,000 (2010: £93,205,000) as adjusted for deferred tax of £5,914,000 (2010: £6,579,000) and goodwill of £6,410,000 (2010: £6,924,000), giving an adjusted net assets figure of £127,081,000 (2010: £92,860,000) and on 192,604,010 (2009: 141,317,110) Ordinary Shares, being the aggregate of Ordinary Shares in issue at the period end.

In common with practice in the sector, the Group would most likely sell the UK company or companies that hold the properties rather than sell an individual property. Consequently, it is the Directors' view that the liability represented by the deferred tax provision is unlikely to crystallise. The goodwill arose on prior period acquisitions and was due to the requirement to recognise deferred tax on fair value gains on acquisition (refer to note 8).

10. Investment properties

Investment properties are initially recognised at cost, being fair value of consideration given including transaction costs associated with the property. After initial recognition, investment properties are measured at fair value, which has been determined based on valuations performed by Jones Lang LaSalle LLP (formerly King Sturge LLP) as at 30 September 2011. In accordance with industry standards, the valuation is net of purchaser costs which are approximately 5.8% (2010: 5.75%) of purchase price.

Investment properties under construction are initially recognised at cost, and are subsequently measured at fair value as at the year end. The fair value has been determined based on valuations performed by Jones Lang LaSalle LLP as at 30 September 2011. In accordance with industry standards, the valuation is the net of completed property value less the remaining costs to complete the property.

The freehold and long leasehold interests in the property investments of the Group were valued at an aggregate of £241,025,000 as at 30 September 2011 by Jones Lang LaSalle LLP. This valuation assumes that all properties, including those under construction, are complete. The difference between the total valuation and the carrying value is the cost to complete those properties under construction and other fair value adjustments as at 30 September 2011.

The Valuer's opinion of market value was primarily derived using comparable recent market transactions on arm's length terms. Jones Lang LaSalle LLP (as King Sturge LLP) have previously valued these properties for reporting purposes as at 31 March 2008, 30 September 2008, 31 March 2009, 31 December 2009, 31 March 2010, 30 June 2010, 30 September 2010, 31 December 2010, 31 March 2011 and 30 June 2011.

The valuation was carried out in accordance with the requirements of the Valuation Standards published by the Royal Institution of Chartered Surveyors, and accounting standards. The properties were valued to market value assuming that they would be sold in prudent lots (i.e. not as portfolios) subject to the existing leases, or agreements for lease where the leases had not yet been completed at the date of valuation.

If the valuation yield were to shift by 0.25%, this would result in an impact on the valuation of the properties of approximately £10,300,000.

	Completed investment properties	Properties under construction	Total investment properties
	£'000	£'000	£'000

Fair value/cost 30 September 2009	153,069	9,834	162,903
Additions	3,540	7,807	11,347
Adjustment to base cost	17	-	17
Transfer to completed properties	12,907	(12,907)	-
Fair value revaluation	6,692	(512)	6,180
Fair value/cost 30 September 2010	176,225	4,222	180,447

Additions	6,436	24,096	30,532
Adjustment to base cost	(150)	-	(150)
Disposals at valuation	(635)	-	(635)
Transfer to completed properties	11,509	(11,509)	-
Fair value revaluation	2,204	1,205	3,409

Fair value 30 September 2011	195,589	18,014	213,603

10. Investment properties (continued)

Some of the investment properties are security for the long-term loan as disclosed in note 13. Of the completed investment properties £43,670,000 (2010: £39,810,000) are long-leasehold properties.

In April 2011 the Pen-y-bryn Surgery investment property in Gorseinon, West Glamorgan was sold at its valuation of £635,000. The loss on the disposal of £12,000 recognised in the Consolidated Statement of Comprehensive Income relates to agency commissions and other conveyance fees incurred as part of the sale process. Aitchison Rafferty acted as the estate agent on behalf of the Company, and their commission is included in the amounts disclosed within note 20.

During the year a portion of the Aviva loan facility disclosed in note 13 was utilised to fund development work on investment properties under construction. Interest costs attributable to development work in progress of £306,000 (2010: £64,000) were capitalised.

11. Trade and other receivables

	2011	2010
	£'000	£'000

Rent receivable	1,325	1,879
VAT recoverable	2,137	35
Other debtors and prepayments	1,663	561
	5,125	2,475

12. Trade and other payables

	2011	2010
	£'000	£'000

Mortgage	52	49
Trade creditors	1,810	196
Deferred rental income	2,794	2,534
Interest payable and similar charges	1,111	1,053
Accruals	2,840	1,816
Other creditors	709	502
	9,316	6,150

The mortgage is secured on one investment property and has a remaining term of 10 years.

13. Long-term loans

	2011	2010
	£'000	£'000
Aviva loan facility:
Amount drawn down	99,600	100,000
Loan issue costs	(403)	(386)
Amortisation of loan issue costs	54	23
	99,251	99,637
Deutsche Postbank loan facility:
Amount drawn down	500	500
Loan issue costs	(449)	(471)
	51	29

Mortgage due after more than one year	1,141	1,193
	100,443	100,859

Repayments of the loans listed above, including amounts due within one year shown in note 12, fall due as follows:

	2011	2010
	£'000	£'000

Due within one year	52	49
Between one and two years	55	52
Between two and five years	239	177
Over five years	100,149	100,630
	100,495	100,908

All amounts are repayable by instalments.

In a prior year, previous loan facilities taken out by MedicX Properties I Limited were refinanced and replaced by loans to MedicX Properties I Limited: £30,000,000, MedicX Properties II Ltd: £33,000,000, MedicX Properties III Ltd: £9,000,000 and MedicX Properties IV Ltd: £28,000,000 with The General Practice Finance Corporation Limited ("GPFC") at a fixed rate of 5.008% on an interest only basis which was fully drawn down on 1 December 2006, with the cash held on deposit to meet future investment requirements. This loan is due for repayment in its entirety on 1 December 2036. GPFC is now trading as Aviva Commercial Finance (formerly Norwich Union Commercial Finance).

Under the terms of the Aviva loan facilities, further charges are incurred when amounts are taken off deposit and utilised for investment purposes. The charge for these withdrawals depends on the quantum of the withdrawal and will be recognised as and when withdrawals are made, and are added to the loan issue costs.

The value of the loan, including amounts available to be drawn, on an amortised cost basis at 30 September 2011 was £99,651,000 (2010: £99,637,000).

The Group does not mark to market its £100 million fixed interest debt in its financial statements. A mark to market calculation gives an indication of the benefit or cost to the Group of the fixed rate debt given the prevailing cost of debt over the remaining life of the debt. An approximate mark to market calculation has been undertaken following advice from the Group's bankers, with reference to the fixed interest rate on the £100 million debt, and the fixed interest rate, including margin, achievable on the last business day of the financial year for a loan with similar terms. The debt benefit is calculated as the difference between the present values of the debt cash flows at the two rates over the remaining term of the loan, discounting the cash flows at the prevailing LIBOR rate. The approximate mark to market benefit to the Group is £3,966,000 as at 30 September 2011 (2010: £8,041,000).

13. Long-term loans (continued)

The Group's £100 million Aviva facility is subject to the following financial covenants:

(i) long-term rental income from the properties charged must cover 140% of projected finance costs;

(ii) the net loan amount must not exceed 75% of the market value of mortgaged property (first tested 30 April 2009).

The Group has been in compliance with the financial covenants throughout the year. At 30 September 2011, the debt service coverage ratio was 194% against a covenant of 140% and the loan to value was 65.4% against a covenant of 75%.

During the year £400,000 of the facility was repaid as part of the disposal of the Pen-y-bryn Surgery (as disclosed in note 10), being the amount of the facility secured against that property. This amount remains undrawn as at 30 September 2011, but is available to be drawn down at any point as the repayment does not affect the total value of the facility.

The Aviva loan is secured on some of the Group's investment properties. The value of properties provided as security for this facility is £152,655,000. As at 30 September 2011, the Group had cash of £0.2 million (2010: £0.1 million) on deposit secured against the loan.

The mortgage was taken out by the subsidiary MedicX (Verwood) Limited and is secured on that company's investment property. Interest on the mortgage is charged at 6.25%.

On 29 December 2009 the Group agreed terms on a £25.5 million facility with Deutsche Postbank, of which £500,000 was drawn in April 2010. Interest is payable on the first drawdown at 2% plus LIBOR. The interest rate applicable to the loan is fixed at the time of each drawdown. Based on the current 5-year swap rate as at 5 December the loan would be fixed at an all-in rate, including margin, of 3.1%. Costs have been accrued within the Statement of Financial Position and will be amortised as future drawdowns are made against the facility.

On 1 August 2011 the Group entered into an agreement to extend the facility to a total of £37.1m on largely the same terms as the original facility. The significant changes to the previously agreed terms were that the facility would no longer be amortised and the loan to value covenant would change from 65% to 62.5%.

The facility has a five year term, expiring in April 2015. A condition of the extension granted is that the facility must be drawn down by 30 June 2012, or any undrawn portion of the facility will be cancelled.

The Group's Postbank borrowings are subject to the following financial covenants:

(i) rental income from a) the previous three months and b) the forecast subsequent 12 months must cover 140% of projected finance costs;

(ii) drawdowns must not exceed 62.5% of the market value of mortgaged property;

(iii) the net loan amount must not exceed 70% of the market value of mortgaged property (to be tested on the second and fourth anniversary of the initial drawdown);

(iv) loan to value on properties after a disposal must be 60% before surplus proceeds from the disposal can be released to the Group.

The Group has been in compliance with the financial covenants of the Deutsche Postbank facility throughout the year. As at 30 September, with only £0.5 million drawn down, the debt service covenant ratio was 6,055% against a covenant of 140%, the forecast debt service coverage ratio was 6,014% against a covenant of 140%, and the loan to value was 3.9% against a covenant of 70%.

13. Long-term loans (continued)

The facility is secured against one of the investment properties held by MedicX Properties VI Limited. The value of the property provided as security is £14,600,000.

14. Share capital

2011	Number of shares	Share Capital £'000

Authorised
Ordinary shares of no par value	Unlimited	-


Issued and fully paid
Ordinary shares of no par value	192,604,010	-

2010	Number of shares	Share Capital £'000

Authorised
Ordinary Shares of no par value	Unlimited	-


Issued and fully paid
Ordinary Shares of no par value	141,317,110	-

On 4 March 2011, the Company issued 46,750,000 Ordinary Shares of no par value at 72.0p per share (10 March 2010: 34,921,028 Ordinary Shares of no par value at 72.0p per share) in a placing and offer for subscription. Ordinary Shares of no par value were issued for cash during the year as detailed below:

	Number of shares	Issue price per share

17 November 2010	1,100,000	72.75 pence
17 June 2011	500,000	78.25 pence
8 July 2011	1,500,000	78.25 pence

In addition, shares were issued in lieu of cash payments of dividends as a result of the scrip dividend scheme introduced at 5 May 2010. The shares issued are detailed below:

	Number of shares	Issue price per share

31 December 2010	149,034	73.05 pence
31 March 2011	96,957	72.43 pence
30 June 2011	156,928	76.63 pence
30 September 2011	133,981	77.73 pence

14. Share capital (continued)

	2011	2010
Share premium	£'000	£'000

At 1 October	44,132	18,284
Net proceeds arising on issue of Ordinary Shares for placing and offer	33,480	24,062
Net proceeds arising on issue of Ordinary Shares	1,157	-
Net proceeds arising on issue of Ordinary Shares pursuant to block listing	1,180	1,615
Net proceeds arising on issue of Ordinary Shares in lieu of dividends	366	171
Share premium at 30 September	80,315	44,132

15. Distributable reserve

The movement in distributable reserves is set out in the Statement of Changes in Equity on page

37.

The Companies (Guernsey) Law 2008, as amended ("2008 Law") made new provisions as to how the consideration received or due for an issue of shares is accounted for and how these sums may be distributed to members.

The distributable reserve is freely distributable with no restrictions. In particular, distributions from the share capital or share premium account do not require the sanction of the court. The Directors may authorise a distribution at any time from share capital, share premium or distributable reserves provided that they are satisfied on reasonable grounds that the Company will immediately after the distribution satisfy the solvency test prescribed in the 2008 Law and that it satisfies any other requirements in its memorandum and articles.

16. Cash and cash equivalents

	2011	2010
	£'000	£'000

Cash in hand and balances with banks	18,112	17,289

Cash and cash equivalents comprise cash held by the Group and short term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value.

Included in the above amounts are balances that are held in restricted accounts which are not immediately available for use by the Group of £200,000 (2010: £100,000).

17. Dividends

	2011		2010
		Dividend		Dividend
	£'000	per share	£'000	per share

Quarterly dividend declared and paid during the year	1,908	1.35p	1,399	1.3325p

Quarterly dividend declared and paid during the year	1,960	1.375p	1,418	1.35p

Quarterly dividend declared and paid during the year	2,617	1.375p	1,881	1.35p

Quarterly dividend declared and paid during the year	2,646	1.375p	1,895	1.35p

Total dividends declared and paid during the year	9,131		6,593

Quarterly dividend declared after year end	2,648	1.375p	1,908	1.35p
Cash flow impact of scrip dividends:
Cash equivalent value of scrip shares issued on quarterly dividend	109
Cash equivalent value of scrip shares issued on quarterly dividend	70
Cash equivalent value of scrip shares issued on quarterly dividend	121		61
Cash equivalent value of scrip shares issued on quarterly dividend	104		124
Total cash equivalent value of scrip shares issued	404		185
Cash payments made for dividends declared and paid	8,727		6,408

Following the equity raising in April 2009, the Company introduced quarterly dividend payments. Such dividends are scheduled for the end of March, June, September and December of each year, subject to Board approval, and commenced with the payment of a dividend on 30 September 2009.

On 7 November 2011, the Board approved a dividend of 1.375 pence per share, bringing the total dividend declared in respect of the year to 30 September 2011 to 5.5 pence per share. The record date for the dividend was 18 November 2011 and the payment date is 30 December 2011. The amount disclosed above is the cash equivalent of the declared dividend. The option to issue scrip dividends in lieu of cash dividends, with effect from the quarterly dividend paid in June 2010, was approved by a resolution of Shareholders at the Company's Annual General Meeting on 10 February 2010. On 22 November 2011 the Board announced an opportunity for qualifying Shareholders to receive the December 2011 dividend in new Ordinary Shares instead of cash.

Shareholders who have any questions regarding the Scrip Dividend Scheme should contact Capita Registrars helpline on 0871 664 0321 (calls made to this number are charged at 10 pence per minute plus network charges). Lines are open 8.30 a.m. to 5.30 p.m. (London time) Monday to Friday (except Bank Holidays).

18. Financial instruments risk management

The Group's operations expose it to a number of financial instrument risks. A risk management programme has been established to protect the Group against the potential adverse effects of these financial instrument risks. There has been no significant change in these financial instrument risks since the prior year.

The financial instruments of the Group at both 30 September 2011 and 30 September 2010 comprised trade receivables and payables, other debtors, cash and cash equivalents, non-current borrowings and current borrowings. It is the Directors' opinion that, with the exception of the mark to market benefit set out in note 13, the carrying value of all financial instruments in the statement of financial position is equal to their fair value.

Credit risk

The Group invests some of its surplus funds in high quality liquid market instruments. Such investments have a maturity of no greater than six months. To reduce the risk of counterparty default the Group deposits the remainder of its surplus funds in AA rated (or better) banks.

Concentrations of credit risk with respect to customers are limited due to the Group's revenue being largely receivable from UK government derived sources. As at the year end 91% of rental income was derived from NHS tenants who are spread across several Primary Care Trusts which further reduces credit risk from this area. The default risk is considered low due to the nature of Primary Care Trusts funding for GP practices.

The Group's maximum exposure to credit risk on financial instruments is as follows:

	2011	2010
	£'000	£'000
Financial assets
Trade receivables	1,325	1,879
Other current assets	1,663	515
Cash and cash equivalents	18,112	17,289

It is the Group's policy to assess debtors for recoverability on an individual basis and to make provision where it is considered necessary. Of the Group's trade receivables balance £895,000 (2010: £1,008,000) is neither impaired nor past due. £430,000 (2010: £832,000) is past due and of this £344,000 (2010: £278,000) is more than 120 days past due. The Board takes active steps to recover all amounts and has assessed that a provision of £76,000 (2010: £72,000) against trade receivables is appropriate.

All financial assets are categorised as loans and receivables.

Market risk

Market risk is the risk that the fair value or future cash flows of the Group's financial instruments will fluctuate because of changes in market prices. The Group is exposed to interest rate risk. The Group operates solely within Guernsey and the United Kingdom and all of the Group's assets, liabilities and cash flows are in pounds sterling which is the reporting currency. Therefore the Directors do not consider the Group to be exposed to foreign currency risk at present.

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises on interest bearing financial assets and liabilities the Group uses.

18. Financial instruments risk management (continued)

The Group's Aviva borrowing facilities of £99,651,000 (2010: £99,637,000) were negotiated at a fixed rate of interest of 5.008%. These facilities represent 99% of the borrowing facilities at the year end. The Directors consider interest rate risk on borrowings to be immaterial and do not consider it appropriate to perform sensitivity analysis on these items.

The Group holds excess monies in deposit accounts until the funds are required, with £12,000,000 held in deposit at the end of the year (2010: £7,000,000). The term of these deposits ranges between 28 days and three months at an average interest rate of 0.83% (2010: 0.87%). Because of the current low interest rates and variation in amounts held on deposit during the year, the Directors consider interest rate risk on deposits to be immaterial and do not consider it appropriate to perform a sensitivity analysis on these items.

Liquidity risk

Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. The Directors review cash flow forecasts on a regular basis to determine whether the Group has sufficient cash reserves to meet future working capital requirements and committed expenditure on property acquisitions.

Contractual maturity analysis for financial liabilities including interest payments at 30 September:

	Due or due less than one month	Due between 1 to 3 months	Due between 3 months to 1 year	Due between 1 to 5 years	Due after 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000

Trade and other payables	196	-	-	-	-	196
Accruals	1,287	529	-	-	-	1,816
Non-current borrowings
Principal	-	-	-	229	100,630	100,859
Interest payments	1,255	-	3,766	20,360	106,781	132,162
	1,255	-	3,766	20,589	207,411	233,021
Current portion of non-current borrowings
Principal	12	-	37	-	-	49
Interest payments	19	-	58	-	-	77
	31	-	95	-	-	126

Liabilities at 30 September 2010	1,495	529	37	229	100,630	102,920
Future costs of non-current borrowings	1,274	-	3,824	20,360	106,781	132,239

Balances at 30 September 2010	2,769	529	3,861	20,589	207,411	235,159

18. Financial instruments risk management (continued)

	Due or due less than one month	Due between 1 to 3 months	Due between 3 months to 1 year	Due between 1 to 5 years	Due after 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000

Trade and other payables	1,810	-	-	-	-	1,810
Accruals	1,951	889	-	-	-	2,840
Non-current borrowings
Principal	-	-	-	294	100,149	100,443
Interest payments	1,347	-	4,179	21,747	101,713	128,986
	1,347	-	4,179	22,041	201,862	229,429
Current portion of non-current borrowings
Principal	13	-	39	-	-	52
Interest payments	18	-	55	-	-	73
	31	-	94	-	-	125

Liabilities at 30 September 2011	3,774	889	39	294	100,149	105,145
Future costs of non-current borrowings	1,365	-	4,234	21,747	101,713	129,059

Balances at 30 September 2011	5,139	889	4,273	22,041	201,862	234,204

All financial liabilities are categorised as financial liabilities at amortised cost.

19. Commitments

At 30 September 2011, the Group had commitments of £27.7 million (2010: £19.7 million) to complete properties under construction.

20. Material contracts

Investment Adviser

MedicX Adviser Ltd is appointed to provide investment advice under the terms of an agreement dated 17 October 2006 and amended on 2 May 2007, 10 January 2008 and 20 March 2009 (the "Investment Advisory Agreement" or "Agreement"). Fees payable under this agreement prior to the 8 April 2009 equity raising were (i) 1.5% per annum on gross assets excluding cash by way of property advisory fee; (ii) a property management fee of 3% of gross rental income; (iii) a corporate transaction fee of 1% of the gross asset value of any property owning subsidiary company acquired; and (iv) a performance fee of 15% of the amount by which the return to shareholders in terms of share price growth plus cumulative dividends paid exceeds the initial offer price compounded annually by 10% in each accounting year.

20. Material contracts (continued)

In conjunction with the equity raising in April 2009 the Investment Adviser agreed from 8 April 2009 to vary its fee calculation and under the new arrangements, the investment advisory base fee in relation to gross assets (excluding cash) in excess of £150 million has been cut significantly. There is now no investment advisory base fee payable on gross assets of between £150 million and £300 million (excluding cash). Above this threshold of £300 million, a reduced investment advisory base fee of 0.75% of gross assets (excluding cash) per annum is payable.

The Investment Adviser is entitled to a performance fee equal to 15% of the amount by which the total shareholder return exceeds an 8% per annum compound hurdle rate calculated from the 69 pence issue price at 8 April 2009, subject to a high watermark. If in any year the total shareholder return falls short of 8% per annum then the deficit in total shareholder return has to be made up in subsequent years before any performance fee can be earned. Unlike the previous performance fee structure, the compounding of the 8% hurdle rate will be adjusted upwards to compound from the high watermark level at which the performance fee was last earned. The high watermark used for the calculation of the performance fee for the year to 30 September 2011 was set with reference to the share price at 30 September 2010, of 73 pence per share. The current high watermark is set with reference to the share price at 30 September 2011, of 73.75 pence per share.

The investment advisory base fee and performance fee earned in aggregate in any one financial year cannot exceed 1.5% of gross assets (excluding cash), such limit being equivalent to the investment advisory base fee that was in existence prior to the change. The excess, if any, of the aggregate of the investment advisory base fee and performance fee earned in any one financial year over 1.5% of gross assets (excluding cash) is not payable but is carried forward to future years or termination of the Investment Advisory Agreement, subject at all times to the annual 1.5% of gross assets (excluding cash) fee limit. The Agreement is terminable at the end of an initial 7-year term and each 3-year term thereafter, provided 12 months' notice is given.

The performance fee that has been earned by the Investment Adviser of £282,000 in respect of the financial year ended 30 September 2011 is the lower of:

(i) the performance fee as set out in the Investment Advisory Agreement, calculated on the basis of the weighted average of the number of Ordinary Shares in issue during the period (which would, for the avoidance of doubt, include the New Ordinary Shares); and

(ii) the aggregate of:

(a) the performance fee attributed to the New Ordinary Shares on the basis of their issue price of 72 pence for the period from Admission to 30 September 2011; and

(b) the performance fee as set out in the Investment Advisory Agreement, calculated on the basis of the weighted average of the number of Ordinary Shares in issue during the period but excluding, for the purposes of this calculation, the New Ordinary Shares.

An amount of £624,000 (2010: £513,000) was paid after the year end in relation to the performance fee earned for the year ended 30 September 2011 and the amount carried forward from the year ended 30 September 2010, and is included in trade and other payables on the Statement of Financial Position. There is no provision relating to amounts due under the Investment Advisory Agreement as at 30 September 2011 (2010: £342,000) included in the Statement of Financial Position.

The Investment Adviser also provides accounting administration services for no additional fee.

20. Material contracts (continued)

During the year, the agreements with MedicX Adviser gave rise to £2,869,000 (2010: £2,670,000) of fees as follows:

	2011	2010
	£'000	£'000
Expensed to the consolidated statement of comprehensive income:
Investment advisory fee	2,250	2,250
Investment advisory performance fee	282	89
Property management fees	337	331
Total Fees	2,869	2,670

Of these fees, £844,000 (2010: £565,000) remained unbilled or outstanding at the end of the year. This excludes performance fees which were billed after the year end and are included within accruals and provisions due after one year.

During the year property development costs of £12,103,000 (2010: £3,290,000) were paid to MedicX Property Ltd, a member of the same group of companies as MedicX Adviser Ltd. At the year end there was a total of £811,000 that remained unbilled or outstanding (2010: £nil). In addition, licence fee income of £568,000 (2010: £114,000) was recognised on properties under construction by MedicX Property Ltd during the year. At 30 September 2011 licence fees totalling £396,000 (2010: £74,000) remained unbilled or outstanding.

Administrator

Effective from 1 July 2009, each Group company entered into a separate administration agreement with International Administration (Guernsey) Limited for the provision of administrative services for fees totalling £63,000 (2010: £60,000) for the provision of corporate secretarial services to all Group companies and other administrative services.

During the year, the agreements with International Administration (Guernsey) Limited gave rise to the following fees, of which £12,000 (2010: £25,000) remained unbilled or outstanding at the year end:

	2011	2010
	£'000	£'000

Administrative fees	51	58

21. Related party transactions

During the year fees of £33,000 (2010: £34,000) were paid to Aitchison Raffety Limited, of which £10,000 (2010: £nil) remained unbilled or outstanding at the year end. John Hearle is Group Chairman of Aitchison Raffety Limited.

22. Subsidiary companies

The following were the subsidiary companies in the Group at 30 September 2011:

Name	Country of incorporation	Principal activity	Ownership percentage	Nominal value of shares in issue	Type of share held
MedicX Properties I Limited	Guernsey	Property Investment	100%	2	Ordinary
MedicX Properties II Ltd	England & Wales	Property Investment	100%	2	Ordinary
MedicX Properties III Ltd	England & Wales	Property Investment	100%	1,000	Ordinary
MedicX Properties IV Ltd	England & Wales	Property Investment	100%	25,000	Ordinary
MedicX Properties V Limited	Guernsey	Property Investment	100%	2	Ordinary
MedicX Properties VI Limited	Guernsey	Property Investment	100%	nil	Ordinary
MedicX (Verwood) Ltd*	England & Wales	Property Investment	100%	1,000	Ordinary
MedicX (Istead Rise) Ltd*	England & Wales	Property Investment	100%	1,000	Ordinary

*Held indirectly

23. Operating leases

At 30 September 2011 the Group had entered into leases in respect of investment properties for the following rental income, excluding any future rent reviews:

	2011	2010
	£'000	£'000
Amounts receivable under leases
Within one year	12,383	11,115
Between one and five years	54,584	49,898
After more than five years	147,365	139,336
Total	214,332	200,349

The length of a typical lease is between 18 and 25 years, with provision for rent reviews every three to five years. Rent reviews are typically agreed with reference to open market value or the retail price index.

24. Capital management

The Group's objectives when managing capital are:

· To safeguard the Group's ability to continue as a going concern, and continue to provide returns for shareholders and benefits for other stakeholders; and

· To provide an adequate return to shareholders by pricing services and setting rents commensurately with the level of risk.

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, purchase shares in the Company, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the adjusted gearing ratio. This is calculated as net debt divided by adjusted capital. Net debt is calculated as total debt, per the statement of financial position, less cash and cash equivalents. Adjusted capital comprises all equity components less cash and cash equivalents and goodwill. The Group is not subject to any externally imposed capital requirements.

The adjusted gearing ratios at 30 September 2011 and 30 September 2010 were as follows:

	2011	2010
	£'000	£'000

Total debt	100,495	100,908
Less: cash and cash equivalents	(18,112)	(17,289)
Net debt	82,383	83,619

Total assets	243,250	207,135
Less: cash and cash equivalents	(18,112)	(17,289)
Less: goodwill	(6,410)	(6,924)
Adjusted capital	218,728	182,922

Adjusted gearing ratio	0.38:1	0.46:1

25. Post year end events

On 25 November 2011 £7 million was drawn down on the Deutsche Postbank facility, bringing the total amount drawn under the facility to £7.5 million. The interest rate has been fixed at an all-in rate of 3.14% until the facility expires in April 2015.

If the amount had been drawn before the end of September, the debt service covenant ratio would be 404% (note 13: 6,055%), the forecast debt service coverage ratio would be 364% (note 13: 6,014%), and the loan to value would be 58.6% (note 13: 3.9%)

On 2 December 2011 the Company agreed terms for a new long-term debt facility of £50 million with Aviva. The length of the facility is 20 years and the interest rate will be fixed when it is drawn down. Drawdowns under the new Facility can be made up to 65% of the value of properties secured against it.

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