Medicx Fund Regulatory News (MXF)

For immediate release

9 December 2015

MedicX Fund Limited

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

Results for the year ended 30 September 2015

MedicX Fund Limited, (LSE: MXF), the specialist primary care infrastructure investor in modern, purpose-built, primary healthcare properties in the United Kingdom and Ireland, today announces its results for the year ended 30 September 2015.

Financial Highlights

Key achievements of 2015

Financial results

· 5.4 pence per share increase in EPRA NAV for the year to 70.8 pence per share (30 September 2014: 65.4 pence per share)

· Quarterly dividend of 1.475p per share announced in October 20154; total dividends of 5.9p per share for the year or 7.0% dividend yield (2014: total dividends of 5.8p per share; 6.9% dividend yield)4,5

· EPRA earnings of £13.4 million, an increase of £4.7 million or 54% from prior year, equivalent to 3.7p per share (30 September 2014: £8.7 million; 2.5p per share)6

· Dividend and underlying dividend cover 63.3% and 68.0% respectively (30 September 2014: 53.6% and 67.1%)7

· Discounted cash flow net asset value of £346.3 million equivalent to 94.9p per share (30 September 2014: £331.1 million; 93.4p per share)

· EPRA NNNAV of £228.9 million equivalent to 62.7p per share (30 September 2014: £229.2 million; 64.7p per share)6

Investments

· New committed and approved investments since 1 October 2014 of £41.2 million acquired at a cash yield of 5.78%1

· First investment made in the Republic of Ireland of €10.1 million

· £559.5 million committed investment in 148 primary healthcare properties as at 4 December 2015, an increase of 8.0% (8 December 2014): £518.2 million, 137 properties)1,8

· Annualised rent roll at 4 December 2015 of £35.8 million with 88.3% of rents reimbursed by the NHS, an increase of £3.0 million, or 9.1%, since 8 December 20141

· Strong pipeline of approximately £126.0 million of acquisition opportunities1

Funding

· Market capitalisation £308.5 million1 following share price appreciation and £6.9 million net proceeds raised from 8.3 million shares issued since 1 October 2014 at an average issue price of 83.1p per share1

· New £50 million loan note with an agreed term of thirteen years and five months with an all-in fixed rate of 3.838%

· The maturity on an existing £50 million loan note was extended nine years and three months to mature in December 2028

· Total drawn debt facilities of £338.3 million with an average all-in fixed rate cost of debt of 4.45% and an average unexpired term of 15.0 years, close to average unexpired lease term of the investment properties of 15.8 years and compared with 4.35% and 13.3 years for the prior year

· Net debt of £281.4 million equating to 50.2% adjusted gearing at 30 September 2015 (30 September 2014: £255.2 million; 49.9%)

1 As at 4 December 2015

2 Based on share price movement between 30 September 2014 and 30 September 2015 and dividends paid during the year

3 Movement on EPRA NAV per share between 30 September 2014 and 30 September 2015 and dividends paid during the year, divided by opening EPRA NAV per share

4 Ex-dividend date 19 November 2015, record date 20 November 2015, payment date 31 December 2015

5 Total dividends declared divided by share price at 4 December 2015 (2014: at 8 December 2014)

6 See note 8 to the financial statements

7 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

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

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

Buchanan +44 (0) 20 7466 5000

Charles Ryland/Vicky Watkins

Information on MedicX Fund Limited

MedicX Fund Limited ("MXF", "MedicX Fund", "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 148 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 is a specialist investor, developer and manager of healthcare properties with 38 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.

Chairman's statement

Introduction

I am pleased to present the ninth annual report for the Company, on behalf of the Board.

The current year has seen growing demand for primary care, with political support to provide greater local community patient choice, as consultations and the range of services offered continue to increase. To respond to the challenge, GP practices are merging, forming federations or joining larger provider groups. The formation of larger practices is driving the need for large, modern purpose built facilities to replace the older existing premises many of which are judged inadequate by the British Medical Association.

The Fund continues to invest in best in class primary healthcare medical centres, thereby generating long term sustainable income from our investments. We look to invest in properties that will generate returns for shareholders well beyond their original lease term by acquiring assets that are not only tailored to the current needs of our tenants but also their expected needs as they respond to increasing pressure and demand for primary care services. As a result of this focus and the value-adding property acquisitions carried out over the past few years, the Fund has created a market leading modern primary care portfolio.

The UK market has become increasingly competitive with relatively high values being paid for assets of variable quality. In the face of these market conditions the Fund has maintained its price discipline and continued to only acquire assets of the highest quality that meet the Fund's investment criteria. The changes brought about by the abolition of PCTs and the lack of clarity on the new estate strategy and premises funding in the UK have negatively impacted the number of available and suitably priced projects within the primary healthcare market during the year. However, the Fund has succeeded in securing five high quality developments in the UK. As a result of the current conditions in the UK market the Fund has looked further afield, seeking new investment opportunities in related markets including the Republic of Ireland primary healthcare sector. The Irish primary healthcare market has a well-defined strategy whereby the Health Service Executive (the Republic of Ireland's equivalent of the NHS) is seeking to procure space in new dominant properties offering a wide range of primary healthcare and complimentary services which fully meet the Fund's investment criteria.

The Fund's first acquisition in the Republic of Ireland followed a significant due diligence exercise on the opportunities available in the Irish healthcare property market. It is the belief of the Board that the Republic of Ireland offers good yields for quality properties, let on long leases, generating principally government backed income, making Irish healthcare property opportunities an attractive fit with the Fund's investment objective. The yields available in the Republic of Ireland, as the market develops, are currently significantly higher than those available for similar quality properties seen in the UK. The Fund will seek to hedge the currency exposure as much as possible where it is cost effective to do so. At the forthcoming AGM in February 2016, the Board will propose a resolution to amend the Company's Investment Policy to enable the Company to invest up to a maximum of 20% of the Company's property asset value, at the time of investment, in properties located in the Republic of Ireland. However, the Directors do not expect to exceed a limit of approximately 15% of the Company's property asset value to be invested in primary healthcare properties in the Republic of Ireland.

Results overview

During the year the Fund became a member of EPRA and these are the first financial statements to prominently include EPRA measures as opposed to adjusted measures previously reported by the Fund. The Board believes this change in emphasis will enable shareholders and other readers of our annual report to gain a more comparable, relevant and transparent view of our results and position relative to our peers.

Fund performance has been good with EPRA NAV as at 30 September 2015, having increased 11.5% to £258.4 million or 70.8 pence per share (30 September 2014: £231.8 million or 65.4 pence per share). Together with dividends paid in the year of 5.875 pence per share this led to an EPRA NAV total return (being growth in EPRA NAV plus dividends paid) of 11.275 pence per share or 17.2%. Total shareholder return was, however, disappointing at -0.4% largely due to the dip in the share price that occurred over the Company's year end. The share price has since recovered to 84.5 pence as at 4 December 2015 (30 September 2015: 77.5 pence).

As explained in my introduction, we maintained our investment discipline and, at 30 September 2015, the Group had committed investment of £545.6 million across 143 properties of which five are under construction. However, since then the Fund has deployed a further £13.9 million on five let, operational assets in the UK.

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 been volatile and had decreased significantly since 30 September 2014 resulting in increased mark to market liabilities inherent in the fixed rate debt, up from £1.5 million (0.4 pence per share) at 1 October 2014, to £25.2 million or 6.9 pence per share at 30 September 2015. The EPRA NNNAV which includes the liability for fixed rate debt was 62.7 pence per share at 30 September 2015 (2014: 64.7 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 £346.3 million or 94.9 pence per share, based upon a weighted average discount rate of 7.06% (30 September 2014: £331.1 million; 93.4 pence per share; 7.06%).

Rental income grew by £4.7 million or 16.8% during the year. Costs were in line with expectations given the level of activity and the acquisitions in the year. Finance costs incurred in the period were in line with expectations, reflecting the additional low cost long term fixed rate debt facilities put in place as the portfolio has grown. We believe the long term profile of the debt facilities taken out by the Fund and the favourable fixed interest rates on these facilities will deliver value to the Fund over their remaining lives.

EPRA earnings have increased 54.0% to £13.4 million for the year to September 2015, from £8.7 million in the previous year. The increase is principally due to the benefit of rents receivable on properties previously under construction and prior year acquisitions being fully reflected in the current year without a significant need to increase finance costs. Improving economies of scale and no performance fee being due for the current year have also had a positive effect.

The portfolio valuation gain of £25.6 million was consistent with yields in the primary healthcare property sector falling as demand continued to rise through the year and properties coming to market remained scarce.

Signed on 20 November 2015 and with effect from 1 October 2015, the Company renegotiated the fee paid to its Investment Adviser. A new reduced scale has been put in place with a freeze on the Investment Adviser base fee, which enables the Fund to grow the value of its property assets up to £782 million with no corresponding increase in the Adviser base fee. The new fee arrangements will bring benefits to shareholders' total return by enhancing future earnings and enabling the Fund to meet a key investment objective of increasing net income over time as well as helping the Fund to improve dividend cover.

Funding

On 18 February 2015 the Company issued 32.8 million new ordinary shares of no par value to its broker, at an issue price of 83.5 pence per share. On 20 February 2015 the Fund repurchased all of the new shares at the same price to be 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. Treasury shares will however only be sold at a premium to EPRA NAV.

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. The RBS facility was repaid in December 2014 once the second stage of funds were received from the loan notes put in place during the previous year.

The Fund has continued to take advantage of continuing attractive borrowing rates to extend existing facilities and put in place new debt facilities at low fixed cost, locking in a significant spread between investment returns and the cost of debt for the long term.

During the year, the Fund raised £50 million through a private placement of loan notes bought by Standard Life Investments Limited, a new institutional investor in the Fund. The loan notes have a duration of thirteen years and five months maturing on 30 September 2028, with no amortisation and the principal value repayable on maturity. The all-in interest rate on the notes is fixed at 3.838%. The loan notes provided funds in two stages with £25 million drawn down on 30 April 2015 and £25 million drawn down on 30 September 2015. This complements MedicX Fund's existing long term debt facilities. In addition, the maturity of the existing £50 million loan note was extended to December 2028, thereby further reducing the Fund's exposure to short and medium term interest rates movements.

The weighted average unexpired term of all drawn debt at 30 September 2015 is 15.0 years, closely matching the average remaining unexpired lease term of the Fund's portfolio of 15.8 years. The debt strategy remains to try to pick the optimal time to put in place the best available debt facilities with the most favourable terms whilst ensuring adherence to the Company's gearing target.

The adjusted gearing as at 30 September 2015 was 50.2%. This has increased from 49.9% as at 30 September 2014 but remains close to the target of 50% set by the Board. The Directors will continue to target borrowings of approximately 50% on average over time but not exceeding 65% of the Company's total assets.

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

Dividends

The Company maintained its progressive dividend policy, with total dividends declared of 5.9p per Ordinary Share in respect of the financial year ended 30 September 2015. This was an increase from the dividends totalling 5.8p per Ordinary Share for the year to 30 September 2014. The Board intend to maintain the Company's progressive dividend policy but, given the current very low inflationary environment and an objective of increasing dividend cover over time, the growth rate for 2016 will be reduced. Subject to unforeseen circumstances, the Directors expect that the Company will pay dividends totalling 5.95p for the financial year ending 30 September 2016.

In October 2015, the Directors approved a quarterly dividend of 1.475p per Ordinary Share in respect of the period 1 July 2015 to 30 September 2015. The dividend will be paid on 31 December 2015 to shareholders on the register as at close of business on 20 November 2015 (the "Record Date"). The corresponding ex-dividend date was 19 November 2015.

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 2015, 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 2015.

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). Of the dividends paid in the year ended 30 September 2015, 9.4% were in the form of scrip dividends. The benefit to the Company was that cash of £1.98 million was retained by the Company which would otherwise have been paid out.

The Fund pays a high proportion of its return in the form of a dividend, yielding 7.0% as at the date of this report. As a consequence of this, part of the dividend is paid from capital rather than earnings.

Dividend cover measured against adjusted earnings was 63.3% for the year to 30 September 2015 (2014: 53.6%). Underlying dividend cover, which is dividend cover adjusted to reflect completion of the properties under construction was (assuming full annual rent on all properties and a full year of associated interest costs and other expenses) 68.0% (2014: 67.1%).

As the Fund continues to grow, achieve rental increases, deploy capital and complete properties under construction, and in tandem with the cap on the Investment Adviser base fee, 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 dividend cover over time.

Share price and outlook

At the year end the share price was 77.5p amidst significant market volatility following, among other things, fears of a contagion effect from China and the potential for a hard landing for Chinese growth. This share price resulted in a dividend yield of 7.6% as at 30 September 2015 and a premium above the basic net asset value of 11%, providing potential for strong performance over the short term. Indeed, the share price has recovered to 84.5p at 4 December 2015.

We believe the fundamentals underlying primary healthcare properties continue to provide attractive investment propositions. Our strong discipline on both the investment and funding sides combined with our continued focus on minimising costs and the good pipeline of investment opportunities, leads us to be confident the Fund is well positioned to continue to deliver solid returns for shareholders.

David Staples

Chairman

8 December 2015

Investment Adviser's report

Market

The primary healthcare market remains attractive to investors due to continued high demand for assets, which have a strong covenant, achieve good resilient yields and are currently in short supply because of delays in the NHS approving new schemes. Yields have continued to fall during the year due to the imbalance between supply and demand. Primary healthcare properties continue to provide good value compared with the wider prime property market which is showing signs of commanding very full valuations.

New schemes have continued to be slow in coming to the market as funding responsibility passes to the Clinical Commissioning Groups ("CCGs"). The limited supply of new property schemes has resulted in yield compression and relatively high prices paid for some lower quality assets in the market. The Fund has maintained a disciplined buying approach, resisting the downward pressure on yields and has continued to acquire best in class assets at good yields. The increased competition for limited stock has reflected positively on the property valuations of the Fund. There is an expectation that the number of new schemes being approved will increase in the next 12-24 months since demand for effective primary care remains very high.

With the UK market seeing aggressive yields for many assets, the Fund has diversified its approach and has started to invest in the Republic of Ireland. Following an extensive review of the Irish market it was considered to offer assets of a similar grade or superior to the UK market whilst being priced at more attractive yields. Following its first investment in the Republic of Ireland the Fund has established relationships with a number of experienced developers through which a pipeline of high quality assets has been established which is expected to be converted into further investments in the near future.

Market rental growth has also been impacted by the lack of new schemes setting new rental evidence, with settled reviews being based on established historical rental evidence often related to older assets. As new schemes come to the market it is expected that underlying construction cost inflation will cause an overdue acceleration in rental growth.

Portfolio update

As at the date of this report the Fund has committed investment of £559.5 million in 148 primary healthcare properties, an increase of 8.0% since 1 October 2014. The annualised rent roll of the property portfolio is now £35.8 million, an increase of £3.0 million, or 9.1%, since 1 October 2014.

The valuation of the portfolio undertaken by Jones Lang LaSalle Limited, independent valuers to the Group, stood at £561.7 million as at 30 September 2015 on the basis that all properties were complete, reflecting a net initial yield of 5.46% (5.68% as at 30 September 2014). The results for the year include a net valuation gain of £25.6 million.

At 4 December 2015, the portfolio of properties had an average age of 7.2 years, remaining lease length of 15.8 years and an average value of £4.0 million. Of the rents receivable, 88.3% are from government-funded doctors and the NHS, 8.2% from pharmacies and 3.5% from other tenants.

During the year the Fund was cautious and targeted best in class assets in a competitive market with limited supply. The Group added a total of six properties representing a total commitment of £27.4 million at a cash yield of 5.87%. One of the new developments acquired by the Fund is in Mullingar in the Republic of Ireland representing a commitment of €10.1 million. This demonstrates the proactive approach of MedicX Fund; diversifying into the Irish market whilst the UK market is experiencing aggressive pricing conditions and a scarcity of available stock.

In addition to the development project in Mullingar, four new development projects at Kingsbury, Maidstone, Streatham and Benllech were acquired in the year. These new investments represent a commitment of £17.6 million. These acquisitions remained under construction at 30 September 2015 with Maidstone achieving successful completion in October 2015. The remaining property purchased during the year was a completed medical centre in Northampton that was fully let and immediately income generating.

During the year, successful completion was achieved on properties previously under construction at Prenton, Buckley, Poringland, Devonport and Peterborough, representing a commitment of £22.6 million. All of the completed projects were delivered within budget.

Construction continued on the existing projects at Stevenage and Briton Ferry, while the construction of the newly acquired projects at Kingsbury, Maidstone, Streatham, Benllech and Mullingar commenced during the year. The outstanding commitment to complete these properties at 30 September 2015 was £16.5 million. Maidstone and Briton Ferry both achieved practical completion in October 2015 with the remaining projects expected to complete within the next 12 months.

The Fund had a pipeline of identified investment opportunities of approximately £139.9 million, of which £13.9 million was completed in October and November 2015.

During the year the Group did not dispose of any investment properties but will continue to look to dispose of properties which no longer meet its long term investment criteria or have been identified within the CCGs estates strategy as less likely to be used for delivery of primary care beyond their existing lease term.

As described above, the initial valuation yield on investments is 5.46% compared with the Group's weighted average cost of fixed rate debt of 4.45% and a benchmark 20-year gilt rate of 2.51% at 30 September 2015. This positive spread has enabled growth through committing investment during the year of £27.4 million with a further £13.9 million since the year end. The Company remains well placed to continue to grow and deliver value to its shareholders as it locks into the differential available between long term returns and the cost of long term funding.

Rent review performance

During the year ended 30 September 2015, the Fund averaged an uplift of 1.6% on its rent reviews, with reviews of 59 leases and rents of £8.5 million having been concluded. Of these reviews, 0.9% per annum was achieved on open market reviews, 2.6% per annum was achieved on RPI based reviews and 2.7% per annum on fixed uplift reviews. Reviews of £14.3 million of passing rent were under negotiation as at 4 December 2015.

Of the £35.8 million annualised rent roll at 4 December 2015, there was £26.0 million (72.7%) subject to open market review, £8.1 million (22.6%) subject to RPI reviews and £1.7 million (4.7%) subject to fixed uplift reviews. The proportion of rent subject to RPI uplifts has increased over the last six years from 7.9% to 22.6%.

Asset management

The Fund continually reviews its portfolio for asset management opportunities and has identified a number of opportunities to enhance the portfolio mainly through extensions, new pharmacy opportunities and lease re-gearing to increase valuations. The Fund is engaging with CCGs to identify further asset management opportunities and is monitoring closely how GP federations, new provider groups and 'Super Practices' are forming in each locality.

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 is calculated and then aggregated with the surplus cash position of the Group.

At 30 September 2015, the DCF valuation was £346.3 million or 94.9 pence per share compared with £331.1 million or 93.4 pence per share at 30 September 2014.

In order to provide a consistent approach the assumptions applied in previous years have remained unchanged. 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 4.55% risk premium to the 20 year gilt rate at 30 September 2015 of 2.51%.

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 2015 of 77.5 pence per share, the discounted cash flow calculation would have to assume a 0.8% decrease in rents per annum, or a 1.2% capital reduction per annum, or a weighted average discount rate of 9.0%. 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 4 December 2015 of 84.5 pence per share, the discounted cash flow calculation would have to assume a 0.6% increase in rents per annum, or a 0.2% capital reduction per annum, or a weighted average discount rate of 8.2%.

Taking the EPRA NNNAV of 62.7 pence per share and assumed purchaser costs of 8.9 pence per share, an implied net initial yield of 4.62% would be required to match the discounted cash flow net asset value of 94.9 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 4.96%, the EPRA net asset value would increase by approximately 15.0 pence per share to 85.8 pence per share and the EPRA NNNAV would increase to 77.7 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 £126 million in value when fully developed.

Interest in voting rights of the Company

The Investment Adviser has a beneficial interest in the following number of 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 in December 2014 and March 2015 and cash in June and September 2015. The cash equivalent of the dividends received by the Investment Adviser for the year was £116,543, compared with £107,311 in the prior year.

Mike Adams

Chief Executive Officer

Octopus Healthcare Adviser Ltd

Risk Management

The principal risks and uncertainties relating to the Group are regularly reviewed by the Board along with the internal controls and risk management processes that are used to mitigate these risks. The principal risks and management of those risks are described below:

Viability Statement

In accordance with provision C.2.1 of the 2014 UK Corporate Governance Code ("the Code"), the Board of directors have carried out a robust assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency and liquidity. In accordance with provision C.2.2 of the Code, the directors present the Company's viability statement which summarises the results of their assessment of the Company's current position, its principal risks and prospects over a period of five years. The prospects were assessed over a five year period for the following reasons:

(i) the Company's long term forecast covers a five year period;

(ii) the Company normally establishes certainty over its rent reviews over a period of between three and five years;

(iii) the Company is exposed to NHS and political policies which are linked to five year parliamentary terms; and

(iv) The Company is exposed to movements in interest rates and inflation which are more uncertain beyond a five year period.

The Company's five year forecast is based on an integrated performance statement, position statement and cash flow forecast. The forecast incorporates assumptions related to the Company's investment strategy and principal risks from which performance results, cash flows and key performance indicators are forecast. Of these risks, those which are expected to have a higher impact on the Company's longer term prospects are those related to rising or falling property values, compliance with financial covenants related to debt facilities and future NHS policies. The principal risks are mitigated by the Company's risk management and internal control processes which function on an ongoing basis. The Board, via delegation to the Audit Committee, monitor the effectiveness of the Company's risk management and internal control processes on an ongoing basis. The monitoring activities are described in the Report of the Audit Committee and include direct review and challenge of the Company's documented risks, risk ratings and controls and review of performance and compliance reports prepared by the Company's advisers including its Investment Adviser and both the independent internal and external auditors.

Where appropriate, the Company's forecasts are subject to sensitivity analysis which involves applying severe conditions and flexing a number of assumptions simultaneously. The underlying five year forecast makes assumptions about the rate of investment rental growth, expenditure, dividend levels and the resulting levels and timing of debt and equity capital required.

Based on the results of their assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period of their assessment.

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2015

Consolidated Statement of Financial Position

As at 30 September 2015

The financial statements were approved and authorised for issue by the Board of Directors on 8 December 2015 and were signed on its behalf by Shelagh Mason and Steve Le Page.

Consolidated Statement of Changes in Equity

For the year ended 30 September 2015

Consolidated Statement of Cash Flows

For the year ended 30 September 2015

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 principal accounting policies are set out below.

The Group has cash reserves and assets available to secure further funding if required, together with long term leases across different geographic areas within the United Kingdom and the Republic of Ireland. The Directors have reviewed the Group's forecast commitments, including commitments to development projects and proposed acquisitions, against the future funding availability, with particular reference to the utilisation of, and continued access to existing debt facilities and also 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 2014.

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 2015. 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 and the Republic of Ireland.

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 £645,000 (2014: £1,367,000), 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.

Functional currency

These consolidated financial statements are presented in pounds sterling, which is the company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the foreign exchange rate ruling at the reporting date.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated to the functional currency using the exchange rate at the date of the transaction.

Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the dates the fair values were determined.

In the financial statements, foreign exchange gains or losses are recognised in capital or revenue reserve depending on whether the gain or loss is of a capital or revenue nature respectively.

Group Companies:

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

· Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of the statement of financial position;

· Income and expenses for each statement of comprehensive income are translated at average rates (unless the average rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

· All resulting exchange differences are recognised directly within equity in the Group's translation reserve.

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 profit and loss 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, on an effective interest basis.

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 profit and loss. 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 profit and loss in the period in which they arise.

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

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 £250,000 (2014: £504,000) 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 profit and loss.

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 from the sale of an 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 effective review date to the period end. This estimation of future rent takes into account the terms of the underlying occupational 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 2015, payable to KPMG LLP (2014: KPMG LLP).

4. Finance costs

During the year interest costs on funding attributable to investment properties under construction were capitalised at an effective interest rate of 4.63%. 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.

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 £1,200 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 20.5% (2014: 22%) 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.

The Group had accumulated tax losses of £12.6 million (2014: £7.3 million) which gave rise to a recognised deferred tax asset of £2.5 million (2014: £1.4 million) at a rate of 20%. The deferred tax assets are netted off the deferred tax liabilities where they may be offset in future.

During the year the quantum of potential brought forward losses not recognised in the financial statements was reassessed, at which point it was considered appropriate to decrease the majority of the brought forward losses previously disclosed but not recognised. There are no accumulated tax losses within the Group (2014: £52.7 million), which are currently not recognised as a deferred tax asset within the financial statements of the Group. All of the existing tax losses of the Group are now recognised as part of the net deferred tax liability.

As a result of the deferred tax recognition exemption for asset acquisitions, deferred tax liabilities of £9,918,000 (2014: £9,923,000) in respect of fair value gains and £2,285,000 (2014: £2,285,000) in respect of capital allowances, and deferred tax assets of £708,000 (2014: £708,000) in respect of unrelieved management expenses, have not been recognised.

7. Provisions

Other provisions

The Company has previously 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 was based on the Directors' estimate of the amount that may be payable. This provision was reversed during the year as MPVII Investments Ltd was sold on 8 July 2015.

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 £35,829,000 (2014: £20,172,000) and on 361,323,024 (2014: 341,049,766) 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 9.9 pence (2014: 5.9 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 £254,097,000 (2014: £230,700,000) and on 365,125,306 (2014: 354,389,088) Ordinary Shares being the aggregate of Ordinary Shares in issue at the year 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 69.6 pence per Ordinary Share (2014: 65.1 pence per Ordinary Share).

EPRA earnings per share and net asset value per share

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

9. Investment properties

Completed investment properties are initially recognised at cost and then subsequently measured at fair value, which has been determined based on the market valuations performed by Jones Lang LaSalle Limited for the properties held within the United Kingdom as at 30 September 2015. The valuation takes account of the rental yield and the fact that a purchaser's offer price to the Group would be net of purchaser's costs (which are estimated at 5.8% (2014: 5.8%) of what would otherwise be the purchase price).

Investment properties under construction are also initially recognised at cost, and are subsequently measured at fair value as at the year-end based on market valuations performed by Jones Lang LaSalle Limited as at 30 September 2015. 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 property under construction held in the Republic of Ireland has not been valued by Jones Lang LaSalle Limited at the year-end due to its location and because it is a recent acquisition meaning that the fair value of the property is considered to be equal to the costs incurred to date. Going forward this property will be valued on a quarterly basis by an appropriately located valuer.

The freehold and long leasehold interests in the property investments of the Group were valued at an aggregate of £561,704,000 as at 30 September 2015 (2014: £517,733,000) by Jones Lang LaSalle Limited (including the property in the Republic of Ireland that was not revalued at the year-end). 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, adjustments for the fair value of ground rents and lease incentive adjustments as at 30 September 2015.

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 market 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 valuer's fee is a set fee applied to the number of properties in the portfolio, the valuer's fees for the year were £72,000 (2014: £55,000).

The net initial yield at 30 September 2015 was 5.46% (2014: 5.68%).

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 2015 (and as at 30 September 2014), 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 £14 million. If rent reviews of 2% were achieved on the full portfolio with no yield movement the valuation of properties would increase by approximately £11 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 £129,837,000 (2014: £130,048,000) 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 £250,000 (2014: £504,000) 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 six primary debt facilities drawn and 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 2015. Details of each facility are disclosed below. Repayments of the loans listed above fall due as follows:

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 £8,517,000 as at 30 September 2015 (30 September 2014: £9,474,000).

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 £25,212,000 as at 30 September 2015 (30 September 2014: £1,501,000).

Fair value hierarchy

The valuation of loans is classified in accordance with the fair value hierarchy described in note 1. As at 30 September 2015 (and as at 30 September 2014), 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:

Any costs incurred relating to the loans are added to the loan issue costs and amortised over the remaining life of the loan facility.

13. Head lease liabilities

The Group holds certain long leasehold properties which are classified as investment properties. The head leases are accounted for as finance leases. These leases typically have lease terms between 32 and 999 years and fixed rentals.

14. 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 dividends payable. The transactions and relevant price per share are noted below:

The closing value of shares held in treasury issued at 83.50 pence per share each is £24,320,941.

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

15. 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.

16. 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 cash and cash equivalents balance of £56.9 million is £25 million of cash in transit related to the second close of the Standard life loan note facility which completed on 30 September 2015.

Included in the above amounts are balances that are held in restricted accounts which are not immediately available for use by the Group of £11,030,000 (2014: £6,152,000). These amounts will be made available when sufficient property has been secured against the loan facility and all documentation is completed. £8,550,000 was released from the restricted accounts on 26 November 2015 following the security of property against the Standard Life loan note.

17. 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 26 October 2015, the Board approved a dividend of 1.475 pence per share, bringing the total dividend declared in respect of the year to 30 September 2015 to 5.9 pence per share. The record date for the dividend was 20 November 2015 and the payment date is 31 December 2015. 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 26 October 2015 the Board announced an opportunity for qualifying Shareholders to receive the December 2015 dividend in new Ordinary Shares instead of cash.

18. Financial instruments risk management

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

The financial instruments of the Group at both 30 September 2015 and 30 September 2014 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% (2014: 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 assets 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 £2,317,000 (2014: £1,792,000) is neither impaired nor past due. £599,000 (2014: £602,000) is past due and of this £524,873 (2014: £543,978) is more than 120 days past due. The Board takes active steps to recover all amounts and has assessed that a provision of £71,000 (2014: £92,000) against trade receivables is appropriate.

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 primarily within Guernsey and the United Kingdom and the majority 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 material 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 (2014: £100,000,000), £50,000,000 (2014: £50,000,000) and £61,045,000 (2014: £61,045,000) 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 RBS loan facility of £25,000,000 (2014: £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 and then repaid using the private loan note facility referred to above.

The Group's private loan note facility of £50,000,000 (2014: £15,000,000) has a fixed rate of 3.99% and the loan facility with Standard Life of £50,000,000 has a fixed rate of 3.838%.

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, £627,000 (2014: £6,152,000) was held in an Aviva deposit account which is A+ 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:

\* The 2014 comparative for non-current borrowings has been amended to show the contractual principal amount before loan issue costs and fair value adjustments.

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

19. Commitments

At 30 September 2015, the Group had commitments of £16.0 million (2014: £14.9 million) to complete properties under construction.

20. Material contracts

Investment Adviser

Octopus Healthcare Adviser Ltd is appointed to provide investment advice under the terms of an agreement dated 17 October 2006 as subsequently amended 20 March 2009, 17 February 2013, 24 September 2013 and 20 November 2015 (the "Investment Advisory Agreement" or "Agreement"). Fees payable under this agreement are:

(i) a tiered investment advisory fee set at 0.50% per annum on healthcare property assets up to £750 million, 0.40% per annum payable on assets between £750 million and £1 billion, and 0.30% per annum payable on assets over £1 billion subject to a total minimum annual fee of £3.878 million or, if lower, the fee that would have been payable under the old fee structure until the consolidated property asset value reaches £782 million after which no minimum fee shall apply;

(ii) a property management fee of 3% of gross rental income up to £25 million, and 1.5% property management fee on gross rental income over £25 million;

(iii) a corporate transaction fee of 1% of the gross asset value of any property owning subsidiary company acquired;

(iv) a performance fee based upon total shareholder return.

The annual performance fee is 15% of the amount by which the total shareholder return (using an average share price for the month of September) exceeds a compound hurdle rate calculated from the 69.0 pence issue price at 8 April 2009, subject to a high watermark. If in any year the total shareholder return falls short of this hurdle, the deficit in the total shareholder return has to be made up in subsequent years before any performance fee can be earned. The compounding of the hurdle rate is adjusted upwards to compound from the high watermark level at which the performance fee was last earned.

The hurdle rate applied in the year ended 30 September 2015 was 10% per annum (2014: 10%). The high watermark used for the calculation of the performance fee for the year to 30 September 2015 was the theoretical price which would have given a compounded 10% total shareholder return over the average share price during September 2014 (83.58 pence per share) with dividends reinvested. The current high watermark as at 30 September 2015 was approximately 85.50 pence per share which will form a base for measuring shareholder return over the next year for the purpose of assessing whether a performance fee is payable.

The investment advisory base fee and performance fee earned in aggregate in any one financial year cannot be paid in excess of 1.5% of gross assets (excluding cash), such limit being equivalent to the investment advisory base fee that was in existence prior to the change. The excess, if any, of the aggregate of the investment advisory base fee and performance fee earned in any one financial year over 1.5% of gross assets (excluding cash) is not payable but is carried forward to future years or termination of the Investment Advisory Agreement, subject at all times to the annual 1.5% of gross assets (excluding cash) fee limit. Until 20 November 2015, the Agreement was terminable at the end of an initial seven year term and each three year term thereafter, with 12 months' notice

On 20 November 2015 the Fund agreed to the renewal of the Investment Advisory Agreement, with revised renewal and notice terms to provide a rolling contract subject to the Company's ability to serve two years' notice at any time.

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

During the year, the agreements with Octopus Healthcare Adviser Ltd gave rise to £4,574,000 (2014: £6,240,000) of fees as follows:

Of these fees, £nil (2014: £nil) remained unbilled or outstanding at the end of the year with the exception of the performance fee which was billed after the year end and is included within accruals due within one year in the prior year figures.

During the year property development costs of £552,000 (2014: £5,552,000) were paid to Octopus Healthcare Property Ltd, a member of the same group of companies as Octopus Healthcare Adviser Ltd. At the year-end there was a total of £nil that remained unbilled or outstanding (2014: £nil). In addition, licence fee income of £7,000 (2014: £356,000) was recognised on properties under construction by Octopus Healthcare Property Ltd during the year. At 30 September 2015 there were no licence fees (2014: £92,000) unbilled or outstanding.

Administrator

Each Group company has entered into a separate administration agreement with International Administration Group (Guernsey) Limited for the provision of administrative services which was renewed with effect from 1 May 2015. Under these agreements fees were incurred totalling £83,000 (2014: £81,000) for the provision of corporate secretarial services to all Group companies and other administrative services.

Of these fees £37,000 (2014: £nil) remained unbilled or outstanding at the year end.

21. Related party transactions

During the year fees of £56,000 (2014: £58,000) were paid to Aitchison Raffety Limited to negotiate rent reviews, and to act as agent for the disposal of properties, of which £nil (2014: £nil) remained unbilled or outstanding at the year end. John Hearle was Group Chairman of Aitchison Raffety Limited until 1 October 2015.

During the year Aitchison Raffety Limited managed the service charges for a number of properties held by the Group. No fees have been paid to date for this service, nor are any payable as at 30 September 2015. The estimated annual fee expected to be earned by Aitchison Raffety for providing this service is £67,000.

The management agreement with Aitchison Raffety has been terminated with effect from 31 December 2015.

22. Operating leases

At 30 September 2015 the Group had entered into leases in respect of investment properties for the following rental income, excluding any future rent reviews:

The length of a typical lease is between 18 and 25 years, with provision for rent reviews mostly every three years. Rent reviews are usually agreed with reference to open market value or the Retail Price Index.

23. Subsidiary companies

The following were the subsidiary companies in the Group at 30 September 2015:

* Dormant companies

24. Capital management

The Group's objectives when managing capital are:

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

· To provide an adequate return to shareholders by sourcing appropriate investment properties and securing long term debt at attractive rates commensurate with the level of risk.

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

The Group monitors capital on the basis of the adjusted gearing ratio. This is calculated as net debt divided by adjusted capital. Net debt is calculated as total debt, per the statement of financial position, less cash and cash equivalents. Adjusted capital comprises all equity components less cash and cash equivalents and goodwill. The Group is not subject to any externally imposed capital requirements. However the Directors intend to secure and utilise long term borrowings of approximately 50% on average over time and not exceeding 65% of the Company's total assets.

The adjusted gearing ratios at 30 September 2015 and 30 September 2014 were as follows:

25. Post year end events

On 23 October 2015 the Fund completed the acquisition of four operational and fully let primary healthcare properties. The transaction is consistent with the Fund's investment strategy of acquiring modern, purpose-built primary healthcare properties and with its objective of achieving rising rental income and capital growth.

The initial purchase price was £11.4 million with a further £0.6 million payable on completion of leases related to space being fitted out at one of the properties. A property in Fakenham was purchased by way of a corporate acquisition whereas the other three properties located in Wymondham, Abergele and Salisbury were property purchases.

On 26 November the Fund completed the acquisition of one operational and fully let primary healthcare property located in Brighton. The purchase price was £1.84 million.

The management agreement with Aitchison Rafferty has been terminated with effect from 31 December 2015 and this service will be carried out by Workman LLP thereafter.