Vital Managed Investment Scheme 2017 Annual Report

DETAILS OF THE SCHEME
The Scheme is the Vital Healthcare Property Trust (Scheme or Vital) which is a managed
investment scheme for the purposes of the Financial Markets Conduct Act 2013 (FMCA).
The Scheme is managed by Vital Healthcare Management Limited (Manager) and supervised
by Trustees Executors Limited (Supervisor), a supervisor licensed under the Financial Markets
Supervisors Act 2011.
The offer of interests in the Scheme was originally made under the Unit Trust Act 1960. The
Scheme transitioned to compliance with the FMCA on 30 November 2016. Accordingly a
Product Disclosure Statement has not been prepared for the Scheme as no regulated offers of
units have been made pursuant to the FMCA. The Scheme units are listed on the New Zealand
Stock Exchange (NZX code: VHP).
Vital’s latest financial statements and the auditor’s report for those statements were lodged
with the Registrar on 26 October 2017.

DESCRIPTION OF THE SCHEME
Vital’s main function is to identify, acquire and manage healthcare properties that are leased
or for lease to operators across the healthcare continuum. From time to time, Vital may
undertake the design, refurbishment or development of healthcare properties for particular
health service operators. Vital may invest directly in real property, or in companies or trusts
(listed on a recognised stock exchange or unlisted) which themselves own, directly or
indirectly, real property with healthcare related qualities.
The Scheme is a unit trust established under the Unit Trust Act 1960 by a Trust Deed dated 11
February 1994, as amended by subsequent Deeds of Variation and Restatement.

INFORMATION ON COMPOSITION OF THE SCHEME
This Annual Report covers the accounting period from 1 July 2016 to 30 June 2017.
The number of managed investment products, being units in the Scheme (Units) on issue at
the start of the accounting period was 345,997,825.
The number of Units on issue at the end of the accounting period was 428,562,486.

CHANGES RELATING TO THE SCHEME
Material changes to the nature of the Scheme, the Scheme property, or the management of
the Scheme over the accounting period are as follows:
STATEMENT OF INVESTMENT POLICIES AND OBJECTIONS (SIPO)
The SIPO was lodged on 29 November 2016. There have been no changes to the SIPO since it
was lodged.

TRUST DEED
As advised to Unit Holders on 19 December 2016, during the period between 1 July 2016 to 30
June 2017, Vital’s Trust Deed (Trust Deed) was amended with effect from 30 November 2016
by a Deed of Amendment to the Trust Deed. The amendments to the Trust Deed, as approved
by the Manager, the Supervisor and NZX Regulation, bring the Trust Deed into compliance with
the FMCA and the Financial Markets Conduct Regulations 2014 (FMC Regulations).
The amendments to the Trust Deed include:
a) updating terminology to reflect the terminology used in the FMCA;

b) referring to relevant sections of the FMCA;

c) changes to the basis of preparation and filing of Vital’s annual accounts and
requirements relating to audits of Vital;

d) changes to the procedure for meetings of Unit Holders;

e) providing that the Supervisor and Manager are indemnified, and related party
transactions may only be entered into, to the extent permitted by the FMCA; and

f) certain other minor amendments of a formal or technical nature.
Vital is required by the Trust Deed to give formal notice to Unit Holders of the amendments
made. Copies of the amended and restated Trust Deed and a copy of the Trust Deed marked
to show the amendments are available on the Vital website (www.vhpt.co.nz) under the
section About/Our Structure.
The amended and restated Trust Deed is also available on the Disclose Register accessible on
the Companies Office website (https://disclose-register.companiesoffice.govt.nz/disclose).
RELATED PARTY TRANSACTIONS
During the period 1 July 2016 to 30 June 2017 there were no changes to the nature and scale
of related party transactions.
There were no related party transactions that were not on arm’s-length terms.
Further details of the related party fees paid by Vital to the Manager can be found in the
financial statements for Vital which have been lodged with the Registrar.
VALUATION AND PRICING METHODOLOGIES
There was no change to the valuation and pricing methodologies for the Scheme during the
reporting period.

FINANCIAL CONDITION AND PERFORMANCE OF THE SCHEME
The 2017 financial year has been a positive and productive one for Vital. We have enhanced
almost every aspect of the business with solid portfolio performance underpinning the financial
position. Execution to plan was validated with the successful $160m rights issue last July and
again at year end with the strong revaluation results. Population and ageing demographic
drivers continue to support demand for healthcare services, and with a stable platform we look
to continue to execute on our long term strategy.

HIGHLIGHTS:
 Operating profit before tax of $53.0m up 37.0%;
 Net distributable income of $61.8m, up 53.6%;
 Distribution of 8.5 cpu, up 2.4% on FY16, adjusted
1
payout ratio of 72%;
 Cash earnings (or AFFO
2
) of 14.5 cpu, up 24.3%;
 Successful $160m capital raising with 87% take up;
 Loan to valuation ratio (LVR) at 29.3%;
 Revaluation gain of $168.5m for the year, like for like increase of 17%;
 Portfolio WACR firmed 113 basis points (bps) to 6.04%;
 Net tangible asset (NTA) per unit of $2.05, up 36.0%;
 Occupancy maintained at over 99% for the eighth consecutive year, WALE of 17.7
years;
 Seven major acquisitions across Australasia totalling $190m, five have future
brownfield potential;
 Spent $31.9m on brownfield developments, A$34.6m still to be completed.




1
Adjusting for the one-off $13.8m lease termination receipt
2 Adjusted funds from operations

With a relatively optimistic outlook as it relates to Vitals scale and diversification strategy the
Board continues to adopt a conservative and prudent capital management plan. Recognising
market support for distribution sustainability, or a conservative payout ratio, and the prudent
application of retained earnings to ongoing growth initiatives, the Board has determined to
maintain cash distribution guidance at 8.5 cpu for the 2018 financial year.
You can find a copy of Vital’s financial statements, including information on distributions made
by the Scheme on the Disclose register at:
https://disclose-register.companiesoffice.govt.nz/disclose, scheme number SCH11214.
Further information on the financial results is provided in Vital’s Annual Report at:
www.vhpt.co.nz

FEES
The following fees and expenses were charged in respect of the Scheme in dollars and as a
percentage of Scheme’s net assets for the 12 month period to 30 June 2017.

MANAGER’S BASE FEE
Stipulated within the Trust Deed is the basis on which the Manager is entitled to receive
management fees and incentive fees.
Management fees are charged, in respect of each month, a base fee equal to 0.75% per
annum of the monthly average of the Gross Value of the assets of Vital for the quarter ended
on the last day of that month.
The remuneration of the Manager includes the remuneration of the CEO and management
team.

MANAGER’S INCENTIVE FEE
The Manager’s incentive fee is an amount equal to 10% per annum of the average annual
increase in the Gross Value of Vital over the relevant financial year and two preceding financial
years.
The Manager is required to apply the incentive fee in subscribing for new Units in Vital issued
at the weighted average price.
EXPENSES CHARGED BY THE MANAGER & ASSOCIATED PERSONS
The Manager (and the Supervisor) is entitled to be reimbursed by Vital for all expenses, costs
or liabilities incurred in acting as Manager (or Supervisor). Certain services are provided by the
Manager in lieu of using external providers. Fees and expenses charged or changes to fees and
expenses charged requires the approval of the Supervisor (or in certain circumstances, Unit
Holders) and would be advised to Unit Holders via the NZX.
For more information in respect to the Fees, please refer to Vital’s financial statements, on the
Disclose register at https://disclose-register.companiesoffice.govt.nz/disclose, scheme number
SCH11214.

SCHEME PROPERTY
The table below contains the assets of the Scheme extracted from the Consolidated Statement
of Financial Position as at 30 June 2017 and 30 June 2016:



CHANGES TO PERSONS INVOLVED IN THE SCHEME
There has been no change to the Manager, directors of the Manager or the Managers key
personnel involved in the Scheme during the accounting period.

The Supervisor appointed Andrew Scott-Howman as a director of the Supervisor on 24 April
2017 and Paul Hocking retired as director on 7 December 2016. Whilst outside of the
accounting period it is also noted that on 18 July 2017 Franceska Banga was appointed a
director.
There have been no changes to the auditors involved in the Scheme during the accounting
period.

HOW TO FIND FURTHER INFORMATION
Copies of documents relating to the Scheme, such as the Trust Deed, SIPO and the annual
financial statements are available on the Disclose register at www.companies.govt.nz/
disclose, scheme number SCH11214 or on request from the Manager.
You have the right, free of charge and during normal office hours, to inspect that part of the
Unit register that relates to your Units on giving 5 working days’ notice to the Manager.
You also have the right, free of charge, on giving 5 working days’ notice and during normal
office hours, to inspect a copy of the Trust Deed, SIPO and annual financial statements at the
Manager’s registered office, which is located at: Level 16, AIG Building, 41 Shortland Street,
Auckland. Alternatively, you can obtain a copy free of charge by writing to us at: PO Box 6945,
Wellesley Street, Auckland 1141.

CONTACT DETAILS AND COMPLAINTS
Manager
Vital Healthcare Management Limited
Level 16, AIG Building, 41 Shortland Street, Auckland
PO Box 6945, Wellesley Street, Auckland 1141
Attn: Company Secretary
Telephone: 0800 225 264
Email: enquiries@vhpt.co.nz
Website: www.vhpt.co.nz
Trustee and Supervisor
Trustees Executors Limited
Level 7, 51 Shortland Street, Auckland 1010
PO Box 4197, Auckland 1140
Attn: Client Services Manager – Governance and Investor Oversight
Telephone: +64 9 308 7100

Registrar
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road, Takapuna
Private Bag 92119, Auckland 1142
Telephone: +64 9 488 8777
Facsimile: +64 9 488 8787
Email: vital@computershare.co.nz

Complaints
Complaints may be made to the Manager or Supervisor.
As a financial service provider registered under the Financial Service Providers (Registration
and Dispute Resolution) Act 2008, the Manager is a member of an approved dispute resolution
scheme (registration number FSP33302)).
Insurance & Financial Services Ombudsman Scheme Inc.
Level 8, 81 Molesworth Street, Wellington 6011
Telephone: +64 4 499 7612
Email: info@ifso.nz
There will be no fee charged to any complainant in connection with investigation or resolution
of a complaint.

---

vhpt.co.nz

Level 16
AIG Building
41 Shortland Street
Auckland 1010
PO Box 6945
Wellesley Street
Auckland 1141
New Zealand

T +64 9 973 7300
F +64 9 377 2776










Dear Unit Holder

Vital Healthcare Property Trust (Vital)
On 10 August 2017 Vital released to the NZX the 2017 Annual Report. That report
contained information required under the NZX Listing Rules and included the Chairman
and Chief Executive Officer’s Reports, details on the Property Portfolios in New Zealand
and Australia, Corporate Governance, Financial Statements and Auditor’s Report.
Many unit holders had elected to receive an electronic notification to view this online
while others received a printed copy of this report.
Vital is a managed investment scheme for the purposes of the Financial Markets Conduct
Act 2013 (FMCA). As a managed investment scheme Vital is now required to produce a
second annual report in a format consistent with that Act.
An electronic copy of this second report has been registered on the New Zealand
Companies Office - Disclose Register and also provided to the NZX.
Unit Holders have the right to receive, by mail and free of charge, a printed report. If
you wish to receive a copy please tick the box below and return this letter in the
resealable envelope it was mailed in, within 15 working days.
 I/we would like to receive a printed copy of the 2017 managed
investment scheme annual report for Vital Healthcare Property Trust.

Please contact our registrar, Computershare Investor Services, if you have any questions
about receiving the report or if you have any other questions relating to your investment
in Vital.
You can contact Computershare by email vital@computershare.co.nz or by telephone
+64 9 488 8777.
Yours faithfully,

Stuart Harrison
Company Secretary