Medicx Fund Regulatory News (MXF)

11 December 2018

MedicX Fund Limited

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

Results for the year ended 30 September 2018

BUILDING A BRIGHTER FUTURE FOR PRIMARY HEALTHCARE INVESTMENT

MedicX Fund is a leading investor in modern purpose-built primary healthcare properties. Our investment supports the transformation of the primary healthcare estate in the United Kingdom and Republic of Ireland.

FINANCIAL HIGHLIGHTS AND KEY ACHIEVEMENTS

Another year of strong performance, reflecting progress and achieving notable milestones.

FINANCIAL RESULTS

· 11.4% increase in EPRA13 earnings per Ordinary Share, from 3.5p per share to 3.9p per share;

· 14.8% total return on EPRA NAV2 for the financial year (2017: 12.7%);

· 6.9% increase in EPRA NAV per share, from 76.5p per share to 81.8 pence per share;

· Continued increase in rent receivable, up 8.6% to £40.3 million (2017: £37.1 million);

· Profit before tax was £49.1 million for the year; 47.4% higher than 2017 (£33.3 million);

· 10.0% increase in annualised rent roll1,14 from £40.0 million to £44.0 million;

· 89.4% (2017: 89.7%) of rent roll was directly from or reimbursed by the NHS11, Irish GPs or HSE12;

· EPRA cost ratios reduced year on year to 18.4% from 19.8% with the investment adviser fee reduction due to reduce this further; and

· Independent expert determination of March 2015 rent review at Clapham increase of 35% (equating to a compounded 10.54% per annum increase over the applicable 3 year rent review period).

INVESTMENTS

· 18.6% increase in the value of the property portfolio to £806.7 million1,4. This is as a result of £99.2 million of capital investment to acquire standing let properties and fund developments through forward funding schemes, less £5.3 million of disposals and a £32.3 million net valuation gain;

· Net Initial Yield of UK assets 4.85% at 30 September 2018 (2017: 5.08%);

· £80.3 million of new committed investments in UK and Republic of Ireland, since 1 October 2017, with a weighted average cash yield of 4.63% together with the acquisition of three sites for £5.3 million in anticipation of new schemes;

· Competed £63.8 million corporate portfolio acquisition of 12 fully let primary care centres with 10 of the properties having an average age of 5.5 years, WAULT of 14.2 years and an average lot size of £5.3m; and

· Strong pipeline of approximately £144 million (2017: £175 million) of further acquisition opportunities including projects with a value of £69 million in solicitors' hands1 (2017: £100 million).

INVESTMENT ADVISER FEE REDUCTION

· The Investment Adviser has agreed a reduction in its fees to reflect the change in the Company's dividend policy and to reduce its costs. Effective from 1 October 2018, the performance fee was abolished, and the investment adviser fee will be £0.5 million per annum lower until the portfolio reaches £1 billion with tapering savings between £1 billion and £1.25 billion. This immediately increases next year's earnings by 0.113 pence per share.

CAPITAL MANAGEMENT

· Quarterly dividend of 1.51p per share announced on 1 November 20185; total dividends of 6.04p per Ordinary Share for the year or 7.4% dividend yield on a share price of 82.0 pence per share at 30 September 20186 (2017: total dividends of 6.0p per Ordinary Share; 6.6% dividend yield);

· Total drawn debt facilities of £446.1 million1 with a weighted average fixed rate cost of debt of 4.26% and an average unexpired term of 12.3 years, compared with 4.29% and 12.7 years for the prior year; and

· Net debt of £430.0 million equating to 52.6% adjusted gearing at 30 September 2018 (30 September 2017: £340.7 million; 49.5%)1,7.

UPDATE ON DIVIDEND POLICY

As announced in May 2018, the Company intends to declare a fully covered dividend for the 2019 financial year onwards.

This new policy of paying a fully covered dividend is intended to free up additional funds for the Group to invest in attractive opportunities, and enable it to deliver superior capital growth over time from a sector which continues to demonstrate attractive growth prospects.

Going forward, the Company intends to continue to pay shareholders the dividend on a quarterly basis, in March, June, September and December of each financial year and on a growing covered basis.

Subject to unforeseen circumstances and based on the current performance, the Directors are targeting dividends of 3.80p per share for the financial year ended 30 September 2019.

Unadjusted performance measures

Adjusted performance measures

The Directors believe that presenting the above adjusted performance measures assists readers of the financial statements in understanding and analysing the performance and position of the Group, as well as providing industry standard measures for benchmarking against other companies. In particular, the Directors believe EPRA measures provide meaningful industry standard key performance indicators.

1 As at the financial year end of 30 September 2018

2 Movement on EPRA NAV per share between 30 September 2017 and 30 September 2018 and dividends paid during the year, divided by opening EPRA NAV per share

3 Based on share price movement between 30 September 2017 and 30 September 2018 and dividends paid and reinvested during the year

4 As shown in note 8 to the financial statements

5 Ex-dividend date 15 November 2018, record date 16 November 2018, payment date 31 December 2018

6 Total dividends declared for the year divided by share price at 30 September

7 As shown in note 24 to the financial statements

8 Dividend cover is EPRA earning per share divided by dividend per share paid in the financial year

9 As disclosed in note 7 to the financial statements

10 Percentage point change

11 NHS is the National Health Service (The national healthcare system in the UK)

12 HSE is Health Service Executive (The body responsible for health and social care in the Republic of Ireland)

13 EPRA is the European Public Real Estate Association

14 Rent roll is the contracted rents reserved under completed properties and properties under construction

For further information please contact:

Octopus Healthcare Adviser Ltd +44 (0) 345 0404 5555

Octopus Healthcare +44 (0) 20 3142 4820

Mike Adams, Executive Chairman

Maitland/AMO +44 (0) 20 7379 5151

Andy Donald/Freddie Barber

Information on MedicX Fund Limited

MedicX Fund Limited ("MXF", "MedicX", 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 and Ireland, listed on the London Stock Exchange, with a portfolio comprising 165 properties.

The Investment Adviser to the Company is Octopus Healthcare Adviser Ltd, which is part of the Octopus Healthcare group. Octopus Healthcare invests in and develops properties as well as creating partnerships to deliver innovative healthcare buildings to improve the health, wealth and wellbeing of the UK. It currently manages over £1.5 billion of healthcare investments across a number of platforms, with a focus on three core areas: GP surgeries, care homes and retirement housing. Octopus Healthcare is part of the Octopus group, a fast-growing UK fund management business with leading positions in several specialist sectors including healthcare property, energy, property finance and smaller company investing. Octopus manages £8.6 billion of funds for more than 65,000 retail and institutional investors as well as supplying energy to more than 385,000 customers.

Octopus Healthcare Adviser Ltd is authorised and regulated by the Financial Conduct Authority.

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.

The Company's Legal Entity Identifier is 2138008POF35FTNFCB25

Chairman's statement

Following my appointment as Chairman in February, I am pleased to present my first, and the Company's twelfth, annual report, on behalf of the Board.

"MedicX has continued to execute its strategy of selectively buying and forward funding new, high quality medical centres. We also agreed a fee reduction with our Investment Adviser and we continue to believe our focus on larger, strategically important premises will deliver secure, sustainable long-term growth."

Introduction

The last twelve months have continued a period of important transformation for MedicX as it entered the UK REIT regime. It has restructured over £235 million of long-term, fixed rate debt, and announced a move to a fully-covered dividend policy from 2019. The Company also continued to improve the quality of its portfolio through £99.2 million of new investment, whilst completing the sale of five smaller non-core assets.

The strong financial results for the year (EPRA NAV up 6.9% and EPRA earnings per share up 11.4%) reinforce the benefits of MedicX's disciplined investment approach and commitment to creating and maintaining a market-leading portfolio of modern, purpose-built assets, which are aligned to the priorities of the NHS (and the HSE in Ireland) and demographic needs.

Over the year, MedicX's share price premium to Net Asset Value reduced in line with the REIT sector generally, as commentators highlighted domestic and global political uncertainty, market volatility and an increasing likelihood of rising interest rates in the near future.

In light of current market conditions, I am pleased to report that we have agreed with our Investment Adviser that their investment advisory fee will be reduced, with effect from 1 October 2018, immediately saving the Company £0.5 million per annum until the portfolio reaches £1billion, with tapering savings between £1 billion and £1.25 billion. In addition, the performance fee will be abolished. This fee reduction will improve our cost ratios, increase EPRA earnings by 0.113 pence per share in the next year and will therefore enable us to set a higher dividend than would otherwise be the case.

Portfolio growth

During the financial year, MedicX deployed almost £100 million into thirteen completed, income-generating assets and seven development properties, four of which reached completion. We also completed the sale of five smaller assets at above their book value for almost £5.6 million earlier this year. Overall, the portfolio grew by 18.6% to £806.7 million, including a £32.2 million revaluation gain.

Earnings growth and dividend policy

The financial results reflect another year of solid performance. Rent receivable increased 8.6% from £37.1 million to £40.3 million and profit before tax was £49.1 million for the year, 47.4% higher than the profit before tax for 2017 of £33.3 million. The rent is set to further increase in 2019 when the full year's benefit of the portfolio acquisition is seen. The income growth exceeded the increase in costs and therefore earnings per share grew 13.8% to 10.7 pence from 9.4 pence. It was also pleasing that earnings grew significantly on an EPRA basis, which eliminates the contribution of the unrealised revaluation gain as well as the small profit on disposal. EPRA earnings per share ("EPRA EPS") increased 11.4% from 3.5 to 3.9 pence per share.

As announced in my interim report, in response to the macro environment and the increased market focus on dividend cover for those companies with real illiquid assets, we conducted a thorough strategic review. This review considered a wide range of matters including our expected levels of return, our capital structure, investment policy, dividend policy and the Company's appeal to a wider range of investors, all with the overarching aim of enabling the Company to grow sustainably over the long-term.

Following this strategic review and a consultation with a number of our major shareholders, the Board made the difficult decision to rebase the Company's dividend distribution policy for 2019 onwards. This means that MedicX can better align its dividend distributions with its cash flows and continue to evolve and take advantage of acquisition opportunities and strengthen its capital structure.

The dividend rebasing was announced in May, following a good set of first half results and notice of an exclusive acquisition opportunity, which would deliver improving economies of scale. I am therefore pleased that MedicX completed the off-market acquisition of a portfolio of 12 operational and fully let primary care medical centres in June 2018 for a price of £63.8 million, adding 8.9% to the Group's portfolio value at that time.

During this period of transition to a fully covered dividend, the Company maintained its previous dividend guidance and declared dividends totalling 6.04 pence per share for the 2018 financial year, with the final quarterly payment of 1.51 pence per share due to be paid on 31 December 2018.

The Board previously expressed its intention that the Company would declare and pay a fully covered rising dividend from 2019 based on paying out 95% of EPRA EPS. On the basis of the results for the year ended 30 September 2018, this would imply setting a dividend on an annualised basis at 3.70 pence per share. However, the Board are keen to maintain as high a dividend as possible and reserve the flexibility to increase the quarterly dividend when earnings increase. In light of the investment advisory fee reduction saving £500,000 per annum until our portfolio reaches £1 billion, subject to unforeseen circumstances and based on current performance, the Board are targeting a dividend of 3.80 pence per share for the financial year ending 30 September 2019 but will increase this where circumstances permit. It remains the intention that dividends will continue to be paid quarterly and a scrip alternative will be offered.

Based on the share price at 5 December 2018 of 75.80 pence, the covered dividend yield would be 5.01% per annum.

Funding

In September, we completed the £264.5 million refinancing of Aviva Investors debt facilities which included an increase of £30.8 million drawn on an interest only basis for 10 years with a fixed interest rate of 3.05% per annum. MedicX benefited from resetting the Loan to Value secured thereby releasing £25 million of property collateral, providing flexibility to undertake asset management projects identified at those locations as well as increasing unencumbered collateral to negotiate future facilities at current market rates. The refinancing, which was conducted without incurring break fees on the refinanced loan facilities, combined forty-six tranches across twenty legacy loan agreements, into two tranches under one new loan agreement. Therefore, as well as providing financing flexibility from the additional collateral, the new loan arrangements will improve operational efficiency.

Gearing has remained within set parameters but marginally increased from 49.5% at 30 September 2017 to 52.6% at 30 September 2018. This was a consequence of equity issuance being less attractive at a low premium, or discount, to NAV. The Company therefore utilised its Revolving Credit Facility over a short period, bridging to the 10 year new fixed rate loan put in place in September 2018.

When announcing the dividend rebase in May, the Board also expressed the intention, that subject to market conditions, the Company would issue up to 42.8 million new Ordinary Shares (being the number of shares which the Company had shareholder authority to issue non-pre-emptively) at a premium to EPRA NAV after costs. Although immediately following the announcement, there was insufficient demand for the whole issuance, the Company did successfully issue 9.7 million shares from its block listing facility at 81.25 pence per share. The proceeds of this tap issue together with extension and utilisation of the Company's Revolving Credit Facility enabled us to complete the corporate acquisition outlined above.

In light of the attractive opportunities available to the Company, we are considering various sources of funding to secure the pipeline but at this stage of the cycle we remain highly selective and do not intend the Company's gearing to rise above 55%.

Corporate governance

At the Annual General Meeting ("AGM") held on 8 February 2018, all proposed ordinary and special resolutions were passed with a majority of more than 99%, including a resolution to authorise the non-pre-emptive issue of up to 42.8 million Ordinary Shares at a price equal to or greater than the prevailing EPRA NAV per share. David Staples, the Company's former Chairman, who had served since October 2008, chose not to stand for re-election and I was appointed to succeed David.

Board composition and diversity

Succession planning is regularly discussed at Board meetings. Following the changes in Board composition during 2017/18 on REIT conversation and relocation of control and management to the UK and the retirement of David Staples, the Board has remained settled since February 2018 when I assumed the role of Company Chairman.

At the current time the Board consists of four members, one is resident in Guernsey, with three resident in the UK. The Board has members who have professionally qualified in accountancy, law, property and taxation and is made up of two male and two female members. The Board assesses its performance and composition annually and is of the view that it functions effectively and has an appropriate mix of skills to perform its responsibilities.

John Hearle, having been with the Company since launch, has served on the Board for twelve years and is standing again for re-appointment as director at the forthcoming AGM. John, who has over 40 years of experience in primary healthcare property, is widely recognised within the industry as a leading figure through his previous and current roles with Aitchison Raffety, RICS, the Primary Care Premises Forum and from acting as an expert witness and arbitrator. His experience of the asset class is an enormous benefit to the Board, and to me particularly, and its ability to constructively challenge the Investment Adviser. These are the reasons that, despite his length of service, the Board is fully supportive of John's reappointment and believes he remains independent.

Sustainability

The Board is committed to adopting responsible Environmental, Social and Governance policies. In support of these policies, the Company has invited its members to register for electronic communications which will reduce the number of communications sent by post resulting in cost savings to the Company, whilst reducing the impact that the unnecessary printing and distribution of reports has on the environment. It is the Board's preference to provide, as far as possible, all documents via the Company's website to all shareholders who have not specifically elected to receive the information in hard copy.

Brexit and market outlook

At the time of writing my report, the terms on which the UK is expected to leave the European Union remain uncertain with the House of Commons yet to vote on the proposals.

MedicX however invests in a sector with ever increasing demand driven by growing, ageing populations. Therefore, independently of the macro-economic factors, and to a certain extent politics, the assets that the MedicX invests in will remain important and in demand. It is therefore unlikely that the Brexit permutations will have a significant direct effect on the Company since it does not rely on EU trade arrangements or staff from EU overseas countries but there could be some indirect consequences driven by macro-economics. The Fund has reviewed its leases and facility agreements in relation to expected changes in legislation resulting from Brexit and no significant issues have been identified.

Global political factors are also creating economic volatility and uncertainty in the bond and equity markets which means MedicX must remain adaptable. In the UK the NHS is being affected by EU citizens looking to repatriate although the NHS is looking to attract GPs from commonwealth countries such as Australia. There will undoubtedly be some indirect effects on the Fund through volatility in the Sterling/Euro exchange rate, inflation, interest rates and new tax and regulatory legislation as Brexit unfolds one way or another which will be monitored by the Fund.

We believe the Company has an important role to play in delivering value for money for the taxpayer as an investor in modern purpose-built primary healthcare properties. The Fund's focus on its portfolio quality together with healthcare transformation driven from modern purpose-built healthcare property places the Company in a strong position for further sustainable growth.

MedicX has a new sustainable dividend policy and a strong pipeline of investment opportunities and a track record of partnering with primary healthcare providers to deliver high quality services and a better patient experience through investment in modern purpose-built properties.

In light of the strong pipelines in both the UK and Ireland as well as the positive experience of large purpose-built high quality assets in Ireland, the Board are of the view that the Fund is well positioned for growth.

Helen Mahy CBE

Chairman

10 December 2018

Market overview

The demand for new modern primary care infrastructure continues to be strong as the population ages and grows, with more complex health needs. The Government and NHS have a clear strategy for GP practices to deliver services at greater

scale and offer access to services seven days per week 8am-8pm.

United Kingdom

Primary Care Services

The NHS celebrated its 70th anniversary in 2018. In this landmark year, the NHS launched a programme to ensure a stronger, more sustainable future for General Practice that will be appropriate for a growing and increasingly elderly population. The new long-term plan identifies potential improvements in primary care through the reformation of GP contracts, a review of the Quality Outcomes Framework ("QOF" provides a payment structure based on quality outcomes) and the revision of payments to support a fair and increasing roll-out of digital systems across primary care. NHS England has finished a public consultation seeking the views of healthcare professionals, General Practitioners and patients to provide feedback on these topics. National Director of Strategy and Innovation for NHS England, Ian Dodge, stated: "2019 starts the most substantial discussion of the GP contract since 2004. This calls for more intensive joint working between NHS England and our partners, particularly the BMA."

Primary Care Estates Strategy

NHS England launched a General Practice Premises Policy review which called for submissions by September 2018. MedicX and the Investment Adviser contributed to submissions by the Primary Care Premises Forum which represents the sector, as well as the Health Committee of the British Property Federation.

All Sustainability and Transformation Partnerships ("STPs") have now submitted draft bid documentation for new infrastructure funding which are being reviewed by NHS England/NHS Improvement with feedback and agreed priority schemes expected in Q1 or Q2 2019.

Third Party Development ("3PD") continues to be a cost effective solution for commissioners to use, partnering with investors to create new modern purpose-built infrastructure.

Republic of Ireland

In the Republic of Ireland there are similar demographic pressures requiring new primary care infrastructure and the Irish Government continues to support their Primary Care Centre strategy delivering modern purpose-built centres serving the local community.

Pricing and rents

The primary care investment sector has continued to see further yield compression during the year due to investor demand, reinforcing the attractiveness of the asset class. Market rental growth remains below inflation but is improving as a result of a number of new development schemes setting new rental evidence. In addition, UK RPI inflation increased to 3.3% over the twelve months to 30 September 2018 providing another strong indication of upward pressure on market rents.

Investment Adviser's report

Building a brighter future for primary healthcare investment

"The Government strategy of shifting services from secondary care to a primary care setting is driving GPs and practices to operate at scale and continues to underpin the need for new primary care infrastructure"

The market

The NHS

Improving primary healthcare infrastructure remains a key priority for the NHS in delivering its Five Year Forward View. Large parts of the primary care estate remain unfit for purpose, unsuited to GPs delivering care at scale or providing access to services twelve hours a day, seven days a week to meet society's ever-increasing health needs.

In his report on the NHS estate published in March 2017, Sir Robert Naylor highlighted that private sector funding and expertise has an important part to play in the transformation of the primary healthcare estate. 3PD, the model through which MedicX invests, is recognised as a procurement method which is simple and provides good value for money in the delivery of new or refurbished premises which support the NHS's vision. Accordingly, MedicX, which focuses on modern, best-in-class asset selection, is well positioned to support the essential primary healthcare estate transformation and places the Company in a strong position for further sustainable growth.

Since Sir Robert's report, the Government has accepted his recommendations and announced various NHS funding increases for primary care and its premises, including through the 44 STPs. Further, a number of the projects awarded grants under the Estate and Technology Transformation Fund (part of the £1 billion Primary Care Infrastructure Fund) are now being accelerated to meet funding deadlines. Accordingly, MedicX is seeing a rise in the number of new development projects in its investment pipeline as the increase in available revenue and capital funding for the NHS drive the primary care market forward.

Good progress has also been made by the Health Service Executive ("HSE") in the Republic of Ireland as it establishes new, modern, purpose-built and integrated infrastructure. MedicX has already invested in five assets and owns part of a sixth site as it continues to build strong relationships with framework developers, GPs and the HSE.

Investment

Despite wider market uncertainty following the result of the EU referendum, the UK primary care investment market has remained highly competitive with continued downward pressure on yields recognising the security of the Government backed income in primary care assets and crucial role in providing sustainable healthcare infrastructure.

Record low yields have been paid in both the UK and Republic of Ireland this year and the asset class is now widely seen as mature. The relative lack of good quality secondary market opportunities is likely to result in more new forward funding opportunities going forward.

Fund performance

The financial highlights reflect another solid period of growth for the Fund, with investment of £99.2 million and a revaluation uplift of £32.2 million driving portfolio growth of 18.6% for the financial year to £806.7 million (2017: £680.4 million).

Over the year the rent roll increased 10.0% to £44.0 million from £40.0 million which drove an 8.4% increase in rent receivable from £37.1 million to £40.3 million. This capital and income growth led to an increase in EPRA Net Asset Value per share of 6.9% from 76.5 pence per share to 81.8 pence per share and 11.4% growth in EPRA earnings per share from 3.5 pence per share to 3.9 pence per share.

This growth enabled the Company to follow its planned dividend policy, with total dividends declared of 6.04p per Ordinary Share in respect of the year ended 30 September 2018.

Overall, the total return on EPRA NAV for the financial year was 14.8% (2017: 12.7%) made up from the payment of dividends of 6.03 pence per share and EPRA NAV growth of 5.3 pence per share.

Portfolio update

At the end of the financial year, the Fund's portfolio stood at 166 properties with a rent roll of £44.0 million (2017: £40.0 million). It remains a best-in-class portfolio with a weighted average asset age of 9.3 years, a weighted average unexpired lease length of 14.2 years and an average property value of £4.8 million (30 September 2017: 8.7 years; 14.1 years; and £4.4 million), reflecting our focus on asset quality and investment discipline.

The rent profile offers significant certainty and a strong covenant with 83.0% of the rent receivable from UK Government-funded doctors and the NHS, 7.3% from the HSE and Irish GPs, 8.5% from pharmacies and only 1.2% from other tenants.

Acquisitions

Fifteen properties were acquired over the year to complement the existing portfolio, representing total new commitments of £80.3 million. These acquisitions were made up of an off-market acquisition of a portfolio of 12 operational and fully let primary medical centres from the One Medical group with a total cost of £65.3 million, one standing let property located in Kilkenny for £6.8 million and commitments to forward fund two UK schemes located near Glynneath in Vale of Neath and Peterborough.

In total, investment was £99.2 million for the year taking into account £27.0 million deployed into properties under construction.

Properties under construction

At the beginning of the year properties were under construction at Cromer and Brynmawr in the UK and Crumlin, Kilnamanagh Tymon and Rialto, all within Dublin. During the year the properties at Cromer, Brynmawr, Crumlin, and Kilnamanagh Tymon reached practical completion and rent commenced. The completed properties contribute in the region of £1.9 million of rent with a combined cost of £29 million representing a blended yield of near 6.5%.

Construction is ongoing at the existing three projects at Rialto, Vale of Neath and Peterborough. The outstanding commitment on these three properties at 30 September 2018 was £7.1 million, with the UK projects expected to complete in quarter two of the 2019 financial year and Rialto to complete in quarter three.

At 30 September 2018, MedicX also owned four sites (30 September 2017: two), recorded at £6.3 million (30 September 2017: £2.7 million), and with the benefit of put options back to the developer should the schemes not proceed. One of the sites was sold in October at its net book value since that scheme is no longer expected to proceed. Work continues on the remaining three schemes with MedicX's development partners confident that agreements for lease will be signed, resulting in live schemes.

Disposals

In the first quarter, MedicX completed the sale of five properties located in Wolverhampton, Southampton, Gravesend, Leicester and Grimsby. These smaller assets were expected to have a lower likelihood of providing primary healthcare services over the long-term. The total gross sale price was £5.6 million representing a gain of approximately £250,000 over the 30 September 2017 valuation, which after costs resulted in a profit on sale of £110,000. The Fund will continue to look to sell properties which no longer meet its long-term investment criteria or have been identified as less likely to be used for delivery of primary care beyond their existing lease term. Following the year end, in October 2018, one property located in Harpenden was sold for proceeds of £595,000 recognising a small profit.

Property valuation

Jones Lang LaSalle Limited (UK) and Cushman & Wakefield (Republic of Ireland) the Group's independent valuers, valued the portfolio at £806.6 million as at 30 September 2018 on the basis that all properties were complete. The carrying value of £806.7 million reflects the cost to complete the assets currently under development as well as including four sites and the effect of head leases and rent incentives.

The weighted average Net Initial Yield for assets located within the UK at 30 September 2018 was 4.85% (2017: 5.08%) and the true equivalent yield was 5.13% (2017: 5.33%). The weighted average true equivalent yield for assets located within the Republic of Ireland was 6.29% (2017: 7.38%).

The asset yields compare favourably with the Group's weighted average fixed rate debt of 4.26% and a benchmark 20-year gilt rate of 1.97% at 30 September 2018. Assuming the Revolving Credit Facility was again utilised, the Group's average cost of debt would fall further towards 4.17% which would enhance returns further. The spreads being achieved for Irish assets remain significantly wider than those seen in the UK market however there has been significant downward pressure on yields this year. 

In March 2018, MSCI published their primary care benchmark report. MedicX achieved a consistent Total Property Return of 8.1%, 9.0% and 8.9% over 1, 3 and 5 years which was slightly behind the primary healthcare benchmark of 11.1%, 10.2% and 9.4% over the same time periods. MedicX's rental return of 5.9% per annum was very much in line with the benchmark, however, its capital return was behind the benchmark in 2017, but strong capital gains in the current year have been achieved suggesting MedicX's Total Property Return will increase when published for 2018.

Rent review performance

A total of 95 rent reviews have been concluded during the year, with a combined rental value of £11.5 million.

During the year, the weighted average rental uplift from completed rent reviews was 4.84%, equating to a blended rate of 1.64% per annum with 0.79% per annum achieved from open market reviews, 2.35% per annum achieved from RPI based reviews and 3.74% per annum from fixed uplift reviews. These results show strong improvement over the comparable figures for 2017 where 92 reviews of £9.0 million of rent gave a blended annualised rental uplift of 1.02% (0.52% on open market reviews, 1.70% on RPI reviews and 2.38% on fixed uplifts).

EPRA weighted average like-for-like Rental Growth, was 4.67%, equating to 1.59% per annum, however, open market rental growth remained the same at 0.79% per annum growth.

Outstanding rent reviews of £24.9 million of passing rent are currently under negotiation as at 30 September 2018 (2017: £20.9 million).

A strong driver for rent review performance will be the final outcome of an independent expert determination of an outstanding open market rent review for one of MedicX's major assets in Clapham, London. The determination found that the contractual rent due from the applicable rent review date of March 2015 should increase by 35% (equating to a compounded 10.5% per annum uplift over the applicable 3-year rent review period). This determination is awaiting formal NHS ratification and as such this has not been included in the above rent review performance figures but, if it were included, the average per annum uplift would move from 1.64% to 1.99%.

Asset management

MedicX's Investment Adviser continually reviews the portfolio for asset management opportunities such as extensions, re-configurations of internal space, new pharmacy opportunities and lease re-gearing.

Two capital expenditure asset management projects have recently gained full NHS approval. The two asset management projects are for the refurbishment of GP practices to bring them in line with the current NHS standards, these projects will result in the unexpired lease terms of four and five years respectively being extended to 20 and 21 years. The projects have been agreed with either additional rent or a rent review immediately at completion following the refurbishment works.

After the year end, MedicX completed a new letting of previously vacant space to an educational company at its property in Middlesbrough. Furthermore, there is another open market letting currently in solicitors' hands to a dentist which is expected to conclude before the end of quarter one of the 2019 financial year.

Looking forward, MedicX is looking to progress fifteen current asset management projects under negotiation (extensions, refurbishments, lease re-gears/renewals and lettings).

Overheads, investment adviser fees and progress on ongoing charges

As a result of the asset and income growth for the year, the Group has made further progress on improving its financial operational efficiency. Its Ongoing Charges Ratio ("OCR") relative to average EPRA Net Asset Value for the year, excluding direct property costs, was 1.73% relative to 1.87% for the prior year.

The Company's EPRA cost ratios (both excluding/including immaterial vacancy costs) also reduced year on year to 18.4% from 19.8%.

As properties under construction complete and MedicX makes further accretive acquisitions, OCRs will continue to fall further providing more earnings to fund growing dividends.

As described above, we, the Company's Investment Adviser, have agreed to reduce our investment adviser fees by amending the bandings of the fee ratchet used to calculate our investment adviser fee. The Company currently incurs an investment adviser fee of 0.5% and 0.4% per annum on its consolidated property asset value up to £750 million and £1 billion respectively, with 0.3% per annum thereafter. The new investment adviser fee will be charged at 0.5% and 0.4% per annum on the consolidated property asset value up to £250 million and £1.25 billion respectively, with 0.3% per annum thereafter. The performance fee will also be abolished. The Company's cost saving up to the point when the portfolio reaches a value £1 billion will be £500,000 per annum which, all other things being equal will have the effect of accelerating the reduction in the OCR above by a further 0.15% to 1.58% and reducing the EPRA cost ratio by 1.2 percentage points to 17.2%.

Financing

New debt facilities were put in place during the year which have enabled MedicX to reduce its average cost of debt from 4.29% to 4.26% per annum whilst importantly releasing unencumbered property collateral, simplifying its facilities by eliminating 44 traches of Aviva debt and maintaining its weighted average unexpired term at 12.3 years at 30 September 2018, comparing well against the average remaining unexpired lease term of the Fund's portfolio of 14.2 years.

The debt strategy remains to put in place long-term fixed rate debt (reflecting the Fund's long-sighted income) as and when new funding is required whilst ensuring adherence to the Company's gearing target. Of the Group's drawn debt facilities, £421.6 million of £446.2 million (94%) has a fixed interest rate.

The adjusted gearing at 30 September 2018, as detailed in note 24, was 52.6% (30 September 2017: 49.5%) which is in line, but at the higher end of the target range of 45 - 55% that the Directors are currently targeting.

During the year, progress was made in three areas on managing the debt strategy.

On 8 March 2018, the Bank of Ireland facility was extended by €4.9 million, increasing the total facility to €34.0 million. At 30 September 2018 an amount of €27.5 million has been drawn. The new tranche was put in place with a margin of 3% over EURIBOR with a floor of zero. This development loan provides a natural hedge against Euro denominated assets and is drawn down as needed in line with development payments. Discussions on refinancing this facility are ongoing with Bank of Ireland since MedicX now has four completed assets located in the Republic of Ireland.

On 6 June 2018, the Company's Revolving Credit Facility commitment with RBS was extended from £20 million to £30 million to facilitate the portfolio acquisition of 12 properties. £23 million was drawn between 6 June 2018 and 9 August 2018, and £20 million was drawn between 9 August 2018 and 12 September 2018 when the facility was repaid in full. On 5 October the extended commitment was cancelled and £20 million is now currently immediately available. The Revolving Credit Facility provides an immediate source of funding at a margin of 2% over LIBOR to complete attractive opportunities quickly and bridge to more permanent longer-term financing. The current Revolving Credit Facility arrangement ends in September 2019 and renewal discussions have started.

On 11 September 2018, MedicX restructured five of its umbrella loan facility agreements with Aviva and replaced these with one agreement for the value of £264.5 million, at the same time increasing the total facility held with Aviva by £30.8 million. The additional loan was on an interest only basis for 10 years with a fixed interest rate of 3.05% per annum.

MedicX benefited from resetting the Loan to Value ("LTV") secured to 65% thereby releasing £25 million of property collateral after increasing the loan balance, providing flexibility to undertake asset management projects identified at those locations as well as increasing unencumbered collateral to negotiate future facilities at current market rates. The refinancing, which was conducted without incurring break fees on the refinanced loan facilities, combined forty-six tranches across twenty legacy loan agreements, into two tranches under one new loan agreement. Therefore, as well as providing financing flexibility from the additional collateral, the new loan arrangements will improve operational efficiency.

In addition, to the new £30.8 million tranche, legacy loans of £233.7 million were reset to a term of 15 years with amortisation of £40 million payable and a fixed interest rate of 4.69% per annum (equal to the blended current cost of the former facilities).

The new facility agreement standardises the covenants that will apply. These will require the Group to operate with a debt service cover ratio of at least 140% throughout and with an LTV of no more than 75% for the first five years, falling to 70% for years six to ten and then 65% for the remaining term.

The covenants on all debt facilities were complied with, within the period and since the year end.

Discounted Cash Flow valuation of assets and debt

The Investment Adviser carries out a Discounted Cash Flow ("DCF") valuation of the Group assets and associated debt at each period end. The values for each asset 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 in place at each property. The sum of the present values of each property and associated debt cash flows are calculated and aggregated with the current surplus working capital of the Group.

At 30 September 2018, the DCF valuation stood at 101.0 pence per share compared with 98.5 pence per share at 30 September 2017, the increase resulting primarily from the property acquisitions and rental uplifts achieved in the year.

In order to provide a consistent approach, the discount rates applied in previous periods remain unchanged. The discount rates used were 7% for completed and occupied properties and 8% for properties under construction. These represented 2.5% and 3.5% risk premiums to an assumed 4.5% long-term gilt rate. The weighted average discount rate is 7.02% and this represented a 5.15% risk premium to the 20 year gilt rate at 30 September 2018 of 1.87%.

The DCF assumes an average 2.0% per annum increase in individual property rents at their respective review dates and also assumes the level of gearing and cost of debt are maintained at current levels. 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).

For the DCF net asset value to equate to the share price as at 30 September 2018 of 82.0 pence per share, the DCF calculation would have to assume either a 1.84% decrease in rents per annum, or a weighted average discount rate of 9.84%, or capital reductions of 1.1% per annum.

Dividends

On 1 November 2018, the Directors announced a quarterly dividend of 1.51p per Ordinary Share in respect of the period 1 July 2018 to 30 September 2018. The dividend will be paid on 31 December 2018 to shareholders on the register as at close of business on 16 November 2018 (the "Record Date"). The corresponding ex-dividend date was 15 November 2018.

The Company followed its planned dividend policy for the financial year ended 30 September 2018, with total dividends declared of 6.04p (2017: 6.00p) per Ordinary Share representing a dividend yield of 7.4% compared to the share price of 82 pence per Ordinary Share at 30 September 2018 (2017: 6.6%). This dividend policy was however achieved with a dividend cover measured against EPRA earnings of 64.0% for the full year to 30 September 2018 (30 September 2017: 59.2%) and the dividend policy will change to a covered model for 2019 onwards.

The Company offered qualifying shareholders the opportunity to take new Ordinary Shares in the Company, credited as fully paid for three of the four dividends declared for the year. The scrip dividend alternative is suspended for the dividend to be paid on 31 December 2018 however the Directors intend to offer the scrip dividend in future subject to the scrip price being greater than Net Asset Value.

Net asset value and sensitivity

The Fund's progress and performance has been positive with unadjusted NAV at 30 September 2018, having increased 6.2% to 81.0 pence per share (30 September 2017: 76.3 pence per share). EPRA Net Asset Value ("EPRA NAV") as at 30 September 2018 increased by 10.5% to £362.2 million or by 6.9% to 81.8 pence per share (30 September 2017: £327.8 million or 76.5 pence per share).

A review of sensitivities has been carried out in relation to the valuation of properties. If valuation yields sharpened by 0.25% to a Net Initial Yield of 4.6%, the EPRA NAV would increase by approximately 10.7 pence per share to 92.5 pence per share and the EPRA NNNAV would increase to 85.6 pence per share. However, if valuation yields widened by 0.25% to a Net Initial Yield of 5.1%, the EPRA NAV would decrease by approximately 9.6 pence per share to 72.2 pence per share and the EPRA NNNAV would decrease to 65.3 pence per share.

At the current time there are no indications that yields in primary healthcare are widening. There has been recent evidence of yields falling in the Republic of Ireland as the asset class matures and asset competition in the UK remains strong, maintaining yields.

Pipeline and investment opportunity

The opportunities available in the Republic of Ireland provide a spread which is wider by approximately 200bps. 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 growing high quality property pipeline, subject to contract, which has a value of approximately £144 million when fully developed.

At 30 September, the UK pipeline was approximately £60.0 million, and the Irish pipeline was the equivalent of £84 million. Of these opportunities, £46 million of assets in the UK, and £23 million of assets in Ireland were undergoing legal due diligence.

These opportunities have been sourced from best in class developers (include the Investment Adviser's own development pipeline) and tailored specifically to the needs of the GPs and other care service providers to produce the highest quality sustainable assets. All are important healthcare premises within their locality.

MedicX is well positioned to fund these through debt facilities or selective disposals as we continue to optimise our portfolio. Consistent with our previous statements, we will look to raise capital at the appropriate time to support the further growth of the portfolio.

Interest in voting rights of the Company

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

The number of shares held by Octopus Healthcare Adviser Ltd as at the date of this report is 2,466,723, equivalent to 0.56% of the issued share capital of the Company.

During the year the Investment Adviser received dividends on its holding in the Company in addition to fees received for services. With the Scrip Dividend Scheme in place, the Investment Adviser received all its dividends in the form of new Ordinary Shares. The cash equivalent of the dividends received by the Investment Adviser was £138,678 compared with £132,147 in the prior year.

Mike Adams

Executive Chairman - Octopus Healthcare Adviser Ltd

10 December 2018

Principal risks and uncertainties

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.

STRATEGIC RISKS

OPERATIONAL RISKS

FINANCIAL RISKS

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2018

Consolidated Statement of Financial Position

As at 30 September 2018

The financial statements were approved and authorised for issue by the Board of Directors on 10 December 2018 and were signed on its behalf by

Helen Mahy CBE

Chairman

10 December 2018

Consolidated Statement of Changes in Equity

For the year ended 30 September 2018

Consolidated Statement of Cash Flows

For the year ended 30 September 2018

Notes to the Financial Statements

For the year ended 30 September 2018

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.

Going concern

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 reference to the utilisation of, 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 at least the next twelve months. 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.

Presentation

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

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 September 2017, except that the Group has adopted a policy of treating its monetary investment in foreign operations for which settlement is neither planned nor likely to occur as net investment in foreign operations in accordance with IAS21.

Impact of revision to International Financial Reporting Standards

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 Directors have assessed the impact of the new standards in issue but not currently effective and do not believe these will have a material impact on the financial statements.

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement. The new standard includes requirements for classification, recognition and measurement, impairment, de-recognition and hedge accounting. The Directors have completed an assessment of the impact of IFRS 9 and believe its impact on the Company will be limited because the Group currently has no complex financial instruments, does not hedge account and does not have significant trade receivables that may be impaired. The recognition and classification of the Company's financial instruments is expected to be unchanged. Furthermore, the refinancing of the debt facilities on 11 September 2018, and in prior years, which were treated as loan modifications in accordance with IAS 39, would also qualify as loan modifications under IFRS 9 and therefore no material restatement is expected. In the future, the new standard aims to simplify the documentation required for hedge accounting which may be of benefit and the rules for the treatment of debt break or modification costs will be slightly different to those under IAS 39.

IFRS 15 Revenue from Contracts with Customers excludes from its scope amounts receivable from leases which fall under the scope of IAS 17 which is due to be replaced by IFRS 16 and amounts receivable from joint ventures which fall under the scope of IAS 28. IFRS 15 therefore only provides guidance on the Company's other income which represents less than 1% of the Company's income. On this basis IFRS 15 is not expected to have a significant effect on the Company's future position or performance.

IFRS 16 Leases specifies how to recognise, measure, present and disclose leases. The standard adopts a single model which is expected to have a high impact on lessees and leases of low value and of less than twelve months. The Directors have completed an assessment of the impact of IFRS 16 and believe its impact on the Company will be limited because the Group is not a lessee with short leases. As a lessor the Group will continue to classify its investment property leases as operating in nature. The Group as a lessee has a small number of long leasehold interests where those long leases have a head lease rent. These are currently treated as finance leases because substantially all the risks and rewards incidental to ownership are with the Group and that will continue to be the case under IFRS 16 with a head lease liability recorded.

In addition, IFRS 16 could have an indirect impact on the Group's business if it leads to a change in tenant behaviour. In future tenants or potential tenants who will be required to account for operating leases as a liability and right to use asset may seek shorter lease terms.

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 2018. Control requires exposure or rights to variable returns and the ability to affect those returns through power over an investee. 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 combination, it is accounted for as an acquisition of underlying 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.

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 based on a best estimate of the new expected rent. Any lease incentives taken by tenants to enter into lease agreements, any premium paid by tenants to the Group or any fixed rent uplifts during the lease term are recognised on a straight-line basis over the full lease term.

Service charge income is recognised on an accrual basis when services have been provided and the Group has to a right to a defined amount of consideration.

Expenses

All expenses are accounted for on an accruals basis.

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 forming part of the cost of the asset produced.

Current and deferred taxation

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

Following the conversion of the Group to a UK REIT, deferred tax liabilities on unrealised revaluation gains are only recognised where an asset is located outside the UK or where a developed asset is expected to be sold within three years of completion.

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.

Investment properties

The Group's completed investment properties are held for long-term investment. Freehold and long-leasehold properties acquired are initially recognised at cost, being fair value of the consideration given including transaction costs associated with the property. After initial recognition, freehold and long-leasehold 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 recognised in profit and loss in the period in which they arise.

The fair values of completed investment properties and investment properties under construction located in the UK are 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, head lease liabilities (the net present value of which are recognised as separate liabilities) and lease incentives. The fair value of investment properties located in the Republic of Ireland are based upon valuations provided by Cushman & Wakefield, an independent firm of chartered surveyors at each period end.

Costs of financing specific developments are capitalised and included in the cost of each development. During the year the loan facilities, as disclosed in note 12, were partly utilised to fund development work on investment properties under construction.

Trade and other receivables

Trade and other receivables are initially recognised at their fair value inclusive of any Value Added Taxes that may be applicable and are subsequently held at amortised cost and net of any provision for any doubtful debts which are not deemed recoverable.

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.

Trade and other payables

Trade and other payables are initially recognised at their fair value inclusive of any Value Added Taxes that may be applicable and are subsequently held at amortised cost.

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 any resulting fair value adjustment being amortised and recognised as a part of finance costs over the term of the loans, on an effective interest basis.

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 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 best economic 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 for applying the following hierarchy:

• 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.

Foreign exchange

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. Differences are recognised in profit and loss.

The net investment in foreign operations, where settlement is neither planned nor likely is an exception to this general policy. Exchange differences arising on such intergroup balances are recognised in other comprehensive income rather than in profit and loss.

Non-monetary assets and liabilities that are measured at 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. Differences are recognised in profit and loss.

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 monthly 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

· Exchange differences resulting from the difference in rates applied to income statement balances and financial position items are recognised directly within equity in the Group's foreign currency translation reserve.

Accounting for associates and joint ventures

A joint venture generally involves the establishment of a corporation, partnership or other entity in which two parties have an interest in the joint control over strategic, financial and operating decisions. The results, assets and liabilities of jointly controlled entities are incorporated in the financial statements using the equity method of accounting.

Where the Group's share of losses exceeds its equity accounted investment in joint venture, the carrying amount of the equity interest is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations. Appropriate adjustment is made to the results of joint ventures where material differences exist between a joint venture's accounting policies and those of the Group.

Dividend income from joint ventures is recognised when the shareholders' right to receive payment have been established. Any dividends received are deducted from the carrying amount of the investment.

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:

Asset acquisitions

The Group'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 in accordance with IFRS 3 or if it is more appropriate to treat it as an asset acquisition.

Refinancing

During the year, in addition to adding to its facilities, the Group refinanced £235 million of legacy loan facilities borrowed from Aviva. The Net Present Value of the discounted cash flows before and after the transaction were seen to be less than 10% different. The refinancing was therefore treated as a debt modification in accordance with IAS 39.

Identifying joint ventures and associates

The Group assesses its power over the operations of investees and its rights to variable returns related to that power. The Group has determined that it jointly controls GP Property Limited which it presents as an equity investment because there is no contractual right to guaranteed cash returns.

The most significant area requiring estimation in the preparation of these financial statements was:

Valuation of investment property

The Group 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 have regard for observable market evidence of transaction prices for similar properties. Further information in relation to the valuation and sensitivity analysis of investment property is disclosed in note 8.

2. Directors' fees

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 2018, payable to KPMG LLP (2017: 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 4.26% (2017: 4.29%). The funding was sourced from all the loan facilities outlined within note 12. Where properties under construction were secured against a specific loan, the interest for that facility was capitalised.

5. Finance income

The foreign exchange gain is derived from the retranslation of monetary assets and liabilities denominated in Sterling (which is a foreign currency for the Group's Irish property-owning subsidiary, MedicX Properties Ireland Limited, which has a functional currency of the Euro). The Company has provided Sterling loans to MedicX Properties Ireland Limited which are eliminated on consolidation. The foreign exchange gain is calculated on the component which is treated as a loan balance rather than a net investment in foreign operations.

6. Taxation

The Group elected to be treated as a UK REIT with effect from 1 October 2017. The UK REIT rules exempt the profits of the Group's property rental business from corporation tax. Gains on properties are also exempt from tax, provided they are not held for trading or sold in the three years post completion of development. The Group will otherwise be subject to corporation tax at 19% (2017:19.5%).

Acquired companies are converted to UK REIT status from the date on which it becomes a member of the Group.

As a UK REIT, the Company is required to pay Property Income Distributions ("PIDs") equal to at least 90% of the Group's rental profit calculated by reference to the tax rules rather than accounting standards.

To remain as a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group's qualifying activities and the balance of its business. The Company and Group have complied with these conditions during the year and subsequently.

A reconciliation of the actual tax charge to the notional tax charge applying the average standard rate of UK corporation tax of 19.0% (2017: 19.5%) is set out below:

There is no current tax charge for the year (2017: £nil) and no corporation or income tax payable at 30 September 2018.

Deferred Taxation

At 30 September 2018, the Group has recognised deferred tax liabilities on the fair value gains of its properties located in the Republic of Ireland at a rate of 33% (2017: 33%). There are currently no plans to sell the Group's properties located in Ireland and as such the deferred tax is not expected to crystallise.

7. 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 £46,128,000 (2017: £38,624,000) and on 432,752,861 (2017: 413,134,343) Ordinary Shares, being the weighted average number of Ordinary Shares in issue calculated over the year, excluding those held in treasury. This gives rise to a basic and diluted earnings per Ordinary Share of 10.7 pence (2017: 9.4 pence) per Ordinary Share.

The basic and diluted net asset value per Ordinary Share are based on the net asset position at the year end attributable to Ordinary Shares of £358,717,000 (2017: £327,202,000) and on 442,916,140 (2017: 428,640,144) Ordinary Shares being the number of Ordinary Shares in issue at the year end, excluding those held in treasury. This gives rise to a basic and diluted net asset value per Ordinary Share of 81.0 pence per Ordinary Share (2017: 76.3 pence per Ordinary Share).

EPRA earnings per share and net asset value per share

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

The above measures eliminate deferred taxes not expected to crystallise, as well as the unrealised revaluation gain and profit on disposal of assets to give a more realistic view of the Company's operating results which is a better indication of the extent to which current dividend payments are supported by earnings. Adjustments to the Company's net asset value are made to give the most relevant information of the current fair value of both the assets and liabilities of the Company and to allow comparison with other market participants.

8. Investment properties

In line with the Company's accounting policies, the Group has treated corporate acquisitions during the year as asset purchases rather than business combinations because they were judged to be acquisitions of assets rather than businesses. Included in additions of £72.2 million above, are £63.8 million of property assets acquired through a corporate acquisition which was settled through cash consideration of £24.3 million, issuance to the vendor of 3.75 million Ordinary Shares in MedicX out of treasury at a price per share of 80.0 pence per share and assuming loans with a fair value of £36.5 million.

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 ("JLL") for the properties located within the United Kingdom as at 30 September 2018. The valuation takes account of the fact that a purchaser's offer price to the Group would be net of purchaser's costs (which are estimated at 6.23% (2017: 6.53%) of what would otherwise be the purchase price).

Investment properties completed and under construction located in the Republic of Ireland have been valued by Cushman & Wakefield ("C&W"). The properties have been valued in line with the approach taken within the UK outlined above, however the notional purchaser's costs used as at 30 September 2018 were 8.46% (30 September 2017: 4.46%). The increase in Irish purchaser's costs since last year reflects the increase in Irish stamp duty on commercial property having risen from 2% to 6% in October 2017.

The sites purchased for forward funding schemes were valued by JLL or C&W as part of the acquisition due diligence. At 30 September a total of 4 sites (30 September 2017: 2) are carried at cost, which is regarded by the Directors as their fair value. One of the sites was sold in October at its carrying amount since the scheme is no longer expected to proceed.

The freehold and long leasehold interests in the property investments of the Group were valued at an aggregate of £806,586,000 as at 30 September 2018 (2017: £689,926,000) by JLL and C&W. This valuation assumes that all properties, including those under construction, are complete and includes the value of assets under construction translated at an exchange rate of £0.89 per €1 for those assets located in the Republic of Ireland.

The average net initial yield for assets located within the UK at 30 September 2018 was 4.85% (2017: 5.08%) and the true equivalent yield was 5.13% (2017: 5.33%). The average true equivalent yield for assets located within the Republic of Ireland was 6.29% (2017: 7.38%).

The valuers' opinions of market value were derived using valuation techniques and comparable recent market transactions on arm's length terms. JLL has valued these properties for reporting purposes since 31 March 2008 and C&W have valued the properties for reporting purposes since 1 June 2017.

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 single 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. C&W's valuation report comments on a greater than usual degree of valuation uncertainty resulting from a scarcity of comparable transaction evidence in the Irish market for primary care centres in the current market.

The valuers' fees are set based on the number of properties in the portfolio valued each quarter. The valuers' aggregate fees for the year were £112,000 (2017: £97,000).

On 16 November 2017 the Group completed the sale of five primary healthcare properties located in Wolverhampton, Southampton, Gravesend, Leicester and Grimsby. The total gross sale price was £5.575 million. The sale price was close to the net book value and after deducting sales costs, a profit on disposal of £119,000 was recognised.

In addition, further disposal costs of £9,057 (2017: £22,000) have been incurred in the year on fee relation to properties sold after the year end.

Capital expenditure

For the year under review, the Group incurred capital cost of £99.2 million. £65.4 million of these costs relate to an off-market acquisition of a portfolio of 12 operational and fully let primary medical centres on 8 June 2018. £18.0 million was invested in the Republic of Ireland, which includes the purchase of a standing let property at Kilkenny for £6.8 million, a new site at Clondalkin for £3.1 million, as well as costs incurred for the development of properties under construction and costs incurred for the improvement and maintaining a high quality portfolio.

Capital improvements carried out on the UK portfolio in order to maintain the high quality nature and value of the assets included £385,000 and £152,000 being spent respectively at Pudsey on an extension and Kendal on further land. A further £15.0 million was invested in the UK in order to forward fund on-going development opportunities at Vale of Neath, Kew, Eastbourne and Peterborough, complete properties under construction and improve the current standing portfolio of properties.

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 2018 (and as at 30 September 2017), 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, which 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 based on a number of significant assumptions. If the valuation yield were to reduce by 0.25% on each property, this would result in an increase in the valuation of the UK and Republic of Ireland properties of approximately £47 million, however, if the yields were to rise by 0.25%, this would result in a decrease in the valuation of the UK and Republic of Ireland properties of approximately £42 million. If rent reviews of 2% were achieved on the full portfolio with no yield movement the valuation of properties would increase by approximately £17 million.

The property yields of the Group excluding five outlying properties range from 7.5% to 4.00%.

The Company's ERVs on primary medical centres ranges from £120 to £400 per square metre.

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

Of the completed investment properties £168,998,000 (2017: £154,662,000) are long leasehold properties.

During the year the loan facilities, as disclosed in note 12, were utilised to fund development work on investment properties under construction. Interest costs of £537,000 (2017: £517,000) attributable to development work in progress were capitalised during the year.

9. Trade and other receivables

10. 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 £2,214,000 (2017: £5,245,000). These amounts are ring-fenced for investment in the completion of the properties under construction which they finance.

11. Trade and other payables

12. Loans

The current portion of long-term loans relates to the amount due in the next twelve months on the Aviva and Santander loan facilities; the terms of these loans are described below.

The Group has eight (2017: nine) primary debt facilities drawn. On 11 September 2018 the group refinanced five of its umbrella loan facility agreements with Aviva and replaced it with one agreement for the value of £264.5 million, increasing the facility held with Aviva by £30.8 million. On 8 March 2018 the Bank of Ireland facility was extended by €4.9 million bringing the total facility held with Bank of Ireland to €34.0 million. On 30 September 2018 an amount of €27.5 million has been drawn. On 8 June 2018, Aviva and Santander loan facilities were added to the Group's total facilities through a portfolio acquisition including twelve properties. Of these, eight facilities are held with Aviva and four facilities are held with Santander, however the information shown aggregates these individual loans and presents them as two new umbrella facilities described as "Aviva - OM" and "Santander - OM". In addition, the Group has a Revolving Credit Facility with RBS. The RBS facility was undrawn at 30 September 2018.

The majority of investment properties disclosed in note 8 are charged as security for the long-term loans.

Repayments of the loans listed above fall due as follows:

Covenants

All financial covenants on the loan facilities were complied with during the year and subsequently.

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 on acquired loans was £12,373,000 as at 30 September 2018 (30 September 2017: £6,666,000).

A mark to market calculation gives an indication of the benefit or liability to the Group of the fixed rate debt given the estimated 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 Gilt rate. The approximate mark to market liability of the total fixed rate debt to the Group was £26,924,000 as at 30 September 2018 (30 September 2017: £42,574,000). The fair value of the debt as at 30 September 2018 is therefore approximately £473,336,000 (2017: £413,157,000).

Fair value hierarchy

The valuation of loans is classified in accordance with the fair value hierarchy described in note 1. As at 30 September 2018 (and as at 30 September 2017), 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.

Reconciliation of borrowings to cash flows from financing activities

Any directly attributable costs incurred relating to the loans are added to the loan issue costs and will be amortised over the remaining life of the specific 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:

At 30 September 2018, the Company had 5,071,668 (2017: 14,771,668) Ordinary Shares remaining under its block listing.

During the year, treasury shares were utilised to satisfy demand for shares in lieu of cash for dividends elected under the Company's scrip dividend scheme. Treasury shares were also issued as partial consideration for a portfolio acquisition of 12 properties. The transactions and relevant price per share are shown below:

The closing value of shares held in treasury issued at 83.50 pence per share each is £2,327,000 (2017: £6,148,000).

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 reserve is set out in the Consolidated Statement of Changes in Equity.

In accordance with the Companies (Guernsey) Law 2008, as amended ("2008 Law") the other reserve is 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 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 the Company's Articles of Incorporation.

The Company's other reserve is used to accumulate annual profits or losses for each year, less dividends declared and paid. The foreign currency translation reserve comprises foreign exchange differences created on consolidation of foreign operations.

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 1 November 2018, the Board approved a dividend of 1.51 pence per share, bringing the total dividend declared in respect of the year to 30 September 2018 to 6.04 pence per share. The record date for the dividend was 16 November 2018 and the payment date is 31 December 2018. 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.

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 2018 and 30 September 2017 comprised trade receivables and payables, other debtors, cash and cash equivalents, non-current borrowings and current borrowings. It is the Directors' opinion that, with the exception of the 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 with 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 a high number of UK Government backed tenants. As at the year-end 89.4% (2017: 89.7%) of rental income receivable was derived from Government backed tenants who are spread across a large number of Clinical Commissioning Groups which further reduces credit risk in this area. The default risk is considered low due to the nature of Government backed 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 £2,963,000 (2017: £2,697,000) is neither impaired nor past due. £620,000 (2017: £466,000) is past due and of this £66,000 (2017: £198,000) is more than 120 days past due. The Company takes active steps to recover all amounts and has assessed that a provision of £54,000 (2017: £50,000) against trade receivables is appropriate at the year end.

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 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. Third party independent valuations are received on a quarterly basis and the portfolio is kept under review for any assets which may no longer meet the criteria of the Group.

Foreign currency risk

At the year end, the Company holds approximately €63 million of investments in the Republic of Ireland. To mitigate the risk of valuation movements driven by foreign exchange movements, the Company has entered into a facility of up to €34.0 million. This creates a natural foreign currency hedge at a group level.

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 £233,644,000 and £30,836,000 were negotiated at a fixed rate of interest of 4.69% and 3.05% respectively, these facilities replaced the previous Aviva borrowing facilities of £100,000,000 (2017: £100,000,000), £50,000,000 (2017: £50,000,000) and £59,777,000 (2017: £59,777,000) which were negotiated at a fixed rate of interest of 5.008%, 4.370% and 4.450% respectively as well as the 12 Aviva GPG and Fakenham loan facilities which was also at a fixed rate. The eight Aviva OM facilities acquired on 8 June 2018 are at a fixed rate ranging between 5.03% - 6.45% and the four Santander facilities also acquired on this date are also at a fixed rate. The Group's loans have a weighted average interest rate of 4.26% (2017: 4.29%).

On 15 September 2016, the Group extended the term of the RBS loan facility for a further three years. The amendment also provides for an option, with lender consent, that the immediately committed £20 million revolving credit facility may be extended by a further £10 million to £30 million or additional lenders be added with a view to increasing the facility on existing terms. Interest is payable on amounts drawn under the amended facility at a rate equal to LIBOR plus a lending margin of 2.00% per annum. A non-utilisation fee of between 1.10% and 0.75% will be payable on the undrawn, £20 million immediately available commitment.

During the year the extension was exercised and committed facilities were increased to £30 million. £23 million was drawn between 6 June 2018 and 9 August 2018, and £20 million was drawn between 9 August 2018 and 12 September 2018. On 5 October the extended commitment was cancelled and £20 million is now currently immediately available.

The Group's private loan note facility of £50,000,000 (2017: £50,000,000) and £27,500,000 (2017: £27,500,000) have fixed rates of 3.99% and 3.000% respectively and the loan note facility with Standard Life of £50,000,000 has a fixed rate of 3.838%.

On 6 March 2017 the Group entered into a debt facility with Bank of Ireland for an amount of €29,100,000, which initially provides development finance, followed by a five year, term loan once the four Irish secured assets reach practical completion. The margin on the new facility is 4% over EURIBOR during the development phase, stepping down to 3% once practical completion and rent commences at each scheme. The average rate as at 30 September 2018 on this facility is 3.03% (2017: 3.03%). On 8 March 2018 the Facility was extended by a further €4,875,000 at a margin of 3.00% over EURIBOR to refinance the purchase of a completed property.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in realising assets or otherwise raising funds to meet financial commitments. The Directors regularly review the Group'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 Group's compliance with covenants on lending facilities.

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

18. Commitments

At 30 September 2018, the Group had commitments of £11.4 million (2017: £21.3 million) to complete properties under construction and to settle final accounts and retentions.

19. Material contracts

Investment Adviser

Octopus Healthcare Adviser Ltd is appointed to provide investment advice under the terms of an agreement originally dated 17 October 2006 as subsequently amended 20 March 2009, 17 February 2013, 24 September 2013, 20 November 2015 and 29 September 2017 (the "Investment Advisory Agreement" or "Agreement").

The Agreement has since been further amended by way of a deed of amendment dated 10 December 2018. Prior to this amendment (the "December 2018 amendment") the fees payable under the Agreement were:

(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; and

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

As at 30 September 2018 the healthcare property asset value exceeded £782 million and no minimum fee applied for the final quarter ended 30 September 2018.

Following the December 2018 amendment, the tiered investment advisory fee was changed with effect from 1 October 2018 and the minimum fee was removed. The notice terms remained unchanged, providing a rolling contract subject to the Company's ability to serve two years' notice at any time. The new and former fee tiers are as follows:

The December 2018 amendment also removed the performance fee from the Agreement.

Prior to the December 2018 amendment the annual performance fee was 15% of the amount by which the total shareholder return exceeded a compound hurdle rate calculated from the 69.0 pence issue price at 8 April 2009, subject to a high watermark.

The Investment Adviser provides accounting administration services for no additional fee. In addition, Octopus AIF Management Limited acts as the Company's Alternative Investment Fund Manager for an annual fee of £1 per annum.

During the year, the agreements with Octopus Healthcare Adviser Ltd gave rise to £5,510,000 (2017: £4,792,000) of fees as follows:

Of these fees, £nil (2017: £nil) remained unbilled and £1,824,000 (2016: £1,146,000) remained outstanding at the end of the year.

Administrator

Each Group undertaking 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 29 September 2017. Under these agreements, fees were incurred totalling £144,000 (2017: £115,000) for the provision of corporate secretarial services to all Group companies and other administrative services.

Of these fees £27,000 (2017: £25,000) remained unbilled or outstanding at the year end.

Depository

On 29 September 2017 the company entered into an agreement with IAG Depository Services Limited for the provision of depository services from 1 October 2017. Under this agreement the fee incurred for the year was £28,000. Of this fee £nil remained unbilled or outstanding at the year end.

20. Investments in joint ventures

The Group has joint control over GP Property Limited which has issued two ordinary £1 voting shares to each of the parties who have joint control.