Medicx Fund Regulatory News (MXF)

15 Jun 2007 07:02

The MedicX Fund Limited15 June 2007 For Immediate Release 15 June 2007 MedicX Fund Limited ("MedicX Fund", "the Fund" or "the Company") MedicX Fund Limited (LSE: MXF), an investment company which invests in modern,purpose built primary healthcare properties in the United Kingdom, todayannounces its interim results for the six month period ended 31 March 2007. Interim Highlights • Out performance against November 2006 initial public offering assumptions • £133m of committed investment in 39 primary healthcare properties and on track to invest £200m by mid 20081 • Annualised rent roll of £7.3m • Adjusted earnings of £4.0m equivalent to 7.0p per ordinary share2 • Interim dividend of 2.5p per ordinary share3 • Adjusted net asset value of £60.0m equivalent to 104.5p per ordinary share2 • Net debt £60.3m (45.7% gearing) • £100m debt facility secured at a fixed rate of 5.0% • £21.5m new equity raised in June 2007 in the form of "C" Shares • Market capitalisation increased to £82 m1 • Substantial pipeline of new opportunities Commenting on these interim results, Christopher Bennett, Director, said: "Thishas been an exciting time for the MedicX Fund. We have made several successfulacquisitions and our portfolio of medical properties has expanded dramaticallysince last November's IPO to 39 sites. With our secured debt facility and themost recent fundraising together with industry trends working in our favour webelieve we are well positioned for future growth and look forward to buildingfurther value for our shareholders." 1 As at 14 June 2007 2 Adjusted to exclude the impact of deferred tax not expected to crystallise 3 Ex dividend date 4 July 2007, Record date 6 July 2007, Payment Date 3 August2007 For further information please contact: MedicX FundAlison Simpson Tel: 01481 723 450 MedicX GroupKeith Maddin Tel: 01483 869 500Mike Adams Buchanan CommunicationsCharles Ryland Tel: 020 7466 5000Lisa BaderoonMary-Jane Johnson Panmure Gordon (UK) LimitedEdward Farmer Tel: 020 7459 3600Stuart GledhillCallum Stewart Director's Statement I am delighted to report a very successful first period of operation for theMedicX Fund following the admission of the ordinary shares of MedicX FundLimited to the Official List of the UK Listing Authority on 2 November 2006. For the period to 31 March 2007, the group reports adjusted earnings of £4.0million, equivalent to 7.0p per share2. The group's adjusted net asset value at31 March was £60.0 million, equivalent to 104.5p per ordinary share2. The Property Adviser, MedicX Adviser Ltd part of the MedicX Group, has been ableto source a greater number of suitable investment opportunities than hadoriginally been anticipated at the time of the initial public offering. Of the£54.4 million of funds net of expenses raised in the initial public offering,£46.2 million was invested in an initial portfolio of 13 primary healthcareproperties. To supplement the funds raised through the listing, in December thegroup secured a £100 million debt facility from Norwich Union at a rate of 5%fixed for 30 years and in the period to 31 March 2007 the group has acquired atotal of 39 primary healthcare properties. Of these 35 are now fullyconstructed and occupied with four further properties under construction1. Thetotal acquisition cost of the properties when all are completed will beapproximately £133.1 million and the group is over a year ahead of itsanticipated investment schedule. The Property Adviser is continuing to identify attractive investmentopportunities and in order to fund ongoing investment and take advantage offuture pipeline opportunities, on 4 June 2007, MedicX Fund Limited raised £21.5million of new equity net of expenses through the issue of 22,160,500 million Cshares. Following the issue of the C shares and until their conversion into ordinaryshares, the group's portfolio will be divided between ordinary share propertiesand C share properties. The C share properties comprise the completedproperties at Swaffham, Beauly and Strathpeffer and the property underconstruction at Alsager, all owned at 31 March 2007 and all further propertiesacquired by the group up to conversion. As at 31 March 2007 £12.5 million wascommitted to assets attributable to the C shares and if the current rate ofinvestment continues it is likely that the conversion of the C shares toordinary shares will be triggered at the earliest possible date which coincideswith the year end of 30 September 2007. The Board has approved an interim dividend of 2.5p per ordinary share. Christopher BennettDirector14 June 2007 1 As at 14 June 2007 2 Adjusted to exclude the impact of deferred tax not expected to crystallise 3 Ex dividend date 4 July 2007, Record date 6 July 2007, Payment Date 3 August2007 Report of the Property Adviser, MedicX Adviser Ltd The Market The NHS continues its drive to reposition a higher proportion of healthcareprovision through primary care, and initiatives such as practice basedcommissioning are expected to result in an increasing number of larger primarycare facilities. Demand for new primary healthcare properties outweighs theavailable funding, and some easing of funding blockages is anticipated followingthe recent reorganisation of the Primary Care Trusts. Inflationary concerns and the recent rise in the interest base rate have putpressure on the commercial property market generally, and the increase in longterm interest rates may have an impact on the acquisition yields in the market,though currently the market remains firm for well let assets. Over delivery against Initial Public Offering assumptions As at 31 March 2007, the value of the MedicX Fund's committed investment was£137 million - over a year ahead of the assumptions made at the time of theinitial public offering. The properties acquired have been consistent with MedicX Fund's objective toacquire mainly modern, purpose-built, primary healthcare properties. At 31March 2007 the average age of the properties was 3 years and the averageremaining term of the leases was 20.1 years. The annualised net rent roll isalready £7.3 million with 92% of the rents payable by doctors and Primary CareTrusts/Local Health Boards and 6% by pharmacies. MedicX Adviser Ltd, Property Adviser to the MedicX Fund and a division of theMedicX Group has been successful in identifying and securing acquisitionopportunities. Exclusive forward funding agreements have been put in place withprimary care developers Oakapple and Medcentres providing the MedicX Fund with acontinuing pipeline of properties. In addition the MedicX Fund group has aforward funding agreement with Primary Asset Ltd, the development arm of theMedicX Group. As stated in the director's statement a debt facility of £100 million has beenobtained from Norwich Union at a rate of 5% fixed for 30 years, and thisrepresents a saving of 0.5% or £0.5 million per annum against the initial publicoffering assumptions. 1 As at 14 June 2007 2 Adjusted to exclude the impact of deferred tax not expected to crystallise 3 Ex dividend date 4 July 2007, Record date 6 July 2007, Payment Date 3 August2007 Pipeline and Investment opportunity The Property Adviser has a pipeline subject to contract which is estimated to beworth approximately £128 million in value when fully developed, including MedicXGroup's own pipeline of 20 projects of value of approximately £78 million andagreed non-binding heads of terms with other developers of projects of value £50million1. During the period six rent reviews were completed and there are a number ofreviews outstanding that we expect to see resolved during the year. The resultsof reviews completed during the period added £42,270 to the rent roll and thereviews outstanding relate to £1,501,940 of passing rent. A further £283,291 ofpassing rent is up for review before the end of the financial year 30 September2007. The average increase in rent agreed during the period as a percentage ofpassing rent over the three year review process has been 16% equating to 5% perannum. Asset management opportunities have also been identified in respect of anumber of the properties in the portfolio. MedicX Group has continued its expansion and has increased its staff numbers to25 employees. Already well placed geographically with offices in Godalming,Nottingham, and Warrington, MedicX Group is looking to expand its office baseand expects to increase its staff numbers further by the end of the year. The Property Adviser is excited by the opportunities available in the primaryhealthcare property market and continues to seek and identify new opportunitiesfor the MedicX Fund to enable it to meet its objective of £200 million investedby mid 2008. Keith Maddin ChairmanMike Adams Managing DirectorMedicX Adviser Ltd14 June 2007 1 As at 14 June 2007 2 Adjusted to exclude the impact of deferred tax not expected to crystallise 3 Ex dividend date 4 July 2007, Record date 6 July 2007, Payment Date 3 August2007 Consolidated Income StatementFor the period from 25 August 2006 to 31 March 2007 Notes £'000Income Rent receivable 2 1,846Finance income 2 979Net valuation gains on investment properties 9 4,079Total income 6,904 ExpensesProperty advisory fee 20 728Property management fee 20 24Administrative fees 20 57Audit fees 4 10Professional fees 54Directors' fees 3 100Other expenses 130Finance costs 5 1,641Provision for impairment of properties under construction 9 172Total expenses 2,916 Profit before tax 3,988 Taxation 6 (636) Profit after taxation 3,352 Earnings per ordinary share Normal and diluted 7 8.6p 1. Included in Note 7 is an adjusted earnings per share calculation that adjustsfor the impact of deferred tax which, based on the expected manner ofrealisation of the carrying amount of investment properties, is unlikely tocrystallise. 2. There were no material transactions between the date of incorporation, 25August 2006, and 1 November 2006, the date on which the Company's ordinaryshares were listed on the London Stock Exchange. Consolidated Balance Sheetas at 31 March 2007 Notes £'000Non-current assetsGoodwill 8 6,175Investment properties 9 103,435Properties under construction 9 18,703Total non-current assets 128,313 Current assetsTrade and other receivables 10 3,721Cash and cash equivalents 40,980Total current assets 44,701 Total assets 173,014 Current liabilitiesTrade and other payables 11 6,936 Non-current liabilitiesLong-term loan 12 99,866Deferred tax provision 6 6,624Total non-current liabilities 106,490 Total liabilities 113,426 Net assets 59,588 EquityShare capital 13 -Share premium 14 1,585Distributable reserves 15 54,651Retained earnings 3,352 Total equity 59,588 Net asset value per ordinary share Normal and diluted 7 103.7p 1. Included in Note 7 is an adjusted net asset value per share calculation thatadjusts for the impact of deferred tax which based on the expected manner ofrealisation of the carrying amount of investment properties, is unlikely tocrystallise. Consolidated Statement of Changes in Equityfor the period from 25 August 2006 to 31 March 2007 Share Distributable Retained Total Premium Reserve Earnings £'000 £'000 £'000 £'000 Proceeds on issue of shares 57,550 - - 57,550 Share issue costs (1,314) - - (1,314) Transfer from share premium (54,651) 54,651 - - Profit attributable to equity holders - - 3,352 3,352 Balance at 31 March 2007 1,585 54,651 3,352 59,588 Consolidated Cash Flow Statementfor the period from 25 August 2006 to 31 March 2007 Notes £'000Operating activitiesProfit before taxation 3,988Adjustments for:Net valuation gains on investment property (3,907)Financial income received (979)Finance costs paid and similar charges 1,641 743 Increase in trade and other receivables (2,499)Increase in trade and other payables 3,029Interest paid (584)Interest received 979Net cash inflow from operating activities 1,668 Investing activitiesAcquisitions net of cash acquired 17 (11,279)Purchase of investment properties (27,510)Net cash outflow from investing activities (38,789) Financing activitiesNet proceeds from issue of share capital 54,647 (36,439)Bank loans repaid on acquisition (41,359) Other loan repaid on acquisitionNet proceeds of long term borrowings 101,252Net cash inflow from financing activities 78,101 Increase in cash and cash equivalents 40,980 Cash and cash equivalents at 31 March 2007 17 40,980 MedicX Fund Limited Notes to the financial statements for the period from 25 August 2006 to 31 March2007 1. Business and objective MedicX Fund Limited was incorporated in Guernsey on 25 August 2006 and commencedtrading on 2 November 2006 on listing on the London Stock Exchange. Notransactions took place between the date of incorporation and the date oflisting. MedicX Fund Limited ("the Company") and its subsidiaries (together "the Group")have been established for the purpose of investing in primary healthcareproperties in the United Kingdom. The Group's investment objective is to achieverising rental income and capital growth from the ownership of a portfolio ofmainly modern, purpose built, primary healthcare properties. The Group is self-managed with property advice and management services from MedicX AdviserLimited, a member of the MedicX Group, an independent group of companies whichis a specialist developer of, investor in, and manager of primary healthcareproperties. The Company's investment policy is to acquire primary healthcare properties inthe United Kingdom, some of which may have potential for enhancement, which willbe sourced in the market by MedicX Adviser Limited, including properties formingpart of the MedicX Group's own pipeline of development and investmentopportunities. 2. Principal accounting policies Basis of preparation and statement of compliance The financial statements of the Group have been prepared in conformity withInternational Financial Reporting Standards ("IFRS") issued by the InternationalAccounting Standards Board, interpretations issued by the InternationalFinancial Reporting Interpretations Committee and applicable legal andregulatory requirements of Guernsey Law. The principal accounting policies areset out below. Impact of revision to International Financial Reporting Standards In preparing these financial statements, the Board have chosen not to earlyadopt any revisions to the International Financial Reporting Standards. Those standards which have been revised that are relevant to the activities ofthe Group are IAS 1 Presentation of financial statements and IFRS 7 FinancialInstrument: Disclosures, which replaces IAS 30 and IAS 32. Both of theserevisions deal with disclosures and presentation of financial statements andwill not have an impact on the Group's equity. Convention The financial statements have been prepared on a going concern basis under theHistorical Cost Convention except for the measurement at fair value ofinvestment properties and financial instruments. Basis of consolidation The Group financial statements consolidate the financial statements of MedicXFund Limited and its subsidiary undertakings. The results of subsidiariesacquired during the period are included in the consolidated income statementfrom the effective date of acquisition. All intra-group transactions, balances,income and expenses are eliminated on consolidation. Business combinations The acquisition of subsidiaries is accounted for using the purchase method. Thecost of the acquisition is measured at the aggregate of the fair values at thedate of exchange of assets given, liabilities incurred or assumed, and equityinstruments issued by the Group in exchange for control of the acquired company,plus any costs directly attributable to the business combination. The acquiredcompanies' assets, liabilities and contingent liabilities that meet theconditions for recognition under IFRS 3 are recognised at their fair value atthe acquisition date. The details of the companies acquired and how they havebeen treated are dealt with in Note 16. Segmental reporting The Directors are of the opinion that the Group is engaged in a single segmentof business, being primary care investment in primary healthcare properties inthe United Kingdom. Income Rental income exclusive of any value added taxes is included in the financialstatements on an accruals basis and is shown gross of any UK income tax.Finance income and fees receivable are included in financial statements on anaccruals basis. Expenses All expenses are accounted for on an accruals basis. Employees The Company has no employees. Taxation The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the period. Deferred tax is the tax which may become payable or recoverable on differencesbetween the carrying amount of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent it is probable that taxableprofits will be available against which deductible temporary differences can beutilised. Goodwill Goodwill arising on acquisition is accounted for being the difference betweenthe fair value of the consideration given and the fair value of the Group shareof identifiable net assets of the subsidiary acquired. It is subject to annualreview for any impairment. Investment properties The Group's completed properties are held for long-term investment. Freeholdproperties are initially recognised at cost, being fair value of considerationgiven including transaction costs associated with the property. After initialrecognition, freehold properties are measured at fair value, with unrealisedgains and losses recognised in the consolidated income statement. Fair value isbased upon the open market valuations of the properties as provided by DTZDebenham Tie Leung, a firm of independent chartered surveyors, as at the balancesheet date. Long leasehold properties are accounted for as freehold properties and, afterinitial recognition at cost, are measured at fair value (on the same basis asfreehold properties above). Properties under construction Freehold properties under construction are valued at cost until such time as acertificate of practical completion has been issued from which date they aretreated as Investment Properties as set out above. At each balance sheet datean assessment is made of whether provision is required to reflect any impairmentin the value of development work in progress. This assessment is based onwhether the costs to date plus estimated future costs to completion exceed anindependent valuer's estimate of the value of the property following completion. Costs of financing development are capitalised and included in the cost ofdevelopment. During the period there were no material borrowing costs ondevelopment work in progress and none were capitalised. Derivative financial instruments and hedging activities The Group has no derivative financial instruments. Cash and cash equivalents Cash on hand and deposits in banks are carried at cost. Cash and cashequivalents are defined as cash in hand, demand deposits, and highly liquidinvestments readily convertible to known amounts of cash and subject toinsignificant risk of changes in value. For the purposes of the ConsolidatedCash Flow Statement, cash and cash equivalents consist of cash in hand anddeposits in banks. Trade and other receivables Trade and other receivables are measured at initial recognition at theirinvoiced value inclusive of any value added taxes that may be applicable. Trade and other payables Trade and other payables are recognised and carried at their invoiced valueinclusive of any value added taxes that may be applicable. Bank loans and borrowings All bank loans and borrowings are initially recognised at cost, being fair valueof the consideration received, less issue costs where applicable. After initialrecognition, all interest-bearing loans and borrowings are subsequently measuredat amortised cost. Amortised cost is calculated by taking into account anydiscount or premium on settlement. Borrowing costs Borrowing costs are taken to the consolidated income statement in the period towhich they relate on an accruals basis. Estimates In the process of applying the Company's accounting policies described above,management is required to make certain judgements and estimates to arrive atfair carrying value for its assets and liabilities. Significant areas requiringmanagement's judgement include the fair value of the assets and liabilities ofsubsidiaries acquired and the assessment of the fair value of development workin progress described above. 3. Directors' fees £'000During the period each of the Directors received the following fees: J M S Tavares 29S Mason 20C Bennett 17A Simpson 17J Hearle 17 100 4. Audit fees The amount disclosed in the consolidated income statement relates to an accrualfor audit fees for the period ending on 30 September 2007, payable to PKF(Guernsey) Limited. Non-audit fees paid to PKF (UK) LLP, a fellow member of PKF International,include the following amounts: £'000 Completing financial due diligence on the acquisition of subsidiaries and included in the cost 95of purchase For acting as reporting accountants in respect of the initial listing and set off against share 50premium For acting as reporting accountants in respect of the "C" Share issue and included in other 55debtors and prepayments For acting as auditors for the non-statutory audit in respect of the "C" Share issue and 26included in other debtors and prepayments Other professional services including tax advice 22 248 5. Finance costs £'000 Interest payable on long term loan 1,641 6. Taxation £'000Current TaxCorporate tax charge for the period - Deferred TaxOn fair value gain for the period 636Total income tax charge in the income statement 636 The Board have estimated that for the period under review the Group does nothave any profits chargeable to tax in jurisdictions outside Guernsey. The Company and its Guernsey registered subsidiaries, MedicX Properties ILimited and MedicX Properties V Limited, have obtained exempt company status inGuernsey under the terms of Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989so that they are exempt from Guernsey taxation on income arising outsideGuernsey and on bank interest receivable. Each Guernsey company is, therefore,only liable to a fixed fee of £600 per annum. The Directors intend to conductthe Group's affairs such that it continues to remain eligible for exemption.Guernsey companies are taxable on UK net rental income. During the period notax arose in respect of the income of any of the Guernsey companies. TheCompany's UK subsidiaries, MedicX Properties II Ltd, MedicX Properties III Ltdand MedicX Properties IV Ltd, are subject to United Kingdom corporation tax ontheir profits less losses. The calculation of the Group's tax charge necessarily involves a degree ofestimation in respect of certain items whose tax treatment cannot be finallydetermined until a formal resolution has been reached with the relevant taxauthorities. Deferred taxation provision £'000Deferred tax is provided as follows: Balance on acquisition 192 On fair value gain arising on acquisition 5,796 On fair value gain in period 636Total deferred tax provision per the balance sheet 6,624 All deferred tax relates to the fair value gains on the Group's investmentproperty portfolio. As required by IAS 12, full provision has been made for the temporary timingdifferences arising on the fair value gain of investment properties held by UKresident companies that have passed through the Group's consolidated incomestatement. In the opinion of the Directors, this provision is only required toensure compliance with IAS 12. It is the Directors' view that the liabilityrepresented by the deferred tax provision is unlikely to crystallise as, incommon with practice in the sector, the Group would sell the company that holdsthe property portfolio rather than sell an individual property. Had theprovision not been made, the Group's earnings for the period would be £636,000higher. 7. Earnings and net asset value per ordinary share The basic and diluted earnings per ordinary share are based on the profit forthe period of £3,352,000 and on 38,745,443 ordinary shares being the weightedaverage aggregate of ordinary shares in issue at the balance sheet date. Theweighted average number is calculated over the period from incorporation on 25August 2006 to the balance sheet date. This gives rise to a basic and dilutedearnings per share of 8.6 pence per share. The basic and diluted net asset value per ordinary share are based on the netasset position at the balance sheet date of £59,588,000 and on 57,460,715ordinary shares being the aggregate of ordinary shares in issue at the balancesheet date. This gives rise to a basic and diluted net asset value per share of103.7 pence per share. Adjusted earnings per share and net asset value per share The Directors believe that the following adjusted earnings per share and netasset value per share are more meaningful key performance indicators for theGroup. Adjusted basic and diluted earnings per share 7.0pAdjusted net asset value per basic and diluted share 104.5p The adjusted earnings per ordinary share is based on the profit for the periodof £3,352,000, adjusted for the impact of deferred tax charged for the period of£636,000, giving an adjusted earnings figure of £3,988,000 and on 56,292,930ordinary shares being the weighted average number of ordinary shares in issue inthe period from commencement of operations on 2 November 2006 to the balancesheet date. The adjusted net asset value per ordinary share is based on the net assetposition at the balance sheet date of £59,588,000 as adjusted for deferred taxof £6,624,000 and goodwill of £6,175,000, giving an adjusted net assets figureof £60,037,000 and on 57,460,715 ordinary shares being the aggregate of ordinaryshares in issue at the balance sheet date. In common with practice in the sector, the Group would sell the UK company or UKcompanies that hold the properties rather than sell an individual property.Consequently, it is the Directors' view that the liability represented by thedeferred tax provision is unlikely to crystallise. 8. Goodwill £'000 Carrying amount at 31 March 2007 6,175 The goodwill arose on the acquisition of MedicX Properties III Ltd and MedicXProperties IV Ltd. The Board have reviewed the carrying value of goodwill andthey do not consider that there has been an impairment in its carrying value. 9. Investment properties Investment properties are initially recognised at cost, being fair value ofconsideration given including transaction costs associated with the property.After initial recognition, freehold properties are measured at fair value, whichhas been determined based on valuations performed by DTZ Debenham Tie Leung asat 31 March 2007, on the basis of open market value, supported by marketevidence, in accordance with International Valuation Standards. In accordancewith industry standards, the valuation does not take account of purchaser costswhich are approximately 5.75% of purchase price. Completed Properties Total Investment Under £'000 Properties Construction £'000 £'000 Acquisitions at cost/fair value 92,429 25,802 118,231Transfer to completed properties 6,927 (6,927) -Fair value revaluation 4,079 - 4,079Provision for impairment - (172) (172) 103,435 18,703 122,138 10. Trade and other receivables £'000Rent receivable 1,049Other debtors and prepayments 1,725VAT recoverable 947 3,721 11. Trade and other payables £'000Bank loans 1,387Trade creditors 919Deferred rental income 1,449Interest payable and similar charges 1,057Accruals 1,717Other creditors 399VAT payable 8 6,936 The loan is secured on one investment property and has a remaining term of 11years. It is expected that the loan will be repaid within one year from thebalance sheet date. 12. Long-term loan £'000Amount drawn down in period 100,000Loan issue costs (135)Amortisation of loan issue costs 1GPFC Loan 99,866 The Company's subsidiary, MedicX Properties I Limited, has a loan facilityagreement for £100,000,000 with The General Practice Finance Corporation Limited("GPFC") at a fixed rate of 5.008% on an interest only basis which was fullydrawn down on 1 December 2006, with the cash held on deposit to meet futureinvestment requirements. This loan is due for repayment in its entirety on 1December 2036. Under the terms of the loan, further charges will be incurred when amounts aretaken off deposit and utilised for investment purposes. The charges for thesewithdrawals depends on the quantum of the withdrawal and will be recognised asand when withdrawals are made. The value of the loan on an amortised cost basis at 31 March 2007 was£99,866,000. During the year, the Group's bank borrowings were subject to the followingfinancial covenants: (i) monies released from deposit must not exceed 65% of the property valuecharged; (ii) the net loan amount must not exceed 75% of the market value of mortgagedproperty; and (iii) long term rental income from the properties charged must cover 140% ofprojected finance costs. The Group has been in compliance with the financial covenants throughout theperiod since issue. The loan is secured on the Group's investment properties. As at 31 March 2007 the Group had £36.0 million on deposit secured against theloan. 13. Share capital Number of shares Share Capital £'000 AuthorisedOrdinary shares of no par value. Unlimited - Issued and fully paidOrdinary shares of no par value 57,460,715 - The Company issued 2 ordinary shares for £1 each on incorporation on 25 August2006 and a further 55,960,713 ordinary shares for £1 each on 2 November 2006pursuant to an offering and listing on the London Stock Exchange. A further1,500,000 shares were issued on 26 February 2007 for a fair value of £1,588,750in connection with the purchase of subsidiaries. 14. Share premium £'000At 25 August 2006 -Proceeds arising on issue of Ordinary Shares on 2 November 2006 55,961Proceeds arising on issue of Ordinary Shares on 26 February 2007 1,589Allocation of issue costs (1,314)Transfer to distributable reserve (note 15) (54,651)Share premium at 31 March 2007 1,585 15. Distributable reserve The Company applied to the Royal Court in Guernsey on 8 November 2006 totransfer its entire share premium account on that date to a distributablereserve and this was approved on 10 November 2006. The reserves are freelydistributable with no restrictions having been applied by the Court. 16. Acquisition of subsidiaries MedicX Properties II MedicX Properties MedicX Properties Total Ltd III Ltd IV Ltd Book value Fair Book Fair Book Fair Book value Fair value value value value value value £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Net assets acquired Investment properties 32,936 32,936 9,412 12,405 16,760 26,937 59,108 72,278 Properties under construction 7,653 7,653 - - 4,989 10,790 12,642 18,443Trade and other receivables 20 20 245 245 867 754 1,132 1,019Cash and cash equivalents 1,196 1,196 87 87 1,797 1,797 3,080 3,080Trade and other payables (814) (814) (209) (209) (398) (398) (1,421) (1,421)Current tax liabilities 368 368 (59) (59) 203 203 512 512Bank loans and other loans (41,359) (41,359) (7,559) (7,559) (28,880) (28,880) (77,798) (77,798)Deferred tax liabilities - - (32) (930) (160) (5,058) (192) (5,988) - - 1,885 3,980 (4,822) 6,145 (2,937) 10,125Goodwill - 943 5,232 6,175Total consideration - 4,923 11,377 16,300 Satisfied by:Cash - 3,515 9,833 13,348Directly attributable costs - 363 1,000 1,363Issue of shares - 1,045 544 1,589 - 4,923 11,377 16,300 Number of shares issued - 1,000 500 1,500Net cash outflow arising onacquisitionCash consideration - (3,515) (9,833) (13,348)Cash and cash equivalents 1,196 87 1,797 3,080acquired 1,196 (3,428) (8,036) (10,268) Date of acquisition 2/11/06 4/12/06 22/12/06Rental income for period 883 220 418 Profit before tax attributable 805 171 398to acquired company excludingintra group charges MedicX Properties II Ltd was acquired for £2. It is not practicable to determine the revenue and profit or loss which wouldhave arisen from MedicX Properties III Ltd and MedicX Properties IV Ltd if theyhad been purchased on the commencement of operations on 2 November 2006. In addition to the above, the Company has two further wholly owned subsidiaries,MedicX Properties I Limited and MedicX Properties V Limited which are alsoproperty investment companies. 17. Cashflow notes Acquisition of subsidiaries £'000Cash 3,080Trade and other receivables 1,019Goodwill 6,175Investment properties 72,278Properties in the course of construction 18,443Trade and other payables (6,897)Long term debt (77,798)Total purchase price 16,300LessShares issued as part of consideration (1,589)Cash acquired (3,080)Acquisition costs accrued not yet paid (352) Net cost of acquisition 11,279 Cash and cash equivalentsCash in hand and balances with banks 40,980 Major non cash transactions Shares were issued as part of the consideration for the acquisition of MedicXProperties III Ltd and MedicX Properties IV Ltd, details of which are in note13. 18. Financial instruments and properties The Group holds cash and liquid resources as well as having debtors andcreditors that arise directly from its operations. The main risks arising from the Group's financial instruments and properties aremarket price risk, credit risk, liquidity risk and interest risk. The Boardregularly reviews and agrees policies for managing each of these risks and theseare summarised below. Market price risk The Group's exposure to market price risk is comprised mainly of movements inthe value of the Group's investment in property. Property and property relatedassets are inherently difficult to value due to the individual nature of eachproperty. As a result, valuations are subject to uncertainty. There is noassurance that the estimates resulting from the valuation process would reflectthe actual sales price even where sale occurs shortly after the valuation datehowever there is no intention to sell any of the properties at the date of thereport. Rental income and the market value for properties are generally affected byoverall conditions in the local economy, such as growth in gross domesticproduct, employment trends, inflation and changes in interest rates. Changes ingross domestic product may also impact employment levels, which in turn mayimpact the demand for premises. Furthermore, movements in interest rates mayalso affect the cost of financing for real estate companies. Both rental income and property values may also be affected by other factorsspecific to the real estate market, such as competition from other propertyowners, the perceptions of prospective tenants of the attractiveness,convenience and safety of properties, the inability to collect rents because ofthe bankruptcy or the insolvency of tenants or otherwise, the periodic need torenovate, repair and release space and the cost thereof, the costs ofmaintenance and insurance, and increased operating costs. The Directors monitor market value by having independent valuations carried outquarterly by DTZ Debenham Tie Leung. Credit risk Credit risk is the risk that an issuer or counterparty will be unable orunwilling to meet a commitment that it has entered into with the Group. In theevent of a default by an occupational tenant, the Group will suffer a rentalincome shortfall and incur additional costs, including legal expenses, inmaintaining, insuring and re-letting the property. Liquidity risk Liquidity risk is the risk that the Group will encounter in realising assets orotherwise raising funds to meet financial commitments. Investments in propertyare relatively illiquid however the Group has tried to mitigate this risk byinvesting in desirable properties which are well let to General Practitionersand Primary Care Trusts. Interest rate risk The interest rate profile of the Group at 31 March 2007 was as follows: Total Fixed rate Variable rate Assets on which Weighted no interest is average £'000 £'000 received interest rate per annum £'000 %Financial assetsGoodwill 6,175 - - 6,175 -Properties 103,435 - - 103,435 -Properties under construction 18,703 - - 18,703 -Debtors 3,721 - - 3,721 -Cash and cash equivalents 40,980 - 40,980 - 5.2%Total assets as per 173,014 - 40,980 132,034 - balance sheet Total Fixed rate Variable rate Liabilities on Weighted which no average interest is interest rate paid per annum £'000 £'000 £'000 £'000 %Financial liabilitiesBank loans 101,253 101,253 - - 5.0%Creditors 5,549 - - 5,549 -Deferred tax provision 6,624 - - 6,624 - Total liabilities as per balance 113,426 101,253 - 12,173 -sheet 19. Commitments At 31 March 2007 the Group had commitments of £13.1 million to completeproperties under construction. 20. Material contracts Property Adviser MedicX Adviser Limited is appointed Property Adviser under the terms of anagreement dated 17 October 2006. Fees payable under this agreement are (i) 1.5%per annum on gross assets by way of property advisory fee; (ii) a propertymanagement fee of 3% of gross rental income; (iii) a corporate transaction feeof 1% of the gross asset value of any property owning subsidiary companyacquired; and (iv) a performance fee of 15% of the amount by which the return toshareholders in terms of share price growth plus cumulative dividends paidexceeds the initial offer price compounded annually by 10% in each accountingperiod. Administration agreements International Administration (Guernsey) Limited, the Company's administrator andcompany secretary, was entitled during the period to receive a fee of £55,000per annum for carrying out administrative services for the Company under theterms of an agreement dated 17 October 2006; a further £25,000 per annum underan agreement of the same date for the provision of administrative services toMedicX Properties I Limited, and £15,000 per annum under an agreement dated 12March 2007 with MedicX Properties V Limited. During the period, the agreements with International Administration (Guernsey)Limited gave rise to the following fees: £'000 Administrative fees 34 MedicX Adviser Limited was entitled during the period to receive fees of £65,000for providing administrative services to MedicX Properties II Ltd, MedicXProperties III Ltd and MedicX Properties IV Ltd. From 1 April 2007, each Group company entered into a separate administrationagreement with International Administration (Guernsey) Limited for the provisionof administrative services for fees totalling £58,000 for the provision ofcorporate secretarial services to all Group companies plus fees at time spentrates for other administrative services. During the period, the agreements with Medicx Adviser gave rise to £1,312,000 offees, of which £464,000 remained outstanding at the end of the period, asfollows: £'000Expensed to the consolidated income statement:Property advisory fee 728Property management fees 24Administrative fees 24 Added to cost of acquisition of properties:Corporate fees for purchase of subsidiaries 536 Total Fees 1,312 21. Post balance sheets events At an extraordinary meeting held on 29 May 2007 the Company approved theadoption of revised memorandum and articles of association and the issue of "C"Shares by way of placing and offer, such "C" Shares to represent a class ofshares with assets segregated from the assets pertaining to the Ordinary Sharesuntil such time as the proceeds of the "C" Share issue are substantiallyinvested, at which time they will be converted to Ordinary Shares on the termsset out in the prospectus dated May 2007. On 4 June 2007 the Company issued 22,160,500 "C" Shares of no par value at aprice of £1 per share for total proceeds net of issue expenses of £21,496,000. 22. Total return per share As at 31 March 2007 the share price was 106p representing an increase of 6.0% inthe period since listing on 2 November 2006. This information is provided by RNS The company news service from the London Stock Exchange