Medicx Fund Regulatory News (MXF)

2 May 2007 17:30

The MedicX Fund Limited02 May 2007 MedicX Fund Limited 2 May 2007 NOT FOR DISTRIBUTION, PUBLICATION OR RELEASE IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, NEW ZEALAND, IRELAND OR SOUTH AFRICA ADVERTISEMENT This document does not constitute or form part of any offer or invitation tosell or issue, or any solicitation of any offer to subscribe for, any C Sharesor any other securities, nor shall it (or any part of it), or the fact of itsdistribution, form the basis of, or be relied on in connection with, anycontract relating thereto. This document is an advertisement and not aprospectus, and investors should not subscribe for any C Shares referred to inthis document except on the basis of the information in the Prospectus. Copiesof the Prospectus will, following publication, be available from the Company'sregistered office. MedicX Fund Limited ('MXF' or the 'Company') Proposed Placing and Offer for Subscription of up to 40 million C Shares at 100p per share and Notice of Extraordinary General Meeting and financial results MedicX Fund Limited (MXF), the Official Listed specialist investor in modernpurpose built primary healthcare properties, today announces that it has agreed,subject to shareholder approval, to raise up to £40m million (before expenses)by way of a Placing and Offer for Subscription of C Shares at 100p per share.The Offer for Subscription period, during which C Shares may be subscribed forbegins today. An EGM will be held on Tuesday 29 May 2007 at which resolutionswill be put to Shareholders permitting MXF to issue the C Shares to raisecapital for further growth. The Placing and Offer for Subscription HIGHLIGHTS • Placing and Offer for Subscription to raise up to £40 million (before expenses). • Panmure Gordon (UK) Limited has procured commitments from institutional and other investors for a minimum of 15 million C Shares under the Placing and Offer for Subscription. • Issue price of 100p per C Share. • Proceeds to be used to finance MXF's further growth with the Company's new target to have invested £200 million in total within 12 months of Admission of the C Shares. • The Placing and Offer for Subscription are subject to the approval of Shareholders which is to be sought at an EGM to be held on 29 May 2007. • The Prospectus describing the terms of the Placing and Offer for Subscription is expected to be posted to shareholders later today. • The ticker symbol for the C Shares is expected to be MXFC. Financial results HIGHLIGHTS • MXF has also today announced its results for the period since IPO; 2 November 2006 to 31 December 2006. Highlights include: o £56.2 million (net of expenses) of equity raised at IPO o 35 properties acquired with a valuation when fully completed of £124 million o Profit after taxation* - £3.4 million o Earnings per share* - 6.1 pence o Net Asset Value* - 103.7 pence per Ordinary Share o Net Debt £43.2 million representing 41% loan to value gearing o £100 million of borrowing secured at 5% cost (including margin) fixed for a 30 year term o Additional 4 properties and £12 million post balance sheet date investments allocated to the C Shares * Adjusted to exclude the impact of deferred tax which the Directors believewill not impact the Company. Commenting on the proposed Placing and Offer for Subscription and financialresults, John Hearle, Non-Executive Director of MedicX Fund, said: 'We are delighted to have secured new capital from both new and existinginvestors and look forward to the continued expansion of our property portfolio.Our financial results are strong and we look forward to building further valuefor shareholders.' -ends- For further information please contactMedicX FundAlison Simpson Tel: 01481 723 450MedicX GroupKeith Maddin Tel: 01483 869 500 Mike Adams Buchanan CommunicationsCharles Ryland Tel: 020 7466 5000 Lisa Baderoon Mary-Jane Johnson Panmure Gordon (UK) LimitedEdward Farmer Tel: 020 7459 3600 Stuart Gledhill Callum Stewart THE PLACING AND OFFER FOR SUBSCRIPTION The Board today announces that it is proposing to raise up to £40 million(before expenses) by way of the Placing and Offer for Subscription at 100p per CShare in order to provide MXF with capital for further growth. The Company's newtarget is to have invested £200 million in total within 12 months of Admissionof the C Shares. The Placing and Offer for Subscription is conditional upon the approval ofShareholders at the forthcoming Extraordinary General Meeting. The principalpurpose of the Prospectus expected to be published later today is to explain thereasons for, and terms of, the Issue and to recommend that Shareholders vote infavour of the Resolution to be proposed at the Extraordinary General Meeting toenable the Issue to proceed, notice of which is set out at the end of theProspectus. The Extraordinary General Meeting is to be held on 29 May 2007, at 11.00 am atthe registered office of MXF; Regency Court, Glategny Esplanade, St Peter Port,Guernsey, Channel Islands, GY1 3RH. PLACING AND OFFER FOR SUBSCRIPTION STATISTICS Placing Price per C Share under the Placing 100p Issue Price per C Share under the Offer for Subscription 100p Number of existing Ordinary Shares in issue at the date of the 57,460,715Prospectus NAV per Ordinary Share on 31 December 2006* 103.7p (adjusted to exclude the impact of deferred tax which theDirectors believe will not impact the Company) Number of C Shares in issue* 40,000,000 Gross proceeds of the Issue approximately* £40,000,000 Net proceeds of the Issue receivable by Company* £38,800,000 Approximate market capitalisation of the Company following £100,900,000Admission* (assuming a share price of 106p per Ordinary Share and 100p per CShare) Initial NAV per C Share on Admission* 97p * assuming the maximum number of C Shares are issued pursuant to the Placing andthe Offer for Subscription EXPECTED TIMETABLE OF PRINCIPAL EVENTSRecord date for Qualifying Shareholders under the Offer for 5:00 p.m. on 1 May 2007Subscription Latest time and date for receipt of Application Forms and 1:00 p.m. on 22 May 2007Priority Application Forms and payment Latest time and date for receipt of completed Forms of Proxy 11:00 a.m. on 27 May 2007 Extraordinary General Meeting 11:00 a.m. on 29 May 2007 C Shares issued; Admission of C Shares and dealings in C 8:00 a.m. on 4 June 2007Shares commence; CREST accounts credited in respect of CShares issued in uncertificated form; Certificates for C Shares issued in certificated form to be by no later than 12 June 2007despatched Application will be made for admission of the Ordinary Shares arising onConversion to the Official List (and to dealings on the London Stock Exchange'smarket for listed securities) to occur at the Conversion Time. Each of the times and dates in the above timetable is subject to change, inwhich event details of the new times and/or dates will be notified to the UKListing Authority and the London Stock Exchange and, where appropriate,Shareholders. References to times in this announcement are to London time. BACKGROUND TO AND REASONS FOR THE PLACING AND OFFER FOR SUBSCRIPTION AND USE OFPROCEEDS The £55.96 million of funds raised in the Company's IPO have been used to investin primary healthcare properties. To supplement the initial proceeds raised atthe time of its IPO, on 4 December 2006 the Company announced that it hadsecured a £100 million debt facility from Norwich Union (via its affiliateGeneral Practice Finance Corporation). The Company has achieved its initialobjective to invest £80 million in primary healthcare properties within sixmonths of its IPO. Following its successful acquisition programme to date andthe Forward Funding Agreements that the Company has already entered into, theCompany has become capital constrained. At the current rate of investment, the Company will shortly become unable toinvest in the pipeline of opportunities that it continues to see. The Property Adviser has, to date, been able to source a greater number ofinvestment opportunities fitting the Company's investment criteria (many of themdirectly from third party vendors), than had originally been anticipated at thetime of its IPO. The level of potential acquisitions that are brought to theCompany's attention has remained significant and the Directors believe that itwould be in the interests of the Company to continue to acquire such propertiesby raising additional funds. Therefore, in order to fund the ongoing investment and to take advantage offuture pipeline opportunities, the Company is seeking to raise up to anadditional £40 million (before expenses) through the issue of up to 40 million CShares in the Company. The Company's objective is now to commit investment of£40 million in primary healthcare property within six months of Admission of theC Shares and to have fully invested £200 million in total within 12 months ofAdmission. The Directors intend to secure and utilise long term borrowingfacilities of, in aggregate, approximately 50 per cent., but not exceeding 65per cent., of the gross assets attributable to the Ordinary Shares and the CShares. ISSUE OF C SHARES The Board is proposing to effect the capital raising by way of an issue of CShares pursuant to the Placing and the Offer for Subscription. CurrentShareholders of the Company (being Qualifying Shareholders) may participate inthe Offer for Subscription by way of the Priority Application Form enclosed withthe Prospectus. New investors may also participate in the Offer forSubscription, subject to clawback in favour of Qualifying Shareholders asmentioned in paragraph 6 of Part I of the Prospectus. Please refer to "Action tobe Taken" in paragraph 16 of Part I of the Prospectus. An issue of C Shares is designed to overcome the potential disadvantages forboth existing and new investors which could arise out of a conventional fixedprice issue of further Ordinary Shares for cash, in particular: • the assets representing the net proceeds attributable to the C Shares(including the C Share Properties) will be valued as a distinct pool of assetsuntil the relevant calculations for purposes of Conversion are made. Byaccounting for the net proceeds separately, holders of Ordinary Shares will notbe exposed to a portfolio potentially containing a substantial amount ofuninvested cash before Conversion; • the Net Asset Value of Ordinary Shares will not be diluted by the expensesassociated with the issue of the C Shares, which will be borne by thesubscribers for C Shares and not by holders of Ordinary Shares; and • the basis upon which the C Shares will convert into Ordinary Shares is suchthat the number of Ordinary Shares to which holders of C Shares will become entitled will reflectthe relative investment performance and value of the pool of new capitalattributable to the C Shares issued up to Conversion, as compared to the assetsattributable to the Ordinary Shares at that time. As a result, neither the NetAsset Value per Ordinary Share nor the Net Asset Value per C Share will beadversely affected by Conversion. Conversion At the Conversion Time, the C Shares will convert in accordance with the NewArticles into Ordinary Shares on the basis of the Conversion Ratio, which willreflect the proportion which the net asset value attributable to the C Sharesbears to the net asset value attributable to the Ordinary Shares at theCalculation Time. It is anticipated that the proceeds of the Issue will havebeen substantially committed by 30 September 2007. Pending Conversion, the assets and liabilities attributable to the C Shares(including the net proceeds of issue of the C Shares and the C ShareProperties), and those attributable to the Ordinary Shares (including theOrdinary Share Properties) will be managed and accounted for separately. Pending investments being made in primary healthcare properties in accordancewith the Company's investment objective, the Net Proceeds of the Issue may beheld in cash, deposits, government securities or money market instruments. Further details of the C Shares, the Calculation Time and the Conversion Ratioare set out in Parts 4 and 9 of the Prospectus. Certain amendments to the Property Advisory Agreement have been agreed, subjectto Admission, between the Property Adviser and the Company in order to ensurethat the Property Advisory Agreement reflects the issue of the C Shares pursuantto the Placing and the Offer for Subscription. These amendments are reflected inthe summary of the Property Advisory Agreement set out in paragraphs 13.1 and13.2 of Part 9 of the Prospectus. SUMMARY OF THE PLACING AND OFFER FOR SUBSCRIPTION Panmure Gordon (UK) Limited has agreed to use its reasonable endeavours toprocure subscribers by way of the Placing and the Offer for Subscription for 15million C Shares at 100p per share. The Placing and the Offer for Subscription,if fully subscribed, will raise approximately £38.8 million for the Company, netof expenses. The Placing and the Offer for Subscription are not underwritten and areconditional, inter alia, upon the passing of the Resolution at the EGM andAdmission occurring on or before 8:00 a.m. on 30 June 2007 (or such later timeand date as the Company and Panmure Gordon (UK) Limited may agree). The Placing will close at noon on 25 May 2007. The latest time and date for receipt of Application Forms and PriorityApplication Forms under the Offer for Subscription will be 1:00 p.m. on 22 May2007. Applications by new investors under the Offer for Subscription will be subjectto clawback in favour of Qualifying Shareholders. The basis of clawback and theoverall allocation of the C Shares pursuant to the Issue will be determined bythe Company in its absolute discretion in consultation with Panmure Gordon (UK)Limited. The Minimum Net Proceeds to be raised under the Placing and the Offer forSubscription will be £14,550,000. Details of the Placing Agreement are set out in paragraph 11 of Part 9 of theProspectus. Capital structure The Company is registered in Guernsey, and was incorporated with share capitalconsisting of an unlimited number of Ordinary Shares of no par value. It isanticipated that the C Shares will be admitted to the Official List and tradedon the London Stock Exchange's market for listed securities. No C Shares have previously been issued by the Company. On the assumption thatthe Placing and the Offer for Subscription are fully subscribed, the Company'sissued share capital will on Admission comprise 57,460,715 Ordinary Shares and40 million C Shares. The Directors intend to secure and utilise long term borrowing facilities of, inaggregate, approximately 50 per cent., but not exceeding 65 per cent., of theCompany's gross assets attributable to the Ordinary Shares and the C Shares. DIVIDENDS AND DIVIDEND POLICY For the period 2 November 2006 to 31 March 2007 the Directors expect, subject,inter alia, to the Company's performance and to availability of distributablereserves, to pay an interim dividend on Ordinary Shares at a rate of 2.5 penceper Ordinary Share. For the period 1 April 2007 to 30 September 2007 the Directors expect, subject,inter alia, to the Company's performance and to availability of distributablereserves, to pay a final dividend on Ordinary Shares (including those arisingfrom any Conversion of the C Shares) at a rate of at least 2.5 pence perOrdinary Share. For the period from Admission to 30 September 2007 the Directors expect,subject, inter alia, to the Company's performance and to availability ofdistributable reserves, to pay a dividend on the C Shares (to the extent notConverted) at a rate of 2.5 pence per C Share. The Directors intend, subject to the Company's performance and to availabledistributable reserves, to maintain the dividend in real terms, although noassurance can be given that this will be achieved. Prior to Conversion, the C Shares will have no right to participate in thedistributable profits of the Company that relate to the Ordinary Shares and,consequently, any dividend declared in respect of those shares. Pursuant to the New Articles the Company will not be able to pay any dividend ordeclare any record date for any class of share between the Calculation Time andthe Conversion Time. KEY RISK FACTORS • There is no guarantee that the market price of the C Shares and the OrdinaryShares will fully reflect their underlying net asset value and the OrdinaryShare or C Shares may trade at a discount or there may be limited liquidity inthem. • Any future property market recession could materially adversely affect thevalue of the properties held by the MedicX Fund Group. • Property and property related assets are inherently difficult to value andvaluations are subject to uncertainty. There can be no assurance that theestimates resulting from the valuation process will reflect actual sale pricesthat could be realised by the MedicX Fund Group in the future. • Refurbishment, maintenance or extension expenditure may be necessary in thefuture to preserve the rental income generated from and/or the capital value ofa property and such expenditure may depress the dividend payable on the C Sharesand the Ordinary Shares in the short term. • If property values rise significantly between the publication of theProspectus and the time when the funds available to the Company are invested,the potential returns available for Shareholders may be less than those set outin the Prospectus. • Rental income and the market value for properties are generally affected byoverall conditions in the local economy, demographic trends, inflation andchanges in interest rates, which in turn may impact upon the demand forproperties. Furthermore, movements in interest rates may also affect the cost offinancing. • There is no assurance that the MedicX Fund Group has acquired or will acquireproperties free of contamination by hazardous waste, asbestos or other toxicsubstances or environmental problems. If at any time the Company has acquired oracquires contaminated properties, the Company may have an obligation, alone orjointly with other parties, to dispose of or otherwise resolve any suchenvironmental hazards to the satisfaction of relevant governmental authorities.There is no basis for estimating the costs and liabilities of such anobligation, but such costs and liabilities could adversely affect returns toShareholders. • In relation to properties acquired by the MedicX Fund Group, the Company isrelying on the warranties given to the relevant MedicX Fund Group company by thevendors under the relevant acquisition agreements and on the reports of itsprofessional advisers prepared in relation to these acquisitions. In relation tothe assets, liabilities and affairs of MPII, the Company is also relying on anindemnity provided by the MedicX Group details of which are set out in paragraph13.21 of Part 9 of the Prospectus. There can be no guarantee that the relevantMedicX Fund Group company will in any given case be able to recover the amountof all or any of its losses under the terms of any of the foregoingarrangements. The relevant warranties (and the indemnity) are also subject tocertain limitations and caps on liability as set out in the relevant agreements.The ability to recover will also depend, among other factors, on the vendors'and the MedicX Group's ability to pay as there is no escrow retention or similararrangement to secure any claims under those agreements. • Investments in property are relatively illiquid and usually more difficult torealise than listed equities or bonds. • The Company may face competition that may drive up prices of prospectiveproperties thereby limiting suitable investment opportunities for the Company,which may also have an impact on the dividend yield of the Company. • Any change in the tax status or tax residence of the Company or in taxlegislation or practice may have an adverse effect on the returns available onan investment in the Company. Similarly any changes under Guernsey law to thebasis on which Guernsey companies may pay dividends could have an adverse effecton the Company's ability to pay dividends. • In the event that a PCT or other tenant found itself unable to meet itsliabilities the Company may not receive rental income when due and/or the totalincome received may be less than that due under the relevant contract. Inaddition budgetary restrictions generally might restrict or delay the number ofopportunities available to the Company. • The Directors' objective is to have fully invested £200 million in totalwithin 12 months of Admission. This may not be possible if the Company cannotsource properties at acceptable prices or on acceptable terms. • The rental costs of premises used for the provision of primary healthcare arereimbursed to GPs (subject to the fulfillment of certain standard conditions) bythe PCTs. There is no guarantee that this will always be the case which couldtherefore increase the risk of default on the leases as a result of changes inGovernment policy. • Prospective investors should be aware that the Company intends to useborrowings which may have an adverse impact on NAV, NAV per Ordinary Share, NAVper C Share or any dividend in respect of Ordinary Shares or C Shares, forexample as a result of any increase in UK Sterling interest rates. • If the Company breaches any financial covenants, the Company may be requiredto repay such borrowings and to sell assets at less than their market value. • The Company is dependent upon its Directors and the Property Adviser and maybe adversely affected if the services of the Directors and/or the PropertyAdviser cease to be available to the Company. • If the Company were for whatever reason unable to meet the continuingobligations of the UKLA and the London Stock Exchange, it is possible that thelisting of the C Shares and/or the Ordinary Shares may be suspended or theCompany's shares could be removed from the Official List. DEFINITIONS Capitalised terms used shall have the meanings given to them in the Prospectusto be sent to Shareholders today. Extraordinary General Meeting A notice convening the Extraordinary General Meeting to be held on 29 May 2007at 11:00 a.m. at Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY13RH is set out at the end of the Prospectus. The purpose of the meeting is toseek Shareholders' approval to the Resolution set out in the notice of EGM,inter alia, to: • approve and adopt the New Articles (including provisions relating to the CShares) and the principles for Conversion; • approve the terms of the Issue and allot the C Shares; • amend the authority granted to the Company to make market purchases ofOrdinary Shares so that the minimum price which may be paid for an OrdinaryShare is one penny; • grant authority, subject to Admission and the approval of the Guernsey Court,to cancel the amount standing to the credit of the share premium account of theCompany attributable to the C Shares following Admission, and credit the amountso cancelled as a distributable reserve to enhance the Company's ability to paydividends attributable to the C Shares; and • amend the Company's memorandum of association to grant power to issue onunlimited number of C Shares in a similar manner to the existing power inrelation to Ordinary Shares. The Directors recommend that Shareholders vote in favour of the Resolution. Tobe passed, the Resolution will require a 2/3 majority of those Shareholdersvoting in person or (on a poll) by proxy in favour of the Resolution. Recommendation The Board considers that the Placing and the Offer for Subscription are in thebest interests of Shareholders as a whole. The Board therefore recommends thatShareholders vote in favour of the Resolution. The Board has received financial advice from Panmure Gordon (UK) Limited inrelation to the Placing and the Offer for Subscription. In giving theirfinancial advice, Panmure Gordon (UK) Limited has relied upon the Directors'commercial assessment of the Placing and the Offer for Subscription. These audited financial results are in respect of the period 2 November 2006 to31 December Consolidated Income Statement for the period 2 November 2006 to 31 December 2006(2) Notes £'000Income Rent receivable 2 427Finance income 2 370Net valuation gains on investment properties 9 3,459Total income 4,256 ExpensesProperty advisory fee 21 256Property management fee 21 12Administrative fees 20Audit fees 4 25Professional fees 15Directors' fees 3 60Other expenses 33Finance costs 5 396 Total expenses 817 Profit before tax 3,439 Taxation 6 413 Profit after taxation 3,026 Earnings per ordinary share(1) Normal and diluted (p) 7 5.4 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 of realisationof the carrying amount of investment properties, is unlikely to crystallise. 2. There were no material transactions between the date of incorporation, 25August 2006, and 1 November 2006. Consolidated Balance Sheet as at 31 December 2006 Notes £'000Non-current assetsGoodwill 8 5,983Investment properties 9 92,825Properties under construction 9 12,325Total non-current assets 111,133 Current assetsTrade and other receivables 10 3,768Cash and cash equivalents 56,599Total current assets 60,367 Total assets 171,500 Current liabilitiesTrade and other payables 11 6,040 6,040Non-current liabilitiesLong-term loan 12 99,865Deferred tax provision 6 6,402Total non-current liabilities 106,267 Total liabilities 112,307 Net assets 59,193 EquityShare capital 13 -Share premium 15 -Share reserve 14 1,510Distributable reserves 16 54,657Retained earnings 3,026 Total equity 59,193 Net asset value per ordinary share(1)Normal and diluted 7 103.0p 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 Equity for the period from 2 November 2006 to 31 December 2006(1) Share Share Distributable Retained Total reserve Premium Reserve Earnings £'000 £'000 £'000 £'000 £'000 Proceeds on issue of shares - 55,961 - - 55,961Share issue Costs - (1,304) - - (1,304)Transfer from share premium - (54,657) 54,657 - -Profit attributable to equity - - - 3,026 3,026holdersShares provisionally allotted but 1,510 - - - 1,510not issuedBalance at 31 December 2006 1,510 - 54,657 3,026 59,193 1. There were no material transactions between the date of incorporation, 25August 2006 and 1 November 2006. Consolidated Cash Flow Statement for the period from 2 November 2006 to 31 December 2006(1) Notes £'000Operating activitiesProfit before taxation 3,439Adjustments for:Net valuation gains on investment property (3,459)Financial income received (370)Finance costs paid and similar charges 396 6Increase in trade and other receivables (1,804)Increase in trade and other payables 774Interest paid (2)Interest received 359Net cash outflow from operating activities (667) Investing activitiesAcquisitions net of cash acquired 18 (10,290)Purchase of investment properties (10,757)Net cash outflow from investing activities (21,047) Financing activitiesNet proceeds from issue of share capital 54,828Bank loans repaid on acquisition (36,439) Other loan repaid on acquisition (41,359) Net proceeds of long term borrowings 101,283Net cash inflow from financing activities 78,313 Increase in cash and cash equivalents 56,599 Cash and cash equivalents at 31 December 18 56,599 1. There were no material transactions between the date of incorporation, 25August 2006 and 1 November 2006. NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD FROM 2 NOVEMBER 2006 TO 31DECEMBER 2006 1. Business and objective MedicX Fund Limited was incorporated in Guernsey on 25 August 2006 but commencedtrading on 2 November 2006 on listing on the London Stock Exchange. Notransactions took place between the date of incorporation and the date of entry. 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. 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 17. 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. Impact of revision to International Financial Reporting Standards In preparing these financial statements, the Board have not chosen 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. 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 expected to be 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 payables Trade and other payables are recognised and carried at their invoiced valueinclusive of any value added taxes that may be applicable. Trade receivables Trade and other receivables are measured at initial recognition at theirinvoiced value inclusive 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. Share reserve The Share reserve has been created for the purposes of recording the value ofshares which the Company has allotted but not yet issued at the balance sheetdate as part of the costs of acquisition of subsidiary companies. 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 20S Mason 10C Bennett 10A Simpson 10J Hearle 10 60 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. Non-audit fees paid to the auditors and set against the share premium accountpremium during the period amounted to £45,000 for acting as reportingaccountants in respect of the listing of the Company's shares on 2 November2006, and £95,000 in relation to financial due diligence on acquisitions whichhas been included in the cost of purchase of properties held by the subsidiariesacquired. 5. Finance costs £'000 Interest payable on long term loan 396 6. Taxation £'000Current TaxCorporate tax charge for the period - Deferred TaxOn fair value gain for the period 413 Total income tax charge in the income statement 413 The Board have estimated that for the period under review the Group does not have any profits chargeable to taxin jurisdictions outside of Guernsey. The Company and its Guernsey registered subsidiaries, MedicX Properties I Limited and MedicX Properties VLimited, have obtained exempt company status in Guernsey under the terms of Income Tax (Exempt Bodies) (Guernsey)Ordinance 1989 so that they are exempt from Guernsey taxation on income arising outside Guernsey and on bankinterest receivable. Each Guernsey company is, therefore, only liable to a fixed fee of £600 per annum. TheDirectors intend to conduct the Group's affairs such that it continues to remain eligible for exemption.Guernsey companies are taxable on UK net rental income. During the period no tax arose in respect of the incomeof any of the Guernsey companies. The Company's UK subsidiaries, MedicX Properties II Limited, MedicX PropertiesIII Limited and MedicX Properties IV Limited, are subject to United Kingdom corporation tax on their profits lesslosses. The calculation of the Group's tax charge necessarily involves a degree of estimation in respect of certain itemswhose tax treatment cannot be finally determined until a formal resolution has been reached with the relevant taxauthorities. Deferred taxation provision £'000Deferred tax is provided as follows: Balance on acquisition 193 Fair value gain arising on acquisition 5,796 Fair value gain in period 413 Total deferred tax provision per the balance sheet 6,402 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 the sector, the Group would sell the company that holds the propertyportfolio rather than sell an individual property. Had the provision not beenmade, the Group's earnings for the period would be £413,000 higher. 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 £3,026,000 and on 56,494,613 ordinary shares being the weightedaverage aggregate of ordinary shares in issue and ordinary shares that wereissueable at the balance sheet date. The weighted average number is calculatedover the period from commencement of operations on 2 November 2006 to thebalance sheet date. This gives rise to a basic and diluted earnings per share of5.4 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 £59,193,000 and on 57,460,715ordinary shares being the aggregate of ordinary shares in issue and ordinaryshares that were issueable at the balance sheet date. This gives rise to a basicand diluted net asset value per share of 103.0 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 earnings per share 6.1pAdjusted net asset value per share 103.7p The adjusted earnings per ordinary share is based on the profit for the periodof £3,026,000, adjusted for the impact of deferred tax charged for the period of£413,000, giving an adjusted earnings figure of £3,439,000 and on 56,494,613ordinary 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 £59,193,000 as adjusted for deferred taxof £6,402,000 and goodwill of £5,983,000, giving an adjusted net assets figureof £59,612,000 and on 57,460,715 ordinary shares being the aggregate of ordinaryshares in issue and ordinary shares that were issueable at the balance sheetdate. In common with the sector, the Group would sell the UK company or UK companiesthat hold the properties rather than sell an individual property. Consequently,it is the Directors' view that the liability represented by the deferred taxprovision is unlikely to crystallise. 8. Goodwill £'000 Carrying amount at 31 December 2006 5,983 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 December 2006, on the basis of open market value, supported by marketevidence, in accordance with International Valuation Standards. In accordancewith industry standards, the valuation is after deduction of purchaser costs of5.75%, which amount to approximately £5.3 million. Completed Properties Total Investment under £'000 properties construction £'000 £'000 Acquisitions at cost/fair value 82,439 18,555 100,994Additions - 697 697Transfer to completed properties 6,927 (6,927) -Fair value revaluation 3,459 - 3,459 92,825 12,325 105,150 10. Trade and other receivables £'000Other debtors and prepayments 1,550Rent receivable 1,647VAT recoverable 571 3,768 11. Trade and other payables £'000Loans 1,418Accruals 2,447Deferred rental income 1,451Interest payable and similar charges 394Trade creditors 242Other creditors 34VAT payable 54 6,040 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 -GPFC Loan 99,865 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 December 2006 was£99,865,000. 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 propertyvalue charged. (ii) the net loan amount must not exceed 75% of the market value ofmortgaged property. (iii) long term rental income from the properties charged must cover 140%of projected 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 December 2006 the Group had £41.9 million on deposit in relation to theloan amount. 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. 55,960,715 - 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. 14. Share reserve The Company had allotted but not yet issued a further 1,500,000 shares at thebalance sheet date as part payment for the purchase of subsidiary companies.The fair value of these shares at the contracted date for the purchase of thesubsidiaries, as measured by the closing price of the shares on the OfficialList on the preceding day was £1,588,750 in total. As this amount is notmaterially different from the contracted amount of share consideration of£1,510,000, that amount has been transferred to the share reserve. These 1,500,000 shares were issued on 26 February 2007. 15. Share premium £'000At 25 August 2006 -Proceeds arising on issue of Ordinary Shares on 2 November 2006 55,961Allocation of issue costs (1,304)Transfer to distributable reserve (note 16) (54,657)Share premium at 31 December 2006 - 16. 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. 17. Acquisition of subsidiaries MedicX Properties MedicX Properties MedicX Properties Total II Ltd III Ltd IV Ltd Book Fair Book value Fair Book Fair Book Fair value 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 - - 10,790 12,642 18,443 4,989Trade and other receivables 20 20 245 245 867 867 1,132 1,132Cash 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) (1,437) (1,437)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) (77,782) (77,782)Deferred tax liabilities - - (32) (930) (160) (5,058) (192) (5,988) - - 1,885 3,980 (4,822) 6,258 (2,937) 10,238Goodwill - 898 5,085 5,983Total consideration - 4,878 11,343 16,221 Satisfied by:Cash - 3,515 9,833 13,348Directly attributable costs - 363 1,000 1,363Issue of shares - 1,000 510 1,510 - 4,878 11,343 16,221Number of shares issued - 1,000 500 1,500Net cash outflow arising onacquisitionCash consideration - (3,515) (9,833) (13,348)Cash and cash equivalentsacquired 1,196 87 1,797 3,080 1,196 (3,428) (8,036) (10,268) Date of acquisition 2/11/06 4/12/06 22/12/06Rental income for period 304 41 44Profit before tax attributableto acquired company 289 42 42 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 Ltd and MedicX Properties V Ltd. MedicX Properties I Ltdwas established prior to listing and is also a property investment company.MedicX Properties V Ltd was formed before the period end but had not traded bythat date. 18. Cashflow notes Acquisition of subsidiaries £'000Cash 3,080Trade and other receivables 1,703Goodwill 5,983Investment properties 72,278Properties in the course of construction 18,443Trade and other payables (7,468)Long term debt (77,798)Total purchase price 16,221Less Shares to be issued as part of consideration (1,510)Cash acquired (3,080)Acquisition costs accrued not yet paid (1,341)Net cost of acquisition 10,290 Cash and cash equivalentsCash in hand and balances with banks 56,599 Major non cash transactions As part of the consideration on the acquisition of MedicX Properties III Ltd andMedicX Properties IV Ltd shares were issued, details are in note 17. 19. 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 December 2006 was as follows: Total Fixed rate Variable rate Assets on which Weighted average no interest is interest rate per £'000 £'000 received annum £'000 %Financial assetsGoodwill 5,983 - - 5,983 - Properties 92,825 - - 92,825 -Properties under 12,325 - - 12,325 - constructionDebtors 3,768 - - 3,768 -Cash and cash equivalents 56,599 - 56,599 - 5.0%Total assets as per 171,500 - 56,599 114,901 - balance sheet Total Fixed rate Variable rate Liabilities on Weighted average which no interest rate per interest is annum paid £'000 £'000 £'000 £'000 %Financial liabilitiesBank loans 101,284 101,284 - - 5.0%Creditors 4,621 - - 4,621 -Deferred tax provision 6,402 - - 6,402 -Total liabilities as per 112,307 101,284 - 11,023 - balance sheet 20. Commitments At 31 December 2006 the Group has commitments of £9.2 million to completeproperties in development and has commitments of a further £6.3 million inrespect of new property. 21. 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, is entitled to receive a fee of £55,000 per annum forcarrying out administrative services for the Company under the terms of anagreement dated 17 October 2006, and a further £25,000 per annum under anagreement of the same date for the provision of administrative services toMedicX Properties I Limited. During the period, the agreements with International Administration (Guernsey)Limited gave rise to the following fees: £'000Administrative fees 14 MedicX Adviser Limited is entitled to receive fees of £65,000 for providingadministrative services to MedicX Properties II Limited, MedicX Properties IIILimited and MedicX Properties IV Limited. During the period, the agreements with Medicx Adviser gave rise to £810,000 offees, which remained outstanding at the end of the period, as follows: £'000Expensed to the consolidated income statement:Property advisory fee 256Property management fees 12Administrative fees 6 Added to cost of acquisition of properties:Corporate fees for purchase of subsidiaries 536 Total Fees 810 22. Post balance sheets events Since the balance sheet date, the Group has entered into forward fundingagreements in respect of two new properties at an aggregate cost of £12.0million and completed the purchase of four new properties at an aggregate costof £9.7 million. 23. Total return per share As at 31 December the share price was 108.75p representing an increase of 8.75%in the period since 2 November 2006. END The contents of this announcement have been approved for the purposes of section21 of the Financial Services and Markets Act 2000 as amended ("FSMA") by PanmureGordon (UK) Limited ("Panmure Gordon") of Moorgate Hall, 155 Moorgate, London,EC2M 6XB. Panmure Gordon is authorised and regulated in the United Kingdom bythe Financial Services Authority in respect of regulated activities and isacting as sponsor and broker in respect of the Placing and Offer forSubscription. Panmure Gordon is acting solely for MedicX Fund Limited inconnection with the Placing and Offer for Subscription and will not beresponsible to anyone other than MedicX Fund Limited for providing theprotections afforded to clients of Panmure Gordon nor for providing advice inrelation to the Placing and Offer for Subscription. This announcement is not for release, publication or distribution, in whole orin part, in or into the United States, Australia, Canada, Japan, South Africa,New Zealand, the Republic of Ireland or Australia (the "Prohibited Territories"). The Shares have not been and will not be registered under the US SecuritiesAct of 1933 (as amended), the United States Investment Company Act of 1940 (asamended) or under the applicable securities laws of the other ProhibitedTerritories and, unless an exemption under such laws is available, may not beoffered for sale or subscription or sold or subscribed directly or indirectlywithin the USA or the other Prohibited Territories or for the account or benefitof any national, resident or citizen of the USA or the other ProhibitedTerritories. Copies of the Prospectus will be available during normal business hours on anyweekday (Saturdays, Sundays and public holidays excepted) at the offices ofPanmure Gordon, Moorgate Hall, 155 Moorgate, London EC2M 6XB until Admission andfor the 14 days following Admission. The Prospectus is also available at thedocument viewing facility of the UKLA at the UKLA Document Viewing Facility,Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E145HS. This information is provided by RNS The company news service from the London Stock Exchange