Medicx Fund Regulatory News (MXF)

Press Release

For immediate release

10 December 2014

MedicX Fund Limited

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

Results for the year ended 30 September 2014

MedicX Fund (LSE: MXF), the specialist primary care infrastructure investor in modern, purpose-built, primary healthcare properties in the United Kingdom, today announces its results for the year ended 30 September 2014.

Highlights

Financial results

· Total shareholder return of 12.0% for the year (2013: 13.1%)1

· Quarterly dividend of 1.45p per share announced in October 20142; total dividends of 5.8p per share for the year or 6.9% dividend yield (2013: total dividends of 5.7p per share; 7.1% dividend yield)3,4

· Dividend and underlying dividend cover 53.6% and 67.1% respectively (30 September 2013: 63.8% and 70.7%)6

· Adjusted earnings of £10.7 million, an increase of £1.2 million or 12.5% from prior year, equivalent to 3.1p per share (30 September 2013: £9.5 million; 3.6p per share)5

· Discounted cash flow net asset value of £331.1 million equivalent to 93.4p per share (30 September 2013: £266.7 million; 97.0p per share)

· Adjusted net asset value less the estimated mark to market liability of fixed rate debt, equivalent to the EPRA NNNAV of £231.6 million equivalent to 65.3p per share (30 September 2013: £190.7 million; 69.4p per share)7,8

Investments

· New committed and approved investments since 1 October 2013 of £61.5 million acquired at a cash yield of 6.02%3

· £518.2 million committed investment in 137 primary healthcare properties an increase of 13.5% over the year (30 September 2013: £456.7 million, 121 properties)3,9

· Annualised rent roll now £32.8 million with 90% of rents reimbursed by the NHS, an increase of £4.0 million, or 13.9%, since 1 October 20133

· Strong pipeline of approximately £100 million of further acquisition opportunities3

Funding

· Market capitalisation £297.7 million3 following share price appreciation and £59.5 million net proceeds raised from 79.5 million shares issued since 1 October 2013 at an average issue price of 76.4p per share

· New £50 million loan note with an agreed term of five years and an all-in fixed rate of 3.80%

· Total drawn debt facilities of £288.4 million with an average all-in fixed rate of debt of 4.35% and an average unexpired term of 13.3 years, close to average unexpired lease term of the investment properties and compared with 4.45% and 15.8 years for the prior year

· Net debt of £255.2 million equating to 49.9% adjusted gearing at 30 September 2014

David Staples, Chairman said "We are delighted to have reached the milestone of having a portfolio of modern primary healthcare properties with a value in excess of £0.5 billion which forms a key part of the delivery of primary care in the UK. We estimate that the portfolio serves approximately 2% of the United Kingdom population. The Fund has performed well during the year, continuing to generate double digit returns for its shareholders whilst significantly increasing the value of its portfolio and rent roll, both by more than 13% since the previous year. The second closing of the Fund's new loan note facility is expected to complete in mid-December which will provide funds to facilitate future growth underpinning progressive long term returns for shareholders.

We continued to maintain our progressive dividend policy with an increase in dividends for the year to 5.8 pence from 5.7 pence the previous year. The dividend yield is currently 6.9% based on the share price at 8 December 2014 of 84.00 pence. Subject to unforeseen circumstances the Directors expect that the Company will pay dividends totalling 5.9 pence for the financial year ending 30 September 2015.

The landscape of primary healthcare continues to evolve to meet the ambitions of the current government. Modern purpose-built primary healthcare properties will continue to be the cornerstone of the NHS in the delivery of high quality healthcare to meet the demands of the changing demographics. The Fund looks to invest in properties that will generate secure long term cash flows well beyond the existing lease term. The Fund has cultivated strong relationships with a number of best in class developers, to complement the in house development expertise of the Investment Adviser, leading to a number of excellent investments and pipeline opportunities.

The interest rate environment continued to remain low during the year, and the Fund has taken advantage of this by raising a £50 million loan note through a private placement with a single investor. The loan note has a fixed all-in interest rate of 3.8%. The total debt facilities of the Company as at 30 September 2014 have a weighted average unexpired term of 13.3 years, and a weighted average all-in fixed rate of 4.35%.

Following the successful fund raising in October 2013, the Fund has been able to finance the acquisition of a number of high quality fully let investments, which are providing strong returns and improving dividend cover through the year. With the completion of the loan note facility, the Fund is well placed to further enhance earnings and continue to deliver attractive long term returns to shareholders."

For further information please contact:

MedicX Fund +44 (0) 1481 723 450

David Staples, Chairman

Octopus Healthcare Group +44 (0) 1483 869 500

Mike Adams, Chief Executive Officer

Mark Osmond, Chief Financial Officer

Buchanan +44 (0) 20 7466 5000

Charles Ryland/Sophie McNulty

Information on MedicX Fund Limited

MedicX Fund Limited ("MXF", the "Fund" or the "Company", or together with its subsidiaries, the "Group") is the specialist primary care infrastructure investor in modern, purpose-built primary healthcare properties in the United Kingdom, listed on the London Stock Exchange, with a portfolio comprising 137 properties.

The Investment Adviser to the Company is Octopus Healthcare Adviser Ltd, which is authorised and regulated by the Financial Conduct Authority and is a subsidiary of the Octopus Healthcare Group. The Octopus Healthcare Group (formerly the MedicX Group) is a specialist investor, developer and manager of healthcare properties with 33 people operating across the UK.

The Company's website address is www.medicxfund.com. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website), nor the contents of any website accessible from hyperlinks within this announcement, are incorporated into, or forms part of, this announcement.

1 Based on share price growth between 30 September 2013 and 30 September 2014 and dividends received during the year

2 Ex-dividend date 13 November 2014, Record date 14 November 2014, Payment date 31 December 2014

3 As at 8 December 2014

4 Total dividends declared divided by share price at 8 December 2014 (2013: at 6 December 2013)

5 Excluding (as appropriate) revaluation gain £11.6m, performance fees £1.9m, debt break costs £0.1m, and interest income £0.4m

6 Dividend cover excludes revaluation gains, performance fee and fair value on reset of loans. Adjusted dividend cover includes impact of properties under construction treated as completed properties

7 Net assets adjusted to exclude the impact of deferred tax not expected to crystallise £1.0m and the impact of resetting debt interest costs £1.4m

8 Estimated cost of all fixed rate debt of £1.5m calculated following advice from the Group's lenders

9 Includes completed properties, properties under construction and committed investment (being any acquisition the Fund is legally committed to following exchange of contracts)

10 This excludes a 10% fixed uplift on a small nominal rent, which if included would not impact the overall uplift, but would increase fixed uplift reviews to 3.1% per annum

Chairman's statement

Introduction

I am pleased to present the eighth annual report for the Fund, on behalf of the Board.

The aim of the Fund is to invest in best in class primary healthcare medical centres, to generate long term income from our investments and achieve stable returns for our investors. We look to invest in properties that will generate returns for shareholders well beyond their original lease term. As a result of this focus and the value-adding property acquisitions carried out over the past few years, the Company has created a market leading modern primary care portfolio. Fund performance has been good and the Fund has generated a total annual shareholder return, as measured by dividends paid and share price growth, over the past five years of 10.4% on average, with a return of 12.0% generated in the year under review.

Results overview

The Fund has had a strong year, following a successful fund raising at the beginning of the year which has been followed by earnings enhancing growth in its portfolio and rent roll, which has been achieved through significant new investment in primary healthcare properties. The Fund has maintained its price discipline and continued to acquire high quality assets meeting the Fund's investment criteria. Additional low cost fixed rate debt has been obtained by way of a loan note, providing further funds for investment. Following the strong growth in previous years, the Fund is well positioned within the primary care investment property market. In spite of the ongoing structural changes to the NHS with delays in approvals of schemes under the new structure, the demand for new purpose-built primary healthcare properties continues to be strong, although lead times to bring projects to fruition have lengthened. The Fund has increased its portfolio with 19 new properties acquired during the year under review.

Nine properties were acquired in March by way of a corporate acquisition with committed investment of £24.6 million. Three of these properties were subsequently sold back to one of the vendors under options agreed at the acquisition leaving the six properties that best met the criteria of the Fund. The properties acquired were completed assets and were immediately revenue generating and the acquisition was accretive to net asset value. Of the other 10 acquisitions, four were fully operational and generating rent on acquisition, whilst the remaining six acquisitions were forward funded developments of new properties successfully secured despite the NHS slowdown. At the year end, the Group had committed investment of £518.2 million across 137 properties of which seven remain under construction.

The Group's net asset value as at 30 September 2014, adjusted to exclude the impact of deferred tax not expected to crystallise, financial derivatives and the impact of resetting debt costs, increased 34.5% to £233.1 million or 65.8 pence per share. (30 September 2013: £173.3 million or 63.1p per share).

It is not appropriate to value the Fund's assets without also having regard to the value of all its liabilities and therefore the Fund reports the mark to market value of its debt. Gilt rates have decreased markedly since September 2013 and through 2014 resulting in the erosion of the mark to market benefit of the Fund's debt facilities from £17.4 million at 1 October 2013, to a mark to market liability of the Fund's debt of £1.5 million or 0.4 pence per share at 30 September 2014. The adjusted net asset value less the estimated liability of fixed rate debt is 65.3 pence per share.

In line with other infrastructure funds and given the long-term predictable cash flows, we believe it is appropriate to calculate a net asset value based upon discounted cash flows. This basis, as set out in the Investment Adviser's report, gives a net asset value of £331.1 million or 93.4 pence per share, based upon a weighted average discount rate of 7.06% (30 September 2013: £266.7 million; 97.0 pence per share).

Rental income grew by £3.9 million or 16.0% during the year. Costs are in line with expectations given the level of activity and the acquisitions in the year. Finance costs incurred in the period were £2.3 million higher than in the prior year, also in line with expectations, reflecting the additional low cost debt facilities put in place as the portfolio has grown. The long term profile of the debt portfolio held by the Fund and the favourable fixed interest rates on these facilities will continue to deliver value to the Fund over their remaining lives.

Profit before interest and tax, excluding the impact of revaluations and performance fees has increased 13.5% to £23.6 million for the year to September 2014, from £20.8 million in the previous year.

Capital appreciation of the portfolio for the year was £12.1 million with £0.5 million of purchase and related costs written off (in line with sector norms) generating a net valuation gain of £11.6 million. The portfolio valuation gain was consistent with yields in the primary healthcare property sector falling as demand continued to rise through the year and properties coming to market remaining scarce.

Adjusted earnings excluding revaluation impact, performance fees, fair value adjustments for financial instruments and deferred taxation was £10.7 million, an increase of £1.2 million or 12.5% from the prior year.

Funding

Another highly successful fund raise was completed at the beginning of the year, with the issue substantially over subscribed. The proceeds of the fund raise were quickly invested into appropriate primary healthcare property investments. The quality of the portfolio was maintained by targeting investments that will generate long term income and strong returns for shareholders. The majority of investments were made in existing let assets, generating immediate returns to the Fund from acquisition which has helped the Fund improve its dividend cover following the fund raising.

The fund raising was priced at only a small discount to the share price at the time and a premium of 6.2% to the adjusted net asset value ("NAV") plus mark to market value of debt. Thus, after allowing for costs, the fund raising was accretive to NAV per share.

The fund raising resulted in the issue of 85 million shares at 75 pence per share, by way of a placing, open offer and offer for subscription, of which 20 million shares were immediately repurchased by the Company and added to those held in treasury. This issue generated net proceeds of £47.6 million excluding those shares held in treasury.

Treasury shares have been and will continue to be utilised to satisfy further demand for shares in the Company, including any demand for shares under the scrip dividend scheme. These shares will however only be sold at a premium to adjusted NAV.

The Fund has continued to take advantage of movements in borrowing rates during the year to put in place new debt facilities at low fixed cost to achieve a significant spread between its investment returns and its cost of debt.

The Fund raised £50 million through a private placement of loan notes bought by a single institutional investor. The loan notes have a duration of five years maturing in August 2019, with no amortisation and the principal repayable on maturity. The all-in interest rate on the notes is fixed at 3.80%. The loan notes provided funds in two stages, £15 million which was drawn in August with the remainder to be drawn down in December 2014. This complements MedicX Fund's existing long term debt facilities.

On 28 November 2014, the Group repaid the GE Capital real estate loan of £31.2 million that was due in April 2015, by drawing down the full £25 million of the RBS revolving loan facility and utilising existing cash reserves. In the light of low gilt rates and margins currently available from potential lenders, the Group is in active discussions with lenders to provide new loan facilities at attractive rates.

The weighted average unexpired term of all drawn debt at 30 September 2014 is 13.3 years, closely matching the average remaining unexpired lease term of the Fund's portfolio. The debt strategy remains to pick the best time to put in place the right debt facilities at the right cost and duration.

The adjusted gearing as at 30 September 2014 was 49.9%. This has reduced from 56.4% as at 30 September 2013 following the successful fund raising achieved at the beginning of the year. Following the receipt of the second tranche of the loan note funds, repayment of the facility with GE Capital real estate, drawdown from RBS and assuming the funds received were invested in properties immediately, adjusted gearing would be approximately 53%.

The Directors continue to target borrowings of approximately 50% on average over time and not exceeding 65% of the Company's total assets.

The covenants on the debt facilities have been complied with in the year.

Dividends

The Fund maintained its progressive dividend policy, with total dividends declared of 5.8p per Ordinary Share in respect of the financial year ended 30 September 2014. This was an increase from the dividends of 5.7p per Ordinary Share for the year to 30 September 2013. Subject to unforeseen circumstances, the Directors expect that the Company will pay dividends totalling 5.9p for the financial year ending 30 September 2015.

In October 2014, the Directors approved a quarterly dividend of 1.45p per Ordinary Share in respect of the period 1 July 2014 to 30 September 2014. The dividend will be paid on 31 December 2014 to shareholders on the register as at close of business on 14 November 2014 (the "Record Date"). The corresponding ex-dividend date was 13 November 2014.

The Company has offered qualifying shareholders the opportunity to take new Ordinary Shares in the Company, credited as fully paid, in lieu of the cash dividend to be paid on 31 December 2014, by participating in the Scrip Dividend Scheme (the "Scheme") put in place by the Company on 5 May 2010. The results from this offer will be announced on 10 December 2014.

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

The Fund pays a high proportion of its return in the form of a dividend, yielding 6.9% as at the date of this report. As a consequence of this, part of the dividend is paid from capital rather than earnings.

Inevitably following a fundraise there is a short term impact on dividend cover until proceeds are deployed, and the success of the fund raise at the beginning of the year had a temporary detrimental impact on dividend cover for the year.

Dividend cover measured against adjusted earnings was 53.6% for the full year to 30 September 2014 (2013: 63.8%). The dividend cover on adjusted earnings was 58.9% for the second half of the year which shows a significant improvement on the cover for the first half of only 48.1% which is a reflection of the time taken to deploy funds in income generating assets. Underlying dividend cover adjusted to reflect completion of the properties under construction was 67.1% (assuming full annual rent on all properties and a full year of associated interest costs and other expenses) (2013: 70.7%). On the basis that further debt is raised on similar terms to the existing debt with gearing increased to 60%, and deployment of funds at similar yields, underlying dividend cover would increase to approximately 73%.

It is encouraging to report that an average of 16.2% of the dividends paid in the year ended 30 September 2014 were in the form of scrip dividends compared with 8.8% in the prior year. These dividends did not result in a cash outflow from the Company.

As the Fund continues to grow, deploy capital and complete properties under construction it is expected that dividend cover and underlying dividend cover will improve further and will align themselves. The Fund will continue to look to improve cover over time.

Annual General Meeting

At the Annual General Meeting held on 18 February 2014, shareholders passed all of the resolutions proposed. This included authority for the Directors to issue Ordinary Shares for cash or sell from treasury up to an amount representing 10% of the issued Ordinary Share capital from time to time on a non-pre-emptive basis, provided that such Ordinary Shares shall be allotted for cash at a price which is not less than the Company's adjusted net asset value at the time of the issue.

In addition a separate resolution was passed giving the ability for the Company to acquire its own shares (either for cancellation or to be held as treasury shares) up to a maximum of 14.99% of total shares issued, at a minimum price of 1 pence per share, and a maximum price per share being the higher of: (i) 105% of the average mid-market share price for the five business days preceding the purchase; (ii) the price of the last independent trade; and (iii) the highest current independent bid at the time of the purchase. All purchases under this resolution are to be made in the market for cash and at prices below the prevailing net asset value per share as determined by the Directors. These powers expire immediately prior to the date of the Annual General Meeting of the Company, to be held on 17 February 2015, and it is intended that two similar resolutions will again be put before shareholders at that meeting.

At the 2015 Annual General Meeting, as well as refreshing the above resolutions to issue Ordinary Shares, acquire Ordinary Shares or sell them from treasury, two additional resolutions will be put before shareholders seeking authority to enter into arrangements to increase the number of shares held in treasury by the Company. As at 8 December 2014, the Company held 7,056,692 shares in treasury. Shares held in treasury will continue to be used to satisfy demand under the scrip dividend scheme and to be issued into the market to meet demand and to raise funds for general corporate purposes.

Board changes

With effect from 13 November 2014, Steve Le Page was appointed to the Board of Directors as a non-executive director. Steve Le Page, who is a Chartered Accountant and Chartered Tax Advisor was previously an audit partner and the senior partner for PwC's practice in the Channel Islands. As a former audit partner with very recent experience, Steve is highly qualified to assume the role of the Chairman of the Audit Committee which is expected to be confirmed when Christopher Bennett retires from the Board with effect from 10 December 2014, following eight years' service. I take this opportunity to thank Christopher for his enormous contribution to the Company and the Board and to wish him well with his new ventures.

Share price and outlook

In the year to 30 September 2014, the total shareholder return, as measured by dividends received and share price growth, was 12.0%. Of the return, 7.4% was attributable to dividends received with the remainder from growth in the share price. At 8 December 2014, the mid-market share price was 84.00 pence per share ex dividend, which represents a 6.9% dividend yield based upon the 5.8 pence per share dividends declared for the year, and a premium of 27.7% to the adjusted net asset value of 65.8 pence per share. Additionally, this represents a premium of 28.5% to the adjusted net asset value plus the estimated mark to market liability of debt of 65.3 pence per share and a discount of 10.1% to the discounted cash flow net asset value of 93.4 pence per share.

The Company made an application to the Financial Conduct Authority ("FCA") during the year to register as a self-managed Alternative Investment Fund. For the purposes of the Alternative Investment Fund Manager Directive, MedicX Fund Limited is categorised as a non - EU alternative investment fund and has elected to be its own manager.

The Directors continue to keep under review the possibility of conversion to a Real Estate Investment Trust ("REIT") but have no immediate plans to convert.

As described in more detail in the Investment Adviser report, the Fund's Investment Adviser was acquired by Octopus Capital Limited on 1 October 2014. As a result of this change of ownership the Fund's Investment Adviser is now part of a larger fast-growing UK fund management company with leading positions in several specialist sectors, including its expanding healthcare business. This step change in scale will bring opportunities to the Fund and at the same time I am pleased that Mike Adams as CEO will continue to lead the Investment Adviser team under its new long term owner.

The Fund has had a successful year, continuing to enhance earnings and to deliver solid returns to shareholders. The fundamentals underlying primary healthcare properties continue to provide an attractive investment proposition and with a good pipeline of investment opportunities the Fund is well positioned for further growth.

David Staples

Chairman

9 December 2014

Investment Adviser's report

Acquisition of MedicX group

On 1 October 2014, Octopus Capital Limited ("Octopus Capital") completed its acquisition of MedicX Group including MedicX Adviser Ltd, the Investment Adviser to MedicX Fund. Following this acquisition, MedicX Adviser Ltd, changed its name to Octopus Healthcare Adviser Ltd.

Octopus is a fast-growing UK fund management company with leading positions in several specialist sectors, including its expanding healthcare business. Mike Adams, formerly CEO of MedicX Group, will continue to lead the existing team, now rebranded as Octopus Healthcare group. MedicX Fund will remain a core focus for the Octopus Healthcare group and in particular Octopus Healthcare Adviser Ltd.

Market

The primary care investment sector has seen yield compression for prime assets during the year, due to continued investor demand, relative value against other prime property sectors, and limited supply of available prime stock. This has reflected positively on the property valuations of the Fund.

Market rental growth however has remained low, due to a lack of new schemes setting new rental evidence, with settled reviews being based on established historical rental evidence often related to older assets.

Initial yields on prime primary healthcare assets secured on leases with fixed or RPI linked rent reviews are currently between 4.75% and 5.25%, and those for assets secured on leases with upwards only, open market reviews are between 5.45% and 5.60% with other assets at higher yields.

The NHS has continued to evolve over the last year and is evidently moving to centre stage in advance of the general election in May 2015. It is reassuring that both main parties continue to support general practice as the main resource that delivers the majority of all the patient contacts in state healthcare in the United Kingdom.

The Fund's assets are well placed to support GPs and the commissioning groups as they seek to implement changes as they respond to the recently announced NHS five year plan. The current portfolio incorporates a wide range of prime buildings that are well located to deliver the services required. The NHS is seeking to deliver more integrated services in the community with extended opening hours and new acquisitions continue to be focused on their ability to be fit to deliver the demands of this new service driven environment that will meet the needs of the primary care estate over the long term.

Portfolio update

The Fund currently has committed investment of £518.2 million, in 137 primary healthcare properties, an increase of 13.5% since 1 October 2013. The annualised rent roll of the property portfolio is now £32.8 million, an increase of £4.0 million, or 13.9%, since 1 October 2013.

The valuation of the portfolio undertaken by Jones Lang LaSalle Limited, independent valuers to the Group, stood at £517.7 million as at 30 September 2014 on the basis that all properties were complete, reflecting a net initial yield of 5.68% (5.79% as at 30 September 2013). The results reflect a net valuation gain of £11.6 million for the year of which the capital appreciation of the portfolio was £12.1 million less £0.5 million of purchase and related costs written off during the year.

At 8 December 2014, the portfolio of properties had an average age of 6.9 years, remaining lease length of 15.8 years and an average value of £3.8 million. Of the rents receivable, 90.2% are from government-funded doctors and the NHS, 8.2% from pharmacies and 1.6% from other tenants.

During the year the Group added a total of 19 properties representing a total commitment of £65.8 million at a cash yield of 6.08%.

Six new development projects at Buckley, Peterborough, Stevenage, Devonport, Poringland and Briton Ferry were acquired in the year. These new investments represent a commitment of £26.5 million. These acquisitions were all under construction as at 30 September 2014.

During the year, successful completion was achieved on properties previously under construction at Caerphilly, Wiveliscombe, Watford, Grange over Sands, Arnold, Maidstone, Rugby, Shoreham, Felixstowe, Potters Bar, and Wigston, representing a total commitment of £47.0 million. All of the completed projects were delivered within budget.

Construction continued on the existing project at Prenton, while the construction of the newly acquired projects at Buckley, Peterborough, Stevenage, Devonport, Poringland and Briton Ferry commenced in the year. The outstanding commitment on these properties at 30 September 2014 was £18.6 million, with most projects expected to complete within the next 12 months. Of the projects under construction as at 30 September 2014, the property at Prenton has since been completed within budget.

The Fund has a pipeline of identified investment opportunities of approximately £100 million, of which £7 million relates to completed assets and £93 million relates to forward funding opportunities where the Fund is the preferred investment partner. The lead time for deployment on completed assets is shorter, hence these remain in the pipeline for less time and so make up a smaller proportion of the existing pipeline.

In October 2013 and November 2013 the Group disposed of two of its smaller properties at Wheathampstead (for £0.6 million) and High Wycombe (for £1.0 million). The Group will continue to look to dispose of properties selectively where they no longer meet its long term investment criteria.

As described above, the initial valuation yield on investments is 5.68% compared with the Group's weighted average fixed rate debt of 4.35% and a benchmark 20-year gilt rate of 3.06% at 30 September 2014. This spread has enabled growth through committing investment since 1 October 2013 of £61.5 million. As the investment opportunities of approximately £100 million are converted, the Company is set to continue to grow and deliver value to its shareholders as it locks into the differential available between long term returns and cost of long term funding.

Asset management

During the year to 30 September 2014, the Fund averaged an uplift of 1.8% on its rent reviews, with 42 leases and rents of £4.8 million having been reviewed. Of these reviews, 1.2% per annum was achieved on open market reviews, 3.0% per annum was achieved on RPI based reviews, and 2.7% per annum on fixed uplift reviews10. Reviews of £13.4 million of passing rent were under negotiation as at 8 December 2014.

The primary healthcare market remains buoyant due to continued demand and limited supply of new opportunities, predominantly caused by delays in the NHS approving new schemes. Yields have fallen during the year due to the imbalance between supply and demand. Primary healthcare properties continue to provide good value compared with wider prime properties at yields close to or below 5%. In addition, previous acquisitions have provided some potential asset management opportunities and the Fund has realised some rental uplifts and valuation gains from these.

The Fund continually reviews its portfolio for asset management opportunities and has identified a number of opportunities to enhance the portfolio and increase valuations.

Of the £32.8 million annualised rent roll at 8 December 2014, there was £25.0 million, 76.2% subject to open market review, £6.2 million, 18.9% subject to RPI reviews and £1.6 million, 4.9% subject to fixed uplift reviews. The proportion of rent subject to RPI uplifts has increased over the last six years from 7.9% to 18.9%.

Discounted cash flow valuation of assets and debt

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

At 30 September 2014, the DCF valuation was £331.1 million or 93.4 pence per share compared with £266.7 million or 97.0 pence per share at 30 September 2013, the increase resulting partly from the acquisition of a portfolio in March 2014 and the new lower cost debt obtained in the year. The value per share has decreased as a result of the successful fund raising in October 2013.

The discount rates used are 7% for completed and occupied properties and 8% for properties under construction. These represent 2.5% and 3.5% risk premiums to an assumed 4.5% long term gilt rate. The weighted average discount rate is 7.06% and this represented a 4.00% risk premium to the 20 year gilt rate at 30 September 2014 of 3.06%.

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

For the discounted cash flow net asset value to equate to the share price as at 30 September 2014 of 83.5 pence per share, the discounted cash flow calculation would have to assume a 0.7% increase in rents per annum, or a 0.3% capital reduction per annum, or a weighted average discount rate of 8.2%. These reductions in rents and capital values would need to take place every year until the expiry of individual property leases.

For the discounted cash flow net asset value to equate to the share price as at 8 December 2014 of 84.00 pence per share, the discounted cash flow calculation would have to assume a 0.8% increase in rents per annum, or a 0.2% capital reduction per annum, or a weighted average discount rate of 8.1%.

Taking the adjusted net asset value less the estimated mark to market liability of fixed rate debt of 65.3 pence per share and assumed purchaser costs of 8.5 pence per share, an implied net initial yield of 5.01% would be required to match the discounted cash flow net asset value of 93.4 pence.

A review of sensitivities has been carried out in relation to the valuation of properties. If valuation yields firmed by 0.5% to a net initial yield of 5.18%, the adjusted net asset value would increase by approximately 14.2 pence per share to 80.0 pence per share and the adjusted net asset value less the estimated mark to market liability of fixed rate debt would increase to 79.6 pence per share.

Pipeline and investment opportunity

The spread between the yields at which the Fund can acquire properties and the cost of long term debt and Government gilts remains significant. The Investment Adviser has continued to successfully source properties both through Octopus Healthcare's development arm, Octopus Healthcare Property Ltd, and through its established relationships with investors, developers and agents in the sector. The Fund currently has access to a property pipeline, subject to contract, which is estimated to be worth approximately £100 million in value when fully developed.

Interest in voting rights of the Company

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

During the year the Investment Adviser received dividends on the holding in the Company in addition to fees received for services. With the Scrip Dividend Scheme in place, the Investment Adviser elected to receive its dividends in the form of new Ordinary Shares. The cash equivalent of the dividends received by the Investment Adviser was £107,311, compared with £84,359 in the year ended 30 September 2013.

Mike Adams Chief Executive Officer

Mark Osmond Chief Financial Officer

Octopus Healthcare Adviser Ltd

Principal risks and uncertainties

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

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

· A rising property market could limit the Company's ability to make appropriate investments which will make an acceptable rate of return for the Fund.

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

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

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

· As regards England, prior to April 2013 the rental costs of premises used for the provision of primary healthcare were usually reimbursed to GPs (subject to the fulfilment of certain standard conditions) by PCTs. Currently, NHS England is given the power (pursuant to the Health and Social Care Act 2013 and The National Health Service (General Medical Services - Premises Costs) Directions 2013) to reimburse GPs their rental costs for premises for the provision of primary healthcare, in appropriate cases subject to certain standard conditions being met and having regard to its budgetary targets. In the event that a Clinical Commissioning Group or other tenant found itself unable to meet its liabilities, the Company may not receive rental income when due and/or the total income received may be less than that due under the relevant contract. NHS budgetary restrictions might also restrict or delay the number of opportunities available to the Company.

· Prospective investors should be aware that the Company intends to use borrowings. This may have an adverse impact on NAV or dividends and those borrowings may not be available at the appropriate time or on appropriate terms. In addition, movements in interest rates may affect the cost of financing.

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

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

Consolidated Statement of Financial Position

As at 30 September 2014

The financial statements were approved and authorised for issue by the Board of Directors on 9 December 2014 and were signed on its behalf by Shelagh Mason.

1. Principal accounting policies

Basis of preparation and statement of compliance

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

At 30 September 2014, the Group had net current liabilities, as the GE Capital real estate loan was due for repayment in April 2015. However, the Group repaid the GE Capital real estate loan on 28 November 2014 by drawing down £25 million of the RBS revolving loan facility and utilising existing cash reserves. The Group expects to repay the RBS revolving loan facility when the second tranche of the loan note facility cash of £35 million is received on 12 December 2014.

The Group has cash reserves and assets available to secure further funding together with long term leases across different geographic areas within the United Kingdom. The Directors have reviewed the Group's forecast commitments, including ongoing commitments to development projects and proposed acquisitions, against the future funding availability, with particular reference to the utilisation and continued access to existing debt facilities and access to restricted cash balances. The Directors have also reviewed the Group's compliance with covenants on lending facilities.

The Group's financial forecasts show that it can remain within its lending facilities and meet its financial obligations as they fall due for the foreseeable future. The Directors also believe that the Group is well placed to manage its business risks successfully in the current economic environment. Accordingly, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Impact of revision to International Financial Reporting Standards

The accounting policies applied and the presentation of figures are consistent with those of the annual financial statements for the year ended 30 September 2013, other than the adoption of IFRS 13 fair value measurement and the consequential impact on fair value measurement, presentation and disclosure.

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

The listed standards either do not apply to the Fund or are not expected to have a material effect on the financial statements.

Basis of consolidation

The Group financial statements consolidate the financial statements of MedicX Fund Limited and entities controlled by the Company (its subsidiary undertakings) made up to 30 September 2014. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to benefit from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Accounting for acquisitions of investment properties

Where the Group acquires subsidiaries that own real estate, at the time of acquisition, the Group considers whether each acquisition represents the acquisition of an asset or a business. The Group accounts for an acquisition as a business combination where an integrated set of activities, including processes, is acquired in addition to the property.

When the acquisition of subsidiaries does not represent a business, it is accounted for as an acquisition of a group of assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based upon their relative fair values, and no goodwill or deferred tax is recognised.

Segmental reporting

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

Expenses 

All expenses are accounted for on an accruals basis.

Employees

The Group has no employees.

Cash and cash equivalents

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

Revenue recognition

Rent receivable comprises rent for the year in relation to the Group's investment properties exclusive of Value Added Tax. Rent is recognised on a straight line basis over the period of the lease. Rent is accrued for any outstanding rent reviews from the date that the review was due. Incentives offered to tenants to enter into lease agreements are amortised on a straight line basis over the remaining lease term. Any premium paid by tenants is recognised on a straight line basis over the full lease term. Fixed uplifts during the lease term are recognised on a straight line basis over the full lease term.

Other income includes licence fee income of £1,367,000 (2013: £1,214,000), which is receivable on properties under construction, this being a mechanism to realise a rental return over the course of the development period. Licence fee income is recognised on an accruals basis exclusive of Value Added Tax.

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

Trade and other receivables

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

Trade and other payables

Trade and other payables are recognised and carried at their invoiced value inclusive of any Value Added Taxes that may be applicable.

Finance costs

Borrowing costs are charged to the Consolidated Statement of Comprehensive Income in the year to which they relate on an accruals basis except where they relate to properties under construction when borrowing costs are capitalised.

Derivative financial instruments and hedging activities

The Group uses interest rate swaps to manage its exposure to interest rate risk. At inception of the hedge the Group documents the relationship between the hedging instrument and the hedged item and its assessment, both at the time of inception and on an ongoing basis, of whether the hedging instrument meets the requirements to be considered an effective hedge in offsetting changes in the cash flows of the hedged item.

All derivatives are initially recognised at fair value at the time of inception, and are subsequently measured at fair value. The fair value of the interest rate swaps are determined by the relevant counterparty to both the interest rate swap and hedged item.

Changes in the fair value of the hedging instrument will be recognised either as part of other comprehensive income if the hedge is considered effective, or as an element of finance costs if it is not considered effective.

Financial derivatives are classified as either current or non-current with relation to the maturity of the underlying hedged item.

Bank loans and borrowings

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

Bank loans that are acquired by means of asset acquisitions are recognised at fair value as at the date of acquisition with the resulting fair value adjustment amortised against finance costs over the life of the loans.

Investment properties

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

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

Investment properties

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

Costs of financing specific developments are capitalised and included in the cost of each development. During the year a portion of the Aviva £100m loan facility, the GE Capital real estate loan facility, the Aviva £50m loan facility and the Aviva GPG loan facility as disclosed in note 12, was utilised to fund development work on investment properties under construction. Interest costs of £504,000 (2013: £742,000) attributable to development work in progress were capitalised.

Taxation

The tax liability represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year.

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

Full provision is made for deferred tax assets and liabilities arising from all temporary differences between the recognition of gains and losses in the financial statements and recognition in the tax computation, other than in respect of asset acquisitions in corporate vehicles where deferred tax is recognised in relation to temporary differences arising after acquisition.

Deferred tax assets and liabilities are calculated at the tax rates expected to be effective at the time the temporary differences are expected to reverse by reference to the tax rates substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

Deferred tax assets

Deferred tax assets are recognised only if it is probable that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.

Impairment of assets

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

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount an impairment loss is recognised immediately in the Consolidated Statement of Comprehensive Income.

Fair value measurements

The Group measures certain financial instruments such as derivatives, and non-financial assets such as investment property, at fair value at the end of each reporting period. Fair value is the price that would be received to sell as asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair value measurement as a whole:

· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

· Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Use of judgements and estimates

In the process of applying the Group's accounting policies, the Directors are required to make certain judgements and estimates to arrive at the carrying value for its assets and liabilities. The most significant areas requiring judgement in the preparation of these financial statements were:

Valuation of investment property

The Fund obtains valuations performed by external valuers in order to determine the fair value of its investment properties. These valuations are based upon assumptions including future rental income, anticipated maintenance costs, future development costs and the appropriate discount rate. The valuers also make reference to market evidence of transaction prices for similar properties. Further information in relation to the valuation of investment property is disclosed in note 9.

Asset acquisitions

The Fund's approach to recognising investment properties acquired in a corporate entity is to treat the acquisition as an asset purchase, as described in IAS 40, if the corporate entity is not considered to contain any material processes. Each corporate entity acquired is considered to determine if it meets the criteria to be recognised as a business combination per IFRS 3 or if it is more appropriate to treat it as an asset acquisition. 

Rent reviews

The Fund estimates and accrues the expected uplift in rent for rent reviews from the review date to the period end and past due. This estimation of future rent takes into account the terms of the underlying occasional leases and the available observable market rental evidence.

Deferred tax assets

The Fund only recognises deferred tax assets if it is considered probable that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.

2. Directors' fees

Those fees paid in relation to the fundraising, reflecting the additional time and duties involved in that exercise, have been expensed against the share premium arising from the issue of new shares at the time of the fundraising.

3. Auditor's remuneration

The amount disclosed in the Consolidated Statement of Comprehensive Income relates to an accrual for audit fees for the year ended 30 September 2014, payable to KPMG LLP (2013: KPMG LLP).

Fees paid to the auditor include the following amounts:

In the prior year, the fee for the review of the interim report was paid to PKF (UK) LLP, the previous auditor.

4. Finance costs

During the year interest costs on funding attributable to investment properties under construction were capitalised at an effective interest rate of 4.45%. The funding was sourced from the Aviva £100m loan facility which has an effective interest rate of 5.008%, the Aviva £50m loan facility which has an effective interest rate of 4.37% and the GE Capital real estate loan facility which has an effective interest rate of 2.75%. Where properties under construction were secured against a specific loan, the interest for that facility was capitalised.

5. Financial derivatives

As part of its risk management strategy, the Group aims to secure fixed interest rates on the significant majority of its external debt (other than revolving loan facilities) to mitigate its exposure to interest rate risk. Where fixed interest rates are not secured with lenders, an interest rate swap will be utilised to fix the rate with the aim of achieving a perfect hedge. The fair value of these contracts is recorded in the Consolidated Statement of Financial Position, and is determined by discounting the future cash flows at prevailing market rates as at the reporting date.

The movement in fair value of effective swaps is recognised as part of other comprehensive income in the Consolidated Statement of Comprehensive Income.

The above movement in fair value of interest rate swaps relates to two swaps. The first interest rate swap was entered into in November 2011 for a notional value of £7.5 million and the second interest rate swap was entered into in October 2012 for a notional value of £23.7 million. The swaps exchange the floating rate for a fixed rate of 1.14% and 0.62% respectively until 30 April 2015. On 28 November 2014 these swaps were unwound and settled at the same time as the early repayment of the underlying loan principal.

6. Taxation

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

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

A reconciliation of the tax charge to the notional tax charge applying the average standard rate of UK corporation tax of 22% (2013: 23.5%) is set out below:

Deferred Taxation

As required by IAS 12 "Income taxes", full provision has been made for the temporary differences arising on the fair value gains of investment properties held by UK resident companies that have passed through the Group's Consolidated Statement of Comprehensive Income. In the opinion of the Directors, this provision is only required to ensure compliance with IAS 12. It is the Directors' view that the deferred tax attributable to the fair value gain on the Group's investment property portfolio is unlikely to crystallise as, in common with practice in the sector, the Group would most likely sell the company that holds the property portfolio rather than sell an individual property.

There are accumulated tax losses within the Group totalling £52.7 million (2013: £48.1 million), which are currently not recognised within the financial statements of the Group on the basis that there is uncertainty over whether these will be utilised in the future.

As a result of the deferred tax recognition exemption for asset acquisitions, deferred tax liabilities of £9,923,000 (2013: £8,639,000) in respect of fair value gains and £2,285,000 (2013: £2,155,000) in respect of capital allowances, and deferred tax assets of £708,000 (2013: £624,000) in respect of unrelieved management expenses, have not been recognised.

7. Provisions

Other provisions

The Company has made provision for potential liabilities relating to compliance and employee related matters arising from transactions which occurred in MPVII Investments Ltd prior to 1 December 2010. The provision made is based on the Directors' estimate of the amount that may be payable but it is subject to uncertainty with regards to both the amount and the timing of the likely payment.

8. Earnings and net asset value per Ordinary Share

Basic and diluted earnings and net asset value per share

The basic and diluted earnings per Ordinary Share are based on the profit for the year attributable to Ordinary Shares of £20,172,000 (2013: £9,366,000) and on 341,409,766 (2013: 263,373,173) Ordinary Shares, being the weighted average aggregate of Ordinary Shares in issue calculated over the year, excluding amounts held in treasury at the year end. This gives rise to a basic and diluted earnings per Ordinary Share of 5.9 pence (2013: 3.6 pence) per Ordinary Share.

The basic and diluted net asset value per ordinary share are based on the net asset position at the period end attributable to Ordinary Shares of £230,700,000 (2013: £170,990,000) and on 354,389,088 (2013: 274,906,714) Ordinary Shares being the aggregate of Ordinary Shares in issue at the period end, excluding amounts held in treasury at the year end. This gives rise to a basic and diluted net asset value per Ordinary Share of 65.1 pence per Ordinary Share (2013: 62.2 pence per Ordinary Share).

Adjusted earnings per share and net asset value per share

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

9. Investment properties

Investment properties are initially recognised at cost, being fair value of consideration given including transaction costs associated with the property. After initial recognition, investment properties are measured at fair value, which has been determined based on valuations performed by Jones Lang LaSalle Limited as at 30 September 2014. The valuation takes account of the rental yield and the fact that a purchaser's offer price to the Group would be less than that in order to cover the purchaser's costs (which are estimated at 5.8% (2013: 5.8%) of what would otherwise be the purchase price).

Investment properties under construction are initially recognised at cost, and are subsequently measured at fair value as at the year end. The fair value has been determined based on valuations performed by Jones Lang LaSalle Limited as at 30 September 2014. In accordance with industry standards, the valuation is the net of purchaser costs and then the remaining costs to complete properties under construction are also deducted.

The freehold and long leasehold interests in the property investments of the Group were valued at an aggregate of £517,733,000 as at 30 September 2014 by Jones Lang LaSalle Limited. This valuation assumes that all properties, including those under construction, are complete. The difference between the total valuation and the carrying value is the cost to complete those properties under construction and lease incentive adjustments as at 30 September 2014.

The Valuer's opinion of market value was derived using valuation techniques and comparable recent market transactions on arm's length terms. Jones Lang LaSalle Limited has valued these properties for reporting purposes since 31 March 2008.

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

The initial yield at 30 September 2014 was 5.68% (2013: 5.79%);

In October 2013 and November 2013 the Group disposed of two of its smaller properties at Wheathampstead and High Wycombe, for £600,000 and £1,045,000 respectively. The carrying values for these properties were £585,000 and £1,040,000. In June 2014 a further three properties and a parcel of land was sold for £4,338,000 being the carrying value of the properties at the time. The loss on the disposal of £23,000 recognised in the Consolidated Statement of Comprehensive Income relates to the difference between the proceeds and carrying value in the accounts, less agency commissions and other conveyancing costs of £43,000.

Fair value hierarchy

The valuation of all investment properties is classified in accordance with the fair value hierarchy described in note 1. As at 30 September 2014 (and as at 30 September 2013), the group determined that all investment properties be included at fair value as Level 3, reflecting significant unobservable inputs.

There were no transfers between Levels 1, 2 or 3 during the year.

Valuation techniques

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As is common for investment property, valuation appraisals are performed using a combination of market and income approaches.

Under the market comparable method (or market comparable approach), a property's fair value is estimated based on comparable observable transactions.

Under income approaches, unobservable inputs are applied to model a property's fair value. The following unobservable inputs are applied:

· The Estimated Rental Value is the amount that an area could be let for, based on prevailing market conditions at the valuation date;

· The Equivalent Yield is the internal rate of return from the cash flows generated from renting a property;

· Rental Growth is an estimate of rental increases expected for contractual or prevailing market conditions; and

· The physical condition of a property that would normally be visited by a valuer on a rotational basis.

Properties under construction have been measured at their fair value by taking the fair value at completion and subtracting the contractual costs to complete the assets under the development contracts. The technique inherently assumes that construction will be completed to an acceptable standard and leases will be entered into under the terms and time line agreed.

The fair value of investment properties is considered to be based on a number of significant assumptions. If the valuation yield were to shift by 0.25% on each property, this would result in an impact on the valuation of the properties of approximately £55 million. If rent reviews of 2% were achieved on the full portfolio with no yield movement the valuation of properties would increase by approximately £10 million.

The property yields of the Fund excluding four outlying properties range from 7.46% to 4.78%.

The property ERVs of the Fund excluding one outlying property range from £103 to £354 per square metre.

The majority of investment properties are security for the long-term loans as disclosed in note 12.

Of the completed investment properties £130,048,000 (2013: £69,337,000) are leasehold properties.

During the year a portion of the Aviva £100m loan facility, the GE Capital loan facility, the Aviva £50m loan facility and Aviva GPG loan facility disclosed in note 12 were utilised to fund development work on investment properties under construction. Interest costs of £504,000 (2013: £742,000) attributable to development work in progress were capitalised during the year.

10. Trade and other receivables

11. Trade and other payables

The current portion of long term loans relates to the amount due in the next twelve months on the GE Capital, Aviva PMPI and Aviva GPG loan facilities; the terms of these loans are disclosed in note 12.

12. Loans

The Group has five primary debt facilities drawn, being the Aviva £100m loan, the GE Capital (formerly Deutsche Postbank) loan, the Aviva £50m loan, the Aviva GPG loan and the Aviva PMPI loan, with a smaller loan facility for a single property. In addition the Group has a revolving loan facility with RBS. The RBS facility was undrawn at 30 September 2014. Details of each facility are disclosed below. Repayments of the loans listed above fall due as follows:

Aviva £100m loan facility

In November 2006 the Group entered into an agreement with Aviva Commercial Finance ("Aviva"), formerly the General Practice Finance Corporation Limited, for a £100 million loan facility at a fixed rate of 5.008% on an interest only basis. The facility was fully drawn down on 1 December 2006, with the cash held on deposit to meet future investment requirements. This loan is due for repayment in its entirety on 1 December 2036. The original loan facility has been split into four loans held by subsidiary companies: MedicX Properties I Limited: £30,000,000, MedicX Properties II Ltd: £33,000,000, MedicX Properties III Ltd: £9,000,000 and MedicX Properties IV Ltd: £28,000,000.

Under the terms of the Aviva £100m loan facility, further charges are incurred when properties are secured or released from charge under the facility. Any costs incurred are added to the loan issue costs and amortised over the remaining life of the loan facility.

The Aviva £100 million loan is secured on some of the Group's investment properties. The value of properties provided as security for this facility is £162,817,000. As at 30 September 2014, the Group had cash of £201,000 (30 September 2013: £201,000) on deposit secured against the loan.

GE Capital Real Estate facility

On 1 August 2011 the Group agreed the facility for a total of £37.1 million. The key terms of the agreement were that the facility would not be amortised, and the draw downs could not exceed 62.5% of the market value of the mortgaged property. The facility had a five year term, expiring in April 2015.

The first significant draw down of the facility was made on 25 November 2011 for £7,000,000. The interest rate was fixed at an all-in rate, including margin, of 3.14%. Further draw downs of £3,700,000 and £20,000,000 were made in July 2012 and September 2012 respectively, and these amounts were fixed at an all in interest rate of 2.62% in October 2012. In the year ended 30 September 2012, the Group allowed the remaining facility of £5.9 million to lapse, leaving a total facility of £31.2 million.

Under the terms of the GE Capital real estate loan facility, further charges were incurred when properties were secured or released from charge under the facility. Any costs incurred were added to the loan issue costs and amortised over the remaining life of the loan facility.

The facility was secured against the ten investment properties held by MedicX Properties VI Limited. The value of the property provided as security was £54,280,000 (2013: £53,410,000).

In November 2013, this loan facility was transferred to GE Capital real estate from Deutsche Postbank AG as part of the acquisition of the latter's loan book. The terms of the facility were unchanged on the transfer.

In November 2014 the Company repaid the GE Capital real estate loan facility of £31.2 million. The GE Capital real estate facility was repaid from a mix of existing cash reserves and a £25 million draw down from the RBS revolving loan facility.

Aviva £50m loan facility

On 4 February 2012 the Group entered into an agreement for a £50 million loan facility with Aviva. The facility is for a period of 20 years at a fixed all-in interest rate of 4.37% including margin. Initially the facility is interest only for the first ten years, and subsequently amortises to £30 million over the remaining ten years with the remaining principal repayable on expiry of the facility.

The facility was fully drawn at the time the agreement was completed with the proceeds placed on deposit secured against the loan, to be released once investment properties are secured against the facility. As at 30 September 2014, the Group had cash of £980,000 on deposit secured against the loan (30 September 2013: £4,622,000). These cash deposits are restricted until such time as sufficient properties are secured to meet the loan draw down covenants mentioned below.

Draw downs must not exceed the lower of 65% of the market value of the property secured against the facility or 50% of the expected market value of the property at the time the facility expires. The value of properties provided as security for this facility is £88,690,000 (2013: £87,650,000).

Under the terms of the Aviva £50m loan facility, further charges are incurred when properties are secured or released from charge under the facility. Any costs incurred are added to the loan issue costs and amortised over the remaining life of the loan facility.

Aviva PMPI loan facility

On 20 July 2012 the Fund acquired the Aviva PMPI loan facility of £62.9m, which comprises three separate facilities all on largely similar terms. The facilities start as interest only and then amortise over their remaining life with a residual amount payable on expiry. In December 2012 the interest rates on these loans were reset to more favourable rates. As this is not considered to be a substantial modification, the cost of resetting the interest rates has been capitalised, and will be amortised over the remaining life of the loans.

The major facility of £54,597,000 expires in February 2027 and is secured at an all-in fixed interest rate of 4.45%. The smaller facilities of £8,000,000 and £279,000 expire in November 2032 and October 2031. These facilities are also secured at an all-in fixed interest rate of 4.45%.

The major facility and the smallest facility are currently amortising, while the other facility is currently interest only and will begin to amortise from January 2015. The residual payment for the major facility is £28,650,000, with the residual payments for the smallest facility being £81,000 and £2,890,000 on the other facility.

A fair value adjustment was recognised on acquisition of the loan facility in accordance with accounting standards. The fair value adjustment will be amortised over the remaining life of the loan facility, and the amount recognised above represents the amortisation since acquisition.

The Aviva PMPI loan facility is secured on the Group's investment properties. The value of properties provided as security for this facility is £85,106,000 (2013: £83,943,000). Additionally, £4,698,000 (2013: £3,335,000) is held in a restricted deposit account with Aviva to provide security for and ensure compliance with the interest cover covenant on the £8,000,000 facility. Amounts held in this deposit will be released against future payments of the facility.

Aviva GPG loan facility

On 24 May 2013 the Fund acquired the Aviva GPG loan facility of £34.9m, which comprises 14 separate facilities. 12 of the loan facilities have fixed interest rates and the remainder have variable interest rates which are expected to be fixed before becoming fully drawn. The facilities start as interest only, until practical completion, and then amortise over their remaining lives with a residual amount payable on expiry.

The Aviva GPG loan facility is secured on the Group's investment properties. The value of properties provided as security for this facility is £38,838,000 (2013: £33,173,000). Additionally, £273,000 (2013: £5,109,000) is held in a restricted deposit account with Aviva and will be made available as the properties secured are developed.

Aviva Verwood loan facility

A mortgage was taken out by the subsidiary MedicX (Verwood) Limited and is secured on that company's investment property. Interest on the mortgage is charged at 6.25%. The loan facility is currently amortising and will be fully repaid by July 2026.

RBS loan facility

On 20 September 2013 a £25 million revolving loan facility was put in place with The Royal Bank of Scotland Plc. The facility is for a three year term at a rate based on a margin over LIBOR, set dependent on group loan to value. At current rates the facility is expected to cost approximately 3%. In November 2014, the loan was fully drawn and applied towards repaying the GE Capital real estate facility.

Loan note facility

On 26 August 2014 a £50 million loan note was put in place by way of a private placement. The loan note is for a five year term at a fixed rate of 3.8%. The loan note is secured on certain of the Group's investment properties. The value of properties provided as security for this facility is £34,590,000.

Covenants

All of the covenants on the loan facilities were complied with in the year.

Mark to market of fixed rate debt

The Group does not mark to market its fixed interest debt in its financial statements, other than the recognition of a fair value adjustment on the acquisition of debt facilities. The unamortised fair value adjustment of acquired loans was £9,474,000 as at 30 September 2014 (30 September 2013: £10,446,000).

A mark to market calculation gives an indication of the benefit or liability to the Group of the fixed rate debt given the prevailing cost of debt over the remaining life of the debt. An approximate mark to market calculation has been undertaken following advice from the Group's lenders, with reference to the fixed interest rate on the individual debt facilities, and the fixed interest rate, including margin, achievable on the last business day of the financial year for a loan with similar terms to match the existing facilities.

The debt benefit or liability is calculated as the difference between the present values of the debt cash flows at the two rates over the remaining term of the loan, discounting the cash flows at the prevailing LIBOR rate. The approximate mark to market liability of the total fixed rate debt to the Group was £1,501,000 as at 30 September 2014 (30 September 2013 benefit: £17,334,000).

Fair value hierarchy

The valuation of loans is classified in accordance with the fair value hierarchy described in note 1. As at 30 September 2014 (and as at 30 September 2013), the Group determined that loans be included at fair value as Level 3, reflecting significant unobservable inputs.

There were no transfers between Levels 1, 2 or 3 during the year.

Cash flow movements

During the year, the principal cash flow movements on the Fund's loan facilities were as follows:

13. Share capital

Ordinary Shares of no par value were issued during the year as detailed below:

Treasury shares were utilised to satisfy general market demand for shares and in lieu of cash payment for the dividend payable. The transactions and relevant price per share are noted below:

The closing value of shares held in treasury issued at 75 pence per share each is £5,292,519.

Any cash consideration received in excess of the price the treasury shares were purchased at has been included as part of share premium.

14. Other reserves

The movement in other reserves is set out in the Statement of Changes in Equity.

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

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

15. Cash and cash equivalents

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

Included in the above amounts are balances that are held in restricted accounts which are not immediately available for use by the Group of £6,152,000 (2013: £13,267,000). These amounts will be made available when sufficient property has been secured against the loan facility and all documentation is completed.

16. Dividends

Dividends are scheduled for the end of March, June, September and December of each year, subject to Board approval and shareholder approval at the AGM of the dividend policy. On 27 October 2014, the Board approved a dividend of 1.45 pence per share, bringing the total dividend declared in respect of the year to 30 September 2014 to 5.8 pence per share. The record date for the dividend was 14 November 2014 and the payment date is 31 December 2014. The amount disclosed above is the cash equivalent of the declared dividend. The option to issue scrip dividends in lieu of cash dividends, with effect from the quarterly dividend paid in June 2010, was approved by a resolution of Shareholders at the Company's Annual General Meeting on 10 February 2010. On 27 October 2014 the Board announced an opportunity for qualifying Shareholders to receive the December 2014 dividend in new Ordinary Shares instead of cash.

17. Financial instruments risk management

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

The financial instruments of the Group at both 30 September 2014 and 30 September 2013 comprised trade receivables and payables, other debtors, cash and cash equivalents, non-current borrowings, current borrowings and interest rate swaps. It is the Directors' opinion that, with the exception of the non-current borrowings for which the mark to market liability or benefit is set out in note 12, the carrying value of all financial instruments in the statement of financial position was equal to their fair value.

Credit risk

From time to time the Group invests surplus funds in high quality liquid market instruments with a maturity of no greater than six months. To reduce the risk of counterparty default, the Group deposits its surplus funds subject to immediate cash flow requirements in A- rated (or better) institutions.

Concentrations of credit risk with respect to customers are limited due to the Group's revenue being largely receivable from UK government derived sources. As at the year end 90% (2013: 90%) of rental income was derived from NHS tenants who are spread across several Clinical Commissioning Groups which further reduces credit risk from this area. The default risk is considered low due to the nature of NHS funding for GP practices.

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

It is the Group's policy to assess debtors for recoverability on an individual basis and to make provision where it is considered necessary. Of the Group's trade receivables balance £1,792,000 (2013: £4,334,000) is neither impaired nor past due. £602,000 (2013: £1,098,000) is past due and of this £543,978 (2013: £657,000) is more than 120 days past due. The Board takes active steps to recover all amounts and has assessed that a provision of £92,000 (2013: £63,000) against trade receivables is appropriate.

All financial assets are categorised as loans and receivables.

Market risk

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

Interest rate risk

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

The Group's Aviva borrowing facilities of £100,000,000 (2013: £100,000,000), £50,000,000 (2013: £50,000,000) and £61,045,000 (2013: £62,876,000) were negotiated at a fixed rate of interest of 5.008%, 4.37% and 4.45% respectively. 12 of the Aviva GPG loan facilities are also fixed, with a weighted average interest rate of 4.45%, as disclosed in note 12. The remaining two Aviva GPG loan facilities are charged at variable interest rates with a 2.5% margin.

The Group's GE Capital real estate loan facility of £31,200,000 (2013: £31,200,000) had a variable rate of LIBOR plus 2%. At the year end £7,500,000 of this facility was fixed at 3.14%, the remaining £23,700,000 was fixed at 2.62% by way of swaps agreements. These swaps, which are the only swaps the Group had, were matched to the terms of the facility and effectively fixed the interest rate for the full term of the loan. This loan was repaid in full in November 2014 together with the fair value of the swaps.

The Group's RBS loan facility of £25,000,000 (2013: £25,000,000) has a variable rate based on a margin over LIBOR, set dependent on group loan to value. At current rates the facility is expected to cost approximately 3%. At the year end the facility had not been drawn against but it was drawn down in full in November 2014 to part fund the repayment of the GE Capital Real Estate facility referred to above.

The Group's loan note facility of £15,000,000 (2013: £Nil) has a fixed rate of 3.8%.

These facilities represented 99% of the drawn borrowing facilities at the year end. The Directors consider interest rate risk on borrowings to be immaterial and do not consider it appropriate to perform sensitivity analysis on these items. Of the restricted cash balances held at the year end, £6,152,000 (2013: £13,267,000) was held in an Aviva deposit account which is AA+ rated with an average interest rate of 0.2%.

Liquidity risk

Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. The Directors regularly review the Company's forecast commitments against the future funding availability, with particular reference to the utilisation of and continued access to existing debt facilities and access to restricted cash balances and the ongoing commitments to development projects and proposed acquisitions. The Directors also review the Company's compliance with covenants on lending facilities.

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