Vital Managed Investment Scheme 2018 Annual Report

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


Dear Unit Holder

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


Vital Healthcare Property Trust (Vital)
On 9 August 2018 Vital released to the NZX the 2018 Annual Report. That report
contained information required under the NZX Listing Rules and included the Chair 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 2018 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





vhpt.co.nz

---

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 NorthWest Healthcare Properties Management Limited (Manager)
and supervised by Trustees Executors Limited, a supervisor licensed under the Financial
Markets Supervisors Act 2011 (Supervisor).
The offer of interests in the Scheme was originally made under the Unit Trust Act 1960.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 20 September 2018.
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 was 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. Vital
became a registered Managed Investment Scheme under the Financial Markets Conduct Act
2013 on 29 November 2016.
INFORMATION ON COMPOSITION OF THE SCHEME
This Annual Report covers the accounting period from 1 July 2017 to 30 June 2018.
The number of managed investment products, being units in the Scheme (Units) on issue at
the start of the accounting period was 428,562,486.
The number of Units on issue at the end of the accounting period was 436,893,108.
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. Amendments were made on 9 August, 2018,
including to provide detail on Vital’s investment objectives and relevant performance
monitoring benchmarks.

TRUST DEED
There were no material changes to the Trust Deed during the period.
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 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 2017 to 30 June 2018 there were no changes to the nature and scale
of related party transactions, apart from the details as outlined below:
There were no related party transactions that were not on arm’s-length terms.
Acquisition of an interest in Healthscope Ltd (“HSO”) by NWH Australia Asset Trust (NWHAAT).
During the year the NWHAAT entered into derivative contracts with Deutsche Bank AG (“DB”)
giving NWHAAT an economic interest equivalent to 10% of the outstanding shares of HSO. The
derivative contracts include a forward contract to acquire HSO shares and an option contract
that limits downside risk and upside potential and reduces the initial margin requirements of
the transaction.
The forward contract gives NWHAAT the ability to acquire, and DB the obligation to deliver,
173,970,330 to 176,111,600 HSO shares at a price of A$2.3863 per share on May 8, 2020, or
earlier, at the NWHAAT’s option, if a voting meeting is scheduled for HSO or HSO receives a
formal takeover bid. The NWHAAT prepaid A$85,254,703 of the A$415,148,293 notional
amount of the forward contract.
The forward contract contemplates physical settlement, but may be net settled in certain
circumstances. Under the forward contract NWHAAT is entitled to receive payments from DB
equivalent to dividends declared by HSO and NWHAAT pays variable interest to DB on the
underlying embedded funding contained in the forward contract at the Bank Bill Swap Rate
plus 3%.
The option contract is a zero cost collar for 173,970,330 options that limits the benefits to the
NWHAAT of HSO share price appreciation above A$2.60 and limits the NWHAAT’s exposure to
HSO share price depreciation below A$2.00 down to A$1.25 per share.
An acquisition of HSO's underlying hospital related real estate is of interest to NWHAAT and
Vital in line with their long term strategy to invest in healthcare real estate assets in the
Australasian market. NWHAAT and Vital currently intend to pursue any potential HSO real
estate acquisition jointly, in accordance with the Conflicts Policy, with scope to introduce other
capital partners as appropriate.
On 6th of May 2018, Vital entered into an agreement with NWHAAT to advance A$41m to
NWHAAT, of which A$40m has been advanced as at 30 June 2018. NWHAAT has used the
proceeds of the advance to prepay a portion (A$85,254,703) of a forward contract to acquire
173,970,330 shares of HSO.

In accordance with the intention of the Conflict Policy, Vital has the benefit of participating in
the opportunity and have agreed to jointly pay the costs and jointly share the benefits and
risks of the mark to market risk of the arrangement with DB.
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 and under the heading
“Fees” below.
TERMS OF THE OFFER OF UNITS
There was no applicable offer of units during the reporting period.
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
Vital’s stable portfolio and financial position has again delivered solid overall results. The
healthcare real estate sector continues to experience rising investor demand driven by its
unique defensive qualities and strong investment characteristics. Notwithstanding some
industry headwinds in Australia and moderate tailwinds in New Zealand, the undeniable trends
of a growing and ageing population continue to support our positive long term outlook.
HIGHLIGHTS:
 Gross rental income of $93.7m, up 20.1%
1
;
 Net distributable income of 10.6 cpu;
 Cash distribution of 8.5625 cpu, payout ratio of 81%;
 Cash earnings (or AFFO
2
) of $49.5m, up 4.5%
1
;
 Successful bank facility renewal and extension by A$100m;
 LVR at 37.5%;
 Vital’s portfolio valued at $1.73bn;
 Portfolio WACR firmed 36bps to 5.76%, from 6.12%;
 NTA increase to $2.26 from $2.05, up 10.2%;
 99.3% occupancy, maintained at over 99% for the ninth consecutive year;
 WALE of 18.2 years, up from 17.7 years;
 $194.7m of acquisitions across Australasia, including 5 hospitals, all with brownfield
potential;
 Invested $27.7m on brownfield projects, $112m to be completed at average yields of
~7%;
 Integration of the NorthWest Healthcare Australia management team, resulting in 30
professionals in Auckland and Melbourne;
 Jointly
3
secured an interest in ASX-listed Healthscope, Australia’s second largest private
hospital operator, providing a tactical and generational opportunity to acquire a quality
hospital real estate portfolio.

1 Adjusting for the 2017 one-off $13.8m lease termination receipt
2 Adjusted funds from operations
3 As announced on 8 May. Interest is with Vital’s Manager and major unitholder, NorthWest Healthcare Properties REIT

Comprehensive Income


2018
$000s
2017
$000s



Profit before income tax
117,437
231,148
Taxation expense (17,372)
(13,526)
Profit for the year attributable to unitholders of the
Trust
100,065 217,622



Total other comprehensive income/(loss) after tax 26,143 (174)
Total comprehensive income after tax 126,208 217,448



Distributions to Unit Holders 37,243 36,592
Distribution paid in the financial year (cents per unit)
8.5 8.5



Financial Position


2018
$000s
2017
$000s



Total non-current assets
1,776,087
1,378,069
Total current assets 10,741
14,159
Total assets 1,786,828 1,392,228



Total Liabilities 798,852 512,407
Net Assets 987,976 879,821

Vital continues to build on its market leading position, which underpins Vital’s strategy to drive
long term value-add opportunities and deliver sustainable returns to investors. With this
backdrop and reflecting Vital’s overall position and relatively stable outlook, the Board has
prudently determined to increase the annualised cash distribution to unitholders to 8.75 cpu
effective from the fourth quarter of the 2018 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 the Scheme’s property for the 12 month period to 30 June 2018

2018
$000s
Percentage
of Scheme
Property
Total fees and expenses incurred
Management fees
11,856
0.66%
Manager's incentive fee 13,096 0.73%
Expenses charged by NorthWest Healthcare Properties
Management Limited
1,442 0.08%
Expenses charged by NorthWest Healthcare Australian
Property Proprietary Limited
1,733 0.10%
Fees charged by the Manager and associated
persons
28,127 1.57%


Auditor's remuneration 143 0.01%
Strategic transaction costs 3,579 0.20%
Other operating income/expenses 2,622 0.15%
Total fees & expenses 34,471 1.93%

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 2018 and 30 June 2017:

2018
$000s
2017
$000s



Non-current assets


Investment Properties
1,731,247
1,376,243
Derivative financial instruments
856
1,499
Other non-current assets 43,984
327
Total non-current assets 1,776,087 1,378,069


Current assets

Cash and cash equivalents 5,388 3,352
Trade and other receivables 1,189 367
Other current assets 3,801 7,886
Derivative financial instruments 363 2,554
Total current assets 10,741 14,159

1,786,828 1,392,228

CHANGES TO PERSONS INVOLVED IN THE SCHEME
The Manager appointed David Carr as an Executive Director to the Board of the Manager (1
May 2018) following the retirement of Graeme Horsley (1 May 2018). Changes to the
Manager’s key personnel involved in the Scheme during the accounting period included the
appointment of Chris Adams (Executive Director-Australia). Key personnel of the Manager who
remained in place throughout the accounting period included: David Carr (holding the position
of Chief Executive Officer); Stuart Harrison (Chief Financial Officer) and Richard Roos
(Managing Director- Australia).
The Supervisor appointed the following persons as Directors of the Supervisor during the
accounting period: Franceska Banga (18 July 2017 and resigned 5 April 2018); Matthew Sale
(17 May 2018) and Mark Darrow (18 June 2018). Whilst outside of the accounting period it is
also noted that Sarah Roberts (16 July 2018) was appointed as a Director. Two further
Directors resigned during the accounting period being Robert Russell (17 May 2018) and
Andrew Scott-Howman (15 June 2018).
There have been no changes to the registrar or 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 https://disclose-
register.companiesoffice.govt.nz/disclose, scheme number SCH11214, on Vital’s website
www.vhpt.co.nz 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
NorthWest Healthcare Properties 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 – Corporate Trustee Services
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 the Supervisor at the contact details above. In
addition, 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) to which complaints may be made.
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.