Vital Managed Investment Scheme 2019 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 8 August 2019 Vital released to the NZX the 2019 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 2019 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The offer of interests in the Scheme was originally made under the Unit Trust Act 1960.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 Disclose Register on 3 September 2019.
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 2018 to 30 June 2019.
The number of managed investment products, being units in the Scheme (Units) on issue at
the start of the accounting period was 436,893,108.
The number of Units on issue at the end of the accounting period was 446,346,087.
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 OBJECTIVES (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 twelve month period to 30 June
2019 but it is noted that the Trust Deed remains subject to a unitholder vote approving a number
of amendments. If approved the Trust Deed will then be amended accordingly.
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 2018 to 30 June 2019 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.
Remuneration of the Manager
The Trust paid management fees to the Manager. The basis for the calculation of management
and incentive fees is stipulated in the Trust Deed.
The base management fees have been charged at 0.75% per annum of the monthly average of
the gross value of the assets of the Trust for the quarter ended on the last day of that month.
Incentive fees are payable when there is an average annual increase in the Gross Value of the
assets of the Trust Fund over the relevant financial year and the two preceding financial years.
The incentive fee is 10% of the amount of the increase with payment being made by way of
subscribing for new units.
On 1 April 2019 a revised basis for management fees was outlined setting out a tiered basis for
charging the base management fees including a provision for charging certain specified activity
and service fees (see later). This revised basis remains subject to unitholders approving
amendments to the Trust Deed to reflect the outlined fees. The unitholder vote is to occur on
31 October 2019. Should unitholders not approve such an amendment then the calculation of
management and incentive fees will remain as currently stipulated in the Trust Deed.
In the intervening period the Manager has agreed to procure that the fees charged will not
exceed those that would have been charged if the amendments had been effective from 1 April
2019 (other than in respect of the incentive fee).
In performing the calculation of the existing Trust Deed fee structure compared to the proposed
fee structure the outcome is that the management fees being charged are as per the existing
fee basis.

The gross value of the assets of the Trust for the base management fee are calculated for the
quarter ended on the last day of that month. The revised basis for management fees proposed
to be adopted would give rise to the base management fees being charged at:
 0.65% per annum of the monthly average of the gross value of the assets of the Trust
up to $1 billion,
 0.55% per annum of the monthly average of the gross value of the assets of the Trust
between $1 billion and $2 billion
 0.45% per annum of the monthly average of the gross value of the assets of the Trust
between $2 billion and $3 billion, and
 0.40% per annum of the monthly average of the gross value of the assets of the Trust
over $3 billion.
From 1 April 2019, activity services and activity fees would be charged based on the following
categories:
a) Leasing
Vital pays the Manager leasing fees where the Manager has negotiated leases instead of or
alongside a real estate agent. Consistent with general market rates, these fees are charged at
11% of the annual rental for terms of 3 years or less (to a minimum of $2,500), 12% of the
annual rental for terms of 3 years, and 12% plus an additional 1% for each year greater than
three years (to a maximum of 20%).
Lease renewals are charged at 50% of a new lease. Structured rent reviews or market reviews
which do not result in a rental increase are charged an administration fee of $1,000. Open
market reviews are charged at 10% of the rental increase achieved in the first year. Leasing
fees are capitalised to the respective investment or development property in the Statement of
Financial Position and amortised over the term of the life of the lease.
b) Property management
Vital pays the Manager property management fees where the Manager acts as the property
manager instead of or alongside a real estate agent. These fees are charged at 1% - 2% of
gross income depending on the type of property. These fees are expensed through direct
operating expenses in the year in which they arise.
c) Facilities management
Vital pays a facilities management fee on a cost recovery basis to the Manager. These fees are
expensed through direct operating expenses in the year in which they arise.
From 1 April 2019, additional services and costs would be charged based on the following
categories:
d) Acquisitions
Vital pays fees to the Manager for managing the due diligence, financing, legal aspects and
settlement of the purchase of properties instead of or alongside a real estate agent. These fees
are charged at 1.5% of the purchase price. Acquisition fees are capitalised to the respective
investment or development property in the Statement of Financial Position.

e) Development management
Vital pays development management fees where the Manager acts as a development manager
on Vital developments. These fees are charged at 4% of the committed spend, exclusive of
land. Development management fees are capitalised to the respective investment or
development property in the Statement of Financial Position.
f) Project management
Vital pays project management fees to the Manager for managing capital expenditure projects,
instead of engaging an external project manager. These fees are charged at 2% of the
committed spend where the Manager is the project lead and 1% of committed spend where
the Manager has an oversight role. Project management fees are capitalised to the respective
property in the Statement of Financial Position.
Other Related Parties - NWH Australia AssetCo Pty Limited as trustee of NWH Australia
Asset Trust (NWHAAT) is a wholly owned subsidiary of NWI Healthcare Properties LP.
Acquisition of an Interest in Healthscope Ltd (“HSO”) by NWHAAT
Derivative contract
During the 2018 and 2019 financial years, NWHAAT entered into derivative contracts with
Deutsche Bank AG ("DB") which gave NWHAAT an economic interest equivalent up to 13% of
the outstanding shares of HSO by way of a forward contract to acquire HSO shares and an option
contract (the terms of which minimise the underlying margin requirements associated with the
forward contract). The forward gave NWHAAT the ability to acquire, and DB the obligation to
deliver, a minimum of 231,387,330 HSO shares at a price of A$2.36 per share. NWHAAT prepaid
A$85.3 million of the A$415.1 million notional amount of the forward contract.
Under the forward contract NWHAAT was entitled to receive dividend equivalents declared by
HSO and it paid variable interest on the underlying embedded funding contained in the forward
contract at Bank Bill Swap Bid Rate ("BBSY") plus 3% to 3.5%.
The zero cost option contract for 173,970,330 options limited the benefits to NWHAAT of HSO
share price appreciation above A$2.60 and limited the exposure to HSO share price depreciation
below A$2.00 down to A$1.25 per share. The option contract also provided that NWHAAT will
reimburse DB for its costs should DB be required to borrow HSO stock to fulfill its obligations
under the forward contract.
On 6 June 2019 the derivative was settled by DB, and the Group's 50% share of the settlement
funds was received on 12 June 2019. The total amount received in settlement of the derivative
by Vital was A$6,176,171.
Related party loan
In accordance with the intention of the Joint Investment Policy, the Group had the benefit of
participating in up to 50% of the opportunity and agreed to jointly pay the costs and jointly
share the benefits and risks of the mark to market risk of the arrangement with DB. On 6 May
2018, the Group entered into an agreement with NWHAAT to advance up to A$41.0m to
NWHAAT, of which A$40.0m had been advanced as at 30 June 2018.
On 5 December 2018, the Group entered into an amended loan agreement with NWHAAT to
advance up to A$81m, to NWHAAT. A total of A$80.3m has been advanced under the loan
agreement which is unsecured, repayable within 12 months from the date of the amended

agreement, and the Group is charging interest to NWHAAT at circa 4% p.a. on a monthly basis.
The loan remained in place at balance date with a repayment date of 5 December 2019, however,
was repaid in full subsequent to balance date on 2 August 2019.
Fees and reimbursements
Due to the significant nature of the proposed HSO real estate transaction the Manager initially
charged a prepaid acquisition fee (HY19: $8.2m). This was subsequently amended to be a fee
for the acquisition of the HSO derivative of $2.8m which was based on the cost incurred and
work performed by the Manager, plus a capital charge of $3.3m based on NW REIT (the ultimate
owner of the Manager) providing security to DB for all of the HSO derivative participation and a
recharge of financing costs of $2.4m which was charged based on the sharing of costs under the
Joint Investment Policy. These fees recognise the significant time, complexity of the transaction
and resources the Manager had contributed pursuing this transaction.
During the period, Directors had exercised judgement in determining that those fees were
capitalised, as the Group continued to make further progress on the HSO transaction. On 10
May 2019 Vital announced that after due consideration, Vital had declined to participate in the
HSO real estate acquisition opportunity with NWHAAT. Vital would still participate in 50% of
NWHAAT's derivative position in the HSO shares including payment of associated fees. These
arrangements, along with related financing, were to be settled in accordance with their terms
following the completion of the transaction.
Net strategic transaction costs, including interest income on the related party loan, incurred
during the 2019 financial year totaled $1.6m (2018: 3.2m). These net costs comprise a notional
HSO dividend received along with the proceeds from the close out of the HSO derivative. Against
this were charges for fees, financing expenses, third party commissions, legal and interest
expenses representing the Group's share of third party costs of the HSO derivative. The related
party amounts settled on a net basis with NWHAAT.
As the Group has determined that the HSO derivative financing cost and capital charge were not
payable to the manager for management services under the Trust Deed, the Directors have
applied judgement in approving those payments to NWHAAT under section 173(2)(b) of the
Financial Markets Conduct Act 2013, after considering expert advice, and provided a certificate
to the supervisor recording that fact.
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
The Trust’s stable portfolio and financial position has delivered a solid core operating result. In
addition to seeing the valuation of existing properties increase to $1.8 billion we continue to
grow the portfolio through the recently announced projects at Wakefield Hospital in Wellington
and Epworth Eastern in Melbourne.
The healthcare real estate sector continues to experience rising tenant demand and provides
Vital investors with a property portfolio which has unique defensive qualities and strong
investment characteristics.
We continue to support the growth demands of our partners, which enables us to drive our
operating, portfolio and financial results, delivering sustainable distributions and creating long
term value for investors. The 2019 full year distribution was 8.75 cpu, which was consistent
with guidance and a 2.2% increase to the FY18 distribution.
HIGHLIGHTS:
Vital delivers a FY19 Normalised Net Distributable Income of $51.0m up 3.8%
 Gross rental income increased 7.9% to $101.1m, primarily driven by structured rent
reviews
1
, completed developments and prior year acquisitions
 Net Property Income up 7.7% to $97.7m following strong same property rental growth and
expense containment
 Normalised
2
Net Distributable Income of $51.0m (FY18 $49.1m) an increase of 3.8%
 Distributions increased 2.2% to 8.75cpu, for a Normalised Net Distributable Income payout
ratio of 76% and a AFFO payout ratio of 76%
 Portfolio value increased to $1.8bn with occupancy of 99.4% and a weighted average lease
term of 18.1 years
 Initiated $218m of projects with a weighted average return on cost of circa 6.1%
 Achieved revaluation gains of $103.6m, a 6.0% increase over the prior year
 Enhanced fee and governance changes proposed subject to a Unit Holder vote
 Delivered a FY19 total return to investors of 27.5%


1
Structured rent reviews have an either agreed annual CPI-based rate of increase or a minimum annual increase
2
Net Distributable Income (NDI) excluding extraordinary and one-off items

Comprehensive Income


2019
$000s
2018
$000s
Profit before income tax
107,033 117,437
Taxation expense (13,611) (17,372)
Profit for the year attributable to unitholders
of the Trust
93,442 100,065



Total other comprehensive income/(loss)
after tax
(31,080) 26,143
Total comprehensive income after tax 62,342 126,208



Distributions to Unit Holders 38,977 37,243
Distribution paid in the financial year (cents per
unit)
8.75 8.50



Financial Position


2019
$000s
2018
$000s
Total non-current assets
1,837,223 1,776,087
Total current assets 94,320 10,741
Total assets 1,931,543 1,786,828



Total Liabilities 901,798 798,852
Net Assets 1,029,745 987,976

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 2019

2019
$000s
Percentage
of Scheme
Property
Total fees and expenses incurred
Management fees
13,839
0.72%
Manager’s incentive fee 12,077 0.63%
Strategic transaction costs 2,834 0.15%
Property management fees 214 0.01%
AFSL fee 834 0.04%
Fees expensed by the Manager and associated
persons
29,798 1.54%


Auditor's remuneration 183 0.01%
Supervisors fees 587 0.03%
Other operating income/expenses 2,819 0.15%
Total fees & expenses 34,817 1.92%

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 Manager provides a highly experienced and diverse range of professionals including a CEO
and management team with expertise across a range of areas. As such the remuneration of the
CEO and management team is the responsibility the Manager.
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 2019 and 30 June 2018:

2019
$000s
2018
$000s
Non-current assets


Investment Properties
1,836,430 1,731,247
Derivative financial instruments
0 856
Other non-current assets 793 43,984
Total non-current assets 1,837,223 1,776,087


Current assets

Cash and cash equivalents 6,068 5,388
Trade and other receivables 1,300 1,189
Other current assets 86,875 3,801
Derivative financial instruments 77 363
Total current assets 94,320 10,741
Total assets 1,931,543 1,786,828

CHANGES TO PERSONS INVOLVED IN THE SCHEME
Graham Stuart (12 November 2018) was appointed as an Independent Director with Claire
Higgins (1 April 2019) resigning as the Chair and an Independent Director during the accounting
period. The Manager appointed Miles Wentworth (10 May 2019) as an Interim Manager following
the resignation of David Carr the Chief Executive Officer on the same day. Key personnel of the
Manager who remained in place throughout the accounting period included: Stuart Harrison
(Chief Financial Officer), Chris Adams (Executive Director-Projects) and Richard Roos (Executive
Director- Portfolio).
David Neidhart ceased as a Director (28 February 2019) of the Supervisor during the accounting
period. Outside of the period Ryan Bessemer, Graeme Kirkpatrick and Victoria Grace were
appointed as Directors with Mark Darrow and Sarah Robert ceasing to be Directors (2 October
2019).
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.