21st Mar 2005 07:00
Medical Property Investment Fd Ltd21 March 2005 The Medical Property Investment Fund Limited Annual Report and Financial Statements For the period from 7 October 2003 to 31 December 2004 Highlights The Medical Property Investment Fund Limited is a support services companylisted on the London Stock Exchange. The Company was launched in November 2003and will have financial resources of circa £400m to invest in primary care. This inaugural set of results is in respect of the period ending 31 December2004. • Good first year results with 46 sites acquired (a further 14 sites in solicitors' hands)1 • Over £175m of capital committed1 • Average net initial yield on capital committed circa 7% • Growing pipeline of acquisitions and developments • BHE acquisition fully integrated, more opportunities in LIFT3 arising • Gross income of £7.6m with retained profit of £0.3m net of all launch and property acquisition expenses • Final dividend 2.67p2 making 4p in total 1 As at 15 March 2005 2 Ex -dividend date 30 March 2005, Record date 1 April 2005, Payment date 11 April 2005 3 Local Improvement Finance Trusts ("LIFT") are part of the Government's aim to procure investment in primary care and community-based facilities and services. Chairman's Statement For the period ended 31 December 2004 This Report is published in respect of the period from incorporation of thebusiness on 7 October 2003 to 31 December 2004. The Ordinary Shares wereadmitted to the Official List of the London Stock Exchange on 21 November 2003. I am pleased to report an extremely satisfactory start for the Company since itsflotation on the London Stock Exchange. During the period, total income amounted to £7.6m producing a net profit afterinvestment result of £2.2m. A dividend of 1.33p per Ordinary Share was declaredat the interim stage. The Board has recommended a final dividend of 2.67p perOrdinary Share making a total of 4p per share which is in line with budget. As at 15 March 2005, the Company had acquired or exchanged contracts on 46 sitesand has a further 14 sites in solicitors' hands. On completion, the aggregatecapital value of these investments will be approximately £120m. In addition,the Company has committed a further £55m to its own development projectsincluding its LIFT investments and pharmacy commitments. On all capitalcommitted to date, the average net initial yield on completion is estimated tobe circa 7%. The Company has pursued the strategy outlined at the time of flotation. Whilstthe property investment market has continued to be very competitive we have beenable to acquire existing primary health care properties and undertake sale andleaseback transactions at average yields consistent with our forecasts. At the interim stage, we reported on the acquisition of 70% of British HealthEnterprise ("BHE"), a specialist developer with expertise in LIFT developments,general primary care projects and the development of hospital main entranceretail malls. BHE's interests in three LIFT companies together with other developmentinitiatives being undertaken by the investment manager and third partydevelopers is enabling the business to build up its own stock of developmentswhere higher returns can be anticipated. During the latter half of 2004, the Company set up its own pharmacy business,Healthcare Pharmacies Limited. This is in direct response to the increasing roleof pharmacy as an integral part of the service provision within larger primaryhealth care developments. We believe that a direct involvement in the way thatpharmacies are operated within these establishments will facilitate innovationand enhance their operational performance and earnings potential. Outlook The NHS Plan will continue to create opportunities in the sector generally andwe expect the commitment to improve the range of services and facilities withinprimary health care premises to be a key focus before and after the election. LIFT areas are likely to continue to attract a significant share of theadditional funding supporting new premises development and the Company willcontinue to explore ways of increasing its exposure to this part of the market. The Company is well placed to meet its forecast returns. The second year ofoperation will see more management resources devoted to development activityparticularly on larger schemes. At the same time, the Company will continue toinvest in sale and leasebacks in order to increase its national foot-print andcontinue to pursue the generation of additional income from sites which havealready been acquired. Against this backdrop and on the assumption that NHS policy continues to bedirected towards increasing resources in primary health care, I am confidentthat the progress made in the first year of operation will be sustained in themedium term. Stockbroker The Company has recently appointed Cenkos Securities as joint broker. Dr Mark JacksonChairman 18 March 2005 Investment Manager's Report For the period ended 31 December 2004 The Company's investment objective is to achieve asset-backed earnings' growthfrom rental and other income streams through the acquisition and development ofa modern portfolio of primary health care premises. In the first period of operation the principal focus has been on establishing aregional infrastructure, creating market awareness and sourcing suitableacquisition opportunities. Deal sourcing to date has comprised investmentpurchases of completed rent producing properties, sale and leasebacktransactions with GP practices and forward funding or purchase commitments onvarious development projects. During the latter half of 2004, we have increasedour management resources focussed towards direct development activity and anumber of land acquisitions have taken place or are in solicitors' hands whichwill enable us to build out our own development pipeline. Financial Performance The Company has been profitable in its inaugural year. It has fulfilled thedividend forecast made at the time of flotation and has fully absorbed allproperty acquisition costs incurred at the time of purchase. During thisperiod, 50% of total income comprised bank and other interest income. In 2005,interest income will be replaced by increased revenue from rental receipts andforward funding arrangements arising from recent capital expenditure on newprojects. The Company intends to draw down a first tranche of debt during the thirdquarter of 2005. The terms of this facility are still being finalised through acompetitive tender process involving four banks. The initial bank facility willbe of the order of £100m and will be arranged on a short term basis withflexibility to allow for a full refinancing once the property portfolioincreases towards £400m. Rent reviews in primary health care property are generally on a three yearlycycle. Given the Company's national focus towards investment and its spread ofactivities among sale and leasebacks, development projects and LIFT, the Companyis building up an extensive database of rental evidence which will becomeincreasingly useful in rent review negotiations. The Company has settled rentreviews on six properties during 2004 resulting in an overall uplift of 14.1% onthe passing rent relating to those properties. On all properties acquired as at 31 December 2004, the Company had a weightedincome un-expired term of 19.7 years. Strategic Initiatives The acquisition of a 70% interest in the share capital of BHE was completed inAugust 2004 and we have been pleased with its performance to date. It hasbrought to the Group financial and operational involvement in three LIFT areasas well as development expertise in other primary health care projects and theniche area of developing hospital main entrance retail malls. A large portfolio of medical properties, owned by the General Practice FinanceCorporation (GPFC), the principal lender in the sector, came to the marketduring the second half of 2004. This attracted considerable interest from avariety of prospective purchasers including ourselves. The eventual sale pricewas somewhat higher than our proposal which was pitched at a level whichbalanced the advantages of scale with the ability to achieve a satisfactoryreturn on investment. The winning bid did however reinforce market evidence ofthe premiums that purchasers are prepared to pay for portfolios. We willcontinue to monitor the market for such opportunities whilst focussing themajority of our management resources on individual property purchases. The Company has established a pharmacy subsidiary to take advantage of changesin the provision of primary health care. The delivery of a wider range ofmedical services has been facilitated by the new GP contract and improvedpremises infrastructure. In order to leverage operational efficiency within thisnew generation of medical buildings it is becoming increasingly important topromote the interaction between GPs, practice nursing staff and the provision ofpharmacy and pharmacists' services. The recent relaxation of conditionscontrolling the grant of new pharmacy contracts is facilitating this change. Asat 15 March 2005, Healthcare Pharmacies Limited had applied for a total of eightlicences and more licence applications are expected as the Company's propertyportfolio expands. The pharmacy initiative is the first example of how we intend to generate otherearnings streams as our portfolio of primary health care developments gainscritical mass. There are a large number of providers of medical services fromboth the private and public sector keen to co-locate in these developments. Theshortage of available space within the current generation of modern medicalfacilities is currently their biggest constraint. As our development pipelinegathers momentum, we intend to pursue innovative and sustainable ways toaccommodate other service providers. Industry Trends In April 2004, GPs signed up to their new contract known as nGMS. This was afurther milestone in the evolution of the NHS Plan towards improved servicedelivery being undertaken within the primary health care market. During thisperiod GP practices have been adjusting to the new regime. We believe that manypractices are only now becoming fully conversant with the implications andopportunities posed by the new contracts. One of the most striking features ofthe new contract is that GPs are now financially incentivised to offer anincreasing range of services. To do this they need modern, larger premises sothat they can offer a wider range of services to patients. At the same time GPs' appetite for owning premises is declining. Workingpractices are becoming more diverse, graduates are more reluctant to be saddledwith property assets, older property-owning GPs want to retire and theprofession generally is focussing more on service delivery. The inevitableconsolidation of smaller GP practices into larger, more capital intensive newdevelopments and the arrival of practice based commissioning are likely toaccelerate these dynamics and increase the demand for new facilities. Growth money funding continues to be a hot topic within the sector with PrimaryCare Trusts being restricted in the amount of funding available to support newpremises' development. Whilst there have been a number of increases announcedby Government during the period under review this continues to be patchy and inmany cases can adversely affect the smooth delivery of new facilities. Webelieve the Company is well placed to tackle these issues as it has thefinancial resources to take a long term view and is not reliant on projectspecific bank debt funding. Strategy and Outlook The main focus over the next twelve months will be on allocating investment intofive key areas: sale and leaseback transactions; investment purchases; forwardfunding development commitments; own developments and investment in LIFTcompanies. The relative mix between the categories is not fixed however it isour intention to allocate at least 50% of our gross assets towards developmentsand LIFT. Our aim is to build on the position we have established in the market as thenatural partner for GPs and PCTs alike as a long term owner and active assetmanager of primary care premises. We anticipate an increased level of sale andleaseback activity during this year as more GP practices recognise the merits offorming a relationship with a partner committed to ongoing capital investmentand development. The Company is uniquely positioned to take an active role in the development ofbigger projects or "one stop shops" where there is an opportunity to attractcomplementary medical providers and services alongside the GP practice. We willdevelop additional space on a 'risk' basis as we believe there is a substantialand unsatisfied group of users keen to gain representation in theseestablishments. We will also explore ways to accelerate the procurement of newpremises. Looking ahead, we believe that the Company's active involvement in thedevelopment process will be a key driver of shareholder value and, as a result,more resources are being allocated to this part of the business. The prime objective of delivering asset-backed income growth by building up theCompany's portfolio of properties and development projects is on course. Wecontinue to explore opportunities to grow other income streams from ourexpanding portfolio of medical premises and we are pleased with the progress ofthe Company so far. Richard BurrellBerrington Fund Management Limited 18 March 2005 The Medical Property Investment Fund Limited Report of the Directors The Directors of The Medical Property Investment Fund Limited ("the Company")and its subsidiaries (together "the Group") are pleased to submit the AuditedConsolidated Financial Statements of the Group for the period from 7 October2003 to 31 December 2004. Investment Policy The primary investment objective of the Group is to achieve income and capitalgrowth primarily from a portfolio of medical centres situated in the UnitedKingdom and related primary care services. Listing The Ordinary Shares of the Company were admitted to the Official List of theLondon Stock Exchange on 21 November 2003. Results The results for the period are shown in the Consolidated Statement ofOperations. Dividend During the period the Company has declared and paid the following interimdividend and declared the following final dividend to its Ordinary Shareholders: Dividend Date Declared Rate Interim 13 September 2004 1.33pFinal 18 March 2005 2.67p Directors' and Other Interests None of the Directors or persons connected with them held any shares at 31December 2004. None of the Directors had a service contract with the Company during the period. As at 31 December 2004, Berrington Fund Management Limited was interested in147,000 Ordinary Shares. Corporate Governance As a Guernsey incorporated company, the Company is not required to comply withthe Code of Best Practice published by the Committee on the Financial Aspects ofCorporate Governance (the "Combined Code"). However, the Directors place a highdegree of importance on ensuring that high standards of Corporate Governance aremaintained. Going Concern The Directors believe it is appropriate to adopt the going concern basis inpreparing the financial statements as, after due consideration, the Directorsconsider that the Group has adequate resources to continue in operationalexistence for the foreseeable future. Substantial Shareholdings At 1 March 2005, Directors were aware that the following shareholders owned 3%or more of the issued Ordinary Shares of the Company. Number of Ordinary Shares % of Ordinary SharesThe Bank of New York (Nominees) Limited 4,645,970 3.26BNY (OCS) Nominees Limited 6,776,810 4.76HSBC Global Custody Nominee (UK) Limited 4,300,000 3.02Morstan Nominees Limited 13,930,000 9.78Nortrust Nominees Limited 9,350,000 6.57Nutraco Nominees Limited 4,355,000 3.06State Street Nominees Limited 14,118,649 9.91Vidacos Nominees Limited 32,596,674 22.89 Directors' Responsibilities The Directors are responsible for preparing financial statements for eachfinancial period which give a true and fair view of the state of affairs of theGroup and of the profit or loss of the Group for that period and are inaccordance with applicable laws. In preparing those financial statements theDirectors are required to:- • select suitable accounting policies and apply them consistently; • make judgements and estimates that are reasonable and prudent; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of theGroup and to enable them to ensure that the financial statements comply with theCompanies (Guernsey) Law, 1994. They are also responsible for safeguarding theassets of the Group and hence for taking reasonable steps for the prevention anddetection of fraud and other irregularities. The Directors are responsible for ensuring that the Report of the Directors andother information included in the Annual Report is prepared in accordance withapplicable company law. They are also responsible for ensuring that the AnnualReport includes information required by the Listing Rules of the FinancialServices Authority. Status for Taxation The Income Tax Authority in Guernsey has granted the Company exemption fromGuernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance1989 and the income of the Company may be distributed or accumulated withoutdeduction of Guernsey income tax. Exemption under the above mentioned Ordinanceentails payment by the Company of an Annual Fee of £600. The property subsidiary is subject to United Kingdom tax on income arising oninvestment properties, after deduction of their debt financing costs andallowable expenses. The UK trading subsidiaries are subject to UK corporationtax on their profits. Auditors Ernst & Young LLP have indicated their willingness to continue in office. Dr Mark Jackson, ChairmanGraham Chase, Director 18 March 2005 Independent Auditors' Report to the Members of The Medical Property Investment Fund Limited We have audited the Group's financial statements for the period ended 31December 2004 which comprise the Consolidated Statement of Operations,Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement ofChanges in Equity, Consolidated Cash Flow Statement and the related notes 1 to25. These financial statements have been prepared on the basis of theaccounting policies set out therein. This report is made solely to the Company's members, as a body, in accordancewith Section 64 of the Companies (Guernsey) Law, 1994. Our audit work has beenundertaken so that we might state to the Company's members those matters we arerequired to state to them in an auditors' report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibilityto anyone other than the Company and the Company's members as a body, for ouraudit work, for this report, or for the opinions we have formed. Respective Responsibilities of Directors and Auditors The Directors are responsible for preparing the financial statements inaccordance with Guernsey law as described in the Statement of Directors'Responsibilities. Our responsibility is to audit the financial statements in accordance withrelevant legal and regulatory requirements, United Kingdom Auditing Standardsand the Listing Rules of the Financial Services Authority. We report to you our opinion as to whether the financial statements, which havebeen prepared in accordance with International Financial Reporting Standards,give a true and fair view and are properly prepared in accordance with theCompanies (Guernsey) Law, 1994. We also report to you if, in our opinion, theDirectors' Report is not consistent with the financial statements, if theCompany has not kept proper accounting records, if we have not received all theinformation and explanations we require for our audit or if informationspecified by the Listing Rules regarding Directors' transactions with the Groupis not disclosed. We read the other information contained in the Annual Report and considerwhether it is consistent with the audited financial statements. This otherinformation comprises the Highlights, Chairman's Statement, Investment Manager'sReport, Directors' Profiles, Management and Administration and Report of theDirectors. We consider the implications for our Report if we become aware ofany apparent misstatements or material inconsistencies with the financialstatements. Our responsibilities do not extend to any other information. Basis of Audit Opinion We conducted our audit in accordance with United Kingdom Auditing Standardsissued by the Auditing Practices Board. An audit includes examination, on atest basis, of evidence relevant to the amounts and disclosures in the financialstatements. It also includes an assessment of the significant estimates andjudgments made by the Directors in the preparation of the financial statements,and of whether the accounting policies are appropriate to the Group'scircumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the stateof affairs of the Group as at 31 December 2004 and of its profit for the periodthen ended and have been properly prepared in accordance with the Companies(Guernsey) Law, 1994. Ernst & Young LLP Guernsey, Channel Islands 18 March 2005 Consolidated Statement of Operations For the period from 7 October 2003 to 31 December 2004 7/10/2003 to 31/12/2004 Notes £Income Rent receivable 3,399,736Fees receivable 358,488Bank and other interest 3,829,875 Total Income 7,588,099 Expenses Interest payable and similar charges 5 43,448Investment Manager's fees 3(i) 2,958,265Salaries 2 409,520Legal and professional fees 189,893Property management expenses 186,546Audit fees 35,000Tax and accountancy fees 22,560Administration fee 3 (ii) 113,453Directors' fees 4 243,287Insurance 37,686Advertising, PR & marketing 260,420Other expenses 409,168Depreciation 350Bank charges 9,503 Total Expenses 4,919,099 Net Profit before Investment Result 2,669,000 Unrealised loss on revaluation of properties (508,027)Minority interests 69,703 Net Profit before Taxation 2,230,676 Taxation 7 - Net Profit for the Period 2,230,676 Dividend 6 (1,893,971) Retained Profit 336,705 Basic and Diluted Profit per Ordinary Share 8 1.58p All items in the above statement are derived from continuing operations. Theaccompanying notes form an integral part of the financial statements. Consolidated Balance Sheet as at 31 December 2004 31/12/2004 Notes £Non-current AssetsProperty 10 51,739,136 Investments 11 4,232 Goodwill 12 5,867,768 Tangible fixed assets 13 20,078 57,631,214 Current AssetsCash and cash equivalents 15 66,650,944Debtors 16 4,615,396Development work in progress 10,071,702 81,338,042 Total Assets 138,969,256 Current LiabilitiesCreditors 17 2,222,416 Total Liabilities 2,222,416 Net Assets 136,746,840 Represented by: Capital and ReservesShare capital 18 14,240,385Share premium 19 122,239,453Reserves 20 336,705 136,816,543 Minority interests (69,703) Total Equity 136,746,840 Net Asset Value per Ordinary Share 21 96.03p The financial statements were approved at a meeting of the Board of Directorsheld on 18 March 2005 and signed on its behalf by: Dr Mark Jackson, Chairman Graham Chase, Director The accompanying notes form an integral part of the financial statements. Company Balance Sheet as at 31 December 2004 31/12/2004 Notes £Non-current AssetsProperty 10 -Investments in subsidiary companies 9 & 11 15,696,868Loans 14 53,299,452 68,996,320 Current AssetsCash and cash equivalents 15 66,340,103 Debtors 16 1,515,910 67,856,013 Total Assets 136,852,333 Current LiabilitiesCreditors 17 105,493 Total Liabilities 105,493 Net Assets 136,746,840 Represented by: Capital and ReservesShare capital 18 14,240,385Share premium 19 122,239,453Reserves 20 267,002 Total Equity 136,746,840 The financial statements were approved at a meeting of the Board of Directorsheld on 18 March 2005 and signed on its behalf by: Dr Mark Jackson, Chairman Graham Chase, Director The accompanying notes form an integral part of the financial statements. Consolidated Statement of Changes in Equity For the period from 7 October 2003 to 31 December 2004 7/10/2003 to 31/12/2004 £ Retained profit 336,705Minority interest (69,703)Issue of Ordinary Shares, net of issue costs 136,479,838 Equity at 31 December 136,746,840 The accompanying notes form an integral part of the financial statements. Consolidated Cash Flow Statement For the period from 7 October 2003 to 31 December 2004 7/10/2003 to 31/12/2004 Note £Operating ActivitiesRent received 3,285,877Fees received 358,488Bank and other interest received 3,829,875Expenses paid (5,240,581)Interest paid and similar charges (43,448) Net cash inflow from operating activities 22 2,190,211 Investing ActivitiesPurchase of property (53,228,913)Purchase of investments (4,232)Purchase of fixed assets (20,428)Acquisition of subsidiary, net of cash acquired (5,867,768)Cost of development work in progress (10,071,702)Short term loan to associated company (932,091) Net cash outflow from investing activities (70,125,134) Financing ActivitiesIssue of Ordinary Shares 142,500,000Issue costs paid on issuance of Ordinary Shares (6,020,162)Dividend paid (1,893,971) Net cash inflow from financing activities 134,585,867 Increase in cash and cash equivalents 66,650,944 Cash and cash equivalents at 7 October 2003 - Cash and cash equivalents at 31 December 2004 66,650,944 The accompanying notes form an integral part of the financial statements. Notes to the Financial Statements For the period from 7 October 2003 to 31 December 2004 1. OperationsThe Medical Property Investment Fund Limited is a closed-ended investmentcompany incorporated in Guernsey whose investment objective is to achievecapital growth and rising rental income from the ownership and development of adiversified portfolio of primary health care properties and the provision ofrelated services. 2. Principal Accounting PoliciesBasis of PreparationThe financial statements of the Group have been prepared in conformity withInternational Financial Reporting Standards ("IFRS") issued by the InternationalAccounting Standards Board, interpretations issued by the InternationalFinancial Reporting Interpretations Committee and applicable legal andregulatory requirements of Guernsey Law, and reflect the following policies: ConventionThe financial statements have been prepared on a going concern basis under theHistorical Cost Convention except for the measurement at fair value ofinvestment properties. Basis of ConsolidationThe Group financial statements consolidate the financial statements of TheMedical Property Investment Fund Limited and its subsidiary undertakings drawnup to 31 December 2004. Segmental ReportingThe Directors are of the opinion that the Group is engaged in a single segmentof business, being primary care investment and development business and relatedservices. The Group invests in primary health care properties and developmentssituated in the United Kingdom. IncomeInterest and fees receivable are included in the financial statements on anaccruals basis. Rental income is included in the financial statements on anaccruals basis and is shown gross of any UK income tax. ExpensesAll expenses are accounted for on an accruals basis. SalariesThe Company has no employees. Salary costs relate to the Group's subsidiary, BHEManagement Services Limited, which has nine employees. The latter company doesnot have a pension scheme. Issue CostsThe share issue costs incurred amounted to £6,020,162 and have been written offin full against the share premium account. Investments in Subsidiary CompaniesThe investments in subsidiary companies are included in the Company BalanceSheet at cost less any provisions for diminution in value. Goodwill Goodwill arising on acquisition is accounted for being the difference betweenthe cost of acquisition and the fair value of the assets acquired. It is thensubject to annual review for any impairment. Property - FreeholdFreehold properties are initially recognised at cost, being the fair value ofconsideration given, including transaction costs associated with the property. After initial recognition, freehold properties are measured at fair value, withunrealised gains and losses recognised in the Consolidated Statement ofOperations. Fair value is based upon the open market valuations of theproperties as provided by FPD Savills Commercial Limited, a firm of independentchartered surveyors, as at the balance sheet date. Property - Long LeaseholdIAS 40 (2003 - revised) has been adopted early. As a result, long leaseholdproperties have been accounted for as freehold properties and, after initialrecognition at cost, are measured at fair value (on the same basis as freeholdproperties above). Tangible Fixed AssetsTangible fixed assets are depreciated over their expected useful lives whichare: Fixtures & Fittings - four years. InvestmentsInvestments are initially recognised at cost, being the fair value of theconsideration paid, including transaction costs associated with the investment.After initial recognition, investments are carried at the Group's share in thenet asset value of the investment. Loans to Subsidiary CompaniesThe unsecured subordinated loan that has been granted to MPIF Holdings Limitedat various times during the accounting period, has been accounted for as anoriginated loan under IFRS. This loan, and other loans to subsidiary companies,have been accounted for on an amortised cost basis with intercompany interestbeing recognised under the effective interest rate method. The loans arereviewed regularly for impairment. Development Work in ProgressDevelopment work in progress, including capitalised interest where applicable,is carried at cost or, if lower, market value. No interest was capitalised inthe period. Cash and Cash EquivalentsCash on hand and deposits in banks are carried at cost. Cash and cashequivalents are defined as cash in hand, demand deposits, and highly liquidinvestments readily convertible to known amounts of cash and subject toinsignificant risk of changes in value. For the purposes of the ConsolidatedCash Flow Statement, cash and cash equivalents consist of cash in hand anddeposits in banks. 3. Material Agreements(i) Under the terms of an appointment made by the Board on 18 November 2003,Berrington Fund Management Limited ("BFML") was appointed as Investment Managerto the Company. With effect from 21 November 2003 the Investment Manager is paidan aggregate annual management fee of 2.0% of the net asset value of the Companypayable monthly in arrears. In addition, BFML is entitled to receive aperformance fee in respect of the period from Admission to 31 December 2008 of18% of the amount by which the market value per share exceeds on 31 December2008 the Placing Price (compounded annually at 12% per annum) and, thereafter,18% of the amount by which the market value per share exceeds the higher of (1)the Placing Price (compounded annually at 12% per annum) or (2) the highestprevious market value per share as stated in the Prospectus. The Investment Management Agreement is terminable by the Company on 12 months'notice, such notice to be given on or after the fourth anniversary of theInvestment Manager's Agreement. The Investment Manager has delegated the management of the investment propertiesto Barlows Asset Management Limited. (ii) Under the terms of an Administration Agreement dated 18 November 2003,the Company appointed Guernsey International Fund Managers Limited ("GIFM") asAdministrator, Secretary and Registrar of the Company. This agreement wasterminated with effect from 27 April 2004. The Company entered into an Administration Agreement dated 26 April 2004 withMourant Guernsey Limited ("Mourant") under which Mourant agreed to provideservices to the Company as Administrator and Secretary to the Company. Mourantis entitled to an annual fee of £85,000 per annum, such fees being invoicedmonthly in arrears. 4. Directors' Fees 7/10/2003 to 31/12/2004During the period each of the Directors was entitled to the following fees: £ M. Jackson (Chairman) 121,643J. Curran (Deputy Chairman) 48,657G. Chase 24,329F. Porter 24,329C. Vibert 24,329 243,287 5. Interest Payable and Similar Charges 7/10/2003 to 31/12/2004 Bank & other interest payable 43,448 43,448 6. Dividends Paid and Payable on Ordinary Shares 7/10/2003 No. of to Ordinary Rate 31/12/2004 Shares pence £ Interim dividend paid 15 October 2004 142,403,847 1.33 1,893,971Dividends paid 1.33 1,893,971 A final dividend of 2.67 pence per Ordinary Share was declared on 18 March 2005. 7. Taxation The Company and its Guernsey registered subsidiary, MPIF Holdings Limited, haveobtained exempt company status in Guernsey under the terms of the Income Tax(Exempt Bodies) (Guernsey) Ordinance 1989 so that they are exempt from Guernseytaxation on income arising outside Guernsey and on bank interest receivable inGuernsey. Each Company is, therefore, only liable to a fixed fee of £600 perannum. The Directors intend to conduct the Group's affairs such that itcontinues to remain eligible for exemption. MPIF Holdings Limited is subject to United Kingdom income tax on income arisingon the investment properties, after deduction of its debt financing costs,allowable expenses and capital allowances. The Company's UK subsidiaries are subject to United Kingdom corporation tax ontheir profits less losses. 8. Basic and Diluted Profit per Ordinary ShareThe basic and diluted profit per Ordinary Share is based on the net profit forthe period of £2,230,676 and on 140,909,564 Ordinary Shares, being the weightedaverage number of Ordinary Shares in issue throughout the period since 21November 2003, when the shares were admitted to the Official List of the LondonStock Exchange. 9. Investments in Subsidiary Companies The Company owns the whole of the issued Ordinary Share capital of MPIF HoldingsLimited, specially formed to act as the property investment holding company forthe Group, which is incorporated and registered in Guernsey. MPIF HoldingsLimited owns the whole of the issued Ordinary Share capital of BHE (Heartlands)Limited (property investment company - registered in England), and BHE(Bonnyrigg) Limited and BHE (Wand) Limited, both of which are dormant andregistered in England. MPIF Holdings Limited also owns the whole of the issued Ordinary Share capitalof MPF Pharmacies Limited, specially formed to act as the pharmacy investmentholding company for the Group, which is incorporated and registered in Guernsey.MPF Pharmacies Limited owns the whole of the issued Ordinary Share capital ofHealthcare Pharmacies Limited which is registered in England and will, in duecourse, carry on its pharmacy trade in the United Kingdom. The Company also owns 70% of the issued Ordinary Share capital of BHE HoldingsLimited and its subsidiaries, Development Support Partnership Limited and BHE(York) Limited, both of which are dormant, and BHE Management Services Limited.BHE Holdings Limited and BHE Management Services Limited, all of which areregistered in England, both undertake property development, health planning andrelated consultancy services. 10. PropertyProperties are stated at fair value, which has been determined based onvaluations performed by FPD Savills Commercial Limited as at 31 December 2004,on the basis of open market value, supported by market evidence, in accordancewith International Valuation Standards. 31/12/2004Group £At 7 October 2003 -Additions at cost 52,247,163Unrealised loss on revaluation (508,027)At 31 December 2004 51,739,136 31/12/2004Company £At 7 October 2003 -Additions at cost 32,040,262Disposals (32,040,262)At 31 December 2004 - During the period the Group has complied with Sections 21.27 (f) to 21.27 (i) ofthe FSA Listing Rules. 11. Investments The Group has the following investments: Shares held % held Place of BusinessName of Company by the Group Incorporation ActivityInfracare (Midlands) 5 Ordinary 5% (with an option to England Dormant (formed toLimited Shares of £1 increase to 40% for invest in the Dudley nominal South LIFT Company) consideration)GB Consortium (No. 1) 4,200 Ordinary 40% held by BHE England Holds 60% of theLimited Shares of £1 (Holdings) Limited share capital in the which is 70% owned by Barnet, Enfield and the Company Haringey, and Liverpool and Sefton LIFT CompaniesGB Consortium (No. 2) 27 Ordinary 45% held by BHE England Holds 60% of theLimited Shares of £1 (Holdings) Limited share capital in the which is 70% owned by Coventry LIFT the Company Company The Company has the following investments in subsidiaries: 31/12/2004Company £Investment in MPIF Holdings Limited 12,000,000Investment in BHE Holdings Limited 6,670,771Provision for diminution in value of subsidiaries (2,973,903) 15,696,868 12. Goodwill On 30 July 2004 the Company acquired 70% of the share capital of BHE HoldingsLimited, and 100% of the share capital of BHE (Bonnyrigg) Limited and BHE(Heartlands) Limited for a consideration of £4m in cash plus 2,403,847 OrdinaryShares in the Company with a value of £2,500,000. The net assets of the group acquired were £Nil. The goodwill arising and at the period end is as follows: 31/12/2004Group £Purchase consideration 6,500,000Stamp duty, legal fees and other costs of acquisition 170,771Total cost 6,670,771 Net assets acquired -Revaluation at date of acquisition 803,003 Goodwill arising and at 31 December 2004 5,867,768 13. Tangible Fixed Assets 31/12/2004Group £ Fixtures & FittingsCostAt date of acquisition and at 31 December 2004 37,896 DepreciationAt date of acquisition 17,468Depreciation for the period 350At 31 December 2004 17,818 Net book value at 31 December 2004 20,078 14. Loans 31/12/2004Company £MPIF Holdings Limited (i) 48,355,860BHE Holdings Limited (ii) 250,000BHE (Heartlands) Limited (iii) 3,424,675BHE (Bonnyrigg) Limited (iii) 1,032,032MPF Pharmacies Limited (iii) 216,560GB Consortium (No. 1) Limited (iii) 20,325 53,299,452 (i) These comprise unsecured subordinated loans issued in support of propertyacquisitions. The loans are repayable on 31 December 2013 and interest ischarged at the fixed rate for that period plus a margin of 3%. (ii) The loan is unsecured, repayable upon demand and carries interest at 8% perannum. (iii) These loans are unsecured, non interest bearing and repayable upon demand. 15. Cash and Cash Equivalents Cash balances include £635,000 held to the bank's order as security for lettersof credit issued by the bank to the debt funders for the three Local ImprovementFinance Trusts (LIFT Companies) to which the Group has pledged funding uponpractical completion of the medical centres under development. 16. Debtors 31/12/2004Group £VAT recoverable 873,584Other debtors 934,796Short term loan to Infracare (Midlands) Limited* 932,091Rent receivable 893,175Property purchase deposits 981,750 4,615,396 * The unsecured loan from MPIF Holdings Limited to Infracare (Midlands) Limited carries interest at12% and is repayable upon financial close of the Dudley South LIFT. Company Due from MPIF Holdings Limited 1,479,132 Prepayments 36,778 1,515,910 17. Creditors 31/12/2004 £GroupTrade creditors 954,745Other creditors 488,355Rents received in advance 779,316 2,222,416 CompanyTrade creditors 6,357Other creditors 99,136 105,493 18. Share Capital Authorised £ 200,000,000 Ordinary Shares of 10p each 20,000,00020,000,000 Preference Shares of 10p each 2,000,000 22,000,000 Number of Share Shares CapitalOrdinary Shares issued and fully paid £ 142,403,847 Ordinary Shares of 10p each 142,403,847 14,240,385 Total share capital 142,403,847 14,240,385 The Company has yet to issue any Preference Shares. Voting Rights Ordinary shareholders are entitled to vote at all general meetings. Preferenceshareholders are entitled to receive notice of and speak at any general meetingof the Company but they can only vote on any resolution relating to thePreference Shares. Dividends The preference shareholders are entitled to, in priority to the holders of anyother class of share, a fixed cumulative preferential cash dividend at the rateof 6p per Preference Share per annum. The ordinary shareholders are entitled to the balance of revenue made availablefor distribution by the Company. Conversion Each preference shareholder may convert part of his shareholding into fully paidOrdinary Shares at the rate of one Ordinary Share for each Preference Shareheld, in the manner and basis set out in the articles. Capital If not converted, the Preference Shares may be redeemed by the Company subjectto notice periods set out in the articles. The ordinary and preference shareholders are entitled to all capital pari passuonce the preference shareholders have received their dividend entitlement. 19. Share Premium 31/12/2004 £ Proceeds arising on issue of Ordinary Shares 128,259,615Allocation of issue costs (6,020,162)Related Shares:
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